MORNINGSTAR, INC., 10-Q filed on 7/31/2020
Quarterly Report
v3.20.2
Cover page - shares
6 Months Ended
Jun. 30, 2020
Jul. 24, 2020
Cover [Abstract]    
Document Quarterly Report true  
Entity Registrant Name MORNINGSTAR, INC.  
Entity Central Index Key 0001289419  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Title of 12(b) Security Common stock, no par value  
Entity Incorporation, State or Country Code IL  
Document Transition Report false  
Entity File Number 000-51280  
Entity Tax Identification Number 36-3297908  
Entity Address, Address Line One 22 West Washington Street  
Entity Address, City or Town Chicago  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60602  
Trading Symbol MORN  
Security Exchange Name NASDAQ  
City Area Code 312  
Local Phone Number 696-6000  
Entity Current Reporting Status Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   42,921,183
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2020
Mar. 31, 2020
Dec. 31, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Current assets:            
Cash and cash equivalents $ 353.7   $ 334.1 $ 383.8   $ 369.3
Investments 29.5   33.4      
Accounts receivable, less allowance for credit losses of $5.2 and $4.1, respectively 181.4   188.5      
Income tax receivable 0.0   6.3      
Deferred commissions 17.6   16.9      
Other current assets 31.3   24.0      
Total current assets 613.5   603.2      
Goodwill 1,025.3   1,039.1      
Intangible assets, net 310.5   333.4      
Property, equipment, and capitalized software, less accumulated depreciation and amortization of $415.2 and $377.3, respectively 147.0   154.7      
Operating lease assets 153.4   144.8      
Investments in unconsolidated entities 62.8   59.6      
Deferred tax assets, net 10.5   10.7      
Deferred commissions 14.0   13.5      
Other assets 13.9   11.9      
Total assets 2,350.9   2,370.9      
Current liabilities:            
Deferred revenue 287.3   250.1      
Accrued compensation 91.3   137.5      
Accounts payable and accrued liabilities 59.0   58.9      
Current portion of long-term debt 11.0   11.0      
Operating lease liabilities 37.1   35.8      
Other current liabilities 4.5   2.5      
Total current liabilities 490.2   495.8      
Operating lease liabilities 142.3   138.7      
Accrued compensation 13.3   12.1      
Deferred tax liabilities, net 93.1   95.0      
Long-term debt 476.7   502.1      
Deferred revenue 33.0   32.2      
Other long-term liabilities 15.4   11.4      
Total liabilities 1,264.0   1,287.3      
Morningstar, Inc. shareholders’ equity:            
Common stock, no par value, 200,000,000 shares authorized, of which 42,921,183 and 42,848,359 shares were outstanding as of June 30, 2020 and December 31, 2019, respectively 0.0   0.0      
Treasury stock at cost, 11,008,317 and 10,840,173 shares as of June 30, 2020 and December 31, 2019, respectively (747.4)   (728.7)      
Additional paid-in capital 659.9   655.0      
Retained earnings 1,264.3   1,217.9      
Accumulated other comprehensive loss:            
Currency translation adjustment (90.6)   (63.0)      
Unrealized gain (loss) on available-for-sale investments 0.7   2.4      
Total accumulated other comprehensive loss (89.9)   (60.6)      
Total equity 1,086.9 $ 1,032.7 1,083.6 $ 1,003.4 $ 968.2 $ 934.7
Total liabilities and equity $ 2,350.9   $ 2,370.9      
v3.20.2
Condensed Consolidated Statements of Income - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Statement [Abstract]        
Revenue $ 327.9 $ 273.9 $ 651.9 $ 532.8
Operating expense:        
Cost of revenue 131.1 107.5 268.1 212.6
Sales and marketing 47.2 45.7 98.1 85.7
General and administrative 54.6 44.0 112.0 84.8
Depreciation and amortization 33.7 25.9 67.9 49.4
Total operating expense 266.6 223.1 546.1 432.5
Operating income 61.3 50.8 105.8 100.3
Non-operating income (expense), net:        
Interest income (expense), net (1.9) 0.7 (5.1) 0.0
Gain (loss) on sale of investments, reclassified from other comprehensive income 0.9 (0.2) 0.5 0.4
Other income (expense), net 3.6 1.8 (4.1) (1.4)
Non-operating income (expense), net 2.6 2.3 (8.7) (1.0)
Income before income taxes and equity in net loss of unconsolidated entities 63.9 53.1 97.1 99.3
Equity in net income (loss) of unconsolidated entities (0.5) 0.7 (1.3) (0.8)
Income tax expense 15.2 11.7 23.7 23.2
Consolidated net income $ 48.2 $ 42.1 $ 72.1 $ 75.3
Net income per share:        
Basic (in dollars per share) $ 1.13 $ 0.99 $ 1.68 $ 1.77
Diluted (in dollars per share) 1.12 0.98 1.67 1.75
Dividends declared (in dollars per share) 0.30 0.28 0.60 0.56
Dividends paid per common share (in dollars per share) $ 0.30 $ 0.28 $ 0.60 $ 0.56
Weighted average shares outstanding:        
Basic (in shares) 42.9 42.7 42.9 42.7
Diluted (in shares) 43.2 43.1 43.2 43.1
v3.20.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]        
Consolidated net income $ 48.2 $ 42.1 $ 72.1 $ 75.3
Other comprehensive income (loss):        
Foreign currency translation adjustment 12.8 (2.8) (27.6) 0.6
Unrealized gains (losses) on securities, net of tax:        
Unrealized holding gains (losses) arising during period 2.8 0.3 (1.3) 2.2
Reclassification losses (gains) included in net income (0.7) 0.2 (0.4) (0.3)
Other comprehensive income (loss) 14.9 (2.3) (29.3) 2.5
Comprehensive income $ 63.1 $ 39.8 $ 42.8 $ 77.8
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts receivable $ 5.2 $ 4.1
Accumulated depreciation and amortization $ 415.2 $ 377.3
Common Stock, No Par Value $ 0 $ 0
Common Stock, Shares Authorized 200,000,000 200,000,000
Common Stock, Shares, Outstanding 42,921,183 42,848,359
Treasury Stock, Shares 11,008,317 10,840,173
v3.20.2
Condensed Consolidated Statement of Equity - USD ($)
$ in Millions
Total
Common Stock
Treasury Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2018 $ 934.7 $ 0.0 $ (726.8) $ 621.7 $ 1,114.8 $ (75.0)
Balance (in shares) at Dec. 31, 2018   42,624,118        
Increase (Decrease) in Stockholders' Equity            
Net income 33.2       33.2  
Other comprehensive loss:            
Unrealized holding gains (losses) arising during period 1.9         1.9
Reclassification of adjustments for gain included in net income, net of income tax (0.5)         (0.5)
Foreign currency translation adjustment 3.4         3.4
Other comprehensive loss, net 4.8         4.8
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (in shares)   73,530        
Stock Issued During Period, Value, Stock Options Exercised and Vesting of Restricted Stock (4.6)     (4.6)    
Reclassification of awards previously liability-classified that were converted to equity 6.6     6.6    
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition            
Stock-based compensation 10.0     10.0    
Common share repurchased (in shares)   (41,935)        
Common shares repurchased (4.6)   (4.6)      
Dividends declared (11.9)       (11.9)  
Balance at Mar. 31, 2019 968.2 $ 0.0 (731.4) 633.7 1,136.1 (70.2)
Balance (in shares) at Mar. 31, 2019   42,655,713        
Balance at Dec. 31, 2018 934.7 $ 0.0 (726.8) 621.7 1,114.8 (75.0)
Balance (in shares) at Dec. 31, 2018   42,624,118        
Increase (Decrease) in Stockholders' Equity            
Net income 75.3          
Other comprehensive loss:            
Unrealized holding gains (losses) arising during period 2.2          
Reclassification of adjustments for gain included in net income, net of income tax (0.3)          
Foreign currency translation adjustment 0.6          
Other comprehensive loss, net 2.5          
Balance at Jun. 30, 2019 1,003.4 $ 0.0 (730.4) 640.1 1,166.2 (72.5)
Balance (in shares) at Jun. 30, 2019   42,763,022        
Balance at Mar. 31, 2019 968.2 $ 0.0 (731.4) 633.7 1,136.1 (70.2)
Balance (in shares) at Mar. 31, 2019   42,655,713        
Increase (Decrease) in Stockholders' Equity            
Net income 42.1       42.1  
Other comprehensive loss:            
Unrealized holding gains (losses) arising during period 0.3         0.3
Reclassification of adjustments for gain included in net income, net of income tax 0.2         0.2
Foreign currency translation adjustment (2.8)         (2.8)
Other comprehensive loss, net (2.3)         (2.3)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (in shares)   107,309        
Stock Issued During Period, Value, Stock Options Exercised and Vesting of Restricted Stock (5.3)   1.0 (6.3)    
Reclassification of awards previously liability-classified that were converted to equity 0.2     0.2    
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition            
Stock-based compensation 12.5     12.5    
Common share repurchased (in shares)   0        
Common shares repurchased 0.0          
Dividends declared (12.0)       (12.0)  
Balance at Jun. 30, 2019 1,003.4 $ 0.0 (730.4) 640.1 1,166.2 (72.5)
Balance (in shares) at Jun. 30, 2019   42,763,022        
Balance at Dec. 31, 2019 $ 1,083.6 $ 0.0 (728.7) 655.0 1,217.9 (60.6)
Balance (in shares) at Dec. 31, 2019 42,848,359 42,848,359        
Increase (Decrease) in Stockholders' Equity            
Net income $ 23.9       23.9  
Other comprehensive loss:            
Unrealized holding gains (losses) arising during period (4.1)         (4.1)
Reclassification of adjustments for gain included in net income, net of income tax 0.3         0.3
Foreign currency translation adjustment (40.4)         (40.4)
Other comprehensive loss, net (44.2)         (44.2)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (in shares)   121,689        
Stock Issued During Period, Value, Stock Options Exercised and Vesting of Restricted Stock (10.6) $ 0.0 0.0 (10.6) 0.0 0.0
Reclassification of awards previously liability-classified that were converted to equity 5.5 $ 0.0 0.0 5.5 0.0 0.0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition            
Stock-based compensation 7.3     7.3    
Common share repurchased (in shares)   (176,925)        
Common shares repurchased (20.0)   (20.0)      
Dividends declared (12.8)       (12.8)  
Balance at Mar. 31, 2020 1,032.7 $ 0.0 (748.7) 657.2 1,229.0 (104.8)
Balance (in shares) at Mar. 31, 2020   42,793,123        
Balance at Dec. 31, 2019 $ 1,083.6 $ 0.0 (728.7) 655.0 1,217.9 (60.6)
Balance (in shares) at Dec. 31, 2019 42,848,359 42,848,359        
Increase (Decrease) in Stockholders' Equity            
Net income $ 72.1          
Other comprehensive loss:            
Unrealized holding gains (losses) arising during period (1.3)          
Reclassification of adjustments for gain included in net income, net of income tax (0.4)          
Foreign currency translation adjustment (27.6)          
Other comprehensive loss, net (29.3)          
Balance at Jun. 30, 2020 $ 1,086.9 $ 0.0 (747.4) 659.9 1,264.3 (89.9)
Balance (in shares) at Jun. 30, 2020 42,921,183 42,921,183        
Balance at Mar. 31, 2020 $ 1,032.7 $ 0.0 (748.7) 657.2 1,229.0 (104.8)
Balance (in shares) at Mar. 31, 2020   42,793,123        
Increase (Decrease) in Stockholders' Equity            
Net income 48.2       48.2  
Other comprehensive loss:            
Unrealized holding gains (losses) arising during period 2.8         2.8
Reclassification of adjustments for gain included in net income, net of income tax (0.7)         (0.7)
Foreign currency translation adjustment 12.8         12.8
Other comprehensive loss, net 14.9         14.9
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (in shares)   128,060        
Stock Issued During Period, Value, Stock Options Exercised and Vesting of Restricted Stock (6.6) $ 0.0 1.3 (7.9) 0.0 0.0
Reclassification of awards previously liability-classified that were converted to equity 0.3 $ 0.0 0.0 0.3 0.0 0.0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition            
Stock-based compensation 10.3     10.3    
Common share repurchased (in shares)   0        
Common shares repurchased 0.0   0.0      
Dividends declared (12.9)       (12.9)  
Balance at Jun. 30, 2020 $ 1,086.9 $ 0.0 $ (747.4) $ 659.9 $ 1,264.3 $ (89.9)
Balance (in shares) at Jun. 30, 2020 42,921,183 42,921,183        
v3.20.2
Condensed Consolidated Statement of Equity (Parenthetical) - $ / shares
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Stockholders' Equity [Abstract]        
Dividends declared (in dollars per share) $ 0.30 $ 0.28 $ 0.60 $ 0.56
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Operating activities    
Consolidated net income $ 72.1 $ 75.3
Adjustments to reconcile consolidated net income to net cash flows from operating activities:    
Depreciation and amortization 67.9 49.4
Deferred income taxes 0.7 (1.8)
Stock-based compensation expense 17.6 22.5
Provision for bad debt 2.3 0.5
Equity in net loss of unconsolidated entities 1.3 0.8
Other, net 3.8 0.7
Changes in operating assets and liabilities:    
Accounts receivable 2.1 2.5
Accounts payable and accrued liabilities (0.7) (4.5)
Accrued compensation and deferred commissions (39.1) (30.8)
Income taxes, current 12.2 1.6
Deferred revenue 40.7 37.2
Other assets and liabilities (4.6) (7.2)
Cash provided by operating activities 176.3 146.2
Investing activities    
Purchases of investment securities (31.2) (19.1)
Proceeds from maturities and sales of investment securities 28.0 19.7
Capital expenditures (32.1) (37.0)
Acquisitions, net of cash acquired (15.5) 0.0
Purchases of equity- and cost-method investments (6.5) (1.2)
Other, net 0.1 (0.4)
Cash used for investing activities (57.2) (38.0)
Financing activities    
Common shares repurchased (20.0) (4.9)
Dividends paid (25.7) (23.9)
Proceeds from long-term debt 55.0 0.0
Repayment of long-term debt (80.6) (55.0)
Proceeds from stock-option exercises 0.4 0.0
Employee taxes paid from withholding of restricted stock units (17.7) (9.9)
Other, net (2.0) (0.5)
Cash used for financing activities (90.6) (94.2)
Effect of exchange rate changes on cash and cash equivalents (8.9) 0.5
Net increase in cash and cash equivalents 19.6 14.5
Cash and cash equivalents—beginning of period 334.1 369.3
Cash and cash equivalents—end of period 353.7 383.8
Supplemental disclosure of cash flow information:    
Cash paid for income taxes 10.6 23.3
Cash paid for interest 5.8 1.2
Supplemental information of non-cash investing and financing activities:    
Unrealized gain (loss) on available-for-sale investments $ (2.2) $ 2.6
v3.20.2
Basis of Presentation of Interim Financial Information
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation of Interim Financial Information Basis of Presentation of Interim Financial Information
 
The accompanying unaudited condensed consolidated financial statements of Morningstar, Inc. and subsidiaries (Morningstar, we, our, the Company) have been prepared to conform to the rules and regulations of the Securities and Exchange Commission (SEC). The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates. In the opinion of management, the statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position, results of operations, equity, and cash flows. These financial statements and notes are unaudited and should be read in conjunction with our Audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020 (our Annual Report).

The acronyms that appear in the Notes to our Unaudited Condensed Consolidated Financial Statements refer to the following:

ASC: Accounting Standards Codification
ASU: Accounting Standards Update
FASB: Financial Accounting Standards Board

COVID-19 Update

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it affects team members, customers, suppliers, and global markets. Since the situation surrounding the COVID-19 pandemic remains fluid, we are actively managing our response and have assessed potential impacts to our financial position and operating results related to our consolidated financial statements for the three and six months ended June 30, 2020.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. The CARES Act had no impact on our consolidated financial statements for the three and six months ended June 30, 2020. We continue to monitor any effects that may result from the CARES Act and other similar legislation or governmental actions in geographies in which our business operates.
v3.20.2
Summary of Significant Accounting Policies
3 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
We discuss our other significant accounting policies in Note 2 of the Notes to our Audited Consolidated Financial Statements included in our Annual Report.

Recently adopted accounting pronouncements

Current Expected Credit Losses: On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU No. 2016-13), which requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU No. 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. On April 25, 2019, the FASB issued ASU No. 2019-04, Codification Improvements (ASU No. 2019-04), which clarifies certain aspects of accounting for credit losses. On May 15, 2019, the FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief (ASU No. 2019-05), which allows entities to elect the fair value option on certain financial instruments. The new standard became effective for us on January 1, 2020 and was applied prospectively. As a result of the adoption of these standards, we made changes to our processes for the assessment of the adequacy of our allowance for credit losses on certain types of financial instruments, including accounts receivable. The adoption of ASU No. 2016-13, ASU No. 2019-04, and ASU No. 2019-05 did not have a material impact on the consolidated financial statements, related disclosures, or results of operations.
Cloud Computing: On August 29, 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement (ASU No. 2018-15), which helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (CCA) by providing guidance for determining when an arrangement includes a software license and when an arrangement is solely a hosted CCA service. The Company adopted this guidance prospectively beginning on January 1, 2020. Upon adoption, fees paid in a CCA will be evaluated for capitalization as a prepaid asset and expensed within the results of operations in the same financial statement line item as software license fees instead of depreciation and amortization expense. The adoption of ASU No. 2018-15 did not have a material impact on the consolidated financial statements, related disclosures, or results of operations.

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement: On August 28, 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU No. 2018-13), which eliminates, adds, and modifies certain disclosure requirements around items such as transfers between Level 1 and 2, policy of timing of transfers, and valuation process for Level 3. The new standard became effective for us on January 1, 2020. As we only have Level 1 investments, the adoption of ASU No. 2018-13 had no impact on our consolidated financial statements and related disclosures.

Recently issued accounting pronouncements not yet adopted

Income Taxes: On December 18, 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (ASU No. 2019-12), which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of ASC 740, Income Taxes, and providing for simplification in several other areas. The new standard is effective for us on January 1, 2021. Early adoption is permitted. We have not decided whether to adopt early and are evaluating the effect that ASU No. 2019-12 may have on our consolidated financial statements, related disclosures, and results of operations.

Reference Rate Reform: On March 12, 2020, the FASB issued ASU No. 2020-04: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) (ASU No. 2020-04), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications resulting from reference rate reform initiatives. The intention of the standard is to ease the potential accounting and financial reporting burden associated with transitioning away from the expiring London Interbank Offered Rate (LIBOR), and other interbank offered rates, to alternative benchmark rates. This guidance is temporary and only in effect during the reference rate transition period through December 31, 2022. We are evaluating the effect that ASU No. 2020-04 may have on our consolidated financial statements, related disclosures, and results of operations.
v3.20.2
Credit Arrangements
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Credit Arrangements Credit Arrangements
Debt

The following table summarizes our total debt and long-term debt as of June 30, 2020 and December 31, 2019.
(in millions)As of June 30, 2020As of December 31, 2019
Term Facility, net of unamortized debt issuance costs of $1.1 million and $1.3 million
$437.7  $443.1  
Revolving Credit Facility50.0  70.0  
Total debt$487.7  $513.1  
Less: Current portion of long-term debt, net of unamortized debt issuance costs of $0.3 million and $0.3 million11.0  11.0  
Long-term debt$476.7  $502.1  
Credit Agreement

In connection with the acquisition of Ratings Acquisition Corp (DBRS) on July 2, 2019, the Company entered into a senior credit agreement (the Credit Agreement). The Credit Agreement provides the Company with a five-year multi-currency credit facility with an initial borrowing capacity of up to $750.0 million, including a $300.0 million revolving credit facility (the Revolving Credit Facility) and a term loan facility of $450.0 million (the Term Facility). The Credit Agreement also provides for the issuance of up to $50.0 million of letters of credit and a $100.0 million sub-limit for a swingline facility under the Revolving Credit Facility. The Credit Agreement will expire on July 2, 2024. As of June 30, 2020, our total outstanding debt under the Credit Agreement was $487.7 million with borrowing availability of $250.0 million under the Revolving Credit Facility.

The interest rate applicable to any loan under the Credit Agreement is, at our option, either: (i) the applicable London Interbank Offered Rate (LIBOR) plus an applicable margin for such loans, which ranges between 1.00% and 1.50%, based on our consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between 0.00% and 0.50%, based on our consolidated leverage ratio.
The proceeds of the Term Facility and initial borrowings under the Revolving Credit Facility were used to finance the acquisition of DBRS. The proceeds of future borrowings under the Revolving Credit Facility may be used for working capital, capital expenditures or any other lawful corporate purpose.
The portions of deferred debt issuance costs related to the Revolving Credit Facility are included in other current and other non-current assets, and the portion of deferred debt issuance costs related to the Term Facility is reported as a reduction to the carrying amount of the Term Facility. Amortization of debt issuance costs related to the Revolving Credit Facility are amortized on a straight-line to interest expense over the term of the Credit Agreement. Amortization of debt issuance costs related to the Term Facility are amortized to interest expense using the effective interest method over the term of the Credit Agreement.

364-Day Revolving Credit Facility

On June 30, 2020, we entered into a 364-day revolving credit facility (364-Day Revolving Credit Facility) providing for borrowings in an aggregate principal amount of up to $50.0 million. The proceeds of such borrowings may be used for working capital, capital expenditures, and any other lawful corporate purpose. As of June 30, 2020, no borrowings were outstanding.

Compliance with Covenants

The Credit Agreement and the 364-Day Revolving Credit Facility contain identical financial covenants under which we: (i) may not exceed a maximum consolidated leverage ratio of 3.50 to 1.00 (or 3.75 to 1.00 for the four fiscal quarters following any material acquisition (as defined in the Credit Agreement and 364-Day Revolving Credit Facility) and (ii) are required to maintain a minimum consolidated interest coverage ratio of not less than 3.00 to 1.00. We were in compliance with these financial covenants as of June 30, 2020 and December 31, 2019.
v3.20.2
Acquisitions, Goodwill and Other Intangible Assets
6 Months Ended
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Acquisitions, Goodwill and Other Intangible Assets Acquisitions, Goodwill, and Other Intangible Assets
2020 Acquisitions
On January 31, 2020, we acquired Hueler Analytics' Stable Value Fund Comparative Universe Data and Stable Value Index (Hueler Analytics). We began consolidating the financial results of Hueler Analytics in our consolidated financial statements on January 31, 2020.
On April 3, 2020, we acquired PlanPlus Global, a financial-planning, risk-profiling, and portfolio tracking software firm. The acquisition expands our financial-planning capabilities for advisors. We began consolidating the financial results of PlanPlus Global in our consolidated financial statements on April 3, 2020.
2019 Acquisitions
During the second quarter of 2020, we finalized the purchase price allocation related to our acquisition of DBRS and did not record any significant adjustments compared with the preliminary estimates disclosed in the Notes to the Audited Consolidated Financial Statements included in our Annual Report.
The following unaudited pro forma information presents a summary of our Condensed Consolidated Statements of Income for the six months ended June 30, 2019 as if we had completed the acquisition as of January 1, 2019.
This unaudited pro forma information is presented for illustrative purposes and is not intended to represent or be indicative of the actual results of operations or expected synergies of DBRS Morningstar that would have been achieved had the acquisition occurred at the beginning of the earliest period presented, nor is it intended to represent or be indicative of future results of operations.
In calculating the pro forma information below, we included an estimate of amortization expense related to the intangible assets acquired, depreciation expense due to changes in estimated remaining useful lives of long-lived assets, and reduction in revenue as a result of the fair value adjustments to deferred revenue, as well as the related income tax impacts.
Unaudited Pro Forma Financial InformationSix months ended
(in millions, except for per share amounts)June 30, 2019
Revenue$613.0  
Operating income101.0  
Net income71.5  
Basic net income per share$1.67  
Diluted net income per share$1.66  

Goodwill
The following table shows the changes in our goodwill balances from December 31, 2019 to June 30, 2020:
 (in millions)
Balance as of December 31, 2019$1,039.1  
Other, primarily foreign currency translation (13.8) 
Balance as of June 30, 2020$1,025.3  

We did not record any goodwill impairment losses in the first six months of 2020 and 2019. We perform our annual impairment reviews in the fourth quarter or when impairment indicators and triggering events are identified.

Intangible Assets
The following table summarizes our intangible assets: 
 As of June 30, 2020As of December 31, 2019
(in millions)GrossAccumulated
Amortization
NetWeighted
Average
Useful  Life
(years)
GrossAccumulated
Amortization
NetWeighted
Average
Useful  Life
(years)
Customer-related assets$373.1  $(142.8) $230.3  11$377.9  $(130.3) $247.6  11
Technology-based assets169.7  (121.0) 48.7  7163.7  (112.0) 51.7  7
Intellectual property & other69.9  (38.4) 31.5  869.3  (35.2) 34.1  8
Total intangible assets$612.7  $(302.2) $310.5  9$610.9  $(277.5) $333.4  10
 
The following table summarizes our amortization expense related to intangible assets:
 Three months ended June 30,Six months ended June 30,
(in millions)2020201920202019
Amortization expense$13.7  $4.9  $27.7  $9.8  
 
We amortize intangible assets using the straight-line method over their expected economic useful lives.
We expect intangible amortization expense for the remainder of 2020 and subsequent years to be as follows:
 (in millions)
Remainder of 2020 (from July 1 through December 31)$27.1  
202151.7  
202243.7  
202339.9  
202434.1  
Thereafter114.0  
Total$310.5  
 
Our estimates of future amortization expense for intangible assets may be affected by additional acquisitions, divestitures, changes in the estimated useful lives, impairments, and foreign currency translation.
v3.20.2
Income Per Share
3 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Income Per Share Income Per Share
The following table shows how we reconcile our net income and the number of shares used in computing basic and diluted net income per share:
 Three months ended June 30,Six months ended June 30,
(in millions, except share and per share amounts)2020201920202019
Basic net income per share:  
Consolidated net income $48.2  $42.1  $72.1  $75.3  
Weighted average common shares outstanding42.9  42.7  42.9  42.7  
Basic net income per share$1.13  $0.99  $1.68  $1.77  
Diluted net income per share:
Consolidated net income $48.2  $42.1  $72.1  $75.3  
Weighted average common shares outstanding42.9  42.7  42.9  42.7  
Net effect of dilutive stock options, restricted stock units, performance share awards, and market stock units0.3  0.4  0.3  0.4  
Weighted average common shares outstanding for computing diluted income per share43.2  43.1  43.2  43.1  
Diluted net income per share$1.12  $0.98  $1.67  $1.75  

During the periods presented, the number of anti-dilutive restricted stock units, performance share awards, or market stock units excluded from our calculation of diluted earnings per share was immaterial.
v3.20.2
Revenue
6 Months Ended
Jun. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Revenue
Disaggregation of Revenue
The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.
Three months ended June 30, Six months ended June 30,
(in millions)2020201920202019
License-based $221.1  $200.9  $437.1  $396.4  
Asset-based51.8  52.6  109.0  101.5  
Transaction-based55.0  20.4  105.8  34.9  
Consolidated revenue$327.9  $273.9  $651.9  $532.8  
License-based performance obligations are generally satisfied over time as the customer has access to the product or service during the term of the subscription license and the level of service is consistent during the contract period. License-based agreements typically have a term of 12 to 36 months. License-based revenue is generated by Morningstar Data, Morningstar Direct, Morningstar Advisor Workstation, PitchBook, and other similar product lines.

Asset-based performance obligations are satisfied over time as the customer receives continuous access to a service for the term. Asset-based arrangements typically have a term of 12 to 36 months. Asset-based fees represent variable consideration and the customer does not make separate purchasing decisions that result in additional performance obligations. Significant changes in the underlying fund assets and significant disruptions in the market are evaluated to determine whether estimates of earned asset-based fees need to be revised for the current quarter. The timing of client asset reporting and the structure of certain contracts can result in a one-quarter lag between market movements and the impact on earned revenue. An estimate of variable consideration is included in the initial transaction price only to the extent it is probable that a significant reversal in the amount of the revenue recognized will not occur. Estimates of asset-based fees are based on the most recently completed quarter and, as a result, it is unlikely a significant reversal of revenue would occur. Asset-based revenue is generated by Investment Management, Workplace Solutions, and Morningstar Indexes.

Transaction-based performance obligations are satisfied when the product or service is completed or delivered. Transaction-based revenue is generated by DBRS Morningstar, Internet advertising, and Morningstar-sponsored conferences. DBRS Morningstar revenue includes revenue from surveillance services, which is recognized over time, as the customer has access to the service during the surveillance period.

Contract liabilities

Our contract liabilities represent deferred revenue. We record contract liabilities when cash payments are received or due in advance of our performance, including amounts which are refundable. The contract liabilities balance as of June 30, 2020 had a net increase of $38.0 million, primarily driven by cash payments received or payable in advance of satisfying our performance obligations. We recognized $180.5 million of revenue in the six month period ended June 30, 2020 that was included in the contract liabilities balance as of December 31, 2019.

We expect to recognize revenue related to our contract liabilities for the remainder of 2020 and subsequent years as follows:
(in millions)As of June 30, 2020
Remainder of 2020 (from July 1 through December 31) $318.6  
2021236.7  
202285.6  
202320.8  
202411.6  
Thereafter 54.5  
Total$727.8  

The aggregate amount of revenue we expect to recognize for the remainder of 2020 and subsequent years is higher than our contract liability balance of $320.3 million as of June 30, 2020. The difference represents the value of future obligations for signed contracts for which we have not yet begun to satisfy the performance obligations or have not yet billed the customer.
The table above does not include variable consideration for unsatisfied performance obligations related to certain of our license-based, asset-based, and transaction-based contracts as of June 30, 2020. We are applying the optional exemption available under ASC Topic 606, as the variable consideration relates to these unsatisfied performance obligations being fulfilled as a series. The performance obligations related to these contracts are expected to be satisfied over the next 12 to 36 months as services are provided to the client. For license-based contracts, the consideration received for services performed is based on the number of future users, which is not known until the services are performed. The variable consideration for this revenue can be affected by the number of user licenses, which cannot be reasonably estimated. For asset-based contracts, the consideration received for services performed is based on future asset values, which are not known until the services are performed. The variable consideration for this revenue can be affected by changes in the underlying value of fund assets due to client redemptions, additional investments, or movements in the market. For transaction-based contracts for Internet advertising, the consideration received for services performed is based on the number of impressions, which is not known until the impressions are created. The variable consideration for this revenue can be affected by the timing and quantity of impressions in any given period and cannot be reasonably estimated.

As of June 30, 2020, the table above also does not include revenue for unsatisfied performance obligations related to certain of our license-based and transaction-based contracts with durations of one year or less since we are applying the optional exemption under ASC Topic 606. For certain license-based contracts, the remaining performance obligation is expected to be less than one year based on the corresponding subscription terms. For transaction-based contracts, such as new credit rating issuances and Morningstar-sponsored conferences, the related performance obligations are expected to be satisfied within the next 12 months.

Contract Assets

Our contract assets represent accounts receivable, less allowance for credit losses, and deferred commissions. We did not record any impairment losses on receivables or deferred commissions in the first six months of 2020.

The following table summarizes our contract assets balance:
(in millions)As of June 30, 2020As of December 31, 2019
Accounts receivable, less allowance for credit losses$181.4  $188.5  
Deferred commissions31.6  30.4  
Total contract assets$213.0  $218.9  
v3.20.2
Segment and Geographical Area Information
3 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
Segment and Geographical Area Information Segment and Geographical Area Information
 
Segment Information

We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources considering our core data which is managed centrally on a company-wide basis and evaluates our financial results. Because we have a single reportable segment, all required financial segment information can be found directly in the Condensed Consolidated Financial Statements. The accounting policies for our reportable segment are the same as those described in Note 2 of the Notes to the Audited Consolidated Financial Statements included in our Annual Report. We evaluate the performance of our reporting segment based on revenue and operating income.
Geographical Area Information

The tables below summarize our revenue and long-lived assets, which includes property, equipment, and capitalized software, net and operating lease assets, by geographical area:

Revenue by geographical area
Three months ended June 30,Six months ended June 30,
(in millions)2020201920202019
United States$228.3  $208.0  $462.9  $403.1  
Asia8.3  6.8  15.9  13.1  
Australia10.4  10.0  21.0  19.5  
Canada28.3  7.8  49.0  15.7  
Continental Europe23.9  20.9  46.9  41.3  
United Kingdom27.0  18.8  53.0  36.9  
Other1.7  1.6  3.2  3.2  
Total International99.6  65.9  189.0  129.7  
Consolidated revenue$327.9  $273.9  $651.9  $532.8  

Property, equipment, and capitalized software, net by geographical area
(in millions)As of June 30, 2020As of December 31, 2019
United States$125.7  $131.2  
Asia5.9  6.6  
Australia3.7  4.2  
Canada2.4  2.9  
Continental Europe2.4  2.3  
United Kingdom6.5  6.9  
Other0.4  0.6  
Total International21.3  23.5  
Consolidated property, equipment, and capitalized software, net$147.0  $154.7  
Operating lease assets by geographical area
(in millions)As of June 30, 2020As of December 31, 2019
United States$93.5  $86.4  
Asia16.1  20.2  
Australia5.5  5.8  
Canada7.2  7.5  
Continental Europe15.2  6.3  
United Kingdom15.2  17.9  
Other0.7  0.7  
Total International59.9  58.4  
Consolidated operating lease assets$153.4  $144.8  

The long-lived assets by geographical area do not include deferred commissions, non-current as the balance is not significant.
v3.20.2
Fair Value Measurement of Investments
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Investments and Fair Value Measurements Fair Value MeasurementsAs of June 30, 2020 and December 31, 2019, our investment balances totaled $29.5 million and $33.4 million, respectively. We classify our investments into three categories: available-for-sale, held-to-maturity, and trading securities. Our investment portfolio consists of stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider. All investments in our investment portfolio have valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access, and, therefore, are classified as Level 1 within the fair value hierarchy.
v3.20.2
Leases
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases Leases
We lease office space and certain equipment under various operating and finance leases, with most of our lease portfolio consisting of operating leases for office space.

We determine whether an arrangement is, or includes, an embedded lease at contract inception. Operating lease assets and lease liabilities are recognized at the commencement date and initially measured using the present value of lease payments over the defined lease term. Lease expense is recognized on a straight-line basis over the lease term. For finance leases, we also recognize a finance lease asset and finance lease liability at inception, with lease expense recognized as interest expense and amortization.

A contract is or contains an embedded lease if the contract meets all the below criteria:

there is an identified asset;
we obtain substantially all the economic benefits of the asset; and
we have the right to direct the use of the asset.

For initial measurement of the present value of lease payments and for subsequent measurement of lease modifications, we are required to use the rate implicit in the lease if available. However, as most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is a collateralized rate. To apply the incremental borrowing rate, we used a portfolio approach and grouped leases based on similar lease terms in a manner whereby we reasonably expect that the application does not differ materially from a lease-by-lease approach.
Our leases have remaining lease terms of approximately 1 year to 13 years, which term may include the option to extend the lease when it is reasonably certain we will exercise that option. We do not have lease agreements with residual value guarantees, sale leaseback terms, or material restrictive covenants.
Leases with an initial term of 12 months or less are not recognized on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

The following table summarizes our operating lease assets and lease liabilities:
Leases (in millions)Classification on the Balance SheetAs of June 30, 2020As of December 31, 2019
Assets
OperatingOperating Lease Assets$153.4  $144.8  
Liabilities
OperatingOperating lease liabilities, current$37.1  $35.8  
OperatingOperating lease liabilities, non-current142.3  138.7  
Total lease liabilities$179.4  $174.5  

Our operating lease expense for the three months ended June 30, 2020 was $10.1 million, compared with $7.9 million for the three months ended June 30, 2019. Charges related to our operating leases that are variable and, therefore, not included in the measurement of the lease liabilities, were $3.5 million for the three months ended June 30, 2020, compared with $3.1 million for the three months ended June 30, 2019. We made lease payments of $10.6 million during the three months ended June 30, 2020, compared with $8.2 million during the three months ended June 30, 2019.

Our operating lease expense for the six months ended June 30, 2020 was $19.8 million, compared with $15.8 million for the six months ended June 30, 2019. Charges related to our operating leases that are variable and, therefore, not included in the measurement of the lease liabilities, were $6.9 million for the six months ended June 30, 2020, compared with $5.7 million for the six months ended June 30, 2019. We made lease payments of $21.1 million during the six months ended June 30, 2020, compared with $14.4 million during the six months ended June 30, 2019.

The following table shows our minimum future lease commitments due in each of the next five years and thereafter for operating leases:
Minimum Future Lease Commitments (in millions)Operating Leases
Remainder of 2020 (July 1 through December 31)$21.6  
202141.4  
202228.4  
202325.8  
202420.3  
Thereafter71.3  
Total minimum lease commitments208.8  
Adjustment for discount to present value29.4  
Total$179.4  

The following table summarizes the weighted-average lease terms and weighted-average discount rates for our operating leases:
As of June 30, 2020
Weighted-average remaining lease term (in years)6.8
Weighted-average discount rate4.24 %
v3.20.2
Stock-Based Compensation
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
 
Stock-Based Compensation Plans
 
All our employees and our non-employee directors are eligible for awards under the Morningstar 2011 Stock Incentive Plan, which provides for a variety of stock-based awards, including stock options, restricted stock units, performance share awards, market stock units, and restricted stock.

The following table summarizes the stock-based compensation expense included in each of our operating expense categories:
Three months ended June 30,Six months ended June 30,
(in millions)2020201920202019
Cost of revenue$3.7  $3.7  $6.1  $6.8  
Sales and marketing1.2  1.4  2.2  2.9  
General and administrative5.4  7.4  9.3  12.8  
Total stock-based compensation expense$10.3  $12.5  $17.6  $22.5  

As of June 30, 2020, the total unrecognized stock-based compensation cost related to outstanding restricted stock units, performance share awards, and market stock units expected to vest was $66.2 million, which we expect to recognize over a weighted average period of 17 months.
v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Effective Tax Rate

The following table shows our effective tax rate for the three and six months ended June 30, 2020 and June 30, 2019:

 Three months ended June 30,Six months ended June 30,
(in millions)2020201920202019
Income before income taxes and equity in net income (loss) of unconsolidated entities$63.9  $53.1  $97.1  $99.3  
Equity in net income (loss) of unconsolidated entities(0.5) 0.7  (1.3) (0.8) 
Total$63.4  $53.8  $95.8  $98.5  
Income tax expense$15.2  $11.7  $23.7  $23.2  
Effective tax rate24.0 %21.7 %24.7 %23.6 %
 
Our effective tax rate in the second quarter and first six months of 2020 was 24.0% and 24.7%, respectively, reflecting respective increases of 2.3 and 1.1 percentage points, compared with the same periods in the prior year. The increases were primarily due to minimum taxes and non-deductible expenses in 2020.

Unrecognized Tax Benefits

The table below provides information concerning our gross unrecognized tax benefits as of June 30, 2020 and December 31, 2019, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.
(in millions)As of June 30, 2020As of December 31, 2019
Gross unrecognized tax benefits$11.4  $12.6  
Gross unrecognized tax benefits that would affect income tax expense$11.4  $12.6  
Decrease in income tax expense upon recognition of gross unrecognized tax benefits$11.2  $12.4  

Our Unaudited Condensed Consolidated Balance Sheets include the following liabilities for unrecognized tax benefits. These amounts include interest and penalties, less any associated tax benefits.

Liabilities for Unrecognized Tax Benefits (in millions)As of June 30, 2020As of December 31, 2019
Current liability$7.9  $10.8  
Non-current liability4.4  3.0  
Total liability for unrecognized tax benefits$12.3  $13.8  

Because we conduct business globally, we file income tax returns in U.S. federal, state, local, and foreign jurisdictions. We are currently under audit by federal, state, and local tax authorities in the U.S. as well as tax authorities in certain non-U.S. jurisdictions. It is likely that the examination phase of some of these federal, state, local, and non-U.S. audits will conclude in 2020. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits.

Approximately 70% of our cash, cash equivalents, and investments balance as of June 30, 2020 was held by our operations outside of the United States. We generally consider our U.S. directly-owned foreign subsidiary earnings to be permanently reinvested. We believe that our cash balances and investments in the United States, along with cash generated from our U.S. operations, will be sufficient to meet our U.S. operating and cash needs for the foreseeable future, without requiring us to repatriate earnings from these foreign subsidiaries.

Certain of our non-U.S. operations have incurred net operating losses (NOLs), which may become deductible to the extent these operations become profitable. For each of our operations, we evaluate whether it is more likely than not that the tax benefits related to NOLs will be realized. As part of this evaluation, we consider evidence such as tax planning strategies, historical operating results, forecasted taxable income, and recent financial performance. In the year that certain non-U.S. operations record a loss, we do not recognize a corresponding tax benefit, which increases our effective tax rate. Upon determining that it is more likely than not that the NOLs will be realized, we reduce the tax valuation allowances related to these NOLs, which results in a reduction to our income tax expense and our effective tax rate in that period.
v3.20.2
Contingencies
6 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Contingencies Contingencies
We record accrued liabilities for litigation, regulatory, and other business matters when those matters represent loss contingencies that are both probable and estimable. In these cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, we do not establish an accrued liability. As litigation, regulatory, or other business matters develop, we evaluate on an ongoing basis whether such matters present a loss contingency that is probable and estimable.

Data Audits and Reviews
In our global data business, we include in our products, or directly redistribute to our customers, data, and information licensed from third-party vendors. Our compliance with the terms of these licenses is reviewed internally and is also subject to audit by the third-party vendors. At a given time, we may be undergoing several such internal reviews and third-party vendor audits and the results and findings of which may indicate that we may be required to make a payment for prior data usage. Due to a lack of available information and data, as well as potential variations of any audit or internal review findings, we generally are not able to reasonably estimate a possible loss, or range of losses for these matters. While we cannot predict the outcome of these processes, we do not anticipate they will have a material adverse effect on our business, operating results, or financial position.
Credit Ratings Matters
In April 2020, the staff of the SEC notified Morningstar Credit Ratings, LLC (MCR) that they had reached a preliminary decision to recommend that the Commission authorize an enforcement action related to MCR’s former commercial mortgage-backed securities ratings methodology. MCR submitted a written response to the staff on May 12, 2020. At this time, we do not believe any result will have a material adverse effect on our business, operating results, or financial position.

On May 15, 2020, in an unrelated matter, MCR entered into a settlement for $3.5 million with the SEC to resolve an investigation into whether certain activities of MCR's asset-backed securities staff in 2015 to 2016 complied with sales and marketing rules applicable to Nationally Recognized Statistical Rating Organizations. The full amount of the settlement was accrued as of December 31, 2019.

Other Matters
We are involved from time to time in regulatory investigations and legal proceedings that arise in the normal course of our business. While it is difficult to predict the outcome of any particular investigation or proceeding, we do not believe the result of any of these matters will have a material adverse effect on our business, operating results, or financial position.
v3.20.2
Share Repurchase Program
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Treasury Stock
13. Share Repurchase Program
 
In December 2017, the board of directors approved a share repurchase program that authorizes the Company to repurchase up to $500.0 million in shares of the Company's outstanding common stock effective January 1, 2018. The authorization expires on December 31, 2020. We may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate.
We did not repurchase any shares during the second quarter of 2020. In the first six months of 2020, we repurchased a total of 176,925 shares for $20.0 million. As of June 30, 2020, we repurchased a total of 421,105 shares for $45.6 million under this program, leaving approximately $454.4 million available for future repurchases.
v3.20.2
Subsequent Events (Notes)
6 Months Ended
Jun. 30, 2020
Subsequent Events [Abstract]  
Subsequent Events Subsequent EventsAcquisition of SustainalyticsOn July 2, 2020, we completed our previously announced acquisition of Sustainalytics, a globally recognized leader in environmental, social, and governance (ESG) ratings and research. The Company owned an approximate 40% ownership stake in Sustainalytics, first acquired in 2017, and purchased the remaining approximate 60% of Sustainalytics shares upon closing of the transaction. The transaction consideration included a cash payment at closing of EUR 54.5 million and additional cash payments in 2021 and 2022 contingent upon on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues.
v3.20.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Recent Accounting Pronouncements Policy
Recently adopted accounting pronouncements

Current Expected Credit Losses: On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU No. 2016-13), which requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU No. 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. On April 25, 2019, the FASB issued ASU No. 2019-04, Codification Improvements (ASU No. 2019-04), which clarifies certain aspects of accounting for credit losses. On May 15, 2019, the FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief (ASU No. 2019-05), which allows entities to elect the fair value option on certain financial instruments. The new standard became effective for us on January 1, 2020 and was applied prospectively. As a result of the adoption of these standards, we made changes to our processes for the assessment of the adequacy of our allowance for credit losses on certain types of financial instruments, including accounts receivable. The adoption of ASU No. 2016-13, ASU No. 2019-04, and ASU No. 2019-05 did not have a material impact on the consolidated financial statements, related disclosures, or results of operations.
Cloud Computing: On August 29, 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement (ASU No. 2018-15), which helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (CCA) by providing guidance for determining when an arrangement includes a software license and when an arrangement is solely a hosted CCA service. The Company adopted this guidance prospectively beginning on January 1, 2020. Upon adoption, fees paid in a CCA will be evaluated for capitalization as a prepaid asset and expensed within the results of operations in the same financial statement line item as software license fees instead of depreciation and amortization expense. The adoption of ASU No. 2018-15 did not have a material impact on the consolidated financial statements, related disclosures, or results of operations.

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement: On August 28, 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU No. 2018-13), which eliminates, adds, and modifies certain disclosure requirements around items such as transfers between Level 1 and 2, policy of timing of transfers, and valuation process for Level 3. The new standard became effective for us on January 1, 2020. As we only have Level 1 investments, the adoption of ASU No. 2018-13 had no impact on our consolidated financial statements and related disclosures.

Recently issued accounting pronouncements not yet adopted

Income Taxes: On December 18, 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (ASU No. 2019-12), which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of ASC 740, Income Taxes, and providing for simplification in several other areas. The new standard is effective for us on January 1, 2021. Early adoption is permitted. We have not decided whether to adopt early and are evaluating the effect that ASU No. 2019-12 may have on our consolidated financial statements, related disclosures, and results of operations.

Reference Rate Reform: On March 12, 2020, the FASB issued ASU No. 2020-04: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) (ASU No. 2020-04), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications resulting from reference rate reform initiatives. The intention of the standard is to ease the potential accounting and financial reporting burden associated with transitioning away from the expiring London Interbank Offered Rate (LIBOR), and other interbank offered rates, to alternative benchmark rates. This guidance is temporary and only in effect during the reference rate transition period through December 31, 2022. We are evaluating the effect that ASU No. 2020-04 may have on our consolidated financial statements, related disclosures, and results of operations.
Segment Reporting Policy We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources considering our core data which is managed centrally on a company-wide basis and evaluates our financial results. Because we have a single reportable segment, all required financial segment information can be found directly in the Condensed Consolidated Financial Statements. The accounting policies for our reportable segment are the same as those described in Note 2 of the Notes to the Audited Consolidated Financial Statements included in our Annual Report. We evaluate the performance of our reporting segment based on revenue and operating income.
Investments- Debt and Equity Securities Policy We classify our investments into three categories: available-for-sale, held-to-maturity, and trading securities. Our investment portfolio consists of stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider.
v3.20.2
(Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Summary of Total Debt and Long-term Debt
The following table summarizes our total debt and long-term debt as of June 30, 2020 and December 31, 2019.
(in millions)As of June 30, 2020As of December 31, 2019
Term Facility, net of unamortized debt issuance costs of $1.1 million and $1.3 million
$437.7  $443.1  
Revolving Credit Facility50.0  70.0  
Total debt$487.7  $513.1  
Less: Current portion of long-term debt, net of unamortized debt issuance costs of $0.3 million and $0.3 million11.0  11.0  
Long-term debt$476.7  $502.1  
v3.20.2
Acquisitions, Goodwill and Other Intangible Assets (Tables)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]      
Business Acquisition, Pro Forma Information [Table Text Block]  
Unaudited Pro Forma Financial InformationSix months ended
(in millions, except for per share amounts)June 30, 2019
Revenue$613.0  
Operating income101.0  
Net income71.5  
Basic net income per share$1.67  
Diluted net income per share$1.66  
 
Schedule of Goodwill
The following table shows the changes in our goodwill balances from December 31, 2019 to June 30, 2020:
 (in millions)
Balance as of December 31, 2019$1,039.1  
Other, primarily foreign currency translation (13.8) 
Balance as of June 30, 2020$1,025.3  
   
Schedule of Intangible Assets
The following table summarizes our intangible assets: