MORNINGSTAR, INC., 10-K filed on 2/28/2013
Annual Report
Document and Entity Information Document (USD $)
12 Months Ended
Dec. 31, 2012
Feb. 22, 2013
Jun. 30, 2012
Document and Entity Information Abstract
 
 
 
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-K 
 
 
Document Period End Date
Dec. 31, 2012 
 
 
Document Fiscal Year Focus
2012 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
46,424,454 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 1,329,810,256 
Condensed Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Revenue
$ 658,288 
$ 631,400 
$ 555,351 
Operating expense (1):
 
 
 
Cost of goods sold
195,347 1
182,132 1
157,068 1
Development
51,436 1
53,157 1
49,244 1
Sales and marketing
108,884 1
106,699 1
95,473 1
General and administrative
108,857 1
108,084 1
92,843 1
Depreciation and amortization
43,096 1
42,913 1
39,664 1
Total operating expense
507,620 1
492,985 1
434,292 1
Operating income
150,668 
138,415 
121,059 
Non-operating income (expense):
 
 
 
Interest income, net
5,153 
2,361 
2,437 
Other income (expense), net
(2,196)
(652)
4,295 
Non-operating income (expense), net
2,957 
1,709 
6,732 
Income before income taxes and equity in net income of unconsolidated entities
153,625 
140,124 
127,791 
Income tax expense
52,878 
43,658 
42,756 
Equity in net income of unconsolidated entities
2,027 
1,848 
1,422 
Consolidated Net Income from Continuing Operations
102,774 
98,314 
86,457 
Gain on Sale of Discontinued Operation, Net of Tax
5,188 
Consolidated net income
107,962 
98,314 
86,457 
Net (income) loss attributable to the noncontrolling interest
117 
43 
(87)
Net income attributable to Morningstar, Inc.
108,079 
98,357 
86,370 
Net Income from Continuing Operations, net of tax
102,891 
98,357 
86,370 
Net Income from Discontinued Operations, Net of Tax
$ 5,188 
$ 0 
$ 0 
Net income per share attributable to Morningstar, Inc.:
 
 
 
Basic (in dollars per share)
$ 2.23 
$ 1.96 
$ 1.75 
Diluted (in dollars per share)
$ 2.20 
$ 1.92 
$ 1.70 
Income (Loss) from Discontinued Operations, Net of Tax, Per Diluted Share
$ 0.10 
$ 0.00 
$ 0.00 
Income (Loss) from Continuing Operations, Per Diluted Share
$ 2.10 
$ 1.92 
$ 1.70 
Income (Loss) from Discontinued Operations, Net of Tax, Per Basic Share
$ 0.11 
$ 0.00 
$ 0.00 
Income (Loss) from Continuing Operations, Per Basic Share
$ 2.12 
$ 1.96 
$ 1.75 
Dividends per common share:
 
 
 
Dividends declared per common share
$ 0.43 
$ 0.25 
$ 0.05 
Dividends paid per common share
$ 0.53 
$ 0.20 
$ 0.00 
Weighted average shares outstanding:
 
 
 
Basic (in shares)
48,497 
50,032 
49,249 
Diluted (in shares)
49,148 
50,988 
50,555 
Consolidated Statements of Income (Parenthetical) Consolidated Statements of Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Allocated Share-based Compensation Expense
$ 18,905 
$ 15,303 
$ 13,793 
Cost of Sales [Member]
 
 
 
Allocated Share-based Compensation Expense
4,488 
4,150 
3,473 
Research and Development Expense [Member]
 
 
 
Allocated Share-based Compensation Expense
1,928 
2,086 
1,840 
Selling and Marketing Expense [Member]
 
 
 
Allocated Share-based Compensation Expense
1,937 
1,871 
1,786 
General and Administrative Expense [Member]
 
 
 
Allocated Share-based Compensation Expense
$ 10,552 
$ 7,196 
$ 6,694 
Consolidated Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Consolidated net income
$ 107,962 
$ 98,314 
$ 86,457 
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustment
6,838 
(2,345)
4,909 
Unrealized gains (losses) on securities:
 
 
 
Unrealized holding gains (losses) arising during period
1,455 
(773)
417 
Reclasification of (gains) losses included in net income
(344)
(166)
(172)
Other comprehensive income (loss)
7,949 
(3,284)
5,154 
Comprehensive income
115,911 
95,030 
91,611 
Comprehensive (income) loss attributable to noncontrolling interest
268 
(179)
(156)
Comprehensive income attributable to Morningstar, Inc.
$ 116,179 
$ 94,851 
$ 91,455 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Current assets:
 
 
Cash and cash equivalents
$ 163,889 
$ 200,437 
Investments
157,529 
269,755 
Accounts receivable, less allowance of $569 and $835, respectively
114,361 
113,312 
Deferred tax asset, net
3,741 
5,104 
Income tax receivable, net
14,267 
7,445 
Other
20,823 
15,980 
Total current assets
474,610 
612,033 
Property, equipment, and capitalized software, net
84,022 
68,196 
Investments in unconsolidated entities
35,305 
27,642 
Goodwill
320,845 
318,492 
Intangible assets, net
116,732 
139,809 
Other assets
10,438 
5,912 
Total assets
1,041,952 
1,172,084 
Current liabilities:
 
 
Accounts payable and accrued liabilities
43,777 
41,403 
Accrued compensation
67,317 
73,124 
Deferred revenue
146,015 
155,494 
Other
256 
612 
Total current liabilities
257,365 
270,633 
Accrued compensation
8,281 
5,724 
Deferred tax liability, net
21,583 
15,940 
Deferred Rent
15,368 
14,604 
Other long-term liabilities
12,460 
8,167 
Total liabilities
315,057 
315,068 
Morningstar, Inc. shareholders' equity:
 
 
Common stock, no par value, 200,000,000 shares authorized, of which 46,541,571 and 50,083,940 shares were outstanding as of December 31, 2012 and December 31, 2011, respectively
Treasury stock at cost, 5,214,070 shares as of December 31, 2012 and 980,177 shares as of December 31, 2011
(301,839)
(46,701)
Additional paid-in capital
521,285 
491,432 
Retained earnings
496,354 
409,022 
Accumulated other comprehensive income (loss):
 
 
Currency translation adjustment
8,925 
1,936 
Unrealized gain (loss) on available-for-sale investments
787 
(324)
Total accumulated other comprehensive income
9,712 
1,612 
Total Morningstar, Inc. shareholders' equity
725,517 
855,370 
Noncontrolling interest
1,378 
1,646 
Total equity
726,895 
857,016 
Total liabilities and equity
$ 1,041,952 
$ 1,172,084 
Consolidated Balance Sheets (Parenthetical) Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Statement of Financial Position [Abstract]
 
 
Allowance for Doubtful Accounts Receivable, Current
$ 569 
$ 835 
Common Stock, No Par Value
$ 0 
$ 0 
Common Stock, Shares Authorized
200,000,000 
200,000,000 
Common Stock, Shares, Outstanding
46,541,571 
50,083,940 
Treasury Stock, Shares
5,214,070 
980,177 
Condensed Consolidated Statement of Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Treasury Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Non Controlling Interests
Balance at Dec. 31, 2009
$ 665,789 
$ 5 
$ (3,130)
$ 428,139 
$ 239,573 
$ 33 
$ 1,169 
Balance (in shares) at Dec. 31, 2009
 
48,768,541 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income (loss)
86,457 
   
   
   
86,370 
   
87 
Other Comprehensive Income (loss)
 
 
 
 
 
 
 
Unrealized gain on available-for-sale investments, net of income tax
417 
   
   
   
   
417 
Reclassification of adjustments for gains included in net income, net of income tax
(172)
   
   
   
   
(172)
Foreign currency translation adjustment, net
4,909 
   
   
   
   
4,840 
69 
Other comprehensive income (loss)
5,154 
   
   
   
   
5,085 
69 
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
9,220 
274 
8,946 
   
   
   
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net (in shares)
 
1,182,069 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition [Abstract]
 
 
 
 
 
 
 
Stock-based compensation - restricted stock units
12,545 
   
   
12,545 
   
   
   
Stock-based compensation - restricted stock
1,248 
 
 
1,248 
 
 
 
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
7,507 
   
   
7,507 
   
   
   
Adjustments to Noncontrolling interest
(216)
   
   
   
   
   
(216)
Dividends declared - common shares outstanding
 
 
 
 
(2,494)
 
 
Dividends declared - restricted stock units
 
 
 
41 
(41)
 
 
Common share repurchased
(3,785)
 
(3,785)
 
 
 
 
Common share repurchased (in shares)
 
(76,218)
 
 
 
 
 
Balance at Dec. 31, 2010
781,425 
(6,641)
458,426 
323,408 
5,118 
1,109 
Balance (in shares) at Dec. 31, 2010
 
49,874,392 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income (loss)
98,314 
   
   
   
98,357 
   
(43)
Other Comprehensive Income (loss)
 
 
 
 
 
 
 
Unrealized gain on available-for-sale investments, net of income tax
(773)
   
   
   
   
(773)
Reclassification of adjustments for gains included in net income, net of income tax
(166)
   
   
   
   
(166)
Foreign currency translation adjustment, net
(2,345)
   
   
   
   
(2,567)
222 
Other comprehensive income (loss)
(3,284)
   
   
   
   
(3,506)
222 
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
8,702 
   
612 
8,090 
   
   
   
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net (in shares)
 
931,667 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition [Abstract]
 
 
 
 
 
 
 
Stock-based compensation - restricted stock units
12,765 
   
   
12,765 
   
   
   
Stock-based compensation - restricted stock
2,196 
   
   
2,196 
   
   
   
Stock-based compensation - stock options
342 
 
 
342 
 
 
 
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
9,525 
   
   
9,525 
   
   
   
Dividends declared - common shares outstanding
(12,550)
   
   
   
(12,550)
   
   
Dividends declared - restricted stock units
(9)
   
   
184 
(193)
   
   
Adjustments to noncontrolling interest
262 
   
   
(96)
   
   
358 
Common share repurchased
(40,672)
   
(40,672)
   
   
   
   
Common share repurchased (in shares)
 
(722,119)
 
 
 
 
 
Balance at Dec. 31, 2011
857,016 
(46,701)
491,432 
409,022 
1,612 
1,646 
Balance (in shares) at Dec. 31, 2011
50,083,940 
50,083,940 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income (loss)
107,962 
   
   
   
108,079 
   
(117)
Other Comprehensive Income (loss)
 
 
 
 
 
 
 
Unrealized gain on available-for-sale investments, net of income tax
1,455 
   
   
   
   
1,455 
Reclassification of adjustments for gains included in net income, net of income tax
(344)
   
   
   
   
(344)
Foreign currency translation adjustment, net
6,838 
   
   
   
   
6,989 
(151)
Other comprehensive income (loss)
7,949 
   
   
   
   
8,100 
(151)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
4,809 
   
1,342 
3,467 
   
   
   
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net (in shares)
 
715,888 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition [Abstract]
 
 
 
 
 
 
 
Stock-based compensation - restricted stock units
13,451 
   
   
13,451 
   
   
   
Stock-based compensation - restricted stock
5,013 
   
   
5,013 
   
   
   
Stock-based compensation - stock options
441 
   
   
441 
   
   
   
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
7,210 
   
   
7,210 
   
   
   
Dividends declared - common shares outstanding
(20,420)
   
   
   
(20,420)
   
   
Dividends declared - restricted stock units
(56)
   
   
271 
(327)
   
   
Common share repurchased
(256,480)
   
(256,480)
   
   
   
   
Common share repurchased (in shares)
 
(4,258,257)
 
 
 
 
 
Balance at Dec. 31, 2012
$ 726,895 
$ 5 
$ (301,839)
$ 521,285 
$ 496,354 
$ 9,712 
$ 1,378 
Balance (in shares) at Dec. 31, 2012
46,541,571 
46,541,571 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Operating activities
 
 
 
Consolidated net income
$ 107,962 
$ 98,314 
$ 86,457 
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
43,096 1
42,913 1
39,664 1
Deferred income taxes
6,316 
(4,436)
211 
Stock-based compensation expense
18,905 
15,303 
13,793 
Provision for bad debt
1,016 
1,237 
413 
Equity in net income of unconsolidated entities
(2,027)
(1,848)
(1,422)
Excess tax benefits from stock-option exercises and vesting of restricted stock units
(7,210)
(9,525)
(7,507)
Gain on sale of discontinued operations, Net of Tax
(5,188)
Loss on sale of cost-method investment
2,034 
Holding gain upon acquisition of additional ownership of equity method investment
(4,564)
Other, net
142 
592 
(90)
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable
(17,124)
(3,858)
(23,652)
Other assets
223 
2,728 
(2,341)
Accounts payable and accrued liabilities
1,173 
(4,821)
(759)
Accrued compensation
(8,861)
10,176 
12,166 
Income taxes—current
(1,205)
10,751 
4,569 
Deferred revenue
7,769 
9,578 
5,752 
Deferred rent
407 
(1,030)
1,364 
Other liabilities
(1,432)
(1,098)
(638)
Cash provided by operating activities
145,996 
164,976 
123,416 
Investing activities
 
 
 
Purchases of investments
(145,491)
(383,281)
(186,283)
Proceeds from maturities and sales of investments
260,317 
297,956 
214,929 
Capital expenditures
(30,039)
(23,322)
(14,771)
Acquisitions, net of cash acquired
300 
(102,324)
Proceeds from sale of a business, net
5,734 
Purchases of cost and equity method investments
(10,304)
(2,450)
Other, net
(25)
30 
500 
Cash used for investing activities
80,192 
(110,767)
(87,949)
Financing activities
 
 
 
Proceeds from stock-option exercises, net
4,809 
8,702 
9,220 
Excess tax benefits from stock-option exercises and vesting of restricted stock units
7,210 
9,525 
7,507 
Common shares repurchased
(251,813)
(40,672)
(3,785)
Dividends paid
(25,487)
(10,041)
Other, net
105 
(110)
(417)
Cash provided by (used for) financing activities
(265,176)
(32,596)
12,525 
Effect of exchange rate changes on cash and cash equivalents
2,440 
(1,352)
1,688 
Net increase (decrease) in cash and cash equivalents
(36,548)
20,261 
49,680 
Cash and cash equivalents - beginning of period
200,437 
180,176 
130,496 
Cash and cash equivalents - end of period
163,889 
200,437 
180,176 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for income taxes
47,355 
38,054 
37,624 
Supplemental information of non-cash investing and financing activities:
 
 
 
Unrealized gain (loss) on available-for-sale investments
1,723 
(1,480)
394 
Equipment obtained under long-term financing arrangement
$ 4,551 
$ 0 
$ 0 
Consolidated Statement of Equity (Parenthetical) (Parentheticals) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Statement of Stockholders' Equity [Abstract]
 
 
 
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax
$ 614 
$ 447 
$ 252 
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Tax
$ 194 
$ 94 
$ 103 
Description of Business
Description of Business
Description of Business
 
Morningstar, Inc. and its subsidiaries (Morningstar, we, our), is a provider of independent investment research to investors around the world. We offer an extensive line of data, software, and research products for individual investors, financial advisors, and institutional clients. We also offer asset management services for advisors, institutions, and retirement plan participants. We have operations in 27 countries.
Correction
Accounting Changes and Error Corrections [Text Block]
Correction

In 2012, we identified errors related to purchases of investments and proceeds from maturities and sales of investments included on our Consolidated Statement of Cash Flows for the year ended December 31, 2011 that had not been previously detected. We did not properly disclose the correct total in each category by equal, but offsetting, amounts. The financial statements have been corrected to increase the purchases of investments and proceeds from maturities and sales of investments as shown in the table below. The error existed in the first quarter of 2012, but does not exist in the cumulative statement as of and for the 12 months ended December 31, 2012.

The following table shows our previously reported amounts, the correction, and our as corrected amounts:
 
 
 
($000)
 
Previously Reported

 
Correction

 
As Corrected

Investing Activities
 
 
 
 
 
 
Purchases of investments
 
$
(320,193
)
 
$
(63,088
)
 
$
(383,281
)
Proceeds from maturities and sales of investments
 
$
234,868

 
$
63,088

 
$
297,956

Cash used for investing activities
 
$
(110,767
)
 
$

 
$
(110,767
)
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

The acronyms that appear in these Notes to our Consolidated Financial Statements refer to the following:
ASC
Accounting Standards Codification
ASU
Accounting Standards Update
EITF
Emerging Issues Task Force
FASB
Financial Accounting Standards Board
SEC
Securities and Exchange Commission

Principles of Consolidation. We conduct our business operations through wholly owned or majority-owned operating subsidiaries. The accompanying consolidated financial statements include the accounts of Morningstar, Inc. and our subsidiaries. The assets, liabilities, and results of operations of subsidiaries in which we have a controlling interest have been consolidated. All significant intercompany accounts and transactions have been eliminated.

We account and report the noncontrolling (minority) interests in our Consolidated Financial Statements in accordance with FASB ASC 810, Consolidation. A noncontrolling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to the parent company. We report the noncontrolling interest in our Consolidated Balance Sheet within equity separate from the shareholders' equity attributable to Morningstar, Inc. In addition, we present the net income (loss) and comprehensive income (loss) attributed to Morningstar, Inc.'s shareholders and the noncontrolling interest in our Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, and Consolidated Statements of Equity.

We account for investments in entities in which we exercise significant influence, but do not control, using the equity method.

Through our Investment Management segment (see Note 5, Segment and Geographical Area Information), we manage certain funds outside of the United States that are considered variable interest entities. For the majority of these variable interest entities, we do not have a variable interest in them. In cases where we do have a variable interest, we are not the primary beneficiary. Accordingly, we do not consolidate any of these variable interest entities.

Comprehensive Income. In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. In accordance with ASU No. 2011-05, we present the total of comprehensive income, the components of net income, and the components of other comprehensive income (OCI) in two separate but consecutive statements, our Consolidated Statements of Income and separately, our Consolidated Statements of Comprehensive Income. We no longer present total comprehensive income in our Consolidated Statement of Equity.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. Actual results may differ from these estimates.

Reclassifications. Certain amounts reported in previous years have been reclassified to conform to the 2012 presentation.

Cash and Cash Equivalents. Cash and cash equivalents consist of cash and investments with original maturities of three months or less. We state them at cost, which approximates fair value. We state at fair value the portion of our cash equivalents that are invested in money market funds, which are actively traded and have quoted market prices.

Investments. We account for our investments in accordance with FASB ASC 320, Investments-Debt and Equity Securities. We classify our investments into three categories: held-to-maturity, trading, and available-for-sale.

Held-to-maturity:  We classify certain investments, primarily certificates of deposit, as held-to-maturity securities, based on our intent and ability to hold these securities to maturity. We record held-to-maturity investments at amortized cost in our Consolidated Balance Sheets.

Trading:  We classify certain other investments, primarily equity securities, as trading securities, primarily to satisfy the requirements of one of our wholly owned subsidiaries, which is a registered broker-dealer. We include realized and unrealized gains and losses associated with these investments as a component of our operating income in our Consolidated Statements of Income. We record these securities at their fair value in our Consolidated Balance Sheets.

Available-for-sale:  Investments not considered held-to-maturity or trading securities are classified as available-for-sale securities. Available-for-sale securities primarily consist of fixed-income securities. We report unrealized gains and losses for available-for-sale securities as other comprehensive income (loss), net of related income taxes. We record these securities at their fair value in our Consolidated Balance Sheets.

Fair Value Measurements. We follow FASB ASC 820, Fair Value Measurements. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Under FASB ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances and does not require any new fair value measurements.

Effective January 1, 2012, we adopted FASB ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU No. 2011-04 clarifies existing fair value measurement and disclosure requirements, amends certain fair value measurement principles, and requires additional disclosures about fair value measurements. The adoption of ASU No. 2011-04 did not have a material impact on our Consolidated Financial Statements.




FASB ASC 820 uses a fair value hierarchy based on three broad levels of valuation inputs as described below:

Level 1:  Valuations based on quoted prices in active markets for identical assets or liabilities that the company has the ability to access.

Level 2:  Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3:  Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

We provide additional information about our cash equivalents and investments that are subject to valuation under FASB ASC 820 in Note 6 in these Notes to our Consolidated Financial Statements.

The Fair Value Option for Financial Assets and Financial Liabilities. FASB ASC 825, Financial Instruments, permits entities the option to measure many financial instruments and certain other items at fair value with changes in fair value recognized in earnings each period. FASB ASC 825 allows the fair value option to be elected on an instrument-by-instrument basis when the asset or liability is initially recognized or when there's an event that gives rise to a new basis of accounting for that instrument. We do not apply this fair value option to any of our eligible assets.

Concentration of Credit Risk. No single customer is large enough to pose a significant credit risk to our operations or financial condition. For the years ended December 31, 2012, 2011, and 2010, no single customer represented 5% or more of our consolidated revenue. If receivables from our customers become delinquent, we begin a collections process. We maintain an allowance for doubtful accounts based on our estimate of the probable losses of accounts receivable.

Property, Equipment, and Depreciation. We state property and equipment at historical cost, net of accumulated depreciation. We depreciate property and equipment primarily using the straight-line method based on the useful life of the asset, which ranges from three to seven years. We amortize leasehold improvements over the lease term or their useful lives, whichever is shorter.

Computer Software and Internal Product Development Costs. We capitalize certain costs in accordance with FASB ASC 350-40, Internal-Use Software, FASB ASC 350-50, Website Development Costs, and FASB ASC 985, Software. Internal product development costs mainly consist of employee costs for developing new web-based products and certain major enhancements of existing products. We amortize these costs on a straight-line basis over the estimated economic life, which is generally three years. Capitalized software development costs related to projects that have not been placed into service yet are included in our construction in progress balance.

Business Combinations. Over the past several years, we have acquired companies that complement our business operations. For each acquisition, we allocate the purchase price to the assets acquired, liabilities assumed, and goodwill. We follow FASB ASC 805, Business Combinations. We recognize and measure the fair value of the acquired operation as a whole, and the assets acquired and liabilities assumed at their full fair values as of the date control is obtained, regardless of the percentage ownership in the acquired operation or how the acquisition was achieved. We expense direct costs related to the business combination, such as advisory, accounting, legal, valuation, and other professional fees, as incurred. We recognize restructuring costs, including severance and relocation for employees of the acquired entity, as post-combination expenses unless the target entity meets the criteria of FASB ASC 420, Exit or Disposal Cost Obligations on the acquisition date.

As part of the purchase price allocation, we follow the requirements of FASB ASC 740, Income Taxes. This includes establishing deferred tax assets or liabilities reflecting the difference between the values assigned for financial statement purposes and values applicable for income tax purposes. In certain acquisitions, the goodwill resulting from the purchase price allocation may not be deductible for income tax purposes. FASB ASC 740 prohibits recognition of a deferred tax asset or liability for temporary differences in goodwill if goodwill is not amortizable and deductible for tax purposes.

Goodwill. Changes in the carrying amount of our recorded goodwill are mainly the result of business acquisitions and divestitures. In accordance with FASB ASC 350, Intangibles - Goodwill and Other, we do not amortize goodwill; instead, goodwill is subject to an impairment test annually, or whenever indicators of impairment exist. An impairment would occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. In 2011, we altered the definition of our reporting units to align with the definition of our operating segments. This realignment occurred because of our successful efforts to integrate acquired businesses and leverage proprietary content across multiple products. As a result, the businesses that previously represented components of our operating segments no longer met the criteria for recognition as reporting units. Our reporting units constitute businesses for which discrete financial information, which is regularly reviewed by management, is available. We performed annual impairment reviews in the fourth quarter of 2012, 2011, and 2010. We did not record any significant impairment losses in 2012, 2011, and 2010.

Intangible Assets. We amortize intangible assets using the straight-line method over their estimated economic useful lives, which range from one to 25 years. We have no intangible assets with indefinite useful lives. In accordance with FASB ASC 360-10-35, Subsequent Measurement-Impairment or Disposal of Long Lived Assets, we review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the value of future undiscounted cash flows is less than the carrying amount of an asset, we record an impairment loss based on the excess of the carrying amount over the fair value of the asset. We recorded an impairment loss of approximately $800,000 in 2011. We did not record any impairment losses in 2012 or 2010. The impairment charge is included in our amortization expense on our Consolidated Statements of Income.

Revenue Recognition:  We recognize revenue in accordance with SEC SAB Topic 13, Revenue Recognition, ASC 605-25, Revenue Recognition:  Multiple Element Arrangements, and ASC 985-605, Software: Revenue Recognition.

Effective January 1, 2011, we adopted FASB ASU No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. ASU 2009-13 superseded EITF Issue 00-21, Revenue Arrangements with Multiple Deliverables and establishes the accounting and reporting guidance for arrangements when a vendor performs multiple revenue-generating activities, addresses how to separate deliverables, and specifies how to measure and allocate arrangement consideration. We applied this guidance for revenue arrangements entered into or materially modified from January 1, 2011. The adoption of ASU 2009-13 did not significantly affect either the timing or amount of our revenue recognition.
We recognize revenue when all of the following conditions are met:

There is persuasive evidence of an arrangement, as evidenced by a signed contract;
Delivery of our products and services is a prerequisite for recognition of revenue. If arrangements include an acceptance provision, we generally begin recognizing revenue upon the receipt of customer acceptance;
The amount of fees to be paid by the customer is fixed or determinable; and
The collectibility of the fees is reasonably assured.

We generate revenue through sales of Morningstar Data, Morningstar Advisor Workstation (including Morningstar Office), Morningstar Direct, Morningstar Equity Research, Premium Membership fees for Morningstar.com, our structured credit research and ratings offerings, and a variety of other investment-related products and services. We generally structure the revenue agreements for these offerings as licenses or subscriptions. We recognize revenue from licenses and subscription sales ratably as we deliver the product or service and over the service obligation period defined by the terms of the customer contract. For new-issue ratings and analysis for CMBS, we charge asset-based fees that are paid by the issuer on the rated balance of the transaction and recognize the revenue immediately upon issuance of the transaction.

We also generate revenue from Internet advertising, primarily from “impression-based” contracts. For advertisers who use our cost-per-impression pricing, we charge fees each time we display their ads on our site.

Investment Advisory Services includes a broad range of services. Pricing for the consulting services is based on the scope of work and the level of service required, and includes asset-based fees for work we perform that involves investment management or acting as a subadvisor to investment portfolios. In arrangements that involve asset-based fees, we generally invoice clients quarterly in arrears based on average assets for the quarter. We recognize asset-based fees once the fees are fixed and determinable assuming all other revenue recognition criteria are met.

Our Retirement Solutions offerings help retirement plan participants plan and invest for retirement. We offer these services both through retirement plan providers (typically third-party asset management companies that offer proprietary mutual funds) and directly to plan sponsors (employers that offer retirement plans to their employees). For our Retirement Solutions offerings, we provide both a hosted solution as well as proprietary installed software advice solution. Clients can integrate the installed customized software into their existing systems to help investors accumulate wealth, transition into retirement, and manage income during retirement. The revenue arrangements for Retirement Solutions generally extend over multiple years. Our contracts may include one-time setup fees, implementation fees, technology licensing and maintenance fees, asset-based fees for managed retirement accounts, fixed and variable fees for advice and guidance, or a combination of these fee structures. Upon customer acceptance, we recognize revenue ratably over the term of the agreement. We recognize asset-based fees and variable fees in excess of any minimum once the value is fixed and determinable.

Some of our revenue arrangements with our customers combine multiple products and services. These products and services may be provided at different points in time or over different time periods within the same arrangement. We allocate fees to the separate deliverables based on the deliverables’ relative selling price, which is generally based on the price we charge when the same deliverable is sold separately.

We record taxes imposed on revenue-producing transactions (such as sales, use, value-added, and some excise taxes) on a net basis; therefore, we exclude such taxes from revenue in our Consolidated Statements of Income.

Deferred revenue represents the portion of subscriptions billed or collected in advance of the service being provided, which we expect to recognize as revenue in future periods. Certain arrangements may have cancellation or refund provisions. If we make a refund, it typically reflects the amount collected from a customer for which we have not yet provided services. The refund therefore results in a reduction of deferred revenue.

Advertising Costs. Advertising costs include expenses incurred for various print and Internet ads, search engine fees, and direct mail campaigns. We expense advertising costs as incurred. The table below summarizes our advertising expense for the past three years:
($000)
 
2012

 
2011

 
2010

Advertising expense
 
$
6,306

 
$
8,210

 
$
8,572



Stock-Based Compensation Expense. We account for our stock-based compensation expense in accordance with FASB ASC 718, Compensation—Stock Compensation. Our stock-based compensation expense reflects grants of restricted stock units, restricted stock, and stock options. We measure the fair value of our restricted stock units and restricted stock on the date of grant based on the closing market price of Morningstar's common stock on the day prior to grant. For stock options granted in 2011, we estimated the fair value of our stock options on the date of grant using a Black-Scholes option-pricing model. We amortize the fair values to stock-based compensation expense, net of estimated forfeitures, ratably over the vesting period.

We estimate expected forfeitures of all employee stock-based awards and recognize compensation cost only for those awards expected to vest. We determine forfeiture rates based on historical experience and adjust the estimated forfeitures to actual forfeiture experience as needed.

Liability for Sabbatical Leave. In certain of our operations, we offer employees a sabbatical leave. Although the sabbatical policy varies by region, in general, Morningstar's full-time employees are eligible for six weeks of paid time off after four years of continuous service. We account for our sabbatical liability in accordance with FASB ASC 710-10-25, Compensated Absences. We record a liability for employees' sabbatical benefits over the period employees earn the right for sabbatical leave.

Income Taxes. We record deferred income taxes for the temporary differences between the carrying amount of assets and liabilities for financial statement purposes and the amounts used for income tax purposes in accordance with FASB ASC 740, Income Taxes. FASB ASC 740 prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements, and also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, and disclosure for uncertain tax positions.

We recognize interest and penalties related to unrecognized tax benefits as part of income tax expense in our Consolidated Statements of Income. We classify liabilities related to unrecognized tax benefits as either current liabilities or “Other long-term liabilities” in our Consolidated Balance Sheet, depending on when we expect to make payment.

Income per Share. We compute and present income per share in accordance with FASB ASC 260, Earnings Per Share. The difference between weighted average shares outstanding and diluted shares outstanding primarily reflects the dilutive effect associated with our stock-based compensation plans. Beginning in 2010, we further compute income per share in accordance with FASB ASC 260-10-45-59A, Participating Securities and the Two Class Method.

In May 2010, we issued restricted stock in conjunction with the acquisition of Realpoint, LLC (now Morningstar Credit Ratings, LLC). Because the restricted stock contains nonforfeitable rights to dividends, it meets the criteria of a participating security. Under the two-class method, we allocate earnings between common stock and participating securities. The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. For purposes of calculating earnings per share, we reduce our reported net earnings by the amount allocated to participating securities to arrive at the earnings allocated to common stock shareholders.

ASC 260-10-45-59A requires the dilutive effect of participating securities to be calculated using the more dilutive of the treasury stock or the two-class method. We have determined the two-class method to be the more dilutive. As such, we adjusted the earnings allocated to common stock shareholders in the basic earnings per share calculation for the reallocation of undistributed earnings to participating securities to calculate diluted earnings per share.

Foreign Currency. We translate the financial statements of non-U.S. subsidiaries to U.S. dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for revenue and expense. We use the local currency as the functional currency for all of our non-U.S. subsidiaries. We record translation adjustments for non-U.S. subsidiaries as a component of “Other comprehensive income (loss)” in our Consolidated Statements of Comprehensive Income. We include exchange gains and losses arising from transactions denominated in currencies other than the functional currency in “Other income (expense), net” in our Consolidated Statements of Income.



Income Per Share
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 income per share:

(in thousands, except per share amounts)
 
2012

 
2011

 
2010

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Net income attributable to Morningstar, Inc.:
 
$
108,079

 
$
98,357

 
$
86,370

Less: Distributed earnings available to participating securities
 
(41
)
 
(40
)
 
(10
)
Less: Undistributed earnings available to participating securities
 
(47
)
 
(259
)
 
(335
)
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
107,991

 
$
98,058

 
$
86,025

 
 
 
 
 
 
 
Weighted average common shares outstanding
 
48,497

 
50,032

 
49,249

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.12

 
$
1.96

 
$
1.75

Discontinued operations
 
0.11

 

 

Total
 
$
2.23

 
$
1.96

 
$
1.75

 
 
 
 
 
 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
107,991

 
$
98,058

 
$
86,025

Add: Undistributed earnings allocated to participating securities
 
47

 
259

 
335

Less: Undistributed earnings reallocated to participating securities
 
(46
)
 
(254
)
 
(326
)
Numerator for diluted net income per share — undistributed and distributed earnings available to common shareholders
 
$
107,992

 
$
98,063

 
$
86,034

 
 


 


 
 
Weighted average common shares outstanding
 
48,497

 
50,032

 
49,249

Net effect of dilutive stock options and restricted stock units
 
651

 
956

 
1,306

Weighted average common shares outstanding for computing diluted income per share
 
49,148

 
50,988

 
50,555

 
 


 


 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.10

 
$
1.92

 
$
1.70

Discontinued operations
 
0.10

 

 

Total
 
$
2.20

 
$
1.92

 
$
1.70


The following table shows the number of weighted average stock options, restricted stock units, and restricted stock excluded from our calculation of diluted earnings per share from both continuing operations and net earnings because their inclusion would have been anti-dilutive:
(in thousands)
 
2012

 
2011

 
2010

Weighted Average stock options
 
83

 
55

 

Weighted average restricted stock units
 
7

 

 

Weighted average restricted stock
 

 

 

Total
 
90

 
55

 


These stock options and restricted stock units could be included in the calculation in the future.
Segment and Geographical Area Information
Segment and Geographical Area Information
Segment and Geographical Area Information

Morningstar has two operating segments:
 
Investment Information. The Investment Information segment includes all of our data, software, and research products and services. These products are typically sold through subscriptions or license agreements.
 
The largest products in this segment based on revenue are Morningstar Data (formerly Licensed Data), Morningstar Advisor Workstation (including Morningstar Office), Morningstar Direct, Morningstar.com, Morningstar Integrated Web Tools, and Morningstar Principia. Morningstar Data is a set of investment data spanning all of our investment databases, including real-time pricing and commodity data, and is available through electronic data feeds. Advisor Workstation is a web-based investment planning system for advisors. Advisor Workstation is available in two editions: Morningstar Office for independent financial advisors and an enterprise edition for financial advisors affiliated with larger firms. Morningstar Direct is a web-based institutional research platform. Morningstar.com includes both Premium Memberships and Internet advertising sales. Morningstar Integrated Web Tools is a set of services that helps institutional clients build customized websites or enhance their existing sites with Morningstar’s online tools and components. Principia is our CD-ROM-based investment research and planning software for advisors.
 
The Investment Information segment also includes Morningstar Equity Research, which we distribute through several channels. We sell Morningstar Equity Research to companies that purchase our research for their own use or provide our research to their affiliated advisors or individual investor clients.

The Investment Information segment also includes Morningstar Credit Research and Morningstar Structured Credit Ratings. The latter is provided by Morningstar Credit Ratings, LLC, a Nationally Recognized Statistical Rating Organization specializing in structured finance. It offers securities ratings, research, surveillance services, and data to help institutional investors identify risk in commercial mortgage-backed securities (CMBS).

We also offer a variety of financial communications and newsletters, other institutional and advisor software, and investment indexes.

Investment Management. The Investment Management segment includes all of our asset management operations, which earn the majority of their revenue from asset-based fees.
 
The key products and services in this segment based on revenue are Investment Advisory Services (formerly Investment Consulting), which focuses on investment monitoring and asset allocation for funds of funds, including mutual funds and variable annuities; Retirement Solutions, including the Morningstar Retirement Manager and Advice by Ibbotson platforms; and Morningstar Managed Portfolios, a fee-based discretionary asset management service that includes a series of mutual fund, exchange-traded fund, and stock portfolios tailored to meet a range of investment time horizons and risk levels that financial advisors can use for their clients' taxable and tax-deferred accounts. In addition, we offer Managed Portfolios through our subsidiary Ibbotson Australia which provides asset management services primarily to institutional clients and individual investors.
 
Our segment accounting policies are the same as those described in Note 3, except for the capitalization and amortization of internal product development costs, amortization of intangible assets, and costs related to corporate functions. We exclude these items from our operating segment results to provide our chief operating decision maker with a better indication of each segment’s ability to generate cash flow. This information is one of the criteria used by our chief operating decision maker in determining how to allocate resources to each segment. We include capitalization and amortization of internal product development costs, amortization of intangible assets, and costs related to corporate functions in the Corporate Items category. Our segment disclosures are consistent with the business segment information provided to our chief operating decision maker on a recurring basis; for that reason, we don’t present balance sheet information by segment. We disclose goodwill by segment in accordance with the requirements of FASB ASC 350-20-50, Intangibles - Goodwill - Disclosure.
 
 
The following tables present information about our operating segments:
 
2012 Segment Information
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2012
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

External revenue
 
$
529,984

 
$
128,304

 
$

 
$
658,288

Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
356,165

 
64,765

 
24,689

 
445,619

Stock-based compensation expense
 
13,831

 
2,278

 
2,796

 
18,905

Depreciation and amortization
 
9,288

 
134

 
33,674

 
43,096

Operating income (loss)
 
$
150,700

 
$
61,127

 
$
(61,159
)
 
$
150,668

 
 
 
 
 
 
 
 
 
U.S. capital expenditures
 
 
 
 

 
 

 
$
22,280

Non-U.S. capital expenditures
 
 

 
 

 
 

 
$
7,759

 
 
 
 
 
 
 
 
 
U.S. revenue
 
 

 
 

 
 

 
$
466,947

Non-U.S. revenue
 
 

 
 

 
 

 
$
191,341

 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2012
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

Goodwill
 
$
279,164

 
$
41,681

 
$

 
$
320,845

 
 
 
 
 
 
 
 
 
U.S. long-lived assets
 
 
 
 
 
 
 
$
60,371

Non-U.S. long-lived assets
 
 
 
 
 
 
 
$
23,651

 
2011 Segment Information
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2011
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

External revenue
 
$
500,909

 
$
130,491

 
$

 
$
631,400

Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
351,194

 
58,596

 
24,979

 
434,769

Stock-based compensation expense
 
10,113

 
2,080

 
3,110

 
15,303

Depreciation and amortization
 
8,088

 
166

 
34,659

 
42,913

Operating income (loss)
 
$
131,514

 
$
69,649

 
$
(62,748
)
 
$
138,415

 
 
 
 
 
 
 
 
 
U.S. capital expenditures
 
 

 
 

 
 

 
$
13,816

Non-U.S. capital expenditures
 
 

 
 

 
 

 
$
9,506

 
 
 
 
 
 
 
 
 
U.S. revenue
 
 

 
 

 
 

 
$
446,470

Non-U.S. revenue
 
 

 
 

 
 

 
$
184,930

 
 
As of December 31, 2011
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

Goodwill
 
$
277,059

 
$
41,433

 
$

 
$
318,492

 
 
 
 
 
 
 
 
 
U.S. long-lived assets
 
 

 
 

 
 

 
$
44,572

Non-U.S. long-lived assets
 
 

 
 

 
 

 
$
23,624

 
2010 Segment Information
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2010
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items
 
Total

External revenue
 
$
444,957

 
$
110,394

 
$

 
$
555,351

Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
301,722

 
51,361

 
27,752

 
380,835

Stock-based compensation expense
 
8,110

 
2,032

 
3,651

 
13,793

Depreciation and amortization
 
7,385

 
185

 
32,094

 
39,664

Operating income (loss)
 
$
127,740

 
$
56,816

 
$
(63,497
)
 
$
121,059

 
 
 
 
 
 
 
 
 
U.S. capital expenditures
 
 
 
 
 
 
 
$
5,067

Non-U.S. capital expenditures
 
 
 
 
 
 
 
$
9,704

 
 
 
 
 
 
 
 
 
U.S. revenue
 
 
 
 
 
 
 
$
398,215

Non-U.S. revenue
 
 
 
 
 
 
 
$
157,136

 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2010
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

Goodwill
 
$
275,611

 
$
42,050

 
$

 
$
317,661

 
 
 
 
 
 
 
 
 
U.S. long-lived assets
 
 
 
 
 
 
 
$
39,496

Non-U.S. long-lived assets
 
 
 
 
 
 
 
$
22,609



Information by geographical region is as follows:
External revenue by geographic region
 
 
 
 
 
 
 
 
 
Year ended December 31
 
($000)
 
2012

 
2011

 
2010

 
United States
 
$
466,947

 
$
446,470

 
$
398,215

 
United Kingdom
 
56,794

 
53,427

 
43,797

 
Europe, excluding the United Kingdom
 
49,844

 
49,507

 
39,851

 
Australia
 
38,229

 
39,761

 
35,638

 
Canada
 
30,664

 
27,808

 
25,533

 
Asia, excluding Japan
 
9,934

 
9,240

 
7,855

 
Japan
 
3,831

 
3,948

 
3,871

 
Other
 
2,045

 
1,239

 
591

 
Total
 
$
658,288

 
$
631,400

 
$
555,351

 


Long-lived assets by geographic region
 
 
 
 
 
 
 
 
 
As of December 31
 
($000)
 
2012

 
2011

 
2010

 
United States
 
$
60,371

 
$
44,572

 
39,496

 
United Kingdom
 
7,435

 
7,512

 
5,960

 
Europe, excluding the United Kingdom
 
2,356

 
2,629

 
3,479

 
Australia
 
1,402

 
1,415

 
1,554

 
Canada
 
1,773

 
2,076

 
2,395

 
Asia, excluding Japan
 
10,445

 
9,656

 
8,874

 
Japan
 
84

 
282

 
233

 
Other
 
156

 
54

 
114

 
Total
 
$
84,022

 
$
68,196

 
62,105

 
Investments and Fair Value Measurements
Investments and Fair Value Measurements
Investments and Fair Value Measurements
 
We account for our investments in accordance with FASB ASC 320, Investments—Debt and Equity Securities. We classify our investments in three categories: available-for-sale, held-to-maturity, and trading. We monitor the concentration, diversification, maturity, and liquidity of our investment portfolio, which is primarily invested in fixed-income securities, and classify our investment portfolio as shown below:
 
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Available-for-sale
 
$
125,786

 
$
247,917

Held-to-maturity
 
26,357

 
16,347

Trading securities
 
5,386

 
5,491

Total
 
$
157,529

 
$
269,755


 
The following table shows the cost, unrealized gains (losses), and fair values related to investments classified as available-for-sale and held-to-maturity:
 
 
 
As of December 31, 2012
 
As of December 31, 2011
($000)
 
Cost

 
Unrealized
Gain

 
Unrealized
Loss

 
Fair
Value

 
Cost

 
Unrealized
Gain

 
Unrealized
Loss

 
Fair
Value

Available-for-sale:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Government obligations
 
$
40,669

 
$
29

 
$
(608
)
 
$
40,090

 
$
139,099

 
$
72

 
$
(402
)
 
$
138,769

Corporate bonds
 
49,339

 
36

 
(292
)
 
49,083

 
61,589

 
14

 
(280
)
 
61,323

Foreign obligations
 
2,437

 
1

 
(19
)
 
2,419

 

 

 

 

Commercial paper
 
2,000

 

 

 
2,000

 
29,964

 
2

 
(7
)
 
29,959

Equity securities and exchange-traded funds
 
19,613

 
1,359

 
(323
)
 
20,649

 
8,461

 
368

 
(558
)
 
8,271

Mutual funds
 
10,499

 
1,092

 
(46
)
 
11,545

 
9,298

 
363

 
(66
)
 
9,595

Total
 
$
124,557

 
$
2,517

 
$
(1,288
)
 
125,786

 
$
248,411

 
$
819

 
$
(1,313
)
 
$
247,917

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Certificates of deposit
 
$
26,357

 
$

 
$

 
$
26,357

 
$
16,347

 
$

 
$

 
$
16,347


 
As of December 31, 2012 and December 31, 2011, investments with unrealized losses for greater than a 12-month period were not material to the Consolidated Balance Sheets and were not deemed to have other than temporary declines in value.

The table below shows the cost and fair value of investments classified as available-for-sale and held-to-maturity based on their contractual maturities as of December 31, 2012 and December 31, 2011. The expected maturities of certain fixed-income securities may differ from their contractual maturities because some of these holdings have call features that allow the issuers the right to prepay obligations without penalties.
 
 
 
As of December 31, 2012
 
As of December 31, 2011
($000)
 
Cost

 
Fair Value

 
Cost

 
Fair Value

Available-for-sale:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
87,599

 
$
86,784

 
$
155,651

 
$
155,247

Due in one to two years
 
6,846

 
6,808

 
75,001

 
74,804

Equity securities, exchange-traded funds, and mutual funds
 
30,112

 
32,194

 
17,759

 
17,866

Total
 
$
124,557

 
$
125,786

 
$
248,411

 
$
247,917

 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
26,352

 
$
26,352

 
$
16,342

 
$
16,342

Due in one to three years
 
5

 
5

 
5

 
5

Total
 
$
26,357

 
$
26,357

 
$
16,347

 
$
16,347


 
As of December 31, 2012 and December 31, 2011, held-to-maturity investments included a $1,500,000 and a $1,600,000 certificate of deposit, respectively, held primarily as collateral against bank guarantees for our office leases, primarily in Australia.

The following table shows the realized gains and losses arising from sales of our investments classified as available-for-sale recorded in our Consolidated Statements of Income: 
($000)
 
2012

 
2011

 
2010

Realized gains
 
$
1,671

 
$
761

 
$
276

Realized losses
 
(1,133
)
 
(501
)
 
(1
)
Realized gains, net
 
$
538

 
$
260

 
$
275


 
We determine realized gains and losses using the specific identification method.

The following table shows the net unrealized gains (losses) on trading securities as recorded in our Consolidated Statements of Income:
 
($000)
 
2012

 
2011

 
2010

Unrealized gains (losses), net
 
$
269

 
$
(387
)
 
$
237



The fair value of our assets subject to fair value measurements and that are measured at fair value on a recurring basis using the fair value hierarchy and the necessary disclosures under FASB ASC 820, Fair Value Measurement, are as follows:
 
 
 
Fair Value
 
Fair Value Measurements as of December 31, 2012
 
 
as of
 
Using Fair Value Hierarchy
($000)
 
December 31, 2012
 
Level 1

 
Level 2

 
Level 3

Available-for-sale investments
 
 

 
 

 
 

 
 

Government obligations
 
$
40,090

 
$

 
$
40,090

 
$

Corporate bonds
 
49,083

 

 
49,083

 

Foreign obligations
 
2,419

 

 
2,419

 

Commercial paper
 
2,000

 

 
2,000

 

Equity securities and exchange-traded funds
 
20,649

 
20,649

 

 

Mutual funds
 
11,545

 
11,545

 

 

Trading securities
 
5,386

 
5,386

 

 

Cash equivalents
 
398

 
398

 

 

Total
 
$
131,570

 
$
37,978

 
$
93,592

 
$

 
 
 
Fair Value
 
Fair Value Measurements as of December 31, 2011
 
 
as of
 
Using Fair Value Hierarchy
($000)
 
December 31, 2011
 
Level 1

 
Level 2

 
Level 3

Available-for-sale investments
 
 

 
 

 
 

 
 

Government obligations
 
$
138,769

 
$

 
$
138,769

 
$

Corporate bonds
 
61,323

 

 
61,323

 

Commercial paper
 
29,959

 

 
29,959

 

Equity securities and exchange-traded funds
 
8,271

 
8,271

 

 

Mutual funds
 
9,595

 
9,595

 

 

Trading securities
 
5,491

 
5,491

 

 

Cash equivalents
 
30,818

 
30,818

 

 

Total
 
$
284,226

 
$
54,175

 
$
230,051

 
$


 
Level 1:
Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2:
Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3:
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Based on our analysis of the nature and risks of our investments in equity securities and mutual funds, we have determined that presenting these investment categories each in the aggregate is appropriate.

There were no transfers between levels one and two during the year ended December 31, 2012.

We measure the fair value of money market funds, equity securities, and exchange-traded funds based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from observable market data. We did not hold any securities categorized as Level 3 as of December 31, 2012 and December 31, 2011.
Acquisitions, Goodwill, and Other Intangible Assets
Acquisitions, Goodwill, and Other Intangible Assets
Acquisitions, Goodwill, and Other Intangible Assets
 
2012 and 2011 Acquisitions
 
We did not complete any acquisitions in 2012 and 2011.
 
2010 Acquisitions
 
Aegis Equities Research

In April 2010, we acquired Aegis Equities Research, a provider of independent equity research in Australia, for $10,269,000 in cash, net of cash acquired. We began including the financial results of this acquisition in our Consolidated Financial Statements on April 1, 2010. The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Cash and cash equivalents
 
$
51

Investments
 
55

Accounts receivable
 
198

Other non-current assets
 
62

Intangible assets
 
5,801

Goodwill
 
5,117

Deferred revenue
 
(617
)
Other current and non-current liabilities
 
(347
)
Total purchase price
 
$
10,320



The allocation includes $5,801,000 of acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
1,879

 
10
Technology-based assets
 
3,253

 
6
Intellectual property (trademarks and trade names)
 
46

 
1
Non-competition agreement
 
623

 
3
Total intangible assets
 
$
5,801

 
7


Goodwill of $5,117,000 represents the premium we paid over the fair value of the net tangible and intangible assets acquired with this acquisition. We paid this premium for a number of reasons, including the strategic benefits of creating a larger analyst team that will enable us to expand our coverage of Australian-listed companies, provide Australian clients with more robust independent research, and give us the potential to expand our services in multiple delivery channels. Approximately $1,787,000 of the intangible assets is deductible for income tax purposes over a period of approximately three years from the acquisition date.

Old Broad Street Research Ltd

In April 2010, we acquired Old Broad Street Research Ltd. (OBSR) for $17,937,000 in cash, net of cash acquired. OBSR is a provider of fund research, ratings, and investment consulting services in the United Kingdom and offers an array of customized consulting services including model portfolios, advice on fund construction, and corporate governance services that are used by many of the leading financial advisers and fund platforms. We began including the financial results of this acquisition in our Consolidated Financial Statements on April 12, 2010.

The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Cash and cash equivalents
 
$
4,632

Accounts receivable and other current assets
 
986

Other non-current assets
 
1,632

Intangible assets
 
9,266

Goodwill
 
12,422

Deferred revenue
 
(2,633
)
Accounts payable and accrued and other current liabilities
 
(1,342
)
Deferred tax liability--non-current
 
(2,317
)
Other non-current liabilities
 
(77
)
Total purchase price
 
$
22,569



The allocation includes $9,266,000 of acquired intangible assets, as follows:

 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
7,073

 
13
Technology-based assets
 
1,424

 
5
Intellectual property (trademarks and trade names)
 
769

 
10
Total intangible assets
 
$
9,266

 
12


Goodwill of $12,422,000 represents the premium we paid over the fair value of the acquired net tangible and intangible assets. We paid this premium for a number of reasons, including the strategic benefit of adding to our existing fund research team in London and continuing to build our thought leadership in investment research. OBSR will also help us expand our investment consulting presence in the United Kingdom, where we already provide asset allocation, manager selection, and portfolio construction services to institutions and intermediaries.

The deferred tax liability of $2,317,000 is primarily because the amortization expense related to intangible assets is not deductible for income tax purposes.

Realpoint, LLC

In May 2010, we acquired Realpoint, LLC (Realpoint), a Nationally Recognized Statistical Rating Organization (NRSRO) that specializes in structured finance. Realpoint offers securities ratings, research, surveillance services, and data to help institutional investors identify credit risk in commercial mortgage-backed securities. Institutional investment firms subscribe to Realpoint's ratings and analytics, including money managers who invest in commercial mortgage-backed securities. We began including the financial results of this acquisition in our Consolidated Financial Statements on May 3, 2010. In 2011, we renamed Realpoint as Morningstar Credit Ratings, LLC.

In conjunction with this acquisition, we paid $38,327,000 in cash, net of cash acquired, and issued 199,174 shares of restricted stock to the selling employee-shareholders. Because of the terms of the restricted share agreements and in accordance with FASB ASC 805, Business Combinations, we account for these grants as stock-based compensation expense and not as part of the acquisition consideration. See Note 12 for additional information concerning the accounting for this restricted stock.

The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

 
 
($000)

Cash and cash equivalents
 
$
5,489

Accounts receivable and other current assets
 
3,567

Other non-current assets
 
738

Deferred tax asset--non-current
 
195

Intangible assets
 
19,120

Goodwill
 
24,903

Deferred revenue
 
(7,316
)
Accounts payable and accrued and other current liabilities
 
(2,785
)
Other non-current liabilities
 
(95
)
Total purchase price
 
$
43,816



The allocation includes $19,120,000 of acquired intangible assets, as follows:

 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
5,000

 
10
Technology-based assets
 
13,610

 
10
Intellectual property (trademarks and trade names)
 
300

 
1
Non-competition agreement
 
210

 
6
Total intangible assets
 
$
19,120

 
10


Goodwill of $24,903,000 represents the premium we paid over the fair value of the acquired net tangible and intangible assets. We paid this premium for a number of reasons, including the opportunity for Morningstar to enter the structured finance ratings and analysis business.

The value assigned to goodwill, intangible assets, and restricted stock at the date of grant are deductible for income tax purposes over a period of approximately 15 years from the acquisition date.

Increased Ownership Interest in Morningstar Danmark A/S

In July 2010, we acquired an additional 75% interest in Morningstar Danmark A/S (Morningstar Denmark), increasing our ownership to 100% from 25%. Morningstar Denmark's main offering is the investment information website for individual investors, Morningstar.dk, which provides fund and ETF data, portfolio tools, and market analysis. We began consolidating the financial results of this acquisition in our Consolidated Financial Statements on July 1, 2010.

Morningstar Denmark's total estimated fair value of $20,192,000 includes $15,467,000 in cash paid to acquire the remaining 75% interest in Morningstar Denmark and $4,725,000 related to the 25% of Morningstar Denmark we previously held. We determined the fair value of the previously held 25% investment independent of the acquired controlling interest and recorded a non-cash holding gain of $4,564,000. The following table summarizes our allocation of the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Cash and cash equivalents
 
$
915

Accounts receivable and other current assets
 
632

Other non-current assets
 
65

Intangible assets
 
9,854

Goodwill
 
12,342

Deferred revenue
 
(496
)
Deferred tax liability
 
(2,504
)
Other current and non-current liabilities
 
(616
)
Total fair value of Morningstar Denmark
 
$
20,192



The allocation includes $9,854,000 of acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
9,130

 
14
Technology-based assets
 
724

 
6
Total intangible assets
 
$
9,854

 
13


We recognized a deferred tax liability of $2,504,000 mainly because the amortization expense related to certain intangible assets is not deductible for income tax purposes.

Goodwill of $12,342,000 represents the premium over the fair value of the net tangible and intangible assets acquired with this acquisition. We paid this premium for a number of reasons, including the opportunity to offer Morningstar's full suite of products and services to investors in Denmark and further leveraging Morningstar's global reach, investment databases, and technology expertise.

Annuity intelligence business of Advanced Sales and Marketing Corporation (ASMC)

In November 2010, we acquired the annuity intelligence business of Advanced Sales and Marketing Corporation (ASMC) for $14,113,000 in cash. The acquisition includes the Annuity Intelligence Report (AI Report), a web-based service that helps broker-dealers, insurers, and the financial professionals they support better understand and more effectively present variable annuity products to their clients. The AI Report service leverages a proprietary database of more than 1,000 variable annuities that includes “plain-English” translations of complex but important information found in prospectuses and other public filings. We began including the financial results of this acquisition in our Consolidated Financial Statements on November 1, 2010.

The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Accounts receivable and other current assets
 
$
163

Other non-current assets
 
9

Intangible assets
 
6,300

Goodwill
 
9,028

Deferred revenue
 
(1,364
)
Accounts payable and accrued and other current liabilities
 
(23
)
Total purchase price
 
$
14,113



The allocation includes $6,300,000 of acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
4,100

 
20
Technology-based assets
 
2,100

 
9
Intellectual property (trademarks and trade names)
 
100

 
10
Total intangible assets
 
$
6,300

 
16


The goodwill value of $9,028,000 represents the premium we paid over the fair value of the acquired net tangible and intangible assets. We paid this premium for a number of reasons, including the opportunity to combine Morningstar's strength in variable annuity subaccount data and modeling tools with AI Report's product-level data and proprietary methodologies.

The value assigned to goodwill and intangible assets are deductible for income tax purposes over a period of approximately 15 years from the acquisition date.

Other Acquisitions in 2010

We also completed two other acquisitions in 2010:

Footnoted business of Financial Fineprint Inc.: In February 2010, we acquired the Footnoted business of Financial Fineprint Inc. (Footnoted), a blog for professional money managers, analysts, and individual investors. Footnoted Pro, a service for institutional investors, provides insight on actionable items and trends in SEC filings. The acquisition includes the Footnoted.org website and the Footnoted Pro service. We began including the financial results of this acquisition in our Consolidated Financial Statements on February 1, 2010.

Seeds Group: In July 2010, we acquired Seeds Group (Seeds), a leading provider of investment consulting services and fund research in France. Through its subsidiary Seeds Finance, Seeds provides investment consulting services and specializes in asset liability management, manager selection, plan construction, risk, and portfolio management in alternative investments and active strategies. Its subsidiary, Multiratings.com, provides a fund research and investment education website for advisor groups and institutions. We began including the financial results of this acquisition in our Consolidated Financial Statements on July 1, 2010.

The combined purchase price for these two acquisitions was $6,113,000 less acquired cash.

For these two acquisitions, the following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the dates of acquisition:
 
 
($000)

Cash
 
$
1,442

Accounts receivable and other current assets
 
939

Other non-current assets
 
179

Intangible assets
 
2,661

Goodwill
 
3,869

Deferred revenue
 
(159
)
Accounts payable and accrued and other current liabilities
 
(576
)
Deferred tax liability--non-current
 
(800
)
Total purchase price
 
$
7,555



The allocation includes $2,661,000 of acquired intangible assets, as follows:

 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
1,835

 
10
Technology-based assets
 
447

 
4
Intellectual property (trademarks and trade names)
 
379

 
10
Total intangible assets
 
$
2,661

 
9


Goodwill
 
The following table shows the changes in our goodwill balances from January 1, 2011 to December 31, 2012:
 
 
($000)

Balance as of January 1, 2011
$
317,661

 
 
Adjustments to 2010 Acquisitions:
 
Acquisition of Aegis Equities Research
(417
)
Acquisition of Realpoint, LLC
1,800

Acquisition of annuity intelligence business of Advanced Sales and Marketing Corp.
107

Acquisition of Footnoted business of Financial Fineprint Inc. and Seeds Group
(103
)
Other, primarily currency translation
(556
)
Balance as of December 31, 2011
$
318,492

Sale of Morningstar Investor Relations and other businesses
(937
)
Other, primarily currency translation
3,290

Balance as of December 31, 2012
$
320,845



We did not record any significant impairment losses in 2012, 2011, or 2010, respectively, as the estimated fair values exceeded the carrying values of the reporting units. We perform our annual impairment testing during the fourth quarter of each year.

Intangible Assets

The following table summarizes our intangible assets: 
 
 
As of December 31, 2012
 
As of December 31, 2011
($000)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
Intellectual property
 
$
30,621

 
$
(21,527
)
 
$
9,094

 
9
 
$
32,293

 
$
(20,455
)
 
$
11,838

 
9
Customer-related assets
 
132,798

 
(63,005
)
 
69,793

 
12
 
134,396

 
(52,611
)
 
81,785

 
12
Supplier relationships
 
240

 
(96
)
 
144

 
20
 
240

 
(84
)
 
156

 
20
Technology-based assets
 
81,333

 
(43,809
)
 
37,524

 
9
 
80,694

 
(35,130
)
 
45,564

 
9
Non-competition agreement
 
1,765

 
(1,588
)
 
177

 
4
 
1,751

 
(1,285
)
 
466

 
4
Total intangible assets
 
$
246,757

 
$
(130,025
)
 
$
116,732

 
10
 
$
249,374

 
$
(109,565
)
 
$
139,809

 
10

 
In 2011, we recorded an impairment loss of approximately $800,000 for the masthead related to one of the magazines we acquired from Aspect Huntley in 2006. We did not record any significant impairment losses in 2012 or 2010.

The following table summarizes our amortization expense related to intangible assets:
($000)
 
2012

 
2011

 
2010

Amortization expense
 
$
23,944

 
$
27,267

 
$
24,850


 
We amortize intangible assets using the straight-line method over their expected economic useful lives.

Based on acquisitions and divestitures completed through December 31, 2012, we expect intangible amortization expense for 2013 and subsequent years as follows:
 
($000)

2013
$
21,246

2014
19,984

2015
19,164

2016
14,558

2017
9,951


 
Our estimates of future amortization expense for intangible assets may be affected by additional acquisitions, divestitures, changes in the estimated average useful life, and currency translations.
Discontinued Operations
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
Discontinued Operations

In October 2012, we sold Morningstar Investor Relations Services to UK-based Investis, a leading specialist in digital corporate communications for public companies. In October 2012, we also sold the Morningstar Australasia trade publishing assets to Sterling Publishing Pty Ltd. We have not reclassified the operating results of these businesses, included as part of our Investment Information segment, to discontinued operations, nor have we reclassified the related assets and liabilities to held for disposition, because these amounts are not significant to our consolidated statements or segment disclosures.

The following table summarizes the amounts included in our Consolidated Statements of Income for discontinued operations for the years ended December 31, 2012, 2011, and 2010:

($000)
 
2012

 
2011

 
2010

 
 
 
 
 
 
 
Gain on sales of businesses
 
$
6,193

 
$

 
$

Income tax expense
 
1,005

 

 

Earnings from discontinued operations, net of tax
 
$
5,188

 
$

 
$

Investments in Unconsolidated Entities
Investments in Unconsolidated Entities
Investments in Unconsolidated Entities
 
Our investments in unconsolidated entities consist primarily of the following:
 
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Investment in MJKK
 
$
20,540

 
$
19,662

Other equity method investments
 
6,288

 
2,807

Investments accounted for using the cost method
 
8,477

 
5,173

Total investments in unconsolidated entities
 
$
35,305

 
$
27,642


 
Morningstar Japan K.K. Morningstar Japan K.K. (MJKK) develops and markets products and services customized for the Japanese market. MJKK’s shares are traded on the Osaka Stock Exchange, “Hercules Market,” using the ticker 4765. We account for our investment in MJKK using the equity method. The following table summarizes our ownership percentage in MJKK and the market value of this investment based on MJKK’s publicly quoted share price: 
 
 
As of December 31
 
 
 
 
2012

 
2011

Morningstar’s approximate ownership of MJKK
 
34
%
 
33
%
Approximate market value of Morningstar’s ownership in MJKK:
 
 

 
 

Japanese yen (¥000)
 
¥
3,109,579

 
¥
2,797,704

Equivalent U.S. dollars ($000)
 
$
36,227

 
$
36,146



Other Equity Method Investments. As of December 31, 2012 and 2011, other equity method investments includes our investments in Morningstar Sweden AB (Morningstar Sweden) and YCharts, Inc. (YCharts). Morningstar Sweden develops and markets products and services customized for investors in Sweden. Our ownership interest in Morningstar Sweden was approximately 24% as of December 31, 2012 and 2011. YCharts is a technology company that provides stock research and analysis. Our ownership interest in YCharts was approximately 22% as of December 31, 2012 and 2011. As of December 31, 2012, other equity method investments also includes our investment in Inquiry Financial Europe AB (Inquiry Financial). In September 2012, we acquired a minority equity stake in Inquiry Financial for $3,554,000. Inquiry Financial is a provider of sell-side consensus estimate data. Our ownership interest in Inquiry Financial was approximately 34% as of December 31, 2012.

We did not record any impairment losses on our equity method investments in 2012 or 2011.
 
Cost Method Investments. As of December 31, 2012, our cost method investments consist mainly of minority investments in Pitchbook Data, Inc. (Pitchbook) and HelloWallet LLC (HelloWallet). Pitchbook offers detailed data and information about private equity transactions, investors, companies, limited partners, and service providers. HelloWallet is a provider of personalized financial guidance to employees of Fortune 1000 companies. We paid approximately $6,750,000 for the minority equity stake in HelloWallet in the first quarter of 2012. As of December 31, 2011, our cost method investments consisted mainly of minority investments in Pitchbook and Bundle Corporation (Bundle). Bundle is a social media company dedicated to helping people make smarter spending and saving choices. We sold our investment in Bundle for approximately $966,000 in the fourth quarter of 2012. We included the loss of approximately $2,034,000 on the sale of the investment in our non-operating expense.

We did not record any impairment losses on our cost method investments in 2012 or 2011.
 
Property, Equipment, and Capitalized Software
Property, Equipment, and Capitalized Software
Property, Equipment, and Capitalized Software

The following table shows our property, equipment, and capitalized software summarized by major category:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Computer equipment
 
$
42,312

 
$
35,269

Capitalized software
 
39,643

 
25,918

Furniture and fixtures
 
22,804

 
19,918

Leasehold improvements
 
51,333

 
47,042

Telephone equipment
 
1,951

 
1,805

Construction in progress
 
13,489

 
8,993

Property, equipment, and capitalized software, at cost
 
171,532

 
138,945

Less accumulated depreciation
 
(87,510
)
 
(70,749
)
Property, equipment, and capitalized software, net
 
$
84,022

 
$
68,196


The following table shows the amount of capitalized software development costs included in construction in progress:
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Capitalized software development costs not yet placed into service
 
$
6,477

 
$
6,122



The following table summarizes our depreciation expense:
($000)
 
2012

 
2011

 
2010

Depreciation expense
 
$
19,152

 
$
15,646

 
$
14,814

Operating Leases
Operating Leases
Operating Leases

The following table shows our minimum future rental commitments due in each of the next five years and thereafter for all non-cancelable operating leases, consisting primarily of leases for office space:
Minimum Future Rental Commitments
 
($000)

2013
 
$
17,570

2014
 
17,584

2015
 
16,337

2016
 
15,833

2017
 
14,978

Thereafter
 
52,706

Total
 
$
135,008


The following table summarizes our rent expense including taxes, insurance, and other operating costs:

($000)
 
2012

 
2011

 
2010

Rent expense
 
$
20,736

 
$
20,122

 
$
18,638



Deferred rent includes build-out and rent abatement allowances received, which are amortized over the remaining portion of the original term of the lease as a reduction in office lease expense. We include deferred rent, as appropriate, in “Accounts payable and accrued liabilities” and “Deferred rent, noncurrent” on our Consolidated Balance Sheets.
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Deferred rent
 
$
27,783

 
$
27,282



Liability for Vacant Office Space

In 2010, we recorded changes to our liability for vacant office space, primarily for the former Ibbotson headquarters. We increased the liability related to this vacant office space because we anticipated receiving lower sublease income and expected it would take more time than previously estimated to identify a tenant. In addition, we increased our liability for vacant office space related to the equity research and data business acquired from CPMS.

We include our liability for vacant office space in "Accounts payable and accrued liabilities" and "Other long-term liabilities", as appropriate, on our Consolidated Balance Sheets. The following table shows the change in our liability for vacant office space from December 31, 2010 to December 31, 2012:

Liability for Vacant Office Space
 
($000)

Balance as of December 31, 2010
 
$
2,429

Reduction of liability for lease and other related payments
 
(1,510
)
Balance as of December 31, 2011
 
919

Reduction of liability for lease and other related payments
 
(774
)
Balance as of December 31, 2012
 
$
145



Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation

Stock-Based Compensation Plans
 
Our shareholders approved the Morningstar 2011 Stock Incentive Plan (the 2011 Plan) on May 17, 2011. As of that date we stopped granting awards under the Morningstar 2004 Stock Incentive Plan (the 2004 Plan). The 2004 Plan amended and restated the Morningstar 1993 Stock Option Plan, the Morningstar 2000 Stock Option Plan, and the Morningstar 2001 Stock Option Plan.
The 2011 Plan provides for a variety of stock-based awards, including, among other things, stock options, restricted stock units, and restricted stock. We granted stock options, restricted stock units, and restricted stock under the 2004 Plan.
All of our employees and our non-employee directors are eligible for awards under the 2011 Plan.
Grants awarded under the 2011 Plan or the 2004 Plan that are forfeited, canceled, settled, or otherwise terminated without a distribution of shares, or shares withheld by us in connection with the exercise of options, will be available for awards under the 2011 Plan. Any shares subject to awards under the 2011 Plan, but not under the 2004 Plan, that are withheld by us in connection with the payment of any required income tax withholding will be available for awards under the 2011 Plan.
The following table summarizes the number of shares available for future grants under our 2011 Plan:
 
 
As of December 31
(000)
 
2012

Shares available for future grants
 
4,731


 
Accounting for Stock-Based Compensation Awards
 
The following table summarizes our stock-based compensation expense and the related income tax benefit we recorded in the past three years:

($000)
 
2012

 
2011

 
2010

Restricted stock units
 
$
13,451

 
$
12,765

 
$
12,545

Restricted stock
 
5,013

 
2,196

 
1,248

Stock options
 
441

 
342

 

Total stock-based compensation expense
 
$
18,905

 
$
15,303

 
$
13,793

 
 
 
 
 
 
 
Income tax benefit related to the stock-based compensation expense
 
$
3,686

 
$
3,535

 
$
3,500



The following table summarizes the amount of unrecognized stock-based compensation expense as of December 31, 2012 and the expected number of months over which the expense will be recognized:
 
 
Unrecognized stock-based compensation expense ($000)

 
Expected amortization period (months)
Restricted stock units
 
$
29,577

 
33
Restricted stock
 
906

 
28
Stock options
 
1,078

 
27
Total unrecognized stock-based compensation expense
 
$
31,561

 
32


In accordance with FASB ASC 718, Compensation—Stock Compensation, we estimate forfeitures of employee stock-based awards and recognize compensation cost only for those awards expected to vest. We adjust the stock-based compensation expense during the third quarter to reflect those awards that ultimately vested and update our estimate of the forfeiture rate that will be applied to awards not yet vested.
 
Restricted Stock Units
 
Restricted stock units represent the right to receive a share of Morningstar common stock when that unit vests. Restricted stock units granted to employees vest ratably over a four-year period. Restricted stock units granted to non-employee directors vest ratably over a three-year period. For restricted stock units granted through December 31, 2008, employees could elect to defer receipt of the Morningstar common stock issued upon vesting of the restricted stock unit.

We measure the fair value of our restricted stock units on the date of grant based on the closing market price of the underlying common stock on the day prior to grant. We amortize that value to stock-based compensation expense, net of estimated forfeitures, ratably over the vesting period.

The following table summarizes restricted stock unit activity during the past three years:
Restricted Stock Units (RSUs)
 
Unvested

 
Vested but
Deferred

 
Total

 
Weighted
Average
Grant Date Value
per RSU

RSUs Outstanding - January 1, 2010
 
681,425

 
39,594

 
721,019

 
$
46.99

Granted
 
399,349

 

 
399,349

 
47.76

Vested
 
(232,292
)
 

 
(232,292
)
 
47.77

Vested but deferred
 
(16,748
)
 
16,748

 

 

Issued
 

 
(11,153
)
 
(11,153
)
 
49.29

Forfeited
 
(54,068
)
 

 
(54,068
)
 
46.70

RSUs Outstanding - December 31, 2010
 
777,666

 
45,189

 
822,855

 
47.14

Granted
 
292,398

 

 
292,398

 
57.36

Dividend equivalents
 
2,673

 

 
2,673

 
48.57

Vested
 
(256,623
)
 

 
(256,623
)
 
48.28

Vested but deferred
 
(1,753
)
 
1,753

 

 

Issued
 

 
(26,866
)
 
(26,866
)
 
46.69

Forfeited
 
(73,318
)
 

 
(73,318
)
 
47.59

RSUs Outstanding - December 31, 2011
 
741,043

 
20,076

 
761,119

 
50.66

Granted
 
341,282

 

 
341,282

 
56.26

Dividend equivalents
 
6,405

 
130

 
6,535

 
52.02

Vested
 
(270,695
)
 

 
(270,695
)
 
50.12

Vested but deferred
 
(892
)
 
892

 

 

Issued
 

 
(2,316
)
 
(2,316
)
 
73.28

Forfeited
 
(89,998
)
 

 
(89,998
)
 
50.84

RSUs Outstanding - December 31, 2012
 
727,145

 
18,782

 
745,927

 
53.37



Restricted Stock
 
In conjunction with the Realpoint acquisition in May 2010, we issued 199,174 shares of restricted stock to the selling employee-shareholders under the 2004 Stock Incentive Plan. The restricted stock vests ratably over a five-year period from the acquisition date and may be subject to forfeiture if the holder terminates his or her employment during the vesting period.

Because of the terms of the restricted share agreements prepared in conjunction with the Realpoint acquisition, we account for the grant of restricted shares as stock-based compensation expense and not as part of the acquisition consideration. See Note 7, in the Notes to our Consolidated Financial Statements, for additional information concerning the Realpoint acquisition.
 
We measured the fair value of the restricted stock on the date of grant based on the closing market price of our common stock on the day prior to the grant. We amortize the fair value of $9,363,000 to stock-based compensation expense over the vesting period. The stock-based compensation expense recorded in 2012 and 2011 includes approximately $3,238,000 and $396,000, respectively, of expense recognized upon the accelerated vesting of restricted stock. We have assumed that all of the remaining restricted stock will ultimately vest, and therefore we have not incorporated a forfeiture rate for purposes of determining the stock-based compensation expense.

Stock Options

Stock options granted to employees vest ratably over a four-year period. Grants to our non-employee directors vest ratably over a three-year period. All grants expire 10 years after the date of grant. Almost all of the outstanding options granted under the 2004 Stock Incentive Plan have a premium price feature in which the exercise price increases over the term of the option at a rate equal to the 10-year Treasury bond yield as of the date of grant. Options granted under the 2011 Plan have an exercise price equal to the fair market value on the grant date.

In May 2011, we granted 86,106 stock options under the 2004 Stock Incentive Plan. In November 2011, we granted 6,095 stock options under the 2011 Plan. We estimated the fair value of the options on the grant date using a Black-Scholes option-pricing model. The weighted average fair value of options granted during 2011 was $23.81 per share, based on the following assumptions:

Assumptions for Black-Scholes Option Pricing Model
 
 
Expected life (years):
 
7.4

Volatility factor:
 
35.1
%
Dividend yield:
 
0.35
%
Interest rate:
 
2.87
%


The following tables summarize stock option activity in the past three years for our various stock option grants. The first table includes activity for options granted at an exercise price below the fair value per share of our common stock on the grant date; the second table includes activity for all other option grants.

 
 
2012
 
 
 
2011
 
 
 
2010
 
 
Options Granted At an Exercise Price Below the Fair Value Per Share on the Grant Date
 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

Options outstanding—beginning of year
 
398,859

 
$
19.72

 
648,885

 
$
18.91

 
809,169

 
$
17.75

Granted
 

 

 

 

 

 

Canceled
 
(650
)
 
14.70

 

 

 
(1,250
)
 
14.21

Exercised
 
(115,514
)
 
20.19

 
(250,026
)
 
19.25

 
(159,034
)
 
16.62

Options outstanding—end of year
 
282,695

 
20.55

 
398,859

 
19.72

 
648,885

 
18.91

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
282,695

 
$
20.55

 
398,859

 
$
19.72

 
648,885

 
$
18.91



 
 
2012
 
 
 
2011
 
 
 
2010
 
 
All Other Option Grants, Excluding Activity Shown Above
 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

Options outstanding—beginning of year
 
818,552

 
$
22.76

 
1,207,540

 
$
17.09

 
1,868,408

 
$
16.15

Granted
 

 

 
92,201

 
57.42

 

 

Canceled
 
(22,330
)
 
39.75

 
(1,960
)
 
16.04

 
(15,524
)
 
13.72

Exercised
 
(404,438
)
 
16.60

 
(479,229
)
 
16.17

 
(645,344
)
 
19.73

Options outstanding—end of year
 
391,784

 
28.98

 
818,552

 
22.76

 
1,207,540

 
17.09

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
337,684

 
$
24.42

 
726,351

 
$
18.36

 
1,207,540

 
$
17.09



The following table summarizes the total intrinsic value (difference between the market value of our stock on the date of exercise and the exercise price of the option) of options exercised:
($000)
 
2012

 
2011

 
2010

Intrinsic value of options exercised
 
$
22,526

 
$
29,899

 
$
31,410


 

The table below shows additional information for options outstanding and exercisable as of December 31, 2012:
 
 
 
Options Outstanding
 
Options Exercisable
Range of Exercise Prices
 
Number of  Options

 
Weighted
Average
Remaining
Contractual
Life (years)
 
Weighted
Average
Exercise
Price

 
Aggregate
Intrinsic
Value
($000)

 
Exercisable Shares

 
Weighted Average Remaining Contractual Life (years)
 
Weighted Average Exercise Price

 
Aggregate Intrinsic Value ($000)

$8.57 - $14.70
 
74,244

 
0.35
 
$
8.59

 
$
4,027

 
74,244

 
0.35
 
$
8.59

 
$
4,027

$20.51- $46.79
 
528,560

 
2.16
 
23.48

 
20,800

 
528,560

 
2.16
 
23.48

 
20,800

57.28 - $59.35
 
71,675

 
8.54
 
57.46

 
385

 
17,575

 
8.54
 
57.46

 
89


 


 

 


 


 


 

 


 


$8.57 - $59.35
 
674,479

 
2.64
 
25.45

 
$
25,212

 
620,379

 
2.12
 
22.66

 
$
24,916

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested or Expected to Vest
 
 
 
 
 
 
 
 
 
 
 
 
 
$8.57 - $59.35
 
674,479

 
2.64
 
$
25.45

 
$
25,212

 
 
 
 
 
 
 
 

 
The aggregate intrinsic value in the table above represents the total pretax intrinsic value all option holders would have received if they had exercised all outstanding options on December 31, 2012. The intrinsic value is based on our closing stock price of $62.83 on that date.

Excess Tax Benefits Related to Stock-Based Compensation
 
FASB ASC 718, Compensation—Stock Compensation, requires that we classify the cash flows that result from excess tax benefits as financing cash flows. Excess tax benefits correspond to the portion of the tax deduction taken on our income tax return that exceeds the amount of tax benefit related to the compensation cost recognized in our Statement of Income. The following table summarizes our excess tax benefits for the past three years:

($000)
 
2012

 
2011

 
2010

Excess tax benefits related to stock-based compensation
 
$
7,210

 
$
9,525

 
$
7,507

Defined Contribution Plan
Defined Contribution Plan
Defined Contribution Plan

We sponsor a defined contribution 401(k) plan, which allows our U.S.-based employees to voluntarily contribute pre-tax dollars up to a maximum amount allowable by the U.S. Internal Revenue Service. In 2012 and 2011, we made matching contributions to our 401(k) plan in the United States in an amount equal to 75 cents for every dollar of an employee's contribution, up to a maximum of 7% of the employee's compensation in the pay period. In 2010, we made matching contributions to our 401(k) plan in the United States in an amount equal to 50 cents for every dollar of an employee's contribution, up to a maximum of 7% of the employee's compensation in the pay period.

The following table summarizes our matching contributions:
($000)
 
2012

 
2011

 
2010

401(k) matching contributions
 
$
6,642

 
$
5,601

 
$
3,321

Non-Operating Income
Non-Operating Income
Non-Operating Income

The following table presents the components of our net non-operating income:

($000)
 
2012

 
2011

 
2010

Interest income
 
$
5,464

 
$
3,679

 
$
2,718

Interest expense
 
(311
)
 
(1,318
)
 
(281
)
Other income (expense), net
 
(2,196
)
 
(652
)
 
4,295

Non-operating income, net
 
$
2,957

 
$
1,709

 
$
6,732



Interest income primarily reflects interest from our investment portfolio. Interest income in 2012 includes approximately $700,000 of interest income related to the $1,000,000 of business tax refund for prior years recorded in 2012, as discussed above in the section, Consolidated Results. In 2011, interest expense of $1,318,000 included approximately $900,000 related to the $1,400,000 of business tax expense for prior years recorded in the second quarter of 2011, as discussed above in the section, Consolidated Results.

In 2012, other income (expense), net included the loss on the sale of our investment in Bundle Corporation of $2,034,000. See Note 9 for additional information concerning our investment in Bundle Corporation. In 2010, this category included the holding gain of $4,564,000 resulting from the difference between the estimated fair value and the book value of our investment in Morningstar Denmark. See Note 7 for additional information concerning Morningstar Denmark.

Other income (expense), net also includes foreign currency exchange gains and losses arising from the ordinary course of business related to our U.S. and non-U.S. operations, realized gains and losses from our investment portfolio, gains and losses on sale of fixed assets, and royalty income from MJKK.
Income Taxes
Income Taxes
Income Taxes
 
Income Tax Expense and Effective Tax Rate

The following table shows our income tax expense and our effective tax rate:

($000)
 
2012

 
2011

 
2010

Income before income taxes and equity in net income of unconsolidated entities
 
$
153,625

 
$
140,124

 
$
127,791

Equity in net income of unconsolidated entities
 
2,027

 
1,848

 
1,422

Net (income) loss attributable to the noncontrolling interest
 
117

 
43

 
(87
)
Total
 
$
155,769

 
$
142,015

 
$
129,126

Income tax expense
 
$
52,878

 
$
43,658

 
$
42,756

Effective tax rate
 
33.9
%
 
30.7
%
 
33.1
%


The following table reconciles our income tax expense at the U.S. federal income tax rate of 35% to income tax expense as recorded:

 
 
2012
 
 
 
2011
 
 
 
2010
 
 
($000, except percentages)
 
Amount

 
%

 
Amount

 
%

 
Amount

 
%

Income tax expense at U.S. federal rate
 
$
54,519

 
35.0
 %
 
$
49,705

 
35.0
 %
 
$
45,194

 
35.0
 %
State income taxes, net of federal income tax benefit
 
1,510

 
1.0

 
1,376

 
1.0

 
1,756

 
1.3

Stock-based compensation activity
 
516

 
0.3

 
440

 
0.3

 
97

 
0.1

Non-U.S. withholding taxes, net of federal income tax effect, and foreign tax credits
 
307

 
0.2

 
346

 
0.2

 
77

 
0.1

Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses
 
(630
)
 
(0.4
)
 
394

 
0.3

 
(1,186
)
 
(0.9
)
Impact of equity in net income of unconsolidated entities
 

 

 

 

 
79

 
0.1

Difference between U.S. federal statutory and foreign tax rates
 
(2,777
)
 
(1.8
)
 
(2,393
)
 
(1.7
)
 
(2,567
)
 
(2.0
)
Adjustment to accruals for state taxes
 

 

 

 

 
(2,633
)
 
(2.0
)
Change in unrecognized tax benefits
 
967

 
0.6

 
3,126

 
2.2

 
2,869

 
2.2

Credits and incentives
 
(1,494
)
 
(1.0
)
 
(7,734
)
 
(5.4
)
 
(984
)
 
(0.8
)
Recognition of deferred tax assets
 

 

 
(1,778
)
 
(1.3
)
 

 

Other - net
 
(40
)
 

 
176

 
0.1

 
54

 

Total income tax expense
 
$
52,878

 
33.9
 %
 
$
43,658

 
30.7
 %
 
$
42,756

 
33.1
 %













Income tax expense consists of the following:

($000)
 
2012

 
2011

 
2010

Current tax expense:
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
$
38,821

 
$
41,520

 
$
38,901

State
 
1,997

 
1,808

 
2,445

Non-U.S.
 
5,719

 
5,756

 
4,122

Current tax expense
 
46,537

 
49,084

 
45,468

Deferred tax expense (benefit):
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
6,287

 
(1,011
)
 
61

State
 
334

 
(242
)
 
(7
)
Non-U.S.
 
(280
)
 
(4,173
)
 
(2,766
)
Deferred tax expense (benefit), net
 
6,341

 
(5,426
)
 
(2,712
)
Income tax expense
 
$
52,878

 
$
43,658

 
$
42,756



The following table provides our income before income taxes and equity in net income of unconsolidated entities, generated by our U.S. and non-U.S. operations:

($000)
 
2012

 
2011

 
2010

U.S.
 
$
128,920

 
$
123,390

 
$
112,357

Non-U.S.
 
24,705

 
16,734

 
15,434

Income before income taxes and equity in net income of unconsolidated entities
 
$
153,625

 
$
140,124

 
$
127,791



Deferred Tax Assets and Liabilities

We recognize deferred income taxes for the temporary differences between the carrying amount of assets and liabilities for financial statement purposes and their tax basis. The tax effects of the temporary differences that give rise to the deferred income tax assets and liabilities are as follows:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Deferred tax assets:
 
 
 
 
Stock-based compensation expense
 
$
4,019

 
$
5,567

Accrued liabilities
 
8,402

 
7,789

Net operating loss carryforwards - U.S. federal and state
 
930

 
1,009

Net operating loss carryforwards - Non-U.S.
 
12,386

 
13,297

Research and development
 
246

 
631

Deferred royalty revenue
 
383

 
403

Allowance for doubtful accounts
 
515

 
503

Deferred rent
 
9,031

 
8,847

Unrealized exchange losses, net
 

 
159

Other
 
846

 
383

Total deferred tax assets
 
36,758

 
38,588

 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Acquired intangible assets
 
(14,535
)
 
(17,558
)
Property, equipment, and capitalized software
 
(14,615
)
 
(8,523
)
Unrealized exchange gains, net
 
(444
)
 

Prepaid expenses
 
(3,694
)
 
(1,724
)
Accrued liabilities
 

 

Investments in unconsolidated entities
 
(9,905
)
 
(9,580
)
Total deferred tax liabilities
 
(43,193
)
 
(37,385
)
Net deferred tax asset (liability) before valuation allowance
 
(6,435
)
 
1,203

Valuation allowance
 
(11,407
)
 
(12,039
)
Net deferred tax liability
 
$
(17,842
)
 
$
(10,836
)


The deferred tax assets and liabilities are included in our Consolidated Balance Sheets as follows:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Deferred tax asset, net - current
 
$
3,741

 
$
5,104

Deferred tax liability, net - non-current
 
(21,583
)
 
(15,940
)
Net deferred tax liability
 
$
(17,842
)
 
$
(10,836
)


The following table summarizes our U.S. net operating loss (NOL) carryforwards:

 
 
As of December 31
 
 
 
($000)
 
 
2012
 
 
2011
 
 
 
Expiration Date
 
 
Expiration Date
U.S. federal NOLs subject to expiration dates
 
$
2,362

2023
 
$
2,587

2023


Our U.S. federal NOL carryforward as of December 31, 2012 of $2,362,000 is subject to limitations on the use of the NOL imposed by the U.S. Internal Revenue Code, and therefore is limited to approximately $225,000 per year.

The following table summarizes our NOL carryforwards for our non-U.S. operations:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Non-U.S. NOLs subject to expiration dates from 2014 through 2032
 
$
6,064

 
$
5,048

Non-U.S. NOLs with no expiration date
 
44,504

 
45,002

Total
 
$
50,568

 
$
50,050

 
 
 
 
 
Non-U.S. NOLs not subject to valuation allowances
 
$
4,031

 
$
5,284



The increase in non-U.S. NOL carryforwards as of December 31, 2012 compared with 2011 primarily reflects additional NOL carryforwards in our non-U.S. operations as well as the impact of currency translations.

We have not provided federal and state income taxes on accumulated undistributed earnings of certain foreign subsidiaries aggregating approximately $95,100,000 as of December 31, 2012, because these earnings have been permanently reinvested. It is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings.

In assessing the realizability of our deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We have recorded a valuation allowance against all but approximately $4,031,000 of the non-U.S. NOLs, reflecting the likelihood that the benefit of these NOLs will not be realized.

Accounting for Uncertainty in Tax Positions

We conduct business globally and as a result, we file income tax returns in U.S. federal, state, local, and foreign jurisdictions. In the normal course of business we are subject to examination by tax authorities throughout the world. The open tax years for our U.S. Federal tax returns and most state tax returns include the years 2008 to the present. In non-U.S. jurisdictions, the statute of limitations generally extends to years prior to 2005.

We are currently under audit by federal, state and local tax authorities in the United States as well as tax authorities in certain non-U.S. jurisdictions. It is likely that the examination phase of some of these U.S. federal, state, local, and non-U.S. audits will conclude in 2013. It is not possible to estimate the impact of current audits on previously recorded unrecognized tax benefits.

As of December 31, 2012, our Consolidated Balance Sheet included a current liability of $6,568,000 and a non-current liability of $5,659,000 for unrecognized tax benefits. These amounts include interest and penalties, less any associated tax benefits.

The table below reconciles the beginning and ending amount of the gross unrecognized tax benefits as follows:

($000)
 
2012

 
2011

Gross unrecognized tax benefits - beginning of the year
 
$
12,189

 
$
9,089

Increases as a result of tax positions taken during a prior-year period
 
445

 
1,639

Decreases as a result of tax positions taken during a prior-year period
 
(1,153
)
 
(876
)
Increases as a result of tax positions taken during the current period
 
2,008

 
3,662

Decreases relating to settlements with tax authorities
 
(299
)
 
(1,001
)
Reductions as a result of lapse of the applicable statute of limitations
 
(491
)
 
(324
)
Gross unrecognized tax benefits - end of the year
 
$
12,699

 
$
12,189



In 2012, we recorded a net increase of $1,299,000 of gross unrecognized tax benefits before settlements and lapses of statutes of limitations, of which $875,000 increased our income tax expense by $702,000. In addition, we reduced our unrecognized tax benefits by $790,000 for settlements and lapses of statutes of limitations, of which $207,000 decreased our income tax expense by $207,000.

As of December 31, 2012, we had $12,699,000 of gross unrecognized tax benefits, of which $12,699,000, if recognized, would reduce our effective income tax rate and decrease our income tax expense by $10,446,000.

We record interest and penalties related to uncertain tax positions as part of our income tax expense. The following table summarizes our gross liability for interest and penalties:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Liabilities for interest and penalties
 
$
2,232

 
$
1,726



We recorded the increase in the liability, net of any tax benefits, to income tax expense in our Consolidated Statement of Income in 2012.
Contingencies
Contingencies
Contingencies
 
Open Matters

Life's Good S.T.A.B.L. Hedge Fund

In September 2011, three individual investors in Life's Good S.T.A.B.L. Mortgage hedge fund (LG), Marta Klass, Gregory Martin, and Richard Roellig, filed a complaint in the United States District Court for the Eastern District of Pennsylvania against LG, its principal Robert Stinson, and several other parties, including Morningstar, Inc. (the Klass Matter). The plaintiffs claim that Morningstar committed fraud and aided and abetted the other defendants' breach of fiduciary duty through the 5-star rating LG obtained from Morningstar. The plaintiffs seek unspecified damages. Hedge fund managers self-report their performance data to Morningstar.

More than a year before the Klass Matter, in June 2010, the SEC filed suit against LG and other entities claiming they were part of a Ponzi scheme operated by Stinson. As a result, LG and the other entities were placed in court-appointed receivership. Morningstar was not part of the SEC suit or receivership. Since that time, the Receiver, as part of his duties, has been investigating whether to assert claims against third parties. Morningstar is aware of 14 lawsuits filed by the Receiver seeking to recover money for the fund.

In November 2011, Morningstar filed a motion to dismiss the Klass Matter. On behalf of the entities in receivership, the Receiver filed a motion to stay the proceedings because the Receivership Order does not permit suits against the entities in receivership without court permission. The court granted the Receiver's motion and stayed the Klass Matter. In April 2012, the Receiver filed a complaint against Morningstar, in which the Receiver claims that Morningstar is liable for contribution and aiding and abetting Stinson's breach of fiduciary duty and fraud through the 5-star rating LG obtained from Morningstar. The Receiver seeks unspecified damages. The same day the Receiver filed his complaint, Morningstar sought leave from the court to file a counter suit against Stinson and two of his entities-Keystone State Capital Corporation and LG-for, among other things, fraud, misrepresentation, and breach of user agreements. In June 2012, the court denied Morningstar's motion for leave to file suit. The court took no position on the merits of Morningstar's claims, and did not preclude Morningstar from renewing its motion to file a complaint at a later time, but deferred to the Receiver's request not to subject the receivership estate to additional litigation at this early point in the receivership. In August 2012, the court denied Morningstar's motion to dismiss the Receiver's complaint.

Morningstar believes the allegations against it by the Klass plaintiffs and the Receiver have no legal or factual basis and plans to vigorously contest the claims. Morningstar also intends to refile its affirmative claims against Stinson, Keystone, and LG at a later time consistent with the court's order. We cannot predict the outcome of the proceedings.

Business Logic Holding Corporation

In November 2009, Business Logic Holding Corporation filed a complaint in the Circuit Court of Cook County, Illinois against Ibbotson Associates, Inc. and Morningstar, Inc. relating to Ibbotson's prior commercial relationship with Business Logic. Business Logic is alleging breach of contract and trade secret misappropriation in connection with Ibbotson's development of a proprietary web-service software and user interface that connects plan participant data with the Ibbotson Wealth Forecasting Engine. Business Logic seeks, among other things, injunctive relief and unspecified damages. Ibbotson and Morningstar answered the complaint, and Ibbotson asserted a counterclaim against Business Logic alleging trade secret misappropriation and breach of contract, seeking damages and injunctive relief. While Morningstar and Ibbotson are vigorously contesting the claims against them, we cannot predict the outcome of the proceeding.

We have not provided an estimate of loss or range of loss in connection with the matters described above because no such estimate can reasonably be made.

Settled Matters

Egan-Jones Rating Co.

In June 2010, Egan-Jones Rating Co. filed a complaint in the Court of Common Pleas of Montgomery County, Pennsylvania against Realpoint, LLC (now known as Morningstar Credit Ratings, LLC) and Morningstar, Inc. in connection with a December 2007 agreement between Egan-Jones and Morningstar Credit Ratings for certain data-sharing and other services. In addition to damages, Egan-Jones filed a petition seeking an injunction to temporarily prevent Morningstar from offering corporate credit ratings through December 31, 2010. In September 2010, the court denied Egan-Jones's request for a preliminary injunction against Morningstar's corporate credit ratings business. In December 2012, Morningstar Credit Ratings, Morningstar, and Egan Jones entered into a settlement agreement resolving the litigation. All settlement terms are confidential.

Other Matters

In addition to these proceedings, we are involved in legal proceedings and litigation that have arisen in the normal course of our business. Although the outcome of a particular proceeding can never be predicted, we do not believe that the result of any of these other matters will have a material adverse effect on our business, operating results, or financial position.
Share Repurchase Program
Quarterly Dividend and Share Repurchase Programs
Share Repurchase Program
 
In September 2010, the board of directors approved a share repurchase program that authorizes the repurchase of up to $100 million in shares of our outstanding common stock. In December 2011, the board approved an increase to the $100 million share repurchase program it announced in 2010. The board approval authorized the company to repurchase up to an additional $200 million in shares of our outstanding common stock. In December 2012, the board approval authorized the company to repurchase an additional $200 million, increasing the repurchase program from $300 million to $500 million. 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. As of December 31, 2012, we had repurchased a total of 5,056,595 shares for $300,936,000 under this authorization.
Subsequent Events
Subsequent Events
Subsequent Events

In February 2013, our board of directors declared a quarterly dividend of 12.5 cents per share. The dividend is payable on April 30, 2013 to shareholders of record as of April 12, 2013.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements

In February 2013, the FASB issued ASU No. 2013-2, Comprehensive Income (Topic 220). The amended guidance requires us to show the effects of items reclassified out of each component of accumulated other comprehensive income to net income on the face of the financial statement where net income is presented. For Morningstar, the ASU No. 2013-2 is effective on January 1, 2013. We do not expect the provisions of ASU No. 2013-2 to have a material impact on our consolidated financial statements.


Selected Quarterly Financial Data
Selected Quarterly Financial Data
Selected Quarterly Financial Data (unaudited)
 
 
2011

 
 
 
 
 
 
 
2012

 
 
 
 
 
 
 
(in thousands except per share amounts)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
Revenue
 
$
151,767

 
$
161,011

 
$
160,051

 
$
158,571

 
$
160,759

 
$
165,968

 
$
160,952

 
$
170,609

 
Total operating expense (1)
 
119,958

 
122,404

 
126,187

 
124,436

 
130,360

 
124,832

 
121,088

 
131,340

 
Operating income
 
31,809

 
38,607

 
33,864

 
34,135

 
30,399

 
41,136

 
39,864

 
39,269

 
Non-operating income (expense), net
 
774

 
9

 
(579
)
 
1,505

 
659

 
995

 
1,880

 
(577
)
 
Income before income taxes and equity in net income of unconsolidated entities
 
32,583

 
38,616

 
33,285

 
35,640

 
31,058

 
42,131

 
41,744

 
38,692

 
Income tax expense
 
10,518

 
12,724

 
12,343

 
8,073

 
11,511

 
14,744

 
15,186

 
11,437

 
Equity in net income (loss) of unconsolidated entities
 
374

 
595

 
428

 
451

 
566

 
497

 
478

 
486

 
Consolidated net income from continuing operations
 
22,439

 
26,487

 
21,370

 
28,018

 
20,113

 
27,884

 
27,036

 
27,741

 
Gain on sale of discontinued operations, net of tax
 

 

 

 

 

 

 

 
5,188

 
Consolidated net income
 
22,439

 
26,487

 
21,370

 
28,018

 
20,113

 
27,884

 
27,036

 
32,929

 
Net (income) loss attributable to the noncontrolling interests
 
98

 
(2
)
 
10

 
(63
)
 
24

 
4

 
34

 
55

 
Net income attributable to Morningstar, Inc.
 
$
22,537

 
$
26,485

 
$
21,380

 
$
27,955

 
$
20,137

 
$
27,888

 
$
27,070

 
$
32,984

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to Morningstar, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.45

 
$
0.53

 
$
0.42

 
$
0.56

 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.59

 
Discontinued operations
 

 

 

 

 

 

 

 
0.11

 
 
 
$
0.45

 
$
0.53

 
$
0.42

 
$
0.56

 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.70

 
Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations

$
0.44


$
0.52


$
0.42


$
0.55


$
0.40


$
0.56


$
0.56


$
0.58


Discontinued operations
 

 

 

 

 

 

 

 
0.11

 
 
 
$
0.44

 
$
0.52

 
$
0.42

 
$
0.55

 
$
0.40

 
$
0.56

 
$
0.56

 
$
0.69

 
Dividends per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.05

 
$
0.05

 
$
0.05

 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.13

 
Dividends paid per common share
 
$
0.05

 
$
0.05

 
$
0.05

 
$
0.05

 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
49,800

 
50,165

 
50,278

 
49,883

 
49,938

 
49,195

 
47,975

 
46,913

 
Diluted
 
50,953

 
51,142

 
51,123

 
50,732

 
50,758

 
49,856

 
48,481

 
47,511

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011

 
 
 
 
 
 
 
2012

 
 
 
 
 
 
 
(in thousands)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
(1) Includes stock-based compensation expense of:
 
$
3,649

 
$
3,843

 
$
3,951

 
$
3,860

 
$
3,866

 
$
3,734

 
$
3,994

 
$
7,311

 
Summary of Significant Accounting Policies (Policies)
Principles of Consolidation. We conduct our business operations through wholly owned or majority-owned operating subsidiaries. The accompanying consolidated financial statements include the accounts of Morningstar, Inc. and our subsidiaries. The assets, liabilities, and results of operations of subsidiaries in which we have a controlling interest have been consolidated. All significant intercompany accounts and transactions have been eliminated.

We account and report the noncontrolling (minority) interests in our Consolidated Financial Statements in accordance with FASB ASC 810, Consolidation. A noncontrolling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to the parent company. We report the noncontrolling interest in our Consolidated Balance Sheet within equity separate from the shareholders' equity attributable to Morningstar, Inc. In addition, we present the net income (loss) and comprehensive income (loss) attributed to Morningstar, Inc.'s shareholders and the noncontrolling interest in our Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, and Consolidated Statements of Equity.

We account for investments in entities in which we exercise significant influence, but do not control, using the equity method.

Through our Investment Management segment (see Note 5, Segment and Geographical Area Information), we manage certain funds outside of the United States that are considered variable interest entities. For the majority of these variable interest entities, we do not have a variable interest in them. In cases where we do have a variable interest, we are not the primary beneficiary. Accordingly, we do not consolidate any of these variable interest entities.
Comprehensive Income. In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. In accordance with ASU No. 2011-05, we present the total of comprehensive income, the components of net income, and the components of other comprehensive income (OCI) in two separate but consecutive statements, our Consolidated Statements of Income and separately, our Consolidated Statements of Comprehensive Income. We no longer present total comprehensive income in our Consolidated Statement of Equity.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. Actual results may differ from these estimates.
Reclassifications. Certain amounts reported in previous years have been reclassified to conform to the 2012 presentation.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash and investments with original maturities of three months or less. We state them at cost, which approximates fair value. We state at fair value the portion of our cash equivalents that are invested in money market funds, which are actively traded and have quoted market prices.
Investments. We account for our investments in accordance with FASB ASC 320, Investments-Debt and Equity Securities. We classify our investments into three categories: held-to-maturity, trading, and available-for-sale.

Held-to-maturity:  We classify certain investments, primarily certificates of deposit, as held-to-maturity securities, based on our intent and ability to hold these securities to maturity. We record held-to-maturity investments at amortized cost in our Consolidated Balance Sheets.

Trading:  We classify certain other investments, primarily equity securities, as trading securities, primarily to satisfy the requirements of one of our wholly owned subsidiaries, which is a registered broker-dealer. We include realized and unrealized gains and losses associated with these investments as a component of our operating income in our Consolidated Statements of Income. We record these securities at their fair value in our Consolidated Balance Sheets.

Available-for-sale:  Investments not considered held-to-maturity or trading securities are classified as available-for-sale securities. Available-for-sale securities primarily consist of fixed-income securities. We report unrealized gains and losses for available-for-sale securities as other comprehensive income (loss), net of related income taxes. We record these securities at their fair value in our Consolidated Balance Sheets.
Fair Value Measurements. We follow FASB ASC 820, Fair Value Measurements. FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Under FASB ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances and does not require any new fair value measurements.

Effective January 1, 2012, we adopted FASB ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU No. 2011-04 clarifies existing fair value measurement and disclosure requirements, amends certain fair value measurement principles, and requires additional disclosures about fair value measurements. The adoption of ASU No. 2011-04 did not have a material impact on our Consolidated Financial Statements.




FASB ASC 820 uses a fair value hierarchy based on three broad levels of valuation inputs as described below:

Level 1:  Valuations based on quoted prices in active markets for identical assets or liabilities that the company has the ability to access.

Level 2:  Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3:  Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

We provide additional information about our cash equivalents and investments that are subject to valuation under FASB ASC 820 in Note 6 in these Notes to our Consolidated Financial Statements.

The Fair Value Option for Financial Assets and Financial Liabilities. FASB ASC 825, Financial Instruments, permits entities the option to measure many financial instruments and certain other items at fair value with changes in fair value recognized in earnings each period. FASB ASC 825 allows the fair value option to be elected on an instrument-by-instrument basis when the asset or liability is initially recognized or when there's an event that gives rise to a new basis of accounting for that instrument. We do not apply this fair value option to any of our eligible assets.

Concentration of Credit Risk. No single customer is large enough to pose a significant credit risk to our operations or financial condition. For the years ended December 31, 2012, 2011, and 2010, no single customer represented 5% or more of our consolidated revenue. If receivables from our customers become delinquent, we begin a collections process. We maintain an allowance for doubtful accounts based on our estimate of the probab
We account for our investments in accordance with FASB ASC 320, Investments—Debt and Equity Securities. We classify our investments in three categories: available-for-sale, held-to-maturity, and trading. We monitor the concentration, diversification, maturity, and liquidity of our investment portfolio, which is primarily invested in fixed-income securities, and classify our investment portfolio as shown below:
Concentration of Credit Risk. No single customer is large enough to pose a significant credit risk to our operations or financial condition. For the years ended December 31, 2012, 2011, and 2010, no single customer represented 5% or more of our consolidated revenue. If receivables from our customers become delinquent, we begin a collections process. We maintain an allowance for doubtful accounts based on our estimate of the probable losses of accounts receivable.
Property, Equipment, and Depreciation. We state property and equipment at historical cost, net of accumulated depreciation. We depreciate property and equipment primarily using the straight-line method based on the useful life of the asset, which ranges from three to seven years. We amortize leasehold improvements over the lease term or their useful lives, whichever is shorter.
Computer Software and Internal Product Development Costs. We capitalize certain costs in accordance with FASB ASC 350-40, Internal-Use Software, FASB ASC 350-50, Website Development Costs, and FASB ASC 985, Software. Internal product development costs mainly consist of employee costs for developing new web-based products and certain major enhancements of existing products. We amortize these costs on a straight-line basis over the estimated economic life, which is generally three years. Capitalized software development costs related to projects that have not been placed into service yet are included in our construction in progress balance.
Business Combinations. Over the past several years, we have acquired companies that complement our business operations. For each acquisition, we allocate the purchase price to the assets acquired, liabilities assumed, and goodwill. We follow FASB ASC 805, Business Combinations. We recognize and measure the fair value of the acquired operation as a whole, and the assets acquired and liabilities assumed at their full fair values as of the date control is obtained, regardless of the percentage ownership in the acquired operation or how the acquisition was achieved. We expense direct costs related to the business combination, such as advisory, accounting, legal, valuation, and other professional fees, as incurred. We recognize restructuring costs, including severance and relocation for employees of the acquired entity, as post-combination expenses unless the target entity meets the criteria of FASB ASC 420, Exit or Disposal Cost Obligations on the acquisition date.

As part of the purchase price allocation, we follow the requirements of FASB ASC 740, Income Taxes. This includes establishing deferred tax assets or liabilities reflecting the difference between the values assigned for financial statement purposes and values applicable for income tax purposes. In certain acquisitions, the goodwill resulting from the purchase price allocation may not be deductible for income tax purposes. FASB ASC 740 prohibits recognition of a deferred tax asset or liability for temporary differences in goodwill if goodwill is not amortizable and deductible for tax purposes.
Goodwill. Changes in the carrying amount of our recorded goodwill are mainly the result of business acquisitions and divestitures. In accordance with FASB ASC 350, Intangibles - Goodwill and Other, we do not amortize goodwill; instead, goodwill is subject to an impairment test annually, or whenever indicators of impairment exist. An impairment would occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. In 2011, we altered the definition of our reporting units to align with the definition of our operating segments. This realignment occurred because of our successful efforts to integrate acquired businesses and leverage proprietary content across multiple products. As a result, the businesses that previously represented components of our operating segments no longer met the criteria for recognition as reporting units. Our reporting units constitute businesses for which discrete financial information, which is regularly reviewed by management, is available. We performed annual impairment reviews in the fourth quarter of 2012, 2011, and 2010. We did not record any significant impairment losses in 2012, 2011, and 2010.

Intangible Assets. We amortize intangible assets using the straight-line method over their estimated economic useful lives, which range from one to 25 years. We have no intangible assets with indefinite useful lives. In accordance with FASB ASC 360-10-35, Subsequent Measurement-Impairment or Disposal of Long Lived Assets, we review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the value of future undiscounted cash flows is less than the carrying amount of an asset, we record an impairment loss based on the excess of the carrying amount over the fair value of the asset. We recorded an impairment loss of approximately $800,000 in 2011. We did not record any impairment losses in 2012 or 2010. The impairment charge is included in our amortization expense on our Consolidated Statements of Income.
Revenue Recognition:  We recognize revenue in accordance with SEC SAB Topic 13, Revenue Recognition, ASC 605-25, Revenue Recognition:  Multiple Element Arrangements, and ASC 985-605, Software: Revenue Recognition.

Effective January 1, 2011, we adopted FASB ASU No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. ASU 2009-13 superseded EITF Issue 00-21, Revenue Arrangements with Multiple Deliverables and establishes the accounting and reporting guidance for arrangements when a vendor performs multiple revenue-generating activities, addresses how to separate deliverables, and specifies how to measure and allocate arrangement consideration. We applied this guidance for revenue arrangements entered into or materially modified from January 1, 2011. The adoption of ASU 2009-13 did not significantly affect either the timing or amount of our revenue recognition.
We recognize revenue when all of the following conditions are met:

There is persuasive evidence of an arrangement, as evidenced by a signed contract;
Delivery of our products and services is a prerequisite for recognition of revenue. If arrangements include an acceptance provision, we generally begin recognizing revenue upon the receipt of customer acceptance;
The amount of fees to be paid by the customer is fixed or determinable; and
The collectibility of the fees is reasonably assured.

We generate revenue through sales of Morningstar Data, Morningstar Advisor Workstation (including Morningstar Office), Morningstar Direct, Morningstar Equity Research, Premium Membership fees for Morningstar.com, our structured credit research and ratings offerings, and a variety of other investment-related products and services. We generally structure the revenue agreements for these offerings as licenses or subscriptions. We recognize revenue from licenses and subscription sales ratably as we deliver the product or service and over the service obligation period defined by the terms of the customer contract. For new-issue ratings and analysis for CMBS, we charge asset-based fees that are paid by the issuer on the rated balance of the transaction and recognize the revenue immediately upon issuance of the transaction.

We also generate revenue from Internet advertising, primarily from “impression-based” contracts. For advertisers who use our cost-per-impression pricing, we charge fees each time we display their ads on our site.

Investment Advisory Services includes a broad range of services. Pricing for the consulting services is based on the scope of work and the level of service required, and includes asset-based fees for work we perform that involves investment management or acting as a subadvisor to investment portfolios. In arrangements that involve asset-based fees, we generally invoice clients quarterly in arrears based on average assets for the quarter. We recognize asset-based fees once the fees are fixed and determinable assuming all other revenue recognition criteria are met.

Our Retirement Solutions offerings help retirement plan participants plan and invest for retirement. We offer these services both through retirement plan providers (typically third-party asset management companies that offer proprietary mutual funds) and directly to plan sponsors (employers that offer retirement plans to their employees). For our Retirement Solutions offerings, we provide both a hosted solution as well as proprietary installed software advice solution. Clients can integrate the installed customized software into their existing systems to help investors accumulate wealth, transition into retirement, and manage income during retirement. The revenue arrangements for Retirement Solutions generally extend over multiple years. Our contracts may include one-time setup fees, implementation fees, technology licensing and maintenance fees, asset-based fees for managed retirement accounts, fixed and variable fees for advice and guidance, or a combination of these fee structures. Upon customer acceptance, we recognize revenue ratably over the term of the agreement. We recognize asset-based fees and variable fees in excess of any minimum once the value is fixed and determinable.

Some of our revenue arrangements with our customers combine multiple products and services. These products and services may be provided at different points in time or over different time periods within the same arrangement. We allocate fees to the separate deliverables based on the deliverables’ relative selling price, which is generally based on the price we charge when the same deliverable is sold separately.

We record taxes imposed on revenue-producing transactions (such as sales, use, value-added, and some excise taxes) on a net basis; therefore, we exclude such taxes from revenue in our Consolidated Statements of Income.

Deferred revenue represents the portion of subscriptions billed or collected in advance of the service being provided, which we expect to recognize as revenue in future periods. Certain arrangements may have cancellation or refund provisions. If we make a refund, it typically reflects the amount collected from a customer for which we have not yet provided services. The refund therefore results in a reduction of deferred revenue.

Advertising Costs. Advertising costs include expenses incurred for various print and Internet ads, search engine fees, and direct mail campaigns. We expense advertising costs as incurred. The table below summarizes our advertising expense for the past three years:
($000)
 
2012

 
2011

 
2010

Advertising expense
 
$
6,306

 
$
8,210

 
$
8,572


Stock-Based Compensation Expense. We account for our stock-based compensation expense in accordance with FASB ASC 718, Compensation—Stock Compensation. Our stock-based compensation expense reflects grants of restricted stock units, restricted stock, and stock options. We measure the fair value of our restricted stock units and restricted stock on the date of grant based on the closing market price of Morningstar's common stock on the day prior to grant. For stock options granted in 2011, we estimated the fair value of our stock options on the date of grant using a Black-Scholes option-pricing model. We amortize the fair values to stock-based compensation expense, net of estimated forfeitures, ratably over the vesting period.

We estimate expected forfeitures of all employee stock-based awards and recognize compensation cost only for those awards expected to vest. We determine forfeiture rates based on historical experience and adjust the estimated forfeitures to actual forfeiture experience as needed.

Liability for Sabbatical Leave. In certain of our operations, we offer employees a sabbatical leave. Although the sabbatical policy varies by region, in general, Morningstar's full-time employees are eligible for six weeks of paid time off after four years of continuous service. We account for our sabbatical liability in accordance with FASB ASC 710-10-25, Compensated Absences. We record a liability for employees' sabbatical benefits over the period employees earn the right for sabbatical leave.

Income Taxes. We record deferred income taxes for the temporary differences between the carrying amount of assets and liabilities for financial statement purposes and the amounts used for income tax purposes in accordance with FASB ASC 740, Income Taxes. FASB ASC 740 prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements, and also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, and disclosure for uncertain tax positions.

We recognize interest and penalties related to unrecognized tax benefits as part of income tax expense in our Consolidated Statements of Income. We classify liabilities related to unrecognized tax benefits as either current liabilities or “Other long-term liabilities” in our Consolidated Balance Sheet, depending on when we expect to make payment.

Income per Share. We compute and present income per share in accordance with FASB ASC 260, Earnings Per Share. The difference between weighted average shares outstanding and diluted shares outstanding primarily reflects the dilutive effect associated with our stock-based compensation plans. Beginning in 2010, we further compute income per share in accordance with FASB ASC 260-10-45-59A, Participating Securities and the Two Class Method.

In May 2010, we issued restricted stock in conjunction with the acquisition of Realpoint, LLC (now Morningstar Credit Ratings, LLC). Because the restricted stock contains nonforfeitable rights to dividends, it meets the criteria of a participating security. Under the two-class method, we allocate earnings between common stock and participating securities. The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. For purposes of calculating earnings per share, we reduce our reported net earnings by the amount allocated to participating securities to arrive at the earnings allocated to common stock shareholders.

ASC 260-10-45-59A requires the dilutive effect of participating securities to be calculated using the more dilutive of the treasury stock or the two-class method. We have determined the two-class method to be the more dilutive. As such, we adjusted the earnings allocated to common stock shareholders in the basic earnings per share calculation for the reallocation of undistributed earnings to participating securities to calculate diluted earnings per share.

Foreign Currency. We translate the financial statements of non-U.S. subsidiaries to U.S. dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for revenue and expense. We use the local currency as the functional currency for all of our non-U.S. subsidiaries. We record translation adjustments for non-U.S. subsidiaries as a component of “Other comprehensive income (loss)” in our Consolidated Statements of Comprehensive Income. We include exchange gains and losses arising from transactions denominated in currencies other than the functional currency in “Other income (expense), net” in our Consolidated Statements of Income.
Our segment accounting policies are the same as those described in Note 3, except for the capitalization and amortization of internal product development costs, amortization of intangible assets, and costs related to corporate functions. We exclude these items from our operating segment results to provide our chief operating decision maker with a better indication of each segment’s ability to generate cash flow. This information is one of the criteria used by our chief operating decision maker in determining how to allocate resources to each segment. We include capitalization and amortization of internal product development costs, amortization of intangible assets, and costs related to corporate functions in the Corporate Items category. Our segment disclosures are consistent with the business segment information provided to our chief operating decision maker on a recurring basis; for that reason, we don’t present balance sheet information by segment. We disclose goodwill by segment in accordance with the requirements of FASB ASC 350-20-50, Intangibles - Goodwill - Disclosure.
 
Correction (Tables)
Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]
The following table shows our previously reported amounts, the correction, and our as corrected amounts:
 
 
 
($000)
 
Previously Reported

 
Correction

 
As Corrected

Investing Activities
 
 
 
 
 
 
Purchases of investments
 
$
(320,193
)
 
$
(63,088
)
 
$
(383,281
)
Proceeds from maturities and sales of investments
 
$
234,868

 
$
63,088

 
$
297,956

Cash used for investing activities
 
$
(110,767
)
 
$

 
$
(110,767
)
Summary of Significant Accounting Policies (Tables)
Schedule of Advertising Expense [Table Text Block]
The table below summarizes our advertising expense for the past three years:
($000)
 
2012

 
2011

 
2010

Advertising expense
 
$
6,306

 
$
8,210

 
$
8,572



Income Per Share (Tables)
The following table shows how we reconcile our net income and the number of shares used in computing basic and diluted income per share:

(in thousands, except per share amounts)
 
2012

 
2011

 
2010

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Net income attributable to Morningstar, Inc.:
 
$
108,079

 
$
98,357

 
$
86,370

Less: Distributed earnings available to participating securities
 
(41
)
 
(40
)
 
(10
)
Less: Undistributed earnings available to participating securities
 
(47
)
 
(259
)
 
(335
)
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
107,991

 
$
98,058

 
$
86,025

 
 
 
 
 
 
 
Weighted average common shares outstanding
 
48,497

 
50,032

 
49,249

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.12

 
$
1.96

 
$
1.75

Discontinued operations
 
0.11

 

 

Total
 
$
2.23

 
$
1.96

 
$
1.75

 
 
 
 
 
 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
107,991

 
$
98,058

 
$
86,025

Add: Undistributed earnings allocated to participating securities
 
47

 
259

 
335

Less: Undistributed earnings reallocated to participating securities
 
(46
)
 
(254
)
 
(326
)
Numerator for diluted net income per share — undistributed and distributed earnings available to common shareholders
 
$
107,992

 
$
98,063

 
$
86,034

 
 


 


 
 
Weighted average common shares outstanding
 
48,497

 
50,032

 
49,249

Net effect of dilutive stock options and restricted stock units
 
651

 
956

 
1,306

Weighted average common shares outstanding for computing diluted income per share
 
49,148

 
50,988

 
50,555

 
 


 


 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.10

 
$
1.92

 
$
1.70

Discontinued operations
 
0.10

 

 

Total
 
$
2.20

 
$
1.92

 
$
1.70


The following table shows the number of weighted average stock options, restricted stock units, and restricted stock excluded from our calculation of diluted earnings per share from both continuing operations and net earnings because their inclusion would have been anti-dilutive:
(in thousands)
 
2012

 
2011

 
2010

Weighted Average stock options
 
83

 
55

 

Weighted average restricted stock units
 
7

 

 

Weighted average restricted stock
 

 

 

Total
 
90

 
55

 


These stock options and restricted stock units could be included in the calculation in the future.
Segment and Geographical Area Information (Tables)
The following tables present information about our operating segments:
 
2012 Segment Information
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2012
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

External revenue
 
$
529,984

 
$
128,304

 
$

 
$
658,288

Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
356,165

 
64,765

 
24,689

 
445,619

Stock-based compensation expense
 
13,831

 
2,278

 
2,796

 
18,905

Depreciation and amortization
 
9,288

 
134

 
33,674

 
43,096

Operating income (loss)
 
$
150,700

 
$
61,127

 
$
(61,159
)
 
$
150,668

 
 
 
 
 
 
 
 
 
U.S. capital expenditures
 
 
 
 

 
 

 
$
22,280

Non-U.S. capital expenditures
 
 

 
 

 
 

 
$
7,759

 
 
 
 
 
 
 
 
 
U.S. revenue
 
 

 
 

 
 

 
$
466,947

Non-U.S. revenue
 
 

 
 

 
 

 
$
191,341

 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2012
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

Goodwill
 
$
279,164

 
$
41,681

 
$

 
$
320,845

 
 
 
 
 
 
 
 
 
U.S. long-lived assets
 
 
 
 
 
 
 
$
60,371

Non-U.S. long-lived assets
 
 
 
 
 
 
 
$
23,651

 
2011 Segment Information
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2011
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

External revenue
 
$
500,909

 
$
130,491

 
$

 
$
631,400

Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
351,194

 
58,596

 
24,979

 
434,769

Stock-based compensation expense
 
10,113

 
2,080

 
3,110

 
15,303

Depreciation and amortization
 
8,088

 
166

 
34,659

 
42,913

Operating income (loss)
 
$
131,514

 
$
69,649

 
$
(62,748
)
 
$
138,415

 
 
 
 
 
 
 
 
 
U.S. capital expenditures
 
 

 
 

 
 

 
$
13,816

Non-U.S. capital expenditures
 
 

 
 

 
 

 
$
9,506

 
 
 
 
 
 
 
 
 
U.S. revenue
 
 

 
 

 
 

 
$
446,470

Non-U.S. revenue
 
 

 
 

 
 

 
$
184,930

 
 
As of December 31, 2011
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

Goodwill
 
$
277,059

 
$
41,433

 
$

 
$
318,492

 
 
 
 
 
 
 
 
 
U.S. long-lived assets
 
 

 
 

 
 

 
$
44,572

Non-U.S. long-lived assets
 
 

 
 

 
 

 
$
23,624

 
2010 Segment Information
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2010
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items
 
Total

External revenue
 
$
444,957

 
$
110,394

 
$

 
$
555,351

Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
301,722

 
51,361

 
27,752

 
380,835

Stock-based compensation expense
 
8,110

 
2,032

 
3,651

 
13,793

Depreciation and amortization
 
7,385

 
185

 
32,094

 
39,664

Operating income (loss)
 
$
127,740

 
$
56,816

 
$
(63,497
)
 
$
121,059

 
 
 
 
 
 
 
 
 
U.S. capital expenditures
 
 
 
 
 
 
 
$
5,067

Non-U.S. capital expenditures
 
 
 
 
 
 
 
$
9,704

 
 
 
 
 
 
 
 
 
U.S. revenue
 
 
 
 
 
 
 
$
398,215

Non-U.S. revenue
 
 
 
 
 
 
 
$
157,136

 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2010
($000)
 
Investment
Information

 
Investment
Management

 
Corporate Items

 
Total

Goodwill
 
$
275,611

 
$
42,050

 
$

 
$
317,661

 
 
 
 
 
 
 
 
 
U.S. long-lived assets
 
 
 
 
 
 
 
$
39,496

Non-U.S. long-lived assets
 
 
 
 
 
 
 
$
22,609

Information by geographical region is as follows:
External revenue by geographic region
 
 
 
 
 
 
 
 
 
Year ended December 31
 
($000)
 
2012

 
2011

 
2010

 
United States
 
$
466,947

 
$
446,470

 
$
398,215

 
United Kingdom
 
56,794

 
53,427

 
43,797

 
Europe, excluding the United Kingdom
 
49,844

 
49,507

 
39,851

 
Australia
 
38,229

 
39,761

 
35,638

 
Canada
 
30,664

 
27,808

 
25,533

 
Asia, excluding Japan
 
9,934

 
9,240

 
7,855

 
Japan
 
3,831

 
3,948

 
3,871

 
Other
 
2,045

 
1,239

 
591

 
Total
 
$
658,288

 
$
631,400

 
$
555,351

 


Long-lived assets by geographic region
 
 
 
 
 
 
 
 
 
As of December 31
 
($000)
 
2012

 
2011

 
2010

 
United States
 
$
60,371

 
$
44,572

 
39,496

 
United Kingdom
 
7,435

 
7,512

 
5,960

 
Europe, excluding the United Kingdom
 
2,356

 
2,629

 
3,479

 
Australia
 
1,402

 
1,415

 
1,554

 
Canada
 
1,773

 
2,076

 
2,395

 
Asia, excluding Japan
 
10,445

 
9,656

 
8,874

 
Japan
 
84

 
282

 
233

 
Other
 
156

 
54

 
114

 
Total
 
$
84,022

 
$
68,196

 
62,105

 
Investments and Fair Value Measurements (Tables)
We monitor the concentration, diversification, maturity, and liquidity of our investment portfolio, which is primarily invested in fixed-income securities, and classify our investment portfolio as shown below:
 
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Available-for-sale
 
$
125,786

 
$
247,917

Held-to-maturity
 
26,357

 
16,347

Trading securities
 
5,386

 
5,491

Total
 
$
157,529

 
$
269,755

The following table shows the cost, unrealized gains (losses), and fair values related to investments classified as available-for-sale and held-to-maturity:
 
 
 
As of December 31, 2012
 
As of December 31, 2011
($000)
 
Cost

 
Unrealized
Gain

 
Unrealized
Loss

 
Fair
Value

 
Cost

 
Unrealized
Gain

 
Unrealized
Loss

 
Fair
Value

Available-for-sale:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Government obligations
 
$
40,669

 
$
29

 
$
(608
)
 
$
40,090

 
$
139,099

 
$
72

 
$
(402
)
 
$
138,769

Corporate bonds
 
49,339

 
36

 
(292
)
 
49,083

 
61,589

 
14

 
(280
)
 
61,323

Foreign obligations
 
2,437

 
1

 
(19
)
 
2,419

 

 

 

 

Commercial paper
 
2,000

 

 

 
2,000

 
29,964

 
2

 
(7
)
 
29,959

Equity securities and exchange-traded funds
 
19,613

 
1,359

 
(323
)
 
20,649

 
8,461

 
368

 
(558
)
 
8,271

Mutual funds
 
10,499

 
1,092

 
(46
)
 
11,545

 
9,298

 
363

 
(66
)
 
9,595

Total
 
$
124,557

 
$
2,517

 
$
(1,288
)
 
125,786

 
$
248,411

 
$
819

 
$
(1,313
)
 
$
247,917

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Certificates of deposit
 
$
26,357

 
$

 
$

 
$
26,357

 
$
16,347

 
$

 
$

 
$
16,347

The table below shows the cost and fair value of investments classified as available-for-sale and held-to-maturity based on their contractual maturities as of December 31, 2012 and December 31, 2011. The expected maturities of certain fixed-income securities may differ from their contractual maturities because some of these holdings have call features that allow the issuers the right to prepay obligations without penalties.
 
 
 
As of December 31, 2012
 
As of December 31, 2011
($000)
 
Cost

 
Fair Value

 
Cost

 
Fair Value

Available-for-sale:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
87,599

 
$
86,784

 
$
155,651

 
$
155,247

Due in one to two years
 
6,846

 
6,808

 
75,001

 
74,804

Equity securities, exchange-traded funds, and mutual funds
 
30,112

 
32,194

 
17,759

 
17,866

Total
 
$
124,557

 
$
125,786

 
$
248,411

 
$
247,917

 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
26,352

 
$
26,352

 
$
16,342

 
$
16,342

Due in one to three years
 
5

 
5

 
5

 
5

Total
 
$
26,357

 
$
26,357

 
$
16,347

 
$
16,347

The following table shows the realized gains and losses arising from sales of our investments classified as available-for-sale recorded in our Consolidated Statements of Income: 
($000)
 
2012

 
2011

 
2010

Realized gains
 
$
1,671

 
$
761

 
$
276

Realized losses
 
(1,133
)
 
(501
)
 
(1
)
Realized gains, net
 
$
538

 
$
260

 
$
275

The following table shows the net unrealized gains (losses) on trading securities as recorded in our Consolidated Statements of Income:
 
($000)
 
2012

 
2011

 
2010

Unrealized gains (losses), net
 
$
269

 
$
(387
)
 
$
237

The fair value of our assets subject to fair value measurements and that are measured at fair value on a recurring basis using the fair value hierarchy and the necessary disclosures under FASB ASC 820, Fair Value Measurement, are as follows:
 
 
 
Fair Value
 
Fair Value Measurements as of December 31, 2012
 
 
as of
 
Using Fair Value Hierarchy
($000)
 
December 31, 2012
 
Level 1

 
Level 2

 
Level 3

Available-for-sale investments
 
 

 
 

 
 

 
 

Government obligations
 
$
40,090

 
$

 
$
40,090

 
$

Corporate bonds
 
49,083

 

 
49,083

 

Foreign obligations
 
2,419

 

 
2,419

 

Commercial paper
 
2,000

 

 
2,000

 

Equity securities and exchange-traded funds
 
20,649

 
20,649

 

 

Mutual funds
 
11,545

 
11,545

 

 

Trading securities
 
5,386

 
5,386

 

 

Cash equivalents
 
398

 
398

 

 

Total
 
$
131,570

 
$
37,978

 
$
93,592

 
$

 
 
 
Fair Value
 
Fair Value Measurements as of December 31, 2011
 
 
as of
 
Using Fair Value Hierarchy
($000)
 
December 31, 2011
 
Level 1

 
Level 2

 
Level 3

Available-for-sale investments
 
 

 
 

 
 

 
 

Government obligations
 
$
138,769

 
$

 
$
138,769

 
$

Corporate bonds
 
61,323

 

 
61,323

 

Commercial paper
 
29,959

 

 
29,959

 

Equity securities and exchange-traded funds
 
8,271

 
8,271

 

 

Mutual funds
 
9,595

 
9,595

 

 

Trading securities
 
5,491

 
5,491

 

 

Cash equivalents
 
30,818

 
30,818

 

 

Total
 
$
284,226

 
$
54,175

 
$
230,051

 
$

Acquisitions, Goodwill, and Other Intangible Assets (Tables)
The following table shows the changes in our goodwill balances from January 1, 2011 to December 31, 2012:
 
 
($000)

Balance as of January 1, 2011
$
317,661

 
 
Adjustments to 2010 Acquisitions:
 
Acquisition of Aegis Equities Research
(417
)
Acquisition of Realpoint, LLC
1,800

Acquisition of annuity intelligence business of Advanced Sales and Marketing Corp.
107

Acquisition of Footnoted business of Financial Fineprint Inc. and Seeds Group
(103
)
Other, primarily currency translation
(556
)
Balance as of December 31, 2011
$
318,492

Sale of Morningstar Investor Relations and other businesses
(937
)
Other, primarily currency translation
3,290

Balance as of December 31, 2012
$
320,845

The following table summarizes our intangible assets: 
 
 
As of December 31, 2012
 
As of December 31, 2011
($000)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
Intellectual property
 
$
30,621

 
$
(21,527
)
 
$
9,094

 
9
 
$
32,293

 
$
(20,455
)
 
$
11,838

 
9
Customer-related assets
 
132,798

 
(63,005
)
 
69,793

 
12
 
134,396

 
(52,611
)
 
81,785

 
12
Supplier relationships
 
240

 
(96
)
 
144

 
20
 
240

 
(84
)
 
156

 
20
Technology-based assets
 
81,333

 
(43,809
)
 
37,524

 
9
 
80,694

 
(35,130
)
 
45,564

 
9
Non-competition agreement
 
1,765

 
(1,588
)
 
177

 
4
 
1,751

 
(1,285
)
 
466

 
4
Total intangible assets
 
$
246,757

 
$
(130,025
)
 
$
116,732

 
10
 
$
249,374

 
$
(109,565
)
 
$
139,809

 
10
 
In 2011, we recorded an impairment loss of approximately $800,000 for the masthead related to one of the magazines we acquired from Aspect Huntley in 2006. We did not record any significant impairment losses in 2012 or 2010.

The following table summarizes our amortization expense related to intangible assets:
($000)
 
2012

 
2011

 
2010

Amortization expense
 
$
23,944

 
$
27,267

 
$
24,850

intangible amortization expense for 2013 and subsequent years as follows:
 
($000)

2013
$
21,246

2014
19,984

2015
19,164

2016
14,558

2017
9,951

The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Cash and cash equivalents
 
$
51

Investments
 
55

Accounts receivable
 
198

Other non-current assets
 
62

Intangible assets
 
5,801

Goodwill
 
5,117

Deferred revenue
 
(617
)
Other current and non-current liabilities
 
(347
)
Total purchase price
 
$
10,320

The allocation includes $5,801,000 of acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
1,879

 
10
Technology-based assets
 
3,253

 
6
Intellectual property (trademarks and trade names)
 
46

 
1
Non-competition agreement
 
623

 
3
Total intangible assets
 
$
5,801

 
7
The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Cash and cash equivalents
 
$
4,632

Accounts receivable and other current assets
 
986

Other non-current assets
 
1,632

Intangible assets
 
9,266

Goodwill
 
12,422

Deferred revenue
 
(2,633
)
Accounts payable and accrued and other current liabilities
 
(1,342
)
Deferred tax liability--non-current
 
(2,317
)
Other non-current liabilities
 
(77
)
Total purchase price
 
$
22,569

The allocation includes $9,266,000 of acquired intangible assets, as follows:

 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
7,073

 
13
Technology-based assets
 
1,424

 
5
Intellectual property (trademarks and trade names)
 
769

 
10
Total intangible assets
 
$
9,266

 
12
The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

 
 
($000)

Cash and cash equivalents
 
$
5,489

Accounts receivable and other current assets
 
3,567

Other non-current assets
 
738

Deferred tax asset--non-current
 
195

Intangible assets
 
19,120

Goodwill
 
24,903

Deferred revenue
 
(7,316
)
Accounts payable and accrued and other current liabilities
 
(2,785
)
Other non-current liabilities
 
(95
)
Total purchase price
 
$
43,816

The allocation includes $19,120,000 of acquired intangible assets, as follows:

 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
5,000

 
10
Technology-based assets
 
13,610

 
10
Intellectual property (trademarks and trade names)
 
300

 
1
Non-competition agreement
 
210

 
6
Total intangible assets
 
$
19,120

 
10
The following table summarizes our allocation of the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Cash and cash equivalents
 
$
915

Accounts receivable and other current assets
 
632

Other non-current assets
 
65

Intangible assets
 
9,854

Goodwill
 
12,342

Deferred revenue
 
(496
)
Deferred tax liability
 
(2,504
)
Other current and non-current liabilities
 
(616
)
Total fair value of Morningstar Denmark
 
$
20,192

The allocation includes $9,854,000 of acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
9,130

 
14
Technology-based assets
 
724

 
6
Total intangible assets
 
$
9,854

 
13
The following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Accounts receivable and other current assets
 
$
163

Other non-current assets
 
9

Intangible assets
 
6,300

Goodwill
 
9,028

Deferred revenue
 
(1,364
)
Accounts payable and accrued and other current liabilities
 
(23
)
Total purchase price
 
$
14,113

The allocation includes $6,300,000 of acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
4,100

 
20
Technology-based assets
 
2,100

 
9
Intellectual property (trademarks and trade names)
 
100

 
10
Total intangible assets
 
$
6,300

 
16
For these two acquisitions, the following table summarizes our allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the dates of acquisition:
 
 
($000)

Cash
 
$
1,442

Accounts receivable and other current assets
 
939

Other non-current assets
 
179

Intangible assets
 
2,661

Goodwill
 
3,869

Deferred revenue
 
(159
)
Accounts payable and accrued and other current liabilities
 
(576
)
Deferred tax liability--non-current
 
(800
)
Total purchase price
 
$
7,555

The allocation includes $2,661,000 of acquired intangible assets, as follows:

 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
1,835

 
10
Technology-based assets
 
447

 
4
Intellectual property (trademarks and trade names)
 
379

 
10
Total intangible assets
 
$
2,661

 
9
Discontinued Operations (Tables)
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]
The following table summarizes the amounts included in our Consolidated Statements of Income for discontinued operations for the years ended December 31, 2012, 2011, and 2010:

($000)
 
2012

 
2011

 
2010

 
 
 
 
 
 
 
Gain on sales of businesses
 
$
6,193

 
$

 
$

Income tax expense
 
1,005

 

 

Earnings from discontinued operations, net of tax
 
$
5,188

 
$

 
$

Investments in Unconsolidated Entities (Tables)
Our investments in unconsolidated entities consist primarily of the following:
 
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Investment in MJKK
 
$
20,540

 
$
19,662

Other equity method investments
 
6,288

 
2,807

Investments accounted for using the cost method
 
8,477

 
5,173

Total investments in unconsolidated entities
 
$
35,305

 
$
27,642

The following table summarizes our ownership percentage in MJKK and the market value of this investment based on MJKK’s publicly quoted share price: 
 
 
As of December 31
 
 
 
 
2012

 
2011

Morningstar’s approximate ownership of MJKK
 
34
%
 
33
%
Approximate market value of Morningstar’s ownership in MJKK:
 
 

 
 

Japanese yen (¥000)
 
¥
3,109,579

 
¥
2,797,704

Equivalent U.S. dollars ($000)
 
$
36,227

 
$
36,146

Property, Equipment, and Capitalized Software Property, Equipment, and Capitalized Software (Tables)
The following table shows our property, equipment, and capitalized software summarized by major category:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Computer equipment
 
$
42,312

 
$
35,269

Capitalized software
 
39,643

 
25,918

Furniture and fixtures
 
22,804

 
19,918

Leasehold improvements
 
51,333

 
47,042

Telephone equipment
 
1,951

 
1,805

Construction in progress
 
13,489

 
8,993

Property, equipment, and capitalized software, at cost
 
171,532

 
138,945

Less accumulated depreciation
 
(87,510
)
 
(70,749
)
Property, equipment, and capitalized software, net
 
$
84,022

 
$
68,196


The following table shows the amount of capitalized software development costs included in construction in progress:
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Capitalized software development costs not yet placed into service
 
$
6,477

 
$
6,122

The following table summarizes our depreciation expense:
($000)
 
2012

 
2011

 
2010

Depreciation expense
 
$
19,152

 
$
15,646

 
$
14,814

Operating Leases Operating Leases (Tables)
The following table shows our minimum future rental commitments due in each of the next five years and thereafter for all non-cancelable operating leases, consisting primarily of leases for office space:
Minimum Future Rental Commitments
 
($000)

2013
 
$
17,570

2014
 
17,584

2015
 
16,337

2016
 
15,833

2017
 
14,978

Thereafter
 
52,706

Total
 
$
135,008


The following table summarizes our rent expense including taxes, insurance, and other operating costs:

($000)
 
2012

 
2011

 
2010

Rent expense
 
$
20,736

 
$
20,122

 
$
18,638

Deferred rent includes build-out and rent abatement allowances received, which are amortized over the remaining portion of the original term of the lease as a reduction in office lease expense. We include deferred rent, as appropriate, in “Accounts payable and accrued liabilities” and “Deferred rent, noncurrent” on our Consolidated Balance Sheets.
 
 
As of December 31
 
 
($000)
 
2012

 
2011

Deferred rent
 
$
27,783

 
$
27,282

The following table shows the change in our liability for vacant office space from December 31, 2010 to December 31, 2012:

Liability for Vacant Office Space
 
($000)

Balance as of December 31, 2010
 
$
2,429

Reduction of liability for lease and other related payments
 
(1,510
)
Balance as of December 31, 2011
 
919

Reduction of liability for lease and other related payments
 
(774
)
Balance as of December 31, 2012
 
$
145

Stock-Based Compensation (Tables)
The following table summarizes the number of shares available for future grants under our 2011 Plan:
 
 
As of December 31
(000)
 
2012

Shares available for future grants
 
4,731

The following table summarizes our stock-based compensation expense and the related income tax benefit we recorded in the past three years:

($000)
 
2012

 
2011

 
2010

Restricted stock units
 
$
13,451

 
$
12,765

 
$
12,545

Restricted stock
 
5,013

 
2,196

 
1,248

Stock options
 
441

 
342

 

Total stock-based compensation expense
 
$
18,905

 
$
15,303

 
$
13,793

 
 
 
 
 
 
 
Income tax benefit related to the stock-based compensation expense
 
$
3,686

 
$
3,535

 
$
3,500


The following table summarizes the amount of unrecognized stock-based compensation expense as of December 31, 2012 and the expected number of months over which the expense will be recognized:
 
 
Unrecognized stock-based compensation expense ($000)

 
Expected amortization period (months)
Restricted stock units
 
$
29,577

 
33
Restricted stock
 
906

 
28
Stock options
 
1,078

 
27
Total unrecognized stock-based compensation expense
 
$
31,561

 
32
The following table summarizes restricted stock unit activity during the past three years:
Restricted Stock Units (RSUs)
 
Unvested

 
Vested but
Deferred

 
Total

 
Weighted
Average
Grant Date Value
per RSU

RSUs Outstanding - January 1, 2010
 
681,425

 
39,594

 
721,019

 
$
46.99

Granted
 
399,349

 

 
399,349

 
47.76

Vested
 
(232,292
)
 

 
(232,292
)
 
47.77

Vested but deferred
 
(16,748
)
 
16,748

 

 

Issued
 

 
(11,153
)
 
(11,153
)
 
49.29

Forfeited
 
(54,068
)
 

 
(54,068
)
 
46.70

RSUs Outstanding - December 31, 2010
 
777,666

 
45,189

 
822,855

 
47.14

Granted
 
292,398

 

 
292,398

 
57.36

Dividend equivalents
 
2,673

 

 
2,673

 
48.57

Vested
 
(256,623
)
 

 
(256,623
)
 
48.28

Vested but deferred
 
(1,753
)
 
1,753

 

 

Issued
 

 
(26,866
)
 
(26,866
)
 
46.69

Forfeited
 
(73,318
)
 

 
(73,318
)
 
47.59

RSUs Outstanding - December 31, 2011
 
741,043

 
20,076

 
761,119

 
50.66

Granted
 
341,282

 

 
341,282

 
56.26

Dividend equivalents
 
6,405

 
130

 
6,535

 
52.02

Vested
 
(270,695
)
 

 
(270,695
)
 
50.12

Vested but deferred
 
(892
)
 
892

 

 

Issued
 

 
(2,316
)
 
(2,316
)
 
73.28

Forfeited
 
(89,998
)
 

 
(89,998
)
 
50.84

RSUs Outstanding - December 31, 2012
 
727,145

 
18,782

 
745,927

 
53.37

In May 2011, we granted 86,106 stock options under the 2004 Stock Incentive Plan. In November 2011, we granted 6,095 stock options under the 2011 Plan. We estimated the fair value of the options on the grant date using a Black-Scholes option-pricing model. The weighted average fair value of options granted during 2011 was $23.81 per share, based on the following assumptions:

Assumptions for Black-Scholes Option Pricing Model
 
 
Expected life (years):
 
7.4

Volatility factor:
 
35.1
%
Dividend yield:
 
0.35
%
Interest rate:
 
2.87
%
The first table includes activity for options granted at an exercise price below the fair value per share of our common stock on the grant date; the second table includes activity for all other option grants.

 
 
2012
 
 
 
2011
 
 
 
2010
 
 
Options Granted At an Exercise Price Below the Fair Value Per Share on the Grant Date
 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

Options outstanding—beginning of year
 
398,859

 
$
19.72

 
648,885

 
$
18.91

 
809,169

 
$
17.75

Granted
 

 

 

 

 

 

Canceled
 
(650
)
 
14.70

 

 

 
(1,250
)
 
14.21

Exercised
 
(115,514
)
 
20.19

 
(250,026
)
 
19.25

 
(159,034
)
 
16.62

Options outstanding—end of year
 
282,695

 
20.55

 
398,859

 
19.72

 
648,885

 
18.91

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
282,695

 
$
20.55

 
398,859

 
$
19.72

 
648,885

 
$
18.91

 
 
2012
 
 
 
2011
 
 
 
2010
 
 
All Other Option Grants, Excluding Activity Shown Above
 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

 
Underlying
Shares

 
Weighted
Average
Exercise
Price

Options outstanding—beginning of year
 
818,552

 
$
22.76

 
1,207,540

 
$
17.09

 
1,868,408

 
$
16.15

Granted
 

 

 
92,201

 
57.42

 

 

Canceled
 
(22,330
)
 
39.75

 
(1,960
)
 
16.04

 
(15,524
)
 
13.72

Exercised
 
(404,438
)
 
16.60

 
(479,229
)
 
16.17

 
(645,344
)
 
19.73

Options outstanding—end of year
 
391,784

 
28.98

 
818,552

 
22.76

 
1,207,540

 
17.09

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
337,684

 
$
24.42

 
726,351

 
$
18.36

 
1,207,540

 
$
17.09

The following table summarizes the total intrinsic value (difference between the market value of our stock on the date of exercise and the exercise price of the option) of options exercised:
($000)
 
2012

 
2011

 
2010

Intrinsic value of options exercised
 
$
22,526

 
$
29,899

 
$
31,410

The table below shows additional information for options outstanding and exercisable as of December 31, 2012:
 
 
 
Options Outstanding
 
Options Exercisable
Range of Exercise Prices
 
Number of  Options

 
Weighted
Average
Remaining
Contractual
Life (years)
 
Weighted
Average
Exercise
Price

 
Aggregate
Intrinsic
Value
($000)

 
Exercisable Shares

 
Weighted Average Remaining Contractual Life (years)
 
Weighted Average Exercise Price

 
Aggregate Intrinsic Value ($000)

$8.57 - $14.70
 
74,244

 
0.35
 
$
8.59

 
$
4,027

 
74,244

 
0.35
 
$
8.59

 
$
4,027

$20.51- $46.79
 
528,560

 
2.16
 
23.48

 
20,800

 
528,560

 
2.16
 
23.48

 
20,800

57.28 - $59.35
 
71,675

 
8.54
 
57.46

 
385

 
17,575

 
8.54
 
57.46

 
89


 


 

 


 


 


 

 


 


$8.57 - $59.35
 
674,479

 
2.64
 
25.45

 
$
25,212

 
620,379

 
2.12
 
22.66

 
$
24,916

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested or Expected to Vest
 
 
 
 
 
 
 
 
 
 
 
 
 
$8.57 - $59.35
 
674,479

 
2.64
 
$
25.45

 
$
25,212

 
 
 
 
 
 
 
 
The following table summarizes our excess tax benefits for the past three years:

($000)
 
2012

 
2011

 
2010

Excess tax benefits related to stock-based compensation
 
$
7,210

 
$
9,525

 
$
7,507

Defined Contribution Plan (Tables)
Schedule of Defined Contribution Plan, Employer Matching Contributions
The following table summarizes our matching contributions:
($000)
 
2012

 
2011

 
2010

401(k) matching contributions
 
$
6,642

 
$
5,601

 
$
3,321



Non-Operating Income (Tables)
Nonoperating Income (Expense) [Table Text Block]
The following table presents the components of our net non-operating income:

($000)
 
2012

 
2011

 
2010

Interest income
 
$
5,464

 
$
3,679

 
$
2,718

Interest expense
 
(311
)
 
(1,318
)
 
(281
)
Other income (expense), net
 
(2,196
)
 
(652
)
 
4,295

Non-operating income, net
 
$
2,957

 
$
1,709

 
$
6,732

Income Taxes (Tables)
The following table shows our income tax expense and our effective tax rate:

($000)
 
2012

 
2011

 
2010

Income before income taxes and equity in net income of unconsolidated entities
 
$
153,625

 
$
140,124

 
$
127,791

Equity in net income of unconsolidated entities
 
2,027

 
1,848

 
1,422

Net (income) loss attributable to the noncontrolling interest
 
117

 
43

 
(87
)
Total
 
$
155,769

 
$
142,015

 
$
129,126

Income tax expense
 
$
52,878

 
$
43,658

 
$
42,756

Effective tax rate
 
33.9
%
 
30.7
%
 
33.1
%
The following table reconciles our income tax expense at the U.S. federal income tax rate of 35% to income tax expense as recorded:

 
 
2012
 
 
 
2011
 
 
 
2010
 
 
($000, except percentages)
 
Amount

 
%

 
Amount

 
%

 
Amount

 
%

Income tax expense at U.S. federal rate
 
$
54,519

 
35.0
 %
 
$
49,705

 
35.0
 %
 
$
45,194

 
35.0
 %
State income taxes, net of federal income tax benefit
 
1,510

 
1.0

 
1,376

 
1.0

 
1,756

 
1.3

Stock-based compensation activity
 
516

 
0.3

 
440

 
0.3

 
97

 
0.1

Non-U.S. withholding taxes, net of federal income tax effect, and foreign tax credits
 
307

 
0.2

 
346

 
0.2

 
77

 
0.1

Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses
 
(630
)
 
(0.4
)
 
394

 
0.3

 
(1,186
)
 
(0.9
)
Impact of equity in net income of unconsolidated entities
 

 

 

 

 
79

 
0.1

Difference between U.S. federal statutory and foreign tax rates
 
(2,777
)
 
(1.8
)
 
(2,393
)
 
(1.7
)
 
(2,567
)
 
(2.0
)
Adjustment to accruals for state taxes
 

 

 

 

 
(2,633
)
 
(2.0
)
Change in unrecognized tax benefits
 
967

 
0.6

 
3,126

 
2.2

 
2,869

 
2.2

Credits and incentives
 
(1,494
)
 
(1.0
)
 
(7,734
)
 
(5.4
)
 
(984
)
 
(0.8
)
Recognition of deferred tax assets
 

 

 
(1,778
)
 
(1.3
)
 

 

Other - net
 
(40
)
 

 
176

 
0.1

 
54

 

Total income tax expense
 
$
52,878

 
33.9
 %
 
$
43,658

 
30.7
 %
 
$
42,756

 
33.1
 %
Income tax expense consists of the following:

($000)
 
2012

 
2011

 
2010

Current tax expense:
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
$
38,821

 
$
41,520

 
$
38,901

State
 
1,997

 
1,808

 
2,445

Non-U.S.
 
5,719

 
5,756

 
4,122

Current tax expense
 
46,537

 
49,084

 
45,468

Deferred tax expense (benefit):
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
6,287

 
(1,011
)
 
61

State
 
334

 
(242
)
 
(7
)
Non-U.S.
 
(280
)
 
(4,173
)
 
(2,766
)
Deferred tax expense (benefit), net
 
6,341

 
(5,426
)
 
(2,712
)
Income tax expense
 
$
52,878

 
$
43,658

 
$
42,756

The following table provides our income before income taxes and equity in net income of unconsolidated entities, generated by our U.S. and non-U.S. operations:

($000)
 
2012

 
2011

 
2010

U.S.
 
$
128,920

 
$
123,390

 
$
112,357

Non-U.S.
 
24,705

 
16,734

 
15,434

Income before income taxes and equity in net income of unconsolidated entities
 
$
153,625

 
$
140,124

 
$
127,791

The tax effects of the temporary differences that give rise to the deferred income tax assets and liabilities are as follows:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Deferred tax assets:
 
 
 
 
Stock-based compensation expense
 
$
4,019

 
$
5,567

Accrued liabilities
 
8,402

 
7,789

Net operating loss carryforwards - U.S. federal and state
 
930

 
1,009

Net operating loss carryforwards - Non-U.S.
 
12,386

 
13,297

Research and development
 
246

 
631

Deferred royalty revenue
 
383

 
403

Allowance for doubtful accounts
 
515

 
503

Deferred rent
 
9,031

 
8,847

Unrealized exchange losses, net
 

 
159

Other
 
846

 
383

Total deferred tax assets
 
36,758

 
38,588

 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Acquired intangible assets
 
(14,535
)
 
(17,558
)
Property, equipment, and capitalized software
 
(14,615
)
 
(8,523
)
Unrealized exchange gains, net
 
(444
)
 

Prepaid expenses
 
(3,694
)
 
(1,724
)
Accrued liabilities
 

 

Investments in unconsolidated entities
 
(9,905
)
 
(9,580
)
Total deferred tax liabilities
 
(43,193
)
 
(37,385
)
Net deferred tax asset (liability) before valuation allowance
 
(6,435
)
 
1,203

Valuation allowance
 
(11,407
)
 
(12,039
)
Net deferred tax liability
 
$
(17,842
)
 
$
(10,836
)
The deferred tax assets and liabilities are included in our Consolidated Balance Sheets as follows:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Deferred tax asset, net - current
 
$
3,741

 
$
5,104

Deferred tax liability, net - non-current
 
(21,583
)
 
(15,940
)
Net deferred tax liability
 
$
(17,842
)
 
$
(10,836
)

The table below reconciles the beginning and ending amount of the gross unrecognized tax benefits as follows:

($000)
 
2012

 
2011

Gross unrecognized tax benefits - beginning of the year
 
$
12,189

 
$
9,089

Increases as a result of tax positions taken during a prior-year period
 
445

 
1,639

Decreases as a result of tax positions taken during a prior-year period
 
(1,153
)
 
(876
)
Increases as a result of tax positions taken during the current period
 
2,008

 
3,662

Decreases relating to settlements with tax authorities
 
(299
)
 
(1,001
)
Reductions as a result of lapse of the applicable statute of limitations
 
(491
)
 
(324
)
Gross unrecognized tax benefits - end of the year
 
$
12,699

 
$
12,189



 The following table summarizes our gross liability for interest and penalties:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Liabilities for interest and penalties
 
$
2,232

 
$
1,726

The following table summarizes our U.S. net operating loss (NOL) carryforwards:

 
 
As of December 31
 
 
 
($000)
 
 
2012
 
 
2011
 
 
 
Expiration Date
 
 
Expiration Date
U.S. federal NOLs subject to expiration dates
 
$
2,362

2023
 
$
2,587

2023
The following table summarizes our NOL carryforwards for our non-U.S. operations:

 
 
As of December 31
 
 
($000)
 
2012

 
2011

Non-U.S. NOLs subject to expiration dates from 2014 through 2032
 
$
6,064

 
$
5,048

Non-U.S. NOLs with no expiration date
 
44,504

 
45,002

Total
 
$
50,568

 
$
50,050

 
 
 
 
 
Non-U.S. NOLs not subject to valuation allowances
 
$
4,031

 
$
5,284

Selected Quarterly Financial Data (Tables)
Schedule of Quarterly Financial Data
 
 
2011

 
 
 
 
 
 
 
2012

 
 
 
 
 
 
 
(in thousands except per share amounts)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
Revenue
 
$
151,767

 
$
161,011

 
$
160,051

 
$
158,571

 
$
160,759

 
$
165,968

 
$
160,952

 
$
170,609

 
Total operating expense (1)
 
119,958

 
122,404

 
126,187

 
124,436

 
130,360

 
124,832

 
121,088

 
131,340

 
Operating income
 
31,809

 
38,607

 
33,864

 
34,135

 
30,399

 
41,136

 
39,864

 
39,269

 
Non-operating income (expense), net
 
774

 
9

 
(579
)
 
1,505

 
659

 
995

 
1,880

 
(577
)
 
Income before income taxes and equity in net income of unconsolidated entities
 
32,583

 
38,616

 
33,285

 
35,640

 
31,058

 
42,131

 
41,744

 
38,692

 
Income tax expense
 
10,518

 
12,724

 
12,343

 
8,073

 
11,511

 
14,744

 
15,186

 
11,437

 
Equity in net income (loss) of unconsolidated entities
 
374

 
595

 
428

 
451

 
566

 
497

 
478

 
486

 
Consolidated net income from continuing operations
 
22,439

 
26,487

 
21,370

 
28,018

 
20,113

 
27,884

 
27,036

 
27,741

 
Gain on sale of discontinued operations, net of tax
 

 

 

 

 

 

 

 
5,188

 
Consolidated net income
 
22,439

 
26,487

 
21,370

 
28,018

 
20,113

 
27,884

 
27,036

 
32,929

 
Net (income) loss attributable to the noncontrolling interests
 
98

 
(2
)
 
10

 
(63
)
 
24

 
4

 
34

 
55

 
Net income attributable to Morningstar, Inc.
 
$
22,537

 
$
26,485

 
$
21,380

 
$
27,955

 
$
20,137

 
$
27,888

 
$
27,070

 
$
32,984

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to Morningstar, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.45

 
$
0.53

 
$
0.42

 
$
0.56

 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.59

 
Discontinued operations
 

 

 

 

 

 

 

 
0.11

 
 
 
$
0.45

 
$
0.53

 
$
0.42

 
$
0.56

 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.70

 
Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations

$
0.44


$
0.52


$
0.42


$
0.55


$
0.40


$
0.56


$
0.56


$
0.58


Discontinued operations
 

 

 

 

 

 

 

 
0.11

 
 
 
$
0.44

 
$
0.52

 
$
0.42

 
$
0.55

 
$
0.40

 
$
0.56

 
$
0.56

 
$
0.69

 
Dividends per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.05

 
$
0.05

 
$
0.05

 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.13

 
Dividends paid per common share
 
$
0.05

 
$
0.05

 
$
0.05

 
$
0.05

 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
49,800

 
50,165

 
50,278

 
49,883

 
49,938

 
49,195

 
47,975

 
46,913

 
Diluted
 
50,953

 
51,142

 
51,123

 
50,732

 
50,758

 
49,856

 
48,481

 
47,511

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011

 
 
 
 
 
 
 
2012

 
 
 
 
 
 
 
(in thousands)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
(1) Includes stock-based compensation expense of:
 
$
3,649

 
$
3,843

 
$
3,951

 
$
3,860

 
$
3,866

 
$
3,734

 
$
3,994

 
$
7,311

 
Description of Business (Details)
Dec. 31, 2012
Countries
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Number of countries in which entity operates
27 
Correction (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Payments to Acquire Marketable Securities
 
$ (383,281)
 
Proceeds from maturities and sales of investments
260,317 
297,956 
214,929 
Net Cash Provided by (Used in) Investing Activities
80,192 
(110,767)
(87,949)
Scenario, Previously Reported [Member]
 
 
 
Payments to Acquire Marketable Securities
 
(320,193)
 
Proceeds from maturities and sales of investments
 
234,868 
 
Net Cash Provided by (Used in) Investing Activities
 
(110,767)
 
Restatement Adjustment [Member]
 
 
 
Payments to Acquire Marketable Securities
 
(63,088)
 
Proceeds from maturities and sales of investments
 
63,088 
 
Net Cash Provided by (Used in) Investing Activities
 
$ 0 
 
Summary of Significant Accounting Policies (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Business Acquisition [Line Items]
 
 
 
Advertising expense
$ 6,306,000 
$ 8,210,000 
$ 8,572,000 
Property, Equipment, and Depreciation, useful life, minimum
3 years 
 
 
Intangible Assets, useful life, minimum
10 years 
10 years 
 
Aspect Huntley [Member]
 
 
 
Business Acquisition [Line Items]
 
 
 
Impairment loss
 
$ 800,000 
 
Minimum [Member]
 
 
 
Business Acquisition [Line Items]
 
 
 
Property, Equipment, and Depreciation, useful life, minimum
3 years 
 
 
Maximum [Member]
 
 
 
Business Acquisition [Line Items]
 
 
 
Property, Equipment, and Depreciation, useful life, minimum
7 years 
 
 
Income Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Morningstar, Inc.
$ 32,984 
$ 27,070 
$ 27,888 
$ 20,137 
$ 27,955 
$ 21,380 
$ 26,485 
$ 22,537 
$ 108,079 
$ 98,357 
$ 86,370 
Less: Distributed earnings availabline to participating securities
 
 
 
 
 
 
 
 
(41)
(40)
(10)
Less: Undistributed earnings allocated to participating securities
 
 
 
 
 
 
 
 
(47)
(259)
(335)
Numerator for basic net income per share - undistributed and distributed earnings available to common shareholders
 
 
 
 
 
 
 
 
107,991 
98,058 
86,025 
Weighted average common shares outstanding
46,913 
47,975 
49,195 
49,938 
49,883 
50,278 
50,165 
49,800 
48,497 
50,032 
49,249 
Basic net income per share attributable to Morningstar, Inc.
$ 0.70 
$ 0.56 
$ 0.57 
$ 0.40 
$ 0.56 
$ 0.42 
$ 0.53 
$ 0.45 
$ 2.23 
$ 1.96 
$ 1.75 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
 
 
 
 
 
Numerator for basic net income per share - undistributed and distributed earnings available to common shareholders
 
 
 
 
 
 
 
 
107,991 
98,058 
86,025 
Add: Undistributed earnings allocated to participating securities
 
 
 
 
 
 
 
 
47 
259 
335 
Less: Undistributed earnings reallocated to participating securities
 
 
 
 
 
 
 
 
(46)
(254)
(326)
Numerator for diluted net income per share - undistributed and distributed earnings available to common shareholders
 
 
 
 
 
 
 
 
$ 107,992 
$ 98,063 
$ 86,034 
Weighted average common shares outstanding
46,913 
47,975 
49,195 
49,938 
49,883 
50,278 
50,165 
49,800 
48,497 
50,032 
49,249 
Net effect of dilutive stock options and restricted stock units
 
 
 
 
 
 
 
 
651 
956 
1,306 
Weighted average common shares outstanding for computing diluted income per share
47,511 
48,481 
49,856 
50,758 
50,732 
51,123 
51,142 
50,953 
49,148 
50,988 
50,555 
Diluted net income per share attributable to Morningstar, Inc.
$ 0.69 
$ 0.56 
$ 0.56 
$ 0.40 
$ 0.55 
$ 0.42 
$ 0.52 
$ 0.44 
$ 2.20 
$ 1.92 
$ 1.70 
Income (Loss) from Continuing Operations, Per Basic Share
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 2.12 
$ 1.96 
$ 1.75 
Income (Loss) from Discontinued Operations, Net of Tax, Per Basic Share
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0.11 
$ 0.00 
$ 0.00 
Income (Loss) from Continuing Operations, Per Diluted Share
$ 0.58 
$ 0.56 
$ 0.56 
$ 0.40 
$ 0.55 
$ 0.42 
$ 0.52 
$ 0.44 
$ 2.10 
$ 1.92 
$ 1.70 
Income (Loss) from Discontinued Operations, Net of Tax, Per Diluted Share
$ 0.11 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.10 
$ 0.00 
$ 0.00 
Income Per Share Income Per Share Antidilutive Shares (Details)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
90 
55 
Stock Options [Member]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
83 
55 
Restricted Stock Units (RSUs) [Member]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
Restricted Stock [Member]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
Segment and Geographical Area Information (Operating Segments) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
External revenue
$ 170,609 
$ 160,952 
$ 165,968 
$ 160,759 
$ 158,571 
$ 160,051 
$ 161,011 
$ 151,767 
$ 658,288 
$ 631,400 
$ 555,351 
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
 
 
 
 
 
 
 
445,619 
434,769 
380,835 
Stock-based compensation expense
7,311 
3,994 
3,734 
3,866 
3,860 
3,951 
3,843 
3,649 
18,905 
15,303 
13,793 
Depreciation and amortization
 
 
 
 
 
 
 
 
43,096 1
42,913 1
39,664 1
Operating income
39,269 
39,864 
41,136 
30,399 
34,135 
33,864 
38,607 
31,809 
150,668 
138,415 
121,059 
Segment Reporting Information, Additional Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Goodwill
320,845 
 
 
 
318,492 
 
 
 
320,845 
318,492 
317,661 
Long-lived Assets
84,022 
 
 
 
68,196 
 
 
 
84,022 
68,196 
62,105 
Investment Information [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
529,984 
500,909 
444,957 
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
 
 
 
 
 
 
 
356,165 
351,194 
301,722 
Stock-based compensation expense
 
 
 
 
 
 
 
 
13,831 
10,113 
8,110 
Depreciation and amortization
 
 
 
 
 
 
 
 
9,288 
8,088 
7,385 
Operating income
 
 
 
 
 
 
 
 
150,700 
131,514 
127,740 
Segment Reporting Information, Additional Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Goodwill
279,164 
 
 
 
277,059 
 
 
 
279,164 
277,059 
275,611 
Investment Management [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
128,304 
130,491 
110,394 
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
 
 
 
 
 
 
 
64,765 
58,596 
51,361 
Stock-based compensation expense
 
 
 
 
 
 
 
 
2,278 
2,080 
2,032 
Depreciation and amortization
 
 
 
 
 
 
 
 
134 
166 
185 
Operating income
 
 
 
 
 
 
 
 
61,127 
69,649 
56,816 
Segment Reporting Information, Additional Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Goodwill
41,681 
 
 
 
41,433 
 
 
 
41,681 
41,433 
42,050 
Corporate Elimination [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
 
 
 
 
 
 
 
 
24,689 
24,979 
27,752 
Stock-based compensation expense
 
 
 
 
 
 
 
 
2,796 
3,110 
3,651 
Depreciation and amortization
 
 
 
 
 
 
 
 
33,674 
34,659 
32,094 
Operating income
 
 
 
 
 
 
 
 
(61,159)
(62,748)
(63,497)
Segment Reporting Information, Additional Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
 
United States [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
466,947 
446,470 
398,215 
Segment Reporting Information, Additional Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditure
 
 
 
 
 
 
 
 
22,280 
13,816 
5,067 
Long-lived Assets
60,371 
 
 
 
44,572 
 
 
 
60,371 
44,572 
39,496 
Non United States [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
191,341 
184,930 
157,136 
Segment Reporting Information, Additional Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditure
 
 
 
 
 
 
 
 
7,759 
9,506 
9,704 
Long-lived Assets
$ 23,651 
 
 
 
$ 23,624 
 
 
 
$ 23,651 
$ 23,624 
$ 22,609 
Segment and Geographical Area Information (External Revenue and Long-Lived Assets) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 170,609 
$ 160,952 
$ 165,968 
$ 160,759 
$ 158,571 
$ 160,051 
$ 161,011 
$ 151,767 
$ 658,288 
$ 631,400 
$ 555,351 
Long-lived assets
84,022 
 
 
 
68,196 
 
 
 
84,022 
68,196 
62,105 
United States [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
466,947 
446,470 
398,215 
Long-lived assets
60,371 
 
 
 
44,572 
 
 
 
60,371 
44,572 
39,496 
United Kingdom [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
56,794 
53,427 
43,797 
Long-lived assets
7,435 
 
 
 
7,512 
 
 
 
7,435 
7,512 
5,960 
Europe, excluding the United Kingdom [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
49,844 
49,507 
39,851 
Long-lived assets
2,356 
 
 
 
2,629 
 
 
 
2,356 
2,629 
3,479 
Australia [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
38,229 
39,761 
35,638 
Long-lived assets
1,402 
 
 
 
1,415 
 
 
 
1,402 
1,415 
1,554 
Canada [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
30,664 
27,808 
25,533 
Long-lived assets
1,773 
 
 
 
2,076 
 
 
 
1,773 
2,076 
2,395 
Asia, Excluding Japan [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
9,934 
9,240 
7,855 
Long-lived assets
10,445 
 
 
 
9,656 
 
 
 
10,445 
9,656 
8,874 
Japan [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
3,831 
3,948 
3,871 
Long-lived assets
84 
 
 
 
282 
 
 
 
84 
282 
233 
Other [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
2,045 
1,239 
591 
Long-lived assets
$ 156 
 
 
 
$ 54 
 
 
 
$ 156 
$ 54 
$ 114 
Investments and Fair Value Measurements (Classification of Securities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Fair Value Disclosures [Abstract]
 
 
Available-for-sale
$ 125,786 
$ 247,917 
Held-to-maturity
26,357 
16,347 
Trading securities
5,386 
5,491 
Total
$ 157,529 
$ 269,755 
Investments and Fair Value Measurements (Gains (Losses) on Investments) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
$ 124,557 
$ 248,411 
 
Available-for-sale securities, unrealized gain
2,517 
819 
 
Available-for-sale securities, unrealized loss
1,288 
1,313 
 
Available-for-sale Securities, Current
125,786 
247,917 
 
Held-to-maturity:
 
 
 
Held-to-maturity securities, total amortized cost
26,357 
16,347 
 
Held-to-maturity securities, unrecognized gain
 
Held-to-maturity securities, unrecognized loss
 
Held-to-maturity Securities, Current
26,357 
16,347 
 
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract]
 
 
 
Available-for-sale securities, realized gains
1,671 
761 
276 
Available-for-sale securities, realized losses
(1,133)
(501)
(1)
Available-for-sale securities, realized gains, net
538 
260 
275 
US Treasury and Government [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
40,669 
139,099 
 
Available-for-sale securities, unrealized gain
29 
72 
 
Available-for-sale securities, unrealized loss
(608)
(402)
 
Available-for-sale securities, fair value disclosure
40,090 
138,769 
 
Corporate Bonds [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
49,339 
61,589 
 
Available-for-sale securities, unrealized gain
36 
14 
 
Available-for-sale securities, unrealized loss
(292)
(280)
 
Available-for-sale securities, fair value disclosure
49,083 
61,323 
 
Foreign Government Debt Securities [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
2,437 
 
Available-for-sale securities, unrealized gain
 
Available-for-sale securities, unrealized loss
(19)
 
Available-for-sale securities, fair value disclosure
2,419 
 
Commercial Paper [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
2,000 
29,964 
 
Available-for-sale securities, unrealized gain
 
Available-for-sale securities, unrealized loss
(7)
 
Available-for-sale securities, fair value disclosure
2,000 
29,959 
 
Equity Securities and Exchange-Traded Funds [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
19,613 
8,461 
 
Available-for-sale securities, unrealized gain
1,359 
368 
 
Available-for-sale securities, unrealized loss
(323)
(558)
 
Available-for-sale securities, fair value disclosure
20,649 
8,271 
 
Mutual Funds [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
10,499 
9,298 
 
Available-for-sale securities, unrealized gain
1,092 
363 
 
Available-for-sale securities, unrealized loss
(46)
(66)
 
Available-for-sale securities, fair value disclosure
$ 11,545 
$ 9,595 
 
Investments and Fair Value Measurements (Cost and Fair Value of Securities) (Details) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Available-for-sale Securities, Debt Maturities [Abstract]
 
 
Available-for-sale securities, due in one year or less, amortized cost basis
$ 87,599,000 
$ 155,651,000 
Available-for-sale securities, due in one year or less, fair vlaue
86,784,000 
155,247,000 
Available for sale securities, due in one to two years, amortized cost basis
6,846,000 
75,001,000 
Available-for-sale securities, due in one to two years, fair value
6,808,000 
74,804,000 
Available-for-sale securities, equity securities and mutual funds, amortized cost basis
30,112,000 
17,759,000 
Available-for-sale securities, equity securities and mutual funds, fair value
32,194,000 
17,866,000 
Available-for-sale securities, amortized cost basis
124,557,000 
248,411,000 
Available-for-sale Securities, Current
125,786,000 
247,917,000 
Held-to-maturity Securities, Debt Maturities [Abstract]
 
 
Held-to-maturity securities, due in one year, net carrying amount
26,352,000 
16,342,000 
Held-to-maturity securities, due within one year, fair value
26,352,000 
16,342,000 
Held-to-maturity securities, due in one to three years, net carrying amount
5,000 
5,000 
Held-to-maturity securities, due in one to three years, fair value
5,000 
5,000 
Held-to-maturity securities, total amortized cost
26,357,000 
16,347,000 
Held-to-maturity Securities, Current
26,357,000 
16,347,000 
Certificate of Deposit Held as Collateral Against Australia Office Lease
$ 1,500,000 
$ 1,600,000 
Investments and Fair Value Measurements (Unrealized Gains on Trading Securities) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Schedule of Trading Securities and Other Trading Assets [Line Items]
 
 
 
Unrealized gains (losses), net
$ 269 
$ (387)
$ 237 
Investments and Fair Value Measurements (Fair Value of Assets) (Details) (Fair Value, Measurements, Recurring [Member], USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
$ 5,386 
$ 5,491 
Cash equivalents, fair value disclosure
398 
30,818 
Investments, fair value disclosure
131,570 
284,226 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Government Obligations
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
40,090 
138,769 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
49,083 
61,323 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Foreign Government Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
2,419 
 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
2,000 
29,959 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Equity Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
20,649 
8,271 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Equity Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
11,545 
9,595 
Fair Value, Inputs, Level 1 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
5,386 
5,491 
Cash equivalents, fair value disclosure
398 
30,818 
Investments, fair value disclosure
37,978 
54,175 
Fair Value, Inputs, Level 1 [Member] |
Government Obligations
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 1 [Member] |
Bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 1 [Member] |
Foreign Government Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
 
Fair Value, Inputs, Level 1 [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 1 [Member] |
Equity Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
20,649 
8,271 
Fair Value, Inputs, Level 1 [Member] |
Equity Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
11,545 
9,595 
Fair Value, Inputs, Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
Cash equivalents, fair value disclosure
Investments, fair value disclosure
93,592 
230,051 
Fair Value, Inputs, Level 2 [Member] |
Government Obligations
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
40,090 
138,769 
Fair Value, Inputs, Level 2 [Member] |
Bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
49,083 
61,323 
Fair Value, Inputs, Level 2 [Member] |
Foreign Government Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
2,419 
 
Fair Value, Inputs, Level 2 [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
2,000 
29,959 
Fair Value, Inputs, Level 2 [Member] |
Equity Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 2 [Member] |
Equity Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 3 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
Cash equivalents, fair value disclosure
Investments, fair value disclosure
Fair Value, Inputs, Level 3 [Member] |
Government Obligations
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 3 [Member] |
Bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 3 [Member] |
Foreign Government Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
 
Fair Value, Inputs, Level 3 [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 3 [Member] |
Equity Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
Fair Value, Inputs, Level 3 [Member] |
Equity Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
$ 0 
$ 0 
Acquisitions, Goodwill, and Other Intangible Assets (Narrative) (Details) (USD $)
12 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2012
Countries
Dec. 31, 2011
Dec. 31, 2010
Mar. 31, 2010
Aegis Equities Research [Member]
Years
Apr. 2, 2010
Aegis Equities Research [Member]
Apr. 2, 2010
Aegis Equities Research [Member]
Deductions for Income Tax Purposes [Member]
Apr. 12, 2010
Old Broad Street Research Ltd. [Member]
May 3, 2010
Realpoint, LLC [Member]
Jul. 2, 2010
Morningstar Denmark [Member]
Nov. 30, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Years
Nov. 2, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Jul. 2, 2010
Footnoted business of Financial Fineprint Inc. and Seeds Group [Member]
Dec. 31, 2011
Aspect Huntley [Member]
Jul. 2, 2010
75% [Member]
Morningstar Denmark [Member]
Jul. 2, 2010
25% [Member]
Morningstar Denmark [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash paid to acquire the entity
 
 
 
 
$ 10,269,000 
 
$ 17,937,000 
$ 38,327,000 
 
 
 
$ 6,113,000 
 
$ 15,467,000 
$ 4,725,000 
Intangible assets
 
 
 
 
 
1,787,000 
 
 
 
 
 
 
 
 
 
Intangible assets
 
 
 
 
5,801,000 
 
9,266,000 
19,120,000 
9,854,000 
 
6,300,000 
2,661,000 
 
 
 
Business acquisition, purchase price
 
 
 
 
 
 
 
 
 
 
14,113,000 
 
 
 
 
Number of shares of restricted stock issued to acquire the entity
 
 
 
 
 
 
 
199,174 
 
 
 
 
 
 
 
Amortization period for tax purposes assigned to goodwill and intangible assets, in years
 
 
 
 
 
 
 
 
15 
 
 
 
 
 
Equity method investment, ownership percentage
 
 
 
 
 
 
 
 
75.00% 
 
 
 
 
 
 
Ownership percentage
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
Business Acquisition, Purchase Price Allocation, Assets Acquired (Liabilities Assumed), Net
 
 
 
 
10,320,000 
 
22,569,000 
43,816,000 
20,192,000 
 
14,113,000 
7,555,000 
 
 
 
Goodwill impairment loss
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred tax liability
 
 
 
 
 
 
2,317,000 
 
2,504,000 
 
 
800,000 
 
 
 
Number of countries in which entity operates, approximately
27 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Holding gain upon acquisition of additional ownership of equity
4,564,000 
 
 
 
 
 
4,564,000 
 
 
 
 
 
 
Goodwill
 
 
 
 
5,117,000 
 
12,422,000 
24,903,000 
12,342,000 
 
9,028,000 
3,869,000 
 
 
 
Total deferred tax liabilities
(43,193,000)
(37,385,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest
1,378,000 
1,646,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment loss
 
 
 
 
 
 
 
 
 
 
 
 
$ 800,000 
 
 
Acquisitions, Goodwill, and Other Intangible Assets (Purchase Price Allocation) (Details) (Details) (USD $)
Apr. 2, 2010
Aegis Equities Research [Member]
Apr. 12, 2010
Old Broad Street Research Ltd. [Member]
May 3, 2010
Realpoint, LLC [Member]
Jul. 2, 2010
Morningstar Denmark [Member]
Nov. 2, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Jul. 2, 2010
Footnoted business of Financial Fineprint Inc. and Seeds Group [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
Equity Method Investment, Ownership Percentage
 
 
 
25.00% 
 
 
Equity method investment, ownership percentage
 
 
 
75.00% 
 
 
Business Acquisition, Purchase Price Allocation [Abstract]
 
 
 
 
 
 
Cash and cash equivalents
$ 51,000 
$ 4,632,000 
$ 5,489,000 
$ 915,000 
 
$ 1,442,000 
Accounts receivable and other current assets
 
986,000 
3,567,000 
632,000 
163,000 
939,000 
Investments
55,000 
 
 
 
 
 
Accounts receivable
198,000 
 
 
 
 
 
Other non-current assets
62,000 
1,632,000 
738,000 
65,000 
9,000 
179,000 
Intangible assets
5,801,000 
9,266,000 
19,120,000 
9,854,000 
6,300,000 
2,661,000 
Deferred tax asset--non-current
 
 
195,000 
 
 
 
Goodwill
5,117,000 
12,422,000 
24,903,000 
12,342,000 
9,028,000 
3,869,000 
Deferred revenue
(617,000)
(2,633,000)
(7,316,000)
(496,000)
(1,364,000)
(159,000)
Accounts payable and accrued and other current liabilities
 
(1,342,000)
(2,785,000)
 
(23,000)
(576,000)
Deferred tax liability--non-current
 
(2,317,000)
 
(2,504,000)
 
(800,000)
Other non-current liabilities
 
(77,000)
(95,000)
 
 
 
Other current and non-current liabilities
(347,000)
 
 
(616,000)
 
 
Total purchase price
$ 10,320,000 
$ 22,569,000 
$ 43,816,000 
$ 20,192,000 
$ 14,113,000 
$ 7,555,000 
Acquisitions, Goodwill, and Other Intangible Assets (Allocation of Acquired Intangible Assets) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 0 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Customer-Related Assets [Member]
Dec. 31, 2011
Customer-Related Assets [Member]
Dec. 31, 2012
Technology-Based Assets [Member]
Dec. 31, 2011
Technology-Based Assets [Member]
Dec. 31, 2012
Intellectual Property (Trademarks and Trade Names) [Member]
Dec. 31, 2011
Intellectual Property (Trademarks and Trade Names) [Member]
Dec. 31, 2012
Non-Competition Agreement [Member]
Dec. 31, 2011
Non-Competition Agreement [Member]
Mar. 31, 2010
Aegis Equities Research [Member]
Apr. 2, 2010
Aegis Equities Research [Member]
Mar. 31, 2010
Aegis Equities Research [Member]
Customer-Related Assets [Member]
Apr. 2, 2010
Aegis Equities Research [Member]
Customer-Related Assets [Member]
Mar. 31, 2010
Aegis Equities Research [Member]
Technology-Based Assets [Member]
Apr. 2, 2010
Aegis Equities Research [Member]
Technology-Based Assets [Member]
Mar. 31, 2010
Aegis Equities Research [Member]
Intellectual Property (Trademarks and Trade Names) [Member]
Apr. 2, 2010
Aegis Equities Research [Member]
Intellectual Property (Trademarks and Trade Names) [Member]
Mar. 31, 2010
Aegis Equities Research [Member]
Non-Competition Agreement [Member]
Apr. 2, 2010
Aegis Equities Research [Member]
Non-Competition Agreement [Member]
Apr. 12, 2010
Old Broad Street Research Ltd. [Member]
Apr. 12, 2010
Old Broad Street Research Ltd. [Member]
Customer-Related Assets [Member]
Apr. 12, 2010
Old Broad Street Research Ltd. [Member]
Technology-Based Assets [Member]
Apr. 12, 2010
Old Broad Street Research Ltd. [Member]
Intellectual Property (Trademarks and Trade Names) [Member]
May 3, 2010
Realpoint, LLC [Member]
May 3, 2010
Realpoint, LLC [Member]
Customer-Related Assets [Member]
May 3, 2010
Realpoint, LLC [Member]
Technology-Based Assets [Member]
May 3, 2010
Realpoint, LLC [Member]
Intellectual Property (Trademarks and Trade Names) [Member]
May 3, 2010
Realpoint, LLC [Member]
Non-Competition Agreement [Member]
Jul. 2, 2010
Morningstar Denmark [Member]
Jul. 2, 2010
Morningstar Denmark [Member]
Customer-Related Assets [Member]
Jul. 2, 2010
Morningstar Denmark [Member]
Technology-Based Assets [Member]
Nov. 30, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Nov. 2, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Nov. 30, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Customer-Related Assets [Member]
Nov. 2, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Customer-Related Assets [Member]
Nov. 30, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Technology-Based Assets [Member]
Nov. 2, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Technology-Based Assets [Member]
Nov. 30, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Intellectual Property (Trademarks and Trade Names) [Member]
Nov. 2, 2010
Annuity Intelligence Business of Advanced Sales and Marketing Corporation [Member]
Intellectual Property (Trademarks and Trade Names) [Member]
Jul. 2, 2010
Footnoted business of Financial Fineprint Inc. and Seeds Group [Member]
Jul. 2, 2010
Footnoted business of Financial Fineprint Inc. and Seeds Group [Member]
Customer-Related Assets [Member]
Jul. 2, 2010
Footnoted business of Financial Fineprint Inc. and Seeds Group [Member]
Technology-Based Assets [Member]
Jul. 2, 2010
Footnoted business of Financial Fineprint Inc. and Seeds Group [Member]
Intellectual Property (Trademarks and Trade Names) [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-Average Useful Life (years)
10 years 
10 years 
12 years 
12 years 
9 years 
9 years 
9 years 
9 years 
4 years 
4 years 
7 years 
 
10 years 
 
6 years 
 
1 year 
 
3 years 
 
12 years 
13 years 
5 years 
10 years 
10 years 
10 years 
10 years 
1 year 
6 years 
13 years 
14 years 
6 years 
16 years 
 
20 years 
 
9 years 
 
10 years 
 
9 years 
10 years 
4 years 
10 years 
Intangible assets
 
 
 
 
 
 
 
 
 
 
 
$ 5,801 
 
$ 1,879 
 
$ 3,253 
 
$ 46 
 
$ 623 
$ 9,266 
$ 7,073 
$ 1,424 
$ 769 
$ 19,120 
$ 5,000 
$ 13,610 
$ 300 
$ 210 
$ 9,854 
$ 9,130 
$ 724 
 
$ 6,300 
 
$ 4,100 
 
$ 2,100 
 
$ 100 
$ 2,661 
$ 1,835 
$ 447 
$ 379 
Acquisitions, Goodwill, and Other Intangible Assets (Schedule of Goodwill) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Aegis Equities Research [Member]
Dec. 31, 2010
Realpoint, LLC [Member]
Business Acquisition [Line Items]
 
 
 
 
Goodwill, Period Increase (Decrease)
$ (937)
 
 
 
Goodwill [Roll Forward]
 
 
 
 
Goodwill, Beginning Balance
318,492 
317,661 
 
 
Adjustments to Acquisitions
 
 
(417)
1,800 
Other, primarily currency translation
 
(556)
 
 
Goodwill, Ending Balance
320,845 
318,492 
 
 
Goodwill impairment loss
$ 0 
$ 0 
 
 
Acquisitions, Goodwill, and Other Intangible Assets (Schedule of Intangible Assets) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
$ 246,757 
$ 249,374 
Accumulated Amortization
(130,025)
(109,565)
Intangible Assets, Net
116,732 
139,809 
Weighted-Average Useful Life (years)
10 years 
10 years 
Intellectual Property [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
30,621 
32,293 
Accumulated Amortization
(21,527)
(20,455)
Intangible Assets, Net
9,094 
11,838 
Weighted-Average Useful Life (years)
9 years 
9 years 
Customer-Related Assets [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
132,798 
134,396 
Accumulated Amortization
(63,005)
(52,611)
Intangible Assets, Net
69,793 
81,785 
Weighted-Average Useful Life (years)
12 years 
12 years 
Supplier Relationships [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
240 
240 
Accumulated Amortization
(96)
(84)
Intangible Assets, Net
144 
156 
Weighted-Average Useful Life (years)
20 years 
20 years 
Technology-Based Assets [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
81,333 
80,694 
Accumulated Amortization
(43,809)
(35,130)
Intangible Assets, Net
37,524 
45,564 
Weighted-Average Useful Life (years)
9 years 
9 years 
Non-Competition Agreement [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
1,765 
1,751 
Accumulated Amortization
(1,588)
(1,285)
Intangible Assets, Net
$ 177 
$ 466 
Weighted-Average Useful Life (years)
4 years 
4 years 
Acquisitions, Goodwill, and Other Intangible Assets (Amortization Expense) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Acquisitions, Goodwill, and Other Intangible Assets [Abstract]
 
 
 
Amortization expense
$ 23,944 
$ 27,267 
$ 24,850 
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
 
 
 
2012
21,246 
 
 
2013
19,984 
 
 
2014
19,164 
 
 
2015
14,558 
 
 
2016
$ 9,951 
 
 
Discontinued Operations (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax
 
 
 
 
 
 
 
 
 
$ 0 
$ 0 
Discontinued Operation, Tax Effect of Discontinued Operation
 
 
 
 
 
 
 
 
 
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax
$ 5,188 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 5,188 
$ 0 
$ 0 
Investments in Unconsolidated Entities (Details)
12 Months Ended 12 Months Ended
Dec. 31, 2012
USD ($)
Dec. 31, 2011
USD ($)
Dec. 31, 2010
USD ($)
Dec. 31, 2012
Other Equity Method Investments [Member]
USD ($)
Dec. 31, 2011
Other Equity Method Investments [Member]
USD ($)
Dec. 31, 2012
Morningstar Sweden AB [Member]
Dec. 31, 2011
Morningstar Sweden AB [Member]
Dec. 31, 2012
YCharts [Member]
Dec. 31, 2011
YCharts [Member]
Dec. 31, 2012
Morningstar Japan KK [Member]
USD ($)
Dec. 31, 2012
Morningstar Japan KK [Member]
JPY (¥)
Dec. 31, 2011
Morningstar Japan KK [Member]
USD ($)
Dec. 31, 2011
Morningstar Japan KK [Member]
JPY (¥)
Dec. 31, 2012
Inquiry Financial Europe AB [Member]
USD ($)
Dec. 31, 2012
HelloWallet [Member]
USD ($)
Dec. 31, 2012
Bundle [Member]
USD ($)
Schedule of Equity Method Investments [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity method investments
 
 
 
$ 6,288,000 
$ 2,807,000 
 
 
 
 
$ 20,540,000 
 
$ 19,662,000 
 
 
 
 
Cost method investments
8,477,000 
5,173,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investments in unconsolidated entities
35,305,000 
27,642,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Investment, Ownership Percentage
 
 
 
 
 
24.00% 
24.00% 
22.00% 
22.00% 
34.00% 
34.00% 
33.00% 
33.00% 
34.00% 
 
 
Equity method investment, approximate market value
 
 
 
 
 
 
 
 
 
36,227,000 
3,109,579,000 
36,146,000 
2,797,704,000 
 
 
 
Cost-method investments, other than temporary impairment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Investment, Other than Temporary Impairment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments to Acquire Other Investments
10,304,000 
2,450,000 
 
 
 
 
 
 
 
 
 
 
3,554,000 
6,750,000 
 
Proceeds from Sale of Other Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
966,000 
Cost-method Investments, Realized Gain (Loss)
$ (2,034,000)
$ 0 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
$ 2,034,000 
Property, Equipment, and Capitalized Software (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
$ 171,532 
$ 138,945 
 
Less accumulated depreciation
(87,510)
(70,749)
 
Property, equipment, and capitalized software, net
84,022 
68,196 
62,105 
Capitalized software development costs not yet placed into service
6,477 
6,122 
 
Depreciation expense
19,152 
15,646 
14,814 
Computer equipment [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
42,312 
35,269 
 
Capitalized software [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
39,643 
25,918 
 
Furniture and fixtures [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
22,804 
19,918 
 
Leasehold improvements [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
51,333 
47,042 
 
Telephone equipment [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
1,951 
1,805 
 
Construction in progress [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
$ 13,489 
$ 8,993 
 
Operating Leases Operating Leases (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
 
 
2012
$ 17,570 
 
 
2013
17,584 
 
 
2014
16,337 
 
 
2015
15,833 
 
 
2016
14,978 
 
 
Thereafter
52,706 
 
 
Total
135,008 
 
 
Rent expense
20,736 
20,122 
18,638 
Deferred rent
27,783 
27,282 
 
Liability for Vacant Office Space [Roll Forward]
 
 
 
Vacant office space liability, beginning balance
919 
2,429 
 
Reduction of liability for lease payments
(774)
(1,510)
 
Vacant office space liability, ending balance
$ 145 
$ 919 
$ 2,429 
Stock-Based Compensation (Narrative) (Details) (USD $)
12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2012
May 31, 2010
Realpoint, LLC [Member]
Dec. 31, 2012
Stock Options [Member]
Dec. 31, 2012
Restricted Stock [Member]
Dec. 31, 2011
Restricted Stock [Member]
Dec. 31, 2012
Restricted Stock Units (RSUs) [Member]
May 31, 2011
2004 Stock Incentive Plan [Member]
Dec. 31, 2011
2004 Stock Incentive Plan [Member]
Nov. 30, 2011
2011 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
Issuance of restricted stock
 
199,174 
 
 
 
 
 
 
 
Amortized fair value to stock-based compensation
 
 
 
$ 9,363,000 
 
 
 
 
 
Expense recognized upon accelerated vesting of restricted stock
 
 
 
3,238,000 
396,000 
 
 
 
 
Unrecognized stock-based compensation expense
$ 31,561,000 
 
$ 1,078,000 
$ 906,000 
 
$ 29,577,000 
 
 
 
Expected amortization period (months)
32 months 
 
27 months 
28 months 
 
33 months 
 
 
 
Stock option granted
 
 
 
 
 
 
86,106 
 
6,095 
Fair value per share
 
 
 
 
 
 
 
$ 23.81 
 
Stock-Based Compensation (Shares Available for Future Grants) (Details)
In Thousands, unless otherwise specified
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
Shares available for future grants
4,731 
Stock-Based Compensation (Allocation of Stock-Based Compensation Costs) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
$ 7,311 
$ 3,994 
$ 3,734 
$ 3,866 
$ 3,860 
$ 3,951 
$ 3,843 
$ 3,649 
$ 18,905 
$ 15,303 
$ 13,793 
Income tax benefit related to the stock-based compensation expense
 
 
 
 
 
 
 
 
3,686 
3,535 
3,500 
Restricted Stock Units (RSUs) [Member]
 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
 
 
 
 
 
 
 
 
13,451 
12,765 
12,545 
Restricted Stock [Member]
 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
 
 
 
 
 
 
 
 
5,013 
2,196 
1,248 
Stock Options [Member]
 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
 
 
 
 
 
 
 
 
$ 441 
$ 342 
$ 0 
Stock-Based Compensation (Unrecognized Stock-Based Compensation Expense) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
$ 31,561 
Expected amortization period (months)
32 months 
Restricted Stock Units (RSUs) [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
29,577 
Expected amortization period (months)
33 months 
Restricted Stock [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
906 
Expected amortization period (months)
28 months 
Stock Options [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
$ 1,078 
Expected amortization period (months)
27 months 
Stock-Based Compensation (Restricted Stock Units Activity) (Details) (Restricted Stock Units (RSUs) [Member], USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Restricted Stock Units (RSUs) [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
 
 
 
RSUs Outstanding, Beginning Balance, Unvested
741,043 
777,666 
681,425 
RSUs Outstanding, Beginning Balance, Vested but Deferred
20,076 
45,189 
39,594 
RSUs Outstanding, Beginning Balance
761,119 
822,855 
721,019 
RSUs Outstanding, Beginning Balance, Weighted Average Grant Date Value per RSU
50.66 
47.14 
46.99 
Granted, Unvested
341,282 
292,398 
399,349 
Granted, Vested but Deferred
Granted
341,282 
292,398 
399,349 
Granted, Weighted Average Grant Date Value per RSU
$ 56.26 
$ 57.36 
$ 47.76 
Dividend equivalents, Unvested
6,405 
2,673 
 
Dividends equivalents, Vested but Deferred
130 
 
Dividends equivalents
6,535 
2,673 
 
Dividends equivalents, Weighted Average Grant Date Value per RSU
$ 52.02 
$ 48.57 
 
Vested, Unvested
(270,695)
(256,623)
(232,292)
Vested, Vested but Deferred
Vested
(270,695)
(256,623)
(232,292)
Vested, Weighted Average Grant Date Value per RSU
$ 50.12 
$ 48.28 
$ 47.77 
Vested but Deferred, Unvested
(892)
(1,753)
(16,748)
Vested but Deferred, Vested but Deferred
892 
1,753 
16,748 
Vested but Deferred
Vested but Deferred, Weighted Average Grant Date Value per RSU
$ 0.00 
$ 0.00 
$ 0.00 
Issued, Unvested
Issued, Vested but Deferred
(2,316)
(26,866)
(11,153)
Issued
(2,316)
(26,866)
(11,153)
Issued, Weighted Average Grant Date Value per RSU
$ 73.28 
$ 46.69 
$ 49.29 
Forfeited, Unvested
(89,998)
(73,318)
(54,068)
Forfeited, Vested but Deferred
Forfeited
(89,998)
(73,318)
(54,068)
Forfeited, Weighted Average Grant Date Value per RSU
$ 50.84 
$ 47.59 
$ 46.70 
RSUs Outstanding, Ending Balance, Unvested
727,145 
741,043 
777,666 
RSUs Outstanding, Ending Balance, Vested but Deferred
18,782 
20,076 
45,189 
RSUs Outstanding, Ending Balance
745,927 
761,119 
822,855 
RSUs Outstanding, Ending Balance, Weighted Average Grant Date Value per RSU
53.37 
50.66 
47.14 
Stock-Based Compensation (Assumptions for Black-Scholes Option Pricing Model) (Details) (Stock Options [Member])
12 Months Ended
Dec. 31, 2012
Stock Options [Member]
 
Assumptions for Black-Scholes Option Pricing Model [Line Items]
 
Expected life (years):
7 years 4 months 24 days 
Volatility factor:
35.10% 
Dividends yield:
0.35% 
Interest rate:
2.87% 
Stock-Based Compensation (Stock Option Activity) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Intrinsic Value of Options Exercised [Abstract]
 
 
 
 
Intrinsic value of options exercised
$ 22,526 
$ 29,899 
$ 31,410 
 
Options Granted At Discount [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
 
 
 
Beginning Balance, Options, Outstanding, Underlying Shares
398,859 
648,885 
809,169 
 
Granted, Underlying Shares
 
Canceled, Underlying Shares
650 
(1,250)
 
Exercised, Underlying Shares
(115,514)
(250,026)
(159,034)
 
Ending Balance, Options, Outstanding, Underlying Shares
282,695 
398,859 
648,885 
 
Options, Weighted Average Exercise Price [Abstract]
 
 
 
 
Beginning Balance, Options, Outstanding, Weighted Average Exercise Price
$ 19.72 
$ 18.91 
$ 17.75 
 
Granted, Weighted Average Exercise Price
$ 0.00 
$ 0.00 
$ 0.00 
 
Canceled, Weighted Average Exercise Price
$ 14.70 
$ 0.00 
$ 14.21 
 
Exercised, Weighted Average Exercise Price
$ 20.19 
$ 19.25 
$ 16.62 
 
Ending Balance, Options, Outstanding, Weighted Average Exercise Price
$ 20.55 
$ 19.72 
$ 18.91 
 
Options, Exercisable, Number of Shares and Weighted Average Exercise Price [Abstract]
 
 
 
 
Options exercisable - end of year, Underlying Shares
282,695 
398,859 
 
648,885 
Options exercisable - end of year, Weighted Average Exercise Price
$ 20.55 
$ 19.72 
 
$ 18.91 
Option Grants Excluding Options Granted At Discount [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
 
 
 
Beginning Balance, Options, Outstanding, Underlying Shares
818,552 
1,207,540 
1,868,408 
 
Granted, Underlying Shares
92,201 
 
Canceled, Underlying Shares
(22,330)
(1,960)
(15,524)
 
Exercised, Underlying Shares
(404,438)
(479,229)
(645,344)
 
Ending Balance, Options, Outstanding, Underlying Shares
391,784 
818,552 
1,207,540 
 
Options, Weighted Average Exercise Price [Abstract]
 
 
 
 
Beginning Balance, Options, Outstanding, Weighted Average Exercise Price
$ 22.76 
$ 17.09 
$ 16.15 
 
Granted, Weighted Average Exercise Price
$ 0.00 
$ 57.42 
$ 0.00 
 
Canceled, Weighted Average Exercise Price
$ 39.75 
$ 16.04 
$ 13.72 
 
Exercised, Weighted Average Exercise Price
$ 16.60 
$ 16.17 
$ 19.73 
 
Ending Balance, Options, Outstanding, Weighted Average Exercise Price
$ 28.98 
$ 22.76 
$ 17.09 
 
Options, Exercisable, Number of Shares and Weighted Average Exercise Price [Abstract]
 
 
 
 
Options exercisable - end of year, Underlying Shares
337,684 
726,351 
 
1,207,540 
Options exercisable - end of year, Weighted Average Exercise Price
$ 24.42 
$ 18.36 
 
$ 17.09 
Stock-Based Compensation (Additional Information on Options) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Closing Stock Price Used to Calculate Intrinsic Value
$ 62.83 
Range One [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
$8.57 - $14.70 
Exercise price range, lower range limit
$ 8.57 
Exercise price range, upper range limit
$ 14.70 
Options Outstanding, Number of Options
74,244 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
0 years 4 months 6 days 
Options Outstanding, Weighted Average Exercise Price
$ 8.59 
Options Outstanding, Aggregate Intrinsic Value
$ 4,027 
Options Exercisable, Exercisable Shares
74,244 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
0 years 4 months 6 days 
Options Exercisable, Weighted Average Exercise Price
$ 8.59 
Options Exercisable, Aggregate Intrinsic Value
4,027 
Range Two [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
$20.51- $46.79 
Exercise price range, lower range limit
$ 20.51 
Exercise price range, upper range limit
$ 46.79 
Options Outstanding, Number of Options
528,560 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
2 years 1 month 28 days 
Options Outstanding, Weighted Average Exercise Price
$ 23.48 
Options Outstanding, Aggregate Intrinsic Value
20,800 
Options Exercisable, Exercisable Shares
528,560 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
2 years 1 month 28 days 
Options Exercisable, Weighted Average Exercise Price
$ 23.48 
Options Exercisable, Aggregate Intrinsic Value
20,800 
Range Three [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
57.28 - $59.35 
Exercise price range, lower range limit
$ 57.28 
Exercise price range, upper range limit
$ 59.35 
Options Outstanding, Number of Options
71,675 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
8 years 6 months 15 days 
Options Outstanding, Weighted Average Exercise Price
$ 57.46 
Options Outstanding, Aggregate Intrinsic Value
385 
Options Exercisable, Exercisable Shares
17,575 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
8 years 6 months 15 days 
Options Exercisable, Weighted Average Exercise Price
$ 57.46 
Options Exercisable, Aggregate Intrinsic Value
89 
Range Four [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
$8.57 - $59.35 
Exercise price range, lower range limit
$ 5.87 
Exercise price range, upper range limit
$ 59.35 
Options Outstanding, Number of Options
674,479 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
2 years 7 months 21 days 
Options Outstanding, Weighted Average Exercise Price
$ 25.45 
Options Outstanding, Aggregate Intrinsic Value
25,212 
Options Exercisable, Exercisable Shares
620,379 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
2 years 1 month 13 days 
Options Exercisable, Weighted Average Exercise Price
$ 22.66 
Options Exercisable, Aggregate Intrinsic Value
24,916 
Vested or Expected to Vest [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Exercise price range, lower range limit
$ 5.87 
Exercise price range, upper range limit
$ 59.35 
Share Based Compensation, Arrangement By Share Based Payments, Vested or Expected to Vest, Range of Exercise Prices
$8.57 - $59.35 
Option Outstanding, Number of Options, Vested or Expected to Vest
674,479 
Options Outstanding, Weighted Average Remaining Contractual Life (years), Vested or Expected to vest
2 years 7 months 21 days 
Options Outstanding, Weighted Average Exercise Price, Vested or Expected to Vest
$ 25.45 
Options Outstanding, Average Intrinsic Value, Vested or Expected to Vest
$ 25,212 
Defined Contribution Plan (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Defined Contribution Plan [Abstract]
 
 
 
401(k) matching contributions
$ 6,642,000 
$ 5,601,000 
$ 3,321,000 
Matching contribution to 401(k) for every dollar
$ 0.75 
$ 0.75 
$ 0.50 
Matching contribution percent to employee's contribution in pay period
7.00% 
7.00% 
7.00% 
Non-Operating Income (Details) (USD $)
3 Months Ended 12 Months Ended 0 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Jul. 2, 2010
Morningstar Denmark [Member]
Interest income
 
 
 
 
 
 
 
 
$ 5,464,000 
$ 3,679,000 
$ 2,718,000 
 
Interest expense
 
 
 
 
 
 
 
 
(311,000)
(1,318,000)
(281,000)
 
Other income (expense), net
 
 
 
 
 
 
 
 
(2,196,000)
(652,000)
4,295,000 
 
Non-operating income (expense), net
(577,000)
1,880,000 
995,000 
659,000 
1,505,000 
(579,000)
9,000 
774,000 
2,957,000 
1,709,000 
6,732,000 
 
Interest on business tax expense related to prior years
 
 
 
 
 
 
 
 
700,000 
900,000 
 
 
Business tax expense related to prior years
 
 
 
 
 
 
 
 
1,000,000 
1,400,000 
 
 
Cost-method Investments, Realized Gain (Loss)
 
 
 
 
 
 
 
 
(2,034,000)
 
Holding gain upon acquisition of additional ownership of equity
 
 
 
 
 
 
 
 
$ 0 
$ 0 
$ 4,564,000 
$ 4,564,000 
Income Taxes (Schedule of Income Tax Expense and Effective Tax Rate) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Tax Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes and equity in net income of unconsolidated entities
$ 38,692 
$ 41,744 
$ 42,131 
$ 31,058 
$ 35,640 
$ 33,285 
$ 38,616 
$ 32,583 
$ 153,625 
$ 140,124 
$ 127,791 
Equity in net income of unconsolidated entities
486 
478 
497 
566 
451 
428 
595 
374 
2,027 
1,848 
1,422 
Net (income) loss attributable to the noncontrolling interest
55 
34 
24 
(63)
10 
(2)
98 
117 
43 
(87)
Income loss from continuing operations before income taxes domestic and foreign
 
 
 
 
 
 
 
 
155,769 
142,015 
129,126 
Income tax expense
$ 11,437 
$ 15,186 
$ 14,744 
$ 11,511 
$ 8,073 
$ 12,343 
$ 12,724 
$ 10,518 
$ 52,878 
$ 43,658 
$ 42,756 
Effective income tax rate
 
 
 
 
 
 
 
 
33.90% 
30.70% 
33.10% 
Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Tax Examination [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Income tax expense at U.S. federal rate
 
 
 
 
 
 
 
 
$ 54,519 
$ 49,705 
$ 45,194 
Income tax expense at U.S. federal rate, percent
 
 
 
 
 
 
 
 
35.00% 
35.00% 
35.00% 
State income taxes, net of frderal income tax benefit
 
 
 
 
 
 
 
 
1,510 
1,376 
1,756 
State income taxes, net of frderal income tax benefit, percent
 
 
 
 
 
 
 
 
1.00% 
1.00% 
1.30% 
Stock option activity
 
 
 
 
 
 
 
 
516 
440 
97 
Stock option activity, percent
 
 
 
 
 
 
 
 
0.30% 
0.30% 
0.10% 
Non-U.S. witholding taxes, net of federal income tax effect, and foreign tax credits
 
 
 
 
 
 
 
 
307 
346 
77 
Non-U.S. witholding taxes, net of federal income tax effect, and foreign tax credits, percent
 
 
 
 
 
 
 
 
0.20% 
0.20% 
0.10% 
Net change in valuation allowance related to non-U.S. deffered tax assets, primarily net operating losses
 
 
 
 
 
 
 
 
(630)
394 
(1,186)
Net change in valuation allowance related to non-U.S. deffered tax assets, primarily net operating losses, percent
 
 
 
 
 
 
 
 
(0.40%)
0.30% 
(0.90%)
Impact of equity in net income of unconsolidated entities
 
 
 
 
 
 
 
 
79 
Impact of equity in net income of unconsolidated entities, percent
 
 
 
 
 
 
 
 
0.00% 
0.00% 
0.10% 
Difference between U.S. federal statutory and foreign tax rates
 
 
 
 
 
 
 
 
(2,777)
(2,393)
(2,567)
Difference between U.S. federal statutory and foreign tax rates, percent
 
 
 
 
 
 
 
 
(1.80%)
(1.70%)
(2.00%)
Adjustments to accruals for state taxes
 
 
 
 
 
 
 
 
(2,633)
Adjustments to accruals for state taxes, percent
 
 
 
 
 
 
 
 
0.00% 
0.00% 
(2.00%)
Change in unrecognized tax benefits
 
 
 
 
 
 
 
 
967 
3,126 
2,869 
Changes in unrecognized tax benefits, percent
 
 
 
 
 
 
 
 
0.60% 
2.20% 
2.20% 
Other tax credits
 
 
 
 
 
 
 
 
(1,494)
(7,734)
(984)
Other tax credits, percent
 
 
 
 
 
 
 
 
(1.00%)
(5.40%)
(0.80%)
Recognition of deferred tax assets
 
 
 
 
 
 
 
 
(1,778)
Recognition of deferred tax assets, percent
 
 
 
 
 
 
 
 
0.00% 
(1.30%)
0.00% 
Other - net
 
 
 
 
 
 
 
 
(40)
176 
54 
Other - net, percent
 
 
 
 
 
 
 
 
0.00% 
0.10% 
0.00% 
Income tax expense
$ 11,437 
$ 15,186 
$ 14,744 
$ 11,511 
$ 8,073 
$ 12,343 
$ 12,724 
$ 10,518 
$ 52,878 
$ 43,658 
$ 42,756 
Incomr tax expense, percent
 
 
 
 
 
 
 
 
33.90% 
30.70% 
33.10% 
Income Taxes (Schedule of Components of Income Tax Expense) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Current tax expense:
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
$ 38,821 
$ 41,520 
$ 38,901 
State
 
 
 
 
 
 
 
 
1,997 
1,808 
2,445 
Non-U.S.
 
 
 
 
 
 
 
 
5,719 
5,756 
4,122 
Current tax expense
 
 
 
 
 
 
 
 
46,537 
49,084 
45,468 
Deferred tax expense (benefit):
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
6,287 
(1,011)
61 
State
 
 
 
 
 
 
 
 
334 
(242)
(7)
Non-U.S.
 
 
 
 
 
 
 
 
(280)
(4,173)
(2,766)
Deferred tax expense (benefit)
 
 
 
 
 
 
 
 
6,341 
(5,426)
(2,712)
Income tax expense
$ 11,437 
$ 15,186 
$ 14,744 
$ 11,511 
$ 8,073 
$ 12,343 
$ 12,724 
$ 10,518 
$ 52,878 
$ 43,658 
$ 42,756 
Income Taxes (Schedule of Income before Income Taxes and Equity in Net Income of Unconsolidated Entities) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Tax Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
 
 
$ 128,920 
$ 123,390 
$ 112,357 
Non-U.S.
 
 
 
 
 
 
 
 
24,705 
16,734 
15,434 
Income before income taxes and equity in net income of unconsolidated entities
$ 38,692 
$ 41,744 
$ 42,131 
$ 31,058 
$ 35,640 
$ 33,285 
$ 38,616 
$ 32,583 
$ 153,625 
$ 140,124 
$ 127,791 
Income Taxes (Schedule of Deferred Tax Assets and Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Deferred tax assets:
 
 
Stock-based compensation expense
$ 4,019 
$ 5,567 
Accrued liabilities
8,402 
7,789 
Net operating loss carryforwards - U.S.
930 
1,009 
Net operating loss carryforwards - Non-U.S.
12,386 
13,297 
Research and development
246 
631 
Deferred royalty revenue
383 
403 
Allowance for doubtful accounts
515 
503 
Deferred rent
9,031 
8,847 
Unrealized exchange losses, net
159 
Other
846 
383 
Total deferred tax assets
36,758 
38,588 
Deferred tax liabilities:
 
 
Acquired intangible assets
(14,535)
(17,558)
Property, equipment and capitalized software
(14,615)
(8,523)
Unrealized exchange gains, net
(444)
Prepaid expenses
(3,694)
(1,724)
Accrued liabilities
Investments in unconsolidated entities
(9,905)
(9,580)
Total deferred tax liabilities
(43,193)
(37,385)
Net deferred tax liability before valuation allowance
6,435 
(1,203)
Valuation allowance
(11,407)
(12,039)
Net deferred tax liability
$ (17,842)
$ (10,836)
Income Taxes (Schedule of Deferred Tax Assets and Liabilities Included in Consolidated Balance Sheets) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
Deferred tax assets, net - current
$ 3,741 
$ 5,104 
Deferred tax liabilities, net - noncurrent
(21,583)
(15,940)
Net deferred tax liability
$ (17,842)
$ (10,836)
Income Taxes (Summary of Operating Loss Carryforward- U.S and Non-U.S) (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Operating Loss Carryforwards [Line Items]
 
 
Undistributed earnings of foreigh subsidiaries, permanently invested
$ 95,100,000 
 
Non-U.S. [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
50,568,000 
50,050,000 
Operating loss carryforwards, not subject to valuation allowances
4,031,000 
5,284,000 
Non-U.S. [Member] |
Subject to Expiration Date [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
6,064,000 
5,048,000 
Non-U.S. [Member] |
No Expiration Date [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
44,504,000 
45,002,000 
U.S [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforward, amount subject to limitations
225,000 
 
U.S [Member] |
Subject to Expiration Date [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
$ 2,362,000 
$ 2,587,000 
Operating loss carryforwards, expiration dates
2023 
2023 
Income Taxes (Accounting for Uncertainty in Tax Positions) (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
Gross unrecognized tax benefits - beginning of the year
$ 12,189,000 
$ 9,089,000 
Increases as a resulting of tax positions taken during a prior-year period
445,000 
1,639,000 
Decreases as a resulting of tax positions taked during a prior-year period
(1,153,000)
(876,000)
Increases as a result of tax positions taken during the current period
2,008,000 
3,662,000 
Unrecognized Tax Benefits, Decreases Resulting from Settlements with Taxing Authorities
(299,000)
(1,001,000)
Decrease of unrecognized tax benefits relating to settlements with tax authorities
207,000 
 
Reductions as a result of lapse of the applicable statute of limitations
(491,000)
(324,000)
Gross unrecognized tax benefits - end of the year
12,699,000 
12,189,000 
Unrecognized tax benefits included in current liabilities
6,568,000 
 
Unrecognized tax benefits included in non-current liabilities
5,659,000 
 
Result of tax position taken during period
875,000 
 
Increase in income tax expense
702,000 
 
Reductions resulting from settlements and lapse of statute of limitations
790,000 
 
Unrecognized tax benefits that would impact effective tax rate
12,699,000 
 
Unrecognized tax benefits, period increase (decrease)
1,299,000 
 
Reductions resulting from settlements and lapse statute of limitations, tax effect
207,000 
 
Decrease in income tax expense upon recognition of gross unrecognized tax benefits
$ 10,446,000 
 
Income Taxes (Summary of Income Tax Examinations) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
Liabilities for interest and penalties
$ 2,232 
$ 1,726 
Quarterly Dividend and Share Repurchase Programs (Details) (USD $)
1 Months Ended 3 Months Ended 12 Months Ended
Feb. 29, 2012
Sep. 30, 2010
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Common stock, dividends, per share, declared
$ 0.125 
 
$ 0.13 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.05 
$ 0.05 
$ 0.05 
$ 0.43 
$ 0.25 
$ 0.05 
Stock repurchase program, authorized amount
 
$ 100,000,000 
 
 
 
 
 
 
 
 
$ 500,000,000 
$ 300,000,000 
 
Total shares repurchased, value
 
 
 
 
 
 
 
 
 
 
200,000,000 
200,000,000 
 
Shares repurchased, program life to date, shares
 
 
5,056,595 
 
 
 
 
 
 
 
5,056,595 
 
 
Shares repurchased, program life to date, value
 
 
$ 300,936,000 
 
 
 
 
 
 
 
$ 300,936,000 
 
 
Subsequent Events (Details)
1 Months Ended 3 Months Ended 12 Months Ended
Feb. 29, 2012
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Subsequent Event [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
$ 0.125 
$ 0.13 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.05 
$ 0.05 
$ 0.05 
$ 0.43 
$ 0.25 
$ 0.05 
Selected Quarterly Financial Data (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
1 Months Ended 3 Months Ended 12 Months Ended
Feb. 29, 2012
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
$ 170,609 
$ 160,952 
$ 165,968 
$ 160,759 
$ 158,571 
$ 160,051 
$ 161,011 
$ 151,767 
$ 658,288 
$ 631,400 
$ 555,351 
Total operating expense
 
131,340 1
121,088 1
124,832 1
130,360 1
124,436 1
126,187 1
122,404 1
119,958 1
507,620 2
492,985 2
434,292 2
Operating income
 
39,269 
39,864 
41,136 
30,399 
34,135 
33,864 
38,607 
31,809 
150,668 
138,415 
121,059 
Non-operating income (expense), net
 
(577)
1,880 
995 
659 
1,505 
(579)
774 
2,957 
1,709 
6,732 
Income before income taxes and equity in net income of unconsolidated entities
 
38,692 
41,744 
42,131 
31,058 
35,640 
33,285 
38,616 
32,583 
153,625 
140,124 
127,791 
Income tax expense
 
11,437 
15,186 
14,744 
11,511 
8,073 
12,343 
12,724 
10,518 
52,878 
43,658 
42,756 
Equity in net income (loss) of unconsolidated entities
 
486 
478 
497 
566 
451 
428 
595 
374 
2,027 
1,848 
1,422 
Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest
 
27,741 
27,036 
27,884 
20,113 
28,018 
21,370 
26,487 
22,439 
102,774 
98,314 
86,457 
Consolidated net income
 
32,929 
27,036 
27,884 
20,113 
28,018 
21,370 
26,487 
22,439 
107,962 
98,314 
86,457 
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax
 
5,188 
5,188 
Net (income) loss attributable to the noncontrolling interest
 
55 
34 
24 
(63)
10 
(2)
98 
117 
43 
(87)
Net income attributable to Morningstar, Inc.
 
32,984 
27,070 
27,888 
20,137 
27,955 
21,380 
26,485 
22,537 
108,079 
98,357 
86,370 
Income (Loss) from Continuing Operations, Per Basic Share
 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 2.12 
$ 1.96 
$ 1.75 
Earnings Per Share, Basic [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.
 
$ 0.70 
$ 0.56 
$ 0.57 
$ 0.40 
$ 0.56 
$ 0.42 
$ 0.53 
$ 0.45 
$ 2.23 
$ 1.96 
$ 1.75 
Weighted average common shares outstanding - basic
 
46,913 
47,975 
49,195 
49,938 
49,883 
50,278 
50,165 
49,800 
48,497 
50,032 
49,249 
Income (Loss) from Continuing Operations, Per Diluted Share
 
$ 0.58 
$ 0.56 
$ 0.56 
$ 0.40 
$ 0.55 
$ 0.42 
$ 0.52 
$ 0.44 
$ 2.10 
$ 1.92 
$ 1.70 
Income (Loss) from Discontinued Operations, Net of Tax, Per Basic Share
 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0.11 
$ 0.00 
$ 0.00 
Earnings Per Share, Diluted [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income per share attributable to Morningstar, Inc.
 
$ 0.69 
$ 0.56 
$ 0.56 
$ 0.40 
$ 0.55 
$ 0.42 
$ 0.52 
$ 0.44 
$ 2.20 
$ 1.92 
$ 1.70 
Weighted average common shares outstanding - diluted
 
47,511 
48,481 
49,856 
50,758 
50,732 
51,123 
51,142 
50,953 
49,148 
50,988 
50,555 
Income (Loss) from Discontinued Operations, Net of Tax, Per Diluted Share
 
$ 0.11 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.10 
$ 0.00 
$ 0.00 
Dividends Per Common Share: [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, dividends, per share, declared
$ 0.125 
$ 0.13 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.05 
$ 0.05 
$ 0.05 
$ 0.43 
$ 0.25 
$ 0.05 
Dividends paid per common share
 
$ 0.23 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.05 
$ 0.05 
$ 0.05 
$ 0.05 
$ 0.53 
$ 0.20 
$ 0.00 
Includes stock-based compaensation expense of:
 
$ 7,311 
$ 3,994 
$ 3,734 
$ 3,866 
$ 3,860 
$ 3,951 
$ 3,843 
$ 3,649 
$ 18,905 
$ 15,303 
$ 13,793