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($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 | ) |
|
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update |
EITF | Emerging Issues Task Force |
FASB | Financial Accounting Standards Board |
SEC | Securities and Exchange Commission |
• | 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. |
• | 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. |
• | 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. |
($000) | 2012 | 2011 | 2010 | |||||||||
Advertising expense | $ | 6,306 | $ | 8,210 | $ | 8,572 |
|
• | 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. |
• | Investment Management. The Investment Management segment includes all of our asset management operations, which earn the majority of their revenue from asset-based fees. |
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 |
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 |
|
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 |
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 | 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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Realized gains | $ | 1,671 | $ | 761 | $ | 276 | ||||||
Realized losses | (1,133 | ) | (501 | ) | (1 | ) | ||||||
Realized gains, net | $ | 538 | $ | 260 | $ | 275 |
($000) | 2012 | 2011 | 2010 | |||||||||
Unrealized gains (losses), net | $ | 269 | $ | (387 | ) | $ | 237 |
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. |
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($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 |
($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 |
($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 |
($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 |
($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 |
($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 |
($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 |
($000) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 9,130 | 14 | |||
Technology-based assets | 724 | 6 | ||||
Total intangible assets | $ | 9,854 | 13 |
($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 |
($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 |
• | 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. |
($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 |
($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 |
($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 |
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Amortization expense | $ | 23,944 | $ | 27,267 | $ | 24,850 |
($000) | |||
2013 | $ | 21,246 | |
2014 | 19,984 | ||
2015 | 19,164 | ||
2016 | 14,558 | ||
2017 | 9,951 |
|
($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 | $ | — | $ | — |
|
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 |
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 |
|
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 |
As of December 31 | ||||||||
($000) | 2012 | 2011 | ||||||
Capitalized software development costs not yet placed into service | $ | 6,477 | $ | 6,122 |
($000) | 2012 | 2011 | 2010 | |||||||||
Depreciation expense | $ | 19,152 | $ | 15,646 | $ | 14,814 |
|
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Rent expense | $ | 20,736 | $ | 20,122 | $ | 18,638 |
As of December 31 | ||||||||
($000) | 2012 | 2011 | ||||||
Deferred rent | $ | 27,783 | $ | 27,282 |
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 |
|
As of December 31 | |||
(000) | 2012 | ||
Shares available for future grants | 4,731 |
($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 |
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 |
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 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % |
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Intrinsic value of options exercised | $ | 22,526 | $ | 29,899 | $ | 31,410 |
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Excess tax benefits related to stock-based compensation | $ | 7,210 | $ | 9,525 | $ | 7,507 |
|
($000) | 2012 | 2011 | 2010 | |||||||||
401(k) matching contributions | $ | 6,642 | $ | 5,601 | $ | 3,321 |
|
($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 |
|
($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 | % |
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 | % |
($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 |
($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 |
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 | ) |
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 | ) |
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 |
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 |
($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 |
As of December 31 | ||||||||
($000) | 2012 | 2011 | ||||||
Liabilities for interest and penalties | $ | 2,232 | $ | 1,726 |
|
|
|
|
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 |
|
• | 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. |
• | 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. |
• | 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. |
($000) | 2012 | 2011 | 2010 | |||||||||
Advertising expense | $ | 6,306 | $ | 8,210 | $ | 8,572 |
|
($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 | ) |
|
($000) | 2012 | 2011 | 2010 | |||||||||
Advertising expense | $ | 6,306 | $ | 8,210 | $ | 8,572 |
|
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 |
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 |
|
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 |
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 | 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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Realized gains | $ | 1,671 | $ | 761 | $ | 276 | ||||||
Realized losses | (1,133 | ) | (501 | ) | (1 | ) | ||||||
Realized gains, net | $ | 538 | $ | 260 | $ | 275 |
($000) | 2012 | 2011 | 2010 | |||||||||
Unrealized gains (losses), net | $ | 269 | $ | (387 | ) | $ | 237 |
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 | $ | — |
|
($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 |
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Amortization expense | $ | 23,944 | $ | 27,267 | $ | 24,850 |
($000) | |||
2013 | $ | 21,246 | |
2014 | 19,984 | ||
2015 | 19,164 | ||
2016 | 14,558 | ||
2017 | 9,951 |
($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 |
($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 |
($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 |
($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 |
($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 |
($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 |
($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 |
($000) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 9,130 | 14 | |||
Technology-based assets | 724 | 6 | ||||
Total intangible assets | $ | 9,854 | 13 |
($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 |
($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 |
($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 |
($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 |
|
($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 | $ | — | $ | — |
|
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 |
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 |
|
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 |
As of December 31 | ||||||||
($000) | 2012 | 2011 | ||||||
Capitalized software development costs not yet placed into service | $ | 6,477 | $ | 6,122 |
($000) | 2012 | 2011 | 2010 | |||||||||
Depreciation expense | $ | 19,152 | $ | 15,646 | $ | 14,814 |
|
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Rent expense | $ | 20,736 | $ | 20,122 | $ | 18,638 |
As of December 31 | ||||||||
($000) | 2012 | 2011 | ||||||
Deferred rent | $ | 27,783 | $ | 27,282 |
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 |
|
As of December 31 | |||
(000) | 2012 | ||
Shares available for future grants | 4,731 |
($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 |
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 |
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 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % |
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Intrinsic value of options exercised | $ | 22,526 | $ | 29,899 | $ | 31,410 |
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 |
($000) | 2012 | 2011 | 2010 | |||||||||
Excess tax benefits related to stock-based compensation | $ | 7,210 | $ | 9,525 | $ | 7,507 |
|
($000) | 2012 | 2011 | 2010 | |||||||||
401(k) matching contributions | $ | 6,642 | $ | 5,601 | $ | 3,321 |
|
($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 |
|
($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 | % |
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 | % |
($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 |
($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 |
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 | ) |
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 | ) |
($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 |
As of December 31 | ||||||||
($000) | 2012 | 2011 | ||||||
Liabilities for interest and penalties | $ | 2,232 | $ | 1,726 |
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 |
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 |
|
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 |
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