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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 equity securities, exchange-traded funds, and mutual funds. 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. |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Capitalized software development costs | $ | 21.8 | $ | 18.8 | $ | 8.1 |
• | There is persuasive evidence of an arrangement, as evidenced by a signed contract; |
• | Delivery of our products and services has taken place. If arrangements include an acceptance provision, we generally begin recognizing revenue when we receive 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. |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Advertising expense | $ | 8.3 | $ | 7.5 | $ | 6.9 |
|
|
External revenue by geographical area | ||||||||||||
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
United States | $ | 585.1 | $ | 550.8 | $ | 500.8 | ||||||
United Kingdom | 64.2 | 61.8 | 56.2 | |||||||||
Continental Europe | 58.8 | 62.7 | 57.6 | |||||||||
Australia | 30.5 | 35.0 | 35.3 | |||||||||
Canada | 27.9 | 30.8 | 31.8 | |||||||||
Asia | 18.5 | 15.8 | 13.9 | |||||||||
Other | 3.8 | 3.2 | 2.7 | |||||||||
Total International | 203.7 | 209.3 | 197.5 | |||||||||
Consolidated revenue | $ | 788.8 | $ | 760.1 | $ | 698.3 |
Long-lived assets by geographical area | ||||||||
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
United States | $ | 116.9 | $ | 98.1 | ||||
United Kingdom | 8.6 | 8.1 | ||||||
Continental Europe | 2.2 | 2.1 | ||||||
Australia | 0.9 | 0.8 | ||||||
Canada | 0.7 | 0.9 | ||||||
Asia | 5.2 | 7.5 | ||||||
Other | — | 0.1 | ||||||
Total International | 17.6 | 19.5 | ||||||
Consolidated property, equipment, and capitalized software, net | $ | 134.5 | $ | 117.6 |
|
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Available-for-sale | $ | 17.3 | $ | 13.2 | ||||
Held-to-maturity | 15.3 | 17.9 | ||||||
Trading securities | 8.9 | 8.3 | ||||||
Total | $ | 41.5 | $ | 39.4 |
As of December 31, 2015 | As of December 31, 2014 | |||||||||||||||||||||||||||||||
(in millions) | Cost | Unrealized Gain | Unrealized Loss | Fair Value | Cost | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||||||
Equity securities and exchange-traded funds | 17.4 | 0.3 | (1.6 | ) | 16.1 | 11.4 | 0.8 | (0.3 | ) | 11.9 | ||||||||||||||||||||||
Mutual funds | 1.3 | — | (0.1 | ) | 1.2 | 1.2 | 0.2 | (0.1 | ) | 1.3 | ||||||||||||||||||||||
Total | $ | 18.7 | $ | 0.3 | $ | (1.7 | ) | $ | 17.3 | $ | 12.6 | $ | 1.0 | $ | (0.4 | ) | $ | 13.2 | ||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 15.3 | $ | — | $ | — | $ | 15.3 | $ | 17.9 | $ | — | $ | — | $ | 17.9 |
As of December 31, 2015 | As of December 31, 2014 | |||||||||||||||
(in millions) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 18.7 | 17.3 | 12.6 | 13.2 | ||||||||||||
Total | $ | 18.7 | $ | 17.3 | $ | 12.6 | $ | 13.2 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 15.3 | $ | 15.3 | $ | 17.9 | $ | 17.9 | ||||||||
Total | $ | 15.3 | $ | 15.3 | $ | 17.9 | $ | 17.9 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Realized gains | $ | 1.3 | $ | 1.5 | $ | 5.5 | ||||||
Realized losses | (0.7 | ) | (0.5 | ) | (1.3 | ) | ||||||
Realized gains, net | $ | 0.6 | $ | 1.0 | $ | 4.2 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Unrealized gains (losses), net | $ | (0.8 | ) | $ | (0.2 | ) | $ | 0.8 |
Fair Value | Fair Value Measurements as of December 31, 2015 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
(in millions) | December 31, 2015 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Equity securities and exchange-traded funds | 16.1 | 16.1 | — | — | ||||||||||||
Mutual funds | 1.2 | 1.2 | — | — | ||||||||||||
Trading securities | 8.9 | 8.9 | — | — | ||||||||||||
Cash equivalents | 0.2 | 0.2 | — | — | ||||||||||||
Total | $ | 26.4 | $ | 26.4 | $ | — | $ | — |
Fair Value | Fair Value Measurements as of December 31, 2014 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
(in millions) | December 31, 2014 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Equity securities and exchange-traded funds | 11.9 | 11.9 | — | — | ||||||||||||
Mutual funds | 1.3 | 1.3 | — | — | ||||||||||||
Trading securities | 8.3 | 8.3 | — | — | ||||||||||||
Cash equivalents | 0.5 | 0.5 | — | — | ||||||||||||
Total | $ | 22.0 | $ | 22.0 | $ | — | $ | — |
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. |
|
(in millions) | ||||
Cash and cash equivalents | $ | 3.7 | ||
Accounts receivable and other current assets | 0.2 | |||
Other current and non-current assets | 0.3 | |||
Deferred tax asset | 8.6 | |||
Intangible assets | 9.5 | |||
Goodwill | 39.2 | |||
Deferred revenue | (2.9 | ) | ||
Deferred tax liability | (3.6 | ) | ||
Other current and non-current liabilities | (1.0 | ) | ||
Total fair value of HelloWallet | $ | 54.0 |
(in millions) | Weighted Average Useful Life (years) | |||||
Technology based assets | $ | 6.7 | 5 | |||
Intellectual property (trademarks and trade names) | 0.2 | 3 | ||||
Non-competition agreement | 2.6 | 5 | ||||
Total intangible assets | $ | 9.5 | 5 |
(in millions) | ||||
Cash and cash equivalents | $ | 0.3 | ||
Accounts receivable and other current assets | 0.1 | |||
Deferred tax asset | 4.0 | |||
Other current and non-current assets | 0.3 | |||
Intangible assets | 8.7 | |||
Goodwill | 18.5 | |||
Deferred revenue | (0.1 | ) | ||
Deferred tax liability | (3.3 | ) | ||
Other current and non-current liabilities | (0.6 | ) | ||
Total purchase price | $ | 27.9 |
(in millions) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 5.5 | 24 | |||
Technology-based assets | 3.0 | 4.5 | ||||
Intellectual property (trademarks and trade names) | 0.1 | 1 | ||||
Non-competition agreement | 0.1 | 3 | ||||
Total intangible assets | $ | 8.7 | 19 |
(in millions) | ||||
Cash and cash equivalents | $ | 3.5 | ||
Accounts receivable and other current assets | 0.5 | |||
Other non-current assets | 0.2 | |||
Intangible assets | 9.7 | |||
Goodwill | 8.9 | |||
Deferred revenue | (1.2 | ) | ||
Deferred tax liability | (2.3 | ) | ||
Other current and non-current liabilities | (0.8 | ) | ||
Total fair value of Morningstar Sweden | $ | 18.5 |
(in millions) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 9.7 | 14 | |||
Total intangible assets | $ | 9.7 | 14 |
(in millions) | ||||
Balance as of January 1, 2014 | $ | 326.5 | ||
Acquisition of HelloWallet and ByAllAccounts | 57.6 | |||
Other, primarily foreign currency translation | (14.0 | ) | ||
Balance as of December 31, 2014 | $ | 370.1 | ||
Other, primarily foreign currency translation | (5.9 | ) | ||
Balance as of December 31, 2015 | $ | 364.2 |
As of December 31, 2015 | As of December 31, 2014 | |||||||||||||||||||||||||||
(in millions) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | ||||||||||||||||||||
Intellectual property | $ | 28.3 | $ | (26.7 | ) | $ | 1.6 | 9 | $ | 29.0 | $ | (25.0 | ) | $ | 4.0 | 9 | ||||||||||||
Customer-related assets | 137.5 | (92.3 | ) | 45.2 | 12 | 141.5 | (83.6 | ) | 57.9 | 12 | ||||||||||||||||||
Supplier relationships | 0.2 | (0.1 | ) | 0.1 | 20 | 0.2 | (0.1 | ) | 0.1 | 20 | ||||||||||||||||||
Technology-based assets | 89.5 | (64.4 | ) | 25.1 | 8 | 88.8 | (57.4 | ) | 31.4 | 8 | ||||||||||||||||||
Non-competition agreement | 4.6 | (2.4 | ) | 2.2 | 5 | 4.4 | (1.9 | ) | 2.5 | 5 | ||||||||||||||||||
Total intangible assets | $ | 260.1 | $ | (185.9 | ) | $ | 74.2 | 10 | $ | 263.9 | $ | (168.0 | ) | $ | 95.9 | 10 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Amortization expense | $ | 22.0 | $ | 22.3 | $ | 21.5 |
(in millions) | ||||
2016 | $ | 17.7 | ||
2017 | 12.8 | |||
2018 | 10.7 | |||
2019 | 8.2 | |||
2020 | 4.7 | |||
Thereafter | 20.1 |
|
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Investment in MJKK | $ | 24.3 | $ | 23.0 | ||||
Other equity method investments | 3.7 | 3.5 | ||||||
Investments accounted for using the cost method | 7.6 | 2.3 | ||||||
Total investments in unconsolidated entities | $ | 35.6 | $ | 28.8 |
As of December 31 | ||||||||
2015 | 2014 | |||||||
Morningstar’s approximate ownership of MJKK | 34 | % | 34 | % | ||||
Approximate market value of Morningstar’s ownership in MJKK: | ||||||||
Japanese yen (¥ in millions) | ¥ | 8,200.5 | ¥ | 7,347.4 | ||||
Equivalent U.S. dollars ($ in millions) | $ | 68.1 | $ | 61.3 |
|
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Computer equipment | $ | 60.3 | $ | 53.4 | ||||
Capitalized software | 144.0 | 87.8 | ||||||
Furniture and fixtures | 24.3 | 23.2 | ||||||
Leasehold improvements | 61.9 | 54.3 | ||||||
Telephone equipment | 2.1 | 1.9 | ||||||
Construction in progress | 11.7 | 29.9 | ||||||
Property, equipment, and capitalized software, at cost | 304.3 | 250.5 | ||||||
Less accumulated depreciation | (169.8 | ) | (132.9 | ) | ||||
Property, equipment, and capitalized software, net | $ | 134.5 | $ | 117.6 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Capitalized software development costs not yet placed into service | $ | — | $ | 18.1 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Depreciation expense | $ | 42.4 | $ | 32.6 | $ | 24.2 |
|
Minimum Future Rental Commitments | (in millions) | |||
2016 | $ | 20.9 | ||
2017 | 20.3 | |||
2018 | 18.1 | |||
2019 | 13.5 | |||
2020 | 13.1 | |||
Thereafter | 35.7 | |||
Total | $ | 121.6 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Rent expense | $ | 27.1 | $ | 24.5 | $ | 22.2 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Deferred rent | $ | 28.5 | $ | 29.1 |
|
As of December 31 | |||
(in millions) | 2015 | ||
Shares available for future grants | 4.0 |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
Restricted stock units | $ | 16.1 | $ | 16.3 | $ | 14.1 | ||||||
Restricted stock | 0.1 | 0.4 | 0.4 | |||||||||
Performance share awards | 1.0 | 0.5 | — | |||||||||
Stock options | 0.2 | 0.4 | 0.5 | |||||||||
Total stock-based compensation expense | $ | 17.4 | $ | 17.6 | $ | 15.0 | ||||||
Income tax benefit related to the stock-based compensation expense | $ | 5.0 | $ | 5.1 | $ | 4.0 |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
Cost of revenue | $ | 8.1 | $ | 7.8 | $ | 6.8 | ||||||
Sales and marketing | 2.2 | 2.1 | 2.0 | |||||||||
General and administrative | 7.1 | 7.7 | 6.2 | |||||||||
Total stock-based compensation expense | $ | 17.4 | $ | 17.6 | $ | 15.0 |
Unrecognized stock-based compensation expense (in millions) | Weighted average expected amortization period (months) | |||||
Restricted stock units | $ | 31.4 | 31 | |||
Performance share awards | 1.2 | 24 | ||||
Total unrecognized stock-based compensation expense | $ | 32.6 | 31 |
Restricted Stock Units (RSUs) | Unvested | Vested but Deferred | Total | Weighted Average Grant Date Value per RSU | |||||||||
RSUs Outstanding - January 1, 2013 | 727,145 | 18,782 | 745,927 | $ | 53.37 | ||||||||
Granted | 287,848 | — | 287,848 | 72.04 | |||||||||
Dividend equivalents | 2,773 | 157 | 2,930 | 57.39 | |||||||||
Vested | (278,549 | ) | — | (278,549 | ) | 50.41 | |||||||
Issued | — | (2,257 | ) | (2,257 | ) | 49.40 | |||||||
Forfeited | (59,215 | ) | — | (59,215 | ) | 57.58 | |||||||
RSUs Outstanding - December 31, 2013 | 680,002 | 16,682 | 696,684 | $ | 62.02 | ||||||||
Granted | 279,524 | — | 279,524 | 72.68 | |||||||||
Dividend equivalents | 2,621 | 150 | 2,771 | 55.70 | |||||||||
Vested | (268,115 | ) | — | (268,115 | ) | 58.91 | |||||||
Issued | — | (2,054 | ) | (2,054 | ) | 53.54 | |||||||
Forfeited | (38,098 | ) | — | (38,098 | ) | 65.21 | |||||||
RSUs Outstanding - December 31, 2014 | 655,934 | 14,778 | 670,712 | $ | 67.51 | ||||||||
Granted | 235,213 | — | 235,213 | 77.17 | |||||||||
Dividend equivalents | 1,409 | 146 | 1,555 | 56.42 | |||||||||
Vested | (253,038 | ) | — | (253,038 | ) | 64.65 | |||||||
Forfeited | (66,992 | ) | — | (66,992 | ) | 53.61 | |||||||
RSUs Outstanding - December 31, 2015 | 572,526 | 14,924 | 587,450 | $ | 72.14 |
As of December 31, 2015 | ||||
Target performance share awards granted | 75,947 | |||
Weighted average fair value per award | $ | 76.33 | ||
Number of shares that would be issued based on current performance levels | 34,713 | |||
Unamortized expense, based on current performance levels (in millions) | $ | 1.2 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % |
2015 | 2014 | 2013 | |||||||||||||||||||
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 | — | $ | — | 179,559 | $ | 21.47 | 282,695 | $ | 20.55 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | — | — | (150 | ) | 22.24 | (250 | ) | 21.48 | |||||||||||||
Exercised | — | — | (179,409 | ) | 22.08 | (102,886 | ) | 21.09 | |||||||||||||
Options outstanding—end of year | — | $ | — | — | $ | — | 179,559 | $ | 21.47 | ||||||||||||
Options exercisable—end of year | — | $ | — | — | $ | — | 179,559 | $ | 21.47 |
2015 | 2014 | 2013 | |||||||||||||||||||
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 | 169,810 | $ | 40.20 | 253,972 | $ | 36.48 | 391,784 | $ | 28.98 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | — | — | (526 | ) | 38.61 | (1,352 | ) | 16.19 | |||||||||||||
Exercised | (117,714 | ) | 32.91 | (83,636 | ) | 30.82 | (136,460 | ) | 16.84 | ||||||||||||
Options outstanding—end of year | 52,096 | $ | 57.52 | 169,810 | $ | 40.20 | 253,972 | $ | 36.48 | ||||||||||||
Options exercisable—end of year | 52,096 | $ | 57.52 | 154,864 | $ | 38.53 | 219,449 | $ | 33.18 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Intrinsic value of options exercised | $ | 5.1 | $ | 12.0 | $ | 12.8 |
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
Range of Exercise Prices | Number of Options | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value (in millions) | Exercisable Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||
$57.28 - $59.35 | 52,096 | 4.77 | $ | 57.52 | $ | 1.2 | 52,096 | 4.77 | $ | 57.52 | $ | 1.2 | ||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||
$57.28 - $59.35 | 52,096 | 4.77 | $ | 57.52 | $ | 1.2 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Excess tax benefits related to stock-based compensation | $ | 2.6 | $ | 4.4 | $ | 5.9 |
|
(in millions) | 2015 | 2014 | 2013 | |||||||||
401(k) matching contributions | $ | 8.3 | $ | 7.5 | $ | 6.9 |
|
(in millions) | 2015 | 2014 | 2013 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 193.7 | $ | 114.0 | $ | 178.0 | ||||||
Equity in net income of unconsolidated entities | 1.8 | — | 1.4 | |||||||||
Net loss attributable to the noncontrolling interest | (0.2 | ) | — | 0.1 | ||||||||
Total | $ | 195.3 | $ | 114.0 | $ | 179.5 | ||||||
Income tax expense | $ | 62.7 | $ | 35.7 | $ | 56.0 | ||||||
Effective tax rate | 32.1 | % | 31.3 | % | 31.2 | % |
2015 | 2014 | 2013 | |||||||||||||||||||
(in millions, except percentages) | Amount | % | Amount | % | Amount | % | |||||||||||||||
Income tax expense at U.S. federal rate | $ | 68.4 | 35.0 | % | $ | 39.9 | 35.0 | % | $ | 62.8 | 35.0 | % | |||||||||
State income taxes, net of federal income tax benefit | 6.6 | 3.4 | 2.1 | 1.9 | 3.0 | 1.7 | |||||||||||||||
Equity in net income of unconsolidated subsidiaries | — | — | (1.4 | ) | (1.2 | ) | — | — | |||||||||||||
Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses | (2.0 | ) | (1.0 | ) | (0.6 | ) | (0.5 | ) | (1.8 | ) | (1.0 | ) | |||||||||
Difference between U.S. federal statutory and foreign tax rates | (4.4 | ) | (2.3 | ) | (4.0 | ) | (3.5 | ) | (2.5 | ) | (1.4 | ) | |||||||||
Change in unrecognized tax benefits | (1.4 | ) | (0.7 | ) | 1.5 | 1.3 | (0.2 | ) | (0.1 | ) | |||||||||||
Credits and incentives | (5.1 | ) | (2.6 | ) | (2.9 | ) | (2.6 | ) | (4.4 | ) | (2.5 | ) | |||||||||
Recognition of deferred tax assets | — | — | (0.1 | ) | (0.1 | ) | (1.4 | ) | (0.8 | ) | |||||||||||
Other - net | 0.6 | 0.3 | 1.2 | 1.0 | 0.5 | 0.3 | |||||||||||||||
Total income tax expense | $ | 62.7 | 32.1 | % | $ | 35.7 | 31.3 | % | $ | 56.0 | 31.2 | % |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
Current tax expense: | ||||||||||||
U.S. | ||||||||||||
Federal | $ | 42.8 | $ | 20.8 | $ | 42.8 | ||||||
State | 8.3 | 2.0 | 3.9 | |||||||||
Non-U.S. | 8.7 | 9.6 | 10.5 | |||||||||
Current tax expense | 59.8 | 32.4 | 57.2 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
U.S. | ||||||||||||
Federal | 4.3 | 3.7 | 2.6 | |||||||||
State | 1.8 | 1.3 | 0.8 | |||||||||
Non-U.S. | (3.2 | ) | (1.7 | ) | (4.6 | ) | ||||||
Deferred tax expense (benefit), net | 2.9 | 3.3 | (1.2 | ) | ||||||||
Income tax expense | $ | 62.7 | $ | 35.7 | $ | 56.0 |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
U.S. | $ | 160.6 | $ | 80.4 | $ | 144.1 | ||||||
Non-U.S. | 33.1 | 33.6 | 33.9 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 193.7 | $ | 114.0 | $ | 178.0 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Deferred tax assets: | ||||||||
Stock-based compensation expense | $ | 3.1 | $ | 3.3 | ||||
Accrued liabilities | 14.3 | 13.6 | ||||||
Deferred revenue | 0.9 | — | ||||||
Net operating loss carryforwards - U.S. federal and state | 7.6 | 10.5 | ||||||
Net operating loss carryforwards - Non-U.S. | 3.7 | 7.7 | ||||||
Credits and incentive carryforwards | 0.6 | — | ||||||
Deferred royalty revenue | 0.3 | 0.4 | ||||||
Allowance for doubtful accounts | 1.0 | 0.9 | ||||||
Deferred rent | 8.9 | 10.0 | ||||||
Unrealized exchange losses, net | 0.4 | — | ||||||
Total deferred tax assets | 40.8 | 46.4 | ||||||
Deferred tax liabilities: | ||||||||
Acquired intangible assets | (13.2 | ) | (16.4 | ) | ||||
Property, equipment, and capitalized software | (28.1 | ) | (23.2 | ) | ||||
Unrealized exchange gains, net | — | (0.2 | ) | |||||
Prepaid expenses | (4.3 | ) | (3.7 | ) | ||||
Investments in unconsolidated entities | (13.7 | ) | (12.8 | ) | ||||
Other | (0.1 | ) | (0.4 | ) | ||||
Total deferred tax liabilities | (59.4 | ) | (56.7 | ) | ||||
Net deferred tax liability before valuation allowance | (18.6 | ) | (10.3 | ) | ||||
Valuation allowance | (1.2 | ) | (6.7 | ) | ||||
Net deferred tax liability | $ | (19.8 | ) | $ | (17.0 | ) |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Deferred tax asset, net - current | $ | — | $ | — | ||||
Deferred tax liability, net - non-current | (19.8 | ) | (17.0 | ) | ||||
Net deferred tax liability | $ | (19.8 | ) | $ | (17.0 | ) |
As of December 31 | ||||||||||
(in millions) | 2015 | 2014 | ||||||||
Expiration Dates | Expiration Dates | |||||||||
U.S. federal NOLs subject to expiration dates | $ | 21.6 | 2023-2034 | $ | 30.0 | 2023-2034 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Non-U.S. NOLs subject to expiration dates from 2019 through 2035 | $ | 2.9 | $ | 5.2 | ||||
Non-U.S. NOLs with no expiration date | 15.5 | 32.7 | ||||||
Total | $ | 18.4 | $ | 37.9 | ||||
Non-U.S. NOLs not subject to valuation allowances | $ | 12.1 | $ | 5.1 |
(in millions) | 2015 | 2014 | ||||||
Gross unrecognized tax benefits - beginning of the year | $ | 11.9 | $ | 13.0 | ||||
Increases as a result of tax positions taken during a prior-year period | 4.4 | 0.9 | ||||||
Decreases as a result of tax positions taken during a prior-year period | (0.7 | ) | (0.1 | ) | ||||
Increases as a result of tax positions taken during the current period | 2.4 | 2.0 | ||||||
Decreases relating to settlements with tax authorities | (1.8 | ) | (2.4 | ) | ||||
Reductions as a result of lapse of the applicable statute of limitations | (1.7 | ) | (1.5 | ) | ||||
Gross unrecognized tax benefits - end of the year | $ | 14.5 | $ | 11.9 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Liabilities for interest and penalties | $ | 1.2 | $ | 1.5 |
|
|
|
2014 | 2015 | |||||||||||||||||||||||||||||||
(in millions except per share amounts) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||||||||||||||||||||||||
Revenue | $ | 181.2 | $ | 189.4 | $ | 193.1 | $ | 196.4 | $ | 189.8 | $ | 202.1 | $ | 195.3 | $ | 201.6 | ||||||||||||||||
Total operating expense | 142.7 | 214.2 | 147.8 | 149.8 | 145.3 | 152.4 | 149.1 | 151.5 | ||||||||||||||||||||||||
Operating income (loss) | 38.5 | (24.8 | ) | 45.3 | 46.6 | 44.5 | 49.7 | 46.2 | 50.1 | |||||||||||||||||||||||
Non-operating income (expense), net | 0.9 | 5.9 | (0.3 | ) | 1.8 | (0.4 | ) | 0.6 | 1.4 | 1.4 | ||||||||||||||||||||||
Income (loss) before income taxes and equity in net income of unconsolidated entities | 39.4 | (18.9 | ) | 45.0 | 48.4 | 44.1 | 50.3 | 47.6 | 51.5 | |||||||||||||||||||||||
Equity in net income (loss) of unconsolidated entities | 0.6 | 0.5 | 0.3 | (1.4 | ) | 0.5 | 0.6 | 0.5 | 0.3 | |||||||||||||||||||||||
Income tax expense (benefit) | 13.7 | (8.6 | ) | 15.1 | 15.5 | 14.8 | 18.7 | 14.6 | 14.5 | |||||||||||||||||||||||
Consolidated net income (loss) | 26.3 | (9.8 | ) | 30.2 | 31.5 | 29.8 | 32.2 | 33.5 | 37.3 | |||||||||||||||||||||||
Net (income) loss attributable to the noncontrolling interests | 0.1 | — | — | — | (0.1 | ) | — | — | — | |||||||||||||||||||||||
Net income (loss) attributable to Morningstar, Inc. | $ | 26.4 | $ | (9.8 | ) | $ | 30.2 | $ | 31.5 | $ | 29.7 | $ | 32.2 | $ | 33.5 | $ | 37.3 | |||||||||||||||
Net income (loss) per share attributable to Morningstar, Inc. | ||||||||||||||||||||||||||||||||
Basic | $ | 0.59 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | $ | 0.67 | $ | 0.73 | $ | 0.76 | $ | 0.85 | |||||||||||||||
Diluted | $ | 0.58 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | $ | 0.67 | $ | 0.72 | $ | 0.76 | $ | 0.85 | |||||||||||||||
Dividends per common share: | ||||||||||||||||||||||||||||||||
Dividends declared per common share | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.22 | ||||||||||||||||
Dividends paid per common share | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.19 | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||
Basic | 44.8 | 44.8 | 44.7 | 44.4 | 44.3 | 44.3 | 44.2 | 43.8 | ||||||||||||||||||||||||
Diluted | 45.1 | 44.8 | 44.9 | 44.5 | 44.5 | 44.4 | 44.3 | 43.9 |
|
• | 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 equity securities, exchange-traded funds, and mutual funds. 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. |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Capitalized software development costs | $ | 21.8 | $ | 18.8 | $ | 8.1 |
• | There is persuasive evidence of an arrangement, as evidenced by a signed contract; |
• | Delivery of our products and services has taken place. If arrangements include an acceptance provision, we generally begin recognizing revenue when we receive 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. |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Advertising expense | $ | 8.3 | $ | 7.5 | $ | 6.9 |
|
(in millions) | 2015 | 2014 | 2013 | |||||||||
Advertising expense | $ | 8.3 | $ | 7.5 | $ | 6.9 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Capitalized software development costs | $ | 21.8 | $ | 18.8 | $ | 8.1 |
|
External revenue by geographical area | ||||||||||||
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
United States | $ | 585.1 | $ | 550.8 | $ | 500.8 | ||||||
United Kingdom | 64.2 | 61.8 | 56.2 | |||||||||
Continental Europe | 58.8 | 62.7 | 57.6 | |||||||||
Australia | 30.5 | 35.0 | 35.3 | |||||||||
Canada | 27.9 | 30.8 | 31.8 | |||||||||
Asia | 18.5 | 15.8 | 13.9 | |||||||||
Other | 3.8 | 3.2 | 2.7 | |||||||||
Total International | 203.7 | 209.3 | 197.5 | |||||||||
Consolidated revenue | $ | 788.8 | $ | 760.1 | $ | 698.3 |
Long-lived assets by geographical area | ||||||||
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
United States | $ | 116.9 | $ | 98.1 | ||||
United Kingdom | 8.6 | 8.1 | ||||||
Continental Europe | 2.2 | 2.1 | ||||||
Australia | 0.9 | 0.8 | ||||||
Canada | 0.7 | 0.9 | ||||||
Asia | 5.2 | 7.5 | ||||||
Other | — | 0.1 | ||||||
Total International | 17.6 | 19.5 | ||||||
Consolidated property, equipment, and capitalized software, net | $ | 134.5 | $ | 117.6 |
|
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Available-for-sale | $ | 17.3 | $ | 13.2 | ||||
Held-to-maturity | 15.3 | 17.9 | ||||||
Trading securities | 8.9 | 8.3 | ||||||
Total | $ | 41.5 | $ | 39.4 |
As of December 31, 2015 | As of December 31, 2014 | |||||||||||||||||||||||||||||||
(in millions) | Cost | Unrealized Gain | Unrealized Loss | Fair Value | Cost | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||||||
Equity securities and exchange-traded funds | 17.4 | 0.3 | (1.6 | ) | 16.1 | 11.4 | 0.8 | (0.3 | ) | 11.9 | ||||||||||||||||||||||
Mutual funds | 1.3 | — | (0.1 | ) | 1.2 | 1.2 | 0.2 | (0.1 | ) | 1.3 | ||||||||||||||||||||||
Total | $ | 18.7 | $ | 0.3 | $ | (1.7 | ) | $ | 17.3 | $ | 12.6 | $ | 1.0 | $ | (0.4 | ) | $ | 13.2 | ||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 15.3 | $ | — | $ | — | $ | 15.3 | $ | 17.9 | $ | — | $ | — | $ | 17.9 |
As of December 31, 2015 | As of December 31, 2014 | |||||||||||||||
(in millions) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 18.7 | 17.3 | 12.6 | 13.2 | ||||||||||||
Total | $ | 18.7 | $ | 17.3 | $ | 12.6 | $ | 13.2 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 15.3 | $ | 15.3 | $ | 17.9 | $ | 17.9 | ||||||||
Total | $ | 15.3 | $ | 15.3 | $ | 17.9 | $ | 17.9 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Realized gains | $ | 1.3 | $ | 1.5 | $ | 5.5 | ||||||
Realized losses | (0.7 | ) | (0.5 | ) | (1.3 | ) | ||||||
Realized gains, net | $ | 0.6 | $ | 1.0 | $ | 4.2 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Unrealized gains (losses), net | $ | (0.8 | ) | $ | (0.2 | ) | $ | 0.8 |
Fair Value | Fair Value Measurements as of December 31, 2015 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
(in millions) | December 31, 2015 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Equity securities and exchange-traded funds | 16.1 | 16.1 | — | — | ||||||||||||
Mutual funds | 1.2 | 1.2 | — | — | ||||||||||||
Trading securities | 8.9 | 8.9 | — | — | ||||||||||||
Cash equivalents | 0.2 | 0.2 | — | — | ||||||||||||
Total | $ | 26.4 | $ | 26.4 | $ | — | $ | — |
Fair Value | Fair Value Measurements as of December 31, 2014 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
(in millions) | December 31, 2014 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Equity securities and exchange-traded funds | 11.9 | 11.9 | — | — | ||||||||||||
Mutual funds | 1.3 | 1.3 | — | — | ||||||||||||
Trading securities | 8.3 | 8.3 | — | — | ||||||||||||
Cash equivalents | 0.5 | 0.5 | — | — | ||||||||||||
Total | $ | 22.0 | $ | 22.0 | $ | — | $ | — |
|
(in millions) | ||||
Cash and cash equivalents | $ | 0.3 | ||
Accounts receivable and other current assets | 0.1 | |||
Deferred tax asset | 4.0 | |||
Other current and non-current assets | 0.3 | |||
Intangible assets | 8.7 | |||
Goodwill | 18.5 | |||
Deferred revenue | (0.1 | ) | ||
Deferred tax liability | (3.3 | ) | ||
Other current and non-current liabilities | (0.6 | ) | ||
Total purchase price | $ | 27.9 |
(in millions) | ||||
Cash and cash equivalents | $ | 3.7 | ||
Accounts receivable and other current assets | 0.2 | |||
Other current and non-current assets | 0.3 | |||
Deferred tax asset | 8.6 | |||
Intangible assets | 9.5 | |||
Goodwill | 39.2 | |||
Deferred revenue | (2.9 | ) | ||
Deferred tax liability | (3.6 | ) | ||
Other current and non-current liabilities | (1.0 | ) | ||
Total fair value of HelloWallet | $ | 54.0 |
(in millions) | ||||
Cash and cash equivalents | $ | 3.5 | ||
Accounts receivable and other current assets | 0.5 | |||
Other non-current assets | 0.2 | |||
Intangible assets | 9.7 | |||
Goodwill | 8.9 | |||
Deferred revenue | (1.2 | ) | ||
Deferred tax liability | (2.3 | ) | ||
Other current and non-current liabilities | (0.8 | ) | ||
Total fair value of Morningstar Sweden | $ | 18.5 |
(in millions) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 9.7 | 14 | |||
Total intangible assets | $ | 9.7 | 14 |
(in millions) | ||||
Balance as of January 1, 2014 | $ | 326.5 | ||
Acquisition of HelloWallet and ByAllAccounts | 57.6 | |||
Other, primarily foreign currency translation | (14.0 | ) | ||
Balance as of December 31, 2014 | $ | 370.1 | ||
Other, primarily foreign currency translation | (5.9 | ) | ||
Balance as of December 31, 2015 | $ | 364.2 |
As of December 31, 2015 | As of December 31, 2014 | |||||||||||||||||||||||||||
(in millions) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | ||||||||||||||||||||
Intellectual property | $ | 28.3 | $ | (26.7 | ) | $ | 1.6 | 9 | $ | 29.0 | $ | (25.0 | ) | $ | 4.0 | 9 | ||||||||||||
Customer-related assets | 137.5 | (92.3 | ) | 45.2 | 12 | 141.5 | (83.6 | ) | 57.9 | 12 | ||||||||||||||||||
Supplier relationships | 0.2 | (0.1 | ) | 0.1 | 20 | 0.2 | (0.1 | ) | 0.1 | 20 | ||||||||||||||||||
Technology-based assets | 89.5 | (64.4 | ) | 25.1 | 8 | 88.8 | (57.4 | ) | 31.4 | 8 | ||||||||||||||||||
Non-competition agreement | 4.6 | (2.4 | ) | 2.2 | 5 | 4.4 | (1.9 | ) | 2.5 | 5 | ||||||||||||||||||
Total intangible assets | $ | 260.1 | $ | (185.9 | ) | $ | 74.2 | 10 | $ | 263.9 | $ | (168.0 | ) | $ | 95.9 | 10 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Amortization expense | $ | 22.0 | $ | 22.3 | $ | 21.5 |
(in millions) | ||||
2016 | $ | 17.7 | ||
2017 | 12.8 | |||
2018 | 10.7 | |||
2019 | 8.2 | |||
2020 | 4.7 | |||
Thereafter | 20.1 |
(in millions) | Weighted Average Useful Life (years) | |||||
Technology based assets | $ | 6.7 | 5 | |||
Intellectual property (trademarks and trade names) | 0.2 | 3 | ||||
Non-competition agreement | 2.6 | 5 | ||||
Total intangible assets | $ | 9.5 | 5 |
(in millions) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 5.5 | 24 | |||
Technology-based assets | 3.0 | 4.5 | ||||
Intellectual property (trademarks and trade names) | 0.1 | 1 | ||||
Non-competition agreement | 0.1 | 3 | ||||
Total intangible assets | $ | 8.7 | 19 |
|
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Investment in MJKK | $ | 24.3 | $ | 23.0 | ||||
Other equity method investments | 3.7 | 3.5 | ||||||
Investments accounted for using the cost method | 7.6 | 2.3 | ||||||
Total investments in unconsolidated entities | $ | 35.6 | $ | 28.8 |
As of December 31 | ||||||||
2015 | 2014 | |||||||
Morningstar’s approximate ownership of MJKK | 34 | % | 34 | % | ||||
Approximate market value of Morningstar’s ownership in MJKK: | ||||||||
Japanese yen (¥ in millions) | ¥ | 8,200.5 | ¥ | 7,347.4 | ||||
Equivalent U.S. dollars ($ in millions) | $ | 68.1 | $ | 61.3 |
|
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Computer equipment | $ | 60.3 | $ | 53.4 | ||||
Capitalized software | 144.0 | 87.8 | ||||||
Furniture and fixtures | 24.3 | 23.2 | ||||||
Leasehold improvements | 61.9 | 54.3 | ||||||
Telephone equipment | 2.1 | 1.9 | ||||||
Construction in progress | 11.7 | 29.9 | ||||||
Property, equipment, and capitalized software, at cost | 304.3 | 250.5 | ||||||
Less accumulated depreciation | (169.8 | ) | (132.9 | ) | ||||
Property, equipment, and capitalized software, net | $ | 134.5 | $ | 117.6 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Capitalized software development costs not yet placed into service | $ | — | $ | 18.1 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Depreciation expense | $ | 42.4 | $ | 32.6 | $ | 24.2 |
|
Minimum Future Rental Commitments | (in millions) | |||
2016 | $ | 20.9 | ||
2017 | 20.3 | |||
2018 | 18.1 | |||
2019 | 13.5 | |||
2020 | 13.1 | |||
Thereafter | 35.7 | |||
Total | $ | 121.6 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Rent expense | $ | 27.1 | $ | 24.5 | $ | 22.2 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Deferred rent | $ | 28.5 | $ | 29.1 |
|
As of December 31 | |||
(in millions) | 2015 | ||
Shares available for future grants | 4.0 |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
Restricted stock units | $ | 16.1 | $ | 16.3 | $ | 14.1 | ||||||
Restricted stock | 0.1 | 0.4 | 0.4 | |||||||||
Performance share awards | 1.0 | 0.5 | — | |||||||||
Stock options | 0.2 | 0.4 | 0.5 | |||||||||
Total stock-based compensation expense | $ | 17.4 | $ | 17.6 | $ | 15.0 | ||||||
Income tax benefit related to the stock-based compensation expense | $ | 5.0 | $ | 5.1 | $ | 4.0 |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
Cost of revenue | $ | 8.1 | $ | 7.8 | $ | 6.8 | ||||||
Sales and marketing | 2.2 | 2.1 | 2.0 | |||||||||
General and administrative | 7.1 | 7.7 | 6.2 | |||||||||
Total stock-based compensation expense | $ | 17.4 | $ | 17.6 | $ | 15.0 |
Unrecognized stock-based compensation expense (in millions) | Weighted average expected amortization period (months) | |||||
Restricted stock units | $ | 31.4 | 31 | |||
Performance share awards | 1.2 | 24 | ||||
Total unrecognized stock-based compensation expense | $ | 32.6 | 31 |
Restricted Stock Units (RSUs) | Unvested | Vested but Deferred | Total | Weighted Average Grant Date Value per RSU | |||||||||
RSUs Outstanding - January 1, 2013 | 727,145 | 18,782 | 745,927 | $ | 53.37 | ||||||||
Granted | 287,848 | — | 287,848 | 72.04 | |||||||||
Dividend equivalents | 2,773 | 157 | 2,930 | 57.39 | |||||||||
Vested | (278,549 | ) | — | (278,549 | ) | 50.41 | |||||||
Issued | — | (2,257 | ) | (2,257 | ) | 49.40 | |||||||
Forfeited | (59,215 | ) | — | (59,215 | ) | 57.58 | |||||||
RSUs Outstanding - December 31, 2013 | 680,002 | 16,682 | 696,684 | $ | 62.02 | ||||||||
Granted | 279,524 | — | 279,524 | 72.68 | |||||||||
Dividend equivalents | 2,621 | 150 | 2,771 | 55.70 | |||||||||
Vested | (268,115 | ) | — | (268,115 | ) | 58.91 | |||||||
Issued | — | (2,054 | ) | (2,054 | ) | 53.54 | |||||||
Forfeited | (38,098 | ) | — | (38,098 | ) | 65.21 | |||||||
RSUs Outstanding - December 31, 2014 | 655,934 | 14,778 | 670,712 | $ | 67.51 | ||||||||
Granted | 235,213 | — | 235,213 | 77.17 | |||||||||
Dividend equivalents | 1,409 | 146 | 1,555 | 56.42 | |||||||||
Vested | (253,038 | ) | — | (253,038 | ) | 64.65 | |||||||
Forfeited | (66,992 | ) | — | (66,992 | ) | 53.61 | |||||||
RSUs Outstanding - December 31, 2015 | 572,526 | 14,924 | 587,450 | $ | 72.14 |
As of December 31, 2015 | ||||
Target performance share awards granted | 75,947 | |||
Weighted average fair value per award | $ | 76.33 | ||
Number of shares that would be issued based on current performance levels | 34,713 | |||
Unamortized expense, based on current performance levels (in millions) | $ | 1.2 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % |
2015 | 2014 | 2013 | |||||||||||||||||||
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 | — | $ | — | 179,559 | $ | 21.47 | 282,695 | $ | 20.55 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | — | — | (150 | ) | 22.24 | (250 | ) | 21.48 | |||||||||||||
Exercised | — | — | (179,409 | ) | 22.08 | (102,886 | ) | 21.09 | |||||||||||||
Options outstanding—end of year | — | $ | — | — | $ | — | 179,559 | $ | 21.47 | ||||||||||||
Options exercisable—end of year | — | $ | — | — | $ | — | 179,559 | $ | 21.47 |
2015 | 2014 | 2013 | |||||||||||||||||||
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 | 169,810 | $ | 40.20 | 253,972 | $ | 36.48 | 391,784 | $ | 28.98 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | — | — | (526 | ) | 38.61 | (1,352 | ) | 16.19 | |||||||||||||
Exercised | (117,714 | ) | 32.91 | (83,636 | ) | 30.82 | (136,460 | ) | 16.84 | ||||||||||||
Options outstanding—end of year | 52,096 | $ | 57.52 | 169,810 | $ | 40.20 | 253,972 | $ | 36.48 | ||||||||||||
Options exercisable—end of year | 52,096 | $ | 57.52 | 154,864 | $ | 38.53 | 219,449 | $ | 33.18 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Intrinsic value of options exercised | $ | 5.1 | $ | 12.0 | $ | 12.8 |
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
Range of Exercise Prices | Number of Options | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value (in millions) | Exercisable Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||
$57.28 - $59.35 | 52,096 | 4.77 | $ | 57.52 | $ | 1.2 | 52,096 | 4.77 | $ | 57.52 | $ | 1.2 | ||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||
$57.28 - $59.35 | 52,096 | 4.77 | $ | 57.52 | $ | 1.2 |
(in millions) | 2015 | 2014 | 2013 | |||||||||
Excess tax benefits related to stock-based compensation | $ | 2.6 | $ | 4.4 | $ | 5.9 |
|
(in millions) | 2015 | 2014 | 2013 | |||||||||
401(k) matching contributions | $ | 8.3 | $ | 7.5 | $ | 6.9 |
|
(in millions) | 2015 | 2014 | 2013 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 193.7 | $ | 114.0 | $ | 178.0 | ||||||
Equity in net income of unconsolidated entities | 1.8 | — | 1.4 | |||||||||
Net loss attributable to the noncontrolling interest | (0.2 | ) | — | 0.1 | ||||||||
Total | $ | 195.3 | $ | 114.0 | $ | 179.5 | ||||||
Income tax expense | $ | 62.7 | $ | 35.7 | $ | 56.0 | ||||||
Effective tax rate | 32.1 | % | 31.3 | % | 31.2 | % |
2015 | 2014 | 2013 | |||||||||||||||||||
(in millions, except percentages) | Amount | % | Amount | % | Amount | % | |||||||||||||||
Income tax expense at U.S. federal rate | $ | 68.4 | 35.0 | % | $ | 39.9 | 35.0 | % | $ | 62.8 | 35.0 | % | |||||||||
State income taxes, net of federal income tax benefit | 6.6 | 3.4 | 2.1 | 1.9 | 3.0 | 1.7 | |||||||||||||||
Equity in net income of unconsolidated subsidiaries | — | — | (1.4 | ) | (1.2 | ) | — | — | |||||||||||||
Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses | (2.0 | ) | (1.0 | ) | (0.6 | ) | (0.5 | ) | (1.8 | ) | (1.0 | ) | |||||||||
Difference between U.S. federal statutory and foreign tax rates | (4.4 | ) | (2.3 | ) | (4.0 | ) | (3.5 | ) | (2.5 | ) | (1.4 | ) | |||||||||
Change in unrecognized tax benefits | (1.4 | ) | (0.7 | ) | 1.5 | 1.3 | (0.2 | ) | (0.1 | ) | |||||||||||
Credits and incentives | (5.1 | ) | (2.6 | ) | (2.9 | ) | (2.6 | ) | (4.4 | ) | (2.5 | ) | |||||||||
Recognition of deferred tax assets | — | — | (0.1 | ) | (0.1 | ) | (1.4 | ) | (0.8 | ) | |||||||||||
Other - net | 0.6 | 0.3 | 1.2 | 1.0 | 0.5 | 0.3 | |||||||||||||||
Total income tax expense | $ | 62.7 | 32.1 | % | $ | 35.7 | 31.3 | % | $ | 56.0 | 31.2 | % |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
Current tax expense: | ||||||||||||
U.S. | ||||||||||||
Federal | $ | 42.8 | $ | 20.8 | $ | 42.8 | ||||||
State | 8.3 | 2.0 | 3.9 | |||||||||
Non-U.S. | 8.7 | 9.6 | 10.5 | |||||||||
Current tax expense | 59.8 | 32.4 | 57.2 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
U.S. | ||||||||||||
Federal | 4.3 | 3.7 | 2.6 | |||||||||
State | 1.8 | 1.3 | 0.8 | |||||||||
Non-U.S. | (3.2 | ) | (1.7 | ) | (4.6 | ) | ||||||
Deferred tax expense (benefit), net | 2.9 | 3.3 | (1.2 | ) | ||||||||
Income tax expense | $ | 62.7 | $ | 35.7 | $ | 56.0 |
Year ended December 31 | ||||||||||||
(in millions) | 2015 | 2014 | 2013 | |||||||||
U.S. | $ | 160.6 | $ | 80.4 | $ | 144.1 | ||||||
Non-U.S. | 33.1 | 33.6 | 33.9 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 193.7 | $ | 114.0 | $ | 178.0 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Deferred tax assets: | ||||||||
Stock-based compensation expense | $ | 3.1 | $ | 3.3 | ||||
Accrued liabilities | 14.3 | 13.6 | ||||||
Deferred revenue | 0.9 | — | ||||||
Net operating loss carryforwards - U.S. federal and state | 7.6 | 10.5 | ||||||
Net operating loss carryforwards - Non-U.S. | 3.7 | 7.7 | ||||||
Credits and incentive carryforwards | 0.6 | — | ||||||
Deferred royalty revenue | 0.3 | 0.4 | ||||||
Allowance for doubtful accounts | 1.0 | 0.9 | ||||||
Deferred rent | 8.9 | 10.0 | ||||||
Unrealized exchange losses, net | 0.4 | — | ||||||
Total deferred tax assets | 40.8 | 46.4 | ||||||
Deferred tax liabilities: | ||||||||
Acquired intangible assets | (13.2 | ) | (16.4 | ) | ||||
Property, equipment, and capitalized software | (28.1 | ) | (23.2 | ) | ||||
Unrealized exchange gains, net | — | (0.2 | ) | |||||
Prepaid expenses | (4.3 | ) | (3.7 | ) | ||||
Investments in unconsolidated entities | (13.7 | ) | (12.8 | ) | ||||
Other | (0.1 | ) | (0.4 | ) | ||||
Total deferred tax liabilities | (59.4 | ) | (56.7 | ) | ||||
Net deferred tax liability before valuation allowance | (18.6 | ) | (10.3 | ) | ||||
Valuation allowance | (1.2 | ) | (6.7 | ) | ||||
Net deferred tax liability | $ | (19.8 | ) | $ | (17.0 | ) |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Deferred tax asset, net - current | $ | — | $ | — | ||||
Deferred tax liability, net - non-current | (19.8 | ) | (17.0 | ) | ||||
Net deferred tax liability | $ | (19.8 | ) | $ | (17.0 | ) |
(in millions) | 2015 | 2014 | ||||||
Gross unrecognized tax benefits - beginning of the year | $ | 11.9 | $ | 13.0 | ||||
Increases as a result of tax positions taken during a prior-year period | 4.4 | 0.9 | ||||||
Decreases as a result of tax positions taken during a prior-year period | (0.7 | ) | (0.1 | ) | ||||
Increases as a result of tax positions taken during the current period | 2.4 | 2.0 | ||||||
Decreases relating to settlements with tax authorities | (1.8 | ) | (2.4 | ) | ||||
Reductions as a result of lapse of the applicable statute of limitations | (1.7 | ) | (1.5 | ) | ||||
Gross unrecognized tax benefits - end of the year | $ | 14.5 | $ | 11.9 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Liabilities for interest and penalties | $ | 1.2 | $ | 1.5 |
As of December 31 | ||||||||||
(in millions) | 2015 | 2014 | ||||||||
Expiration Dates | Expiration Dates | |||||||||
U.S. federal NOLs subject to expiration dates | $ | 21.6 | 2023-2034 | $ | 30.0 | 2023-2034 |
As of December 31 | ||||||||
(in millions) | 2015 | 2014 | ||||||
Non-U.S. NOLs subject to expiration dates from 2019 through 2035 | $ | 2.9 | $ | 5.2 | ||||
Non-U.S. NOLs with no expiration date | 15.5 | 32.7 | ||||||
Total | $ | 18.4 | $ | 37.9 | ||||
Non-U.S. NOLs not subject to valuation allowances | $ | 12.1 | $ | 5.1 |
|
2014 | 2015 | |||||||||||||||||||||||||||||||
(in millions except per share amounts) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||||||||||||||||||||||||
Revenue | $ | 181.2 | $ | 189.4 | $ | 193.1 | $ | 196.4 | $ | 189.8 | $ | 202.1 | $ | 195.3 | $ | 201.6 | ||||||||||||||||
Total operating expense | 142.7 | 214.2 | 147.8 | 149.8 | 145.3 | 152.4 | 149.1 | 151.5 | ||||||||||||||||||||||||
Operating income (loss) | 38.5 | (24.8 | ) | 45.3 | 46.6 | 44.5 | 49.7 | 46.2 | 50.1 | |||||||||||||||||||||||
Non-operating income (expense), net | 0.9 | 5.9 | (0.3 | ) | 1.8 | (0.4 | ) | 0.6 | 1.4 | 1.4 | ||||||||||||||||||||||
Income (loss) before income taxes and equity in net income of unconsolidated entities | 39.4 | (18.9 | ) | 45.0 | 48.4 | 44.1 | 50.3 | 47.6 | 51.5 | |||||||||||||||||||||||
Equity in net income (loss) of unconsolidated entities | 0.6 | 0.5 | 0.3 | (1.4 | ) | 0.5 | 0.6 | 0.5 | 0.3 | |||||||||||||||||||||||
Income tax expense (benefit) | 13.7 | (8.6 | ) | 15.1 | 15.5 | 14.8 | 18.7 | 14.6 | 14.5 | |||||||||||||||||||||||
Consolidated net income (loss) | 26.3 | (9.8 | ) | 30.2 | 31.5 | 29.8 | 32.2 | 33.5 | 37.3 | |||||||||||||||||||||||
Net (income) loss attributable to the noncontrolling interests | 0.1 | — | — | — | (0.1 | ) | — | — | — | |||||||||||||||||||||||
Net income (loss) attributable to Morningstar, Inc. | $ | 26.4 | $ | (9.8 | ) | $ | 30.2 | $ | 31.5 | $ | 29.7 | $ | 32.2 | $ | 33.5 | $ | 37.3 | |||||||||||||||
Net income (loss) per share attributable to Morningstar, Inc. | ||||||||||||||||||||||||||||||||
Basic | $ | 0.59 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | $ | 0.67 | $ | 0.73 | $ | 0.76 | $ | 0.85 | |||||||||||||||
Diluted | $ | 0.58 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | $ | 0.67 | $ | 0.72 | $ | 0.76 | $ | 0.85 | |||||||||||||||
Dividends per common share: | ||||||||||||||||||||||||||||||||
Dividends declared per common share | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.22 | ||||||||||||||||
Dividends paid per common share | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.19 | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||
Basic | 44.8 | 44.8 | 44.7 | 44.4 | 44.3 | 44.3 | 44.2 | 43.8 | ||||||||||||||||||||||||
Diluted | 45.1 | 44.8 | 44.9 | 44.5 | 44.5 | 44.4 | 44.3 | 43.9 |
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