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As of December 31, 2013 | ||||||||||||
($000) | Previously Reported | Correction | As Corrected | |||||||||
Accounts payable and accrued liabilities | $ | 52,877 | $ | (10,746 | ) | $ | 42,131 | |||||
Deferred rent | $ | 13,192 | $ | 10,746 | $ | 23,938 |
|
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. |
($000) | 2014 | 2013 | 2012 | |||||||||
Capitalized software development costs | $ | 18,804 | $ | 8,142 | $ | 8,527 |
• | 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. |
($000) | 2014 | 2013 | 2012 | |||||||||
Advertising expense | $ | 7,497 | $ | 6,939 | $ | 6,306 |
|
|
External revenue by product group | ||||||||||||
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Investment information | $ | 597,046 | $ | 555,642 | $ | 526,147 | ||||||
Investment management | 163,025 | 142,624 | 132,141 | |||||||||
Consolidated revenue | $ | 760,071 | $ | 698,266 | $ | 658,288 |
External revenue by geographical area | ||||||||||||
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
United States | $ | 550,740 | $ | 500,730 | $ | 466,947 | ||||||
United Kingdom | 61,844 | 56,298 | 56,794 | |||||||||
Continental Europe | 62,677 | 57,580 | 49,844 | |||||||||
Australia | 34,977 | 35,289 | 38,229 | |||||||||
Canada | 30,790 | 31,845 | 30,664 | |||||||||
Asia | 15,830 | 13,860 | 13,765 | |||||||||
Other | 3,213 | 2,664 | 2,045 | |||||||||
Total International | 209,331 | 197,536 | 191,341 | |||||||||
Consolidated revenue | $ | 760,071 | $ | 698,266 | $ | 658,288 |
Long-lived assets by geographical area | ||||||||
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
United States | $ | 98,135 | $ | 84,321 | ||||
United Kingdom | 8,014 | 6,873 | ||||||
Continental Europe | 2,102 | 1,873 | ||||||
Australia | 794 | 1,051 | ||||||
Canada | 938 | 1,275 | ||||||
Asia | 7,491 | 9,479 | ||||||
Other | 87 | 114 | ||||||
Total International | 19,426 | 20,665 | ||||||
Consolidated property, equipment, and capitalized software, net | $ | 117,561 | $ | 104,986 |
|
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Available-for-sale | $ | 13,187 | $ | 91,461 | ||||
Held-to-maturity | 17,930 | 31,214 | ||||||
Trading securities | 8,305 | 7,732 | ||||||
Total | $ | 39,422 | $ | 130,407 |
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||||||||||||||||||
($000) | Cost | Unrealized Gain | Unrealized Loss | Fair Value | Cost | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||||||
Government obligations | $ | — | $ | — | $ | — | $ | — | $ | 19,693 | $ | 8 | $ | (3 | ) | $ | 19,698 | |||||||||||||||
Corporate bonds | — | — | — | — | 49,913 | 22 | (124 | ) | 49,811 | |||||||||||||||||||||||
Foreign obligations | — | — | — | — | 505 | — | (2 | ) | 503 | |||||||||||||||||||||||
Commercial paper | — | — | — | — | 9,482 | 7 | — | 9,489 | ||||||||||||||||||||||||
Equity securities and exchange-traded funds | 11,428 | 796 | (289 | ) | 11,935 | 8,872 | 1,011 | (141 | ) | 9,742 | ||||||||||||||||||||||
Mutual funds | 1,220 | 132 | (100 | ) | 1,252 | 2,095 | 221 | (98 | ) | 2,218 | ||||||||||||||||||||||
Total | $ | 12,648 | $ | 928 | $ | (389 | ) | $ | 13,187 | $ | 90,560 | $ | 1,269 | $ | (368 | ) | $ | 91,461 | ||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 17,930 | $ | — | $ | — | $ | 17,930 | $ | 31,214 | $ | — | $ | — | $ | 31,214 |
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||
($000) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | 45,486 | $ | 45,402 | ||||||||
Due in one to two years | — | — | 34,107 | 34,099 | ||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 12,648 | 13,187 | 10,967 | 11,960 | ||||||||||||
Total | $ | 12,648 | $ | 13,187 | $ | 90,560 | $ | 91,461 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 17,929 | $ | 17,929 | $ | 31,210 | $ | 31,210 | ||||||||
Due in one to three years | 1 | 1 | 4 | 4 | ||||||||||||
Total | $ | 17,930 | $ | 17,930 | $ | 31,214 | $ | 31,214 |
($000) | 2014 | 2013 | 2012 | |||||||||
Realized gains | $ | 1,484 | $ | 5,550 | $ | 1,671 | ||||||
Realized losses | (466 | ) | (1,343 | ) | (1,133 | ) | ||||||
Realized gains, net | $ | 1,018 | $ | 4,207 | $ | 538 |
($000) | 2014 | 2013 | 2012 | |||||||||
Unrealized gains (losses), net | $ | (188 | ) | $ | 827 | $ | 269 |
Fair Value | Fair Value Measurements as of December 31, 2014 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | December 31, 2014 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | — | $ | — | $ | — | $ | — | ||||||||
Corporate bonds | — | — | — | — | ||||||||||||
Foreign obligations | — | — | — | — | ||||||||||||
Commercial paper | — | — | — | — | ||||||||||||
Equity securities and exchange-traded funds | 11,935 | 11,935 | — | — | ||||||||||||
Mutual funds | 1,252 | 1,252 | — | — | ||||||||||||
Trading securities | 8,305 | 8,305 | — | — | ||||||||||||
Cash equivalents | 512 | 512 | — | — | ||||||||||||
Total | $ | 22,004 | $ | 22,004 | $ | — | $ | — |
Fair Value | Fair Value Measurements as of December 31, 2013 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | December 31, 2013 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 19,698 | $ | — | $ | 19,698 | $ | — | ||||||||
Corporate bonds | 49,811 | — | 49,811 | — | ||||||||||||
Foreign obligations | 503 | — | 503 | — | ||||||||||||
Commercial paper | 9,489 | — | 9,489 | — | ||||||||||||
Equity securities and exchange-traded funds | 9,742 | 9,742 | — | — | ||||||||||||
Mutual funds | 2,218 | 2,218 | — | — | ||||||||||||
Trading securities | 7,732 | 7,732 | — | — | ||||||||||||
Cash equivalents | 925 | 925 | — | — | ||||||||||||
Total | $ | 100,118 | $ | 20,617 | $ | 79,501 | $ | — |
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. |
|
($000) | ||||
Cash and cash equivalents | $ | 3,739 | ||
Accounts receivable and other current assets | 150 | |||
Other current and non-current assets | 318 | |||
Deferred tax asset | 8,646 | |||
Intangible assets | 9,460 | |||
Goodwill | 39,166 | |||
Deferred revenue | (2,897 | ) | ||
Deferred tax liability | (3,595 | ) | ||
Other current and non-current liabilities | (981 | ) | ||
Total fair value of HelloWallet | $ | 54,006 |
($000) | Weighted Average Useful Life (years) | |||||
Technology based assets | 6,670 | 5 | ||||
Intellectual property (trademarks and trade names) | 169 | 3 | ||||
Non-competition agreement | 2,621 | 5 | ||||
Total intangible assets | $ | 9,460 | 5 |
($000) | ||||
Cash and cash equivalents | $ | 287 | ||
Accounts receivable and other current assets | 152 | |||
Deferred tax asset | 3,987 | |||
Other current and non-current assets | 257 | |||
Intangible assets | 8,681 | |||
Goodwill | 18,476 | |||
Deferred revenue | (79 | ) | ||
Deferred tax liability | (3,299 | ) | ||
Other current and non-current liabilities | (513 | ) | ||
Total purchase price | $ | 27,949 |
($000) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 5,506 | 24 | |||
Technology-based assets | 3,020 | 4.5 | ||||
Intellectual property (trademarks and trade names) | 47 | 1 | ||||
Non-competition agreement | 108 | 3 | ||||
Total intangible assets | $ | 8,681 | 19 |
($000) | ||||
Cash and cash equivalents | $ | 3,472 | ||
Accounts receivable and other current assets | 519 | |||
Other non-current assets | 244 | |||
Intangible assets | 9,700 | |||
Goodwill | 8,911 | |||
Deferred revenue | (1,191 | ) | ||
Deferred tax liability | (2,272 | ) | ||
Other current and non-current liabilities | (870 | ) | ||
Total fair value of Morningstar Sweden | $ | 18,513 |
($000) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 9,700 | 14 | |||
Total intangible assets | $ | 9,700 | 14 |
($000) | ||||
Balance as of January 1, 2013 | $ | 320,845 | ||
Acquisition of remaining ownership in Morningstar Sweden | 8,911 | |||
Other, primarily foreign currency translation | (3,306 | ) | ||
Balance as of December 31, 2013 | $ | 326,450 | ||
Acquisition of HelloWallet and ByAllAccounts | 57,642 | |||
Foreign currency translation | (14,038 | ) | ||
Balance as of December 31, 2014 | $ | 370,054 |
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||||||||||||||
($000) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | ||||||||||||||||||||
Intellectual property | $ | 29,026 | $ | (25,033 | ) | $ | 3,993 | 9 | $ | 29,477 | $ | (23,128 | ) | $ | 6,349 | 9 | ||||||||||||
Customer-related assets | 141,497 | (83,582 | ) | 57,915 | 12 | 141,833 | (74,311 | ) | 67,522 | 12 | ||||||||||||||||||
Supplier relationships | 240 | (120 | ) | 120 | 20 | 240 | (108 | ) | 132 | 20 | ||||||||||||||||||
Technology-based assets | 88,816 | (57,395 | ) | 31,421 | 8 | 80,489 | (50,673 | ) | 29,816 | 9 | ||||||||||||||||||
Non-competition agreement | 4,339 | (1,883 | ) | 2,456 | 5 | 1,661 | (1,571 | ) | 90 | 4 | ||||||||||||||||||
Total intangible assets | $ | 263,918 | $ | (168,013 | ) | $ | 95,905 | 10 | $ | 253,700 | $ | (149,791 | ) | $ | 103,909 | 10 |
($000) | 2014 | 2013 | 2012 | |||||||||
Amortization expense | $ | 22,264 | $ | 21,454 | $ | 23,944 |
($000) | ||||
2015 | $ | 21,920 | ||
2016 | 17,394 | |||
2017 | 12,941 | |||
2018 | 10,790 | |||
2019 | 8,046 | |||
Thereafter | 24,814 |
|
($000) | 2014 | 2013 | 2012 | |||||||||
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) | 2014 | 2013 | ||||||
Investment in MJKK | $ | 23,014 | $ | 21,782 | ||||
Other equity method investments | 3,475 | 6,166 | ||||||
Investments accounted for using the cost method | 2,309 | 10,766 | ||||||
Total investments in unconsolidated entities | $ | 28,798 | $ | 38,714 |
As of December 31 | ||||||||
2014 | 2013 | |||||||
Morningstar’s approximate ownership of MJKK | 34 | % | 34 | % | ||||
Approximate market value of Morningstar’s ownership in MJKK: | ||||||||
Japanese yen (¥000) | ¥ | 7,347,413 | ¥ | 9,824,068 | ||||
Equivalent U.S. dollars ($000) | $ | 61,277 | $ | 94,999 |
|
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Computer equipment | $ | 53,420 | $ | 47,830 | ||||
Capitalized software | 87,764 | 50,360 | ||||||
Furniture and fixtures | 23,172 | 23,259 | ||||||
Leasehold improvements | 54,320 | 52,512 | ||||||
Telephone equipment | 1,948 | 2,032 | ||||||
Construction in progress | 29,870 | 35,159 | ||||||
Property, equipment, and capitalized software, at cost | 250,494 | 211,152 | ||||||
Less accumulated depreciation | (132,933 | ) | (106,166 | ) | ||||
Property, equipment, and capitalized software, net | $ | 117,561 | $ | 104,986 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Capitalized software development costs not yet placed into service | $ | 18,070 | $ | 11,345 |
($000) | 2014 | 2013 | 2012 | |||||||||
Depreciation expense | $ | 32,622 | $ | 24,239 | $ | 19,152 |
|
Minimum Future Rental Commitments | ($000) | |||
2015 | $ | 19,395 | ||
2016 | 20,299 | |||
2017 | 19,270 | |||
2018 | 16,916 | |||
2019 | 12,632 | |||
Thereafter | 48,203 | |||
Total | $ | 136,715 |
($000) | 2014 | 2013 | 2012 | |||||||||
Rent expense | $ | 24,460 | $ | 22,169 | $ | 20,736 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Deferred rent | $ | 29,124 | $ | 26,157 |
|
As of December 31 | |||
(000) | 2014 | ||
Shares available for future grants | 4,233 |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Restricted stock units | $ | 16,307 | $ | 14,163 | $ | 13,451 | ||||||
Restricted stock | 388 | 388 | 5,013 | |||||||||
Performance share awards | 505 | — | — | |||||||||
Stock options | 424 | 492 | 441 | |||||||||
Total stock-based compensation expense | $ | 17,624 | $ | 15,043 | $ | 18,905 | ||||||
Income tax benefit related to the stock-based compensation expense | $ | 5,055 | $ | 4,027 | $ | 3,686 |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Cost of revenue | $ | 7,774 | $ | 6,870 | $ | 6,416 | ||||||
Sales and marketing | 2,170 | 1,975 | 1,937 | |||||||||
General and administrative | 7,680 | 6,198 | 10,552 | |||||||||
Total stock-based compensation expense | $ | 17,624 | $ | 15,043 | $ | 18,905 |
Unrecognized stock-based compensation expense ($000) | Expected amortization period (months) | |||||
Restricted stock units | $ | 33,064 | 32 | |||
Restricted stock | 129 | 4 | ||||
Performance share awards | 453 | 24 | ||||
Stock options | 162 | 6 | ||||
Total unrecognized stock-based compensation expense | $ | 33,808 | 32 |
Restricted Stock Units (RSUs) | Unvested | Vested but Deferred | Total | Weighted Average Grant Date Value per RSU | |||||||||
RSUs Outstanding - January 1, 2012 | 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 | |||||||||
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 |
As of December 31, 2014 | ||||
Target performance share awards granted | 23,685 | |||
Fair value per award (1) | $ | 80.91 | ||
Number of shares that would be issued based on current performance levels | 11,843 | |||
Unamortized expense, based on current performance levels | $ | 453,000 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % |
2014 | 2013 | 2012 | |||||||||||||||||||
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 | 398,859 | $ | 19.72 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | (150 | ) | 22.24 | (250 | ) | 21.48 | (650 | ) | 14.70 | ||||||||||||
Exercised | (179,409 | ) | 22.08 | (102,886 | ) | 21.09 | (115,514 | ) | 20.19 | ||||||||||||
Options outstanding—end of year | — | — | 179,559 | 21.47 | 282,695 | 20.55 | |||||||||||||||
Options exercisable—end of year | — | $ | — | 179,559 | $ | 21.47 | 282,695 | $ | 20.55 |
2014 | 2013 | 2012 | |||||||||||||||||||
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 | 253,972 | $ | 36.48 | 391,784 | $ | 28.98 | 818,552 | $ | 22.76 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | (526 | ) | 38.61 | (1,352 | ) | 16.19 | (22,330 | ) | 39.75 | ||||||||||||
Exercised | (83,636 | ) | 30.82 | (136,460 | ) | 16.84 | (404,438 | ) | 16.60 | ||||||||||||
Options outstanding—end of year | 169,810 | 40.20 | 253,972 | 36.48 | 391,784 | 28.98 | |||||||||||||||
Options exercisable—end of year | 154,864 | $ | 38.53 | 219,449 | $ | 33.18 | 337,684 | $ | 24.42 |
($000) | 2014 | 2013 | 2012 | |||||||||
Intrinsic value of options exercised | $ | 12,021 | $ | 12,801 | $ | 22,526 |
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) | ||||||||||||||||||
$27.54 | 96,354 | 0.34 | $ | 27.54 | $ | 3,582 | 96,354 | 0.34 | $ | 27.54 | $ | 3,582 | ||||||||||||||
$40.49 - $51.03 | 5,781 | 0.91 | 49.10 | 90 | 5,781 | 0.91 | 49.10 | 90 | ||||||||||||||||||
$57.28 - $59.35 | 67,675 | 6.51 | 57.47 | 490 | 52,729 | 6.51 | 57.46 | 358 | ||||||||||||||||||
$27.54 - $59.35 | 169,810 | 2.82 | 40.20 | $ | 4,162 | 154,864 | 2.46 | 38.53 | $ | 4,030 | ||||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||
$27.54 - $59.35 | 169,810 | 2.82 | $ | 40.20 | $ | 4,162 |
($000) | 2014 | 2013 | 2012 | |||||||||
Excess tax benefits related to stock-based compensation | $ | 4,449 | $ | 5,898 | $ | 7,210 |
|
($000) | 2014 | 2013 | 2012 | |||||||||
401(k) matching contributions | $ | 7,451 | $ | 6,879 | $ | 6,642 |
|
($000) | 2014 | 2013 | 2012 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 113,898 | $ | 178,010 | $ | 153,625 | ||||||
Equity in net income of unconsolidated entities | 39 | 1,428 | 2,027 | |||||||||
Net loss attributable to the noncontrolling interest | 42 | 122 | 117 | |||||||||
Total | $ | 113,979 | $ | 179,560 | $ | 155,769 | ||||||
Income tax expense | $ | 35,678 | $ | 56,031 | $ | 52,878 | ||||||
Effective tax rate | 31.3 | % | 31.2 | % | 33.9 | % |
2014 | 2013 | 2012 | |||||||||||||||||||
($000, except percentages) | Amount | % | Amount | % | Amount | % | |||||||||||||||
Income tax expense at U.S. federal rate | $ | 39,893 | 35.0 | % | $ | 62,845 | 35.0 | % | $ | 54,519 | 35.0 | % | |||||||||
State income taxes, net of federal income tax benefit | 2,129 | 1.9 | 3,029 | 1.7 | 1,510 | 1.0 | |||||||||||||||
Equity in net income of unconsolidated subsidiaries | (1,397 | ) | (1.2 | ) | — | — | — | — | |||||||||||||
Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses | (600 | ) | (0.5 | ) | (1,842 | ) | (1.0 | ) | (630 | ) | (0.4 | ) | |||||||||
Difference between U.S. federal statutory and foreign tax rates | (3,961 | ) | (3.5 | ) | (2,513 | ) | (1.4 | ) | (2,777 | ) | (1.8 | ) | |||||||||
Change in unrecognized tax benefits | 1,481 | 1.3 | (211 | ) | (0.1 | ) | 967 | 0.6 | |||||||||||||
Credits and incentives | (2,924 | ) | (2.6 | ) | (4,374 | ) | (2.5 | ) | (1,494 | ) | (1.0 | ) | |||||||||
Recognition of deferred tax assets | (140 | ) | (0.1 | ) | (1,448 | ) | (0.8 | ) | — | — | |||||||||||
Other - net | 1,197 | 1.0 | 545 | 0.3 | 783 | 0.5 | |||||||||||||||
Total income tax expense | $ | 35,678 | 31.3 | % | $ | 56,031 | 31.2 | % | $ | 52,878 | 33.9 | % |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Current tax expense: | ||||||||||||
U.S. | ||||||||||||
Federal | $ | 20,726 | $ | 42,808 | $ | 38,821 | ||||||
State | 1,996 | 3,882 | 1,997 | |||||||||
Non-U.S. | 9,638 | 10,456 | 5,719 | |||||||||
Current tax expense | 32,360 | 57,146 | 46,537 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
U.S. | ||||||||||||
Federal | 3,668 | 2,630 | 6,287 | |||||||||
State | 1,326 | 814 | 334 | |||||||||
Non-U.S. | (1,676 | ) | (4,559 | ) | (280 | ) | ||||||
Deferred tax expense (benefit), net | 3,318 | (1,115 | ) | 6,341 | ||||||||
Income tax expense | $ | 35,678 | $ | 56,031 | $ | 52,878 |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
U.S. | $ | 80,394 | $ | 144,065 | $ | 128,920 | ||||||
Non-U.S. | 33,504 | 33,945 | 24,705 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 113,898 | $ | 178,010 | $ | 153,625 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Deferred tax assets: | ||||||||
Stock-based compensation expense | $ | 3,262 | $ | 3,479 | ||||
Accrued liabilities | 13,632 | 9,805 | ||||||
Net operating loss carryforwards - U.S. federal and state | 10,505 | 851 | ||||||
Net operating loss carryforwards - Non-U.S. | 7,725 | 9,229 | ||||||
Deferred royalty revenue | 354 | 366 | ||||||
Allowance for doubtful accounts | 929 | 758 | ||||||
Deferred rent | 10,019 | 8,673 | ||||||
Total deferred tax assets | 46,426 | 33,161 | ||||||
Deferred tax liabilities: | ||||||||
Acquired intangible assets | (16,419 | ) | (12,967 | ) | ||||
Property, equipment, and capitalized software | (23,157 | ) | (15,525 | ) | ||||
Unrealized exchange gains, net | (174 | ) | (395 | ) | ||||
Prepaid expenses | (3,677 | ) | (4,299 | ) | ||||
Investments in unconsolidated entities | (12,836 | ) | (12,009 | ) | ||||
Other | (435 | ) | (373 | ) | ||||
Total deferred tax liabilities | (56,698 | ) | (45,568 | ) | ||||
Net deferred tax liability before valuation allowance | (10,272 | ) | (12,407 | ) | ||||
Valuation allowance | (6,706 | ) | (7,456 | ) | ||||
Net deferred tax liability | $ | (16,978 | ) | $ | (19,863 | ) |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Deferred tax asset, net - current | $ | 9,000 | $ | 3,892 | ||||
Deferred tax liability, net - non-current | (25,978 | ) | (23,755 | ) | ||||
Net deferred tax liability | $ | (16,978 | ) | $ | (19,863 | ) |
As of December 31 | ||||||||||
($000) | 2014 | 2013 | ||||||||
Expiration Date | Expiration Date | |||||||||
U.S. federal NOLs subject to expiration dates | $ | 30,015 | 2023-2034 | $ | 2,136 | 12/31/2023 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Non-U.S. NOLs subject to expiration dates from 2018 through 2034 | $ | 5,240 | $ | 5,314 | ||||
Non-U.S. NOLs with no expiration date | 32,628 | 40,054 | ||||||
Total | $ | 37,868 | $ | 45,368 | ||||
Non-U.S. NOLs not subject to valuation allowances | $ | 5,127 | $ | 8,759 |
($000) | 2014 | 2013 | ||||||
Gross unrecognized tax benefits - beginning of the year | $ | 12,958 | $ | 12,699 | ||||
Increases as a result of tax positions taken during a prior-year period | 866 | 791 | ||||||
Decreases as a result of tax positions taken during a prior-year period | (54 | ) | (146 | ) | ||||
Increases as a result of tax positions taken during the current period | 2,007 | 2,887 | ||||||
Decreases relating to settlements with tax authorities | (2,400 | ) | (2,779 | ) | ||||
Reductions as a result of lapse of the applicable statute of limitations | (1,455 | ) | (494 | ) | ||||
Gross unrecognized tax benefits - end of the year | $ | 11,922 | $ | 12,958 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Liabilities for interest and penalties | $ | 1,488 | $ | 1,865 |
|
|
|
|
2013 | 2014 | |||||||||||||||||||||||||||||||
(in thousands except per share amounts) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||||||||||||||||||||||||
Revenue | $ | 168,856 | $ | 175,428 | $ | 173,482 | $ | 180,500 | $ | 181,165 | $ | 189,385 | $ | 193,106 | $ | 196,415 | ||||||||||||||||
Total operating expense | 128,296 | 131,844 | 128,869 | 138,603 | 142,633 | 214,165 | 147,845 | 149,834 | ||||||||||||||||||||||||
Operating income (loss) | 40,560 | 43,584 | 44,613 | 41,897 | 38,532 | (24,780 | ) | 45,261 | 46,581 | |||||||||||||||||||||||
Non-operating income (expense), net | 945 | 3,111 | 771 | 2,529 | 865 | 5,898 | (298 | ) | 1,839 | |||||||||||||||||||||||
Income (loss) before income taxes and equity in net income of unconsolidated entities | 41,505 | 46,695 | 45,384 | 44,426 | 39,397 | (18,882 | ) | 44,963 | 48,420 | |||||||||||||||||||||||
Equity in net income (loss) of unconsolidated entities | 497 | 360 | 315 | 256 | 599 | 497 | 337 | (1,394 | ) | |||||||||||||||||||||||
Income tax expense (benefit) | 12,427 | 15,955 | 14,265 | 13,384 | 13,650 | (8,611 | ) | 15,149 | 15,490 | |||||||||||||||||||||||
Consolidated net income (loss) | 29,575 | 31,100 | 31,434 | 31,298 | 26,346 | (9,774 | ) | 30,151 | 31,536 | |||||||||||||||||||||||
Net (income) loss attributable to the noncontrolling interests | 43 | 21 | 29 | 29 | 30 | 5 | 29 | (22 | ) | |||||||||||||||||||||||
Net income (loss) attributable to Morningstar, Inc. | $ | 29,618 | $ | 31,121 | $ | 31,463 | $ | 31,327 | $ | 26,376 | $ | (9,769 | ) | $ | 30,180 | $ | 31,514 | |||||||||||||||
Net income (loss) per share attributable to Morningstar, Inc. | ||||||||||||||||||||||||||||||||
Basic | $ | 0.64 | $ | 0.67 | $ | 0.68 | $ | 0.68 | $ | 0.59 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | |||||||||||||||
Diluted | $ | 0.63 | $ | 0.66 | $ | 0.68 | $ | 0.68 | $ | 0.58 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | |||||||||||||||
Dividends per common share: | ||||||||||||||||||||||||||||||||
Dividends declared per common share | $ | 0.125 | $ | 0.125 | $ | — | $ | 0.295 | $ | 0.170 | $ | 0.170 | $ | 0.170 | $ | 0.190 | ||||||||||||||||
Dividends paid per common share | $ | — | $ | 0.125 | $ | 0.125 | $ | 0.125 | $ | 0.170 | $ | 0.170 | $ | 0.170 | $ | 0.170 | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||
Basic | 46,406 | 46,400 | 46,080 | 45,756 | 44,777 | 44,777 | 44,734 | 44,414 | ||||||||||||||||||||||||
Diluted | 46,814 | 46,853 | 46,519 | 46,211 | 45,093 | 44,777 | 44,889 | 44,548 |
|
• | 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. |
($000) | 2014 | 2013 | 2012 | |||||||||
Capitalized software development costs | $ | 18,804 | $ | 8,142 | $ | 8,527 |
• | 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. |
($000) | 2014 | 2013 | 2012 | |||||||||
Advertising expense | $ | 7,497 | $ | 6,939 | $ | 6,306 |
|
As of December 31, 2013 | ||||||||||||
($000) | Previously Reported | Correction | As Corrected | |||||||||
Accounts payable and accrued liabilities | $ | 52,877 | $ | (10,746 | ) | $ | 42,131 | |||||
Deferred rent | $ | 13,192 | $ | 10,746 | $ | 23,938 |
|
($000) | 2014 | 2013 | 2012 | |||||||||
Advertising expense | $ | 7,497 | $ | 6,939 | $ | 6,306 |
($000) | 2014 | 2013 | 2012 | |||||||||
Capitalized software development costs | $ | 18,804 | $ | 8,142 | $ | 8,527 |
|
External revenue by product group | ||||||||||||
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Investment information | $ | 597,046 | $ | 555,642 | $ | 526,147 | ||||||
Investment management | 163,025 | 142,624 | 132,141 | |||||||||
Consolidated revenue | $ | 760,071 | $ | 698,266 | $ | 658,288 |
External revenue by geographical area | ||||||||||||
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
United States | $ | 550,740 | $ | 500,730 | $ | 466,947 | ||||||
United Kingdom | 61,844 | 56,298 | 56,794 | |||||||||
Continental Europe | 62,677 | 57,580 | 49,844 | |||||||||
Australia | 34,977 | 35,289 | 38,229 | |||||||||
Canada | 30,790 | 31,845 | 30,664 | |||||||||
Asia | 15,830 | 13,860 | 13,765 | |||||||||
Other | 3,213 | 2,664 | 2,045 | |||||||||
Total International | 209,331 | 197,536 | 191,341 | |||||||||
Consolidated revenue | $ | 760,071 | $ | 698,266 | $ | 658,288 |
Long-lived assets by geographical area | ||||||||
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
United States | $ | 98,135 | $ | 84,321 | ||||
United Kingdom | 8,014 | 6,873 | ||||||
Continental Europe | 2,102 | 1,873 | ||||||
Australia | 794 | 1,051 | ||||||
Canada | 938 | 1,275 | ||||||
Asia | 7,491 | 9,479 | ||||||
Other | 87 | 114 | ||||||
Total International | 19,426 | 20,665 | ||||||
Consolidated property, equipment, and capitalized software, net | $ | 117,561 | $ | 104,986 |
|
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Available-for-sale | $ | 13,187 | $ | 91,461 | ||||
Held-to-maturity | 17,930 | 31,214 | ||||||
Trading securities | 8,305 | 7,732 | ||||||
Total | $ | 39,422 | $ | 130,407 |
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||||||||||||||||||
($000) | Cost | Unrealized Gain | Unrealized Loss | Fair Value | Cost | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||||||
Government obligations | $ | — | $ | — | $ | — | $ | — | $ | 19,693 | $ | 8 | $ | (3 | ) | $ | 19,698 | |||||||||||||||
Corporate bonds | — | — | — | — | 49,913 | 22 | (124 | ) | 49,811 | |||||||||||||||||||||||
Foreign obligations | — | — | — | — | 505 | — | (2 | ) | 503 | |||||||||||||||||||||||
Commercial paper | — | — | — | — | 9,482 | 7 | — | 9,489 | ||||||||||||||||||||||||
Equity securities and exchange-traded funds | 11,428 | 796 | (289 | ) | 11,935 | 8,872 | 1,011 | (141 | ) | 9,742 | ||||||||||||||||||||||
Mutual funds | 1,220 | 132 | (100 | ) | 1,252 | 2,095 | 221 | (98 | ) | 2,218 | ||||||||||||||||||||||
Total | $ | 12,648 | $ | 928 | $ | (389 | ) | $ | 13,187 | $ | 90,560 | $ | 1,269 | $ | (368 | ) | $ | 91,461 | ||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 17,930 | $ | — | $ | — | $ | 17,930 | $ | 31,214 | $ | — | $ | — | $ | 31,214 |
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||
($000) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | 45,486 | $ | 45,402 | ||||||||
Due in one to two years | — | — | 34,107 | 34,099 | ||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 12,648 | 13,187 | 10,967 | 11,960 | ||||||||||||
Total | $ | 12,648 | $ | 13,187 | $ | 90,560 | $ | 91,461 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 17,929 | $ | 17,929 | $ | 31,210 | $ | 31,210 | ||||||||
Due in one to three years | 1 | 1 | 4 | 4 | ||||||||||||
Total | $ | 17,930 | $ | 17,930 | $ | 31,214 | $ | 31,214 |
($000) | 2014 | 2013 | 2012 | |||||||||
Realized gains | $ | 1,484 | $ | 5,550 | $ | 1,671 | ||||||
Realized losses | (466 | ) | (1,343 | ) | (1,133 | ) | ||||||
Realized gains, net | $ | 1,018 | $ | 4,207 | $ | 538 |
($000) | 2014 | 2013 | 2012 | |||||||||
Unrealized gains (losses), net | $ | (188 | ) | $ | 827 | $ | 269 |
Fair Value | Fair Value Measurements as of December 31, 2014 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | December 31, 2014 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | — | $ | — | $ | — | $ | — | ||||||||
Corporate bonds | — | — | — | — | ||||||||||||
Foreign obligations | — | — | — | — | ||||||||||||
Commercial paper | — | — | — | — | ||||||||||||
Equity securities and exchange-traded funds | 11,935 | 11,935 | — | — | ||||||||||||
Mutual funds | 1,252 | 1,252 | — | — | ||||||||||||
Trading securities | 8,305 | 8,305 | — | — | ||||||||||||
Cash equivalents | 512 | 512 | — | — | ||||||||||||
Total | $ | 22,004 | $ | 22,004 | $ | — | $ | — |
Fair Value | Fair Value Measurements as of December 31, 2013 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | December 31, 2013 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 19,698 | $ | — | $ | 19,698 | $ | — | ||||||||
Corporate bonds | 49,811 | — | 49,811 | — | ||||||||||||
Foreign obligations | 503 | — | 503 | — | ||||||||||||
Commercial paper | 9,489 | — | 9,489 | — | ||||||||||||
Equity securities and exchange-traded funds | 9,742 | 9,742 | — | — | ||||||||||||
Mutual funds | 2,218 | 2,218 | — | — | ||||||||||||
Trading securities | 7,732 | 7,732 | — | — | ||||||||||||
Cash equivalents | 925 | 925 | — | — | ||||||||||||
Total | $ | 100,118 | $ | 20,617 | $ | 79,501 | $ | — |
|
($000) | ||||
Cash and cash equivalents | $ | 3,739 | ||
Accounts receivable and other current assets | 150 | |||
Other current and non-current assets | 318 | |||
Deferred tax asset | 8,646 | |||
Intangible assets | 9,460 | |||
Goodwill | 39,166 | |||
Deferred revenue | (2,897 | ) | ||
Deferred tax liability | (3,595 | ) | ||
Other current and non-current liabilities | (981 | ) | ||
Total fair value of HelloWallet | $ | 54,006 |
($000) | ||||
Cash and cash equivalents | $ | 287 | ||
Accounts receivable and other current assets | 152 | |||
Deferred tax asset | 3,987 | |||
Other current and non-current assets | 257 | |||
Intangible assets | 8,681 | |||
Goodwill | 18,476 | |||
Deferred revenue | (79 | ) | ||
Deferred tax liability | (3,299 | ) | ||
Other current and non-current liabilities | (513 | ) | ||
Total purchase price | $ | 27,949 |
($000) | ||||
Cash and cash equivalents | $ | 3,472 | ||
Accounts receivable and other current assets | 519 | |||
Other non-current assets | 244 | |||
Intangible assets | 9,700 | |||
Goodwill | 8,911 | |||
Deferred revenue | (1,191 | ) | ||
Deferred tax liability | (2,272 | ) | ||
Other current and non-current liabilities | (870 | ) | ||
Total fair value of Morningstar Sweden | $ | 18,513 |
($000) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 9,700 | 14 | |||
Total intangible assets | $ | 9,700 | 14 |
($000) | ||||
Balance as of January 1, 2013 | $ | 320,845 | ||
Acquisition of remaining ownership in Morningstar Sweden | 8,911 | |||
Other, primarily foreign currency translation | (3,306 | ) | ||
Balance as of December 31, 2013 | $ | 326,450 | ||
Acquisition of HelloWallet and ByAllAccounts | 57,642 | |||
Foreign currency translation | (14,038 | ) | ||
Balance as of December 31, 2014 | $ | 370,054 |
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||||||||||||||
($000) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | ||||||||||||||||||||
Intellectual property | $ | 29,026 | $ | (25,033 | ) | $ | 3,993 | 9 | $ | 29,477 | $ | (23,128 | ) | $ | 6,349 | 9 | ||||||||||||
Customer-related assets | 141,497 | (83,582 | ) | 57,915 | 12 | 141,833 | (74,311 | ) | 67,522 | 12 | ||||||||||||||||||
Supplier relationships | 240 | (120 | ) | 120 | 20 | 240 | (108 | ) | 132 | 20 | ||||||||||||||||||
Technology-based assets | 88,816 | (57,395 | ) | 31,421 | 8 | 80,489 | (50,673 | ) | 29,816 | 9 | ||||||||||||||||||
Non-competition agreement | 4,339 | (1,883 | ) | 2,456 | 5 | 1,661 | (1,571 | ) | 90 | 4 | ||||||||||||||||||
Total intangible assets | $ | 263,918 | $ | (168,013 | ) | $ | 95,905 | 10 | $ | 253,700 | $ | (149,791 | ) | $ | 103,909 | 10 |
($000) | 2014 | 2013 | 2012 | |||||||||
Amortization expense | $ | 22,264 | $ | 21,454 | $ | 23,944 |
($000) | ||||
2015 | $ | 21,920 | ||
2016 | 17,394 | |||
2017 | 12,941 | |||
2018 | 10,790 | |||
2019 | 8,046 | |||
Thereafter | 24,814 |
($000) | Weighted Average Useful Life (years) | |||||
Customer-related assets | $ | 5,506 | 24 | |||
Technology-based assets | 3,020 | 4.5 | ||||
Intellectual property (trademarks and trade names) | 47 | 1 | ||||
Non-competition agreement | 108 | 3 | ||||
Total intangible assets | $ | 8,681 | 19 |
($000) | Weighted Average Useful Life (years) | |||||
Technology based assets | 6,670 | 5 | ||||
Intellectual property (trademarks and trade names) | 169 | 3 | ||||
Non-competition agreement | 2,621 | 5 | ||||
Total intangible assets | $ | 9,460 | 5 |
|
($000) | 2014 | 2013 | 2012 | |||||||||
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) | 2014 | 2013 | ||||||
Investment in MJKK | $ | 23,014 | $ | 21,782 | ||||
Other equity method investments | 3,475 | 6,166 | ||||||
Investments accounted for using the cost method | 2,309 | 10,766 | ||||||
Total investments in unconsolidated entities | $ | 28,798 | $ | 38,714 |
As of December 31 | ||||||||
2014 | 2013 | |||||||
Morningstar’s approximate ownership of MJKK | 34 | % | 34 | % | ||||
Approximate market value of Morningstar’s ownership in MJKK: | ||||||||
Japanese yen (¥000) | ¥ | 7,347,413 | ¥ | 9,824,068 | ||||
Equivalent U.S. dollars ($000) | $ | 61,277 | $ | 94,999 |
|
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Computer equipment | $ | 53,420 | $ | 47,830 | ||||
Capitalized software | 87,764 | 50,360 | ||||||
Furniture and fixtures | 23,172 | 23,259 | ||||||
Leasehold improvements | 54,320 | 52,512 | ||||||
Telephone equipment | 1,948 | 2,032 | ||||||
Construction in progress | 29,870 | 35,159 | ||||||
Property, equipment, and capitalized software, at cost | 250,494 | 211,152 | ||||||
Less accumulated depreciation | (132,933 | ) | (106,166 | ) | ||||
Property, equipment, and capitalized software, net | $ | 117,561 | $ | 104,986 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Capitalized software development costs not yet placed into service | $ | 18,070 | $ | 11,345 |
($000) | 2014 | 2013 | 2012 | |||||||||
Depreciation expense | $ | 32,622 | $ | 24,239 | $ | 19,152 |
|
Minimum Future Rental Commitments | ($000) | |||
2015 | $ | 19,395 | ||
2016 | 20,299 | |||
2017 | 19,270 | |||
2018 | 16,916 | |||
2019 | 12,632 | |||
Thereafter | 48,203 | |||
Total | $ | 136,715 |
($000) | 2014 | 2013 | 2012 | |||||||||
Rent expense | $ | 24,460 | $ | 22,169 | $ | 20,736 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Deferred rent | $ | 29,124 | $ | 26,157 |
|
As of December 31 | |||
(000) | 2014 | ||
Shares available for future grants | 4,233 |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Restricted stock units | $ | 16,307 | $ | 14,163 | $ | 13,451 | ||||||
Restricted stock | 388 | 388 | 5,013 | |||||||||
Performance share awards | 505 | — | — | |||||||||
Stock options | 424 | 492 | 441 | |||||||||
Total stock-based compensation expense | $ | 17,624 | $ | 15,043 | $ | 18,905 | ||||||
Income tax benefit related to the stock-based compensation expense | $ | 5,055 | $ | 4,027 | $ | 3,686 |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Cost of revenue | $ | 7,774 | $ | 6,870 | $ | 6,416 | ||||||
Sales and marketing | 2,170 | 1,975 | 1,937 | |||||||||
General and administrative | 7,680 | 6,198 | 10,552 | |||||||||
Total stock-based compensation expense | $ | 17,624 | $ | 15,043 | $ | 18,905 |
Unrecognized stock-based compensation expense ($000) | Expected amortization period (months) | |||||
Restricted stock units | $ | 33,064 | 32 | |||
Restricted stock | 129 | 4 | ||||
Performance share awards | 453 | 24 | ||||
Stock options | 162 | 6 | ||||
Total unrecognized stock-based compensation expense | $ | 33,808 | 32 |
Restricted Stock Units (RSUs) | Unvested | Vested but Deferred | Total | Weighted Average Grant Date Value per RSU | |||||||||
RSUs Outstanding - January 1, 2012 | 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 | |||||||||
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 |
As of December 31, 2014 | ||||
Target performance share awards granted | 23,685 | |||
Fair value per award (1) | $ | 80.91 | ||
Number of shares that would be issued based on current performance levels | 11,843 | |||
Unamortized expense, based on current performance levels | $ | 453,000 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % |
2014 | 2013 | 2012 | |||||||||||||||||||
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 | 398,859 | $ | 19.72 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | (150 | ) | 22.24 | (250 | ) | 21.48 | (650 | ) | 14.70 | ||||||||||||
Exercised | (179,409 | ) | 22.08 | (102,886 | ) | 21.09 | (115,514 | ) | 20.19 | ||||||||||||
Options outstanding—end of year | — | — | 179,559 | 21.47 | 282,695 | 20.55 | |||||||||||||||
Options exercisable—end of year | — | $ | — | 179,559 | $ | 21.47 | 282,695 | $ | 20.55 |
2014 | 2013 | 2012 | |||||||||||||||||||
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 | 253,972 | $ | 36.48 | 391,784 | $ | 28.98 | 818,552 | $ | 22.76 | ||||||||||||
Granted | — | — | — | — | — | — | |||||||||||||||
Canceled | (526 | ) | 38.61 | (1,352 | ) | 16.19 | (22,330 | ) | 39.75 | ||||||||||||
Exercised | (83,636 | ) | 30.82 | (136,460 | ) | 16.84 | (404,438 | ) | 16.60 | ||||||||||||
Options outstanding—end of year | 169,810 | 40.20 | 253,972 | 36.48 | 391,784 | 28.98 | |||||||||||||||
Options exercisable—end of year | 154,864 | $ | 38.53 | 219,449 | $ | 33.18 | 337,684 | $ | 24.42 |
($000) | 2014 | 2013 | 2012 | |||||||||
Intrinsic value of options exercised | $ | 12,021 | $ | 12,801 | $ | 22,526 |
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) | ||||||||||||||||||
$27.54 | 96,354 | 0.34 | $ | 27.54 | $ | 3,582 | 96,354 | 0.34 | $ | 27.54 | $ | 3,582 | ||||||||||||||
$40.49 - $51.03 | 5,781 | 0.91 | 49.10 | 90 | 5,781 | 0.91 | 49.10 | 90 | ||||||||||||||||||
$57.28 - $59.35 | 67,675 | 6.51 | 57.47 | 490 | 52,729 | 6.51 | 57.46 | 358 | ||||||||||||||||||
$27.54 - $59.35 | 169,810 | 2.82 | 40.20 | $ | 4,162 | 154,864 | 2.46 | 38.53 | $ | 4,030 | ||||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||
$27.54 - $59.35 | 169,810 | 2.82 | $ | 40.20 | $ | 4,162 |
($000) | 2014 | 2013 | 2012 | |||||||||
Excess tax benefits related to stock-based compensation | $ | 4,449 | $ | 5,898 | $ | 7,210 |
|
($000) | 2014 | 2013 | 2012 | |||||||||
401(k) matching contributions | $ | 7,451 | $ | 6,879 | $ | 6,642 |
|
($000) | 2014 | 2013 | 2012 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 113,898 | $ | 178,010 | $ | 153,625 | ||||||
Equity in net income of unconsolidated entities | 39 | 1,428 | 2,027 | |||||||||
Net loss attributable to the noncontrolling interest | 42 | 122 | 117 | |||||||||
Total | $ | 113,979 | $ | 179,560 | $ | 155,769 | ||||||
Income tax expense | $ | 35,678 | $ | 56,031 | $ | 52,878 | ||||||
Effective tax rate | 31.3 | % | 31.2 | % | 33.9 | % |
2014 | 2013 | 2012 | |||||||||||||||||||
($000, except percentages) | Amount | % | Amount | % | Amount | % | |||||||||||||||
Income tax expense at U.S. federal rate | $ | 39,893 | 35.0 | % | $ | 62,845 | 35.0 | % | $ | 54,519 | 35.0 | % | |||||||||
State income taxes, net of federal income tax benefit | 2,129 | 1.9 | 3,029 | 1.7 | 1,510 | 1.0 | |||||||||||||||
Equity in net income of unconsolidated subsidiaries | (1,397 | ) | (1.2 | ) | — | — | — | — | |||||||||||||
Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses | (600 | ) | (0.5 | ) | (1,842 | ) | (1.0 | ) | (630 | ) | (0.4 | ) | |||||||||
Difference between U.S. federal statutory and foreign tax rates | (3,961 | ) | (3.5 | ) | (2,513 | ) | (1.4 | ) | (2,777 | ) | (1.8 | ) | |||||||||
Change in unrecognized tax benefits | 1,481 | 1.3 | (211 | ) | (0.1 | ) | 967 | 0.6 | |||||||||||||
Credits and incentives | (2,924 | ) | (2.6 | ) | (4,374 | ) | (2.5 | ) | (1,494 | ) | (1.0 | ) | |||||||||
Recognition of deferred tax assets | (140 | ) | (0.1 | ) | (1,448 | ) | (0.8 | ) | — | — | |||||||||||
Other - net | 1,197 | 1.0 | 545 | 0.3 | 783 | 0.5 | |||||||||||||||
Total income tax expense | $ | 35,678 | 31.3 | % | $ | 56,031 | 31.2 | % | $ | 52,878 | 33.9 | % |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
Current tax expense: | ||||||||||||
U.S. | ||||||||||||
Federal | $ | 20,726 | $ | 42,808 | $ | 38,821 | ||||||
State | 1,996 | 3,882 | 1,997 | |||||||||
Non-U.S. | 9,638 | 10,456 | 5,719 | |||||||||
Current tax expense | 32,360 | 57,146 | 46,537 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
U.S. | ||||||||||||
Federal | 3,668 | 2,630 | 6,287 | |||||||||
State | 1,326 | 814 | 334 | |||||||||
Non-U.S. | (1,676 | ) | (4,559 | ) | (280 | ) | ||||||
Deferred tax expense (benefit), net | 3,318 | (1,115 | ) | 6,341 | ||||||||
Income tax expense | $ | 35,678 | $ | 56,031 | $ | 52,878 |
Year ended December 31 | ||||||||||||
($000) | 2014 | 2013 | 2012 | |||||||||
U.S. | $ | 80,394 | $ | 144,065 | $ | 128,920 | ||||||
Non-U.S. | 33,504 | 33,945 | 24,705 | |||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 113,898 | $ | 178,010 | $ | 153,625 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Deferred tax assets: | ||||||||
Stock-based compensation expense | $ | 3,262 | $ | 3,479 | ||||
Accrued liabilities | 13,632 | 9,805 | ||||||
Net operating loss carryforwards - U.S. federal and state | 10,505 | 851 | ||||||
Net operating loss carryforwards - Non-U.S. | 7,725 | 9,229 | ||||||
Deferred royalty revenue | 354 | 366 | ||||||
Allowance for doubtful accounts | 929 | 758 | ||||||
Deferred rent | 10,019 | 8,673 | ||||||
Total deferred tax assets | 46,426 | 33,161 | ||||||
Deferred tax liabilities: | ||||||||
Acquired intangible assets | (16,419 | ) | (12,967 | ) | ||||
Property, equipment, and capitalized software | (23,157 | ) | (15,525 | ) | ||||
Unrealized exchange gains, net | (174 | ) | (395 | ) | ||||
Prepaid expenses | (3,677 | ) | (4,299 | ) | ||||
Investments in unconsolidated entities | (12,836 | ) | (12,009 | ) | ||||
Other | (435 | ) | (373 | ) | ||||
Total deferred tax liabilities | (56,698 | ) | (45,568 | ) | ||||
Net deferred tax liability before valuation allowance | (10,272 | ) | (12,407 | ) | ||||
Valuation allowance | (6,706 | ) | (7,456 | ) | ||||
Net deferred tax liability | $ | (16,978 | ) | $ | (19,863 | ) |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Deferred tax asset, net - current | $ | 9,000 | $ | 3,892 | ||||
Deferred tax liability, net - non-current | (25,978 | ) | (23,755 | ) | ||||
Net deferred tax liability | $ | (16,978 | ) | $ | (19,863 | ) |
($000) | 2014 | 2013 | ||||||
Gross unrecognized tax benefits - beginning of the year | $ | 12,958 | $ | 12,699 | ||||
Increases as a result of tax positions taken during a prior-year period | 866 | 791 | ||||||
Decreases as a result of tax positions taken during a prior-year period | (54 | ) | (146 | ) | ||||
Increases as a result of tax positions taken during the current period | 2,007 | 2,887 | ||||||
Decreases relating to settlements with tax authorities | (2,400 | ) | (2,779 | ) | ||||
Reductions as a result of lapse of the applicable statute of limitations | (1,455 | ) | (494 | ) | ||||
Gross unrecognized tax benefits - end of the year | $ | 11,922 | $ | 12,958 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Liabilities for interest and penalties | $ | 1,488 | $ | 1,865 |
As of December 31 | ||||||||||
($000) | 2014 | 2013 | ||||||||
Expiration Date | Expiration Date | |||||||||
U.S. federal NOLs subject to expiration dates | $ | 30,015 | 2023-2034 | $ | 2,136 | 12/31/2023 |
As of December 31 | ||||||||
($000) | 2014 | 2013 | ||||||
Non-U.S. NOLs subject to expiration dates from 2018 through 2034 | $ | 5,240 | $ | 5,314 | ||||
Non-U.S. NOLs with no expiration date | 32,628 | 40,054 | ||||||
Total | $ | 37,868 | $ | 45,368 | ||||
Non-U.S. NOLs not subject to valuation allowances | $ | 5,127 | $ | 8,759 |
|
2013 | 2014 | |||||||||||||||||||||||||||||||
(in thousands except per share amounts) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||||||||||||||||||||||||
Revenue | $ | 168,856 | $ | 175,428 | $ | 173,482 | $ | 180,500 | $ | 181,165 | $ | 189,385 | $ | 193,106 | $ | 196,415 | ||||||||||||||||
Total operating expense | 128,296 | 131,844 | 128,869 | 138,603 | 142,633 | 214,165 | 147,845 | 149,834 | ||||||||||||||||||||||||
Operating income (loss) | 40,560 | 43,584 | 44,613 | 41,897 | 38,532 | (24,780 | ) | 45,261 | 46,581 | |||||||||||||||||||||||
Non-operating income (expense), net | 945 | 3,111 | 771 | 2,529 | 865 | 5,898 | (298 | ) | 1,839 | |||||||||||||||||||||||
Income (loss) before income taxes and equity in net income of unconsolidated entities | 41,505 | 46,695 | 45,384 | 44,426 | 39,397 | (18,882 | ) | 44,963 | 48,420 | |||||||||||||||||||||||
Equity in net income (loss) of unconsolidated entities | 497 | 360 | 315 | 256 | 599 | 497 | 337 | (1,394 | ) | |||||||||||||||||||||||
Income tax expense (benefit) | 12,427 | 15,955 | 14,265 | 13,384 | 13,650 | (8,611 | ) | 15,149 | 15,490 | |||||||||||||||||||||||
Consolidated net income (loss) | 29,575 | 31,100 | 31,434 | 31,298 | 26,346 | (9,774 | ) | 30,151 | 31,536 | |||||||||||||||||||||||
Net (income) loss attributable to the noncontrolling interests | 43 | 21 | 29 | 29 | 30 | 5 | 29 | (22 | ) | |||||||||||||||||||||||
Net income (loss) attributable to Morningstar, Inc. | $ | 29,618 | $ | 31,121 | $ | 31,463 | $ | 31,327 | $ | 26,376 | $ | (9,769 | ) | $ | 30,180 | $ | 31,514 | |||||||||||||||
Net income (loss) per share attributable to Morningstar, Inc. | ||||||||||||||||||||||||||||||||
Basic | $ | 0.64 | $ | 0.67 | $ | 0.68 | $ | 0.68 | $ | 0.59 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | |||||||||||||||
Diluted | $ | 0.63 | $ | 0.66 | $ | 0.68 | $ | 0.68 | $ | 0.58 | $ | (0.22 | ) | $ | 0.67 | $ | 0.71 | |||||||||||||||
Dividends per common share: | ||||||||||||||||||||||||||||||||
Dividends declared per common share | $ | 0.125 | $ | 0.125 | $ | — | $ | 0.295 | $ | 0.170 | $ | 0.170 | $ | 0.170 | $ | 0.190 | ||||||||||||||||
Dividends paid per common share | $ | — | $ | 0.125 | $ | 0.125 | $ | 0.125 | $ | 0.170 | $ | 0.170 | $ | 0.170 | $ | 0.170 | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||
Basic | 46,406 | 46,400 | 46,080 | 45,756 | 44,777 | 44,777 | 44,734 | 44,414 | ||||||||||||||||||||||||
Diluted | 46,814 | 46,853 | 46,519 | 46,211 | 45,093 | 44,777 | 44,889 | 44,548 |
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