MORNINGSTAR, INC., 10-K filed on 2/28/2014
Annual Report
Document and Entity Information Document (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Feb. 21, 2014
Jun. 30, 2013
Document and Entity Information Abstract
 
 
 
Entity Registrant Name
MORNINGSTAR, INC. 
 
 
Entity Central Index Key
0001289419 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2013 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
44,700,741 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 1.6 
Condensed Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Revenue
$ 698,266 
$ 658,288 
$ 631,400 
Operating expense (1):
 
 
 
Cost of revenue
271,437 1
246,783 1
235,289 1
Sales and marketing
103,614 1
108,884 1
106,699 1
General and administrative
106,868 1
108,857 1
108,084 1
Depreciation and amortization
45,693 
43,096 
42,913 
Total operating expense
527,612 1
507,620 1
492,985 1
Operating income
170,654 
150,668 
138,415 
Non-operating income (expense):
 
 
 
Interest income, net
2,712 
5,153 
2,361 
Gain (loss) on sale of investments reclassified from other comprehensive income
4,207 
538 
260 
Equity Method Investments Holding Gain
3,635 
0 
0 
Other income (expense), net
(3,198)
(2,734)
(912)
Non-operating income (expense), net
7,356 
2,957 
1,709 
Income before income taxes and equity in net income of unconsolidated entities
178,010 
153,625 
140,124 
Income tax expense
56,031 
52,878 
43,658 
Equity in net income of unconsolidated entities
1,428 
2,027 
1,848 
Consolidated Net Income from Continuing Operations
123,407 
102,774 
98,314 
Gain on Sale of Discontinued Operation, Net of Tax
0 
5,188 
0 
Consolidated net income
123,407 
107,962 
98,314 
Net (income) loss attributable to the noncontrolling interest
122 
117 
43 
Net income attributable to Morningstar, Inc.
123,529 
108,079 
98,357 
Net Income from Continuing Operations, net of tax
123,529 
102,891 
98,357 
Net Income from Discontinued Operations, Net of Tax
$ 0 
$ 5,188 
$ 0 
Net income per share attributable to Morningstar, Inc.:
 
 
 
Basic (in dollars per share)
$ 2.68 
$ 2.23 
$ 1.96 
Diluted (in dollars per share)
$ 2.66 
$ 2.20 
$ 1.92 
Income (Loss) from Discontinued Operations, Net of Tax, Per Diluted Share
$ 0.00 
$ 0.10 
$ 0.00 
Income (Loss) from Continuing Operations, Per Diluted Share
$ 2.66 
$ 2.10 
$ 1.92 
Income (Loss) from Discontinued Operations, Net of Tax, Per Basic Share
$ 0.00 
$ 0.11 
$ 0.00 
Income (Loss) from Continuing Operations, Per Basic Share
$ 2.68 
$ 2.12 
$ 1.96 
Dividends per common share:
 
 
 
Dividends declared per common share
$ 0.55 
$ 0.43 
$ 0.25 
Dividends paid per common share
$ 0.38 
$ 0.53 
$ 0.20 
Weighted average shares outstanding:
 
 
 
Basic (in shares)
46,158 
48,497 
50,032 
Diluted (in shares)
46,491 
49,148 
50,988 
Consolidated Statements of Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Allocated Share-based Compensation Expense
$ 15,043 
$ 18,905 
$ 15,303 
Cost of Revenue [Member]
 
 
 
Allocated Share-based Compensation Expense
6,870 
6,416 
6,236 
Selling and Marketing Expense [Member]
 
 
 
Allocated Share-based Compensation Expense
1,975 
1,937 
1,871 
General and Administrative Expense [Member]
 
 
 
Allocated Share-based Compensation Expense
$ 6,198 
$ 10,552 
$ 7,196 
Consolidated Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Consolidated net income
$ 123,407 
$ 107,962 
$ 98,314 
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustment
(4,539)
6,838 
(2,345)
Unrealized gains (losses) on securities:
 
 
 
Unrealized holding gains (losses) arising during period
2,408 
1,455 
(773)
Reclasification of (gains) losses included in net income
(2,631)
(344)
(166)
Other comprehensive income (loss)
(4,762)
7,949 
(3,284)
Comprehensive income
118,645 
115,911 
95,030 
Comprehensive (income) loss attributable to noncontrolling interest
345 
268 
(179)
Comprehensive income attributable to Morningstar, Inc.
$ 118,990 
$ 116,179 
$ 94,851 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 168,160 
$ 163,889 
Investments
130,407 
157,529 
Accounts receivable, less allowance of $1,089 and 569, respectively
114,131 
114,361 
Deferred tax asset, net
3,892 
3,741 
Income tax receivable, net
3,942 
14,267 
Other
26,361 
20,823 
Total current assets
446,893 
474,610 
Property, equipment, and capitalized software, net
104,986 
84,022 
Investments in unconsolidated entities
38,714 
35,305 
Goodwill
326,450 
320,845 
Intangible assets, net
103,909 
116,732 
Other assets
9,716 
10,438 
Total assets
1,030,668 
1,041,952 
Current liabilities:
 
 
Accounts payable and accrued liabilities
52,877 
43,777 
Accrued compensation
71,403 
67,317 
Deferred revenue
149,225 
146,015 
Other
6,786 
256 
Total current liabilities
280,291 
257,365 
Accrued compensation
8,193 
8,281 
Deferred tax liability, net
23,755 
21,583 
Deferred Rent
13,192 
15,368 
Other long-term liabilities
13,947 
12,460 
Total liabilities
339,378 
315,057 
Morningstar, Inc. shareholders' equity:
 
 
Common stock, no par value, 200,000,000 shares authorized, of which 44,967,423 and 46,541,571 shares were outstanding as of December 31, 2013 and December 31, 2012, respectively
5 
5 
Treasury stock at cost, 7,202,896 shares as of December 31, 2013 and 5,214,070 shares as of December 31, 2012
(449,054)
(301,839)
Additional paid-in capital
539,507 
521,285 
Retained earnings
594,626 
496,354 
Accumulated other comprehensive income (loss):
 
 
Currency translation adjustment
4,609 
8,925 
Unrealized gain (loss) on available-for-sale investments
564 
787 
Total accumulated other comprehensive income
5,173 
9,712 
Total Morningstar, Inc. shareholders' equity
690,257 
725,517 
Noncontrolling interest
1,033 
1,378 
Total equity
691,290 
726,895 
Total liabilities and equity
$ 1,030,668 
$ 1,041,952 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Allowance for Doubtful Accounts Receivable, Current
$ 1,089 
$ 569 
Common Stock, No Par Value
$ 0 
$ 0 
Common Stock, Shares Authorized
200,000,000 
200,000,000 
Common Stock, Shares, Outstanding
44,967,423 
46,541,571 
Treasury Stock, Shares
7,202,896 
5,214,070 
Condensed Consolidated Statement of Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Treasury Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Non Controlling Interests
Balance at Dec. 31, 2010
$ 781,425 
$ 5 
$ (6,641)
$ 458,426 
$ 323,408 
$ 5,118 
$ 1,109 
Balance (in shares) at Dec. 31, 2010
 
49,874,392 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income (loss)
98,314 
   
   
   
98,357 
   
(43)
Other Comprehensive Income (loss)
 
 
 
 
 
 
 
Unrealized gain on available-for-sale investments, net of income tax
(773)
   
   
   
   
(773)
0 
Reclassification of adjustments for gains included in net income, net of income tax
(166)
   
   
   
   
(166)
0 
Foreign currency translation adjustment, net
(2,345)
   
   
   
   
(2,567)
222 
Other comprehensive income (loss)
(3,284)
   
   
   
   
(3,506)
222 
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
8,702 
0 
612 
8,090 
   
   
   
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net (in shares)
 
931,667 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition [Abstract]
 
 
 
 
 
 
 
Stock-based compensation - restricted stock units
12,765 
   
   
12,765 
   
   
   
Stock-based compensation - restricted stock
2,196 
 
 
2,196 
 
 
 
Stock-based compensation - stock options
342 
   
   
342 
   
   
   
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
9,525 
   
   
9,525 
   
   
   
Noncontrolling Interest, Increase from Subsidiary Equity Issuance
262 
   
   
(96)
   
   
358 
Dividends declared - common shares outstanding
(12,550)
 
 
 
(12,550)
 
 
Dividends declared - restricted stock units
(9)
 
 
184 
(193)
 
 
Common share repurchased
(40,672)
 
(40,672)
 
 
 
 
Common share repurchased (in shares)
 
(722,119)
 
 
 
 
 
Balance at Dec. 31, 2011
857,016 
5 
(46,701)
491,432 
409,022 
1,612 
1,646 
Balance (in shares) at Dec. 31, 2011
 
50,083,940 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income (loss)
107,962 
   
   
   
108,079 
   
(117)
Other Comprehensive Income (loss)
 
 
 
 
 
 
 
Unrealized gain on available-for-sale investments, net of income tax
1,455 
   
   
   
   
1,455 
0 
Reclassification of adjustments for gains included in net income, net of income tax
(344)
   
   
   
   
(344)
0 
Foreign currency translation adjustment, net
6,838 
   
   
   
   
6,989 
(151)
Other comprehensive income (loss)
7,949 
   
   
   
   
8,100 
(151)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
4,809 
   
1,342 
3,467 
   
   
   
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net (in shares)
 
715,888 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition [Abstract]
 
 
 
 
 
 
 
Stock-based compensation - restricted stock units
13,451 
   
   
13,451 
   
   
   
Stock-based compensation - restricted stock
5,013 
   
   
5,013 
   
   
   
Stock-based compensation - stock options
441 
 
 
441 
 
 
 
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
7,210 
   
   
7,210 
   
   
   
Dividends declared - common shares outstanding
(20,420)
   
   
   
(20,420)
   
   
Dividends declared - restricted stock units
(56)
   
   
271 
(327)
   
   
Common share repurchased
(256,480)
   
(256,480)
   
   
   
   
Common share repurchased (in shares)
 
(4,258,257)
 
 
 
 
 
Balance at Dec. 31, 2012
726,895 
5 
(301,839)
521,285 
496,354 
9,712 
1,378 
Balance (in shares) at Dec. 31, 2012
46,541,571 
46,541,571 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
Net income (loss)
123,407 
   
   
   
123,529 
   
(122)
Other Comprehensive Income (loss)
 
 
 
 
 
 
 
Unrealized gain on available-for-sale investments, net of income tax
2,408 
   
   
   
   
2,408 
0 
Reclassification of adjustments for gains included in net income, net of income tax
(2,631)
   
   
   
   
(2,631)
0 
Foreign currency translation adjustment, net
(4,539)
   
   
   
   
(4,316)
(223)
Other comprehensive income (loss)
(4,762)
   
   
   
   
(4,539)
(223)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
(1,275)
   
1,633 
(2,908)
   
   
   
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net (in shares)
 
437,263 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition [Abstract]
 
 
 
 
 
 
 
Stock-based compensation - restricted stock units
14,163 
   
   
14,163 
   
   
   
Stock-based compensation - restricted stock
388 
   
   
388 
   
   
   
Stock-based compensation - stock options
492 
   
   
492 
   
   
   
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
5,898 
   
   
5,898 
   
   
   
Dividends declared - common shares outstanding
(24,977)
   
   
   
(24,977)
   
   
Dividends declared - restricted stock units
(91)
   
   
189 
(280)
   
   
Common share repurchased
(148,848)
   
(148,848)
   
   
   
   
Common share repurchased (in shares)
 
(2,011,411)
 
 
 
 
 
Balance at Dec. 31, 2013
$ 691,290 
$ 5 
$ (449,054)
$ 539,507 
$ 594,626 
$ 5,173 
$ 1,033 
Balance (in shares) at Dec. 31, 2013
44,967,423 
44,967,423 
 
 
 
 
 
Condensed Consolidated Statement of Equity (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Stockholders' Equity [Abstract]
 
 
 
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax
$ 1,469 
$ 614 
$ 447 
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Tax
$ 1,576 
$ 194 
$ 94 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Operating activities
 
 
 
Consolidated net income
$ 123,407 
$ 107,962 
$ 98,314 
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
45,693 
43,096 
42,913 
Deferred income taxes
(1,133)
6,316 
(4,436)
Stock-based compensation expense
15,043 
18,905 
15,303 
Provision for bad debt
825 
1,016 
1,237 
Equity in net income of unconsolidated entities
(1,428)
(2,027)
(1,848)
Excess tax benefits from stock-option exercises and vesting of restricted stock units
(5,898)
(7,210)
(9,525)
Gain on sale of discontinued operations, Net of Tax
0 
(5,188)
0 
Loss on sale of cost-method investment
0 
2,034 
0 
Holding gain upon acquisition of additional ownership of equity method investment
(3,635)
0 
0 
Other, net
(1,830)
142 
592 
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable
(1,593)
(17,124)
(3,858)
Other assets
(2,302)
223 
2,728 
Accounts payable and accrued liabilities
(1,244)
1,173 
(4,821)
Accrued compensation
3,153 
(8,861)
10,176 
Income taxes—current
16,794 
(1,205)
10,751 
Deferred revenue
3,658 
7,769 
9,578 
Deferred rent
(1,484)
407 
(1,030)
Other liabilities
(1,368)
(1,432)
(1,098)
Cash provided by operating activities
186,658 
145,996 
164,976 
Investing activities
 
 
 
Purchases of investments
(140,051)
(145,491)
(383,281)
Proceeds from maturities and sales of investments
171,243 
260,317 
297,956 
Capital expenditures
(33,583)
(30,039)
(23,322)
Acquisitions, net of cash acquired
(11,079)
0 
300 
Proceeds from sale of a business, net
957 
5,734 
0 
Purchases of cost and equity method investments
(2,751)
(10,304)
(2,450)
Other, net
403 
(25)
30 
Cash used for investing activities
(14,861)
80,192 
(110,767)
Financing activities
 
 
 
Proceeds from stock-option exercises, net
4,532 
9,101 
12,866 
Taxes Withheld For Restricted Stock Units
(5,807)
(4,292)
(4,164)
Excess tax benefits from stock-option exercises and vesting of restricted stock units
5,898 
7,210 
9,525 
Common shares repurchased
(153,514)
(251,813)
(40,672)
Dividends paid
(17,425)
(25,487)
(10,041)
Other, net
(56)
105 
(110)
Cash provided by (used for) financing activities
(166,372)
(265,176)
(32,596)
Effect of exchange rate changes on cash and cash equivalents
(1,154)
2,440 
(1,352)
Net increase (decrease) in cash and cash equivalents
4,271 
(36,548)
20,261 
Cash and cash equivalents - beginning of period
163,889 
200,437 
180,176 
Cash and cash equivalents - end of period
168,160 
163,889 
200,437 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for income taxes
40,364 
47,355 
38,054 
Supplemental information of non-cash investing and financing activities:
 
 
 
Unrealized gain (loss) on available-for-sale investments
(328)
1,723 
(1,480)
Equipment obtained under long-term financing arrangement
$ 4,860 
$ 4,551 
$ 0 
Description of Business
Description of Business
Description of Business
 
Morningstar, Inc. and its subsidiaries (Morningstar, we, our), is a provider of independent investment research to investors around the world. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. We have operations in 27 countries.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

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

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

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

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

As part of our investment management operations, we manage certain funds outside of the United States that are considered variable interest entities. For the majority of these variable interest entities, we do not have a variable interest in them. In cases where we do have a variable interest, we are not the primary beneficiary. Accordingly, we do not consolidate any of these variable interest entities.

Comprehensive Income. In accordance with ASU No. 2011-05, Presentation of Comprehensive Income, we present the total of comprehensive income, the components of net income, and the components of other comprehensive income (OCI) in two separate but consecutive statements, our Consolidated Statements of Income and separately, our Consolidated Statements of Comprehensive Income. In addition, effective January 1, 2013, we adopted FASB ASU No. 2013-2, Comprehensive Income (Topic 220). We show the effects of items reclassified out of each component of accumulated other comprehensive income to net income on the face of the financial statement where net income is presented.

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

Reclassifications. Certain amounts reported in previous years have been reclassified to conform to the 2013 presentation. We now include development expense in the cost of revenue category, which we previously referred to as cost of goods sold. We previously reported development expense as a separate operating expense category. We have reclassified development expense to include it in cost of revenue for all periods presented.

Separately, as a result of our recent reorganization (including new positions created, changes in focus for some existing roles, and the refinement of employee cost categorizations as we moved to a more centralized structure), approximately 180 net positions shifted from the general and administrative and sales and marketing categories to cost of revenue. For 2013 as compared with both 2012 and 2011, changes related to our more centralized organizational structure added approximately $14 million of compensation expense to cost of revenue, and reduced the compensation expense in our sales and marketing and general and administrative expense categories by approximately $8 million and $6 million, respectively. These changes did not affect our total operating expense or operating income for any of the periods presented.

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

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

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

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

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

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

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

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

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

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

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

We provide additional information about our cash equivalents and investments that are subject to valuation under FASB ASC 820 in Note 5 in these Notes to our Consolidated Financial Statements.

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

Concentration of Credit Risk. No single customer is large enough to pose a significant credit risk to our operations or financial condition. For the years ended December 31, 2013, 2012, and 2011, no single customer represented 5% or more of our consolidated revenue. If receivables from our customers become delinquent, we begin a collections process. We maintain an allowance for doubtful accounts based on our estimate of the probable losses of accounts receivable.

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

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

The table below summarizes our capitalized software development costs for the past three years:
($000)
 
2013

 
2012

 
2011

Capitalized software development costs
 
$
8,142

 
$
8,527

 
$
5,315



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

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

Goodwill. Changes in the carrying amount of our recorded goodwill are mainly the result of business acquisitions and divestitures. In accordance with FASB ASC 350, Intangibles—Goodwill and Other, we do not amortize goodwill; instead, goodwill is subject to an impairment test annually, or whenever indicators of impairment exist. An impairment would occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. We performed annual impairment reviews in the fourth quarter of 2013, 2012, and 2011. We did not record any significant impairment losses in 2013, 2012, and 2011.

Intangible Assets. We amortize intangible assets using the straight-line method over their estimated useful lives, which range from one to 25 years. We have no intangible assets with indefinite useful lives. In accordance with FASB ASC 360-10-35, Subsequent Measurement—Impairment or Disposal of Long Lived Assets, we review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the value of future undiscounted cash flows is less than the carrying amount of an asset group, we record an impairment loss based on the excess of the carrying amount over the fair value of the asset group. We recorded an impairment loss of approximately $800,000 in 2011. We did not record any impairment losses in 2013 or 2012. The impairment charge is included in our amortization expense on our Consolidated Statements of Income.

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

We recognize revenue when all of the following conditions are met:

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

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

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

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

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

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

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

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

Advertising Costs. Advertising costs include expenses incurred for various print and Internet ads, search engine fees, and direct mail campaigns. We expense advertising costs as incurred. The table below summarizes our advertising expense for the past three years:
($000)
 
2013

 
2012

 
2011

Advertising expense
 
$
6,939

 
$
6,306

 
$
8,210



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

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

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

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

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

Income per Share. We compute and present income per share in accordance with FASB ASC 260, Earnings Per Share. The difference between weighted average shares outstanding and diluted shares outstanding primarily reflects the dilutive effect associated with our stock-based compensation plans. We further compute income per share in accordance with FASB ASC 260-10-45-59A, Participating Securities and the Two Class Method. Under the two-class method, we allocate earnings between common stock and participating securities. The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. For purposes of calculating earnings per share, we reduce our reported net earnings by the amount allocated to participating securities to arrive at the earnings allocated to common stock shareholders.

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

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



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

(in thousands, except per share amounts)
 
2013

 
2012

 
2011

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Net income attributable to Morningstar, Inc.:
 
$
123,529

 
$
108,079

 
$
98,357

Less: Distributed earnings available to participating securities
 
(10
)
 
(41
)
 
(40
)
Less: Undistributed earnings available to participating securities
 
(36
)
 
(47
)
 
(259
)
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
123,483

 
$
107,991

 
$
98,058

 
 
 
 
 
 
 
Weighted average common shares outstanding
 
46,158

 
48,497

 
50,032

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.68

 
$
2.12

 
$
1.96

Discontinued operations
 
—

 
0.11

 
—

Total
 
$
2.68

 
$
2.23

 
$
1.96

 
 
 
 
 
 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
123,483

 
$
107,991

 
$
98,058

Add: Undistributed earnings allocated to participating securities
 
36

 
47

 
259

Less: Undistributed earnings reallocated to participating securities
 
(36
)
 
(46
)
 
(254
)
Numerator for diluted net income per share — undistributed and distributed earnings available to common shareholders
 
$
123,483

 
$
107,992

 
$
98,063

 
 


 


 
 
Weighted average common shares outstanding
 
46,158

 
48,497

 
50,032

Net effect of dilutive stock options and restricted stock units
 
333

 
651

 
956

Weighted average common shares outstanding for computing diluted income per share
 
46,491

 
49,148

 
50,988

 
 


 


 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.66

 
$
2.10

 
$
1.92

Discontinued operations
 
—

 
0.10

 
—

Total
 
$
2.66

 
$
2.20

 
$
1.92


The following table shows the number of weighted average stock options, restricted stock units, and restricted stock excluded from our calculation of diluted earnings per share from both continuing operations and net earnings because their inclusion would have been anti-dilutive:
(in thousands)
 
2013

 
2012

 
2011

Weighted average stock options
 
—

 
83

 
55

Weighted average restricted stock units
 
17

 
7

 
—

Weighted average restricted stock
 
—

 
—

 
—

Total
 
17

 
90

 
55


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

Segment Information

In the third quarter of 2013, we revised our segment structure to reflect our shift to a more centralized organizational structure. We now report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and evaluates our financial results. We have revised our historical financial results to reflect this change.

Because we have a single reportable segment, all required financial segment information can be found directly in the Consolidated Financial Statements.

The accounting policies for our reportable segment are the same as those described in “Note 2. Summary of Significant Accounting Policies”. We evaluate the performance of our reporting segment based on revenue and operating income.

Products and Services Information

We derive revenue from two product groups. The investment information product group includes all of our data, software, and research products and services. These products are typically sold through subscriptions or license agreements. The investment management product group includes all of our asset management operations, which earn the majority of their revenue from asset-based fees. The table below summarizes our revenue by product group:
 
External revenue by product group
 
 
 
 
 
 
 
 
 
 
 
 
 
($000)
 
2013

 
2012

 
2011

Investment information
 
555,642

 
526,147

 
498,265

Investment management
 
142,624

 
132,141

 
133,135

Consolidated revenue
 
$
698,266

 
$
658,288

 
$
631,400



Geographical Area Information

The tables below summarize our revenue and long-lived assets by geographical area:

External revenue by geographical area
 
 
 
 
 
 
 
 
Year ended December 31
($000)
 
2013

 
2012

 
2011

United States
 
$
500,730

 
$
466,947

 
$
446,470

 
 
 
 
 
 
 
United Kingdom
 
56,298

 
56,794

 
53,427

Continental Europe
 
57,580

 
49,844

 
49,507

Australia
 
35,289

 
38,229

 
39,761

Canada
 
31,845

 
30,664

 
27,808

Asia
 
13,860

 
13,765

 
13,188

Other
 
2,664

 
2,045

 
1,239

Total International
 
197,536

 
191,341

 
184,930

 
 
 
 
 
 
 
Consolidated revenue
 
$
698,266

 
$
658,288

 
$
631,400


Long-lived assets by geographical area
 
 
 
 
 
 
As of December 31
($000)
 
2013

 
2012

United States
 
$
84,321

 
$
60,371

 
 
 
 
 
United Kingdom
 
6,873

 
7,435

Continental Europe
 
1,873

 
2,356

Australia
 
1,051

 
1,402

Canada
 
1,275

 
1,773

Asia
 
9,479

 
10,529

Other
 
114

 
156

Total International
 
20,665

 
23,651

 
 
 
 
 
Consolidated property, equipment, and capitalized software, net
 
$
104,986

 
$
84,022

Investments and Fair Value Measurements
Investments and Fair Value Measurements
Investments and Fair Value Measurements
 
We account for our investments in accordance with FASB ASC 320, Investments—Debt and Equity Securities. We classify our investments in three categories: available-for-sale, held-to-maturity, and trading. We monitor the concentration, diversification, maturity, and liquidity of our investment portfolio, which is primarily invested in fixed-income securities, and classify our investment portfolio as shown below:
 
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Available-for-sale
 
$
91,461

 
$
125,786

Held-to-maturity
 
31,214

 
$
26,357

Trading securities
 
7,732

 
$
5,386

Total
 
$
130,407

 
$
157,529


 
The following table shows the cost, unrealized gains (losses), and fair values related to investments classified as available-for-sale and held-to-maturity:
 
 
 
As of December 31, 2013
 
As of December 31, 2012
($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

 
$
40,669

 
$
29

 
$
(608
)
 
$
40,090

Corporate bonds
 
49,913

 
22

 
(124
)
 
49,811

 
49,339

 
36

 
(292
)
 
49,083

Foreign obligations
 
505

 
—

 
(2
)
 
503

 
2,437

 
1

 
(19
)
 
2,419

Commercial paper
 
9,482

 
7

 
—

 
9,489

 
2,000

 
—

 
—

 
2,000

Equity securities and exchange-traded funds
 
8,872

 
1,011

 
(141
)
 
9,742

 
19,613

 
1,359

 
(323
)
 
20,649

Mutual funds
 
2,095

 
221

 
(98
)
 
2,218

 
10,499

 
1,092

 
(46
)
 
11,545

Total
 
$
90,560

 
$
1,269

 
$
(368
)
 
91,461

 
$
124,557

 
$
2,517

 
$
(1,288
)
 
$
125,786

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

Certificates of deposit
 
$
31,214

 
$
—

 
$
—

 
$
31,214

 
$
26,357

 
$
—

 
$
—

 
$
26,357


 
As of December 31, 2013 and December 31, 2012, investments with unrealized losses for greater than a 12-month period were not material to the Consolidated Balance Sheets and were not deemed to have other than temporary declines in value.

The table below shows the cost and fair value of investments classified as available-for-sale and held-to-maturity based on their contractual maturities as of December 31, 2013 and December 31, 2012. The expected maturities of certain fixed-income securities may differ from their contractual maturities because some of these holdings have call features that allow the issuers the right to prepay obligations without penalties.
 
 
 
As of December 31, 2013
 
As of December 31, 2012
($000)
 
Cost

 
Fair Value

 
Cost

 
Fair Value

Available-for-sale:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
45,486

 
$
45,402

 
$
87,599

 
$
86,784

Due in one to two years
 
34,107

 
34,099

 
6,846

 
6,808

Equity securities, exchange-traded funds, and mutual funds
 
10,967

 
11,960

 
30,112

 
32,194

Total
 
$
90,560

 
$
91,461

 
$
124,557

 
$
125,786

 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
31,210

 
$
31,210

 
$
26,352

 
$
26,352

Due in one to three years
 
4

 
4

 
5

 
5

Total
 
$
31,214

 
$
31,214

 
$
26,357

 
$
26,357


 
As of December 31, 2013 and December 31, 2012, held-to-maturity investments included a $1,500,000 certificate of deposit, held primarily as collateral against bank guarantees for our office leases, primarily in Australia.

The following table shows the realized gains and losses arising from sales of our investments classified as available-for-sale recorded in our Consolidated Statements of Income: 
($000)
 
2013

 
2012

 
2011

Realized gains
 
$
5,550

 
$
1,671

 
$
761

Realized losses
 
(1,343
)
 
(1,133
)
 
(501
)
Realized gains, net
 
$
4,207

 
$
538

 
$
260


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

The following table shows the net unrealized gains (losses) on trading securities as recorded in our Consolidated Statements of Income:
 
($000)
 
2013

 
2012

 
2011

Unrealized gains (losses), net
 
$
827

 
$
269

 
$
(387
)


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

 
$
—

 
 
 
Fair Value
 
Fair Value Measurements as of December 31, 2012
 
 
as of
 
Using Fair Value Hierarchy
($000)
 
December 31, 2012
 
Level 1

 
Level 2

 
Level 3

Available-for-sale investments
 
 

 
 

 
 

 
 

Government obligations
 
$
40,090

 
$
—

 
$
40,090

 
$
—

Corporate bonds
 
49,083

 
—

 
49,083

 
—

Foreign obligations
 
2,419

 
—

 
2,419

 
—

Commercial paper
 
2,000

 
—

 
2,000

 
—

Equity securities and exchange-traded funds
 
20,649

 
20,649

 
—

 
—

Mutual funds
 
11,545

 
11,545

 
—

 
—

Trading securities
 
5,386

 
5,386

 
—

 
—

Cash equivalents
 
398

 
398

 
—

 
—

Total
 
$
131,570

 
$
37,978

 
$
93,592

 
$
—


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

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

There were no transfers between levels one and two during the year ended December 31, 2013.

We measure the fair value of money market funds, equity securities, and ETFs based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from observable market data. We did not hold any securities categorized as Level 3 as of December 31, 2013 and December 31, 2012.
Acquisitions, Goodwill, and Other Intangible Assets
Acquisitions, Goodwill, and Other Intangible Assets
Acquisitions, Goodwill, and Other Intangible Assets
 
2013 Acquisitions

Increased Ownership Interest in Morningstar Sweden AB

In May 2013, we acquired an additional 76% interest in Morningstar Sweden AB (Morningstar Sweden), increasing our ownership to 100% from 24%. Morningstar’s main offerings in Sweden include Morningstar Direct, Morningstar Data, Integrated Web Tools, and Morningstar.se, a website for individual investors that provides fund and ETF data, portfolio tools, and market analysis. We began consolidating the financial results of this acquisition in our Consolidated Financial Statements on May 2, 2013.

Morningstar Sweden's total estimated fair value of $18,513,000 included $14,554,000 in cash paid to acquire the remaining 76% interest in Morningstar Sweden and $3,959,000 related to the 24% of Morningstar Sweden we previously held. We determined the fair value of the previously held 24% investment independent of the acquired controlling interest by applying a minority interest discount based on analysis of comparable transactions. Accordingly, we recorded a non-cash holding gain of $3,635,000, which is classified as "Holding gain upon acquisition of additional ownership of equity-method investments" in our Consolidated Statement of Income for the year ended December 31, 2013.

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

Cash and cash equivalents
 
$
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



The allocation included acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
9,700

 
14
Total intangible assets
 
$
9,700

 
14


We recognized a deferred tax liability of $2,272,000 mainly because the amortization expense related to certain intangible assets is not deductible for income tax purposes.

Goodwill of $8,911,000 represents the premium over the fair value of the net tangible and intangible assets acquired with this acquisition. We paid this premium for a number of reasons, including the opportunity to offer Morningstar's full suite of products and services to investors in Sweden and further leverage Morningstar's global reach, investment databases, and technology expertise.

2012 and 2011 Acquisitions
 
We did not complete any acquisitions in 2012 and 2011.
 
Goodwill
 
The following table shows the changes in our goodwill balances from January 1, 2012 to December 31, 2013:
 
 
 
($000)

Balance as of January 1, 2012
 
$
318,492

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

Balance as of December 31, 2012
 
$
320,845

Acquisition of remaining ownership in Morningstar Sweden
 
8,911

Other, primarily currency translation
 
(3,306
)
Balance as of December 31, 2013
 
$
326,450



We did not record any significant impairment losses in 2013, 2012, or 2011, as the estimated fair values of our reporting units exceeded their carrying values. We perform our annual impairment testing during the fourth quarter of each year.

Intangible Assets

The following table summarizes our intangible assets: 
 
 
As of December 31, 2013
 
As of December 31, 2012
($000)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
Intellectual property
 
$
29,477

 
$
(23,128
)
 
$
6,349

 
9
 
$
30,621

 
$
(21,527
)
 
$
9,094

 
9
Customer-related assets
 
141,833

 
(74,311
)
 
67,522

 
12
 
132,798

 
(63,005
)
 
69,793

 
12
Supplier relationships
 
240

 
(108
)
 
132

 
20
 
240

 
(96
)
 
144

 
20
Technology-based assets
 
80,489

 
(50,673
)
 
29,816

 
9
 
81,333

 
(43,809
)
 
37,524

 
9
Non-competition agreement
 
1,661

 
(1,571
)
 
90

 
4
 
1,765

 
(1,588
)
 
177

 
4
Total intangible assets
 
$
253,700

 
$
(149,791
)
 
$
103,909

 
10
 
$
246,757

 
$
(130,025
)
 
$
116,732

 
10

 
The following table summarizes our amortization expense related to intangible assets:
($000)
 
2013

 
2012

 
2011

Amortization expense
 
$
21,454

 
$
23,944

 
$
27,267


 
In 2011, we recorded an impairment loss of approximately $800,000 for an acquired intangible asset. We did not record any significant impairment losses in 2013 or 2012.

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

Based on acquisitions and divestitures completed through December 31, 2013, we expect intangible amortization expense for 2014 and subsequent years to be as follows:
 
 
($000)

2014
 
$
20,485

2015
 
19,659

2016
 
15,101

2017
 
10,565

2018
 
8,568


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

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

The following table summarizes the amounts included in our Consolidated Statements of Income for discontinued operations for the years ended December 31, 2013, 2012, and 2011:

($000)
 
2013

 
2012

 
2011

Gain on sales of businesses
 
$
—

 
$
6,193

 
$
—

Income tax expense
 
—

 
1,005

 
—

Earnings from discontinued operations, net of tax
 
$
—

 
$
5,188

 
$
—

Investments in Unconsolidated Entities
Investments in Unconsolidated Entities
Investments in Unconsolidated Entities
 
Our investments in unconsolidated entities consist primarily of the following:
 
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Investment in MJKK
 
$
21,782

 
$
20,540

Other equity method investments
 
6,166

 
6,288

Investments accounted for using the cost method
 
10,766

 
8,477

Total investments in unconsolidated entities
 
$
38,714

 
$
35,305


 
Morningstar Japan K.K. Morningstar Japan K.K. (MJKK) develops and markets products and services customized for the Japanese market. MJKK’s shares are traded on the Osaka Stock Exchange, “Hercules Market,” using the ticker 4765. We account for our investment in MJKK using the equity method. The following table summarizes our ownership percentage in MJKK and the market value of this investment based on MJKK’s publicly quoted share price: 
 
 
As of December 31
 
 
 
 
2013

 
2012

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

 
 

Japanese yen (¥000)
 
¥
9,824,068

 
¥
3,109,579

Equivalent U.S. dollars ($000)
 
$
94,999

 
$
36,227



Other Equity Method Investments. As of December 31, 2013 and 2012, other equity method investments include our investments in Inquiry Financial Europe AB (Inquiry Financial) and YCharts, Inc. (YCharts). Inquiry Financial is a provider of sell-side consensus estimate data. Our ownership interest in Inquiry Financial was approximately 34% as of December 31, 2013 and 2012. YCharts is a technology company that provides stock research and analysis. Our ownership interest in YCharts was approximately 22% as of December 31, 2013 and 2012.

As of December 31, 2012, other equity-method investments also included our investment in Morningstar Sweden. Our ownership interest and profit-and-loss sharing interest in Morningstar Sweden was 24% at that date. In May 2013, we acquired the remaining 76% interest in Morningstar Sweden, increasing our ownership to 100%. See Note 6 for additional information concerning our acquisition of Morningstar Sweden.

We did not record any impairment losses on our equity method investments in 2013, 2012, or 2011.
 
Cost Method Investments. As of December 31, 2013 and December 31, 2012, our cost method investments consist mainly of minority investments in HelloWallet LLC (HelloWallet) Pitchbook Data, Inc. (Pitchbook). HelloWallet is a provider of personalized financial guidance to employees of Fortune 1000 companies. Pitchbook offers detailed data and information about private equity transactions, investors, companies, limited partners, and service providers.

We did not record any impairment losses on our cost method investments in 2013, 2012, or 2011.
 
Property, Equipment, and Capitalized Software
Property, Equipment, and Capitalized Software
Property, Equipment, and Capitalized Software

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

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Computer equipment
 
$
47,830

 
$
42,312

Capitalized software
 
50,360

 
39,643

Furniture and fixtures
 
23,259

 
22,804

Leasehold improvements
 
52,512

 
51,333

Telephone equipment
 
2,032

 
1,951

Construction in progress
 
35,159

 
13,489

Property, equipment, and capitalized software, at cost
 
211,152

 
171,532

Less accumulated depreciation
 
(106,166
)
 
(87,510
)
Property, equipment, and capitalized software, net
 
$
104,986

 
$
84,022


The following table shows the amount of capitalized software development costs included in construction in progress:
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Capitalized software development costs not yet placed into service
 
$
11,345

 
$
6,478



The following table summarizes our depreciation expense:
($000)
 
2013

 
2012

 
2011

Depreciation expense
 
$
24,239

 
$
19,152

 
$
15,646

Operating Leases
Operating Leases
Operating Leases

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

2014
 
$
18,987

2015
 
17,656

2016
 
16,918

2017
 
16,001

2018
 
13,908

Thereafter
 
42,592

Total
 
$
126,062


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

($000)
 
2013

 
2012

 
2011

Rent expense
 
$
22,169

 
$
20,736

 
$
20,122



Deferred rent includes build-out and rent abatement allowances received, which are amortized over the remaining portion of the original term of the lease as a reduction in office lease expense. We include deferred rent, as appropriate, in “Accounts payable and accrued liabilities” and “Deferred rent, noncurrent” on our Consolidated Balance Sheets.
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Deferred rent
 
$
26,157

 
$
27,783



Liability for Vacant Office Space

We include our liability for vacant office space in "Accounts payable and accrued liabilities" and "Other long-term liabilities," as appropriate, on our Consolidated Balance Sheets. The following table shows the change in our liability for vacant office space from December 31, 2011 to December 31, 2013:

Liability for Vacant Office Space
 
($000)

Balance as of December 31, 2011
 
$
919

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

Reduction of liability for lease and other related payments
 
(14
)
Balance as of December 31, 2013
 
$
131



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

Stock-Based Compensation Plans
 
Our shareholders approved the Morningstar 2011 Stock Incentive Plan (the 2011 Plan) on May 17, 2011. As of that date we stopped granting awards under the Morningstar 2004 Stock Incentive Plan (the 2004 Plan). The 2004 Plan amended and restated the Morningstar 1993 Stock Option Plan, the Morningstar 2000 Stock Option Plan, and the Morningstar 2001 Stock Option Plan.
The 2011 Plan provides for a variety of stock-based awards, including, among other things, stock options, restricted stock units, and restricted stock. We granted stock options, restricted stock units, and restricted stock under the 2004 Plan.
All of our employees and our non-employee directors are eligible for awards under the 2011 Plan.
Grants awarded under the 2011 Plan or the 2004 Plan that are forfeited, canceled, settled, or otherwise terminated without a distribution of shares, or shares withheld by us in connection with the exercise of options, will be available for awards under the 2011 Plan. Any shares subject to awards under the 2011 Plan, but not under the 2004 Plan, that are withheld by us in connection with the payment of any required income tax withholding will be available for awards under the 2011 Plan.
The following table summarizes the number of shares available for future grants under our 2011 Plan:
 
 
As of December 31
(000)
 
2013

Shares available for future grants
 
4,501


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

($000)
 
2013

 
2012

 
2011

Restricted stock units
 
$
14,163

 
$
13,451

 
$
12,765

Restricted stock
 
388

 
5,013

 
2,196

Stock options
 
492

 
441

 
342

Total stock-based compensation expense
 
$
15,043

 
$
18,905

 
$
15,303

 
 
 
 
 
 
 
Income tax benefit related to the stock-based compensation expense
 
$
4,027

 
$
3,686

 
$
3,535



The following table summarizes the amount of unrecognized stock-based compensation expense as of December 31, 2013 and the expected number of months over which the expense will be recognized:
 
 
Unrecognized stock-based compensation expense ($000)

 
Expected amortization period (months)
Restricted stock units
 
$
31,306

 
33
Restricted stock
 
517

 
16
Stock options
 
585

 
16
Total unrecognized stock-based compensation expense
 
$
32,408

 
32


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

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

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

 
Vested but
Deferred

 
Total

 
Weighted
Average
Grant Date Value
per RSU

RSUs Outstanding - January 1, 2011
 
777,666

 
45,189

 
822,855

 
$
47.14

Granted
 
292,398

 
—

 
292,398

 
57.36

Dividend equivalents
 
2,673

 
—

 
2,673

 
48.57

Vested
 
(256,623
)
 
—

 
(256,623
)
 
48.28

Vested but deferred
 
(1,753
)
 
1,753

 
—

 
—

Issued
 
—

 
(26,866
)
 
(26,866
)
 
46.69

Forfeited
 
(73,318
)
 
—

 
(73,318
)
 
47.59

RSUs Outstanding - December 31, 2011
 
741,043

 
20,076

 
761,119

 
50.66

Granted
 
341,282

 
—

 
341,282

 
56.26

Dividend equivalents
 
6,405

 
130

 
6,535

 
52.02

Vested
 
(270,695
)
 
—

 
(270,695
)
 
50.12

Vested but deferred
 
(892
)
 
892

 
—

 
—

Issued
 
—

 
(2,316
)
 
(2,316
)
 
73.28

Forfeited
 
(89,998
)
 
—

 
(89,998
)
 
50.84

RSUs Outstanding - December 31, 2012
 
727,145

 
18,782

 
745,927

 
53.37

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



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

Because of the terms of the restricted share agreements prepared in conjunction with the Realpoint acquisition, we account for the grant of restricted shares as stock-based compensation expense and not as part of the acquisition consideration.

We measured the fair value of the restricted stock on the date of grant based on the closing market price of our common stock on the day prior to the grant. We amortize the fair value of $9,363,000 to stock-based compensation expense over the vesting period. The stock-based compensation expense recorded in 2012 and 2011 includes approximately $3,238,000 and $396,000, respectively, of expense recognized upon the accelerated vesting of restricted stock. We have assumed that all of the remaining restricted stock will ultimately vest, and therefore we have not incorporated a forfeiture rate for purposes of determining the stock-based compensation expense.

Stock Options

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

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

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

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


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

 
 
2013
 
 
 
2012
 
 
 
2011
 
 
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
 
282,695

 
$
20.55

 
398,859

 
$
19.72

 
648,885

 
$
18.91

Granted
 
—

 
—

 
—

 
—

 
—

 
—

Canceled
 
(250
)
 
21.48

 
(650
)
 
14.70

 
—

 
—

Exercised
 
(102,886
)
 
21.09

 
(115,514
)
 
20.19

 
(250,026
)
 
19.25

Options outstanding—end of year
 
179,559

 
21.47

 
282,695

 
20.55

 
398,859

 
19.72

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
179,559

 
$
21.47

 
282,695

 
$
20.55

 
398,859

 
$
19.72



 
 
2013
 
 
 
2012
 
 
 
2011
 
 
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
 
391,784

 
$
28.98

 
818,552

 
$
22.76

 
1,207,540

 
$
17.09

Granted
 
—

 
—

 
—

 
—

 
92,201

 
57.42

Canceled
 
(1,352
)
 
16.19

 
(22,330
)
 
39.75

 
(1,960
)
 
16.04

Exercised
 
(136,460
)
 
16.84

 
(404,438
)
 
16.60

 
(479,229
)
 
16.17

Options outstanding—end of year
 
253,972

 
36.48

 
391,784

 
28.98

 
818,552

 
22.76

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
219,449

 
$
33.18

 
337,684

 
$
24.42

 
726,351

 
$
18.36



The following table summarizes the total intrinsic value (difference between the market value of our stock on the date of exercise and the exercise price of the option) of options exercised:
($000)
 
2013

 
2012

 
2011

Intrinsic value of options exercised
 
$
12,801

 
$
22,526

 
$
29,899


 

The table below shows additional information for options outstanding and exercisable as of December 31, 2013:
 
 
 
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)

$14.70
 
285

 
0.93
 
$
14.70

 
$
18

 
285

 
0.93
 
$
14.70

 
$
18

$21.40 - $48.90
 
361,571

 
1.17
 
24.88

 
19,238

 
361,571

 
1.17
 
24.88

 
19,238

$57.28 - $59.35
 
71,675

 
7.52
 
57.46

 
1,479

 
37,152

 
7.52
 
57.45

 
710


 


 

 


 


 


 

 


 


$14.70 - $59.35
 
433,531

 
2.22
 
30.26

 
$
20,735

 
399,008

 
1.76
 
27.91

 
$
19,966

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested or Expected to Vest
 
 
 
 
 
 
 
 
 
 
 
 
 
$14.70 - $59.35
 
433,531

 
2.22
 
$
30.26

 
$
20,735

 
 
 
 
 
 
 
 

 
The aggregate intrinsic value in the table above represents the total pretax intrinsic value all option holders would have received if they had exercised all outstanding options on December 31, 2013. The intrinsic value is based on our closing stock price of $78.09 on that date.

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

($000)
 
2013

 
2012

 
2011

Excess tax benefits related to stock-based compensation
 
$
5,898

 
$
7,210

 
$
9,525

Defined Contribution Plan
Defined Contribution Plan
Defined Contribution Plan

We sponsor a defined contribution 401(k) plan, which allows our U.S.-based employees to voluntarily contribute pre-tax dollars up to a maximum amount allowable by the U.S. Internal Revenue Service. In 2013, 2012, and 2011, we made matching contributions to our 401(k) plan in the United States in an amount equal to 75 cents for every dollar of an employee's contribution, up to a maximum of 7% of the employee's compensation in the pay period.

The following table summarizes our matching contributions:
($000)
 
2013

 
2012

 
2011

401(k) matching contributions
 
$
6,879

 
$
6,642

 
$
5,601

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

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

($000)
 
2013

 
2012

 
2011

Interest income
 
$
2,940

 
$
5,464

 
$
3,679

Interest expense
 
(228
)
 
(311
)
 
(1,318
)
Gain on sale of investments, net
 
4,207

 
538

 
260

Holding gain upon acquisition of additional ownership of equity-method investments
 
3,635

 
—

 
—

Other expense, net
 
(3,198
)
 
(2,734
)
 
(912
)
Non-operating income, net
 
$
7,356

 
$
2,957

 
$
1,709



Interest income primarily reflects interest from our investment portfolio. Interest income in 2012 included approximately $700,000 of interest income related to a $1,000,000 of business tax refund for prior years recorded in 2012. In 2011, interest expense included approximately $900,000 related to $1,400,000 of business tax expense for prior years recorded in 2011.

Other expense, net includes foreign currency exchange gains and losses arising from the ordinary course of business related to our U.S. and non-U.S. operations and royalty income from MJKK. In 2012, other expense, net included the loss on the sale of our investment in Bundle Corporation of $2,034,000.
Income Taxes
Income Taxes
Income Taxes
 
Income Tax Expense and Effective Tax Rate

The following table shows our income tax expense and our effective tax rate for the years ending December 31, 2013, 2012, and 2011:

($000)
 
2013

 
2012

 
2011

Income before income taxes and equity in net income of unconsolidated entities
 
$
178,010

 
$
153,625

 
$
140,124

Equity in net income of unconsolidated entities
 
1,428

 
2,027

 
1,848

Net (income) loss attributable to the noncontrolling interest
 
122

 
117

 
43

Total
 
$
179,560

 
$
155,769

 
$
142,015

Income tax expense
 
$
56,031

 
$
52,878

 
$
43,658

Effective tax rate
 
31.2
%
 
33.9
%
 
30.7
%



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

 
 
2013
 
 
 
2012
 
 
 
2011
 
 
($000, except percentages)
 
Amount

 
%

 
Amount

 
%

 
Amount

 
%

Income tax expense at U.S. federal rate
 
$
62,845

 
35.0
 %
 
$
54,519

 
35.0
 %
 
$
49,705

 
35.0
 %
State income taxes, net of federal income tax benefit
 
3,029

 
1.7

 
1,510

 
1.0

 
1,376

 
1.0

Stock-based compensation activity
 
254

 
0.1

 
516

 
0.3

 
440

 
0.3

Non-U.S. withholding taxes, net of federal income tax effect, and foreign tax credits
 
310

 
0.2

 
307

 
0.2

 
346

 
0.2

Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses
 
(1,842
)
 
(1.0
)
 
(630
)
 
(0.4
)
 
394

 
0.3

Difference between U.S. federal statutory and foreign tax rates
 
(2,513
)
 
(1.4
)
 
(2,777
)
 
(1.8
)
 
(2,393
)
 
(1.7
)
Change in unrecognized tax benefits
 
(211
)
 
(0.1
)
 
967

 
0.6

 
3,126

 
2.2

Credits and incentives
 
(4,374
)
 
(2.5
)
 
(1,494
)
 
(1.0
)
 
(7,734
)
 
(5.4
)
Recognition of deferred tax assets
 
(1,448
)
 
(0.8
)
 
—

 
—

 
(1,778
)
 
(1.3
)
Other - net
 
(19
)
 
—

 
(40
)
 
—

 
176

 
0.1

Total income tax expense
 
$
56,031

 
31.2
 %
 
$
52,878

 
33.9
 %
 
$
43,658

 
30.7
 %


Income tax expense consists of the following:

($000)
 
2013

 
2012

 
2011

Current tax expense:
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
$
42,808

 
$
38,821

 
$
41,520

State
 
3,882

 
1,997

 
1,808

Non-U.S.
 
10,456

 
5,719

 
5,756

Current tax expense
 
57,146

 
46,537

 
49,084

Deferred tax expense (benefit):
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
2,630

 
6,287

 
(1,011
)
State
 
814

 
334

 
(242
)
Non-U.S.
 
(4,559
)
 
(280
)
 
(4,173
)
Deferred tax expense (benefit), net
 
(1,115
)
 
6,341

 
(5,426
)
Income tax expense
 
$
56,031

 
$
52,878

 
$
43,658



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

($000)
 
2013

 
2012

 
2011

U.S.
 
$
144,065

 
$
128,920

 
$
123,390

Non-U.S.
 
33,945

 
24,705

 
16,734

Income before income taxes and equity in net income of unconsolidated entities
 
$
178,010

 
$
153,625

 
$
140,124


Deferred Tax Assets and Liabilities

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

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Deferred tax assets:
 
 
 
 
Stock-based compensation expense
 
$
3,479

 
$
4,019

Accrued liabilities
 
9,805

 
8,402

Net operating loss carryforwards - U.S. federal and state
 
851

 
930

Net operating loss carryforwards - Non-U.S.
 
9,229

 
12,386

Research and development
 
—

 
246

Deferred royalty revenue
 
366

 
383

Allowance for doubtful accounts
 
758

 
515

Deferred rent
 
8,673

 
9,031

Other
 
—

 
846

Total deferred tax assets
 
33,161

 
36,758

 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Acquired intangible assets
 
(12,967
)
 
(14,535
)
Property, equipment, and capitalized software
 
(15,525
)
 
(14,615
)
Unrealized exchange gains, net
 
(395
)
 
(444
)
Prepaid expenses
 
(4,299
)
 
(3,694
)
Investments in unconsolidated entities
 
(12,009
)
 
(9,905
)
Other
 
(373
)
 
—

Total deferred tax liabilities
 
(45,568
)
 
(43,193
)
Net deferred tax asset (liability) before valuation allowance
 
(12,407
)
 
(6,435
)
Valuation allowance
 
(7,456
)
 
(11,407
)
Net deferred tax liability
 
$
(19,863
)
 
$
(17,842
)


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

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Deferred tax asset, net - current
 
$
3,892

 
$
3,741

Deferred tax liability, net - non-current
 
(23,755
)
 
(21,583
)
Net deferred tax liability
 
$
(19,863
)
 
$
(17,842
)


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

 
 
As of December 31
 
 
 
($000)
 
 
2013
 
 
2012
 
 
 
Expiration Date
 
 
Expiration Date
U.S. federal NOLs subject to expiration dates
 
$
2,136

12/31/2023
 
$
2,362

12/31/2023


Our U.S. federal NOL carryforward as of December 31, 2013 of $2,136,000 is subject to limitations on the use of the NOL imposed by the U.S. Internal Revenue Code, and therefore is limited to approximately $225,000 per year.

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

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Non-U.S. NOLs subject to expiration dates from 2014 through 2032
 
$
5,314

 
$
6,064

Non-U.S. NOLs with no expiration date
 
40,054

 
44,504

Total
 
$
45,368

 
$
50,568

 
 
 
 
 
Non-U.S. NOLs not subject to valuation allowances
 
$
8,759

 
$
4,031



The decrease in non-U.S. NOL carryforwards as of December 31, 2013 compared with 2013 primarily reflects the utilization of NOL carryforwards in our non-U.S. operations.

We have not provided federal and state income taxes on accumulated undistributed earnings of certain foreign subsidiaries aggregating approximately $112,600,000 as of December 31, 2013, because these earnings have been permanently reinvested. It is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings.

In assessing the realizability of our deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We have recorded a valuation allowance against all but approximately $8,759,000 of the non-U.S. NOLs, reflecting the likelihood that the benefit of these NOLs will not be realized.

Uncertain Tax Positions

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

We are currently under audit by federal, state and local tax authorities in the United States as well as tax authorities in certain non-U.S. jurisdictions. It is likely that the examination phase of some of these U.S. federal, state, local, and non-U.S. audits will conclude in 2014. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits.

As of December 31, 2013, our Consolidated Balance Sheet included a current liability of $6,211,000 and a non-current liability of $6,012,000 for unrecognized tax benefits. These amounts include interest and penalties, less any associated tax benefits.

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

($000)
 
2013

 
2012

Gross unrecognized tax benefits - beginning of the year
 
$
12,699

 
$
12,189

Increases as a result of tax positions taken during a prior-year period
 
791

 
445

Decreases as a result of tax positions taken during a prior-year period
 
(146
)
 
(1,153
)
Increases as a result of tax positions taken during the current period
 
2,887

 
2,008

Decreases relating to settlements with tax authorities
 
(2,779
)
 
(299
)
Reductions as a result of lapse of the applicable statute of limitations
 
(494
)
 
(491
)
Gross unrecognized tax benefits - end of the year
 
$
12,958

 
$
12,699



In 2013, we recorded a net increase of $3,532,000 of gross unrecognized tax benefits before settlements and lapses of statutes of limitations, of which $3,227,000 increased our income tax expense by $2,690,000. In addition, we reduced our unrecognized tax benefits by $3,275,000 for settlements and lapses of statutes of limitations, of which $2,785,000 decreased our income tax expense by $2,301,000.

As of December 31, 2013, we had $12,958,000 of gross unrecognized tax benefits, of which $10,557,000, if recognized, would reduce our effective income tax rate and decrease our income tax expense by $9,262,000.

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

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Liabilities for interest and penalties
 
$
1,865

 
$
2,232



We recorded the decrease in the liability, net of any tax benefits, to income tax expense in our Consolidated Statement of Income in 2013.
Contingencies
Contingencies
Contingencies
 
Life's Good S.T.A.B.L. Hedge Fund

In September 2011, three individual investors in Life's Good S.T.A.B.L. Mortgage hedge fund (LG), Marta Klass, Gregory Martin, and Richard Roellig, filed a complaint in the United States District Court for the Eastern District of Pennsylvania against LG, its principal Robert Stinson, and several other parties, including Morningstar, Inc. (the Klass Matter). The plaintiffs claim that Morningstar committed fraud and aided and abetted the other defendants' breach of fiduciary duty through the 5-star rating LG obtained from Morningstar. The plaintiffs seek unspecified damages. Hedge fund managers self-report their performance data to Morningstar. More than a year before the Klass Matter, in June 2010, the SEC filed suit against LG and other entities claiming they were part of a Ponzi scheme operated by Stinson. As a result, LG and the other entities were placed in court-appointed receivership. Morningstar was not part of the SEC suit or receivership. Since that time, the Receiver, as part of his duties, has been investigating whether to assert claims against third parties. Morningstar is aware of 14 lawsuits filed by the Receiver seeking to recover money for the fund.

In November 2011, Morningstar filed a motion to dismiss the Klass Matter. On behalf of the entities in receivership, the Receiver filed a motion to stay the proceedings because the Receivership Order does not permit suits against the entities in receivership without court permission. The court granted the Receiver's motion and stayed the Klass Matter. In April 2012, the Receiver filed a complaint against Morningstar, in which the Receiver claims that Morningstar is liable for contribution and aiding and abetting Stinson's breach of fiduciary duty and fraud through the 5-star rating LG obtained from Morningstar. The same day the Receiver filed his complaint, Morningstar sought leave from the court to file a counter suit against Stinson and two of his entities-Keystone State Capital Corporation and LG for, among other things, fraud, misrepresentation, and breach of user agreements. In June 2012, the court denied Morningstar's motion for leave to file suit. The court took no position on the merits of Morningstar's claims, and did not preclude us from renewing our motion to file a complaint at a later time, but deferred to the Receiver's request not to subject the receivership estate to additional litigation at this early point in the receivership. A bench trial related to the Receiver’s claims against Morningstar was held between January 13 and January 28, 2014. At trial, the Receiver claimed that Morningstar is liable under a contribution theory for all or part of a $14.5 million disgorgement judgment that the SEC obtained against the entities and individuals in receivership. Morningstar contested liability and damages at trial and believes it is not liable for any amount. The parties will file post-trial proposed findings of fact and conclusions of law in early March 2014. It is not known when the court will issue its decision.

We believe the allegations against Morningstar by the Klass plaintiffs and the Receiver have no legal or factual basis and we plan to continue to vigorously contest the claims. We also intend to refile our affirmative claims against Stinson, Keystone, and LG at a later time consistent with the court's order. We cannot predict the outcome of the proceedings.

We have not provided an estimate of loss or range of loss in connection with this matter because no such estimate can reasonably be made.

Business Logic Holding Corporation

In November 2009, Business Logic Holding Corporation filed a complaint in the Circuit Court of Cook County, Illinois against Ibbotson Associates, Inc. and Morningstar, Inc. relating to Ibbotson's prior commercial relationship with Business Logic. Business Logic is alleging breach of contract and trade secret misappropriation in connection with Ibbotson's development of a proprietary web-service software and user interface that connects plan participant data with the Ibbotson Wealth Forecasting Engine. Ibbotson and Morningstar answered the complaint, and Ibbotson asserted a counterclaim against Business Logic alleging trade secret misappropriation and breach of contract, also seeking damages and injunctive relief. Business Logic filed a motion for summary judgment on its breach of contract claim, which was denied on October 1, 2013.

Business Logic's complaint seeks, among other things, compensatory damages, punitive damages, attorneys' fees, and injunctive relief. With regard to compensatory damages, based on the analysis of Ibbotson's retained damages expert (who has assumed, solely for purposes of his analysis, that Business Logic will prevail with regard to the issue of liability), and recognizing the uncertainty inherent in litigation and our intention to continue to vigorously defend the claims made by Business Logic, our best estimate of the range of possible loss is between $0 and $5.4 million, excluding punitive damages or attorneys' fees, both of which are recoverable in certain circumstances under the Illinois Trade Secrets Act. Business Logic's retained damages expert (who has also assumed for purposes of her estimate that Business Logic will prevail with regard to the issue of liability) has, however, estimated compensatory damages of $84 million, excluding punitive damages or attorneys' fees. We dispute the conclusions reached and the methods employed by Business Logic's expert.

With regard to Business Logic's claim for injunctive relief, no reasonable estimate of loss or range of loss is possible.

Morningstar and Ibbotson continue to vigorously contest all the claims against them in this matter. We cannot, however, predict the outcome of the proceeding.

We record accrued liabilities for litigation and regulatory matters when those matters represent loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, we do not establish an accrued liability. As a litigation or regulatory matter develops, we evaluate on an ongoing basis whether such matter presents a loss contingency that is probable and estimable.

In addition to these proceedings, we are involved in legal proceedings and litigation that have arisen in the normal course of our business. Although the outcome of a particular proceeding can never be predicted, we do not believe that the result of any of these other matters will have a material adverse effect on our business, operating results, or financial position.
Share Repurchase Program
Quarterly Dividend and Share Repurchase Programs
Share Repurchase Program
 
In September 2010, the board of directors approved a share repurchase program that authorizes the repurchase shares of our outstanding common stock. We may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate. As of December 31, 2013, we had repurchased a total of 7,068,006 shares for $449,784,000 under this authorization. As of February 21, 2014, we had repurchased a total of approximately 7,350,000 shares, and approximately $230,000,000 remained available for future repurchases.

The following table summarizes the board approvals for increases to the program and the total available under the program:
Date
 
Increase

 
Total program

September 2010
 
$
100
 million
 
$
100
 million
December 2011
 
$
200
 million
 
$
300
 million
December 2012
 
$
200
 million
 
$
500
 million
December 2013
 
$
200
 million
 
$
700
 million
Subsequent Events
Subsequent Events
Subsequent Events

In February 2014, our board of directors declared a quarterly dividend of 17 cents per share. The dividend is payable on April 30, 2014 to shareholders of record as of April 11, 2014.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements

In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or an Investment in a Foreign Entity. ASU No. 2013-05 specifies that when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the parent is required to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Additionally, the amendments in this update clarify that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that results in an acquirer obtaining control of an acquire in which it held an equity interest immediately before the acquisition date (sometimes referred to as a step acquisition). The currency translation adjustment should be released into net income upon the occurrence of those events. For Morningstar, ASU No. 2013-05 is effective prospectively for events occurring on or after January 1, 2014.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). This update requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for an net operating loss (NOL) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. The update does not require new recurring disclosures. For Morningstar, ASU No. 2013-11 is effective prospectively as of January 1, 2014.

We do not expect the provisions of ASU No. 2013-05 and ASU No. 2013-11 to have a material impact on our consolidated financial statements.


Selected Quarterly Financial Data
Selected Quarterly Financial Data
Selected Quarterly Financial Data (unaudited)
 
 
2012

 
 
 
 
 
 
 
2013

 
 
 
 
 
 
 
(in thousands except per share amounts)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
Revenue
 
$
160,759

 
$
165,968

 
$
160,952

 
$
170,609

 
$
168,856

 
$
175,428

 
$
173,482

 
$
180,500

 
Total operating expense (1)
 
130,360

 
124,832

 
121,088

 
131,340

 
128,296

 
131,844

 
128,869

 
138,603

 
Operating income
 
30,399

 
41,136

 
39,864

 
39,269

 
40,560

 
43,584

 
44,613

 
41,897

 
Non-operating income (expense), net
 
659

 
995

 
1,880

 
(577
)
 
945

 
3,111

 
771

 
2,529

 
Income before income taxes and equity in net income of unconsolidated entities
 
31,058

 
42,131

 
41,744

 
38,692

 
41,505

 
46,695

 
45,384

 
44,426

 
Income tax expense
 
11,511

 
14,744

 
15,186

 
11,437

 
12,427

 
15,955

 
14,265

 
13,384

 
Equity in net income (loss) of unconsolidated entities
 
566

 
497

 
478

 
486

 
497

 
360

 
315

 
256

 
Consolidated net income from continuing operations
 
20,113

 
27,884

 
27,036

 
27,741

 
29,575

 
31,100

 
31,434

 
31,298

 
Gain on sale of discontinued operations, net of tax
 
—

 
—

 
—

 
5,188

 
—

 
—

 
—

 
—

 
Consolidated net income
 
20,113

 
27,884

 
27,036

 
32,929

 
29,575

 
31,100

 
31,434

 
31,298

 
Net (income) loss attributable to the noncontrolling interests
 
24

 
4

 
34

 
55

 
43

 
21

 
29

 
29

 
Net income attributable to Morningstar, Inc.
 
$
20,137

 
$
27,888

 
$
27,070

 
$
32,984

 
$
29,618

 
$
31,121

 
$
31,463

 
$
31,327

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to Morningstar, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.59

 
$
0.64

 
$
0.67

 
$
0.68

 
$
0.68

 
Discontinued operations
 
—

 
—

 
—

 
0.11

 
—

 
—

 
—

 
—

 
 
 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.70

 
$
0.64

 
$
0.67

 
$
0.68

 
$
0.68

 
Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations

$
0.40


$
0.56


$
0.56


$
0.58


$
0.63


$
0.66


$
0.68


$
0.68


Discontinued operations
 
—

 
—

 
—

 
0.11

 
—

 
—

 
—

 
—

 
 
 
$
0.40

 
$
0.56

 
$
0.56

 
$
0.69

 
$
0.63

 
$
0.66

 
$
0.68

 
$
0.68

 
Dividends per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.125

 
$
0.125

 
$
0.125

 
$
—

 
$
0.295

 
Dividends paid per common share
 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.225

 
$
—

 
$
0.125

 
$
0.125

 
$
0.125

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
49,938

 
49,195

 
47,975

 
46,913

 
46,406

 
46,400

 
46,080

 
45,756

 
Diluted
 
50,758

 
49,856

 
48,481

 
47,511

 
46,814

 
46,853

 
46,519

 
46,211

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012

 
 
 
 
 
 
 
2013

 
 
 
 
 
 
 
(in thousands)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
(1) Includes stock-based compensation expense of:
 
$
3,866

 
$
3,734

 
$
3,994

 
$
7,311

 
$
3,783

 
$
3,954

 
$
3,416

 
$
3,890

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

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

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

As part of our investment management operations, we manage certain funds outside of the United States that are considered variable interest entities. For the majority of these variable interest entities, we do not have a variable interest in them. In cases where we do have a variable interest, we are not the primary beneficiary. Accordingly, we do not consolidate any of these variable interest entities.
Comprehensive Income 
Comprehensive Income. In accordance with ASU No. 2011-05, Presentation of Comprehensive Income, we present the total of comprehensive income, the components of net income, and the components of other comprehensive income (OCI) in two separate but consecutive statements, our Consolidated Statements of Income and separately, our Consolidated Statements of Comprehensive Income. In addition, effective January 1, 2013, we adopted FASB ASU No. 2013-2, Comprehensive Income (Topic 220). We show the effects of items reclassified out of each component of accumulated other comprehensive income to net income on the face of the financial statement where net income is presented.
Use of Estimates 
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period. Actual results may differ from these estimates.
Reclassification, Policy [Policy Text Block] 
Reclassifications. Certain amounts reported in previous years have been reclassified to conform to the 2013 presentation. We now include development expense in the cost of revenue category, which we previously referred to as cost of goods sold. We previously reported development expense as a separate operating expense category. We have reclassified development expense to include it in cost of revenue for all periods presented.

Separately, as a result of our recent reorganization (including new positions created, changes in focus for some existing roles, and the refinement of employee cost categorizations as we moved to a more centralized structure), approximately 180 net positions shifted from the general and administrative and sales and marketing categories to cost of revenue. For 2013 as compared with both 2012 and 2011, changes related to our more centralized organizational structure added approximately $14 million of compensation expense to cost of revenue, and reduced the compensation expense in our sales and marketing and general and administrative expense categories by approximately $8 million and $6 million, respectively. These changes did not affect our total operating expense or operating income for any of the periods presented.
Cash and Cash Equivalents 
Cash and Cash Equivalents. Cash and cash equivalents consist of cash and investments with original maturities of three months or less. We state them at cost, which approximates fair value. We state at fair value the portion of our cash equivalents that are invested in money market funds, which are actively traded and have quoted market prices.
Investments 
Investments. We account for our investments in accordance with FASB ASC 320, Investments—Debt and Equity Securities. We classify our investments into three categories: held-to-maturity, trading, and available-for-sale.

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

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

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

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

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

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

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

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

We provide additional information about our cash equivalents and investments that are subject to valuation under FASB ASC 820 in Note 5 in these Notes to our Consolidated Financial Statements.

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

We account for our investments in accordance with FASB ASC 320, Investments—Debt and Equity Securities. We classify our investments in three categories: available-for-sale, held-to-maturity, and trading. We monitor the concentration, diversification, maturity, and liquidity of our investment portfolio, which is primarily invested in fixed-income securities, and classify our investment portfolio as shown below:
Concentration of Credit Risk Policy [Policy Text Block] 
Concentration of Credit Risk. No single customer is large enough to pose a significant credit risk to our operations or financial condition. For the years ended December 31, 2013, 2012, and 2011, no single customer represented 5% or more of our consolidated revenue. If receivables from our customers become delinquent, we begin a collections process. We maintain an allowance for doubtful accounts based on our estimate of the probable losses of accounts receivable.
Property, Equipment, and Depreciation 
Property, Equipment, and Depreciation. We state property and equipment at historical cost, net of accumulated depreciation. We depreciate property and equipment primarily using the straight-line method based on the useful life of the asset, which ranges from three to seven years. We amortize leasehold improvements over the lease term or their useful lives, whichever is shorter.
Computer Software and Internal Product Development Costs 
Computer Software and Internal Product Development Costs. We capitalize certain costs in accordance with FASB ASC 350-40, Internal-Use Software, FASB ASC 350-50, Website Development Costs, and FASB ASC 985, Software. Internal product development costs mainly consist of employee costs for developing new web-based products and certain major enhancements of existing products. We amortize these costs on a straight-line basis over the estimated economic life, which is generally three years. Capitalized software development costs related to projects that have not been placed into service yet are included in our construction in progress balance.

The table below summarizes our capitalized software development costs for the past three years:
($000)
 
2013

 
2012

 
2011

Capitalized software development costs
 
$
8,142

 
$
8,527

 
$
5,315

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

As part of the purchase price allocation, we follow the requirements of FASB ASC 740, Income Taxes. This includes establishing deferred tax assets or liabilities reflecting the difference between the values assigned for financial statement purposes and values applicable for income tax purposes. In certain acquisitions, the goodwill resulting from the purchase price allocation may not be deductible for income tax purposes. FASB ASC 740 prohibits recognition of a deferred tax asset or liability for temporary differences in goodwill if goodwill is not amortizable and deductible for tax purposes.
Goodwill 
Goodwill. Changes in the carrying amount of our recorded goodwill are mainly the result of business acquisitions and divestitures. In accordance with FASB ASC 350, Intangibles—Goodwill and Other, we do not amortize goodwill; instead, goodwill is subject to an impairment test annually, or whenever indicators of impairment exist. An impairment would occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. We performed annual impairment reviews in the fourth quarter of 2013, 2012, and 2011. We did not record any significant impairment losses in 2013, 2012, and 2011.

Intangible Assets 
Intangible Assets. We amortize intangible assets using the straight-line method over their estimated useful lives, which range from one to 25 years. We have no intangible assets with indefinite useful lives. In accordance with FASB ASC 360-10-35, Subsequent Measurement—Impairment or Disposal of Long Lived Assets, we review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the value of future undiscounted cash flows is less than the carrying amount of an asset group, we record an impairment loss based on the excess of the carrying amount over the fair value of the asset group. We recorded an impairment loss of approximately $800,000 in 2011. We did not record any impairment losses in 2013 or 2012. The impairment charge is included in our amortization expense on our Consolidated Statements of Income.
Revenue Recognition 
Revenue Recognition. We recognize revenue in accordance with SEC SAB Topic 13, Revenue Recognition, ASC 605-25, Revenue Recognition:  Multiple Element Arrangements, and ASC 985-605, Software: Revenue Recognition.

We recognize revenue when all of the following conditions are met:

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

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

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

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

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

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

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

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

Advertising Costs. Advertising costs include expenses incurred for various print and Internet ads, search engine fees, and direct mail campaigns. We expense advertising costs as incurred. The table below summarizes our advertising expense for the past three years:
($000)
 
2013

 
2012

 
2011

Advertising expense
 
$
6,939

 
$
6,306

 
$
8,210

Stock-Based Compensation Expense 

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

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

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

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

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

Income per Share. We compute and present income per share in accordance with FASB ASC 260, Earnings Per Share. The difference between weighted average shares outstanding and diluted shares outstanding primarily reflects the dilutive effect associated with our stock-based compensation plans. We further compute income per share in accordance with FASB ASC 260-10-45-59A, Participating Securities and the Two Class Method. Under the two-class method, we allocate earnings between common stock and participating securities. The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. For purposes of calculating earnings per share, we reduce our reported net earnings by the amount allocated to participating securities to arrive at the earnings allocated to common stock shareholders.

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

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

In the third quarter of 2013, we revised our segment structure to reflect our shift to a more centralized organizational structure. We now report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and evaluates our financial results. We have revised our historical financial results to reflect this change.

Because we have a single reportable segment, all required financial segment information can be found directly in the Consolidated Financial Statements.

The accounting policies for our reportable segment are the same as those described in “Note 2. Summary of Significant Accounting Policies”. We evaluate the performance of our reporting segment based on revenue and operating income.
Summary of Significant Accounting Policies (Tables)
Schedule of Advertising Expense [Table Text Block] 
The table below summarizes our advertising expense for the past three years:
($000)
 
2013

 
2012

 
2011

Advertising expense
 
$
6,939

 
$
6,306

 
$
8,210



Capitalized Software Development Costs [Table Text Block] 
The table below summarizes our capitalized software development costs for the past three years:
($000)
 
2013

 
2012

 
2011

Capitalized software development costs
 
$
8,142

 
$
8,527

 
$
5,315

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

(in thousands, except per share amounts)
 
2013

 
2012

 
2011

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Net income attributable to Morningstar, Inc.:
 
$
123,529

 
$
108,079

 
$
98,357

Less: Distributed earnings available to participating securities
 
(10
)
 
(41
)
 
(40
)
Less: Undistributed earnings available to participating securities
 
(36
)
 
(47
)
 
(259
)
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
123,483

 
$
107,991

 
$
98,058

 
 
 
 
 
 
 
Weighted average common shares outstanding
 
46,158

 
48,497

 
50,032

 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.68

 
$
2.12

 
$
1.96

Discontinued operations
 
—

 
0.11

 
—

Total
 
$
2.68

 
$
2.23

 
$
1.96

 
 
 
 
 
 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
 
$
123,483

 
$
107,991

 
$
98,058

Add: Undistributed earnings allocated to participating securities
 
36

 
47

 
259

Less: Undistributed earnings reallocated to participating securities
 
(36
)
 
(46
)
 
(254
)
Numerator for diluted net income per share — undistributed and distributed earnings available to common shareholders
 
$
123,483

 
$
107,992

 
$
98,063

 
 


 


 
 
Weighted average common shares outstanding
 
46,158

 
48,497

 
50,032

Net effect of dilutive stock options and restricted stock units
 
333

 
651

 
956

Weighted average common shares outstanding for computing diluted income per share
 
46,491

 
49,148

 
50,988

 
 


 


 
 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
Continuing operations
 
$
2.66

 
$
2.10

 
$
1.92

Discontinued operations
 
—

 
0.10

 
—

Total
 
$
2.66

 
$
2.20

 
$
1.92


Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] 
The following table shows the number of weighted average stock options, restricted stock units, and restricted stock excluded from our calculation of diluted earnings per share from both continuing operations and net earnings because their inclusion would have been anti-dilutive:
(in thousands)
 
2013

 
2012

 
2011

Weighted average stock options
 
—

 
83

 
55

Weighted average restricted stock units
 
17

 
7

 
—

Weighted average restricted stock
 
—

 
—

 
—

Total
 
17

 
90

 
55


These stock options and restricted stock units could be included in the calculation in the future.
Segment and Geographical Area Information (Tables)
Revenue from External Customers by Products and Services [Table Text Block] 
Products and Services Information

We derive revenue from two product groups. The investment information product group includes all of our data, software, and research products and services. These products are typically sold through subscriptions or license agreements. The investment management product group includes all of our asset management operations, which earn the majority of their revenue from asset-based fees. The table below summarizes our revenue by product group:
 
External revenue by product group
 
 
 
 
 
 
 
 
 
 
 
 
 
($000)
 
2013

 
2012

 
2011

Investment information
 
555,642

 
526,147

 
498,265

Investment management
 
142,624

 
132,141

 
133,135

Consolidated revenue
 
$
698,266

 
$
658,288

 
$
631,400



Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas 

External revenue by geographical area
 
 
 
 
 
 
 
 
Year ended December 31
($000)
 
2013

 
2012

 
2011

United States
 
$
500,730

 
$
466,947

 
$
446,470

 
 
 
 
 
 
 
United Kingdom
 
56,298

 
56,794

 
53,427

Continental Europe
 
57,580

 
49,844

 
49,507

Australia
 
35,289

 
38,229

 
39,761

Canada
 
31,845

 
30,664

 
27,808

Asia
 
13,860

 
13,765

 
13,188

Other
 
2,664

 
2,045

 
1,239

Total International
 
197,536

 
191,341

 
184,930

 
 
 
 
 
 
 
Consolidated revenue
 
$
698,266

 
$
658,288

 
$
631,400


Long-lived assets by geographical area
 
 
 
 
 
 
As of December 31
($000)
 
2013

 
2012

United States
 
$
84,321

 
$
60,371

 
 
 
 
 
United Kingdom
 
6,873

 
7,435

Continental Europe
 
1,873

 
2,356

Australia
 
1,051

 
1,402

Canada
 
1,275

 
1,773

Asia
 
9,479

 
10,529

Other
 
114

 
156

Total International
 
20,665

 
23,651

 
 
 
 
 
Consolidated property, equipment, and capitalized software, net
 
$
104,986

 
$
84,022

Investments and Fair Value Measurements (Tables)
Schedule of Investments 
We monitor the concentration, diversification, maturity, and liquidity of our investment portfolio, which is primarily invested in fixed-income securities, and classify our investment portfolio as shown below:
 
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Available-for-sale
 
$
91,461

 
$
125,786

Held-to-maturity
 
31,214

 
$
26,357

Trading securities
 
7,732

 
$
5,386

Total
 
$
130,407

 
$
157,529

Unrealized Gain (Loss) on Investments 
The following table shows the cost, unrealized gains (losses), and fair values related to investments classified as available-for-sale and held-to-maturity:
 
 
 
As of December 31, 2013
 
As of December 31, 2012
($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

 
$
40,669

 
$
29

 
$
(608
)
 
$
40,090

Corporate bonds
 
49,913

 
22

 
(124
)
 
49,811

 
49,339

 
36

 
(292
)
 
49,083

Foreign obligations
 
505

 
—

 
(2
)
 
503

 
2,437

 
1

 
(19
)
 
2,419

Commercial paper
 
9,482

 
7

 
—

 
9,489

 
2,000

 
—

 
—

 
2,000

Equity securities and exchange-traded funds
 
8,872

 
1,011

 
(141
)
 
9,742

 
19,613

 
1,359

 
(323
)
 
20,649

Mutual funds
 
2,095

 
221

 
(98
)
 
2,218

 
10,499

 
1,092

 
(46
)
 
11,545

Total
 
$
90,560

 
$
1,269

 
$
(368
)
 
91,461

 
$
124,557

 
$
2,517

 
$
(1,288
)
 
$
125,786

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

Certificates of deposit
 
$
31,214

 
$
—

 
$
—

 
$
31,214

 
$
26,357

 
$
—

 
$
—

 
$
26,357

Investments Classified by Contractual Maturity Date 
The table below shows the cost and fair value of investments classified as available-for-sale and held-to-maturity based on their contractual maturities as of December 31, 2013 and December 31, 2012. The expected maturities of certain fixed-income securities may differ from their contractual maturities because some of these holdings have call features that allow the issuers the right to prepay obligations without penalties.
 
 
 
As of December 31, 2013
 
As of December 31, 2012
($000)
 
Cost

 
Fair Value

 
Cost

 
Fair Value

Available-for-sale:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
45,486

 
$
45,402

 
$
87,599

 
$
86,784

Due in one to two years
 
34,107

 
34,099

 
6,846

 
6,808

Equity securities, exchange-traded funds, and mutual funds
 
10,967

 
11,960

 
30,112

 
32,194

Total
 
$
90,560

 
$
91,461

 
$
124,557

 
$
125,786

 
 
 
 
 
 
 
 
 
Held-to-maturity:
 
 

 
 

 
 

 
 

Due in one year or less
 
$
31,210

 
$
31,210

 
$
26,352

 
$
26,352

Due in one to three years
 
4

 
4

 
5

 
5

Total
 
$
31,214

 
$
31,214

 
$
26,357

 
$
26,357

Schedule of Realized Gain (Loss) 
The following table shows the realized gains and losses arising from sales of our investments classified as available-for-sale recorded in our Consolidated Statements of Income: 
($000)
 
2013

 
2012

 
2011

Realized gains
 
$
5,550

 
$
1,671

 
$
761

Realized losses
 
(1,343
)
 
(1,133
)
 
(501
)
Realized gains, net
 
$
4,207

 
$
538

 
$
260

Unrealized Gain Loss On Trading Securities 
The following table shows the net unrealized gains (losses) on trading securities as recorded in our Consolidated Statements of Income:
 
($000)
 
2013

 
2012

 
2011

Unrealized gains (losses), net
 
$
827

 
$
269

 
$
(387
)
Fair Value, Assets Measured on Recurring Basis 
The fair value of our assets subject to fair value measurements and that are measured at fair value on a recurring basis using the fair value hierarchy and the necessary disclosures under FASB ASC 820, Fair Value Measurement, are as follows:
 
 
 
Fair Value
 
Fair Value Measurements as of December 31, 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

 
$
—

 
 
 
Fair Value
 
Fair Value Measurements as of December 31, 2012
 
 
as of
 
Using Fair Value Hierarchy
($000)
 
December 31, 2012
 
Level 1

 
Level 2

 
Level 3

Available-for-sale investments
 
 

 
 

 
 

 
 

Government obligations
 
$
40,090

 
$
—

 
$
40,090

 
$
—

Corporate bonds
 
49,083

 
—

 
49,083

 
—

Foreign obligations
 
2,419

 
—

 
2,419

 
—

Commercial paper
 
2,000

 
—

 
2,000

 
—

Equity securities and exchange-traded funds
 
20,649

 
20,649

 
—

 
—

Mutual funds
 
11,545

 
11,545

 
—

 
—

Trading securities
 
5,386

 
5,386

 
—

 
—

Cash equivalents
 
398

 
398

 
—

 
—

Total
 
$
131,570

 
$
37,978

 
$
93,592

 
$
—

Acquisitions, Goodwill, and Other Intangible Assets (Tables)
Schedule of Business Acquisitions 
The following table summarizes our allocation of the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
 
 
($000)

Cash and cash equivalents
 
$
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

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination 
The allocation included acquired intangible assets, as follows:
 
 
($000)

 
Weighted Average Useful Life (years)
Customer-related assets
 
$
9,700

 
14
Total intangible assets
 
$
9,700

 
14
Schedule of Goodwill 
The following table shows the changes in our goodwill balances from January 1, 2012 to December 31, 2013:
 
 
 
($000)

Balance as of January 1, 2012
 
$
318,492

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

Balance as of December 31, 2012
 
$
320,845

Acquisition of remaining ownership in Morningstar Sweden
 
8,911

Other, primarily currency translation
 
(3,306
)
Balance as of December 31, 2013
 
$
326,450

Schedule of Intangible Assets 
The following table summarizes our intangible assets: 
 
 
As of December 31, 2013
 
As of December 31, 2012
($000)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
 
Gross

 
Accumulated
Amortization

 
Net

 
Weighted
Average
Useful  Life
(years)
Intellectual property
 
$
29,477

 
$
(23,128
)
 
$
6,349

 
9
 
$
30,621

 
$
(21,527
)
 
$
9,094

 
9
Customer-related assets
 
141,833

 
(74,311
)
 
67,522

 
12
 
132,798

 
(63,005
)
 
69,793

 
12
Supplier relationships
 
240

 
(108
)
 
132

 
20
 
240

 
(96
)
 
144

 
20
Technology-based assets
 
80,489

 
(50,673
)
 
29,816

 
9
 
81,333

 
(43,809
)
 
37,524

 
9
Non-competition agreement
 
1,661

 
(1,571
)
 
90

 
4
 
1,765

 
(1,588
)
 
177

 
4
Total intangible assets
 
$
253,700

 
$
(149,791
)
 
$
103,909

 
10
 
$
246,757

 
$
(130,025
)
 
$
116,732

 
10
Schedule of Intangible Asset, Amortization Expense 
 
The following table summarizes our amortization expense related to intangible assets:
($000)
 
2013

 
2012

 
2011

Amortization expense
 
$
21,454

 
$
23,944

 
$
27,267

Schedule of Expected Amortization Expense 
Based on acquisitions and divestitures completed through December 31, 2013, we expect intangible amortization expense for 2014 and subsequent years to be as follows:
 
 
($000)

2014
 
$
20,485

2015
 
19,659

2016
 
15,101

2017
 
10,565

2018
 
8,568

Discontinued Operations (Tables)
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]
The following table summarizes the amounts included in our Consolidated Statements of Income for discontinued operations for the years ended December 31, 2013, 2012, and 2011:

($000)
 
2013

 
2012

 
2011

Gain on sales of businesses
 
$
—

 
$
6,193

 
$
—

Income tax expense
 
—

 
1,005

 
—

Earnings from discontinued operations, net of tax
 
$
—

 
$
5,188

 
$
—

Investments in Unconsolidated Entities (Tables)
Schedule of Equity Method And Cost Method Investments 
Our investments in unconsolidated entities consist primarily of the following:
 
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Investment in MJKK
 
$
21,782

 
$
20,540

Other equity method investments
 
6,166

 
6,288

Investments accounted for using the cost method
 
10,766

 
8,477

Total investments in unconsolidated entities
 
$
38,714

 
$
35,305

Schedule of Equity Method Investments 
The following table summarizes our ownership percentage in MJKK and the market value of this investment based on MJKK’s publicly quoted share price: 
 
 
As of December 31
 
 
 
 
2013

 
2012

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

 
 

Japanese yen (¥000)
 
¥
9,824,068

 
¥
3,109,579

Equivalent U.S. dollars ($000)
 
$
94,999

 
$
36,227

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

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Computer equipment
 
$
47,830

 
$
42,312

Capitalized software
 
50,360

 
39,643

Furniture and fixtures
 
23,259

 
22,804

Leasehold improvements
 
52,512

 
51,333

Telephone equipment
 
2,032

 
1,951

Construction in progress
 
35,159

 
13,489

Property, equipment, and capitalized software, at cost
 
211,152

 
171,532

Less accumulated depreciation
 
(106,166
)
 
(87,510
)
Property, equipment, and capitalized software, net
 
$
104,986

 
$
84,022


Capitalized Software Not Yet Placed In Service Included In Construction In Progress Balance 
The following table shows the amount of capitalized software development costs included in construction in progress:
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Capitalized software development costs not yet placed into service
 
$
11,345

 
$
6,478

Summary of Depreciation Expense 
The following table summarizes our depreciation expense:
($000)
 
2013

 
2012

 
2011

Depreciation expense
 
$
24,239

 
$
19,152

 
$
15,646

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

2014
 
$
18,987

2015
 
17,656

2016
 
16,918

2017
 
16,001

2018
 
13,908

Thereafter
 
42,592

Total
 
$
126,062


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

($000)
 
2013

 
2012

 
2011

Rent expense
 
$
22,169

 
$
20,736

 
$
20,122

Schedule of Deferred Rent 
Deferred rent includes build-out and rent abatement allowances received, which are amortized over the remaining portion of the original term of the lease as a reduction in office lease expense. We include deferred rent, as appropriate, in “Accounts payable and accrued liabilities” and “Deferred rent, noncurrent” on our Consolidated Balance Sheets.
 
 
As of December 31
 
 
($000)
 
2013

 
2012

Deferred rent
 
$
26,157

 
$
27,783

Schedule of Liability for Vacant Office Space 
The following table shows the change in our liability for vacant office space from December 31, 2011 to December 31, 2013:

Liability for Vacant Office Space
 
($000)

Balance as of December 31, 2011
 
$
919

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

Reduction of liability for lease and other related payments
 
(14
)
Balance as of December 31, 2013
 
$
131

Stock-Based Compensation (Tables)
Schedule of Shares Available for Future Grants 
The following table summarizes the number of shares available for future grants under our 2011 Plan:
 
 
As of December 31
(000)
 
2013

Shares available for future grants
 
4,501

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

($000)
 
2013

 
2012

 
2011

Restricted stock units
 
$
14,163

 
$
13,451

 
$
12,765

Restricted stock
 
388

 
5,013

 
2,196

Stock options
 
492

 
441

 
342

Total stock-based compensation expense
 
$
15,043

 
$
18,905

 
$
15,303

 
 
 
 
 
 
 
Income tax benefit related to the stock-based compensation expense
 
$
4,027

 
$
3,686

 
$
3,535

Schedule of Uncategorized Stock-Based Compensation Expense 

The following table summarizes the amount of unrecognized stock-based compensation expense as of December 31, 2013 and the expected number of months over which the expense will be recognized:
 
 
Unrecognized stock-based compensation expense ($000)

 
Expected amortization period (months)
Restricted stock units
 
$
31,306

 
33
Restricted stock
 
517

 
16
Stock options
 
585

 
16
Total unrecognized stock-based compensation expense
 
$
32,408

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

 
Vested but
Deferred

 
Total

 
Weighted
Average
Grant Date Value
per RSU

RSUs Outstanding - January 1, 2011
 
777,666

 
45,189

 
822,855

 
$
47.14

Granted
 
292,398

 
—

 
292,398

 
57.36

Dividend equivalents
 
2,673

 
—

 
2,673

 
48.57

Vested
 
(256,623
)
 
—

 
(256,623
)
 
48.28

Vested but deferred
 
(1,753
)
 
1,753

 
—

 
—

Issued
 
—

 
(26,866
)
 
(26,866
)
 
46.69

Forfeited
 
(73,318
)
 
—

 
(73,318
)
 
47.59

RSUs Outstanding - December 31, 2011
 
741,043

 
20,076

 
761,119

 
50.66

Granted
 
341,282

 
—

 
341,282

 
56.26

Dividend equivalents
 
6,405

 
130

 
6,535

 
52.02

Vested
 
(270,695
)
 
—

 
(270,695
)
 
50.12

Vested but deferred
 
(892
)
 
892

 
—

 
—

Issued
 
—

 
(2,316
)
 
(2,316
)
 
73.28

Forfeited
 
(89,998
)
 
—

 
(89,998
)
 
50.84

RSUs Outstanding - December 31, 2012
 
727,145

 
18,782

 
745,927

 
53.37

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

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

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

Volatility factor:
 
35.1
%
Dividend yield:
 
0.35
%
Interest rate:
 
2.87
%
Schedule of Options Granted at Exercise Price Below Fair Value per Share on Grant Date 
The first table includes activity for options granted at an exercise price below the fair value per share of our common stock on the grant date; the second table includes activity for all other option grants.

 
 
2013
 
 
 
2012
 
 
 
2011
 
 
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
 
282,695

 
$
20.55

 
398,859

 
$
19.72

 
648,885

 
$
18.91

Granted
 
—

 
—

 
—

 
—

 
—

 
—

Canceled
 
(250
)
 
21.48

 
(650
)
 
14.70

 
—

 
—

Exercised
 
(102,886
)
 
21.09

 
(115,514
)
 
20.19

 
(250,026
)
 
19.25

Options outstanding—end of year
 
179,559

 
21.47

 
282,695

 
20.55

 
398,859

 
19.72

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
179,559

 
$
21.47

 
282,695

 
$
20.55

 
398,859

 
$
19.72

Schedule of All Other Option Granted 
 
 
2013
 
 
 
2012
 
 
 
2011
 
 
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
 
391,784

 
$
28.98

 
818,552

 
$
22.76

 
1,207,540

 
$
17.09

Granted
 
—

 
—

 
—

 
—

 
92,201

 
57.42

Canceled
 
(1,352
)
 
16.19

 
(22,330
)
 
39.75

 
(1,960
)
 
16.04

Exercised
 
(136,460
)
 
16.84

 
(404,438
)
 
16.60

 
(479,229
)
 
16.17

Options outstanding—end of year
 
253,972

 
36.48

 
391,784

 
28.98

 
818,552

 
22.76

 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable—end of year
 
219,449

 
$
33.18

 
337,684

 
$
24.42

 
726,351

 
$
18.36

Schedule of Intrinsic Value of Stock Options Exercised During Period 
The following table summarizes the total intrinsic value (difference between the market value of our stock on the date of exercise and the exercise price of the option) of options exercised:
($000)
 
2013

 
2012

 
2011

Intrinsic value of options exercised
 
$
12,801

 
$
22,526

 
$
29,899

Schedule of Options, Vested and Expected to Vest, Outstanding and Exercisable 
The table below shows additional information for options outstanding and exercisable as of December 31, 2013:
 
 
 
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)

$14.70
 
285

 
0.93
 
$
14.70

 
$
18

 
285

 
0.93
 
$
14.70

 
$
18

$21.40 - $48.90
 
361,571

 
1.17
 
24.88

 
19,238

 
361,571

 
1.17
 
24.88

 
19,238

$57.28 - $59.35
 
71,675

 
7.52
 
57.46

 
1,479

 
37,152

 
7.52
 
57.45

 
710


 


 

 


 


 


 

 


 


$14.70 - $59.35
 
433,531

 
2.22
 
30.26

 
$
20,735

 
399,008

 
1.76
 
27.91

 
$
19,966

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested or Expected to Vest
 
 
 
 
 
 
 
 
 
 
 
 
 
$14.70 - $59.35
 
433,531

 
2.22
 
$
30.26

 
$
20,735

 
 
 
 
 
 
 
 
Schedule of Tax Benefits Related To Share Based Compensation 
The following table summarizes our excess tax benefits for the past three years:

($000)
 
2013

 
2012

 
2011

Excess tax benefits related to stock-based compensation
 
$
5,898

 
$
7,210

 
$
9,525

Defined Contribution Plan (Tables)
Schedule of Defined Contribution Plan, Employer Matching Contributions
The following table summarizes our matching contributions:
($000)
 
2013

 
2012

 
2011

401(k) matching contributions
 
$
6,879

 
$
6,642

 
$
5,601



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

($000)
 
2013

 
2012

 
2011

Interest income
 
$
2,940

 
$
5,464

 
$
3,679

Interest expense
 
(228
)
 
(311
)
 
(1,318
)
Gain on sale of investments, net
 
4,207

 
538

 
260

Holding gain upon acquisition of additional ownership of equity-method investments
 
3,635

 
—

 
—

Other expense, net
 
(3,198
)
 
(2,734
)
 
(912
)
Non-operating income, net
 
$
7,356

 
$
2,957

 
$
1,709

Income Taxes (Tables)
Schedule of Income Tax Expense and Effective Tax Rate 
The following table shows our income tax expense and our effective tax rate for the years ending December 31, 2013, 2012, and 2011:

($000)
 
2013

 
2012

 
2011

Income before income taxes and equity in net income of unconsolidated entities
 
$
178,010

 
$
153,625

 
$
140,124

Equity in net income of unconsolidated entities
 
1,428

 
2,027

 
1,848

Net (income) loss attributable to the noncontrolling interest
 
122

 
117

 
43

Total
 
$
179,560

 
$
155,769

 
$
142,015

Income tax expense
 
$
56,031

 
$
52,878

 
$
43,658

Effective tax rate
 
31.2
%
 
33.9
%
 
30.7
%
Schedule of Effective Income Tax Rate Reconciliation 
The following table reconciles our income tax expense at the U.S. federal income tax rate of 35% to income tax expense as recorded:

 
 
2013
 
 
 
2012
 
 
 
2011
 
 
($000, except percentages)
 
Amount

 
%

 
Amount

 
%

 
Amount

 
%

Income tax expense at U.S. federal rate
 
$
62,845

 
35.0
 %
 
$
54,519

 
35.0
 %
 
$
49,705

 
35.0
 %
State income taxes, net of federal income tax benefit
 
3,029

 
1.7

 
1,510

 
1.0

 
1,376

 
1.0

Stock-based compensation activity
 
254

 
0.1

 
516

 
0.3

 
440

 
0.3

Non-U.S. withholding taxes, net of federal income tax effect, and foreign tax credits
 
310

 
0.2

 
307

 
0.2

 
346

 
0.2

Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses
 
(1,842
)
 
(1.0
)
 
(630
)
 
(0.4
)
 
394

 
0.3

Difference between U.S. federal statutory and foreign tax rates
 
(2,513
)
 
(1.4
)
 
(2,777
)
 
(1.8
)
 
(2,393
)
 
(1.7
)
Change in unrecognized tax benefits
 
(211
)
 
(0.1
)
 
967

 
0.6

 
3,126

 
2.2

Credits and incentives
 
(4,374
)
 
(2.5
)
 
(1,494
)
 
(1.0
)
 
(7,734
)
 
(5.4
)
Recognition of deferred tax assets
 
(1,448
)
 
(0.8
)
 
—

 
—

 
(1,778
)
 
(1.3
)
Other - net
 
(19
)
 
—

 
(40
)
 
—

 
176

 
0.1

Total income tax expense
 
$
56,031

 
31.2
 %
 
$
52,878

 
33.9
 %
 
$
43,658

 
30.7
 %
Schedule of Components of Income Tax Expense 
Income tax expense consists of the following:

($000)
 
2013

 
2012

 
2011

Current tax expense:
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
$
42,808

 
$
38,821

 
$
41,520

State
 
3,882

 
1,997

 
1,808

Non-U.S.
 
10,456

 
5,719

 
5,756

Current tax expense
 
57,146

 
46,537

 
49,084

Deferred tax expense (benefit):
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
Federal
 
2,630

 
6,287

 
(1,011
)
State
 
814

 
334

 
(242
)
Non-U.S.
 
(4,559
)
 
(280
)
 
(4,173
)
Deferred tax expense (benefit), net
 
(1,115
)
 
6,341

 
(5,426
)
Income tax expense
 
$
56,031

 
$
52,878

 
$
43,658

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

($000)
 
2013

 
2012

 
2011

U.S.
 
$
144,065

 
$
128,920

 
$
123,390

Non-U.S.
 
33,945

 
24,705

 
16,734

Income before income taxes and equity in net income of unconsolidated entities
 
$
178,010

 
$
153,625

 
$
140,124

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

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Deferred tax assets:
 
 
 
 
Stock-based compensation expense
 
$
3,479

 
$
4,019

Accrued liabilities
 
9,805

 
8,402

Net operating loss carryforwards - U.S. federal and state
 
851

 
930

Net operating loss carryforwards - Non-U.S.
 
9,229

 
12,386

Research and development
 
—

 
246

Deferred royalty revenue
 
366

 
383

Allowance for doubtful accounts
 
758

 
515

Deferred rent
 
8,673

 
9,031

Other
 
—

 
846

Total deferred tax assets
 
33,161

 
36,758

 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Acquired intangible assets
 
(12,967
)
 
(14,535
)
Property, equipment, and capitalized software
 
(15,525
)
 
(14,615
)
Unrealized exchange gains, net
 
(395
)
 
(444
)
Prepaid expenses
 
(4,299
)
 
(3,694
)
Investments in unconsolidated entities
 
(12,009
)
 
(9,905
)
Other
 
(373
)
 
—

Total deferred tax liabilities
 
(45,568
)
 
(43,193
)
Net deferred tax asset (liability) before valuation allowance
 
(12,407
)
 
(6,435
)
Valuation allowance
 
(7,456
)
 
(11,407
)
Net deferred tax liability
 
$
(19,863
)
 
$
(17,842
)
Schedule of Deferred Tax Assets and Liabilities Included in Consolidated Balance Sheets 
The deferred tax assets and liabilities are presented in our Consolidated Balance Sheets as follows:

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Deferred tax asset, net - current
 
$
3,892

 
$
3,741

Deferred tax liability, net - non-current
 
(23,755
)
 
(21,583
)
Net deferred tax liability
 
$
(19,863
)
 
$
(17,842
)
Schedule of Gross Unrecognized Tax Benefits 

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

($000)
 
2013

 
2012

Gross unrecognized tax benefits - beginning of the year
 
$
12,699

 
$
12,189

Increases as a result of tax positions taken during a prior-year period
 
791

 
445

Decreases as a result of tax positions taken during a prior-year period
 
(146
)
 
(1,153
)
Increases as a result of tax positions taken during the current period
 
2,887

 
2,008

Decreases relating to settlements with tax authorities
 
(2,779
)
 
(299
)
Reductions as a result of lapse of the applicable statute of limitations
 
(494
)
 
(491
)
Gross unrecognized tax benefits - end of the year
 
$
12,958

 
$
12,699



Summary of Income Tax Examinations 
 The following table summarizes our gross liability for interest and penalties:

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Liabilities for interest and penalties
 
$
1,865

 
$
2,232

Summary of Operating Loss Carryforwards 
The following table summarizes our U.S. net operating loss (NOL) carryforwards:

 
 
As of December 31
 
 
 
($000)
 
 
2013
 
 
2012
 
 
 
Expiration Date
 
 
Expiration Date
U.S. federal NOLs subject to expiration dates
 
$
2,136

12/31/2023
 
$
2,362

12/31/2023
Summary of Operating Loss Carryforwards 
The following table summarizes our NOL carryforwards for our non-U.S. operations:

 
 
As of December 31
 
 
($000)
 
2013

 
2012

Non-U.S. NOLs subject to expiration dates from 2014 through 2032
 
$
5,314

 
$
6,064

Non-U.S. NOLs with no expiration date
 
40,054

 
44,504

Total
 
$
45,368

 
$
50,568

 
 
 
 
 
Non-U.S. NOLs not subject to valuation allowances
 
$
8,759

 
$
4,031

Share Repurchase Program (Tables)
Class of Treasury Stock
The following table summarizes the board approvals for increases to the program and the total available under the program:
Date
 
Increase

 
Total program

September 2010
 
$
100
 million
 
$
100
 million
December 2011
 
$
200
 million
 
$
300
 million
December 2012
 
$
200
 million
 
$
500
 million
December 2013
 
$
200
 million
 
$
700
 million
Selected Quarterly Financial Data (Tables)
Schedule of Quarterly Financial Data
 
 
2012

 
 
 
 
 
 
 
2013

 
 
 
 
 
 
 
(in thousands except per share amounts)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
Revenue
 
$
160,759

 
$
165,968

 
$
160,952

 
$
170,609

 
$
168,856

 
$
175,428

 
$
173,482

 
$
180,500

 
Total operating expense (1)
 
130,360

 
124,832

 
121,088

 
131,340

 
128,296

 
131,844

 
128,869

 
138,603

 
Operating income
 
30,399

 
41,136

 
39,864

 
39,269

 
40,560

 
43,584

 
44,613

 
41,897

 
Non-operating income (expense), net
 
659

 
995

 
1,880

 
(577
)
 
945

 
3,111

 
771

 
2,529

 
Income before income taxes and equity in net income of unconsolidated entities
 
31,058

 
42,131

 
41,744

 
38,692

 
41,505

 
46,695

 
45,384

 
44,426

 
Income tax expense
 
11,511

 
14,744

 
15,186

 
11,437

 
12,427

 
15,955

 
14,265

 
13,384

 
Equity in net income (loss) of unconsolidated entities
 
566

 
497

 
478

 
486

 
497

 
360

 
315

 
256

 
Consolidated net income from continuing operations
 
20,113

 
27,884

 
27,036

 
27,741

 
29,575

 
31,100

 
31,434

 
31,298

 
Gain on sale of discontinued operations, net of tax
 
—

 
—

 
—

 
5,188

 
—

 
—

 
—

 
—

 
Consolidated net income
 
20,113

 
27,884

 
27,036

 
32,929

 
29,575

 
31,100

 
31,434

 
31,298

 
Net (income) loss attributable to the noncontrolling interests
 
24

 
4

 
34

 
55

 
43

 
21

 
29

 
29

 
Net income attributable to Morningstar, Inc.
 
$
20,137

 
$
27,888

 
$
27,070

 
$
32,984

 
$
29,618

 
$
31,121

 
$
31,463

 
$
31,327

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to Morningstar, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.59

 
$
0.64

 
$
0.67

 
$
0.68

 
$
0.68

 
Discontinued operations
 
—

 
—

 
—

 
0.11

 
—

 
—

 
—

 
—

 
 
 
$
0.40

 
$
0.57

 
$
0.56

 
$
0.70

 
$
0.64

 
$
0.67

 
$
0.68

 
$
0.68

 
Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations

$
0.40


$
0.56


$
0.56


$
0.58


$
0.63


$
0.66


$
0.68


$
0.68


Discontinued operations
 
—

 
—

 
—

 
0.11

 
—

 
—

 
—

 
—

 
 
 
$
0.40

 
$
0.56

 
$
0.56

 
$
0.69

 
$
0.63

 
$
0.66

 
$
0.68

 
$
0.68

 
Dividends per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.125

 
$
0.125

 
$
0.125

 
$
—

 
$
0.295

 
Dividends paid per common share
 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.225

 
$
—

 
$
0.125

 
$
0.125

 
$
0.125

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
49,938

 
49,195

 
47,975

 
46,913

 
46,406

 
46,400

 
46,080

 
45,756

 
Diluted
 
50,758

 
49,856

 
48,481

 
47,511

 
46,814

 
46,853

 
46,519

 
46,211

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012

 
 
 
 
 
 
 
2013

 
 
 
 
 
 
 
(in thousands)
 
Q1

 
Q2

 
Q3

 
Q4

 
Q1

 
Q2

 
Q3

 
Q4

 
(1) Includes stock-based compensation expense of:
 
$
3,866

 
$
3,734

 
$
3,994

 
$
7,311

 
$
3,783

 
$
3,954

 
$
3,416

 
$
3,890

 
Description of Business (Details)
Dec. 31, 2013
Countries
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Number of countries in which entity operates
27 
Summary of Significant Accounting Policies (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Business Acquisition [Line Items]
 
 
 
capitalized software development costs
$ 8,142,000 
$ 8,527,000 
$ 5,315,000 
Advertising expense
6,939,000 
6,306,000 
8,210,000 
Property, Equipment, and Depreciation, useful life, minimum
3 years 
 
 
Intangible Assets, useful life, minimum
10 years 
10 years 
 
Aspect Huntley [Member]
 
 
 
Business Acquisition [Line Items]
 
 
 
Impairment loss
 
$ 800,000 
 
Minimum [Member]
 
 
 
Business Acquisition [Line Items]
 
 
 
Property, Equipment, and Depreciation, useful life, minimum
3 years 
 
 
Maximum [Member]
 
 
 
Business Acquisition [Line Items]
 
 
 
Property, Equipment, and Depreciation, useful life, minimum
7 years 
 
 
Income Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Basic net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Morningstar, Inc.
$ 31,327 
$ 31,463 
$ 31,121 
$ 29,618 
$ 32,984 
$ 27,070 
$ 27,888 
$ 20,137 
$ 123,529 
$ 108,079 
$ 98,357 
Less: Distributed earnings availabline to participating securities
 
 
 
 
 
 
 
 
(10)
(41)
(40)
Less: Undistributed earnings allocated to participating securities
 
 
 
 
 
 
 
 
(36)
(47)
(259)
Numerator for basic net income per share - undistributed and distributed earnings available to common shareholders
 
 
 
 
 
 
 
 
123,483 
107,991 
98,058 
Weighted average common shares outstanding
45,756 
46,080 
46,400 
46,406 
46,913 
47,975 
49,195 
49,938 
46,158 
48,497 
50,032 
Basic net income per share attributable to Morningstar, Inc.
$ 0.68 
$ 0.68 
$ 0.67 
$ 0.64 
$ 0.70 
$ 0.56 
$ 0.57 
$ 0.40 
$ 2.68 
$ 2.23 
$ 1.96 
Diluted net income per share attributable to Morningstar, Inc.:
 
 
 
 
 
 
 
 
 
 
 
Numerator for basic net income per share - undistributed and distributed earnings available to common shareholders
 
 
 
 
 
 
 
 
123,483 
107,991 
98,058 
Add: Undistributed earnings allocated to participating securities
 
 
 
 
 
 
 
 
36 
47 
259 
Less: Undistributed earnings reallocated to participating securities
 
 
 
 
 
 
 
 
(36)
(46)
(254)
Numerator for diluted net income per share - undistributed and distributed earnings available to common shareholders
 
 
 
 
 
 
 
 
$ 123,483 
$ 107,992 
$ 98,063 
Weighted average common shares outstanding
45,756 
46,080 
46,400 
46,406 
46,913 
47,975 
49,195 
49,938 
46,158 
48,497 
50,032 
Net effect of dilutive stock options and restricted stock units
 
 
 
 
 
 
 
 
333 
651 
956 
Weighted average common shares outstanding for computing diluted income per share
46,211 
46,519 
46,853 
46,814 
47,511 
48,481 
49,856 
50,758 
46,491 
49,148 
50,988 
Diluted net income per share attributable to Morningstar, Inc.
$ 0.68 
$ 0.68 
$ 0.66 
$ 0.63 
$ 0.69 
$ 0.56 
$ 0.56 
$ 0.40 
$ 2.66 
$ 2.20 
$ 1.92 
Income (Loss) from Continuing Operations, Per Basic Share
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 2.68 
$ 2.12 
$ 1.96 
Income (Loss) from Discontinued Operations, Net of Tax, Per Basic Share
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0.00 
$ 0.11 
$ 0.00 
Income (Loss) from Continuing Operations, Per Diluted Share
$ 0.68 
$ 0.68 
$ 0.66 
$ 0.63 
$ 0.58 
$ 0.56 
$ 0.56 
$ 0.40 
$ 2.66 
$ 2.10 
$ 1.92 
Income (Loss) from Discontinued Operations, Net of Tax, Per Diluted Share
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.11 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.10 
$ 0.00 
Income Per Share Income Per Share Antidilutive Shares (Details)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
55 
Stock Options [Member]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
55 
Restricted Stock Units (RSUs) [Member]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
0 
Restricted Stock [Member]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
0 
Segment and Geographical Area Information (Operating Segments) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External revenue
$ 180,500 
$ 173,482 
$ 175,428 
$ 168,856 
$ 170,609 
$ 160,952 
$ 165,968 
$ 160,759 
 
 
 
$ 698,266 
$ 658,288 
$ 631,400 
Stock-based compensation expense
3,890 
 
 
 
7,311 
3,416 
3,954 
3,783 
3,994 
3,734 
3,866 
15,043 
18,905 
15,303 
Depreciation and amortization
 
 
 
 
 
 
 
 
 
 
 
45,693 
43,096 
42,913 
Operating income
41,897 
44,613 
43,584 
40,560 
39,269 
39,864 
41,136 
30,399 
 
 
 
170,654 
150,668 
138,415 
Segment Reporting Information, Additional Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
326,450 
 
 
 
320,845 
 
 
 
 
 
 
326,450 
320,845 
318,492 
United States [Member]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
 
 
 
500,730 
466,947 
446,470 
Investment Management [Member]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
 
 
 
142,624 
132,141 
133,135 
Investment Information [Member]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information, Operating Income (Loss) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External revenue
 
 
 
 
 
 
 
 
 
 
 
$ 555,642 
$ 526,147 
$ 498,265 
Segment and Geographical Area Information (External Revenue and Long-Lived Assets) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 180,500 
$ 173,482 
$ 175,428 
$ 168,856 
$ 170,609 
$ 160,952 
$ 165,968 
$ 160,759 
$ 698,266 
$ 658,288 
$ 631,400 
Long-lived assets
104,986 
 
 
 
84,022 
 
 
 
104,986 
84,022 
 
United States [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
500,730 
466,947 
446,470 
Long-lived assets
84,321 
 
 
 
60,371 
 
 
 
84,321 
60,371 
 
United Kingdom [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
56,298 
56,794 
53,427 
Long-lived assets
6,873 
 
 
 
7,435 
 
 
 
6,873 
7,435 
 
Europe excluding the United Kingdom [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
57,580 
49,844 
49,507 
Long-lived assets
1,873 
 
 
 
2,356 
 
 
 
1,873 
2,356 
 
Australia [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
35,289 
38,229 
39,761 
Long-lived assets
1,051 
 
 
 
1,402 
 
 
 
1,051 
1,402 
 
Canada [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
31,845 
30,664 
27,808 
Long-lived assets
1,275 
 
 
 
1,773 
 
 
 
1,275 
1,773 
 
Asia, Excluding Japan [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
13,860 
13,765 
13,188 
Long-lived assets
9,479 
 
 
 
10,529 
 
 
 
9,479 
10,529 
 
Other [Member]
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
2,664 
2,045 
1,239 
Long-lived assets
$ 114 
 
 
 
$ 156 
 
 
 
$ 114 
$ 156 
 
Investments and Fair Value Measurements (Classification of Securities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Fair Value Disclosures [Abstract]
 
 
Available-for-sale
$ 91,461 
$ 125,786 
Held-to-maturity
31,214 
26,357 
Trading securities
7,732 
5,386 
Total
$ 130,407 
$ 157,529 
Investments and Fair Value Measurements (Gains (Losses) on Investments) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2010
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
$ 90,560 
$ 124,557 
 
Available-for-sale securities, unrealized gain
1,269 
2,517 
 
Available-for-sale securities, unrealized loss
(368)
(1,288)
 
Available-for-sale securities, current
91,461 
125,786 
 
Held-to-maturity:
 
 
 
Held-to-maturity securities, total amortized cost
31,214 
26,357 
 
Held-to-maturity securities, unrealized gain
0 
0 
 
Held-to-maturity securities, unrealized loss
0 
0 
 
Held-to-maturity securities, current
31,214 
26,357 
 
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract]
 
 
 
Available-for-sale securities, realized gains
5,550 
1,671 
761 
Available-for-sale securities, realized losses
(1,343)
(1,133)
(501)
Available-for-sale securities, realized gains, net
4,207 
538 
260 
US Treasury and Government [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
19,693 
40,669 
 
Available-for-sale securities, unrealized gain
8 
29 
 
Available-for-sale securities, unrealized loss
(3)
(608)
 
Available-for-sale securities, fair value disclosure
19,698 
40,090 
 
Corporate Bonds [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
49,913 
49,339 
 
Available-for-sale securities, unrealized gain
22 
36 
 
Available-for-sale securities, unrealized loss
(124)
(292)
 
Available-for-sale securities, fair value disclosure
49,811 
49,083 
 
Foreign obligations [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
505 
2,437 
 
Available-for-sale securities, unrealized gain
0 
1 
 
Available-for-sale securities, unrealized loss
(2)
(19)
 
Available-for-sale securities, fair value disclosure
503 
2,419 
 
Commercial paper [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
9,482 
2,000 
 
Available-for-sale securities, unrealized gain
7 
0 
 
Available-for-sale securities, unrealized loss
0 
0 
 
Available-for-sale securities, fair value disclosure
9,489 
2,000 
 
Equity securities and exchange-traded funds [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
8,872 
19,613 
 
Available-for-sale securities, unrealized gain
1,011 
1,359 
 
Available-for-sale securities, unrealized loss
(141)
(323)
 
Available-for-sale securities, fair value disclosure
9,742 
20,649 
 
Mutual funds [Member]
 
 
 
Available-for-sale:
 
 
 
Available-for-sale securities, amortized cost basis
2,095 
10,499 
 
Available-for-sale securities, unrealized gain
221 
1,092 
 
Available-for-sale securities, unrealized loss
(98)
(46)
 
Available-for-sale securities, fair value disclosure
$ 2,218 
$ 11,545 
 
Investments and Fair Value Measurements (Cost and Fair Value of Securities) (Details) (USD $)
Dec. 31, 2013
Dec. 31, 2012
Available-for-sale Securities, Debt Maturities [Abstract]
 
 
Available-for-sale securities, due in one year or less, amortized cost basis
$ 45,486,000 
$ 87,599,000 
Available-for-sale securities, due in one year or less, fair vlaue
45,402,000 
86,784,000 
Available for sale securities, due in one to two years, amortized cost basis
34,107,000 
6,846,000 
Available-for-sale securities, due in one to two years, fair value
34,099,000 
6,808,000 
Available-for-sale securities, equity securities and mutual funds, amortized cost basis
10,967,000 
30,112,000 
Available-for-sale securities, equity securities and mutual funds, fair value
11,960,000 
32,194,000 
Available-for-sale securities, amortized cost basis
90,560,000 
124,557,000 
Available-for-sale securities, current
91,461,000 
125,786,000 
Held-to-maturity Securities, Debt Maturities [Abstract]
 
 
Held-to-maturity securities, due in one year, net carrying amount
31,210,000 
26,352,000 
Held-to-maturity securities, due within one year, fair value
31,210,000 
26,352,000 
Held-to-maturity securities, due in one to three years, net carrying amount
4,000 
5,000 
Held-to-maturity securities, due in one to three years, fair value
4,000 
5,000 
Held-to-maturity securities, total amortized cost
31,214,000 
26,357,000 
Held-to-maturity securities, current
31,214,000 
26,357,000 
Certificate of Deposit Held as Collateral Against Australia Office Lease
$ 1,500,000 
 
Investments and Fair Value Measurements (Unrealized Gains on Trading Securities) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2010
Fair Value Disclosures [Abstract]
 
 
 
Unrealized gains (losses), net
$ 827 
$ 269 
$ (387)
Investments and Fair Value Measurements (Fair Value of Assets) (Details) (Fair Value, Measurements, Recurring [Member], USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Estimate of Fair Value Measurement [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
$ 7,732 
$ 5,386 
Cash equivalents, fair value disclosure
925 
398 
Investments, fair value disclosure
100,118 
131,570 
Estimate of Fair Value Measurement [Member] |
Government obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
19,698 
40,090 
Estimate of Fair Value Measurement [Member] |
Corporate bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
49,811 
49,083 
Estimate of Fair Value Measurement [Member] |
Foreign obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
503 
2,419 
Estimate of Fair Value Measurement [Member] |
Commercial paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
9,489 
2,000 
Estimate of Fair Value Measurement [Member] |
Equity securities and exchange-traded funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
9,742 
20,649 
Estimate of Fair Value Measurement [Member] |
Mutual funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
2,218 
11,545 
Fair Value, Inputs, Level 1 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
7,732 
5,386 
Cash equivalents, fair value disclosure
925 
398 
Investments, fair value disclosure
20,617 
37,978 
Fair Value, Inputs, Level 1 [Member] |
Government obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 1 [Member] |
Corporate bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 1 [Member] |
Foreign obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 1 [Member] |
Commercial paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 1 [Member] |
Equity securities and exchange-traded funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
9,742 
20,649 
Fair Value, Inputs, Level 1 [Member] |
Mutual funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
2,218 
11,545 
Fair Value, Inputs, Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
0 
0 
Cash equivalents, fair value disclosure
0 
0 
Investments, fair value disclosure
79,501 
93,592 
Fair Value, Inputs, Level 2 [Member] |
Government obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
19,698 
40,090 
Fair Value, Inputs, Level 2 [Member] |
Corporate bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
49,811 
49,083 
Fair Value, Inputs, Level 2 [Member] |
Foreign obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
503 
2,419 
Fair Value, Inputs, Level 2 [Member] |
Commercial paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
9,489 
2,000 
Fair Value, Inputs, Level 2 [Member] |
Equity securities and exchange-traded funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 2 [Member] |
Mutual funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 3 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading securities, fair value disclosure
0 
0 
Cash equivalents, fair value disclosure
0 
0 
Investments, fair value disclosure
0 
0 
Fair Value, Inputs, Level 3 [Member] |
Government obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 3 [Member] |
Corporate bonds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 3 [Member] |
Foreign obligations [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 3 [Member] |
Commercial paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 3 [Member] |
Equity securities and exchange-traded funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
0 
0 
Fair Value, Inputs, Level 3 [Member] |
Mutual funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities, fair value disclosure
$ 0 
$ 0 
Acquisitions, Goodwill, and Other Intangible Assets (Narrative) (Details) (USD $)
12 Months Ended 0 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
May 3, 2013
Morningstar Sweden AB [Member]
Mar. 31, 2013
Morningstar Sweden AB [Member]
Business Acquisition [Line Items]
 
 
 
 
 
Percentage of voting interests acquired
 
 
 
76.00% 
 
Equity method investment, ownership percentage
 
 
 
100.00% 
24.00% 
Acquisition estimated fair value
 
 
 
$ 18,513,000 
 
Cash paid to acquire the entity
 
 
 
14,554,000 
 
Equity method investments, fair value
 
 
 
 
3,959,000 
Equity Method Investments Holding Gain
3,635,000 
0 
0 
3,635,000 
 
Deferred tax liability
 
 
 
2,272,000 
 
Goodwill
326,450,000 
320,845,000 
318,492,000 
8,911,000 
 
Goodwill, Impairment Loss
0 
0 
0 
 
 
Impairment of intangible assets
$ 0 
$ 0 
$ 800,000 
 
 
Acquisitions, Goodwill, and Other Intangible Assets (Purchase Price Allocation) (Details) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
May 3, 2013
Morningstar Sweden AB [Member]
Business Acquisition, Purchase Price Allocation [Abstract]
 
 
 
 
Cash and cash equivalents
 
 
 
$ 3,472 
Accounts receivable and other current assets
 
 
 
519 
Other non-current assets
 
 
 
244 
Intangible assets
 
 
 
9,700 
Goodwill
326,450 
320,845 
318,492 
8,911 
Deferred revenue
 
 
 
(1,191)
Deferred tax liability
 
 
 
(2,272)
Other current and non-current liabilities
 
 
 
(870)
Acquisition estimated fair value
 
 
 
$ 18,513 
Acquisitions, Goodwill, and Other Intangible Assets (Allocation of Acquired Intangible Assets) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2013
Customer-Related Assets [Member]
Dec. 31, 2012
Customer-Related Assets [Member]
May 3, 2013
Morningstar Sweden AB [Member]
May 3, 2013
Morningstar Sweden AB [Member]
Customer-Related Assets [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
Intangible assets
 
 
 
 
$ 9,700 
$ 9,700 
Weighted Average Useful Life (years)
10 years 
10 years 
12 years 
12 years 
14 years 
14 years 
Acquisitions, Goodwill, and Other Intangible Assets (Schedule of Goodwill) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2012
Inquiry Financial Europe AB [Member]
Dec. 31, 2013
Morningstar Sweden AB [Member]
May 3, 2013
Morningstar Sweden AB [Member]
Goodwill [Roll Forward]
 
 
 
 
 
Goodwill, Beginning Balance
$ 320,845 
$ 318,492 
 
 
$ 8,911 
Adjustments to Acquisitions
 
 
(937)
8,911 
 
Other, primarily currency translation
(3,306)
3,290 
 
 
 
Goodwill, Ending Balance
$ 326,450 
$ 320,845 
 
 
$ 8,911 
Acquisitions, Goodwill, and Other Intangible Assets (Schedule of Intangible Assets) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
$ 253,700 
$ 246,757 
Accumulated Amortization
(149,791)
(130,025)
Net
103,909 
116,732 
Weighted Average Useful Life (years)
10 years 
10 years 
Intellectual Property [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
29,477 
30,621 
Accumulated Amortization
(23,128)
(21,527)
Net
6,349 
9,094 
Weighted Average Useful Life (years)
9 years 
9 years 
Customer-Related Assets [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
141,833 
132,798 
Accumulated Amortization
(74,311)
(63,005)
Net
67,522 
69,793 
Weighted Average Useful Life (years)
12 years 
12 years 
Supplier Relationships [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
240 
240 
Accumulated Amortization
(108)
(96)
Net
132 
144 
Weighted Average Useful Life (years)
20 years 
20 years 
Technology-Based Assets [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
80,489 
81,333 
Accumulated Amortization
(50,673)
(43,809)
Net
29,816 
37,524 
Weighted Average Useful Life (years)
9 years 
9 years 
Non-Competition Agreement [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross
1,661 
1,765 
Accumulated Amortization
(1,571)
(1,588)
Net
$ 90 
$ 177 
Weighted Average Useful Life (years)
4 years 
4 years 
Acquisitions, Goodwill, and Other Intangible Assets (Amortization Expense) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Acquisitions, Goodwill, and Other Intangible Assets [Abstract]
 
 
 
Amortization expense
$ 21,454 
$ 23,944 
$ 27,267 
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
 
 
 
2014
20,485 
 
 
2015
19,659 
 
 
2016
15,101 
 
 
2017
10,565 
 
 
2018
$ 8,568 
 
 
Discontinued Operations (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax
 
 
 
 
 
 
 
 
 
$ 6,193 
$ 0 
Discontinued Operation, Tax Effect of Discontinued Operation
 
 
 
 
 
 
 
 
 
1,005 
0 
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax
$ 0 
$ 0 
$ 0 
$ 0 
$ 5,188 
$ 0 
$ 0 
$ 0 
$ 0 
$ 5,188 
$ 0 
Investments in Unconsolidated Entities (Details)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended
Dec. 31, 2013
USD ($)
Dec. 31, 2012
USD ($)
Dec. 31, 2011
USD ($)
Dec. 31, 2013
Other Equity Method Investments [Member]
USD ($)
Dec. 31, 2012
Other Equity Method Investments [Member]
USD ($)
Dec. 31, 2012
Morningstar Sweden AB [Member]
Dec. 31, 2013
YCharts [Member]
Dec. 31, 2012
YCharts [Member]
Dec. 31, 2013
Morningstar Japan KK [Member]
USD ($)
Dec. 31, 2013
Morningstar Japan KK [Member]
JPY (¥)
Dec. 31, 2012
Morningstar Japan KK [Member]
USD ($)
Dec. 31, 2012
Morningstar Japan KK [Member]
JPY (¥)
Dec. 31, 2013
Inquiry Financial Europe AB [Member]
May 3, 2013
Morningstar Sweden AB [Member]
USD ($)
Mar. 31, 2013
Morningstar Sweden AB [Member]
Schedule of Equity Method Investments [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity method investments
 
 
 
$ 6,166 
$ 6,288 
 
 
 
$ 21,782 
 
$ 20,540 
 
 
 
 
Cost method investments
10,766 
8,477 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investments in unconsolidated entities
38,714 
35,305 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity method investment, ownership percentage
 
 
 
 
 
24.00% 
22.00% 
22.00% 
34.00% 
34.00% 
34.00% 
34.00% 
34.00% 
100.00% 
24.00% 
Holding gain upon acquisition of additional ownership of equity method investment
(3,635)
0 
0 
 
 
 
 
 
 
 
 
 
 
(3,635)
 
Percentage of voting interests acquired
 
 
 
 
 
 
 
 
 
 
 
 
 
76.00% 
 
Equity method investment, approximate market value
 
 
 
 
 
 
 
 
94,999 
9,824,068 
36,227 
3,109,579 
 
 
 
Cost-method investments, other than temporary impairment
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Investment, Other than Temporary Impairment
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments to Acquire Other Investments
2,751 
10,304 
2,450 
 
 
 
 
 
 
 
 
 
 
 
 
Cost-method Investments, Realized Gain (Loss)
$ 0 
$ (2,034)
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
Property, Equipment, and Capitalized Software (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2013
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
$ 171,532 
 
$ 211,152 
Less accumulated depreciation
(87,510)
 
(106,166)
Property, equipment, and capitalized software, net
84,022 
 
104,986 
Capitalized software development costs not yet placed into service
6,478 
 
11,345 
Depreciation expense
19,152 
15,646 
 
Computer equipment [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
42,312 
 
47,830 
Capitalized software [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
39,643 
 
50,360 
Furniture and fixtures [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
22,804 
 
23,259 
Leasehold improvements [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
51,333 
 
52,512 
Telephone equipment [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
1,951 
 
2,032 
Construction in progress [Member]
 
 
 
Property, Plant and Equipment, Net [Abstract]
 
 
 
Property, equipment, and capitalized software, at cost
$ 13,489 
 
$ 35,159 
Operating Leases Operating Leases (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
 
 
2012
$ 18,987 
 
 
2013
17,656 
 
 
2014
16,918 
 
 
2015
16,001 
 
 
2016
13,908 
 
 
Thereafter
42,592 
 
 
Total
126,062 
 
 
Rent expense
22,169 
20,736 
20,122 
Deferred rent
26,157 
27,783 
 
Liability for Vacant Office Space [Roll Forward]
 
 
 
Vacant office space liability, beginning balance
145 
 
919 
Reduction of liability for lease and other related payments
 
(774)
 
Reduction of liability for lease payments
(14)
 
 
Vacant office space liability, ending balance
$ 131 
$ 145 
 
Stock-Based Compensation (Narrative) (Details) (USD $)
12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2013
May 31, 2010
Realpoint, LLC [Member]
Dec. 31, 2013
Stock Options [Member]
Dec. 31, 2013
Restricted Stock [Member]
Dec. 31, 2012
Restricted Stock [Member]
Dec. 31, 2011
Restricted Stock [Member]
Dec. 31, 2013
Restricted Stock Units (RSUs) [Member]
May 31, 2011
2004 Stock Incentive Plan [Member]
Dec. 31, 2012
2004 Stock Incentive Plan [Member]
Nov. 30, 2011
2011 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
Issuance of restricted stock
 
199,174 
 
 
 
 
 
 
 
 
Amortized fair value to stock-based compensation
 
 
 
$ 9,363,000 
 
 
 
 
 
 
Expense recognized upon accelerated vesting of restricted stock
 
 
 
 
3,238,000 
396,000 
 
 
 
 
Unrecognized stock-based compensation expense
$ 32,408,000 
 
$ 585,000 
$ 517,000 
 
 
$ 31,306,000 
 
 
 
Expected amortization period (months)
32 years 
 
16 years 
16 years 
 
 
33 years 
 
 
 
Stock option granted
 
 
 
 
 
 
 
86,106 
 
6,095 
Fair value per share
 
 
 
 
 
 
 
 
$ 23.81 
 
Stock-Based Compensation (Shares Available for Future Grants) (Details)
In Thousands, unless otherwise specified
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
Shares available for future grants
4,501 
Stock-Based Compensation (Allocation of Stock-Based Compensation Costs) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
$ 3,890 
$ 7,311 
$ 3,416 
$ 3,954 
$ 3,783 
$ 3,994 
$ 3,734 
$ 3,866 
$ 15,043 
$ 18,905 
$ 15,303 
Income tax benefit related to the stock-based compensation expense
 
 
 
 
 
 
 
 
4,027 
3,686 
3,535 
Restricted Stock Units (RSUs) [Member]
 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
 
 
 
 
 
 
 
 
14,163 
13,451 
12,765 
Restricted Stock [Member]
 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
 
 
 
 
 
 
 
 
388 
5,013 
2,196 
Stock Options [Member]
 
 
 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
 
 
 
 
 
 
 
 
$ 492 
$ 441 
$ 342 
Stock-Based Compensation (Unrecognized Stock-Based Compensation Expense) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
$ 32,408 
Expected amortization period (months)
32 years 
Restricted Stock Units (RSUs) [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
31,306 
Expected amortization period (months)
33 years 
Restricted Stock [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
517 
Expected amortization period (months)
16 years 
Stock Options [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
Income tax benefit related to the stock-based compensation expense
$ 585 
Expected amortization period (months)
16 years 
Stock-Based Compensation (Restricted Stock Units Activity) (Details) (Restricted Stock Units (RSUs) [Member], USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Restricted Stock Units (RSUs) [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
 
 
 
RSUs Outstanding, Beginning Balance, Unvested
727,145 
741,043 
777,666 
RSUs Outstanding, Beginning Balance, Vested but Deferred
18,782 
20,076 
45,189 
RSUs Outstanding, Beginning Balance
745,927 
761,119 
822,855 
RSUs Outstanding, Beginning Balance, Weighted Average Grant Date Value per RSU
53.37 
50.66 
47.14 
Granted, Unvested
287,848 
341,282 
292,398 
Granted, Vested but Deferred
0 
0 
0 
Granted
287,848 
341,282 
292,398 
Granted, Weighted Average Grant Date Value per RSU
$ 72.04 
$ 56.26 
$ 57.36 
Dividend equivalents, Unvested
2,773 
6,405 
 
Dividends equivalents, Vested but Deferred
157 
130 
 
Dividends equivalents
2,930 
6,535 
 
Dividends equivalents, Weighted Average Grant Date Value per RSU
$ 57.39 
$ 52.02 
 
Vested, Unvested
(278,549)
(270,695)
(256,623)
Vested, Vested but Deferred
0 
0 
0 
Vested
(278,549)
(270,695)
(256,623)
Vested, Weighted Average Grant Date Value per RSU
$ 50.41 
$ 50.12 
$ 48.28 
Vested but Deferred, Unvested
 
(892)
(1,753)
Vested but Deferred, Vested but Deferred
 
892 
1,753 
Vested but Deferred
 
0 
0 
Vested but Deferred, Weighted Average Grant Date Value per RSU
 
$ 0.00 
$ 0.00 
Issued, Unvested
0 
0 
0 
Issued, Vested but Deferred
(2,257)
(2,316)
(26,866)
Issued
(2,257)
(2,316)
(26,866)
Issued, Weighted Average Grant Date Value per RSU
$ 49.40 
$ 73.28 
$ 46.69 
Forfeited, Unvested
(59,215)
(89,998)
(73,318)
Forfeited, Vested but Deferred
0 
0 
0 
Forfeited
(59,215)
(89,998)
(73,318)
Forfeited, Weighted Average Grant Date Value per RSU
$ 57.58 
$ 50.84 
$ 47.59 
RSUs Outstanding, Ending Balance, Unvested
680,002 
727,145 
741,043 
RSUs Outstanding, Ending Balance, Vested but Deferred
16,682 
18,782 
20,076 
RSUs Outstanding, Ending Balance
696,684 
745,927 
761,119 
RSUs Outstanding, Ending Balance, Weighted Average Grant Date Value per RSU
62.02 
53.37 
50.66 
Stock-Based Compensation (Assumptions for Black-Scholes Option Pricing Model) (Details) (Employee Stock Option [Member])
12 Months Ended
Dec. 31, 2013
Employee Stock Option [Member]
 
Assumptions for Black-Scholes Option Pricing Model [Line Items]
 
Expected life (years):
7 years 4 months 24 days 
Volatility factor:
35.10% 
Dividends yield:
0.35% 
Interest rate:
2.87% 
Stock-Based Compensation (Stock Option Activity) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2010
Dec. 31, 2009
Intrinsic Value of Options Exercised [Abstract]
 
 
 
 
Intrinsic value of options exercised
$ 12,801 
$ 22,526 
$ 29,899 
 
Options Granted At Discount [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
 
 
 
Beginning Balance, Options, Outstanding, Underlying Shares
282,695 
 
648,885 
 
Granted, Underlying Shares
0 
0 
0 
 
Canceled, Underlying Shares
(250)
(650)
0 
 
Exercised, Underlying Shares
(102,886)
(115,514)
(250,026)
 
Ending Balance, Options, Outstanding, Underlying Shares
179,559 
282,695 
398,859 
 
Options, Weighted Average Exercise Price [Abstract]
 
 
 
 
Beginning Balance, Options, Outstanding, Weighted Average Exercise Price
$ 20.55 
 
$ 18.91 
 
Granted, Weighted Average Exercise Price
$ 0.00 
$ 0.00 
$ 0.00 
 
Canceled, Weighted Average Exercise Price
$ 21.48 
$ 14.70 
$ 0.00 
 
Exercised, Weighted Average Exercise Price
$ 21.09 
$ 20.19 
$ 19.25 
 
Ending Balance, Options, Outstanding, Weighted Average Exercise Price
$ 21.47 
$ 20.55 
$ 19.72 
 
Options, Exercisable, Number of Shares and Weighted Average Exercise Price [Abstract]
 
 
 
 
Options exercisable - end of year, Underlying Shares
179,559 
282,695 
 
398,859 
Options exercisable - end of year, Weighted Average Exercise Price
$ 21.47 
$ 20.55 
 
$ 19.72 
Option Grants Excluding Options Granted At Discount [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
 
 
 
Beginning Balance, Options, Outstanding, Underlying Shares
391,784 
 
1,207,540 
 
Granted, Underlying Shares
0 
0 
92,201 
 
Canceled, Underlying Shares
(1,352)
(22,330)
(1,960)
 
Exercised, Underlying Shares
(136,460)
(404,438)
(479,229)
 
Ending Balance, Options, Outstanding, Underlying Shares
253,972 
391,784 
818,552 
 
Options, Weighted Average Exercise Price [Abstract]
 
 
 
 
Beginning Balance, Options, Outstanding, Weighted Average Exercise Price
$ 28.98 
 
$ 17.09 
 
Granted, Weighted Average Exercise Price
$ 0.00 
$ 0.00 
$ 57.42 
 
Canceled, Weighted Average Exercise Price
$ 16.19 
$ 39.75 
$ 16.04 
 
Exercised, Weighted Average Exercise Price
$ 16.84 
$ 16.60 
$ 16.17 
 
Ending Balance, Options, Outstanding, Weighted Average Exercise Price
$ 36.48 
$ 28.98 
$ 22.76 
 
Options, Exercisable, Number of Shares and Weighted Average Exercise Price [Abstract]
 
 
 
 
Options exercisable - end of year, Underlying Shares
219,449 
337,684 
 
726,351 
Options exercisable - end of year, Weighted Average Exercise Price
$ 33.18 
$ 24.42 
 
$ 18.36 
Stock-Based Compensation (Additional Information on Options) (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Closing Stock Price Used to Calculate Intrinsic Value
$ 78.09 
Range One [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
$14.70 
Exercise price range, lower range limit
$ 8.57 
Exercise price range, upper range limit
$ 14.70 
Options Outstanding, Number of Options
285 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
0 years 11 months 5 days 
Options Outstanding, Weighted Average Exercise Price
$ 14.70 
Options Outstanding, Aggregate Intrinsic Value
$ 18 
Options Exercisable, Exercisable Shares
285 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
0 years 11 months 5 days 
Options Exercisable, Weighted Average Exercise Price
$ 14.70 
Options Exercisable, Aggregate Intrinsic Value
18 
Range Two [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
$21.40 - $48.90 
Exercise price range, lower range limit
   
Exercise price range, upper range limit
   
Options Outstanding, Number of Options
361,571 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
1 year 2 months 1 day 
Options Outstanding, Weighted Average Exercise Price
$ 24.88 
Options Outstanding, Aggregate Intrinsic Value
19,238 
Options Exercisable, Exercisable Shares
361,571 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
1 year 2 months 1 day 
Options Exercisable, Weighted Average Exercise Price
$ 24.88 
Options Exercisable, Aggregate Intrinsic Value
19,238 
Range Three [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
$57.28 - $59.35 
Exercise price range, lower range limit
$ 57.28 
Exercise price range, upper range limit
$ 59.35 
Options Outstanding, Number of Options
71,675 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
7 years 6 months 7 days 
Options Outstanding, Weighted Average Exercise Price
$ 57.46 
Options Outstanding, Aggregate Intrinsic Value
1,479 
Options Exercisable, Exercisable Shares
37,152 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
7 years 6 months 7 days 
Options Exercisable, Weighted Average Exercise Price
$ 57.45 
Options Exercisable, Aggregate Intrinsic Value
710 
Range Four [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Range of Exercise Prices
$14.70 - $59.35 
Exercise price range, lower range limit
$ 5.87 
Exercise price range, upper range limit
$ 59.35 
Options Outstanding, Number of Options
433,531 
Options Outstanding, Weighted Average Remaining Contractual Life (years)
2 years 2 months 19 days 
Options Outstanding, Weighted Average Exercise Price
$ 30.26 
Options Outstanding, Aggregate Intrinsic Value
20,735 
Options Exercisable, Exercisable Shares
399,008 
Options Exercisable, Weighted Average Remaining Contractual Life (years)
1 year 9 months 4 days 
Options Exercisable, Weighted Average Exercise Price
$ 27.91 
Options Exercisable, Aggregate Intrinsic Value
19,966 
Vested or Expected to Vest [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Exercise price range, lower range limit
$ 5.87 
Exercise price range, upper range limit
$ 59.35 
Share Based Compensation, Arrangement By Share Based Payments, Vested or Expected to Vest, Range of Exercise Prices
$14.70 - $59.35 
Option Outstanding, Number of Options, Vested or Expected to Vest
433,531 
Options Outstanding, Weighted Average Remaining Contractual Life (years), Vested or Expected to vest
2 years 2 months 19 days 
Options Outstanding, Weighted Average Exercise Price, Vested or Expected to Vest
$ 30.26 
Options Outstanding, Average Intrinsic Value, Vested or Expected to Vest
$ 20,735 
Defined Contribution Plan (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Defined Contribution Plan [Abstract]
 
 
 
401(k) matching contributions
$ 6,879,000 
$ 6,642,000 
$ 5,601,000 
Matching contribution to 401(k) for every dollar
$ 0.75 
$ 0.75 
 
Matching contribution percent to employee's contribution in pay period
7.00% 
1.00% 
 
Non-Operating Income (Details) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Nonoperating Income (Expense) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
 
 
 
 
 
 
 
$ 2,940,000 
$ 5,464,000 
$ 3,679,000 
Interest expense
 
 
 
 
 
 
 
 
(228,000)
(311,000)
(1,318,000)
Gain (loss) on sale of investments reclassified from other comprehensive income
 
 
 
 
 
 
 
 
4,207,000 
538,000 
260,000 
Other income (expense), net
 
 
 
 
 
 
 
 
(3,198,000)
(2,734,000)
(912,000)
Non-operating income (expense), net
2,529,000 
771,000 
3,111,000 
945,000 
(577,000)
1,880,000 
995,000 
659,000 
7,356,000 
2,957,000 
1,709,000 
Interest on business tax expense related to prior years
 
 
 
 
 
 
 
 
 
700,000 
900,000 
Business tax expense related to prior years
 
 
 
 
 
 
 
 
 
1,000,000 
1,400,000 
Cost-method Investments, Realized Gain (Loss)
 
 
 
 
 
 
 
 
0 
(2,034,000)
0 
Holding gain upon acquisition of additional ownership of equity method investment
 
 
 
 
 
 
 
 
$ (3,635,000)
$ 0 
$ 0 
Income Taxes (Schedule of Income Tax Expense and Effective Tax Rate) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes and equity in net income of unconsolidated entities
$ 44,426 
$ 45,384 
$ 46,695 
$ 41,505 
$ 38,692 
$ 41,744 
$ 42,131 
$ 31,058 
$ 178,010 
$ 153,625 
$ 140,124 
Equity in net income of unconsolidated entities
256 
315 
360 
497 
486 
478 
497 
566 
1,428 
2,027 
1,848 
Net (income) loss attributable to the noncontrolling interest
29 
29 
21 
43 
55 
34 
4 
24 
122 
117 
43 
Income loss from continuing operations before income taxes domestic and foreign
 
 
 
 
 
 
 
 
179,560 
155,769 
142,015 
Income tax expense
$ 13,384 
$ 14,265 
$ 15,955 
$ 12,427 
$ 11,437 
$ 15,186 
$ 14,744 
$ 11,511 
$ 56,031 
$ 52,878 
$ 43,658 
Effective income tax rate
 
 
 
 
 
 
 
 
31.20% 
33.90% 
30.70% 
Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Tax Examination [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Income tax expense at U.S. federal rate
 
 
 
 
 
 
 
 
$ 62,845 
$ 54,519 
$ 49,705 
Income tax expense at U.S. federal rate, percent
 
 
 
 
 
 
 
 
35.00% 
35.00% 
35.00% 
State income taxes, net of frderal income tax benefit
 
 
 
 
 
 
 
 
3,029 
1,510 
1,376 
State income taxes, net of frderal income tax benefit, percent
 
 
 
 
 
 
 
 
1.70% 
1.00% 
1.00% 
Stock option activity
 
 
 
 
 
 
 
 
254 
516 
440 
Stock option activity, percent
 
 
 
 
 
 
 
 
0.10% 
0.30% 
0.30% 
Non-U.S. witholding taxes, net of federal income tax effect, and foreign tax credits
 
 
 
 
 
 
 
 
310 
307 
346 
Non-U.S. witholding taxes, net of federal income tax effect, and foreign tax credits, percent
 
 
 
 
 
 
 
 
0.20% 
0.20% 
0.20% 
Net change in valuation allowance related to non-U.S. deffered tax assets, primarily net operating losses
 
 
 
 
 
 
 
 
(1,842)
(630)
394 
Net change in valuation allowance related to non-U.S. deffered tax assets, primarily net operating losses, percent
 
 
 
 
 
 
 
 
(1.00%)
(0.40%)
0.30% 
Difference between U.S. federal statutory and foreign tax rates
 
 
 
 
 
 
 
 
(2,513)
(2,777)
(2,393)
Difference between U.S. federal statutory and foreign tax rates, percent
 
 
 
 
 
 
 
 
(1.40%)
(1.80%)
(1.70%)
Change in unrecognized tax benefits
 
 
 
 
 
 
 
 
(211)
967 
3,126 
Changes in unrecognized tax benefits, percent
 
 
 
 
 
 
 
 
(0.10%)
0.60% 
2.20% 
Other tax credits
 
 
 
 
 
 
 
 
(4,374)
(1,494)
(7,734)
Other tax credits, percent
 
 
 
 
 
 
 
 
(2.50%)
(1.00%)
(5.40%)
Recognition of deferred tax assets
 
 
 
 
 
 
 
 
(1,448)
0 
(1,778)
Recognition of deferred tax assets, percent
 
 
 
 
 
 
 
 
(0.80%)
0.00% 
(1.30%)
Other - net
 
 
 
 
 
 
 
 
(19)
(40)
176 
Other - net, percent
 
 
 
 
 
 
 
 
0.00% 
0.00% 
0.10% 
Income tax expense
$ 13,384 
$ 14,265 
$ 15,955 
$ 12,427 
$ 11,437 
$ 15,186 
$ 14,744 
$ 11,511 
$ 56,031 
$ 52,878 
$ 43,658 
Incomr tax expense, percent
 
 
 
 
 
 
 
 
31.20% 
33.90% 
30.70% 
Income Taxes (Schedule of Components of Income Tax Expense) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
$ 42,808 
$ 38,821 
$ 41,520 
State
 
 
 
 
 
 
 
 
3,882 
1,997 
1,808 
Non-U.S.
 
 
 
 
 
 
 
 
10,456 
5,719 
5,756 
Current tax expense
 
 
 
 
 
 
 
 
57,146 
46,537 
49,084 
Federal
 
 
 
 
 
 
 
 
2,630 
6,287 
(1,011)
State
 
 
 
 
 
 
 
 
814 
334 
(242)
Non-U.S.
 
 
 
 
 
 
 
 
(4,559)
(280)
(4,173)
Deferred tax expense (benefit)
 
 
 
 
 
 
 
 
(1,115)
6,341 
(5,426)
Income tax expense
$ 13,384 
$ 14,265 
$ 15,955 
$ 12,427 
$ 11,437 
$ 15,186 
$ 14,744 
$ 11,511 
$ 56,031 
$ 52,878 
$ 43,658 
Income Taxes (Schedule of Income before Income Taxes and Equity in Net Income of Unconsolidated Entities) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
 
 
$ 144,065 
$ 128,920 
$ 123,390 
Non-U.S.
 
 
 
 
 
 
 
 
33,945 
24,705 
16,734 
Income before income taxes and equity in net income of unconsolidated entities
$ 44,426 
$ 45,384 
$ 46,695 
$ 41,505 
$ 38,692 
$ 41,744 
$ 42,131 
$ 31,058 
$ 178,010 
$ 153,625 
$ 140,124 
Income Taxes (Schedule of Deferred Tax Assets and Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Deferred tax assets:
 
 
Stock-based compensation expense
$ 3,479 
$ 4,019 
Accrued liabilities
9,805 
8,402 
Net operating loss carryforwards - U.S.
851 
930 
Net operating loss carryforwards - Non-U.S.
9,229 
12,386 
Research and development
0 
246 
Deferred royalty revenue
366 
383 
Allowance for doubtful accounts
758 
515 
Deferred rent
8,673 
9,031 
Other
0 
846 
Total deferred tax assets
33,161 
36,758 
Deferred tax liabilities:
 
 
Acquired intangible assets
(12,967)
(14,535)
Property, equipment and capitalized software
(15,525)
(14,615)
Unrealized exchange gains, net
(395)
(444)
Prepaid expenses
(4,299)
(3,694)
Investments in unconsolidated entities
(12,009)
(9,905)
Other
(373)
0 
Total deferred tax liabilities
(45,568)
(43,193)
Net deferred tax liability before valuation allowance
12,407 
6,435 
Valuation allowance
(7,456)
(11,407)
Net deferred tax liability
$ (19,863)
$ (17,842)
Income Taxes (Schedule of Deferred Tax Assets and Liabilities Included in Consolidated Balance Sheets) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
Deferred tax assets, net - current
$ 3,892 
$ 3,741 
Deferred tax liabilities, net - noncurrent
(23,755)
(21,583)
Net deferred tax liability
$ (19,863)
$ (17,842)
Income Taxes (Summary of Operating Loss Carryforward- U.S and Non-U.S) (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Operating Loss Carryforwards [Line Items]
 
 
Undistributed earnings of foreigh subsidiaries, permanently invested
$ 112,600,000 
 
Non-U.S. [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
45,368,000 
50,568,000 
Operating loss carryforwards, not subject to valuation allowances
8,759,000 
4,031,000 
Non-U.S. [Member] |
Subject to Expiration Date [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
5,314,000 
6,064,000 
Non-U.S. [Member] |
No Expiration Date [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
40,054,000 
44,504,000 
U.S [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforward, amount subject to limitations
225,000 
 
U.S [Member] |
Subject to Expiration Date [Member]
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating loss carryforwards
$ 2,136,000 
$ 2,362,000 
Operating loss carryforwards, expiration dates
Dec. 31, 2023 
Dec. 31, 2023 
Income Taxes (Accounting for Uncertainty in Tax Positions) (Details) (USD $)
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2010
Income Tax Disclosure [Abstract]
 
 
 
Gross unrecognized tax benefits - beginning of the year
$ 12,699,000 
 
$ 12,189,000 
Increases as a resulting of tax positions taken during a prior-year period
791,000 
445,000 
 
Decreases as a resulting of tax positions taked during a prior-year period
(146,000)
(1,153,000)
 
Increases as a result of tax positions taken during the current period
2,887,000 
2,008,000 
 
Unrecognized Tax Benefits, Decreases Resulting from Settlements with Taxing Authorities
(2,779,000)
(299,000)
 
Decrease of unrecognized tax benefits relating to settlements with tax authorities
2,785,000 
 
 
Reductions as a result of lapse of the applicable statute of limitations
(494,000)
(491,000)
 
Gross unrecognized tax benefits - end of the year
12,958,000 
12,699,000 
12,189,000 
Unrecognized tax benefits included in current liabilities
6,211,000 
 
 
Unrecognized tax benefits included in non-current liabilities
6,012,000 
 
 
Result of tax position taken during period
3,227,000 
 
 
Increase in income tax expense
2,690,000 
 
 
Reductions resulting from settlements and lapse of statute of limitations
3,275,000 
 
 
Unrecognized tax benefits that would impact effective tax rate
10,557,000 
 
 
Unrecognized tax benefits, period increase (decrease)
3,532,000 
 
 
Reductions resulting from settlements and lapse statute of limitations, tax effect
2,301,000 
 
 
Decrease in income tax expense upon recognition of gross unrecognized tax benefits
$ 9,262,000 
 
 
Income Taxes (Summary of Income Tax Examinations) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
Liabilities for interest and penalties
$ 1,865 
$ 2,232 
Share Repurchase Program (Details) (USD $)
1 Months Ended 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Sep. 30, 2010
Dec. 31, 2013
Feb. 21, 2014
Equity [Abstract]
 
 
 
 
 
 
Shares repurchased, program life to date, shares
7,068,006 
 
 
 
7,068,006 
7,350,000 
Shares repurchased, program life to date, value
$ 449,784,000 
 
 
 
$ 449,784,000 
 
Stock repurchase program, increase in authorized amount
200,000,000 
200,000,000 
200,000,000 
100,000,000 
 
 
Stock repurchase program, authorized amount
700,000,000 
500,000,000 
300,000,000 
100,000,000 
 
 
Stock Repurchase Program, Remaining Authorized Repurchase Amount
 
 
 
 
$ 230,000,000 
 
Subsequent Events (Details)
3 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Feb. 29, 2012
Subsequent Event [Member]
Subsequent Event [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
$ 0.30 
$ 0.00 
$ 0.13 
$ 0.13 
$ 0.13 
$ 0.10 
$ 0.10 
$ 0.10 
$ 0.55 
$ 0.43 
$ 0.25 
$ 0.17 
Selected Quarterly Financial Data (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 180,500 
$ 173,482 
$ 175,428 
$ 168,856 
$ 170,609 
$ 160,952 
$ 165,968 
$ 160,759 
 
 
 
$ 698,266 
$ 658,288 
$ 631,400 
Total operating expense
138,603 1
128,869 1
131,844 1
128,296 1
131,340 1
121,088 1
124,832 1
130,360 1
 
 
 
527,612 2
507,620 2
492,985 2
Operating income
41,897 
44,613 
43,584 
40,560 
39,269 
39,864 
41,136 
30,399 
 
 
 
170,654 
150,668 
138,415 
Non-operating income (expense), net
2,529 
771 
3,111 
945 
(577)
1,880 
995 
659 
 
 
 
7,356 
2,957 
1,709 
Income before income taxes and equity in net income of unconsolidated entities
44,426 
45,384 
46,695 
41,505 
38,692 
41,744 
42,131 
31,058 
 
 
 
178,010 
153,625 
140,124 
Income tax expense
13,384 
14,265 
15,955 
12,427 
11,437 
15,186 
14,744 
11,511 
 
 
 
56,031 
52,878 
43,658 
Equity in net income (loss) of unconsolidated entities
256 
315 
360 
497 
486 
478 
497 
566 
 
 
 
1,428 
2,027 
1,848 
Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest
31,298 
31,434 
31,100 
29,575 
27,741 
27,036 
27,884 
20,113 
 
 
 
123,407 
102,774 
98,314 
Consolidated net income
31,298 
31,434 
31,100 
29,575 
32,929 
27,036 
27,884 
20,113 
 
 
 
123,407 
107,962 
98,314 
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax
0 
0 
0 
0 
5,188 
0 
0 
0 
 
 
 
0 
5,188 
0 
Net (income) loss attributable to the noncontrolling interest
29 
29 
21 
43 
55 
34 
4 
24 
 
 
 
122 
117 
43 
Net income attributable to Morningstar, Inc.
31,327 
31,463 
31,121 
29,618 
32,984 
27,070 
27,888 
20,137 
 
 
 
123,529 
108,079 
98,357 
Income (Loss) from Continuing Operations, Per Basic Share
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
 
 
 
$ 2.68 
$ 2.12 
$ 1.96 
Earnings Per Share, Basic [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic net income per share attributable to Morningstar, Inc.
$ 0.68 
$ 0.68 
$ 0.67 
$ 0.64 
$ 0.70 
$ 0.56 
$ 0.57 
$ 0.40 
 
 
 
$ 2.68 
$ 2.23 
$ 1.96 
Weighted average common shares outstanding - basic
45,756 
46,080 
46,400 
46,406 
46,913 
47,975 
49,195 
49,938 
 
 
 
46,158 
48,497 
50,032 
Income (Loss) from Continuing Operations, Per Diluted Share
$ 0.68 
$ 0.68 
$ 0.66 
$ 0.63 
$ 0.58 
$ 0.56 
$ 0.56 
$ 0.40 
 
 
 
$ 2.66 
$ 2.10 
$ 1.92 
Income (Loss) from Discontinued Operations, Net of Tax, Per Basic Share
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
 
 
 
$ 0.00 
$ 0.11 
$ 0.00 
Earnings Per Share, Diluted [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income per share attributable to Morningstar, Inc.
$ 0.68 
$ 0.68 
$ 0.66 
$ 0.63 
$ 0.69 
$ 0.56 
$ 0.56 
$ 0.40 
 
 
 
$ 2.66 
$ 2.20 
$ 1.92 
Weighted average common shares outstanding - diluted
46,211 
46,519 
46,853 
46,814 
47,511 
48,481 
49,856 
50,758 
 
 
 
46,491 
49,148 
50,988 
Income (Loss) from Discontinued Operations, Net of Tax, Per Diluted Share
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.00 
$ 0.11 
$ 0.00 
$ 0.00 
$ 0.00 
 
 
 
$ 0.00 
$ 0.10 
$ 0.00 
Dividends Per Common Share: [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, dividends, per share, declared
$ 0.30 
$ 0.00 
$ 0.13 
$ 0.13 
$ 0.13 
$ 0.10 
$ 0.10 
$ 0.10 
 
 
 
$ 0.55 
$ 0.43 
$ 0.25 
Dividends paid per common share
$ 0.13 
$ 0.13 
$ 0.13 
$ 0.00 
$ 0.23 
$ 0.10 
$ 0.10 
$ 0.10 
 
 
 
$ 0.38 
$ 0.53 
$ 0.20 
Includes stock-based compaensation expense of:
$ 3,890 
 
 
 
$ 7,311 
$ 3,416 
$ 3,954 
$ 3,783 
$ 3,994 
$ 3,734 
$ 3,866 
$ 15,043 
$ 18,905 
$ 15,303