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• | 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. |
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Acquisition | Description | Date of Acquisition | Purchase Price* | |||
Footnoted business of Financial Fineprint Inc. | Footnoted is a highly regarded blog for professional money managers, analysts, and sophisticated individual investors. Footnoted Pro, a service for institutional investors, provides insight on actionable items and trends in SEC filings. | February 1, 2010 | Not separately disclosed | |||
Aegis Equities Research | A leading provider of independent equity research in Sydney, Australia. | April 1, 2010 | $10.3 million | |||
Old Broad Street Research Ltd. | A premier provider of fund research, ratings, and investment consulting services in the United Kingdom. | April 12, 2010 | $16.8 million | |||
Realpoint, LLC | A Nationally Recognized Statistical Rating Organization (NRSRO) that specializes in structured finance. | May 3, 2010 | $38.4 million in cash and 199,174 shares of restricted stock (valued at approximately $10 million as of the date the acquisition was announced in March 2010) | |||
Morningstar Danmark A/S (Morningstar Denmark) | Acquisition of the 75% ownership interest not previously owned by Morningstar, bringing our ownership to 100%. | July 1, 2010 | $14.6 million | |||
Seeds Group | A leading provider of investment consulting services and fund research in France. | July 1, 2010 | Not separately disclosed | |||
Annuity Intelligence business of Advanced Sales and Marketing Corporation | The Annuity Intelligence business provides a web-based service that leverages a proprietary database of more than 1,000 variable annuities that includes "plain-English" translations of complex but important information found in prospectuses and other public filings. | November 1, 2010 | $14.1 million |
($000) | |||
Balance as of December 31, 2010 | $ | 317,661 | |
Adjustments to 2010 acquisitions | 1,387 | ||
Other, primarily currency translation | 319 | ||
Balance as of September 30, 2011 | $ | 319,367 |
As of September 30, 2011 | As of December 31, 2010 | |||||||||||||||||||||||||||||
($000) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | ||||||||||||||||||||||
Intellectual property | $ | 31,979 | $ | (18,529 | ) | $ | 13,450 | 9 | $ | 33,990 | $ | (15,970 | ) | $ | 18,020 | 10 | ||||||||||||||
Customer-related assets | 135,025 | (49,548 | ) | 85,477 | 12 | 130,675 | (39,951 | ) | 90,724 | 11 | ||||||||||||||||||||
Supplier relationships | 240 | (81 | ) | 159 | 20 | 240 | (72 | ) | 168 | 20 | ||||||||||||||||||||
Technology-based assets | 80,597 | (32,916 | ) | 47,681 | 9 | 78,651 | (25,682 | ) | 52,969 | 9 | ||||||||||||||||||||
Non-competition agreement | 1,724 | (1,180 | ) | 544 | 4 | 1,751 | (909 | ) | 842 | 4 | ||||||||||||||||||||
Intangible assets related to acquisitions with preliminary purchase price allocations | — | — | — | — | 6,407 | (107 | ) | 6,300 | 10 | |||||||||||||||||||||
Total intangible assets | $ | 249,565 | $ | (102,254 | ) | $ | 147,311 | 10 | $ | 251,714 | $ | (82,691 | ) | $ | 169,023 | 10 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Amortization expense | $ | 6,894 | $ | 6,219 | $ | 20,039 | $ | 17,535 |
($000) | |||
2011 | $ | 26,287 | |
2012 | 23,874 | ||
2013 | 21,217 | ||
2014 | 19,989 | ||
2015 | 19,118 | ||
2016 | 14,527 |
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• | Investment Information. The Investment Information segment includes all of our data, software, and research products and services. These products are typically sold through subscriptions or license agreements. |
• | Investment Management. The Investment Management segment includes all of our asset management operations, which earn the majority of their revenue from asset-based fees. |
Three months ended September 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 125,804 | $ | 34,247 | $ | — | $ | 160,051 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 89,652 | 15,587 | 6,050 | 111,289 | ||||||||||||
Stock-based compensation expense | 2,609 | 556 | 786 | 3,951 | ||||||||||||
Depreciation and amortization | 2,117 | 42 | 8,788 | 10,947 | ||||||||||||
Operating income (loss) | $ | 31,426 | $ | 18,062 | $ | (15,624 | ) | $ | 33,864 | |||||||
U.S. capital expenditures | $ | 4,560 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,711 | ||||||||||||||
U.S. revenue | $ | 112,790 | ||||||||||||||
Non-U.S. revenue | $ | 47,261 |
Three months ended September 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 112,055 | $ | 27,762 | $ | — | $ | 139,817 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 75,129 | 13,670 | 7,215 | 96,014 | ||||||||||||
Stock-based compensation expense | 2,326 | 525 | 894 | 3,745 | ||||||||||||
Depreciation and amortization | 1,789 | 44 | 8,064 | 9,897 | ||||||||||||
Operating income (loss) | $ | 32,811 | $ | 13,523 | $ | (16,173 | ) | $ | 30,161 | |||||||
U.S. capital expenditures | $ | 1,975 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,887 | ||||||||||||||
U.S. revenue | $ | 99,933 | ||||||||||||||
Non-U.S. revenue | $ | 39,884 |
Nine months ended September 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 374,319 | $ | 98,510 | $ | — | $ | 472,829 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 259,899 | 43,258 | 22,237 | 325,394 | ||||||||||||
Stock-based compensation expense | 7,567 | 1,529 | 2,347 | 11,443 | ||||||||||||
Depreciation and amortization | 6,023 | 124 | 25,565 | 31,712 | ||||||||||||
Operating income (loss) | $ | 100,830 | $ | 53,599 | $ | (50,149 | ) | $ | 104,280 | |||||||
U.S. capital expenditures | $ | 8,084 | ||||||||||||||
Non-U.S. capital expenditures | $ | 6,605 | ||||||||||||||
U.S. revenue | $ | 334,395 | ||||||||||||||
Non-U.S. revenue | $ | 138,434 |
Nine months ended September 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 324,600 | $ | 79,598 | $ | — | $ | 404,198 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 217,559 | 36,768 | 22,682 | 277,009 | ||||||||||||
Stock-based compensation expense | 5,926 | 1,557 | 2,854 | 10,337 | ||||||||||||
Depreciation and amortization | 5,016 | 136 | 22,930 | 28,082 | ||||||||||||
Operating income (loss) | $ | 96,099 | $ | 41,137 | $ | (48,466 | ) | $ | 88,770 | |||||||
U.S. capital expenditures | $ | 3,607 | ||||||||||||||
Non-U.S. capital expenditures | $ | 4,094 | ||||||||||||||
U.S. revenue | $ | 291,529 | ||||||||||||||
Non-U.S. revenue | $ | 112,669 |
As of September 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
Goodwill | $ | 277,246 | $ | 42,121 | $ | — | $ | 319,367 | ||||||||
U.S. long-lived assets | $ | 41,066 | ||||||||||||||
Non-U.S. long-lived assets | $ | 22,637 |
As of December 31, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
Goodwill | $ | 275,611 | $ | 42,050 | $ | — | $ | 317,661 | ||||||||
U.S. long-lived assets | $ | 39,496 | ||||||||||||||
Non-U.S. long-lived assets | $ | 22,609 |
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As of September 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Available-for-sale | $ | 238,990 | $ | 173,072 | ||||
Held-to-maturity | 14,813 | 7,476 | ||||||
Trading securities | 4,946 | 4,692 | ||||||
Total | $ | 258,749 | $ | 185,240 |
As of September 30, 2011 | As of December 31, 2010 | |||||||||||||||||||||||||||||||
($000) | Cost | Unrealized Gain | Unrealized Loss | Fair Value | Cost | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||||||
Government obligations | $ | 122,991 | $ | 54 | $ | (186 | ) | $ | 122,859 | $ | 113,597 | $ | 36 | $ | (56 | ) | $ | 113,577 | ||||||||||||||
Corporate bonds | 65,079 | 27 | (293 | ) | 64,813 | 42,839 | 63 | (24 | ) | 42,878 | ||||||||||||||||||||||
Commercial paper | 34,941 | 2 | (18 | ) | 34,925 | 2,994 | — | (3 | ) | 2,991 | ||||||||||||||||||||||
Equity securities and exchange-traded funds | 8,411 | 203 | (1,197 | ) | 7,417 | 4,510 | 418 | (6 | ) | 4,922 | ||||||||||||||||||||||
Mutual funds | 9,180 | 45 | (249 | ) | 8,976 | 8,146 | 558 | — | 8,704 | |||||||||||||||||||||||
Total | $ | 240,602 | $ | 331 | $ | (1,943 | ) | 238,990 | $ | 172,086 | $ | 1,075 | $ | (89 | ) | $ | 173,072 | |||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 14,813 | $ | — | $ | — | $ | 14,813 | $ | 7,476 | $ | — | $ | — | $ | 7,476 |
As of September 30, 2011 | As of December 31, 2010 | |||||||||||||||
($000) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Due in one year or less | $ | 177,348 | $ | 177,124 | $ | 85,990 | $ | 85,964 | ||||||||
Due in one to three years | 45,663 | 45,473 | 73,440 | 73,482 | ||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 17,591 | 16,393 | 12,656 | 13,626 | ||||||||||||
Total | $ | 240,602 | $ | 238,990 | $ | 172,086 | $ | 173,072 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 14,808 | $ | 14,808 | $ | 7,223 | $ | 7,223 | ||||||||
Due in one to three years | 5 | 5 | 253 | 253 | ||||||||||||
Total | $ | 14,813 | $ | 14,813 | $ | 7,476 | $ | 7,476 |
Nine months ended September 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Realized gains | $ | 270 | $ | 17 | ||||
Realized losses | — | (3 | ) | |||||
Realized gains, net | $ | 270 | $ | 14 |
Nine months ended September 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Unrealized loss, net | $ | 810 | $ | 75 |
Fair Value | Fair Value Measurements as of September 30, 2011 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | September 30, 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 122,859 | $ | — | $ | 122,859 | $ | — | ||||||||
Corporate bonds | 64,813 | — | 64,813 | — | ||||||||||||
Commercial paper | 34,925 | — | 34,925 | — | ||||||||||||
Equity securities and exchange-traded funds | 7,417 | 7,417 | — | — | ||||||||||||
Mutual funds | 8,976 | 8,976 | — | — | ||||||||||||
Trading securities | 4,946 | 4,946 | — | — | ||||||||||||
Total | $ | 243,936 | $ | 21,339 | $ | 222,597 | $ | — |
Fair Value | Fair Value Measurements as of December 31, 2010 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | December 31, 2010 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 113,577 | $ | — | $ | 113,577 | $ | — | ||||||||
Corporate bonds | 42,878 | — | 42,878 | — | ||||||||||||
Commercial paper | 2,991 | — | 2,991 | — | ||||||||||||
Equity securities and exchange-traded funds | 4,922 | 4,922 | — | — | ||||||||||||
Mutual funds | 8,704 | 8,704 | — | — | ||||||||||||
Trading securities | 4,692 | 4,692 | — | — | ||||||||||||
Total | $ | 177,764 | $ | 18,318 | $ | 159,446 | $ | — |
Level 1: | Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. |
Level 2: | Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
Level 3: | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
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As of September 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Investment in MJKK | $ | 19,311 | $ | 19,036 | ||||
Other equity method investments | 269 | 109 | ||||||
Investments accounted for using the cost method | 5,181 | 5,117 | ||||||
Total investments in unconsolidated entities | $ | 24,761 | $ | 24,262 |
As of September 30 | As of December 31 | |||||||
2011 | 2010 | |||||||
Morningstar’s approximate ownership of MJKK | 33 | % | 34 | % | ||||
Approximate market value of Morningstar’s ownership in MJKK: | ||||||||
Japanese yen (¥000) | ¥ | 2,507,844 | ¥ | 3,197,000 | ||||
Equivalent U.S. dollars ($000) | $ | 32,727 | $ | 38,361 |
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Liability for vacant office space | ($000) | |||
Balance as of December 31, 2010 | $ | 2,429 | ||
Reduction of liability for lease and other related payments | (1,182 | ) | ||
Balance as of September 30, 2011 | $ | 1,247 |
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As of September 30 | |||
(000) | 2011 | ||
Shares available for future grants | 5,004 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Restricted stock units | $ | 3,372 | $ | 3,277 | $ | 9,489 | $ | 9,557 | ||||||||
Restricted stock | 444 | 468 | 1,752 | 780 | ||||||||||||
Stock options | 135 | — | 202 | — | ||||||||||||
Total stock-based compensation expense | $ | 3,951 | $ | 3,745 | $ | 11,443 | $ | 10,337 | ||||||||
Income tax benefit related to the stock-based compensation expense | $ | 967 | $ | 973 | $ | 2,636 | $ | 2,874 |
Unrecognized stock-based compensation expense ($000) | Expected amortization period (months) | ||||||
Restricted stock units | $ | 30,520 | 34 | ||||
Restricted stock | 6,363 | 43 | |||||
Stock options | 1,843 | 42 | |||||
Total unrecognized stock-based compensation expense | $ | 38,726 | 36 |
Restricted Stock Units (RSUs) | Unvested | Vested but Deferred | Total | Weighted Average Grant Date Value per RSU | |||||||||
RSUs outstanding—December 31, 2010 | 777,666 | 45,189 | 822,855 | $ | 47.14 | ||||||||
Granted | 271,821 | — | 271,821 | 57.14 | |||||||||
Dividend equivalents | 1,988 | 52 | 2,040 | 48.06 | |||||||||
Vested | (236,328 | ) | — | (236,328 | ) | 48.64 | |||||||
Vested but deferred | (1,691 | ) | 1,691 | — | — | ||||||||
Issued | — | (26,866 | ) | (26,866 | ) | 46.69 | |||||||
Forfeited | (68,180 | ) | — | (68,180 | ) | 47.61 | |||||||
RSUs outstanding—September 30, 2011 | 745,276 | 20,066 | 765,342 | 50.23 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % | |
Expected exercise price: | $57.28 |
Options Granted At an Exercise Price Below the Fair Value Per Share on the Grant Date | Underlying Shares | Weighted Average Exercise Price | |||||
Options outstanding—December 31, 2010 | 648,885 | $ | 18.91 | ||||
Granted | — | — | |||||
Canceled | — | — | |||||
Exercised | (188,775 | ) | 19.13 | ||||
Options outstanding—September 30, 2011 | 460,110 | 19.52 | |||||
Options exercisable—September 30, 2011 | 460,110 | $ | 19.52 |
All Other Option Grants, Excluding Activity Shown Above | Underlying Shares | Weighted Average Exercise Price | |||||
Options outstanding—December 31, 2010 | 1,207,540 | $ | 18.91 | ||||
Granted | 86,106 | 57.28 | |||||
Canceled | (1,910 | ) | 15.56 | ||||
Exercised | (415,959 | ) | 15.37 | ||||
Options outstanding—September 30, 2011 | 875,777 | 22.28 | |||||
Options exercisable—September 30, 2011 | 789,671 | $ | 18.47 |
Nine months ended September 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Intrinsic value of options exercised | $ | 25,061 | $ | 17,094 |
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
Range of Exercise Prices | Number of Options | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value ($000) | Exercisable Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value ($000) | ||||||||||||||||||||
$8.57 - $14.70 | 371,323 | 1.15 | $ | 9.59 | $ | 17,396 | 371,323 | 1.15 | $ | 9.59 | $ | 17,396 | ||||||||||||||||
$19.47 - $44.35 | 878,458 | 3.23 | 22.77 | 29,578 | 878,458 | 3.23 | 22.77 | 29,578 | ||||||||||||||||||||
$57.28 | 86,106 | 9.76 | 57.28 | — | — | — | — | — | ||||||||||||||||||||
$8.57 - $57.28 | 1,335,887 | 3.07 | 21.33 | $ | 46,974 | 1,249,781 | 2.61 | 18.86 | $ | 46,974 | ||||||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||||
$8.57 - $57.28 | 1,335,887 | 3.07 | $ | 21.33 | $ | 46,974 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Excess tax benefits related to stock-based compensation | $ | 1,450 | $ | 680 | $ | 7,621 | $ | 4,885 |
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Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 33,285 | $ | 36,367 | $ | 104,484 | $ | 94,818 | ||||||||
Equity in net income of unconsolidated entities | 428 | 333 | 1,397 | 1,176 | ||||||||||||
Net (income) loss attributable to the noncontrolling interest | 10 | (106 | ) | 106 | 10 | |||||||||||
Total | $ | 33,723 | $ | 36,594 | $ | 105,987 | $ | 96,004 | ||||||||
Income tax expense | $ | 12,343 | $ | 11,917 | $ | 35,585 | $ | 33,137 | ||||||||
Effective tax rate | 36.6 | % | 32.6 | % | 33.6 | % | 34.5 | % |
As of September 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Gross unrecognized tax benefits | $ | 11,781 | $ | 9,089 | ||||
Gross unrecognized tax benefits which would affect income tax expense | $ | 11,431 | $ | 8,482 | ||||
Decrease in income tax expense upon recognition of gross unrecognized tax benefits | $ | (9,680 | ) | $ | (6,895 | ) |
As of September 30 | As of December 31 | |||||||
Liabilities for Unrecognized Tax Benefits ($000) | 2011 | 2010 | ||||||
Current liability | $ | 1,985 | $ | 654 | ||||
Non-current liability | 9,533 | 8,173 | ||||||
Total liability for unrecognized tax benefits | $ | 11,518 | $ | 8,827 |
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• | 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. |
|
|
Acquisition | Description | Date of Acquisition | Purchase Price* | |||
Footnoted business of Financial Fineprint Inc. | Footnoted is a highly regarded blog for professional money managers, analysts, and sophisticated individual investors. Footnoted Pro, a service for institutional investors, provides insight on actionable items and trends in SEC filings. | February 1, 2010 | Not separately disclosed | |||
Aegis Equities Research | A leading provider of independent equity research in Sydney, Australia. | April 1, 2010 | $10.3 million | |||
Old Broad Street Research Ltd. | A premier provider of fund research, ratings, and investment consulting services in the United Kingdom. | April 12, 2010 | $16.8 million | |||
Realpoint, LLC | A Nationally Recognized Statistical Rating Organization (NRSRO) that specializes in structured finance. | May 3, 2010 | $38.4 million in cash and 199,174 shares of restricted stock (valued at approximately $10 million as of the date the acquisition was announced in March 2010) | |||
Morningstar Danmark A/S (Morningstar Denmark) | Acquisition of the 75% ownership interest not previously owned by Morningstar, bringing our ownership to 100%. | July 1, 2010 | $14.6 million | |||
Seeds Group | A leading provider of investment consulting services and fund research in France. | July 1, 2010 | Not separately disclosed | |||
Annuity Intelligence business of Advanced Sales and Marketing Corporation | The Annuity Intelligence business provides a web-based service that leverages a proprietary database of more than 1,000 variable annuities that includes "plain-English" translations of complex but important information found in prospectuses and other public filings. | November 1, 2010 | $14.1 million |
($000) | |||
Balance as of December 31, 2010 | $ | 317,661 | |
Adjustments to 2010 acquisitions | 1,387 | ||
Other, primarily currency translation | 319 | ||
Balance as of September 30, 2011 | $ | 319,367 |
As of September 30, 2011 | As of December 31, 2010 | |||||||||||||||||||||||||||||
($000) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | Gross | Accumulated Amortization | Net | Weighted Average Useful Life (years) | ||||||||||||||||||||||
Intellectual property | $ | 31,979 | $ | (18,529 | ) | $ | 13,450 | 9 | $ | 33,990 | $ | (15,970 | ) | $ | 18,020 | 10 | ||||||||||||||
Customer-related assets | 135,025 | (49,548 | ) | 85,477 | 12 | 130,675 | (39,951 | ) | 90,724 | 11 | ||||||||||||||||||||
Supplier relationships | 240 | (81 | ) | 159 | 20 | 240 | (72 | ) | 168 | 20 | ||||||||||||||||||||
Technology-based assets | 80,597 | (32,916 | ) | 47,681 | 9 | 78,651 | (25,682 | ) | 52,969 | 9 | ||||||||||||||||||||
Non-competition agreement | 1,724 | (1,180 | ) | 544 | 4 | 1,751 | (909 | ) | 842 | 4 | ||||||||||||||||||||
Intangible assets related to acquisitions with preliminary purchase price allocations | — | — | — | — | 6,407 | (107 | ) | 6,300 | 10 | |||||||||||||||||||||
Total intangible assets | $ | 249,565 | $ | (102,254 | ) | $ | 147,311 | 10 | $ | 251,714 | $ | (82,691 | ) | $ | 169,023 | 10 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Amortization expense | $ | 6,894 | $ | 6,219 | $ | 20,039 | $ | 17,535 |
($000) | |||
2011 | $ | 26,287 | |
2012 | 23,874 | ||
2013 | 21,217 | ||
2014 | 19,989 | ||
2015 | 19,118 | ||
2016 | 14,527 |
|
Three months ended September 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 125,804 | $ | 34,247 | $ | — | $ | 160,051 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 89,652 | 15,587 | 6,050 | 111,289 | ||||||||||||
Stock-based compensation expense | 2,609 | 556 | 786 | 3,951 | ||||||||||||
Depreciation and amortization | 2,117 | 42 | 8,788 | 10,947 | ||||||||||||
Operating income (loss) | $ | 31,426 | $ | 18,062 | $ | (15,624 | ) | $ | 33,864 | |||||||
U.S. capital expenditures | $ | 4,560 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,711 | ||||||||||||||
U.S. revenue | $ | 112,790 | ||||||||||||||
Non-U.S. revenue | $ | 47,261 |
Three months ended September 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 112,055 | $ | 27,762 | $ | — | $ | 139,817 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 75,129 | 13,670 | 7,215 | 96,014 | ||||||||||||
Stock-based compensation expense | 2,326 | 525 | 894 | 3,745 | ||||||||||||
Depreciation and amortization | 1,789 | 44 | 8,064 | 9,897 | ||||||||||||
Operating income (loss) | $ | 32,811 | $ | 13,523 | $ | (16,173 | ) | $ | 30,161 | |||||||
U.S. capital expenditures | $ | 1,975 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,887 | ||||||||||||||
U.S. revenue | $ | 99,933 | ||||||||||||||
Non-U.S. revenue | $ | 39,884 |
Nine months ended September 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 374,319 | $ | 98,510 | $ | — | $ | 472,829 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 259,899 | 43,258 | 22,237 | 325,394 | ||||||||||||
Stock-based compensation expense | 7,567 | 1,529 | 2,347 | 11,443 | ||||||||||||
Depreciation and amortization | 6,023 | 124 | 25,565 | 31,712 | ||||||||||||
Operating income (loss) | $ | 100,830 | $ | 53,599 | $ | (50,149 | ) | $ | 104,280 | |||||||
U.S. capital expenditures | $ | 8,084 | ||||||||||||||
Non-U.S. capital expenditures | $ | 6,605 | ||||||||||||||
U.S. revenue | $ | 334,395 | ||||||||||||||
Non-U.S. revenue | $ | 138,434 |
Nine months ended September 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 324,600 | $ | 79,598 | $ | — | $ | 404,198 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 217,559 | 36,768 | 22,682 | 277,009 | ||||||||||||
Stock-based compensation expense | 5,926 | 1,557 | 2,854 | 10,337 | ||||||||||||
Depreciation and amortization | 5,016 | 136 | 22,930 | 28,082 | ||||||||||||
Operating income (loss) | $ | 96,099 | $ | 41,137 | $ | (48,466 | ) | $ | 88,770 | |||||||
U.S. capital expenditures | $ | 3,607 | ||||||||||||||
Non-U.S. capital expenditures | $ | 4,094 | ||||||||||||||
U.S. revenue | $ | 291,529 | ||||||||||||||
Non-U.S. revenue | $ | 112,669 |
As of September 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
Goodwill | $ | 277,246 | $ | 42,121 | $ | — | $ | 319,367 | ||||||||
U.S. long-lived assets | $ | 41,066 | ||||||||||||||
Non-U.S. long-lived assets | $ | 22,637 |
As of December 31, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
Goodwill | $ | 275,611 | $ | 42,050 | $ | — | $ | 317,661 | ||||||||
U.S. long-lived assets | $ | 39,496 | ||||||||||||||
Non-U.S. long-lived assets | $ | 22,609 |
|
As of September 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Available-for-sale | $ | 238,990 | $ | 173,072 | ||||
Held-to-maturity | 14,813 | 7,476 | ||||||
Trading securities | 4,946 | 4,692 | ||||||
Total | $ | 258,749 | $ | 185,240 |
As of September 30, 2011 | As of December 31, 2010 | |||||||||||||||||||||||||||||||
($000) | Cost | Unrealized Gain | Unrealized Loss | Fair Value | Cost | Unrealized Gain | Unrealized Loss | Fair Value | ||||||||||||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||||||
Government obligations | $ | 122,991 | $ | 54 | $ | (186 | ) | $ | 122,859 | $ | 113,597 | $ | 36 | $ | (56 | ) | $ | 113,577 | ||||||||||||||
Corporate bonds | 65,079 | 27 | (293 | ) | 64,813 | 42,839 | 63 | (24 | ) | 42,878 | ||||||||||||||||||||||
Commercial paper | 34,941 | 2 | (18 | ) | 34,925 | 2,994 | — | (3 | ) | 2,991 | ||||||||||||||||||||||
Equity securities and exchange-traded funds | 8,411 | 203 | (1,197 | ) | 7,417 | 4,510 | 418 | (6 | ) | 4,922 | ||||||||||||||||||||||
Mutual funds | 9,180 | 45 | (249 | ) | 8,976 | 8,146 | 558 | — | 8,704 | |||||||||||||||||||||||
Total | $ | 240,602 | $ | 331 | $ | (1,943 | ) | 238,990 | $ | 172,086 | $ | 1,075 | $ | (89 | ) | $ | 173,072 | |||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 14,813 | $ | — | $ | — | $ | 14,813 | $ | 7,476 | $ | — | $ | — | $ | 7,476 |
As of September 30, 2011 | As of December 31, 2010 | |||||||||||||||
($000) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Due in one year or less | $ | 177,348 | $ | 177,124 | $ | 85,990 | $ | 85,964 | ||||||||
Due in one to three years | 45,663 | 45,473 | 73,440 | 73,482 | ||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 17,591 | 16,393 | 12,656 | 13,626 | ||||||||||||
Total | $ | 240,602 | $ | 238,990 | $ | 172,086 | $ | 173,072 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 14,808 | $ | 14,808 | $ | 7,223 | $ | 7,223 | ||||||||
Due in one to three years | 5 | 5 | 253 | 253 | ||||||||||||
Total | $ | 14,813 | $ | 14,813 | $ | 7,476 | $ | 7,476 |
Nine months ended September 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Realized gains | $ | 270 | $ | 17 | ||||
Realized losses | — | (3 | ) | |||||
Realized gains, net | $ | 270 | $ | 14 |
Nine months ended September 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Unrealized loss, net | $ | 810 | $ | 75 |
Fair Value | Fair Value Measurements as of September 30, 2011 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | September 30, 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 122,859 | $ | — | $ | 122,859 | $ | — | ||||||||
Corporate bonds | 64,813 | — | 64,813 | — | ||||||||||||
Commercial paper | 34,925 | — | 34,925 | — | ||||||||||||
Equity securities and exchange-traded funds | 7,417 | 7,417 | — | — | ||||||||||||
Mutual funds | 8,976 | 8,976 | — | — | ||||||||||||
Trading securities | 4,946 | 4,946 | — | — | ||||||||||||
Total | $ | 243,936 | $ | 21,339 | $ | 222,597 | $ | — |
Fair Value | Fair Value Measurements as of December 31, 2010 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | December 31, 2010 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 113,577 | $ | — | $ | 113,577 | $ | — | ||||||||
Corporate bonds | 42,878 | — | 42,878 | — | ||||||||||||
Commercial paper | 2,991 | — | 2,991 | — | ||||||||||||
Equity securities and exchange-traded funds | 4,922 | 4,922 | — | — | ||||||||||||
Mutual funds | 8,704 | 8,704 | — | — | ||||||||||||
Trading securities | 4,692 | 4,692 | — | — | ||||||||||||
Total | $ | 177,764 | $ | 18,318 | $ | 159,446 | $ | — |
|
As of September 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Investment in MJKK | $ | 19,311 | $ | 19,036 | ||||
Other equity method investments | 269 | 109 | ||||||
Investments accounted for using the cost method | 5,181 | 5,117 | ||||||
Total investments in unconsolidated entities | $ | 24,761 | $ | 24,262 |
As of September 30 | As of December 31 | |||||||
2011 | 2010 | |||||||
Morningstar’s approximate ownership of MJKK | 33 | % | 34 | % | ||||
Approximate market value of Morningstar’s ownership in MJKK: | ||||||||
Japanese yen (¥000) | ¥ | 2,507,844 | ¥ | 3,197,000 | ||||
Equivalent U.S. dollars ($000) | $ | 32,727 | $ | 38,361 |
|
Liability for vacant office space | ($000) | |||
Balance as of December 31, 2010 | $ | 2,429 | ||
Reduction of liability for lease and other related payments | (1,182 | ) | ||
Balance as of September 30, 2011 | $ | 1,247 |
|
As of September 30 | |||
(000) | 2011 | ||
Shares available for future grants | 5,004 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Restricted stock units | $ | 3,372 | $ | 3,277 | $ | 9,489 | $ | 9,557 | ||||||||
Restricted stock | 444 | 468 | 1,752 | 780 | ||||||||||||
Stock options | 135 | — | 202 | — | ||||||||||||
Total stock-based compensation expense | $ | 3,951 | $ | 3,745 | $ | 11,443 | $ | 10,337 | ||||||||
Income tax benefit related to the stock-based compensation expense | $ | 967 | $ | 973 | $ | 2,636 | $ | 2,874 |
Unrecognized stock-based compensation expense ($000) | Expected amortization period (months) | ||||||
Restricted stock units | $ | 30,520 | 34 | ||||
Restricted stock | 6,363 | 43 | |||||
Stock options | 1,843 | 42 | |||||
Total unrecognized stock-based compensation expense | $ | 38,726 | 36 |
Restricted Stock Units (RSUs) | Unvested | Vested but Deferred | Total | Weighted Average Grant Date Value per RSU | |||||||||
RSUs outstanding—December 31, 2010 | 777,666 | 45,189 | 822,855 | $ | 47.14 | ||||||||
Granted | 271,821 | — | 271,821 | 57.14 | |||||||||
Dividend equivalents | 1,988 | 52 | 2,040 | 48.06 | |||||||||
Vested | (236,328 | ) | — | (236,328 | ) | 48.64 | |||||||
Vested but deferred | (1,691 | ) | 1,691 | — | — | ||||||||
Issued | — | (26,866 | ) | (26,866 | ) | 46.69 | |||||||
Forfeited | (68,180 | ) | — | (68,180 | ) | 47.61 | |||||||
RSUs outstanding—September 30, 2011 | 745,276 | 20,066 | 765,342 | 50.23 |
Assumptions for Black-Scholes Option Pricing Model | |||
Expected life (years): | 7.4 | ||
Volatility factor: | 35.1 | % | |
Dividend yield: | 0.35 | % | |
Interest rate: | 2.87 | % | |
Expected exercise price: | $57.28 |
Options Granted At an Exercise Price Below the Fair Value Per Share on the Grant Date | Underlying Shares | Weighted Average Exercise Price | |||||
Options outstanding—December 31, 2010 | 648,885 | $ | 18.91 | ||||
Granted | — | — | |||||
Canceled | — | — | |||||
Exercised | (188,775 | ) | 19.13 | ||||
Options outstanding—September 30, 2011 | 460,110 | 19.52 | |||||
Options exercisable—September 30, 2011 | 460,110 | $ | 19.52 |
All Other Option Grants, Excluding Activity Shown Above | Underlying Shares | Weighted Average Exercise Price | |||||
Options outstanding—December 31, 2010 | 1,207,540 | $ | 18.91 | ||||
Granted | 86,106 | 57.28 | |||||
Canceled | (1,910 | ) | 15.56 | ||||
Exercised | (415,959 | ) | 15.37 | ||||
Options outstanding—September 30, 2011 | 875,777 | 22.28 | |||||
Options exercisable—September 30, 2011 | 789,671 | $ | 18.47 |
Nine months ended September 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Intrinsic value of options exercised | $ | 25,061 | $ | 17,094 |
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
Range of Exercise Prices | Number of Options | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value ($000) | Exercisable Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Aggregate Intrinsic Value ($000) | ||||||||||||||||||||
$8.57 - $14.70 | 371,323 | 1.15 | $ | 9.59 | $ | 17,396 | 371,323 | 1.15 | $ | 9.59 | $ | 17,396 | ||||||||||||||||
$19.47 - $44.35 | 878,458 | 3.23 | 22.77 | 29,578 | 878,458 | 3.23 | 22.77 | 29,578 | ||||||||||||||||||||
$57.28 | 86,106 | 9.76 | 57.28 | — | — | — | — | — | ||||||||||||||||||||
$8.57 - $57.28 | 1,335,887 | 3.07 | 21.33 | $ | 46,974 | 1,249,781 | 2.61 | 18.86 | $ | 46,974 | ||||||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||||
$8.57 - $57.28 | 1,335,887 | 3.07 | $ | 21.33 | $ | 46,974 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Excess tax benefits related to stock-based compensation | $ | 1,450 | $ | 680 | $ | 7,621 | $ | 4,885 |
|
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 33,285 | $ | 36,367 | $ | 104,484 | $ | 94,818 | ||||||||
Equity in net income of unconsolidated entities | 428 | 333 | 1,397 | 1,176 | ||||||||||||
Net (income) loss attributable to the noncontrolling interest | 10 | (106 | ) | 106 | 10 | |||||||||||
Total | $ | 33,723 | $ | 36,594 | $ | 105,987 | $ | 96,004 | ||||||||
Income tax expense | $ | 12,343 | $ | 11,917 | $ | 35,585 | $ | 33,137 | ||||||||
Effective tax rate | 36.6 | % | 32.6 | % | 33.6 | % | 34.5 | % |
As of September 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Gross unrecognized tax benefits | $ | 11,781 | $ | 9,089 | ||||
Gross unrecognized tax benefits which would affect income tax expense | $ | 11,431 | $ | 8,482 | ||||
Decrease in income tax expense upon recognition of gross unrecognized tax benefits | $ | (9,680 | ) | $ | (6,895 | ) |
As of September 30 | As of December 31 | |||||||
Liabilities for Unrecognized Tax Benefits ($000) | 2011 | 2010 | ||||||
Current liability | $ | 1,985 | $ | 654 | ||||
Non-current liability | 9,533 | 8,173 | ||||||
Total liability for unrecognized tax benefits | $ | 11,518 | $ | 8,827 |
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