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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 | 7,495 | ||
Balance as of June 30, 2011 | $ | 326,543 |
As of June 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 | $ | 32,759 | $ | (17,744 | ) | $ | 15,015 | 10 | $ | 33,990 | $ | (15,970 | ) | $ | 18,020 | 10 | ||||||||||||||
Customer-related assets | 137,412 | (46,880 | ) | 90,532 | 12 | 130,675 | (39,951 | ) | 90,724 | 11 | ||||||||||||||||||||
Supplier relationships | 240 | (78 | ) | 162 | 20 | 240 | (72 | ) | 168 | 20 | ||||||||||||||||||||
Technology-based assets | 81,556 | (30,992 | ) | 50,564 | 9 | 78,651 | (25,682 | ) | 52,969 | 9 | ||||||||||||||||||||
Non-competition agreement | 1,781 | (1,114 | ) | 667 | 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 | $ | 253,748 | $ | (96,808 | ) | $ | 156,940 | 10 | $ | 251,714 | $ | (82,691 | ) | $ | 169,023 | 10 |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Amortization expense | $ | 6,632 | $ | 5,848 | $ | 13,145 | $ | 11,316 |
($000) | |||
2011 | $ | 25,947 | |
2012 | 24,416 | ||
2013 | 21,677 | ||
2014 | 20,407 | ||
2015 | 19,525 | ||
2016 | 14,896 |
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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 June 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 128,116 | $ | 32,895 | $ | — | $ | 161,011 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 86,484 | 13,833 | 7,681 | 107,998 | ||||||||||||
Stock-based compensation expense | 2,488 | 531 | 824 | 3,843 | ||||||||||||
Depreciation and amortization | 2,047 | 40 | 8,476 | 10,563 | ||||||||||||
Operating income (loss) | $ | 37,097 | $ | 18,491 | $ | (16,981 | ) | $ | 38,607 | |||||||
U.S. capital expenditures | $ | 1,593 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,788 | ||||||||||||||
U.S. revenue | $ | 113,424 | ||||||||||||||
Non-U.S. revenue | $ | 47,587 |
Three months ended June 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 109,021 | $ | 27,070 | $ | — | $ | 136,091 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 74,785 | 12,166 | 8,572 | 95,523 | ||||||||||||
Stock-based compensation expense | 2,112 | 539 | 1,004 | 3,655 | ||||||||||||
Depreciation and amortization | 1,582 | 44 | 7,620 | 9,246 | ||||||||||||
Operating income (loss) | $ | 30,542 | $ | 14,321 | $ | (17,196 | ) | $ | 27,667 | |||||||
U.S. capital expenditures | $ | 731 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,458 | ||||||||||||||
U.S. revenue | $ | 98,986 | ||||||||||||||
Non-U.S. revenue | $ | 37,105 |
Six months ended June 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 248,515 | $ | 64,263 | $ | — | $ | 312,778 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 170,247 | 27,671 | 16,187 | 214,105 | ||||||||||||
Stock-based compensation expense | 4,958 | 973 | 1,561 | 7,492 | ||||||||||||
Depreciation and amortization | 3,906 | 82 | 16,777 | 20,765 | ||||||||||||
Operating income (loss) | $ | 69,404 | $ | 35,537 | $ | (34,525 | ) | $ | 70,416 | |||||||
U.S. capital expenditures | $ | 3,523 | ||||||||||||||
Non-U.S. capital expenditures | $ | 4,895 | ||||||||||||||
U.S. revenue | $ | 221,605 | ||||||||||||||
Non-U.S. revenue | $ | 91,173 |
Six months ended June 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 212,545 | $ | 51,836 | $ | — | $ | 264,381 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 142,430 | 23,098 | 15,467 | 180,995 | ||||||||||||
Stock-based compensation expense | 3,600 | 1,032 | 1,960 | 6,592 | ||||||||||||
Depreciation and amortization | 3,227 | 92 | 14,866 | 18,185 | ||||||||||||
Operating income (loss) | $ | 63,288 | $ | 27,614 | $ | (32,293 | ) | $ | 58,609 | |||||||
U.S. capital expenditures | $ | 1,632 | ||||||||||||||
Non-U.S. capital expenditures | $ | 2,207 | ||||||||||||||
U.S. revenue | $ | 191,596 | ||||||||||||||
Non-U.S. revenue | $ | 72,785 |
As of June 30, 2011 | ||||||||||||||||
(000’s) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
Goodwill | $ | 284,097 | $ | 42,446 | $ | — | $ | 326,543 | ||||||||
U.S. long-lived assets | $ | 38,772 | ||||||||||||||
Non-U.S. long-lived assets | $ | 23,290 |
As of December 31, 2010 | ||||||||||||||||
(000’s) | 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 June 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Available-for-sale | $ | 214,211 | $ | 173,072 | ||||
Held-to-maturity | 15,496 | 7,476 | ||||||
Trading securities | 5,509 | 4,692 | ||||||
Total | $ | 235,216 | $ | 185,240 |
As of June 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 | $ | 116,101 | $ | 58 | $ | (46 | ) | $ | 116,113 | $ | 113,597 | $ | 36 | $ | (56 | ) | $ | 113,577 | ||||||||||||||
Corporate bonds | 55,758 | 86 | (56 | ) | 55,788 | 42,839 | 63 | (24 | ) | 42,878 | ||||||||||||||||||||||
Commercial paper | 25,959 | 6 | (3 | ) | 25,962 | 2,994 | — | (3 | ) | 2,991 | ||||||||||||||||||||||
Equity securities and exchange-traded funds | 6,182 | 312 | (46 | ) | 6,448 | 4,510 | 418 | (6 | ) | 4,922 | ||||||||||||||||||||||
Mutual funds | 9,006 | 894 | — | 9,900 | 8,146 | 558 | — | 8,704 | ||||||||||||||||||||||||
Total | $ | 213,006 | $ | 1,356 | $ | (151 | ) | $ | 214,211 | $ | 172,086 | $ | 1,075 | $ | (89 | ) | $ | 173,072 | ||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 15,496 | $ | — | $ | — | $ | 15,496 | $ | 7,476 | $ | — | $ | — | $ | 7,476 |
As of June 30, 2011 | As of December 31, 2010 | |||||||||||||||
($000) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Due in one year or less | $ | 143,986 | $ | 144,052 | $ | 85,990 | $ | 85,964 | ||||||||
Due in one to two years | 53,832 | 53,811 | 73,440 | 73,482 | ||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 15,188 | 16,348 | 12,656 | 13,626 | ||||||||||||
Total | $ | 213,006 | $ | 214,211 | $ | 172,086 | $ | 173,072 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 15,490 | $ | 15,490 | $ | 7,223 | $ | 7,223 | ||||||||
Due in more than one year | 6 | 6 | 253 | 253 | ||||||||||||
Total | $ | 15,496 | $ | 15,496 | $ | 7,476 | $ | 7,476 |
Six months ended June 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Realized gains | $ | 397 | $ | 17 | ||||
Realized losses | — | (8 | ) | |||||
Realized gains, net | $ | 397 | $ | 9 |
Six months ended June 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Unrealized loss, net | $ | 9 | $ | 398 |
Fair Value | Fair Value Measurements as of June 30, 2011 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | June 30, 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 116,113 | $ | — | $ | 116,113 | $ | — | ||||||||
Corporate bonds | 55,788 | — | 55,788 | — | ||||||||||||
Commercial paper | 25,962 | — | 25,962 | — | ||||||||||||
Equity securities and exchange-traded funds | 6,448 | 6,448 | — | — | ||||||||||||
Mutual funds | 9,900 | 9,900 | — | — | ||||||||||||
Trading securities | 5,509 | 5,509 | — | — | ||||||||||||
Total | $ | 219,720 | $ | 21,857 | $ | 197,863 | $ | — |
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 June 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Investment in MJKK | $ | 18,971 | $ | 19,036 | ||||
Other equity method investments | 232 | 109 | ||||||
Investments accounted for using the cost method | 5,221 | 5,117 | ||||||
Total investments in unconsolidated entities | $ | 24,424 | $ | 24,262 |
As of June 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) | ¥ | 2,674,000 | ¥ | 3,197,000 | ||||
Equivalent U.S. dollars ($000) | $ | 33,022 | $ | 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 payments | (855 | ) | ||
Balance as of June 30, 2011 | $ | 1,574 |
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As of June 30 | |||
(000) | 2011 | ||
Shares available for future grants | 5,000 |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Restricted stock units | $ | 3,332 | $ | 3,343 | $ | 6,117 | $ | 6,280 | ||||||||
Restricted stock | 444 | 312 | 1,308 | 312 | ||||||||||||
Stock options | 67 | — | 67 | — | ||||||||||||
Total stock-based compensation expense | $ | 3,843 | $ | 3,655 | $ | 7,492 | $ | 6,592 | ||||||||
Income tax benefit related to the stock-based compensation expense | $ | 944 | $ | 1,008 | $ | 1,669 | $ | 1,901 |
Unrecognized stock-based compensation expense ($000) | Expected amortization period (months) | ||||||
Restricted stock units | $ | 33,520 | 36 | ||||
Restricted stock | 6,807 | 46 | |||||
Stock options | 1,978 | 45 | |||||
Total unrecognized stock-based compensation expense | $ | 42,305 | 38 |
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 | 264,402 | — | 264,402 | 57.25 | |||||||||
Vested | (221,806 | ) | — | (221,806 | ) | 48.37 | |||||||
Vested but deferred | (1,726 | ) | 1,726 | — | — | ||||||||
Issued | — | (26,962 | ) | (26,962 | ) | 46.71 | |||||||
Forfeited | (58,025 | ) | — | (58,025 | ) | 47.45 | |||||||
RSUs outstanding—June 30, 2011 | 760,511 | 19,953 | 780,464 | 50.20 |
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 | (114,956 | ) | 18.95 | ||||
Options outstanding—June 30, 2011 | 533,929 | 19.32 | |||||
Options exercisable— June 30, 2011 | 533,929 | $ | 19.32 |
All Other Option Grants, Excluding Activity Shown Above | Underlying Shares | Weighted Average Exercise Price | |||||
Options outstanding—December 31, 2010 | 1,207,540 | $ | 17.09 | ||||
Granted | 86,106 | 57.28 | |||||
Canceled | (450 | ) | 21.12 | ||||
Exercised | (374,630 | ) | 15.66 | ||||
Options outstanding— June 30, 2011 | 918,566 | 21.71 | |||||
Options exercisable— June 30, 2011 | 832,460 | $ | 18.03 |
Six months ended June 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Intrinsic value of options exercised | $ | 20,137 | $ | 14,502 |
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 | 410,323 | 1.34 | $ | 9.78 | $ | 20,926 | 410,323 | 1.34 | $ | 9.78 | $ | 20,926 | ||||||||||||||||
$19.33 - $43.87 | 956,066 | 3.44 | 22.29 | 36,799 | 956,066 | 3.44 | 22.29 | 36,799 | ||||||||||||||||||||
$57.28 | 86,106 | 9.88 | 57.28 | 301 | — | — | — | — | ||||||||||||||||||||
$8.57 - $57.28 | 1,452,495 | 3.23 | 20.83 | $ | 58,026 | 1,366,389 | 2.81 | 18.54 | $ | 57,725 | ||||||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||||
$8.57 - $57.28 | 1,452,495 | 3.23 | $ | 20.83 | $ | 58,026 |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Excess tax benefits related to stock-based compensation | $ | 2,049 | $ | 1,157 | $ | 6,171 | $ | 4,205 |
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Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 38,616 | $ | 27,688 | $ | 71,199 | $ | 58,451 | ||||||||
Equity in net income of unconsolidated entities | 595 | 454 | 969 | 843 | ||||||||||||
Net (income) loss attributable to the noncontrolling interest | (2 | ) | 85 | 96 | 116 | |||||||||||
Total | $ | 39,209 | $ | 28,227 | $ | 72,264 | $ | 59,410 | ||||||||
Income tax expense | $ | 12,724 | $ | 10,225 | $ | 23,242 | $ | 21,220 | ||||||||
Effective tax rate | 32.5 | % | 36.2 | % | 32.2 | % | 35.7 | % |
As of June 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Gross unrecognized tax benefits | $ | 10,910 | $ | 9,089 | ||||
Gross unrecognized tax benefits which would affect income tax expense | $ | 10,303 | $ | 8,482 | ||||
Effect on income tax expense upon recognition of gross unrecognized tax benefits (increase (decrease)) | $ | (8,669 | ) | $ | (6,895 | ) |
As of June 30 | As of December 31 | |||||||
Liabilities for Unrecognized Tax Benefits ($000) | 2011 | 2010 | ||||||
Current liability | $ | 1,953 | $ | 654 | ||||
Non-current liability | 8,791 | 8,173 | ||||||
Total liability for unrecognized tax benefits | $ | 10,744 | $ | 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 | 7,495 | ||
Balance as of June 30, 2011 | $ | 326,543 |
As of June 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 | $ | 32,759 | $ | (17,744 | ) | $ | 15,015 | 10 | $ | 33,990 | $ | (15,970 | ) | $ | 18,020 | 10 | ||||||||||||||
Customer-related assets | 137,412 | (46,880 | ) | 90,532 | 12 | 130,675 | (39,951 | ) | 90,724 | 11 | ||||||||||||||||||||
Supplier relationships | 240 | (78 | ) | 162 | 20 | 240 | (72 | ) | 168 | 20 | ||||||||||||||||||||
Technology-based assets | 81,556 | (30,992 | ) | 50,564 | 9 | 78,651 | (25,682 | ) | 52,969 | 9 | ||||||||||||||||||||
Non-competition agreement | 1,781 | (1,114 | ) | 667 | 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 | $ | 253,748 | $ | (96,808 | ) | $ | 156,940 | 10 | $ | 251,714 | $ | (82,691 | ) | $ | 169,023 | 10 |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Amortization expense | $ | 6,632 | $ | 5,848 | $ | 13,145 | $ | 11,316 |
($000) | |||
2011 | $ | 25,947 | |
2012 | 24,416 | ||
2013 | 21,677 | ||
2014 | 20,407 | ||
2015 | 19,525 | ||
2016 | 14,896 |
|
Three months ended June 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 128,116 | $ | 32,895 | $ | — | $ | 161,011 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 86,484 | 13,833 | 7,681 | 107,998 | ||||||||||||
Stock-based compensation expense | 2,488 | 531 | 824 | 3,843 | ||||||||||||
Depreciation and amortization | 2,047 | 40 | 8,476 | 10,563 | ||||||||||||
Operating income (loss) | $ | 37,097 | $ | 18,491 | $ | (16,981 | ) | $ | 38,607 | |||||||
U.S. capital expenditures | $ | 1,593 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,788 | ||||||||||||||
U.S. revenue | $ | 113,424 | ||||||||||||||
Non-U.S. revenue | $ | 47,587 |
Three months ended June 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 109,021 | $ | 27,070 | $ | — | $ | 136,091 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 74,785 | 12,166 | 8,572 | 95,523 | ||||||||||||
Stock-based compensation expense | 2,112 | 539 | 1,004 | 3,655 | ||||||||||||
Depreciation and amortization | 1,582 | 44 | 7,620 | 9,246 | ||||||||||||
Operating income (loss) | $ | 30,542 | $ | 14,321 | $ | (17,196 | ) | $ | 27,667 | |||||||
U.S. capital expenditures | $ | 731 | ||||||||||||||
Non-U.S. capital expenditures | $ | 1,458 | ||||||||||||||
U.S. revenue | $ | 98,986 | ||||||||||||||
Non-U.S. revenue | $ | 37,105 |
Six months ended June 30, 2011 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 248,515 | $ | 64,263 | $ | — | $ | 312,778 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 170,247 | 27,671 | 16,187 | 214,105 | ||||||||||||
Stock-based compensation expense | 4,958 | 973 | 1,561 | 7,492 | ||||||||||||
Depreciation and amortization | 3,906 | 82 | 16,777 | 20,765 | ||||||||||||
Operating income (loss) | $ | 69,404 | $ | 35,537 | $ | (34,525 | ) | $ | 70,416 | |||||||
U.S. capital expenditures | $ | 3,523 | ||||||||||||||
Non-U.S. capital expenditures | $ | 4,895 | ||||||||||||||
U.S. revenue | $ | 221,605 | ||||||||||||||
Non-U.S. revenue | $ | 91,173 |
Six months ended June 30, 2010 | ||||||||||||||||
($000) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
External revenue | $ | 212,545 | $ | 51,836 | $ | — | $ | 264,381 | ||||||||
Operating expense, excluding stock-based compensation expense, depreciation, and amortization | 142,430 | 23,098 | 15,467 | 180,995 | ||||||||||||
Stock-based compensation expense | 3,600 | 1,032 | 1,960 | 6,592 | ||||||||||||
Depreciation and amortization | 3,227 | 92 | 14,866 | 18,185 | ||||||||||||
Operating income (loss) | $ | 63,288 | $ | 27,614 | $ | (32,293 | ) | $ | 58,609 | |||||||
U.S. capital expenditures | $ | 1,632 | ||||||||||||||
Non-U.S. capital expenditures | $ | 2,207 | ||||||||||||||
U.S. revenue | $ | 191,596 | ||||||||||||||
Non-U.S. revenue | $ | 72,785 |
As of June 30, 2011 | ||||||||||||||||
(000’s) | Investment Information | Investment Management | Corporate Items | Total | ||||||||||||
Goodwill | $ | 284,097 | $ | 42,446 | $ | — | $ | 326,543 | ||||||||
U.S. long-lived assets | $ | 38,772 | ||||||||||||||
Non-U.S. long-lived assets | $ | 23,290 |
As of December 31, 2010 | ||||||||||||||||
(000’s) | 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 June 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Available-for-sale | $ | 214,211 | $ | 173,072 | ||||
Held-to-maturity | 15,496 | 7,476 | ||||||
Trading securities | 5,509 | 4,692 | ||||||
Total | $ | 235,216 | $ | 185,240 |
As of June 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 | $ | 116,101 | $ | 58 | $ | (46 | ) | $ | 116,113 | $ | 113,597 | $ | 36 | $ | (56 | ) | $ | 113,577 | ||||||||||||||
Corporate bonds | 55,758 | 86 | (56 | ) | 55,788 | 42,839 | 63 | (24 | ) | 42,878 | ||||||||||||||||||||||
Commercial paper | 25,959 | 6 | (3 | ) | 25,962 | 2,994 | — | (3 | ) | 2,991 | ||||||||||||||||||||||
Equity securities and exchange-traded funds | 6,182 | 312 | (46 | ) | 6,448 | 4,510 | 418 | (6 | ) | 4,922 | ||||||||||||||||||||||
Mutual funds | 9,006 | 894 | — | 9,900 | 8,146 | 558 | — | 8,704 | ||||||||||||||||||||||||
Total | $ | 213,006 | $ | 1,356 | $ | (151 | ) | $ | 214,211 | $ | 172,086 | $ | 1,075 | $ | (89 | ) | $ | 173,072 | ||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 15,496 | $ | — | $ | — | $ | 15,496 | $ | 7,476 | $ | — | $ | — | $ | 7,476 |
As of June 30, 2011 | As of December 31, 2010 | |||||||||||||||
($000) | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Available-for-sale: | ||||||||||||||||
Due in one year or less | $ | 143,986 | $ | 144,052 | $ | 85,990 | $ | 85,964 | ||||||||
Due in one to two years | 53,832 | 53,811 | 73,440 | 73,482 | ||||||||||||
Equity securities, exchange-traded funds, and mutual funds | 15,188 | 16,348 | 12,656 | 13,626 | ||||||||||||
Total | $ | 213,006 | $ | 214,211 | $ | 172,086 | $ | 173,072 | ||||||||
Held-to-maturity: | ||||||||||||||||
Due in one year or less | $ | 15,490 | $ | 15,490 | $ | 7,223 | $ | 7,223 | ||||||||
Due in more than one year | 6 | 6 | 253 | 253 | ||||||||||||
Total | $ | 15,496 | $ | 15,496 | $ | 7,476 | $ | 7,476 |
Six months ended June 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Realized gains | $ | 397 | $ | 17 | ||||
Realized losses | — | (8 | ) | |||||
Realized gains, net | $ | 397 | $ | 9 |
Six months ended June 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Unrealized loss, net | $ | 9 | $ | 398 |
Fair Value | Fair Value Measurements as of June 30, 2011 | |||||||||||||||
as of | Using Fair Value Hierarchy | |||||||||||||||
($000) | June 30, 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||
Available-for-sale investments | ||||||||||||||||
Government obligations | $ | 116,113 | $ | — | $ | 116,113 | $ | — | ||||||||
Corporate bonds | 55,788 | — | 55,788 | — | ||||||||||||
Commercial paper | 25,962 | — | 25,962 | — | ||||||||||||
Equity securities and exchange-traded funds | 6,448 | 6,448 | — | — | ||||||||||||
Mutual funds | 9,900 | 9,900 | — | — | ||||||||||||
Trading securities | 5,509 | 5,509 | — | — | ||||||||||||
Total | $ | 219,720 | $ | 21,857 | $ | 197,863 | $ | — |
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 June 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Investment in MJKK | $ | 18,971 | $ | 19,036 | ||||
Other equity method investments | 232 | 109 | ||||||
Investments accounted for using the cost method | 5,221 | 5,117 | ||||||
Total investments in unconsolidated entities | $ | 24,424 | $ | 24,262 |
As of June 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) | ¥ | 2,674,000 | ¥ | 3,197,000 | ||||
Equivalent U.S. dollars ($000) | $ | 33,022 | $ | 38,361 |
|
Liability for vacant office space | ($000) | |||
Balance as of December 31, 2010 | $ | 2,429 | ||
Reduction of liability for lease payments | (855 | ) | ||
Balance as of June 30, 2011 | $ | 1,574 |
|
As of June 30 | |||
(000) | 2011 | ||
Shares available for future grants | 5,000 |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Restricted stock units | $ | 3,332 | $ | 3,343 | $ | 6,117 | $ | 6,280 | ||||||||
Restricted stock | 444 | 312 | 1,308 | 312 | ||||||||||||
Stock options | 67 | — | 67 | — | ||||||||||||
Total stock-based compensation expense | $ | 3,843 | $ | 3,655 | $ | 7,492 | $ | 6,592 | ||||||||
Income tax benefit related to the stock-based compensation expense | $ | 944 | $ | 1,008 | $ | 1,669 | $ | 1,901 |
Unrecognized stock-based compensation expense ($000) | Expected amortization period (months) | ||||||
Restricted stock units | $ | 33,520 | 36 | ||||
Restricted stock | 6,807 | 46 | |||||
Stock options | 1,978 | 45 | |||||
Total unrecognized stock-based compensation expense | $ | 42,305 | 38 |
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 | (114,956 | ) | 18.95 | ||||
Options outstanding—June 30, 2011 | 533,929 | 19.32 | |||||
Options exercisable— June 30, 2011 | 533,929 | $ | 19.32 |
All Other Option Grants, Excluding Activity Shown Above | Underlying Shares | Weighted Average Exercise Price | |||||
Options outstanding—December 31, 2010 | 1,207,540 | $ | 17.09 | ||||
Granted | 86,106 | 57.28 | |||||
Canceled | (450 | ) | 21.12 | ||||
Exercised | (374,630 | ) | 15.66 | ||||
Options outstanding— June 30, 2011 | 918,566 | 21.71 | |||||
Options exercisable— June 30, 2011 | 832,460 | $ | 18.03 |
Six months ended June 30 | ||||||||
($000) | 2011 | 2010 | ||||||
Intrinsic value of options exercised | $ | 20,137 | $ | 14,502 |
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 | 410,323 | 1.34 | $ | 9.78 | $ | 20,926 | 410,323 | 1.34 | $ | 9.78 | $ | 20,926 | ||||||||||||||||
$19.33 - $43.87 | 956,066 | 3.44 | 22.29 | 36,799 | 956,066 | 3.44 | 22.29 | 36,799 | ||||||||||||||||||||
$57.28 | 86,106 | 9.88 | 57.28 | 301 | — | — | — | — | ||||||||||||||||||||
$8.57 - $57.28 | 1,452,495 | 3.23 | 20.83 | $ | 58,026 | 1,366,389 | 2.81 | 18.54 | $ | 57,725 | ||||||||||||||||||
Vested or Expected to Vest | ||||||||||||||||||||||||||||
$8.57 - $57.28 | 1,452,495 | 3.23 | $ | 20.83 | $ | 58,026 |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Excess tax benefits related to stock-based compensation | $ | 2,049 | $ | 1,157 | $ | 6,171 | $ | 4,205 |
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 | 264,402 | — | 264,402 | 57.25 | |||||||||
Vested | (221,806 | ) | — | (221,806 | ) | 48.37 | |||||||
Vested but deferred | (1,726 | ) | 1,726 | — | — | ||||||||
Issued | — | (26,962 | ) | (26,962 | ) | 46.71 | |||||||
Forfeited | (58,025 | ) | — | (58,025 | ) | 47.45 | |||||||
RSUs outstanding—June 30, 2011 | 760,511 | 19,953 | 780,464 | 50.20 |
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 |
|
As of June 30 | As of December 31 | |||||||
($000) | 2011 | 2010 | ||||||
Gross unrecognized tax benefits | $ | 10,910 | $ | 9,089 | ||||
Gross unrecognized tax benefits which would affect income tax expense | $ | 10,303 | $ | 8,482 | ||||
Effect on income tax expense upon recognition of gross unrecognized tax benefits (increase (decrease)) | $ | (8,669 | ) | $ | (6,895 | ) |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
($000) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Income before income taxes and equity in net income of unconsolidated entities | $ | 38,616 | $ | 27,688 | $ | 71,199 | $ | 58,451 | ||||||||
Equity in net income of unconsolidated entities | 595 | 454 | 969 | 843 | ||||||||||||
Net (income) loss attributable to the noncontrolling interest | (2 | ) | 85 | 96 | 116 | |||||||||||
Total | $ | 39,209 | $ | 28,227 | $ | 72,264 | $ | 59,410 | ||||||||
Income tax expense | $ | 12,724 | $ | 10,225 | $ | 23,242 | $ | 21,220 | ||||||||
Effective tax rate | 32.5 | % | 36.2 | % | 32.2 | % | 35.7 | % |
As of June 30 | As of December 31 | |||||||
Liabilities for Unrecognized Tax Benefits ($000) | 2011 | 2010 | ||||||
Current liability | $ | 1,953 | $ | 654 | ||||
Non-current liability | 8,791 | 8,173 | ||||||
Total liability for unrecognized tax benefits | $ | 10,744 | $ | 8,827 |
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