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Illinois
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36-3297908
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification Number)
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22 West Washington Street
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Chicago, Illinois
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60602
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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PART 1.
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FINANCIAL INFORMATION
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Item 1.
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Unaudited Condensed Consolidated Financial Statements
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Three months ended June 30
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Six months ended June 30
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||||||||||||
(in thousands except per share amounts)
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2011
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2010
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2011
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2010
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Revenue
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$
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161,011
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$
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136,091
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$
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312,778
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$
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264,381
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||||||||
Operating expense (1):
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Cost of goods sold
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45,186
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39,738
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85,855
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74,054
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Development
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13,681
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11,899
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25,669
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22,788
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Sales and marketing
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26,767
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24,435
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53,249
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46,996
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General and administrative
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26,207
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23,106
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56,824
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43,749
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Depreciation and amortization
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10,563
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9,246
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20,765
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18,185
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||||
Total operating expense
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122,404
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108,424
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242,362
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205,772
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Operating income
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38,607
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27,667
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70,416
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58,609
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Non-operating income (expense):
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Interest income (expense), net
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(179
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)
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593
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345
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1,180
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Other income (expense), net
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188
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(572
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)
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438
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(1,338
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)
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Non-operating income (expense), net
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9
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21
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783
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(158
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)
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Income before income taxes and equity in net income of unconsolidated entities
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38,616
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27,688
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71,199
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58,451
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Income tax expense
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12,724
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10,225
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23,242
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21,220
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Equity in net income of unconsolidated entities
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595
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454
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969
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843
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Consolidated net income
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26,487
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17,917
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48,926
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38,074
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Net (income) loss attributable to the noncontrolling interest
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(2
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)
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85
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96
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116
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Net income attributable to Morningstar, Inc.
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$
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26,485
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$
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18,002
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$
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49,022
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$
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38,190
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Net income per share attributable to Morningstar, Inc.:
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Basic
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$
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0.53
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$
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0.37
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$
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0.98
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$
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0.78
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Diluted
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$
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0.52
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$
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0.36
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$
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0.96
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$
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0.76
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Weighted average shares outstanding:
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Basic
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50,165
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49,234
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49,983
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49,032
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Diluted
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51,142
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50,533
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51,041
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50,426
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Three months ended June 30
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Six months ended June 30
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||||||||||||
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2011
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2010
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2011
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2010
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||||
(1) Includes stock-based compensation expense of:
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Cost of goods sold
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$
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1,072
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$
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907
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$
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1,951
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$
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1,622
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Development
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572
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449
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1,043
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842
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||||
Sales and marketing
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481
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486
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903
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889
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General and administrative
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1,718
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1,813
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3,595
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3,239
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||||
Total stock-based compensation expense
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$
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3,843
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$
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3,655
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$
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7,492
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$
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6,592
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As of June 30
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As of December 31
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|||
(in thousands except share amounts)
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2011
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2010
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Assets
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Current assets:
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|
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Cash and cash equivalents
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$
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195,023
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$
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180,176
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Investments
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235,216
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185,240
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Accounts receivable, less allowance of $767 and $1,056, respectively
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111,518
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110,891
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Deferred tax asset, net
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2,787
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2,860
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|
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Income tax receivable, net
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14,381
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10,459
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Other
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16,497
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17,654
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Total current assets
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575,422
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507,280
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Property, equipment, and capitalized software, net
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62,062
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62,105
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Investments in unconsolidated entities
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24,424
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24,262
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Goodwill
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326,543
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317,661
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Intangible assets, net
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156,940
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169,023
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Other assets
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7,675
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5,971
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Total assets
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$
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1,153,066
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$
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1,086,302
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|
||||
Liabilities and equity
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|
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Current liabilities:
|
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|
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Accounts payable and accrued liabilities
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$
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38,646
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$
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42,680
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Accrued compensation
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50,089
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62,404
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|
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Deferred revenue
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156,760
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146,267
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|
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Other
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761
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1,373
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|
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Total current liabilities
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246,256
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252,724
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|
||
Accrued compensation
|
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4,855
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4,965
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|
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Deferred tax liability, net
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19,477
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|
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19,975
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|
||
Other long-term liabilities
|
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26,256
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|
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27,213
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|
||
Total liabilities
|
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296,844
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|
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304,877
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||
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|
||||
Equity:
|
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|
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Morningstar, Inc. shareholders’ equity:
|
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|
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|
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Common stock, no par value, 200,000,000 shares authorized, of which 50,539,113 and 49,874,392 shares were outstanding as of June 30, 2011 and December 31, 2010, respectively
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5
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5
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Treasury stock at cost, 266,334 shares as of June 30, 2011 and 279,456 shares as of December 31, 2010
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(6,391
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)
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(6,641
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)
|
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Additional paid-in capital
|
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476,456
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458,426
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|
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Retained earnings
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367,310
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323,408
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|
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Accumulated other comprehensive income:
|
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|
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|
|||
Currency translation adjustment
|
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17,070
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|
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4,503
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|
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Unrealized gain on available-for-sale securities
|
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762
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|
|
615
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|
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Total accumulated other comprehensive income
|
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17,832
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|
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5,118
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|
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Total Morningstar, Inc. shareholders’ equity
|
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855,212
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|
|
780,316
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|
||
Noncontrolling interest
|
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1,010
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|
|
1,109
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|
||
Total equity
|
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856,222
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|
|
781,425
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|
||
Total liabilities and equity
|
|
$
|
1,153,066
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|
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$
|
1,086,302
|
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|
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Morningstar, Inc. Shareholders’ Equity
|
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|
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|
|||||||||||||||||||||||||
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Accumulated
Other
Comprehensive
Income
(Loss)
|
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|
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|
||||||||||||||||
|
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Common Stock
|
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|
|
Additional
Paid-in
Capital
|
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|
|
|
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Non
Controlling
Interests
|
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|
|||||||||||||||
(in thousands, except share amounts)
|
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Shares
Outstanding
|
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Par
Value
|
|
|
Treasury
Stock
|
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|
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Retained
Earnings
|
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Total
Equity
|
|
|||||||||||||
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|
|
|
|
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|
|||||||||||||||
Balance as of December 31, 2010
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49,874,392
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$
|
5
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|
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$
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(6,641
|
)
|
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$
|
458,426
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|
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$
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323,408
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|
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$
|
5,118
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|
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$
|
1,109
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|
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$
|
781,425
|
|
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|
|||||||||||||||
Comprehensive income (loss):
|
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|||||||||
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|
|||||||||||||||
Net income (loss)
|
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|
|
—
|
|
|
—
|
|
|
—
|
|
|
49,022
|
|
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—
|
|
|
(96
|
)
|
|
48,926
|
|
||||||||
Unrealized gain on available-for-sale investments, net of income tax of $73
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||||||
Foreign currency translation adjustment, net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,567
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|
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(3
|
)
|
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12,564
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|
||||||||
Total comprehensive income (loss)
|
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|
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—
|
|
|
—
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|
|
—
|
|
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49,022
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|
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12,714
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|
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(99
|
)
|
|
61,637
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|
||||||||
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|
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|
|||||||||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
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666,614
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|
|
—
|
|
|
359
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|
|
4,293
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|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,652
|
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
6,117
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|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,117
|
|
||||||||
Stock-based compensation — restricted stock
|
|
|
|
—
|
|
|
—
|
|
|
1,308
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,308
|
|
||||||||
Stock-based compensation - stock-options
|
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
||||||||
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
6,171
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,171
|
|
||||||||
Common shares repurchased
|
|
(1,893
|
)
|
|
—
|
|
|
(109
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,042
|
)
|
|
—
|
|
|
—
|
|
|
(5,042
|
)
|
||||||||
Dividends declared — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
74
|
|
|
(78
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of June 30, 2011
|
|
50,539,113
|
|
|
$
|
5
|
|
|
$
|
(6,391
|
)
|
|
$
|
476,456
|
|
|
$
|
367,310
|
|
|
$
|
17,832
|
|
|
$
|
1,010
|
|
|
$
|
856,222
|
|
|
|
Six months ended June 30
|
||||||
(in thousands)
|
|
2011
|
|
|
2010
|
|
||
|
|
|
|
|
||||
Operating activities
|
|
|
|
|
|
|
||
Consolidated net income
|
|
$
|
48,926
|
|
|
$
|
38,074
|
|
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
20,765
|
|
|
18,185
|
|
||
Deferred income tax expense (benefit)
|
|
454
|
|
|
(1,012
|
)
|
||
Stock-based compensation expense
|
|
7,492
|
|
|
6,592
|
|
||
Provision for bad debt
|
|
530
|
|
|
356
|
|
||
Equity in net income of unconsolidated entities
|
|
(969
|
)
|
|
(843
|
)
|
||
Excess tax benefits from stock-option exercises and vesting of restricted stock units
|
|
(6,171
|
)
|
|
(4,205
|
)
|
||
Other, net
|
|
(547
|
)
|
|
1,386
|
|
||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
||||
Accounts receivable
|
|
617
|
|
|
(6,615
|
)
|
||
Other assets
|
|
608
|
|
|
(511
|
)
|
||
Accounts payable and accrued liabilities
|
|
(5,260
|
)
|
|
2,859
|
|
||
Accrued compensation
|
|
(14,528
|
)
|
|
(11,154
|
)
|
||
Income taxes payable
|
|
2,742
|
|
|
(4,255
|
)
|
||
Deferred revenue
|
|
8,197
|
|
|
7,177
|
|
||
Deferred rent
|
|
(657
|
)
|
|
(80
|
)
|
||
Other liabilities
|
|
(1,043
|
)
|
|
(924
|
)
|
||
Cash provided by operating activities
|
|
61,156
|
|
|
45,030
|
|
||
|
|
|
|
|
||||
Investing activities
|
|
|
|
|
|
|
||
Purchases of investments
|
|
(198,647
|
)
|
|
(85,528
|
)
|
||
Proceeds from maturities and sales of investments
|
|
150,360
|
|
|
130,381
|
|
||
Capital expenditures
|
|
(8,418
|
)
|
|
(3,839
|
)
|
||
Acquisitions, net of cash acquired
|
|
569
|
|
|
(67,455
|
)
|
||
Other, net
|
|
785
|
|
|
889
|
|
||
Cash used for investing activities
|
|
(55,351
|
)
|
|
(25,552
|
)
|
||
|
|
|
|
|
||||
Financing activities
|
|
|
|
|
|
|
||
Proceeds from stock-option exercises, net
|
|
4,652
|
|
|
3,650
|
|
||
Excess tax benefits from stock-option exercises and vesting of restricted stock units
|
|
6,171
|
|
|
4,205
|
|
||
Common shares repurchased
|
|
(109
|
)
|
|
—
|
|
||
Dividends paid
|
|
(5,011
|
)
|
|
—
|
|
||
Other, net
|
|
(214
|
)
|
|
205
|
|
||
Cash provided by financing activities
|
|
5,489
|
|
|
8,060
|
|
||
|
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
|
3,553
|
|
|
(3,657
|
)
|
||
Net increase in cash and cash equivalents
|
|
14,847
|
|
|
23,881
|
|
||
Cash and cash equivalents—beginning of period
|
|
180,176
|
|
|
130,496
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
195,023
|
|
|
$
|
154,377
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
||
Cash paid for income taxes
|
|
$
|
21,104
|
|
|
$
|
26,396
|
|
Supplemental information of non-cash investing and financing activities:
|
|
|
|
|
||||
Unrealized gain (loss) on available-for-sale investments
|
|
$
|
220
|
|
|
$
|
(941
|
)
|
1.
|
Basis of Presentation of Interim Financial Information
|
2.
|
Summary of Significant Accounting Policies
|
•
|
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.
|
3.
|
Acquisitions, Goodwill, and Other Intangible Assets
|
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
|
|
4.
|
Income Per Share
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in thousands, except per share amounts)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income attributable to Morningstar, Inc.:
|
|
$
|
26,485
|
|
|
$
|
18,002
|
|
|
$
|
49,022
|
|
|
$
|
38,190
|
|
Less: Distributed earnings available to participating securities
|
|
(8
|
)
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
||||
Less: Undistributed earnings available to participating securities
|
|
(72
|
)
|
|
—
|
|
|
(131
|
)
|
|
—
|
|
||||
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
|
|
$
|
26,405
|
|
|
$
|
18,002
|
|
|
$
|
48,874
|
|
|
$
|
38,190
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
50,165
|
|
|
49,234
|
|
|
49,983
|
|
|
49,032
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share attributable to Morningstar, Inc.
|
|
$
|
0.53
|
|
|
$
|
0.37
|
|
|
$
|
0.98
|
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
|
|
$
|
26,405
|
|
|
$
|
18,002
|
|
|
$
|
48,874
|
|
|
$
|
38,190
|
|
Add: Undistributed earnings allocated to participating securities
|
|
72
|
|
|
—
|
|
|
131
|
|
|
—
|
|
||||
Less: Undistributed earnings reallocated to participating securities
|
|
(70
|
)
|
|
—
|
|
|
(129
|
)
|
|
—
|
|
||||
Numerator for diluted net income per share — undistributed and distributed earnings available to common shareholders
|
|
$
|
26,407
|
|
|
$
|
18,002
|
|
|
$
|
48,876
|
|
|
$
|
38,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding
|
|
50,165
|
|
|
49,234
|
|
|
49,983
|
|
|
49,032
|
|
||||
Net effect of dilutive stock options and restricted stock units
|
|
977
|
|
|
1,299
|
|
|
1,058
|
|
|
1,394
|
|
||||
Weighted average common shares outstanding for computing diluted income per share
|
|
51,142
|
|
|
50,533
|
|
|
51,041
|
|
|
50,426
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income per share attributable to Morningstar, Inc.
|
|
$
|
0.52
|
|
|
$
|
0.36
|
|
|
$
|
0.96
|
|
|
$
|
0.76
|
|
5.
|
Segment and Geographical Area Information
|
•
|
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
|
|
6.
|
Investments and Fair Value Measurements
|
|
|
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
|
|
||
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.
|
7.
|
Investments in Unconsolidated Entities
|
|
|
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
|
|
8.
|
Liability for Vacant Office Space
|
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
|
|
9.
|
Stock-Based Compensation
|
|
|
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
|
|
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
|
|
10.
|
Income Taxes
|
|
|
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
|
|
11.
|
Contingencies
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
the increasing concentration of data and development work carried out at our offshore facilities in China and India;
|
•
|
Enhance our position in each of our key market segments by focusing on our three major Internet-based platforms;
|
•
|
Create a premier global investment database;
|
•
|
Continue building thought leadership in independent investment research;
|
•
|
Become a global leader in fund-of-funds investment management; and
|
•
|
Expand our international brand presence, products, and services.
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|||||||||||||||||||
Key Metrics ($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|||||
Revenue
|
|
$
|
161,011
|
|
|
$
|
136,091
|
|
|
18.3
|
%
|
|
$
|
312,778
|
|
|
$
|
264,381
|
|
9
|
|
18.3
|
%
|
|
Operating income
|
|
$
|
38,607
|
|
|
$
|
27,667
|
|
|
39.5
|
%
|
|
$
|
70,416
|
|
|
$
|
58,609
|
|
|
20.1
|
%
|
|
|
Operating margin
|
|
24.0
|
%
|
|
20.3
|
%
|
|
3.7
|
|
pp
|
22.5
|
%
|
|
22.2
|
%
|
|
0.3
|
|
pp
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash used for investing activities
|
|
$
|
(45,307
|
)
|
|
$
|
(60,134
|
)
|
|
(24.7
|
)%
|
|
$
|
(55,351
|
)
|
|
$
|
(25,552
|
)
|
|
116.6
|
%
|
|
|
Cash provided by (used for) financing activities
|
|
$
|
(846
|
)
|
|
$
|
1,203
|
|
|
NMF
|
|
|
$
|
5,489
|
|
|
$
|
8,060
|
|
|
(31.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided by operating activities
|
|
$
|
46,810
|
|
|
$
|
30,580
|
|
|
53.1
|
%
|
|
$
|
61,156
|
|
|
$
|
45,030
|
|
|
35.8
|
%
|
|
|
Capital expenditures
|
|
(3,381
|
)
|
|
(2,189
|
)
|
|
54.5
|
%
|
|
(8,418
|
)
|
|
(3,839
|
)
|
|
119.3
|
%
|
|
|||||
Free cash flow
|
|
$
|
43,429
|
|
|
$
|
28,391
|
|
|
53.0
|
%
|
|
$
|
52,738
|
|
|
$
|
41,191
|
|
|
28.0
|
%
|
|
Acquisition
|
|
Date of Acquisition
|
|
Six months ended June 30, 2011
|
Footnoted business of Financial Fineprint Inc.
|
|
February 1, 2010
|
|
January 1 through January 31, 2011
|
Aegis Equities Research
|
|
April 1, 2010
|
|
January 1 through March 31, 2011
|
Old Broad Street Research Ltd.
|
|
April 12, 2010
|
|
January 1 through April 11, 2011
|
Realpoint, LLC
|
|
May 3, 2010
|
|
January 1 through May 2, 2011
|
Seeds Group
|
|
July 1, 2010
|
|
January 1 through June 30, 2011
|
Morningstar Danmark A/S (Morningstar Denmark)
|
|
July 1, 2010
|
|
January 1 through June 30, 2011
|
Annuity intelligence business of Advanced Sales and Marketing Corporation
|
|
November 1, 2010
|
|
January 1 through June 30, 2011
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
||||
Consolidated revenue
|
|
$
|
161,011
|
|
|
$
|
136,091
|
|
|
18.3
|
%
|
|
$
|
312,778
|
|
|
$
|
264,381
|
|
|
18.3
|
%
|
Less: acquisitions
|
|
(5,097
|
)
|
|
—
|
|
|
NMF
|
|
|
(14,112
|
)
|
|
—
|
|
|
NMF
|
|
||||
Less: impact of foreign currency translations
|
|
(4,573
|
)
|
|
—
|
|
|
NMF
|
|
|
(6,253
|
)
|
|
—
|
|
|
NMF
|
|
||||
Organic revenue
|
|
$
|
151,341
|
|
|
$
|
136,091
|
|
|
11.2
|
%
|
|
$
|
292,413
|
|
|
$
|
264,381
|
|
|
10.6
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
||||
International revenue
|
|
$
|
47,587
|
|
|
$
|
37,105
|
|
|
28.2
|
%
|
|
$
|
91,173
|
|
|
$
|
72,785
|
|
|
25.3
|
%
|
Less: acquisitions
|
|
(2,076
|
)
|
|
—
|
|
|
NMF
|
|
|
(5,561
|
)
|
|
—
|
|
|
NMF
|
|
||||
Less: impact of foreign currency translations
|
|
(4,573
|
)
|
|
—
|
|
|
NMF
|
|
|
(6,253
|
)
|
|
—
|
|
|
NMF
|
|
||||
International organic revenue
|
|
$
|
40,938
|
|
|
$
|
37,105
|
|
|
10.3
|
%
|
|
$
|
79,359
|
|
|
$
|
72,785
|
|
|
9.0
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|||||
Operating expense
|
|
$
|
122,404
|
|
|
$
|
108,424
|
|
|
12.9
|
%
|
|
$
|
242,362
|
|
|
$
|
205,772
|
|
9
|
|
17.8
|
%
|
|
% of revenue
|
|
76.0
|
%
|
|
79.7
|
%
|
|
(3.7
|
)
|
pp
|
77.5
|
%
|
|
77.8
|
%
|
|
(0.3
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Cost of goods sold
|
|
$
|
45,186
|
|
|
$
|
39,738
|
|
|
13.7
|
%
|
|
$
|
85,855
|
|
|
$
|
74,054
|
|
|
15.9
|
%
|
|
% of revenue
|
|
28.1
|
%
|
|
29.2
|
%
|
|
(1.1
|
)
|
pp
|
27.4
|
%
|
|
28.0
|
%
|
|
(0.6
|
)
|
pp
|
||||
Gross profit
|
|
$
|
115,825
|
|
|
$
|
96,353
|
|
|
20.2
|
%
|
|
$
|
226,923
|
|
|
$
|
190,327
|
|
|
19.2
|
%
|
|
Gross margin
|
|
71.9
|
%
|
|
70.8
|
%
|
|
1.1
|
|
pp
|
72.6
|
%
|
|
72.0
|
%
|
|
0.6
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|||||
Development expense
|
|
$
|
13,681
|
|
|
$
|
11,899
|
|
|
15.0
|
%
|
|
$
|
25,669
|
|
|
$
|
22,788
|
|
9
|
|
12.6
|
%
|
|
% of revenue
|
|
8.5
|
%
|
|
8.7
|
%
|
|
(0.2
|
)
|
pp
|
8.2
|
%
|
|
8.6
|
%
|
|
(0.4
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|||||
Sales and marketing expense
|
|
$
|
26,767
|
|
|
$
|
24,435
|
|
|
9.5
|
%
|
|
$
|
53,249
|
|
|
$
|
46,996
|
|
9
|
|
13.3
|
%
|
|
% of revenue
|
|
16.6
|
%
|
|
18.0
|
%
|
|
(1.4
|
)
|
pp
|
17.0
|
%
|
|
17.8
|
%
|
|
(0.8
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
General and administrative expense
|
|
$
|
26,207
|
|
|
$
|
23,106
|
|
|
13.4
|
%
|
|
$
|
56,824
|
|
|
$
|
43,749
|
|
|
29.9
|
%
|
|
% of revenue
|
|
16.3
|
%
|
|
17.0
|
%
|
|
(0.7
|
)
|
pp
|
18.2
|
%
|
|
16.5
|
%
|
|
1.7
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Depreciation expense
|
|
$
|
3,931
|
|
|
$
|
3,398
|
|
|
15.7
|
%
|
|
$
|
7,620
|
|
|
$
|
6,869
|
|
|
10.9
|
%
|
|
Amortization expense
|
|
6,632
|
|
|
5,848
|
|
|
13.4
|
%
|
|
13,145
|
|
|
11,316
|
|
|
16.2
|
%
|
|
||||
Total depreciation and amortization expense
|
|
$
|
10,563
|
|
|
$
|
9,246
|
|
|
14.2
|
%
|
|
$
|
20,765
|
|
|
$
|
18,185
|
|
|
14.2
|
%
|
|
% of revenue
|
|
6.6
|
%
|
|
6.8
|
%
|
|
(0.2
|
)
|
pp
|
6.6
|
%
|
|
6.9
|
%
|
|
(0.3
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Restricted stock units
|
|
$
|
3,332
|
|
|
$
|
3,343
|
|
|
(0.3
|
)%
|
|
$
|
6,117
|
|
|
$
|
6,280
|
|
|
(2.6
|
)%
|
|
Restricted stock
|
|
444
|
|
|
312
|
|
|
42.3
|
%
|
|
1,308
|
|
|
312
|
|
|
319.2
|
%
|
|
||||
Stock options
|
|
67
|
|
|
—
|
|
|
NMF
|
|
|
67
|
|
|
—
|
|
|
NMF
|
|
|
||||
Total stock-based compensation expense
|
|
$
|
3,843
|
|
|
$
|
3,655
|
|
|
5.1
|
%
|
|
$
|
7,492
|
|
|
$
|
6,592
|
|
|
13.7
|
%
|
|
% of revenue
|
|
2.4
|
%
|
|
2.7
|
%
|
|
(0.3
|
)
|
pp
|
2.4
|
%
|
|
2.5
|
%
|
|
(0.1
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Bonus expense
|
|
$
|
10,982
|
|
|
$
|
8,993
|
|
|
22.1
|
%
|
|
$
|
21,115
|
|
|
$
|
16,701
|
|
|
26.4
|
%
|
|
% of revenue
|
|
6.8
|
%
|
|
6.6
|
%
|
|
0.2
|
|
pp
|
6.8
|
%
|
|
6.3
|
%
|
|
0.5
|
|
pp
|
|
|
Bonus Expense
|
|
Difference
between
bonuses paid in
Q1 2011 (for 2010
performance) vs.
2010 bonus
expense
|
|
|
Net Increase
(Decrease) in
Bonus Expense
|
|
||||||||||||
($000)
|
|
Q1 2011
|
|
|
Q1 2010
|
|
|
Change
|
|
|
|
|||||||||
Cost of sales
|
|
$
|
4,205
|
|
|
$
|
2,821
|
|
|
$
|
1,384
|
|
|
$
|
(1,577
|
)
|
|
$
|
(193
|
)
|
Development
|
|
1,715
|
|
|
1,152
|
|
|
563
|
|
|
(959
|
)
|
|
(396
|
)
|
|||||
Sales and Marketing
|
|
1,557
|
|
|
1,248
|
|
|
309
|
|
|
(521
|
)
|
|
(212
|
)
|
|||||
General and administrative expense
|
|
3,104
|
|
|
2,487
|
|
|
617
|
|
|
2,609
|
|
|
3,226
|
|
|||||
Total bonus expense
|
|
$
|
10,581
|
|
|
$
|
7,708
|
|
|
$
|
2,873
|
|
|
$
|
(448
|
)
|
|
$
|
2,425
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Operating income
|
|
$
|
38,607
|
|
|
$
|
27,667
|
|
|
39.5
|
%
|
|
$
|
70,416
|
|
|
$
|
58,609
|
|
|
20.1
|
%
|
|
% of revenue
|
|
24.0
|
%
|
|
20.3
|
%
|
|
3.7
|
|
pp
|
22.5
|
%
|
|
22.2
|
%
|
|
0.3
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
||||
Cash provided by operating activities
|
|
$
|
46,810
|
|
|
$
|
30,580
|
|
|
53.1
|
%
|
|
$
|
61,156
|
|
|
$
|
45,030
|
|
|
35.8
|
%
|
Capital expenditures
|
|
(3,381
|
)
|
|
(2,189
|
)
|
|
54.5
|
%
|
|
(8,418
|
)
|
|
(3,839
|
)
|
|
119.3
|
%
|
||||
Free cash flow
|
|
$
|
43,429
|
|
|
$
|
28,391
|
|
|
53.0
|
%
|
|
$
|
52,738
|
|
|
$
|
41,191
|
|
|
28.0
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
||||||
Consolidated net income
|
|
$
|
26,487
|
|
|
$
|
17,917
|
|
|
$
|
8,570
|
|
|
$
|
48,926
|
|
|
$
|
38,074
|
|
|
$
|
10,852
|
|
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Excess tax benefits from stock-option exercises and vesting of restricted stock units
|
|
(2,049
|
)
|
|
(1,157
|
)
|
|
(892
|
)
|
|
(6,171
|
)
|
|
(4,205
|
)
|
|
(1,966
|
)
|
||||||
Depreciation and amortization expense
|
|
10,563
|
|
|
9,246
|
|
|
1,317
|
|
|
20,765
|
|
|
18,185
|
|
|
2,580
|
|
||||||
Stock-based compensation expense
|
|
3,843
|
|
|
3,655
|
|
|
188
|
|
|
7,492
|
|
|
6,592
|
|
|
900
|
|
||||||
All other non-cash items included in net income
|
|
746
|
|
|
609
|
|
|
137
|
|
|
(532
|
)
|
|
(113
|
)
|
|
(419
|
)
|
||||||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash paid for bonuses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37,464
|
)
|
|
(21,360
|
)
|
|
(16,104
|
)
|
||||||
Cash paid for income taxes
|
|
(14,142
|
)
|
|
(17,831
|
)
|
|
3,689
|
|
|
(21,104
|
)
|
|
(26,396
|
)
|
|
5,292
|
|
||||||
Cash paid related to adjusting the tax treatment of certain stock options originally considered incentive stock options
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,887
|
)
|
|
4,887
|
|
||||||
Cash paid for separation agreements
|
|
(686
|
)
|
|
—
|
|
|
(686
|
)
|
|
(2,756
|
)
|
|
—
|
|
|
(2,756
|
)
|
||||||
Accounts receivable
|
|
3,974
|
|
|
(1,748
|
)
|
|
5,722
|
|
|
617
|
|
|
(6,615
|
)
|
|
7,232
|
|
||||||
Deferred revenue
|
|
(1,650
|
)
|
|
(3,253
|
)
|
|
1,603
|
|
|
8,197
|
|
|
7,177
|
|
|
1,020
|
|
||||||
Income taxes — current
|
|
11,587
|
|
|
9,895
|
|
|
1,692
|
|
|
23,846
|
|
|
22,141
|
|
|
1,705
|
|
||||||
Accrued compensation
|
|
13,034
|
|
|
11,362
|
|
|
1,672
|
|
|
25,692
|
|
|
15,093
|
|
|
10,599
|
|
||||||
Other assets
|
|
(845
|
)
|
|
(31
|
)
|
|
(814
|
)
|
|
608
|
|
|
(511
|
)
|
|
1,119
|
|
||||||
Accounts payable and accrued liabilities
|
|
(2,660
|
)
|
|
1,685
|
|
|
(4,345
|
)
|
|
(5,260
|
)
|
|
2,859
|
|
|
(8,119
|
)
|
||||||
All other
|
|
(1,392
|
)
|
|
231
|
|
|
(1,623
|
)
|
|
(1,700
|
)
|
|
(1,004
|
)
|
|
(696
|
)
|
||||||
Cash provided by operating activities
|
|
$
|
46,810
|
|
|
$
|
30,580
|
|
|
$
|
16,230
|
|
|
$
|
61,156
|
|
|
$
|
45,030
|
|
|
$
|
16,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics ($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment Information
|
|
$
|
128,116
|
|
|
$
|
109,021
|
|
|
17.5
|
%
|
|
$
|
248,515
|
|
|
$
|
212,545
|
|
|
16.9
|
%
|
|
Investment Management
|
|
32,895
|
|
|
27,070
|
|
|
21.5
|
%
|
|
64,263
|
|
|
51,836
|
|
|
24.0
|
%
|
|
||||
Consolidated revenue
|
|
$
|
161,011
|
|
|
$
|
136,091
|
|
|
18.3
|
%
|
|
$
|
312,778
|
|
|
$
|
264,381
|
|
|
18.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment Information
|
|
$
|
37,097
|
|
|
$
|
30,542
|
|
|
21.5
|
%
|
|
$
|
69,404
|
|
|
$
|
63,288
|
|
|
9.7
|
%
|
|
Investment Management
|
|
18,491
|
|
|
14,321
|
|
|
29.1
|
%
|
|
35,537
|
|
|
27,614
|
|
|
28.7
|
%
|
|
||||
Intangible amortization and corporate depreciation expense
|
|
(8,476
|
)
|
|
(7,620
|
)
|
|
11.2
|
%
|
|
(16,777
|
)
|
|
(14,866
|
)
|
|
12.9
|
%
|
|
||||
Corporate unallocated
|
|
(8,505
|
)
|
|
(9,576
|
)
|
|
(11.2
|
)%
|
|
(17,748
|
)
|
|
(17,427
|
)
|
|
1.8
|
%
|
|
||||
Consolidated operating income
|
|
$
|
38,607
|
|
|
$
|
27,667
|
|
|
39.5
|
%
|
|
$
|
70,416
|
|
|
$
|
58,609
|
|
|
20.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment Information
|
|
29.0
|
%
|
|
28.0
|
%
|
|
1.0
|
|
pp
|
27.9
|
%
|
|
29.8
|
%
|
|
(1.9
|
)
|
pp
|
||||
Investment Management
|
|
56.2
|
%
|
|
52.9
|
%
|
|
3.3
|
|
pp
|
55.3
|
%
|
|
53.3
|
%
|
|
2.0
|
|
pp
|
||||
Consolidated operating margin
|
|
24.0
|
%
|
|
20.3
|
%
|
|
3.7
|
|
pp
|
22.5
|
%
|
|
22.2
|
%
|
|
0.3
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics ($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Revenue
|
|
$
|
128,116
|
|
|
$
|
109,021
|
|
|
17.5
|
%
|
|
$
|
248,515
|
|
|
$
|
212,545
|
|
|
16.9
|
%
|
|
Operating income
|
|
$
|
37,097
|
|
|
$
|
30,542
|
|
|
21.5
|
%
|
|
$
|
69,404
|
|
|
$
|
63,288
|
|
|
9.7
|
%
|
|
Operating margin (%)
|
|
29.0
|
%
|
|
28.0
|
%
|
|
1.0
|
|
pp
|
27.9
|
%
|
|
29.8
|
%
|
|
(1.9
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics ($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
||||
Revenue
|
|
$
|
32,895
|
|
|
$
|
27,070
|
|
|
21.5
|
%
|
|
$
|
64,263
|
|
|
$
|
51,836
|
|
|
24.0
|
%
|
|
Operating income
|
|
$
|
18,491
|
|
|
$
|
14,321
|
|
|
29.1
|
%
|
|
$
|
35,537
|
|
|
$
|
27,614
|
|
|
28.7
|
%
|
|
Operating margin (%)
|
|
56.2
|
%
|
|
52.9
|
%
|
|
3.3
|
|
pp
|
55.3
|
%
|
|
53.3
|
%
|
|
2.0
|
|
pp
|
|
|
As of June 30
|
||||||
($ billions)
|
|
2011
|
|
|
2010
|
|
||
Assets under advisement - U.S.
|
|
$
|
136.6
|
|
|
$
|
94.8
|
|
Assets under advisement and management - International
|
|
4.9
|
|
|
3.9
|
|
||
Total
|
|
$
|
141.5
|
|
|
$
|
98.7
|
|
|
|
As of June 30
|
||||||
($ billions)
|
|
2011
|
|
|
2010
|
|
||
Assets under management
|
|
$
|
21.4
|
|
|
$
|
16.1
|
|
Assets under advisement
|
|
17.0
|
|
|
12.2
|
|
||
Total
|
|
$
|
38.4
|
|
|
$
|
28.3
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
||||
Amortization expense
|
|
$
|
6,632
|
|
|
$
|
5,848
|
|
|
13.4
|
%
|
|
$
|
13,145
|
|
|
$
|
11,316
|
|
|
16.2
|
%
|
Depreciation expense
|
|
1,844
|
|
|
1,772
|
|
|
4.1
|
%
|
|
3,632
|
|
|
3,550
|
|
|
2.3
|
%
|
||||
Corporate unallocated
|
|
8,505
|
|
|
9,576
|
|
|
(11.2
|
)%
|
|
17,748
|
|
|
17,427
|
|
|
1.8
|
%
|
||||
Corporate items
|
|
$
|
16,981
|
|
|
$
|
17,196
|
|
|
(1.3
|
)%
|
|
$
|
34,525
|
|
|
$
|
32,293
|
|
|
6.9
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
||||
Equity in net income of unconsolidated entities
|
|
$
|
595
|
|
|
$
|
454
|
|
|
$
|
969
|
|
|
$
|
843
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
||||
Interest income
|
|
$
|
810
|
|
|
$
|
657
|
|
|
$
|
1,386
|
|
|
$
|
1,318
|
|
Interest expense
|
|
(989
|
)
|
|
(64
|
)
|
|
(1,041
|
)
|
|
(138
|
)
|
||||
Other income (expense), net
|
|
188
|
|
|
(572
|
)
|
|
438
|
|
|
(1,338
|
)
|
||||
Non-operating income (expense), net
|
|
$
|
9
|
|
|
$
|
21
|
|
|
$
|
783
|
|
|
$
|
(158
|
)
|
|
|
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
|
%
|
Top Five Products 2010
|
|
Reclassified for
Consistency with
2011 Product
Revenue
($000)
|
|
|
As Reported
Revenue ($000)
|
|
||
Licensed Data
|
|
$
|
98,186
|
|
|
$
|
98,186
|
|
Advisor Workstation
|
|
69,321
|
|
|
69,321
|
|
||
Investment Consulting
|
|
66,114
|
|
|
72,798
|
|
||
Morningstar.com
|
|
49,673
|
|
|
49,673
|
|
||
Morningstar Direct
|
|
38,069
|
|
|
38,069
|
|
||
Top Five Products 2009
|
|
Reclassified for
Consistency with
2011 Product
Revenue
($000)
|
|
|
As Reported
Revenue ($000)
|
|
||
Licensed Data
|
|
$
|
91,524
|
|
|
$
|
91,524
|
|
Advisor Workstation
|
|
65,673
|
|
|
65,673
|
|
||
Investment Consulting
|
|
56,344
|
|
|
62,531
|
|
||
Morningstar.com
|
|
39,454
|
|
|
39,454
|
|
||
Principia
|
|
29,968
|
|
|
29,968
|
|
Name and Position
|
|
Date of
Plan
|
|
Plan
Termination
Date
|
|
Number of
Shares
to be
Sold under
the Plan
|
|
|
Timing of Sales under the Plan
|
|
Number of Shares Sold under the Plan through July 31, 2011
|
|
|
Projected
Beneficial
Ownership (1)
|
|
Scott Cooley
Chief Financial Officer
|
|
3/22/2011
|
|
5/31/2012
|
|
10,000
|
|
|
Shares to be sold under the plan if the stock reaches a specified price
|
|
__
|
|
|
41,335
|
|
Bevin Desmond President, International Operations and Global Human Resources
|
|
5/27/2011
|
|
5/31/2013
|
|
92,243
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
__
|
|
|
101,803 (2)
|
|
Steve Kaplan,
Director
|
|
2/23/2011
|
|
2/28/2012
|
|
7,500
|
|
|
Shares to be sold under the plan on specified dates
|
|
__
|
|
|
60,644
|
|
Liz Kirscher
President, Data Division
|
|
11/23/2009
|
|
2/28/2012
|
|
63,750
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
24,000
|
|
|
73,847
|
|
Cathy Odelbo
President, Equity & Credit Research
|
|
8/13/2008
|
|
12/31/2011
|
|
100,000
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
__
|
|
|
92,458
|
|
Don Phillips
President,
Fund Research
|
|
3/11/2011
|
|
5/1/2012
|
|
95,000
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
41,603
|
|
|
342,808
|
|
Don Phillips
President,
Fund Research
|
|
5/25/2011
|
|
7/31/2012
|
|
27,640
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
__
|
|
|
315,168
|
|
David Williams
Managing Director, Design
|
|
9/10/2008
|
|
2/28/2012
|
|
20,000
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
5,000
|
|
|
91,413
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
(a)
|
Evaluation and Disclosure Controls and Procedures
|
(b)
|
Changes in Internal Controls Over Financial Reporting
|
PART 2.
|
OTHER INFORMATION
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period:
|
|
Total number
of shares
purchased
|
|
|
Average
price paid
per share
|
|
|
Total number
of shares
purchased as
part of publicly
announced
programs (1)
|
|
|
Approximate
dollar value of
shares that
may yet be
purchased
under the
programs (1)
|
|
||
Cumulative through March 31, 2011
|
|
76,218
|
|
|
$
|
49.64
|
|
|
76,218
|
|
|
$
|
96,216,778
|
|
April 1, 2011 – April 30, 2011
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
96,216,778
|
|
|
May 1, 2011 – May 31, 2011
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
96,216,778
|
|
|
June 1, 2011 – June 30, 2011
|
|
1,893
|
|
|
57.57
|
|
|
1,893
|
|
|
$
|
96,106,235
|
|
|
Total
|
|
78,111
|
|
|
$
|
49.83
|
|
|
78,111
|
|
|
|
|
(1)
|
In September 2010, our board of directors approved a share repurchase program that authorizes the purchase of up to $100 million of the outstanding common stock with an expiration date of December 31, 2012.
|
Item 6.
|
Exhibits
|
(a)
|
Exhibits
|
Exhibit No
|
|
Description of Exhibit
|
|
|
|
10.1
|
|
Form of Morningstar 2004 Stock Incentive Plan Stock Option Agreement for awards made on May 15, 2011
|
|
|
|
10.2
|
|
Form of Morningstar 2004 Stock Incentive Plan Director Stock Option Agreement for awards made on May 15, 2011
|
|
|
|
10.3
|
|
Morningstar, Inc. 2011 Stock Incentive Plan is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K that we filed with the SEC on May 18, 2011
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101*
|
|
The following financial information from Morningstar Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the SEC on
August 2, 2011
, formatted in XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statement of Equity and Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to Unaudited Condensed Consolidated Financial Statement
|
|
|
MORNINGSTAR, INC.
|
|
|
|
|
|
Date: August 2, 2011
|
By:
|
/s/ Scott Cooley
|
|
|
|
Scott Cooley
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
PARTICIPANT
«Employee»
Please return by:
«Return Date»
|
MORNINGSTAR, INC.
By: _________________________________
Its:
_________________________________
|
PARTICIPANT
«Director»
Please return by:
«Return Date»
|
MORNINGSTAR, INC.
By: _________________________________
Its:
_________________________________
|
Date: August 2, 2011
|
|
/s/ Joe Mansueto
|
|
|
|
Joe Mansueto
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
Date: August 2, 2011
|
|
/s/ Scott Cooley
|
|
|
|
Scott Cooley
|
|
|
|
Chief Financial Officer
|
1.
|
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
2.
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Joe Mansueto
|
|||
Joe Mansueto
|
|
||
Chairman of the Board and Chief Executive Officer
|
|||
|
|||
Date: August 2, 2011
|
|
1.
|
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
2.
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Scott Cooley
|
|
||
Scott Cooley
|
|
||
Chief Financial Officer
|
|
||
|
|
||
Date: August 2, 2011
|
|