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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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Unaudited Condensed Consolidated Statements of Income for the three and six months ended June 30, 2013 and 2012
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Unaudited Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012
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Unaudited Condensed Consolidated Statement of Equity for the six months ended June 30, 2013
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Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012
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PART 1.
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FINANCIAL INFORMATION
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Item 1.
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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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2013
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2012
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2013
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2012
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||||
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||||||||
Revenue
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$
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175,428
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$
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165,968
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$
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344,284
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$
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326,727
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||||||||
Operating expense (1):
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||||||||
Cost of goods sold
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50,273
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49,452
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98,283
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99,768
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||||
Development
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14,154
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12,442
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27,794
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25,807
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||||
Sales and marketing
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28,035
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27,373
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56,015
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55,699
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||||
General and administrative
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28,120
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24,946
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55,447
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53,124
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||||
Depreciation and amortization
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11,262
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10,619
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22,601
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20,794
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||||
Total operating expense
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131,844
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124,832
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260,140
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255,192
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||||
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||||||||
Operating income
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43,584
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41,136
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84,144
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71,535
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||||||||
Non-operating income (expense):
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||||||
Interest income, net
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664
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1,260
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1,405
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2,129
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Gain (loss) on sale of investments, reclassified from other comprehensive income
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423
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37
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1,148
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(49
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)
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||||
Holding gain upon acquisition of additional ownership of equity method investments
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3,713
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—
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3,713
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—
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||||
Other expense, net
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(1,689
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)
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(302
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)
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(2,210
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)
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(426
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)
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||||
Non-operating income, net
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3,111
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995
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4,056
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1,654
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||||
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||||||||
Income before income taxes and equity in net income of unconsolidated entities
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46,695
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42,131
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88,200
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73,189
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||||
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||||||||
Income tax expense
|
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15,955
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14,744
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28,382
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26,255
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||||
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||||||||
Equity in net income of unconsolidated entities
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360
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497
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857
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1,063
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||||
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||||||||
Consolidated net income
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31,100
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27,884
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60,675
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47,997
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||||
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||||||||
Net loss attributable to the noncontrolling interest
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21
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4
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64
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28
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||||||||
Net income attributable to Morningstar, Inc.
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$
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31,121
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$
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27,888
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$
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60,739
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$
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48,025
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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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0.67
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$
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0.57
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$
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1.31
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$
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0.97
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Diluted
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$
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0.66
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$
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0.56
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$
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1.30
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$
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0.95
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Dividends per common share:
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Dividends declared per common share
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$
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0.13
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$
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0.10
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$
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0.25
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$
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0.20
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Dividends paid per common share
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$
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0.13
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$
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0.10
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$
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0.13
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$
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0.20
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||||||||
Weighted average shares outstanding:
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Basic
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46,400
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49,195
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46,403
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49,566
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Diluted
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46,853
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49,856
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46,756
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50,296
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||||||||
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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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2013
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2012
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2013
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2012
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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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1,204
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$
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1,067
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$
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2,407
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|
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$
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2,156
|
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Development
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487
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465
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985
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|
964
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|
||||
Sales and marketing
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522
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461
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1,034
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940
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|
||||
General and administrative
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1,741
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1,741
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3,311
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3,540
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|
||||
Total stock-based compensation expense
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$
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3,954
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$
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3,734
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$
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7,737
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$
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7,600
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|
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Three months ended June 30
|
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Six months ended June 30
|
||||||||||||
(in thousands)
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2013
|
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2012
|
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2013
|
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2012
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|
||||
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||||||||
Consolidated net income
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$
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31,100
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$
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27,884
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$
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60,675
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$
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47,997
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|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
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(7,128
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)
|
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(8,743
|
)
|
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(16,199
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)
|
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(1,778
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)
|
||||
Unrealized gains on securities, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gains arising during period
|
|
(166
|
)
|
|
(541
|
)
|
|
1,000
|
|
|
368
|
|
||||
Reclassification of gains included in net income
|
|
(271
|
)
|
|
(22
|
)
|
|
(734
|
)
|
|
33
|
|
||||
Other comprehensive loss
|
|
(7,565
|
)
|
|
(9,306
|
)
|
|
(15,933
|
)
|
|
(1,377
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive income
|
|
23,535
|
|
|
18,578
|
|
|
44,742
|
|
|
46,620
|
|
||||
Comprehensive (income) loss attributable to noncontrolling interest
|
|
64
|
|
|
(46
|
)
|
|
206
|
|
|
61
|
|
||||
Comprehensive income attributable to Morningstar, Inc.
|
|
$
|
23,599
|
|
|
$
|
18,532
|
|
|
$
|
44,948
|
|
|
$
|
46,681
|
|
|
|
As of June 30
|
|
As of December 31
|
||||
(in thousands except share amounts)
|
|
2013
|
|
|
2012
|
|
||
Assets
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
169,810
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|
|
$
|
163,889
|
|
Investments
|
|
144,973
|
|
|
157,529
|
|
||
Accounts receivable, less allowance of $784 and $569, respectively
|
|
110,646
|
|
|
114,361
|
|
||
Deferred tax asset, net
|
|
3,590
|
|
|
3,741
|
|
||
Income tax receivable, net
|
|
6,492
|
|
|
14,267
|
|
||
Other
|
|
26,874
|
|
|
20,823
|
|
||
Total current assets
|
|
462,385
|
|
|
474,610
|
|
||
Property, equipment, and capitalized software, net
|
|
95,550
|
|
|
84,022
|
|
||
Investments in unconsolidated entities
|
|
36,087
|
|
|
35,305
|
|
||
Goodwill
|
|
321,425
|
|
|
320,845
|
|
||
Intangible assets, net
|
|
112,073
|
|
|
116,732
|
|
||
Other assets
|
|
11,537
|
|
|
10,438
|
|
||
Total assets
|
|
$
|
1,039,057
|
|
|
$
|
1,041,952
|
|
|
|
|
|
|
||||
Liabilities and equity
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
|
$
|
47,639
|
|
|
$
|
43,777
|
|
Accrued compensation
|
|
50,326
|
|
|
67,317
|
|
||
Deferred revenue
|
|
155,059
|
|
|
146,015
|
|
||
Other
|
|
272
|
|
|
256
|
|
||
Total current liabilities
|
|
253,296
|
|
|
257,365
|
|
||
Accrued compensation
|
|
8,144
|
|
|
8,281
|
|
||
Deferred tax liability, net
|
|
24,072
|
|
|
21,583
|
|
||
Deferred rent
|
|
14,457
|
|
|
15,368
|
|
||
Other long-term liabilities
|
|
21,812
|
|
|
12,460
|
|
||
Total liabilities
|
|
321,781
|
|
|
315,057
|
|
||
|
|
|
|
|
||||
Equity:
|
|
|
|
|
|
|
||
Morningstar, Inc. shareholders’ equity:
|
|
|
|
|
|
|
||
Common stock, no par value, 200,000,000 shares authorized, of which 46,131,688 and 46,541,571 shares were outstanding as of June 30, 2013 and December 31, 2012, respectively
|
|
5
|
|
|
5
|
|
||
Treasury stock at cost, 5,943,566
shares as of June 30, 2013 and 5,214,070 shares as of December 31, 2012
|
|
(352,503
|
)
|
|
(301,839
|
)
|
||
Additional paid-in capital
|
|
529,334
|
|
|
521,285
|
|
||
Retained earnings
|
|
545,347
|
|
|
496,354
|
|
||
Accumulated other comprehensive income (loss):
|
|
|
|
|
||||
Currency translation adjustment
|
|
(7,132
|
)
|
|
8,925
|
|
||
Unrealized gain on available-for-sale investments
|
|
1,053
|
|
|
787
|
|
||
Total accumulated other comprehensive income
|
|
(6,079
|
)
|
|
9,712
|
|
||
Total Morningstar, Inc. shareholders’ equity
|
|
716,104
|
|
|
725,517
|
|
||
Noncontrolling interest
|
|
1,172
|
|
|
1,378
|
|
||
Total equity
|
|
717,276
|
|
|
726,895
|
|
||
Total liabilities and equity
|
|
$
|
1,039,057
|
|
|
$
|
1,041,952
|
|
|
|
Morningstar, Inc. Shareholders’ Equity
|
|
|
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
|
|
|
|
||||||||||||||||
|
|
Common Stock
|
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
|
|
Non
Controlling
Interests
|
|
|
|
|||||||||||||||
(in thousands, except share amounts)
|
|
Shares
Outstanding
|
|
|
Par
Value
|
|
|
Treasury
Stock
|
|
|
|
Retained
Earnings
|
|
|
|
|
Total
Equity
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2012
|
|
46,541,571
|
|
|
$
|
5
|
|
|
$
|
(301,839
|
)
|
|
$
|
521,285
|
|
|
$
|
496,354
|
|
|
$
|
9,712
|
|
|
$
|
1,378
|
|
|
$
|
726,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss)
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,739
|
|
|
—
|
|
|
(64
|
)
|
|
60,675
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Unrealized gain on available-for-sale investments, net of income tax of $151
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
|
1,000
|
|
||||||||
Reclassification of adjustments for gains included in net income, net of income tax of $414
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(734
|
)
|
|
—
|
|
|
(734
|
)
|
||||||||
Foreign currency translation adjustment, net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,057
|
)
|
|
(142
|
)
|
|
(16,199
|
)
|
||||||||
Other comprehensive loss, net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,791
|
)
|
|
(142
|
)
|
|
(15,933
|
)
|
||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
|
337,886
|
|
|
—
|
|
|
1,286
|
|
|
(3,633
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,347
|
)
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
7,297
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,297
|
|
||||||||
Stock-based compensation — restricted stock
|
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
194
|
|
||||||||
Stock-based compensation — stock-options
|
|
|
|
—
|
|
|
—
|
|
|
246
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
246
|
|
||||||||
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
3,842
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,842
|
|
||||||||
Common shares repurchased
|
|
(747,769
|
)
|
|
—
|
|
|
(51,950
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(51,950
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,563
|
)
|
|
—
|
|
|
—
|
|
|
(11,563
|
)
|
||||||||
Dividends declared — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
103
|
|
|
(183
|
)
|
|
—
|
|
|
—
|
|
|
(80
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of June 30, 2013
|
|
46,131,688
|
|
|
$
|
5
|
|
|
$
|
(352,503
|
)
|
|
$
|
529,334
|
|
|
$
|
545,347
|
|
|
$
|
(6,079
|
)
|
|
$
|
1,172
|
|
|
$
|
717,276
|
|
|
|
Six months ended June 30
|
||||||
(in thousands)
|
|
2013
|
|
|
2012
|
|
||
|
|
|
|
|
||||
Operating activities
|
|
|
|
|
|
|
||
Consolidated net income
|
|
$
|
60,675
|
|
|
$
|
47,997
|
|
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
22,601
|
|
|
20,794
|
|
||
Deferred income taxes
|
|
(38
|
)
|
|
299
|
|
||
Stock-based compensation expense
|
|
7,737
|
|
|
7,600
|
|
||
Provision for bad debts
|
|
461
|
|
|
717
|
|
||
Equity in net income of unconsolidated entities
|
|
(857
|
)
|
|
(1,063
|
)
|
||
Excess tax benefits from stock-option exercises and vesting of restricted stock units
|
|
(3,842
|
)
|
|
(4,548
|
)
|
||
Holding gain upon acquisition of additional ownership of equity method investments
|
|
(3,713
|
)
|
|
—
|
|
||
Other, net
|
|
688
|
|
|
745
|
|
||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
||||
Accounts receivable
|
|
524
|
|
|
(4,394
|
)
|
||
Other assets
|
|
(3,465
|
)
|
|
(3,640
|
)
|
||
Accounts payable and accrued liabilities
|
|
638
|
|
|
652
|
|
||
Accrued compensation
|
|
(19,581
|
)
|
|
(26,920
|
)
|
||
Income taxes—current
|
|
13,693
|
|
|
4,525
|
|
||
Deferred revenue
|
|
11,023
|
|
|
12,333
|
|
||
Deferred rent
|
|
(872
|
)
|
|
468
|
|
||
Other liabilities
|
|
(537
|
)
|
|
(776
|
)
|
||
Cash provided by operating activities
|
|
85,135
|
|
|
54,789
|
|
||
|
|
|
|
|
||||
Investing activities
|
|
|
|
|
|
|
||
Purchases of investments
|
|
(82,299
|
)
|
|
(133,888
|
)
|
||
Proceeds from maturities and sales of investments
|
|
96,128
|
|
|
161,523
|
|
||
Capital expenditures
|
|
(18,881
|
)
|
|
(17,922
|
)
|
||
Acquisitions, net of cash acquired
|
|
(11,125
|
)
|
|
—
|
|
||
Proceeds from sale of a business
|
|
957
|
|
|
—
|
|
||
Purchases of equity- and cost-method investments
|
|
(909
|
)
|
|
(6,750
|
)
|
||
Other, net
|
|
436
|
|
|
—
|
|
||
Cash provided by (used for) investing activities
|
|
(15,693
|
)
|
|
2,963
|
|
||
|
|
|
|
|
||||
Financing activities
|
|
|
|
|
|
|
||
Proceeds from stock-option exercises
|
|
2,810
|
|
|
4,474
|
|
||
Employee taxes withheld for restricted stock units
|
|
(5,157
|
)
|
|
(3,693
|
)
|
||
Excess tax benefits from stock-option exercises and vesting of restricted stock units
|
|
3,842
|
|
|
4,548
|
|
||
Common shares repurchased
|
|
(53,937
|
)
|
|
(105,439
|
)
|
||
Dividends paid
|
|
(5,889
|
)
|
|
(10,004
|
)
|
||
Other, net
|
|
(50
|
)
|
|
(20
|
)
|
||
Cash used for financing activities
|
|
(58,381
|
)
|
|
(110,134
|
)
|
||
|
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
|
(5,140
|
)
|
|
(556
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
5,921
|
|
|
(52,938
|
)
|
||
Cash and cash equivalents—beginning of period
|
|
163,889
|
|
|
200,437
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
169,810
|
|
|
$
|
147,499
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
||
Cash paid for income taxes
|
|
$
|
14,511
|
|
|
$
|
21,405
|
|
Supplemental information of non-cash investing and financing activities:
|
|
|
|
|
||||
Unrealized gain on available-for-sale investments
|
|
$
|
418
|
|
|
$
|
606
|
|
Equipment obtained under long-term financing arrangement
|
|
$
|
4,860
|
|
|
$
|
—
|
|
|
|
($000)
|
|
|
Weighted Average Useful Life (years)
|
|
Customer-related assets
|
|
$
|
9,000
|
|
|
14
|
Total intangible assets
|
|
$
|
9,000
|
|
|
14
|
|
($000)
|
|
|
Balance as of December 31, 2012
|
$
|
320,845
|
|
Acquisition of remaining ownership in Morningstar Sweden
|
9,940
|
|
|
Other, primarily foreign currency translation
|
(9,360
|
)
|
|
Balance as of June 30, 2013
|
$
|
321,425
|
|
|
|
As of June 30, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||||||
($000)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
||||||
Intellectual property
|
|
$
|
29,577
|
|
|
$
|
(22,012
|
)
|
|
$
|
7,565
|
|
|
9
|
|
$
|
30,621
|
|
|
$
|
(21,527
|
)
|
|
$
|
9,094
|
|
|
9
|
Customer-related assets
|
|
138,673
|
|
|
(67,508
|
)
|
|
71,165
|
|
|
12
|
|
132,798
|
|
|
(63,005
|
)
|
|
69,793
|
|
|
12
|
||||||
Supplier relationships
|
|
240
|
|
|
(102
|
)
|
|
138
|
|
|
20
|
|
240
|
|
|
(96
|
)
|
|
144
|
|
|
20
|
||||||
Technology-based assets
|
|
79,720
|
|
|
(46,618
|
)
|
|
33,102
|
|
|
9
|
|
81,333
|
|
|
(43,809
|
)
|
|
37,524
|
|
|
9
|
||||||
Non-competition agreement
|
|
1,680
|
|
|
(1,577
|
)
|
|
103
|
|
|
4
|
|
1,765
|
|
|
(1,588
|
)
|
|
177
|
|
|
4
|
||||||
Total intangible assets
|
|
$
|
249,890
|
|
|
$
|
(137,817
|
)
|
|
$
|
112,073
|
|
|
10
|
|
$
|
246,757
|
|
|
$
|
(130,025
|
)
|
|
$
|
116,732
|
|
|
10
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Amortization expense
|
|
$
|
5,337
|
|
|
$
|
5,976
|
|
|
$
|
10,962
|
|
|
$
|
12,031
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in thousands, except per share amounts)
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income attributable to Morningstar, Inc.:
|
|
|
$
|
31,121
|
|
|
$
|
27,888
|
|
|
$
|
60,739
|
|
|
$
|
48,025
|
|
Less: Distributed earnings available to participating securities
|
|
|
(2
|
)
|
|
(12
|
)
|
|
(5
|
)
|
|
(27
|
)
|
||||
Less: Undistributed earnings available to participating securities
|
|
|
(9
|
)
|
|
(53
|
)
|
|
(18
|
)
|
|
(88
|
)
|
||||
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
|
|
|
$
|
31,110
|
|
|
$
|
27,823
|
|
|
$
|
60,716
|
|
|
$
|
47,910
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
|
46,400
|
|
|
49,195
|
|
|
46,403
|
|
|
49,566
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share attributable to Morningstar, Inc.
|
|
|
$
|
0.67
|
|
|
$
|
0.57
|
|
|
$
|
1.31
|
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
|
|
|
||||||||
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
|
|
|
$
|
31,110
|
|
|
$
|
27,823
|
|
|
$
|
60,716
|
|
|
$
|
47,910
|
|
Add: Undistributed earnings allocated to participating securities
|
|
|
9
|
|
|
53
|
|
|
18
|
|
|
88
|
|
||||
Less: Undistributed earnings reallocated to participating securities
|
|
|
(9
|
)
|
|
(53
|
)
|
|
(17
|
)
|
|
(87
|
)
|
||||
Numerator for diluted net income per share — undistributed and distributed earnings available to common shareholders
|
|
|
$
|
31,110
|
|
|
$
|
27,823
|
|
|
$
|
60,717
|
|
|
$
|
47,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding
|
|
|
46,400
|
|
|
49,195
|
|
|
46,403
|
|
|
49,566
|
|
||||
Net effect of dilutive stock options and restricted stock units
|
|
|
453
|
|
|
661
|
|
|
353
|
|
|
730
|
|
||||
Weighted average common shares outstanding for computing diluted income per share
|
|
|
46,853
|
|
|
49,856
|
|
|
46,756
|
|
|
50,296
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income per share attributable to Morningstar, Inc.
|
|
|
$
|
0.66
|
|
|
$
|
0.56
|
|
|
$
|
1.30
|
|
|
$
|
0.95
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||
(in thousands)
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Weighted average stock options
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
Weighted average restricted stock units
|
|
|
2
|
|
|
—
|
|
|
22
|
|
|
—
|
|
Weighted average restricted stock
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
2
|
|
|
13
|
|
|
22
|
|
|
13
|
|
•
|
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, 2013
|
||||||||||||||
($000)
|
|
Investment
Information
|
|
|
Investment
Management
|
|
|
Corporate Items
|
|
|
Total
|
|
||||
External revenue
|
|
$
|
141,426
|
|
|
$
|
34,002
|
|
|
$
|
—
|
|
|
$
|
175,428
|
|
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
|
|
91,751
|
|
|
16,856
|
|
|
8,021
|
|
|
116,628
|
|
||||
Stock-based compensation expense
|
|
2,483
|
|
|
611
|
|
|
860
|
|
|
3,954
|
|
||||
Depreciation and amortization
|
|
2,343
|
|
|
19
|
|
|
8,900
|
|
|
11,262
|
|
||||
Operating income (loss)
|
|
$
|
44,849
|
|
|
$
|
16,516
|
|
|
$
|
(17,781
|
)
|
|
$
|
43,584
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
8,241
|
|
|||
Non-U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
1,522
|
|
|||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three months ended June 30, 2012
|
||||||||||||||
($000)
|
|
Investment
Information
|
|
|
Investment
Management
|
|
|
Corporate Items
|
|
|
Total
|
|
||||
External revenue
|
|
$
|
134,749
|
|
|
$
|
31,219
|
|
|
$
|
—
|
|
|
$
|
165,968
|
|
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
|
|
86,915
|
|
|
17,179
|
|
|
6,385
|
|
|
110,479
|
|
||||
Stock-based compensation expense
|
|
2,531
|
|
|
529
|
|
|
674
|
|
|
3,734
|
|
||||
Depreciation and amortization
|
|
2,300
|
|
|
38
|
|
|
8,281
|
|
|
10,619
|
|
||||
Operating income (loss)
|
|
$
|
43,003
|
|
|
$
|
13,473
|
|
|
$
|
(15,340
|
)
|
|
$
|
41,136
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
6,818
|
|
|||
Non-U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
2,110
|
|
|||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Six months ended June 30, 2013
|
||||||||||||||
($000)
|
|
Investment
Information
|
|
|
Investment
Management
|
|
|
Corporate Items
|
|
|
Total
|
|
||||
External revenue
|
|
$
|
277,613
|
|
|
$
|
66,671
|
|
|
$
|
—
|
|
|
$
|
344,284
|
|
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
|
|
181,620
|
|
|
32,475
|
|
|
15,707
|
|
|
229,802
|
|
||||
Stock-based compensation expense
|
|
4,982
|
|
|
1,203
|
|
|
1,552
|
|
|
7,737
|
|
||||
Depreciation and amortization
|
|
4,695
|
|
|
43
|
|
|
17,863
|
|
|
22,601
|
|
||||
Operating income (loss)
|
|
$
|
86,316
|
|
|
$
|
32,950
|
|
|
$
|
(35,122
|
)
|
|
$
|
84,144
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
16,250
|
|
|||
Non-U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
2,631
|
|
|||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Six months ended June 30, 2012
|
||||||||||||||
($000)
|
|
Investment
Information
|
|
|
Investment
Management
|
|
|
Corporate Items
|
|
|
Total
|
|
||||
External revenue
|
|
$
|
261,674
|
|
|
$
|
65,053
|
|
|
$
|
—
|
|
|
$
|
326,727
|
|
Operating expense, excluding stock-based compensation expense, depreciation, and amortization
|
|
180,353
|
|
|
33,132
|
|
|
13,313
|
|
|
226,798
|
|
||||
Stock-based compensation expense
|
|
5,090
|
|
|
1,080
|
|
|
1,430
|
|
|
7,600
|
|
||||
Depreciation and amortization
|
|
4,544
|
|
|
77
|
|
|
16,173
|
|
|
20,794
|
|
||||
Operating income (loss)
|
|
$
|
71,687
|
|
|
$
|
30,764
|
|
|
$
|
(30,916
|
)
|
|
$
|
71,535
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
14,215
|
|
|||
Non-U.S. capital expenditures
|
|
|
|
|
|
|
|
|
|
|
$
|
3,707
|
|
|||
|
|
|
|
|
|
|
|
|
External revenue by geographical area
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
United States
|
|
$
|
126,335
|
|
|
$
|
117,952
|
|
|
$
|
247,748
|
|
|
$
|
232,421
|
|
|
|
|
|
|
|
|
|
|
||||||||
United Kingdom
|
|
14,015
|
|
|
14,714
|
|
|
27,168
|
|
|
28,450
|
|
||||
Europe, excluding the United Kingdom
|
|
13,993
|
|
|
12,281
|
|
|
27,160
|
|
|
24,336
|
|
||||
Australia
|
|
9,176
|
|
|
9,791
|
|
|
18,528
|
|
|
19,139
|
|
||||
Canada
|
|
7,812
|
|
|
7,397
|
|
|
15,548
|
|
|
14,747
|
|
||||
Asia, excluding Japan
|
|
2,661
|
|
|
2,366
|
|
|
5,256
|
|
|
4,735
|
|
||||
Japan
|
|
788
|
|
|
986
|
|
|
1,617
|
|
|
1,965
|
|
||||
Other
|
|
648
|
|
|
481
|
|
|
1,259
|
|
|
934
|
|
||||
Total Non-U.S.
|
|
49,093
|
|
|
48,016
|
|
|
96,536
|
|
|
94,306
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total
|
|
$
|
175,428
|
|
|
$
|
165,968
|
|
|
$
|
344,284
|
|
|
$
|
326,727
|
|
Long-lived assets by geographical area
|
|
|
|
|
||||
|
|
As of June 30
|
|
As of December 31
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
United States
|
|
$
|
74,154
|
|
|
$
|
60,371
|
|
|
|
|
|
|
||||
United Kingdom
|
|
6,318
|
|
|
7,435
|
|
||
Europe, excluding the United Kingdom
|
|
2,169
|
|
|
2,356
|
|
||
Australia
|
|
1,114
|
|
|
1,402
|
|
||
Canada
|
|
1,484
|
|
|
1,773
|
|
||
Asia, excluding Japan
|
|
10,121
|
|
|
10,445
|
|
||
Japan
|
|
51
|
|
|
84
|
|
||
Other
|
|
139
|
|
|
156
|
|
||
Total Non-U.S.
|
|
21,396
|
|
|
23,651
|
|
||
|
|
|
|
|
||||
Total
|
|
$
|
95,550
|
|
|
$
|
84,022
|
|
|
|
As of June 30
|
|
As of December 31
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Available-for-sale
|
|
$
|
109,687
|
|
|
$
|
125,786
|
|
Held-to-maturity
|
|
28,343
|
|
|
26,357
|
|
||
Trading securities
|
|
6,943
|
|
|
5,386
|
|
||
Total
|
|
$
|
144,973
|
|
|
$
|
157,529
|
|
|
|
As of June 30, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||||||||||
($000)
|
|
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
||||||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Government obligations
|
|
$
|
25,277
|
|
|
$
|
11
|
|
|
$
|
(61
|
)
|
|
$
|
25,227
|
|
|
$
|
40,669
|
|
|
$
|
29
|
|
|
$
|
(608
|
)
|
|
$
|
40,090
|
|
Corporate bonds
|
|
54,189
|
|
|
8
|
|
|
(302
|
)
|
|
53,895
|
|
|
49,339
|
|
|
36
|
|
|
(292
|
)
|
|
49,083
|
|
||||||||
Foreign obligations
|
|
2,437
|
|
|
—
|
|
|
(41
|
)
|
|
2,396
|
|
|
2,437
|
|
|
1
|
|
|
(19
|
)
|
|
2,419
|
|
||||||||
Commercial paper
|
|
7,484
|
|
|
—
|
|
|
(2
|
)
|
|
7,482
|
|
|
2,000
|
|
|
—
|
|
|
—
|
|
|
2,000
|
|
||||||||
Equity securities and exchange-traded funds
|
|
8,038
|
|
|
515
|
|
|
(220
|
)
|
|
8,333
|
|
|
19,613
|
|
|
1,359
|
|
|
(323
|
)
|
|
20,649
|
|
||||||||
Mutual funds
|
|
10,615
|
|
|
1,838
|
|
|
(99
|
)
|
|
12,354
|
|
|
10,499
|
|
|
1,092
|
|
|
(46
|
)
|
|
11,545
|
|
||||||||
Total
|
|
$
|
108,040
|
|
|
$
|
2,372
|
|
|
$
|
(725
|
)
|
|
$
|
109,687
|
|
|
$
|
124,557
|
|
|
$
|
2,517
|
|
|
$
|
(1,288
|
)
|
|
$
|
125,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Certificates of deposit
|
|
$
|
28,343
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,343
|
|
|
$
|
26,357
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,357
|
|
|
|
As of June 30, 2013
|
|
As of December 31, 2012
|
||||||||||||
($000)
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
49,646
|
|
|
$
|
49,421
|
|
|
$
|
87,599
|
|
|
$
|
86,784
|
|
Due in one to two years
|
|
39,741
|
|
|
39,579
|
|
|
6,846
|
|
|
6,808
|
|
||||
Equity securities, exchange-traded funds, and mutual funds
|
|
18,653
|
|
|
20,687
|
|
|
30,112
|
|
|
32,194
|
|
||||
Total
|
|
$
|
108,040
|
|
|
$
|
109,687
|
|
|
$
|
124,557
|
|
|
$
|
125,786
|
|
|
|
|
|
|
|
|
|
|
||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
28,339
|
|
|
$
|
28,339
|
|
|
$
|
26,352
|
|
|
$
|
26,352
|
|
Due in one to three years
|
|
4
|
|
|
4
|
|
|
5
|
|
|
5
|
|
||||
Total
|
|
$
|
28,343
|
|
|
$
|
28,343
|
|
|
$
|
26,357
|
|
|
$
|
26,357
|
|
|
|
Six months ended June 30
|
||||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Realized gains
|
|
$
|
2,226
|
|
|
$
|
470
|
|
Realized losses
|
|
(1,078
|
)
|
|
(519
|
)
|
||
Realized gains (losses), net
|
|
$
|
1,148
|
|
|
$
|
(49
|
)
|
|
|
Six months ended June 30
|
||||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Unrealized gains, net
|
|
$
|
273
|
|
|
$
|
156
|
|
|
|
Fair Value
|
|
Fair Value Measurements as of June 30, 2013
|
||||||||||||
|
|
as of
|
|
Using Fair Value Hierarchy
|
||||||||||||
($000)
|
|
June 30, 2013
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government obligations
|
|
$
|
25,227
|
|
|
$
|
—
|
|
|
$
|
25,227
|
|
|
$
|
—
|
|
Corporate bonds
|
|
53,895
|
|
|
—
|
|
|
53,895
|
|
|
—
|
|
||||
Foreign obligations
|
|
2,396
|
|
|
—
|
|
|
2,396
|
|
|
—
|
|
||||
Equity securities and exchange-traded funds
|
|
8,333
|
|
|
8,333
|
|
|
—
|
|
|
—
|
|
||||
Mutual funds
|
|
12,354
|
|
|
12,354
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
6,943
|
|
|
6,943
|
|
|
—
|
|
|
—
|
|
||||
Cash equivalents
|
|
9,489
|
|
|
9,489
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
118,637
|
|
|
$
|
37,119
|
|
|
$
|
81,518
|
|
|
$
|
—
|
|
|
|
Fair Value
|
|
Fair Value Measurements as of December 31, 2012
|
||||||||||||
|
|
as of
|
|
Using Fair Value Hierarchy
|
||||||||||||
($000)
|
|
December 31, 2012
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government obligations
|
|
$
|
40,090
|
|
|
$
|
—
|
|
|
$
|
40,090
|
|
|
$
|
—
|
|
Corporate bonds
|
|
49,083
|
|
|
—
|
|
|
49,083
|
|
|
—
|
|
||||
Foreign obligations
|
|
2,419
|
|
|
—
|
|
|
2,419
|
|
|
—
|
|
||||
Commercial paper
|
|
2,000
|
|
|
—
|
|
|
2,000
|
|
|
—
|
|
||||
Equity securities and exchange-traded funds
|
|
20,649
|
|
|
20,649
|
|
|
—
|
|
|
—
|
|
||||
Mutual funds
|
|
11,545
|
|
|
11,545
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
5,386
|
|
|
5,386
|
|
|
—
|
|
|
—
|
|
||||
Cash equivalents
|
|
398
|
|
|
398
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
131,570
|
|
|
$
|
37,978
|
|
|
$
|
93,592
|
|
|
$
|
—
|
|
Level 1:
|
Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
|
Level 2:
|
Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
Level 3:
|
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
|
|
As of June 30
|
|
|
As of December 31
|
|
||
($000)
|
|
2013
|
|
|
2012
|
|
||
Investment in MJKK
|
|
$
|
20,900
|
|
|
$
|
20,540
|
|
Other equity method investments
|
|
6,366
|
|
|
6,288
|
|
||
Investments accounted for using the cost method
|
|
8,821
|
|
|
8,477
|
|
||
Total investments in unconsolidated entities
|
|
$
|
36,087
|
|
|
$
|
35,305
|
|
|
|
As of June 30
|
|
|
As of December 31
|
|
||
|
|
2013
|
|
|
2012
|
|
||
Morningstar’s approximate ownership of MJKK
|
|
34
|
%
|
|
34
|
%
|
||
|
|
|
|
|
||||
Approximate market value of Morningstar’s ownership in MJKK:
|
|
|
|
|
|
|
||
Japanese yen (¥000)
|
|
¥
|
9,218,664
|
|
|
¥
|
3,109,579
|
|
Equivalent U.S. dollars ($000)
|
|
$
|
93,016
|
|
|
$
|
36,227
|
|
|
|
As of June 30
|
|
(in thousands)
|
|
2013
|
|
Shares available for future grants
|
|
4,521
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Restricted stock units
|
|
$
|
3,734
|
|
|
$
|
3,270
|
|
|
$
|
7,297
|
|
|
$
|
6,548
|
|
Restricted stock
|
|
97
|
|
|
444
|
|
|
194
|
|
|
888
|
|
||||
Stock options
|
|
123
|
|
|
20
|
|
|
246
|
|
|
164
|
|
||||
Total stock-based compensation expense
|
|
$
|
3,954
|
|
|
$
|
3,734
|
|
|
$
|
7,737
|
|
|
$
|
7,600
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income tax benefit related to the stock-based compensation expense
|
|
$
|
1,068
|
|
|
$
|
882
|
|
|
$
|
2,098
|
|
|
$
|
1,804
|
|
|
|
Unrecognized stock-based compensation expense ($000)
|
|
|
Expected amortization period (months)
|
|
Restricted stock units
|
|
$
|
38,079
|
|
|
36
|
Restricted stock
|
|
711
|
|
|
22
|
|
Stock options
|
|
831
|
|
|
22
|
|
Total unrecognized stock-based compensation expense
|
|
$
|
39,621
|
|
|
35
|
Restricted Stock Units (RSUs)
|
|
Unvested
|
|
|
Vested but
Deferred
|
|
|
Total
|
|
|
Weighted
Average
Grant Date Value
per RSU
|
|
|
RSUs outstanding—December 31, 2012
|
|
727,145
|
|
|
18,782
|
|
|
745,927
|
|
|
$
|
53.37
|
|
Granted
|
|
244,364
|
|
|
—
|
|
|
244,364
|
|
|
69.99
|
|
|
Dividend equivalents
|
|
1,357
|
|
|
36
|
|
|
1,393
|
|
|
54.85
|
|
|
Vested
|
|
(251,514
|
)
|
|
—
|
|
|
(251,514
|
)
|
|
49.88
|
|
|
Vested but deferred
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Issued
|
|
—
|
|
|
(2,257
|
)
|
|
(2,257
|
)
|
|
49.40
|
|
|
Forfeited
|
|
(23,605
|
)
|
|
—
|
|
|
(23,605
|
)
|
|
55.01
|
|
|
RSUs outstanding—June 30, 2013
|
|
697,747
|
|
|
16,561
|
|
|
714,308
|
|
|
60.29
|
|
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, 2012
|
|
282,695
|
|
|
$
|
20.55
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Canceled
|
|
(250
|
)
|
|
21.04
|
|
|
Exercised
|
|
(33,972
|
)
|
|
20.82
|
|
|
Options outstanding—June 30, 2013
|
|
248,473
|
|
|
21.01
|
|
|
|
|
|
|
|
|||
Options exercisable—June 30, 2013
|
|
248,473
|
|
|
$
|
21.01
|
|
All Other Option Grants, Excluding Activity Shown Above
|
|
Underlying
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Options outstanding—December 31, 2012
|
|
391,784
|
|
|
$
|
28.98
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Canceled
|
|
(1,252
|
)
|
|
13.71
|
|
|
Exercised
|
|
(125,159
|
)
|
|
15.89
|
|
|
Options outstanding—June 30, 2013
|
|
265,373
|
|
|
35.69
|
|
|
|
|
|
|
|
|||
Options exercisable—June 30, 2013
|
|
229,326
|
|
|
$
|
32.25
|
|
|
|
Six months ended June 30
|
||||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Intrinsic value of options exercised
|
|
$
|
8,170
|
|
|
$
|
14,531
|
|
|
|
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
|
|
735
|
|
|
0.78
|
|
$
|
10.95
|
|
|
$
|
49
|
|
|
735
|
|
|
0.78
|
|
$
|
10.95
|
|
|
$
|
49
|
|
$20.96 - $47.86
|
|
441,436
|
|
|
1.65
|
|
23.93
|
|
|
23,683
|
|
|
441,436
|
|
|
1.65
|
|
23.93
|
|
|
23,683
|
|
||||
$57.28 - $59.35
|
|
71,675
|
|
|
8.03
|
|
57.46
|
|
|
1,442
|
|
|
35,628
|
|
|
8.01
|
|
57.37
|
|
|
692
|
|
||||
$8.57 - $59.35
|
|
513,846
|
|
|
2.54
|
|
28.59
|
|
|
$
|
25,174
|
|
|
477,799
|
|
|
2.12
|
|
26.40
|
|
|
$
|
24,424
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Vested or Expected to Vest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$8.57 - $59.35
|
|
513,846
|
|
|
2.54
|
|
$
|
28.59
|
|
|
$
|
25,174
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Excess tax benefits related to stock-based compensation
|
|
$
|
2,255
|
|
|
$
|
1,235
|
|
|
$
|
3,842
|
|
|
$
|
4,548
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Income before income taxes and equity in net income of unconsolidated entities
|
|
$
|
46,695
|
|
|
$
|
42,131
|
|
|
$
|
88,200
|
|
|
$
|
73,189
|
|
Equity in net income of unconsolidated entities
|
|
360
|
|
|
497
|
|
|
857
|
|
|
1,063
|
|
||||
Net loss attributable to the noncontrolling interest
|
|
21
|
|
|
4
|
|
|
64
|
|
|
28
|
|
||||
Total
|
|
$
|
47,076
|
|
|
$
|
42,632
|
|
|
$
|
89,121
|
|
|
$
|
74,280
|
|
Income tax expense
|
|
$
|
15,955
|
|
|
$
|
14,744
|
|
|
$
|
28,382
|
|
|
$
|
26,255
|
|
Effective tax rate
|
|
33.9
|
%
|
|
34.6
|
%
|
|
31.8
|
%
|
|
35.3
|
%
|
|
|
As of June 30
|
|
As of December 31
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Gross unrecognized tax benefits
|
|
$
|
14,332
|
|
|
$
|
12,699
|
|
Gross unrecognized tax benefits that would affect income tax expense
|
|
$
|
14,332
|
|
|
$
|
12,699
|
|
Decrease in income tax expense upon recognition of gross unrecognized tax benefits
|
|
$
|
11,877
|
|
|
$
|
10,446
|
|
|
|
As of June 30
|
|
As of December 31
|
||||
Liabilities for Unrecognized Tax Benefits ($000)
|
|
2013
|
|
|
2012
|
|
||
Current liability
|
|
$
|
6,604
|
|
|
$
|
6,568
|
|
Non-current liability
|
|
7,367
|
|
|
5,659
|
|
||
Total liability for unrecognized tax benefits
|
|
$
|
13,971
|
|
|
$
|
12,227
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics ($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Revenue
|
|
$
|
175,428
|
|
|
$
|
165,968
|
|
|
5.7
|
%
|
|
$
|
344,284
|
|
|
$
|
326,727
|
|
|
5.4
|
%
|
|
Operating income
|
|
$
|
43,584
|
|
|
$
|
41,136
|
|
|
6.0
|
%
|
|
$
|
84,144
|
|
|
$
|
71,535
|
|
|
17.6
|
%
|
|
Operating margin
|
|
24.8
|
%
|
|
24.8
|
%
|
|
—
|
|
|
24.4
|
%
|
|
21.9
|
%
|
|
2.5
|
|
pp
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by (used for) investing activities
|
|
$
|
(64,925
|
)
|
|
$
|
24,943
|
|
|
NMF
|
|
|
$
|
(15,693
|
)
|
|
$
|
2,963
|
|
|
NMF
|
|
|
Cash used for financing activities
|
|
$
|
(46,731
|
)
|
|
$
|
(89,291
|
)
|
|
(47.7
|
)%
|
|
$
|
(58,381
|
)
|
|
$
|
(110,134
|
)
|
|
(47.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by operating activities
|
|
$
|
58,462
|
|
|
$
|
49,165
|
|
|
18.9
|
%
|
|
$
|
85,135
|
|
|
$
|
54,789
|
|
|
55.4
|
%
|
|
Capital expenditures
|
|
(9,763
|
)
|
|
(8,928
|
)
|
|
9.4
|
%
|
|
(18,881
|
)
|
|
(17,922
|
)
|
|
5.4
|
%
|
|
||||
Free cash flow
|
|
$
|
48,699
|
|
|
$
|
40,237
|
|
|
21.0
|
%
|
|
$
|
66,254
|
|
|
$
|
36,867
|
|
|
79.7
|
%
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
||||
Consolidated revenue
|
|
$
|
175,428
|
|
|
$
|
165,968
|
|
|
5.7
|
%
|
|
$
|
344,284
|
|
|
$
|
326,727
|
|
|
5.4
|
%
|
Less: acquisitions
|
|
(867
|
)
|
|
—
|
|
|
NMF
|
|
|
(867
|
)
|
|
—
|
|
|
NMF
|
|
||||
Less: divestitures
|
|
—
|
|
|
(1,500
|
)
|
|
NMF
|
|
|
—
|
|
|
(2,663
|
)
|
|
NMF
|
|
||||
Unfavorable effect of foreign currency translations
|
|
749
|
|
|
—
|
|
|
NMF
|
|
|
1,189
|
|
|
—
|
|
|
NMF
|
|
||||
Organic revenue
|
|
$
|
175,310
|
|
|
$
|
164,468
|
|
|
6.6
|
%
|
|
$
|
344,606
|
|
|
$
|
324,064
|
|
|
6.3
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
||||
International revenue
|
|
$
|
49,093
|
|
|
$
|
48,016
|
|
|
2.2
|
%
|
|
$
|
96,536
|
|
|
$
|
94,306
|
|
|
2.4
|
%
|
Less: acquisitions
|
|
(867
|
)
|
|
—
|
|
|
NMF
|
|
|
(867
|
)
|
|
—
|
|
|
NMF
|
|
||||
Less: divestitures
|
|
—
|
|
|
(1,385
|
)
|
|
NMF
|
|
|
—
|
|
|
(2,461
|
)
|
|
NMF
|
|
||||
Unfavorable effect of foreign currency translations
|
|
749
|
|
|
—
|
|
|
NMF
|
|
|
1,189
|
|
|
—
|
|
|
NMF
|
|
||||
International organic revenue
|
|
$
|
48,975
|
|
|
$
|
46,631
|
|
|
5.0
|
%
|
|
$
|
96,858
|
|
|
$
|
91,845
|
|
|
5.5
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Operating expense
|
|
$
|
131,844
|
|
|
$
|
124,832
|
|
|
5.6
|
%
|
|
$
|
260,140
|
|
|
$
|
255,192
|
|
|
1.9
|
%
|
|
% of revenue
|
|
75.2
|
%
|
|
75.2
|
%
|
|
—
|
|
|
75.6
|
%
|
|
78.1
|
%
|
|
(2.5
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Cost of goods sold
|
|
$
|
50,273
|
|
|
$
|
49,452
|
|
|
1.7
|
%
|
|
$
|
98,283
|
|
|
$
|
99,768
|
|
|
(1.5
|
)%
|
|
% of revenue
|
|
28.7
|
%
|
|
29.8
|
%
|
|
(1.1
|
)
|
pp
|
28.5
|
%
|
|
30.5
|
%
|
|
(2.0
|
)
|
pp
|
||||
Gross profit
|
|
$
|
125,155
|
|
|
$
|
116,516
|
|
|
7.4
|
%
|
|
$
|
246,001
|
|
|
$
|
226,959
|
|
|
8.4
|
%
|
|
Gross margin
|
|
71.3
|
%
|
|
70.2
|
%
|
|
1.1
|
|
pp
|
71.5
|
%
|
|
69.5
|
%
|
|
2.0
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Development expense
|
|
$
|
14,154
|
|
|
$
|
12,442
|
|
|
13.8
|
%
|
|
$
|
27,794
|
|
|
$
|
25,807
|
|
|
7.7
|
%
|
|
% of revenue
|
|
8.1
|
%
|
|
7.5
|
%
|
|
0.6
|
|
pp
|
8.1
|
%
|
|
7.9
|
%
|
|
0.2
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Sales and marketing expense
|
|
$
|
28,035
|
|
|
$
|
27,373
|
|
|
2.4
|
%
|
|
$
|
56,015
|
|
|
$
|
55,699
|
|
|
0.6
|
%
|
|
% of revenue
|
|
16.0
|
%
|
|
16.5
|
%
|
|
(0.5
|
)
|
pp
|
16.3
|
%
|
|
17.0
|
%
|
|
(0.7
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
General and administrative expense
|
|
$
|
28,120
|
|
|
$
|
24,946
|
|
|
12.7
|
%
|
|
$
|
55,447
|
|
|
$
|
53,124
|
|
|
4.4
|
%
|
|
% of revenue
|
|
16.0
|
%
|
|
15.0
|
%
|
|
1.0
|
|
pp
|
16.1
|
%
|
|
16.3
|
%
|
|
(0.2
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Depreciation expense
|
|
$
|
5,925
|
|
|
$
|
4,643
|
|
|
27.6
|
%
|
|
$
|
11,639
|
|
|
$
|
8,763
|
|
|
32.8
|
%
|
|
Amortization expense
|
|
5,337
|
|
|
5,976
|
|
|
(10.7
|
)%
|
|
10,962
|
|
|
12,031
|
|
|
(8.9
|
)%
|
|
||||
Total depreciation and amortization expense
|
|
$
|
11,262
|
|
|
$
|
10,619
|
|
|
6.1
|
%
|
|
$
|
22,601
|
|
|
$
|
20,794
|
|
|
8.7
|
%
|
|
% of revenue
|
|
6.4
|
%
|
|
6.4
|
%
|
|
—
|
|
|
6.6
|
%
|
|
6.4
|
%
|
|
0.2
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Total stock-based compensation expense
|
|
$
|
3,954
|
|
|
$
|
3,734
|
|
|
5.9
|
%
|
|
$
|
7,737
|
|
|
$
|
7,600
|
|
|
1.8
|
%
|
|
% of revenue
|
|
2.3
|
%
|
|
2.2
|
%
|
|
0.1
|
|
pp
|
2.2
|
%
|
|
2.3
|
%
|
|
(0.1
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Bonus expense
|
|
$
|
9,628
|
|
|
$
|
7,398
|
|
|
30.1
|
%
|
|
$
|
20,154
|
|
|
$
|
18,718
|
|
|
7.7
|
%
|
|
% of revenue
|
|
5.5
|
%
|
|
4.5
|
%
|
|
1.0
|
|
pp
|
5.9
|
%
|
|
5.7
|
%
|
|
0.2
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Operating income
|
|
$
|
43,584
|
|
|
$
|
41,136
|
|
|
6.0
|
%
|
|
$
|
84,144
|
|
|
$
|
71,535
|
|
|
17.6
|
%
|
|
% of revenue
|
|
24.8
|
%
|
|
24.8
|
%
|
|
—
|
|
|
24.4
|
%
|
|
21.9
|
%
|
|
2.5
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
||||
Cash provided by operating activities
|
|
$
|
58,462
|
|
|
$
|
49,165
|
|
|
18.9
|
%
|
|
$
|
85,135
|
|
|
$
|
54,789
|
|
|
55.4
|
%
|
Capital expenditures
|
|
(9,763
|
)
|
|
(8,928
|
)
|
|
9.4
|
%
|
|
(18,881
|
)
|
|
(17,922
|
)
|
|
5.4
|
%
|
||||
Free cash flow
|
|
$
|
48,699
|
|
|
$
|
40,237
|
|
|
21.0
|
%
|
|
$
|
66,254
|
|
|
$
|
36,867
|
|
|
79.7
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
||||||
Consolidated net income
|
|
$
|
31,100
|
|
|
$
|
27,884
|
|
|
$
|
3,216
|
|
|
$
|
60,675
|
|
|
$
|
47,997
|
|
|
$
|
12,678
|
|
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
|
|
(2,255
|
)
|
|
(1,235
|
)
|
|
(1,020
|
)
|
|
(3,842
|
)
|
|
(4,548
|
)
|
|
706
|
|
||||||
Depreciation and amortization expense
|
|
11,262
|
|
|
10,619
|
|
|
643
|
|
|
22,601
|
|
|
20,794
|
|
|
1,807
|
|
||||||
Stock-based compensation expense
|
|
3,954
|
|
|
3,734
|
|
|
220
|
|
|
7,737
|
|
|
7,600
|
|
|
137
|
|
||||||
Holding gain upon acquisition of additional ownership of equity method investment
|
|
(3,713
|
)
|
|
—
|
|
|
(3,713
|
)
|
|
(3,713
|
)
|
|
—
|
|
|
(3,713
|
)
|
||||||
All other non-cash items included in net income
|
|
4,142
|
|
|
1,882
|
|
|
2,260
|
|
|
254
|
|
|
698
|
|
|
(444
|
)
|
||||||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash paid for bonuses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36,568
|
)
|
|
(42,820
|
)
|
|
6,252
|
|
||||||
Cash paid for income taxes
|
|
(13,867
|
)
|
|
(16,485
|
)
|
|
2,618
|
|
|
(14,511
|
)
|
|
(21,405
|
)
|
|
6,894
|
|
||||||
Cash paid for separation agreements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(137
|
)
|
|
137
|
|
||||||
Accounts receivable
|
|
6,430
|
|
|
3,045
|
|
|
3,385
|
|
|
524
|
|
|
(4,394
|
)
|
|
4,918
|
|
||||||
Deferred revenue
|
|
(6,746
|
)
|
|
(1,832
|
)
|
|
(4,914
|
)
|
|
11,023
|
|
|
12,333
|
|
|
(1,310
|
)
|
||||||
Income taxes — current
|
|
13,073
|
|
|
13,641
|
|
|
(568
|
)
|
|
28,204
|
|
|
25,930
|
|
|
2,274
|
|
||||||
Accrued compensation
|
|
12,231
|
|
|
8,248
|
|
|
3,983
|
|
|
16,987
|
|
|
16,037
|
|
|
950
|
|
||||||
Other assets
|
|
3,110
|
|
|
118
|
|
|
2,992
|
|
|
(3,465
|
)
|
|
(3,640
|
)
|
|
175
|
|
||||||
Accounts payable and accrued liabilities
|
|
238
|
|
|
(51
|
)
|
|
289
|
|
|
638
|
|
|
652
|
|
|
(14
|
)
|
||||||
All other
|
|
(497
|
)
|
|
(403
|
)
|
|
(94
|
)
|
|
(1,409
|
)
|
|
(308
|
)
|
|
(1,101
|
)
|
||||||
Cash provided by operating activities
|
|
$
|
58,462
|
|
|
$
|
49,165
|
|
|
$
|
9,297
|
|
|
$
|
85,135
|
|
|
$
|
54,789
|
|
|
$
|
30,346
|
|
|
|||||||||||||||||||||||
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics ($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment Information
|
|
$
|
141,426
|
|
|
$
|
134,749
|
|
|
5.0
|
%
|
|
$
|
277,613
|
|
|
$
|
261,674
|
|
|
6.1
|
%
|
|
Investment Management
|
|
34,002
|
|
|
31,219
|
|
|
8.9
|
%
|
|
66,671
|
|
|
65,053
|
|
|
2.5
|
%
|
|
||||
Consolidated revenue
|
|
$
|
175,428
|
|
|
$
|
165,968
|
|
|
5.7
|
%
|
|
$
|
344,284
|
|
|
$
|
326,727
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment Information
|
|
$
|
44,849
|
|
|
$
|
43,003
|
|
|
4.3
|
%
|
|
$
|
86,316
|
|
|
$
|
71,687
|
|
|
20.4
|
%
|
|
Investment Management
|
|
16,516
|
|
|
13,473
|
|
|
22.6
|
%
|
|
32,950
|
|
|
30,764
|
|
|
7.1
|
%
|
|
||||
Intangible amortization and corporate depreciation expense
|
|
(8,900
|
)
|
|
(8,281
|
)
|
|
7.5
|
%
|
|
(17,863
|
)
|
|
(16,173
|
)
|
|
10.4
|
%
|
|
||||
Corporate unallocated
|
|
(8,881
|
)
|
|
(7,059
|
)
|
|
25.8
|
%
|
|
(17,259
|
)
|
|
(14,743
|
)
|
|
17.1
|
%
|
|
||||
Consolidated operating income
|
|
$
|
43,584
|
|
|
$
|
41,136
|
|
|
6.0
|
%
|
|
$
|
84,144
|
|
|
$
|
71,535
|
|
|
17.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment Information
|
|
31.7
|
%
|
|
31.9
|
%
|
|
(0.2
|
)
|
pp
|
31.1
|
%
|
|
27.4
|
%
|
|
3.7
|
|
pp
|
||||
Investment Management
|
|
48.6
|
%
|
|
43.2
|
%
|
|
5.4
|
|
pp
|
49.4
|
%
|
|
47.3
|
%
|
|
2.1
|
|
pp
|
||||
Consolidated operating margin
|
|
24.8
|
%
|
|
24.8
|
%
|
|
—
|
|
|
24.4
|
%
|
|
21.9
|
%
|
|
2.5
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics ($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Revenue
|
|
$
|
141,426
|
|
|
$
|
134,749
|
|
|
5.0
|
%
|
|
$
|
277,613
|
|
|
$
|
261,674
|
|
|
6.1
|
%
|
|
Operating income
|
|
$
|
44,849
|
|
|
$
|
43,003
|
|
|
4.3
|
%
|
|
$
|
86,316
|
|
|
$
|
71,687
|
|
|
20.4
|
%
|
|
Operating margin (%)
|
|
31.7
|
%
|
|
31.9
|
%
|
|
(0.2
|
)
|
pp
|
31.1
|
%
|
|
27.4
|
%
|
|
3.7
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics ($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
||||
Revenue
|
|
$
|
34,002
|
|
|
$
|
31,219
|
|
|
8.9
|
%
|
|
$
|
66,671
|
|
|
$
|
65,053
|
|
|
2.5
|
%
|
|
Operating income
|
|
$
|
16,516
|
|
|
$
|
13,473
|
|
|
22.6
|
%
|
|
$
|
32,950
|
|
|
$
|
30,764
|
|
|
7.1
|
%
|
|
Operating margin (%)
|
|
48.6
|
%
|
|
43.2
|
%
|
|
5.4
|
|
pp
|
49.4
|
%
|
|
47.3
|
%
|
|
2.1
|
|
pp
|
|
|
As of June 30
|
||||||
($ billions)
|
|
2013
|
|
|
2012
|
|
||
Assets under advisement – U.S.
|
|
$
|
95.6
|
|
|
$
|
133.8
|
|
Assets under advisement – International
|
|
5.8
|
|
|
4.3
|
|
||
Total
|
|
$
|
101.4
|
|
|
$
|
138.1
|
|
|
|
As of June 30
|
||||||
($ billions)
|
|
2013
|
|
|
2012
|
|
||
Assets under management
|
|
$
|
27.9
|
|
|
$
|
22.4
|
|
Assets under advisement
|
|
28.0
|
|
|
19.3
|
|
||
Total
|
|
$
|
55.9
|
|
|
$
|
41.7
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
||||
Amortization expense
|
|
$
|
5,337
|
|
|
$
|
5,976
|
|
|
(10.7
|
)%
|
|
$
|
10,962
|
|
|
$
|
12,031
|
|
|
(8.9
|
)%
|
Depreciation expense
|
|
3,563
|
|
|
2,305
|
|
|
54.6
|
%
|
|
6,901
|
|
|
4,142
|
|
|
66.6
|
%
|
||||
Corporate unallocated
|
|
8,881
|
|
|
7,059
|
|
|
25.8
|
%
|
|
17,259
|
|
|
14,743
|
|
|
17.1
|
%
|
||||
Corporate items
|
|
$
|
17,781
|
|
|
$
|
15,340
|
|
|
15.9
|
%
|
|
$
|
35,122
|
|
|
$
|
30,916
|
|
|
13.6
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Equity in net income of unconsolidated entities
|
|
$
|
360
|
|
|
$
|
497
|
|
|
$
|
857
|
|
|
$
|
1,063
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Interest income
|
|
$
|
664
|
|
|
$
|
1,260
|
|
|
$
|
1,405
|
|
|
$
|
2,129
|
|
Gain (loss) on sale of investments, reclassified from other comprehensive income
|
|
423
|
|
|
37
|
|
|
1,148
|
|
|
(49
|
)
|
||||
Holding gain upon acquisition of additional ownership of equity method investments
|
|
3,713
|
|
|
—
|
|
|
3,713
|
|
|
—
|
|
||||
Other expense, net
|
|
(1,689
|
)
|
|
(302
|
)
|
|
(2,210
|
)
|
|
(426
|
)
|
||||
Non-operating income, net
|
|
$
|
3,111
|
|
|
$
|
995
|
|
|
$
|
4,056
|
|
|
$
|
1,654
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Income before income taxes and equity in net income of unconsolidated entities
|
|
$
|
46,695
|
|
|
$
|
42,131
|
|
|
$
|
88,200
|
|
|
$
|
73,189
|
|
Equity in net income of unconsolidated entities
|
|
360
|
|
|
497
|
|
|
857
|
|
|
1,063
|
|
||||
Net loss attributable to the noncontrolling interest
|
|
21
|
|
|
4
|
|
|
64
|
|
|
28
|
|
||||
Total
|
|
$
|
47,076
|
|
|
$
|
42,632
|
|
|
$
|
89,121
|
|
|
$
|
74,280
|
|
Income tax expense
|
|
$
|
15,955
|
|
|
$
|
14,744
|
|
|
$
|
28,382
|
|
|
$
|
26,255
|
|
Effective tax rate
|
|
33.9
|
%
|
|
34.6
|
%
|
|
31.8
|
%
|
|
35.3
|
%
|
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 15, 2013
|
|
|
Projected
Beneficial
Ownership (1)
|
|
Cheryl Francis
Director
|
|
5/21/2013
|
|
5/31/2014
|
|
2,800
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
—
|
|
|
20,952
|
|
Steve Kaplan
Director
|
|
3/4/2013
|
|
12/31/2013
|
|
6,000
|
|
|
Shares to be sold under the plan on specified dates
|
|
—
|
|
|
51,055
|
|
Jack Noonan
Director
|
|
11/15/2012
|
|
5/2/2015
|
|
24,000
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
6,000
|
|
|
63,232
|
|
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 Control 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, 2013
|
|
5,222,136
|
|
|
$
|
59.63
|
|
|
5,222,136
|
|
|
$
|
188,490,274
|
|
April 1, 2013 – April 30, 2013
|
|
10,218
|
|
|
66.06
|
|
|
10,218
|
|
|
$
|
187,815,036
|
|
|
May 1, 2013 – May 31, 2013
|
|
250,333
|
|
|
68.75
|
|
|
250,333
|
|
|
$
|
170,600,168
|
|
|
June 1, 2013 – June 30, 2013
|
|
321,677
|
|
|
72.99
|
|
|
321,677
|
|
|
$
|
147,113,706
|
|
|
Total
|
|
5,804,364
|
|
|
$
|
60.78
|
|
|
5,804,364
|
|
|
|
|
(1)
|
In September 2010, our board of directors approved a share repurchase program that authorized the purchase of up to $100 million of the outstanding common stock with an expiration date of December 31, 2012. In December 2011, the board approved an increase to this program. The board approval authorized the company to repurchase up to an additional $200 million in shares of our outstanding common stock. In December 2012, the board approved another increase to this program. The board approval authorized the company to repurchase up to an additional $200 million in shares of our outstanding common stock with a revised expiration date of December 31, 2014.
|
Item 6.
|
Exhibits
|
|
|
MORNINGSTAR, INC.
|
|
|
|
|
|
Date: July 31, 2013
|
By:
|
/s/ Scott Cooley
|
|
|
|
Scott Cooley
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
Exhibit No
|
|
Description of Exhibit
|
10.1
|
|
Form of Morningstar 2011 Stock Incentive Plan Restricted Stock Unit Award Agreement for awards made on and after May 15, 2013
|
|
|
|
10.2
|
|
Form of Morningstar 2011 Stock Incentive Plan Director Restricted Stock Unit Award Agreement for awards made on and after May 15, 2013
|
|
|
|
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, 2013, filed with the SEC on July 31, 2013 formatted in XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statement of Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Condensed Consolidated Financial Statement
|
(1)
|
MORNINGSTAR, INC.,
an Illinois corporation (the “Company”); and
|
(2)
|
The Participant identified in the Grant Notice.
|
1.1
|
In accordance with the terms of the Plan and subject to the terms and conditions of this Award Agreement, the Company hereby grants to the Participant the number of Restricted Stock Units specified in the Grant Notice.
|
1.2
|
Each Restricted Stock Unit is a notional amount that represents one unvested share of common stock, no par value, of the Company (a “Share”). Each Restricted Stock Unit constitutes the right, subject to the terms and conditions of the Plan and this Award Agreement, to distribution of a Share if and when the Restricted Stock Unit vests.
|
1.3
|
This Award Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Participant hereby agrees to be bound by the terms of this Award Agreement and the Plan.
|
1.4
|
Subject to, and except as otherwise provided by, this Award Agreement, including Section 3.2 hereof, the Restricted Stock Units subject to this Award Agreement shall vest in installments, with each installment becoming vested on the “Vesting Date” shown below, if the Participant has remained in continuous Service (as defined in Section 3.3 hereof) until that Vesting Date. Notwithstanding the foregoing, the Board or the Committee may cause the Restricted Stock Units granted hereby to vest at an earlier date pursuant to its authority under the Plan.
|
Percentage of Restricted Stock Units
|
Vesting Date
|
25%
|
First anniversary of Grant Date
|
25%
|
Second Anniversary of Grant Date
|
25%
|
Third Anniversary of Grant Date
|
25%
|
Fourth Anniversary of Grant Date
|
|
|
1.5
|
Further details of the Restricted Stock Units granted to the Participant under the terms of this Award Agreement are set forth in the Grant Notice.
|
2
|
RIGHTS AS A SHAREHOLDER
|
2.1
|
Unless and until a Restricted Stock Unit has vested and the Share underlying it has been distributed to the Participant, the Participant will not be entitled to vote that Share or have any right to dividends, dividend equivalents or other distributions with respect to that Share; provided that the number and class of securities subject to this Award Agreement shall be subject to adjustment in accordance with Section 5.7 of the Plan.
|
3
|
TERMINATION OF SERVICE AND OTHER CHANGES IN SERVICE STATUS
|
3.1
|
If the Participant’s Service (as defined in Section 3.3) terminates for any reason other than Disability or death, the Participant will forfeit the right to receive Shares underlying any Restricted Stock Units that have not vested at that time. Notwithstanding anything in the Plan to the contrary, for purposes of this Award Agreement, “Disability” shall mean the condition of being “disabled” as provided in Code Section 409A(a)(2)(C).
|
3.2
|
If the Participant’s Service terminates on account of the Disability or death of the Participant, the Shares underlying all of the Restricted Stock Units awarded hereunder shall become immediately vested and be distributed to the Participant or the Participant’s beneficiary under the Plan as soon as practicable in accordance with Section 4.1 of this Award Agreement.
|
3.3
|
For purposes of this Award Agreement “Service” means the provision of services to the Company or its Affiliates in the capacity of an employee or a member of the Board but not as a consultant to the Company or an Affiliate. For purposes of this Award Agreement, the transfer of an employee from the Company to an Affiliate, from an Affiliate to the Company or from an Affiliate to another Affiliate shall not be a termination of Service. However, if the Affiliate for which an employee is providing services ceases to be an Affiliate of the Company due to a sale, transfer or other reason, and the employee ceases to perform services for the Company or any Affiliate, the employee shall incur a termination of Service. For purposes of this Award Agreement, "Affiliate” means an entity that is (directly or indirectly) controlled by, or controls, the Company.
|
4
|
TIMING AND FORM OF PAYMENT
|
4.1
|
Once a Restricted Stock Unit vests, the Participant will be entitled to receive a Share in its place. Delivery of the Share will be made as soon as administratively feasible after its associated Restricted Stock Unit vests, but no later than 2½ months from the end of the calendar year in which such vesting occurs.
|
5
|
WITHHOLDING OBLIGATIONS
|
5.1
|
Without limiting the Company’s power or rights pursuant to Section 5.5 of the Plan, amounts required by tax law or regulation to be withheld by the Company with respect to any taxable event arising under this Award Agreement will be satisfied by having Shares withheld in accordance with Section 5.5 of the Plan. In addition, the Participant may elect to deliver to the Company the necessary funds to satisfy the withholding obligation, in which case there will be no reduction in the Shares otherwise distributable to the Participant.
|
6
|
NOTICES
|
6.1
|
Any notice or other communication required or permitted under this Award Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, or sent by overnight courier, at the sender's expense. Notice will be deemed given when delivered personally or, if mailed, three days after the date of deposit or, if sent by overnight courier, on the regular business day following the date sent. Notice to the Company should be sent to Morningstar, Inc., 22 West Washington Street, Chicago, Illinois, 60602, Attention: General Counsel. Notice to the Participant should be sent to the address of the Participant contained in the Company’s records. Either party may change the person and/or address to whom the other party must give notice by giving such other party written notice of such change, in accordance with the procedures described above.
|
7
|
CONSTRUCTION
|
7.1
|
The Restricted Stock Units granted hereunder are subject to any rules and regulations promulgated by the Committee pursuant to the Plan, now or hereafter in effect.
|
7.2
|
The Company and the Participant may amend this Award Agreement only by a written instrument signed by both parties, provided, that the Company may amend this Award Agreement without further action by the Participant if (i) such amendment is deemed by the Company to be advisable or necessary to comply with applicable law, rule, or, regulation, including Section 409A of the Code, or (ii) if such amendment is not to the detriment of the Participant.
|
7.3
|
The Participant shall agree to the terms of this Award Agreement by accepting the Grant Notice at the time and in the manner specified by the Company.
|
(1)
|
MORNINGSTAR, INC.,
an Illinois corporation (the “Company”); and
|
(2)
|
The Participant identified in the Grant Notice.
|
1.1
|
In accordance with the terms of the Plan and subject to the terms and conditions of this Award Agreement, the Company hereby grants to the Participant the number of Restricted Stock Units specified in the Grant Notice.
|
1.2
|
Each Restricted Stock Unit is a notional amount that represents one unvested share of common stock, no par value, of the Company (a “Share”). Each Restricted Stock Unit constitutes the right, subject to the terms and conditions of the Plan and this Award Agreement, to distribution of a Share if and when the Restricted Stock Unit vests.
|
1.3
|
This Award Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Participant hereby agrees to be bound by the terms of this Award Agreement and the Plan.
|
1.4
|
Subject to, and except as otherwise provided by, this Award Agreement, including Section 3.2 hereof, the Restricted Stock Units subject to this Award Agreement shall vest in installments, with each installment becoming vested on the “Vesting Date” shown below, if the Participant has remained in continuous Service (as defined in Section 3.3 hereof) until that Vesting Date. Notwithstanding the foregoing, the Board or the Committee may cause the Restricted Stock Units granted hereby to vest at an earlier date pursuant to its authority under the Plan.
|
Percentage of Restricted Stock Units
|
Vesting Date
|
33.3%
|
First anniversary of Grant Date
|
33.3%
|
Second Anniversary of Grant Date
|
33.3%
|
Third Anniversary of Grant Date
|
|
|
1.5
|
Further details of the Restricted Stock Units granted to the Participant under the terms of this Award Agreement are set forth in the Grant Notice.
|
2
|
RIGHTS AS A SHAREHOLDER
|
2.1
|
Unless and until a Restricted Stock Unit has vested and the Share underlying it has been distributed to the Participant, the Participant will not be entitled to vote that Share or have any right to dividends, dividend equivalents or other distributions with respect to that Share; provided that the number and class of securities subject to this Award Agreement shall be subject to adjustment in accordance with Section 5.7 of the Plan.
|
3
|
TERMINATION OF SERVICE AND OTHER CHANGES IN SERVICE STATUS
|
3.1
|
If the Participant’s Service (as defined in Section 3.3) terminates for any reason other than Disability, death, or by virtue of the Company’s 12 year term limit for non-employee directors, the Participant will forfeit the right to receive Shares underlying any Restricted Stock Units that have not vested at that time. Notwithstanding anything in the Plan to the contrary, for purposes of this Award Agreement, “Disability” shall mean the condition of being “disabled” as provided in Code Section 409A(a)(2)(C).
|
3.2
|
If the Participant’s Service terminates on account of the Disability or death of the Participant or by virtue of the Company’s 12 year term limit for non-employee directors, the Shares underlying all of the Restricted Stock Units awarded hereunder shall become immediately vested and be distributed to the Participant or the Participant’s beneficiary under the Plan as soon as practicable in accordance with Section 4.1 of this Award Agreement.
|
3.3
|
For purposes of this Award Agreement “Service” means the provision of services to the Company or its Affiliates in the capacity of an employee or a member of the Board but not as a consultant to the Company or an Affiliate. For purposes of this Award Agreement, "Affiliate” means an entity that is (directly or indirectly) controlled by, or controls, the Company.
|
4
|
TIMING AND FORM OF PAYMENT
|
4.1
|
Once a Restricted Stock Unit vests, the Participant will be entitled to receive a Share in its place. Delivery of the Share will be made as soon as administratively feasible after its associated Restricted Stock Unit vests, but no later than 2½ months from the end of the calendar year in which such vesting occurs.
|
5
|
WITHHOLDING OBLIGATIONS
|
5.1
|
Without limiting the Company’s power or rights pursuant to Section 5.5 of the Plan with respect to a member of the Board who also serves as an employee of the Company, amounts required by tax law or regulation to be withheld by the Company with respect to any taxable event arising under this Award Agreement will be satisfied by having Shares withheld in accordance with Section 5.5 of the Plan. In addition, a Participant subject to withholding obligations may elect to deliver to the Company the necessary funds to satisfy the withholding obligation, in which case there will be no reduction in the Shares otherwise distributable to the Participant.
|
6
|
NOTICES
|
6.1
|
Any notice or other communication required or permitted under this Award Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, or sent by overnight courier, at the sender's expense. Notice will be deemed given when delivered personally or, if mailed, three days after the date of deposit or, if sent by overnight courier, on the regular business day following the date sent. Notice to the Company should be sent to Morningstar, Inc., 22 West Washington Street, Chicago, Illinois, 60602, Attention: General Counsel. Notice to the Participant should be sent to the address of the Participant contained in the Company’s records. Either party may change the person and/or address to whom the other party must give notice by giving such other party written notice of such change, in accordance with the procedures described above.
|
7
|
CONSTRUCTION
|
7.1
|
The Restricted Stock Units granted hereunder are subject to any rules and regulations promulgated by the Committee pursuant to the Plan, now or hereafter in effect.
|
7.2
|
The Company and the Participant may amend this Award Agreement only by a written instrument signed by both parties, provided, that the Company may amend this Award Agreement without further action by the Participant if (i) such amendment is deemed by the Company to be advisable or necessary to comply with applicable law, rule, or, regulation, including Section 409A of the Code, or (ii) if such amendment is not to the detriment of the Participant.
|
7.3
|
The Participant shall agree to the terms of this Award Agreement by accepting the Grant Notice at the time and in the manner specified by the Company.
|
Date: July 31, 2013
|
|
/s/ Joe Mansueto
|
|
|
|
Joe Mansueto
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
Date: July 31, 2013
|
|
/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, 2013 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: July 31, 2013
|
|
1.
|
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 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: July 31, 2013
|
|