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FORM 10-K
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||||
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x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
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|
Illinois
|
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36-3297908
|
(State or Other Jurisdiction of
|
|
(I.R.S. Employer
|
Incorporation or Organization)
|
|
Identification Number)
|
Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
Common stock, no par value
|
|
The NASDAQ Stock Market LLC
|
Large accelerated filer
x
|
Accelerated filer
¨
|
|
Non-accelerated filer
¨
|
|
Smaller reporting company
¨
|
(Do not check if a smaller reporting company)
|
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|
•
|
155,000 open-end mutual funds globally;
|
•
|
10,700 exchange-traded funds (ETFs);
|
•
|
6,300 closed-end funds;
|
•
|
34,500 stocks;
|
•
|
5,800 hedge funds;
|
•
|
10,300 separate accounts and collective investment trusts;
|
•
|
115,400 variable annuity/life subaccounts and policies;
|
•
|
61,900 insurance, pension, and life funds;
|
•
|
14,000 unit investment trusts; and
|
•
|
4,600 state-sponsored college savings plan portfolios (commonly known as Section 529 College Savings Plans).
|
•
|
87 years of capital markets data capturing performance of several major asset classes;
|
•
|
extensive cash flow, ownership, and biographical data on directors and officers;
|
•
|
security-level identification information;
|
•
|
regulatory documents, disclosure filings, and conference-call transcripts;
|
•
|
real-time market data on more than 9 million exchange-traded equities, derivatives, commodities, futures, foreign exchanges, precious metals, news, company fundamentals, and analytics; and
|
•
|
real-time price quotes for global foreign currencies.
|
•
|
Extend leadership position in global fund research
. In recent years, we have expanded our analyst coverage outside of the United States. We've built an integrated team of locally based fund experts to expand our research coverage in additional markets around the world. As of December 31, 2013, we had 105 fund analysts globally, including teams in North America, Europe, Asia, and Australia. We currently produce qualitative analyst research and Morningstar Analyst Ratings on about 4,000 funds around the world. We plan to continue expanding the number of funds that have Morningstar Analyst Ratings and in-depth qualitative research reports.
|
•
|
Continue leveraging our capabilities in stocks.
Our equity research complements our approach to mutual fund analysis, where we focus on analyzing the individual stocks that make up each fund's portfolio. As of December 31, 2013, we provided analyst research on about 1,600 companies globally. We also provide quantitative ratings and reports for approximately 28,000 companies globally.
|
•
|
Build business in credit research and ratings.
We began publishing research and ratings on corporate credit issuers in 2009 and currently produce research and ratings on about 600 corporate credit issuers. In 2012, we began publishing research on more than 100 municipal bond issuers. We view credit ratings as a natural extension of the equity research we've been producing for the past decade. We believe we have a unique viewpoint to offer on company default risk that leverages our cash-flow modeling expertise, proprietary measures like economic moat, and in-depth knowledge of the companies and industries we cover. In 2013, we also published research reports analyzing pension plan assets and liabilities for pension plans administered by all 50 states and 25 major cities.
|
•
|
Advisor (including independent financial advisors as well as those affiliated with broker-dealers, other intermediaries, and retail brokerage firms);
|
•
|
Asset management (including fund companies, insurance companies, and other companies that build and manage portfolios of securities for their clients);
|
•
|
Retirement (including retirement plan providers and plan sponsors); and
|
•
|
Individual investor.
|
•
|
Equity and Credit Research: our fundamental research on approximately 1,600 companies worldwide plus credit ratings and analysis for about 600 of the largest corporate bond issuers worldwide;
|
•
|
Structured Credit Ratings and Research, offered through Morningstar Credit Ratings, LLC, a Nationally Recognized Statistical Rating Organization (NRSRO) that provides timely new issue and surveillance ratings and analysis for commercial and residential mortgage-backed securities, as well as operational risk assessment services;
|
•
|
Morningstar Investment Profiles: pre-made or custom-generated investment fact sheets institutions can use to help investors understand, compare, and differentiate investment offerings;
|
•
|
Morningstar Commodity Data: high-quality market data and analytical products for energy data management systems, financial and agricultural data management, historical analysis, trading, risk management and forecasting;
|
•
|
Principia: our CD-ROM-based investment research and planning software for financial planners;
|
•
|
Morningstar Indexes: a comprehensive set of investment indexes that can be used to benchmark the market and create investment products;
|
•
|
Financial Communications materials;
|
•
|
Morningstar Enterprise Data Management: customized data aggregation and performance reporting solutions that help clients integrate data more effectively;
|
•
|
Market data and desktop software;
|
•
|
Other investment software for financial advisors and institutions; and
|
•
|
Print and online publications.
|
Ibbotson Associates ®
|
|
Morningstar Office
SM
|
Morningstar ® Advisor Workstation
SM
|
|
Morningstar ® Ownership Zone
SM
|
Morningstar Analyst Rating
TM
|
|
Morningstar ® Portfolio X-Ray ®
|
Morningstar ® Analyst Research Center
SM
|
|
Morningstar ® Principia ®
|
Morningstar Direct
SM
|
|
Morningstar Rating ™
|
Morningstar ® Integrated Web Tools
SM
|
|
Morningstar ® Retirement Manager
SM
|
Morningstar® for iPad®
|
|
Morningstar ® Stewardship Grade
SM
|
Morningstar ® Managed Portfolios
SM
|
|
Morningstar Style Box ™
|
Morningstar Market Barometer
SM
|
|
Morningstar.com ®
|
Name
|
|
Age
|
|
Position
|
Joe Mansueto
|
|
57
|
|
Chairman, Chief Executive Officer, and Director
|
Stéphane Biehler
|
|
46
|
|
Chief Financial Officer
|
Bevin Desmond
|
|
47
|
|
Head of Global Markets and Human Resources
|
Catherine Gillis Odelbo
|
|
51
|
|
Head of Corporate Strategy and Partnerships
|
Greg Goff
|
|
42
|
|
Chief Technology Officer
|
Thomas Idzorek
|
|
43
|
|
President, Morningstar Investment Management
|
Kunal Kapoor
|
|
38
|
|
Head of Information Products and Client Solutions
|
Haywood Kelly
|
|
45
|
|
Head of Global Research
|
Richard Robbins
|
|
51
|
|
General Counsel and Corporate Secretary
|
James Tanner
|
|
53
|
|
Head of Global Business Development and Sales
|
David W. Williams
|
|
53
|
|
Head of Design and Marketing
|
|
|
|
2013
|
|
|
|
2012
|
|
||||||
|
|
High
|
|
Low
|
|
|
High
|
|
Low
|
|
||||
First Quarter
|
|
$
|
71.14
|
|
$
|
61.31
|
|
|
$
|
63.25
|
|
$
|
56.23
|
|
Second Quarter
|
|
77.83
|
|
63.01
|
|
|
63.57
|
|
54.71
|
|
||||
Third Quarter
|
|
80.00
|
|
74.19
|
|
|
63.08
|
|
56.35
|
|
||||
Fourth Quarter
|
|
85.97
|
|
73.40
|
|
|
65.62
|
|
60.69
|
|
|
|
|
2013
|
|
|
|
2012
|
|
||||||
|
|
Dividends declared
|
|
Dividends paid
|
|
|
Dividends declared
|
|
Dividends paid
|
|
||||
First Quarter
|
|
$
|
0.125
|
|
$
|
—
|
|
|
$
|
0.10
|
|
$
|
0.10
|
|
Second Quarter
|
|
0.125
|
|
0.125
|
|
|
0.10
|
|
0.10
|
|
||||
Third Quarter
|
|
—
|
|
0.125
|
|
|
0.10
|
|
0.10
|
|
||||
Fourth Quarter
|
|
0.295
|
|
0.125
|
|
|
0.125
|
|
0.225
|
|
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 September 30, 2013
|
|
5,885,886
|
|
|
$
|
60.99
|
|
|
5,885,886
|
|
|
$
|
140,936,469
|
|
October 1, 2013 - October 31, 2013
|
|
152,139
|
|
|
74.75
|
|
|
152,139
|
|
|
$
|
129,560,608
|
|
|
November 1, 2013 - November 30, 2013
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
129,560,608
|
|
|
December 1, 2013 - December 31, 2013
|
|
1,029,981
|
|
|
77.01
|
|
|
1,029,981
|
|
|
$
|
250,216,174
|
|
|
Total
|
|
7,068,006
|
|
|
$
|
63.62
|
|
|
7,068,006
|
|
|
|
|
(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 a $200 million increase to this program. In December 2012, the board authorized the company to repurchase up to an additional $200 million in shares of our outstanding common stock and extended the expiration date of the program to December 31, 2014. In December 2013, the board approved another $200 million increase in the program.
|
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 February 15, 2014
|
|
|
Projected
Beneficial
Ownership (1)
|
|
|
Jack Noonan Director
|
|
11/15/2012
|
|
5/2/2015
|
|
24,000
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
13,000
|
|
|
58,232
|
|
|
David W. Williams
Head of Design and Marketing
|
|
11/25/2013
|
|
4/1/2015
|
|
7,500
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
—
|
|
|
36,943
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
48,112
|
|
|
49,249
|
|
|
50,032
|
|
|
48,497
|
|
|
46,158
|
|
|||||
Diluted
|
|
49,793
|
|
|
50,555
|
|
|
50,988
|
|
|
49,148
|
|
|
46,491
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other Consolidated Financial Data ($000)
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Stock-based compensation expense (1):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Restricted stock units
|
|
$
|
10,591
|
|
|
$
|
12,545
|
|
|
$
|
12,765
|
|
|
$
|
13,451
|
|
|
$
|
14,163
|
|
Restricted stock
|
|
—
|
|
|
1,248
|
|
|
2,196
|
|
|
5,013
|
|
|
388
|
|
|||||
Stock options
|
|
1,002
|
|
|
—
|
|
|
342
|
|
|
441
|
|
|
492
|
|
|||||
Total stock-based compensation expense
|
|
$
|
11,593
|
|
|
$
|
13,793
|
|
|
$
|
15,303
|
|
|
$
|
18,905
|
|
|
$
|
15,043
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by (used for) investing activities (2)
|
|
$
|
(174,675
|
)
|
|
$
|
(87,949
|
)
|
|
$
|
(110,767
|
)
|
|
$
|
80,192
|
|
|
$
|
(14,861
|
)
|
Cash provided by (used for) financing activities (3)
|
|
$
|
25,320
|
|
|
$
|
12,525
|
|
|
$
|
(32,596
|
)
|
|
$
|
(265,176
|
)
|
|
$
|
(166,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by operating activities
|
|
$
|
101,256
|
|
|
$
|
123,416
|
|
|
$
|
164,976
|
|
|
$
|
145,996
|
|
|
$
|
186,658
|
|
Capital expenditures
|
|
(12,372
|
)
|
|
(14,771
|
)
|
|
(23,322
|
)
|
|
(30,039
|
)
|
|
(33,583
|
)
|
|||||
Free cash flow (4)
|
|
$
|
88,884
|
|
|
$
|
108,645
|
|
|
$
|
141,654
|
|
|
$
|
115,957
|
|
|
$
|
153,075
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As of December 31 ($000)
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents, and investments
|
|
$
|
342,553
|
|
|
$
|
365,416
|
|
|
$
|
470,192
|
|
|
$
|
321,418
|
|
|
$
|
298,567
|
|
Working capital
|
|
236,595
|
|
|
254,556
|
|
|
341,400
|
|
|
217,245
|
|
|
166,602
|
|
|||||
Total assets
|
|
919,083
|
|
|
1,086,302
|
|
|
1,172,084
|
|
|
1,041,952
|
|
|
1,030,668
|
|
|||||
Deferred revenue (5)
|
|
127,114
|
|
|
146,267
|
|
|
155,494
|
|
|
146,015
|
|
|
149,225
|
|
|||||
Long-term liabilities
|
|
45,792
|
|
|
52,153
|
|
|
44,435
|
|
|
57,692
|
|
|
59,087
|
|
|||||
Total equity
|
|
665,789
|
|
|
781,425
|
|
|
857,016
|
|
|
726,895
|
|
|
691,290
|
|
•
|
liability for any losses that result from an actual or claimed breach of our fiduciary duties;
|
•
|
failing to differentiate our products and continuously create innovative, proprietary research tools;
|
•
|
failing to respond to technological change, keep pace with new technology developments, or adopt a successful technology strategy
|
•
|
a prolonged outage of our database and network facilities;
|
•
|
any failures or disruptions in our electronic delivery systems and the Internet;
|
•
|
liability and/or damage to our reputation as a result of some of our pending litigation;
|
•
|
liability related to the storage of personal information about our users;
|
•
|
general industry conditions and competition, including global financial uncertainty, trends in the mutual fund industry, and continued growth in passively managed investment vehicles;
|
•
|
the impact of market volatility on revenue from asset-based fees;
|
•
|
failing to maintain and protect our brand, independence, and reputation;
|
•
|
changes in laws applicable to our investment advisory or credit rating operations, compliance failures, or regulatory action; and
|
•
|
challenges faced by our non-U.S. operations, including the concentration of development work at our offshore facilities in China and India.
|
|
As of December 31,
|
|
|
|
|
||||||||||||
Our business
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013 change
|
|
|
2012 change
|
|
|||
Morningstar.com Premium Membership subscriptions (U.S.)
|
124,027
|
|
|
123,899
|
|
|
130,354
|
|
|
0.1
|
%
|
|
(5.0
|
)%
|
|||
Registered users for Morningstar.com (U.S.)
|
7,848,057
|
|
|
7,521,043
|
|
|
6,891,458
|
|
|
4.3
|
%
|
|
9.1
|
%
|
|||
U.S. Advisor Workstation and Morningstar Office licenses
|
169,592
|
|
|
162,904
|
|
|
160,287
|
|
|
4.1
|
%
|
|
1.6
|
%
|
|||
Principia subscriptions
|
19,206
|
|
|
26,807
|
|
|
31,270
|
|
|
(28.4
|
)%
|
|
(14.3
|
)%
|
|||
Morningstar Direct licenses (3)
|
8,514
|
|
|
7,388
|
|
|
6,134
|
|
|
15.2
|
%
|
|
20.4
|
%
|
|||
Assets under advisement and management (approximate) ($bil)
|
|
|
|
|
|
|
|
|
|
||||||||
Investment Advisory services (1)
|
$
|
83.5
|
|
|
$
|
94.3
|
|
|
$
|
137.5
|
|
|
(11.5
|
)%
|
|
(31.4
|
)%
|
Retirement Solutions
|
|
|
|
|
|
|
|
|
|
||||||||
Managed retirement accounts (2)
|
$
|
31.7
|
|
|
$
|
25.1
|
|
|
$
|
19.9
|
|
|
26.3
|
%
|
|
26.1
|
%
|
Other assets
|
$
|
33.9
|
|
|
$
|
22.1
|
|
|
$
|
17.5
|
|
|
53.4
|
%
|
|
26.3
|
%
|
Total for Retirement Solutions
|
$
|
65.6
|
|
|
$
|
47.2
|
|
|
$
|
37.4
|
|
|
39.0
|
%
|
|
26.2
|
%
|
Morningstar Managed Portfolios
|
$
|
7.3
|
|
|
$
|
4.7
|
|
|
$
|
3.1
|
|
|
55.3
|
%
|
|
51.6
|
%
|
Ibbotson Australia
|
$
|
3.0
|
|
|
$
|
3.3
|
|
|
$
|
2.9
|
|
|
(9.1
|
)%
|
|
13.8
|
%
|
Number of commercial mortgage-backed securities (CMBS) new-issue ratings completed
|
38
|
|
|
19
|
|
|
13
|
|
|
100.0
|
%
|
|
46.2
|
%
|
|||
Rated balance for CMBS new-issue ratings ($bil)
|
$
|
24.5
|
|
|
$
|
15.4
|
|
|
$
|
13.3
|
|
|
59.1
|
%
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
||||||||
Our employees
|
|
|
|
|
|
|
|
|
|
||||||||
Worldwide headcount (approximate)
|
3,565
|
|
|
3,495
|
|
|
3,465
|
|
|
2.0
|
%
|
|
0.9
|
%
|
|||
Number of worldwide equity and credit analysts (approximate)
|
165
|
|
|
155
|
|
|
140
|
|
|
6.5
|
%
|
|
10.7
|
%
|
|||
Number of worldwide fund analysts (approximate)
|
105
|
|
|
110
|
|
|
105
|
|
|
(4.5
|
)%
|
|
4.8
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
||||||||
Key product revenue ($000)
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013 change
|
|
|
2012 change
|
|
|||
Morningstar Data (3)
|
$
|
129,262
|
|
|
$
|
115,273
|
|
|
$
|
103,996
|
|
|
12.1
|
%
|
|
10.8
|
%
|
Morningstar Advisor Workstation (3)
|
93,059
|
|
|
86,048
|
|
|
79,664
|
|
|
8.1
|
%
|
|
8.0
|
%
|
|||
Morningstar Direct (3)
|
79,358
|
|
|
65,279
|
|
|
52,185
|
|
|
21.6
|
%
|
|
25.1
|
%
|
|||
Investment Advisory (3)
|
59,187
|
|
|
66,369
|
|
|
71,465
|
|
|
(10.8
|
)%
|
|
(7.1
|
)%
|
|||
Morningstar.com
|
55,637
|
|
|
53,671
|
|
|
56,352
|
|
|
3.7
|
%
|
|
(4.8
|
)%
|
Key Metrics ($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013 Change
|
|
|
2012 Change
|
|
|
|||
Revenue
|
|
$
|
698,266
|
|
|
$
|
658,288
|
|
|
631,400
|
|
|
6.1
|
%
|
|
4.3
|
%
|
|
|
Operating income
|
|
$
|
170,654
|
|
|
$
|
150,668
|
|
|
138,415
|
|
|
13.3
|
%
|
|
8.9
|
%
|
|
|
Operating margin
|
|
24.4
|
%
|
|
22.9
|
%
|
|
21.9
|
%
|
|
1.5
|
|
pp
|
1.0
|
|
pp
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash provided by (used for) investing activities
|
|
$
|
(14,861
|
)
|
|
$
|
80,192
|
|
|
(110,767
|
)
|
|
NMF
|
|
|
NMF
|
|
|
|
Cash used for financing activities
|
|
$
|
(166,372
|
)
|
|
$
|
(265,176
|
)
|
|
(32,596
|
)
|
|
(37.3
|
)%
|
|
713.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash provided by operating activities
|
|
$
|
186,658
|
|
|
$
|
145,996
|
|
|
164,976
|
|
|
27.9
|
%
|
|
(11.5
|
)%
|
|
|
Capital expenditures
|
|
(33,583
|
)
|
|
(30,039
|
)
|
|
(23,322
|
)
|
|
11.8
|
%
|
|
28.8
|
%
|
|
|||
Free cash flow
|
|
$
|
153,075
|
|
|
$
|
115,957
|
|
|
$
|
141,654
|
|
|
32.0
|
%
|
|
(18.1
|
)%
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013 Change
|
|
|
2012 Change
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Investment information
|
|
555,642
|
|
|
526,147
|
|
|
498,265
|
|
|
5.6
|
%
|
|
5.6
|
%
|
|
Investment management
|
|
142,624
|
|
|
132,141
|
|
|
133,135
|
|
|
7.9
|
%
|
|
(0.7
|
%)
|
|
Consolidated revenue
|
|
698,266
|
|
|
658,288
|
|
|
631,400
|
|
|
6.1
|
%
|
|
4.3
|
%
|
|
2013 vs. 2012 ($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
||
Consolidated revenue
|
|
$
|
698,266
|
|
|
$
|
658,288
|
|
|
6.1
|
%
|
Less: acquisitions
|
|
(3,746
|
)
|
|
—
|
|
|
NMF
|
|
||
Less: divestitures
|
|
—
|
|
|
(4,144
|
)
|
|
NMF
|
|
||
Unfavorable effect of foreign currency translations
|
|
3,575
|
|
|
—
|
|
|
NMF
|
|
||
Organic revenue
|
|
$
|
698,095
|
|
|
$
|
654,144
|
|
|
6.7
|
%
|
2012 vs. 2011 ($000)
|
|
2012
|
|
|
2011
|
|
|
Change
|
|
||
Consolidated revenue
|
|
$
|
658,288
|
|
|
$
|
631,400
|
|
|
4.3
|
%
|
Less: acquisitions
|
|
—
|
|
|
—
|
|
|
NMF
|
|
||
Less: divestitures
|
|
—
|
|
|
(1,057
|
)
|
|
NMF
|
|
||
Unfavorable effect of foreign currency translations
|
|
4,620
|
|
|
—
|
|
|
NMF
|
|
||
Organic revenue
|
|
$
|
662,908
|
|
|
$
|
630,343
|
|
|
5.2
|
%
|
|
|
Year ended December 31
|
|
|
|
|
||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013 Change
|
|
|
2012 Change
|
|
|||
United States
|
|
$
|
500,730
|
|
|
$
|
466,947
|
|
|
$
|
446,470
|
|
|
7.2
|
%
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
United Kingdom
|
|
56,298
|
|
|
56,794
|
|
|
53,427
|
|
|
(0.9
|
)%
|
|
6.3
|
%
|
|||
Continental Europe
|
|
57,580
|
|
|
49,844
|
|
|
49,507
|
|
|
15.5
|
%
|
|
0.7
|
%
|
|||
Australia
|
|
35,289
|
|
|
38,229
|
|
|
39,761
|
|
|
(7.7
|
)%
|
|
(3.9
|
)%
|
|||
Canada
|
|
31,845
|
|
|
30,664
|
|
|
27,808
|
|
|
3.9
|
%
|
|
10.3
|
%
|
|||
Asia
|
|
13,860
|
|
|
13,765
|
|
|
13,188
|
|
|
0.7
|
%
|
|
4.4
|
%
|
|||
Other
|
|
2,664
|
|
|
2,045
|
|
|
1,239
|
|
|
30.3
|
%
|
|
65.1
|
%
|
|||
Total international
|
|
197,536
|
|
|
191,341
|
|
|
184,930
|
|
|
3.2
|
%
|
|
3.5
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consolidated revenue
|
|
$
|
698,266
|
|
|
$
|
658,288
|
|
|
$
|
631,400
|
|
|
6.1
|
%
|
|
4.3
|
%
|
($000)
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
||
International revenue
|
|
$
|
197,536
|
|
|
$
|
191,341
|
|
|
3.2
|
%
|
Less: acquisitions
|
|
(3,746
|
)
|
|
—
|
|
|
NMF
|
|
||
Less: divestitures
|
|
—
|
|
|
(3,814
|
)
|
|
NMF
|
|
||
Unfavorable effect of foreign currency translations
|
|
3,575
|
|
|
—
|
|
|
NMF
|
|
||
International organic revenue
|
|
$
|
197,365
|
|
|
$
|
187,527
|
|
|
5.2
|
%
|
($000)
|
|
2012
|
|
|
2011
|
|
|
Change
|
|
||
International revenue
|
|
$
|
191,341
|
|
|
$
|
184,930
|
|
|
3.5
|
%
|
Less: acquisitions
|
|
—
|
|
|
—
|
|
|
NMF
|
|
||
Less: divestitures
|
|
—
|
|
|
(982
|
)
|
|
NMF
|
|
||
Unfavorable effect of foreign currency translations
|
|
4,620
|
|
|
—
|
|
|
NMF
|
|
||
International organic revenue
|
|
$
|
195,961
|
|
|
$
|
183,948
|
|
|
6.5
|
%
|
|
|
|
|
|
||||||||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013 Change
|
|
|
|
2012 Change
|
|
|
|||
Cost of revenue (1)
|
|
$
|
271,437
|
|
|
$
|
246,783
|
|
|
$
|
235,289
|
|
|
10.0
|
%
|
|
|
4.9
|
%
|
|
% of revenue
|
|
38.9
|
%
|
|
37.5
|
%
|
|
37.3
|
%
|
|
1.4
|
pp
|
|
0.2
|
|
pp
|
||||
Sales and marketing
|
|
103,614
|
|
|
108,884
|
|
|
106,699
|
|
|
(4.8
|
)%
|
|
|
2.0
|
%
|
|
|||
% of revenue
|
|
14.8
|
%
|
|
16.5
|
%
|
|
16.9
|
%
|
|
(1.7)
|
pp
|
|
(0.4)
|
pp
|
|||||
General and administrative
|
|
106,868
|
|
|
108,857
|
|
|
108,084
|
|
|
(1.8
|
)%
|
|
|
0.7
|
%
|
|
|||
% of revenue
|
|
15.3
|
%
|
|
16.5
|
%
|
|
17.1
|
%
|
|
(1.2)
|
pp
|
|
(0.6)
|
pp
|
|||||
Depreciation and amortization
|
|
45,693
|
|
|
43,096
|
|
|
42,913
|
|
|
6.0
|
%
|
|
|
0.4
|
%
|
|
|||
% of revenue
|
|
6.5
|
%
|
|
6.5
|
%
|
|
6.8
|
%
|
|
0.0
|
pp
|
|
(0.3)
|
pp
|
|||||
Total operating expense (2) (3)
|
|
$
|
527,612
|
|
|
$
|
507,620
|
|
|
$
|
492,985
|
|
|
3.9
|
%
|
|
|
3.0
|
%
|
|
% of revenue
|
|
75.6
|
%
|
|
77.1
|
%
|
|
78.1
|
%
|
|
(1.5)
|
pp
|
|
(1.0)
|
pp
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|||
Stock-based compensation expense
|
|
$
|
15,043
|
|
|
$
|
18,905
|
|
|
$
|
15,303
|
|
|
% of revenue
|
|
2.2
|
%
|
|
2.9
|
%
|
|
2.4
|
%
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|||
Bonus expense
|
|
$
|
40,930
|
|
|
$
|
36,241
|
|
|
$
|
42,621
|
|
|
% of revenue
|
|
5.9
|
%
|
|
5.5
|
%
|
|
6.8
|
%
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|||
Operating income
|
|
$
|
170,654
|
|
|
$
|
150,668
|
|
|
$
|
138,415
|
|
|
% change
|
|
13.3
|
%
|
|
8.9
|
%
|
|
14.3
|
%
|
|
|||
Operating margin
|
|
24.4
|
%
|
|
22.9
|
%
|
|
21.9
|
%
|
|
|||
Change
|
|
1.5
|
|
pp
|
1.0
|
|
pp
|
0.1
|
|
pp
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Equity in net income of unconsolidated entities
|
|
$
|
1,428
|
|
|
$
|
2,027
|
|
|
$
|
1,848
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Interest income
|
|
$
|
2,940
|
|
|
$
|
5,464
|
|
|
$
|
3,679
|
|
Interest expense
|
|
(228
|
)
|
|
(311
|
)
|
|
(1,318
|
)
|
|||
Gain on sale of investments, net
|
|
4,207
|
|
|
538
|
|
|
260
|
|
|||
Holding gain upon acquisition of additional ownership of equity-method investments
|
|
3,635
|
|
|
—
|
|
|
—
|
|
|||
Other expense, net
|
|
(3,198
|
)
|
|
(2,734
|
)
|
|
(912
|
)
|
|||
Non-operating income, net
|
|
$
|
7,356
|
|
|
$
|
2,957
|
|
|
$
|
1,709
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Income before income taxes and equity in net income of unconsolidated entities
|
|
$
|
178,010
|
|
|
$
|
153,625
|
|
|
$
|
140,124
|
|
Equity in net income of unconsolidated entities
|
|
1,428
|
|
|
2,027
|
|
|
1,848
|
|
|||
Net (income) loss attributable to the noncontrolling interest
|
|
122
|
|
|
117
|
|
|
43
|
|
|||
Total
|
|
$
|
179,560
|
|
|
$
|
155,769
|
|
|
$
|
142,015
|
|
Income tax expense
|
|
$
|
56,031
|
|
|
$
|
52,878
|
|
|
$
|
43,658
|
|
Effective tax rate
|
|
31.2
|
%
|
|
33.9
|
%
|
|
30.7
|
%
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013 Change
|
|
|
2012 Change
|
|
|||
Cash provided by operating activities
|
|
$
|
186,658
|
|
|
$
|
145,996
|
|
|
$
|
164,976
|
|
|
27.9
|
%
|
|
(11.5
|
)%
|
Capital expenditures
|
|
(33,583
|
)
|
|
(30,039
|
)
|
|
(23,322
|
)
|
|
11.8
|
%
|
|
28.8
|
%
|
|||
Free cash flow
|
|
$
|
153,075
|
|
|
$
|
115,957
|
|
|
$
|
141,654
|
|
|
32.0
|
%
|
|
(18.1
|
)%
|
•
|
Identify the acquired intangible assets: For each acquisition, we identify the intangible assets acquired. These intangible assets generally consist of customer relationships, trademarks and trade names, technology-related intangibles including internally developed software and databases, and non-compete agreements.
|
•
|
Estimate the fair value of these intangible assets: We consider various approaches to value the intangible assets. These valuation approaches include the cost approach, which measures the value of an asset based on the cost to reproduce it or replace it with another asset of like utility; the market approach, which values the asset through an analysis of sales and offerings of comparable assets; and the income approach, which measures the value of an asset based by measuring the present worth of the economic benefits it is expected to produce.
|
•
|
Estimate the remaining useful life of the assets: For each intangible asset, we use judgment and assumptions to establish the remaining useful life of the asset. For example, for customer relationships, we determine the estimated useful life with reference to observed customer attrition rates. For technology-related assets such as databases, we make judgments about the demand for current data and historical metrics in establishing the remaining useful life. For internally developed software, we estimate an obsolescence factor associated with the software.
|
($000)
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
Thereafter
|
|
|
Total
|
|
|||||||
Minimum commitments on non-cancelable operating lease obligations (1)
|
|
$
|
18,987
|
|
|
$
|
17,656
|
|
|
$
|
16,918
|
|
|
$
|
16,001
|
|
|
$
|
13,908
|
|
|
$
|
42,592
|
|
|
$
|
126,062
|
|
Unrecognized tax benefits (2)
|
|
6,211
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,211
|
|
|||||||
Total
|
|
$
|
25,198
|
|
|
$
|
17,656
|
|
|
$
|
16,918
|
|
|
$
|
16,001
|
|
|
$
|
13,908
|
|
|
$
|
42,592
|
|
|
$
|
132,273
|
|
Year ended December 31 (in thousands except per share amounts)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Revenue
|
|
$
|
698,266
|
|
|
$
|
658,288
|
|
|
$
|
631,400
|
|
|
|
|
|
|
|
|
||||||
Operating expense (1):
|
|
|
|
|
|
|
||||||
Cost of revenue
|
|
271,437
|
|
|
246,783
|
|
|
235,289
|
|
|||
Sales and marketing
|
|
103,614
|
|
|
108,884
|
|
|
106,699
|
|
|||
General and administrative
|
|
106,868
|
|
|
108,857
|
|
|
108,084
|
|
|||
Depreciation and amortization
|
|
45,693
|
|
|
43,096
|
|
|
42,913
|
|
|||
Total operating expense
|
|
527,612
|
|
|
507,620
|
|
|
492,985
|
|
|||
|
|
|
|
|
|
|
||||||
Operating income
|
|
170,654
|
|
|
150,668
|
|
|
138,415
|
|
|||
|
|
|
|
|
|
|
||||||
Non-operating income (expense):
|
|
|
|
|
|
|
||||||
Interest income, net
|
|
2,712
|
|
|
5,153
|
|
|
2,361
|
|
|||
Gain on sale of investments, reclassified from other comprehensive income
|
|
4,207
|
|
|
538
|
|
|
260
|
|
|||
Holding gain upon acquisition of additional ownership of equity method investments
|
|
3,635
|
|
|
—
|
|
|
—
|
|
|||
Other expense, net
|
|
(3,198
|
)
|
|
(2,734
|
)
|
|
(912
|
)
|
|||
Non-operating income, net
|
|
7,356
|
|
|
2,957
|
|
|
1,709
|
|
|||
|
|
|
|
|
|
|
||||||
Income before income taxes and equity in net income of unconsolidated entities
|
|
178,010
|
|
|
153,625
|
|
|
140,124
|
|
|||
|
|
|
|
|
|
|
||||||
Equity in net income of unconsolidated entities
|
|
1,428
|
|
|
2,027
|
|
|
1,848
|
|
|||
|
|
|
|
|
|
|
||||||
Income tax expense
|
|
56,031
|
|
|
52,878
|
|
|
43,658
|
|
|||
|
|
|
|
|
|
|
||||||
Consolidated net income from continuing operations
|
|
123,407
|
|
|
102,774
|
|
|
98,314
|
|
|||
|
|
|
|
|
|
|
||||||
Gain on sale of discontinued operations, net of tax
|
|
—
|
|
|
5,188
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
Consolidated net income
|
|
123,407
|
|
|
107,962
|
|
|
98,314
|
|
|||
|
|
|
|
|
|
|
||||||
Net loss attributable to noncontrolling interest
|
|
122
|
|
|
117
|
|
|
43
|
|
|||
|
|
|
|
|
|
|
||||||
Net income attributable to Morningstar, Inc.
|
|
$
|
123,529
|
|
|
$
|
108,079
|
|
|
$
|
98,357
|
|
|
|
|
|
|
|
|
||||||
Amounts attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Net income from continuing operations, net of tax
|
|
$
|
123,529
|
|
|
$
|
102,891
|
|
|
$
|
98,357
|
|
Net income from discontinued operations, net of tax
|
|
—
|
|
|
5,188
|
|
|
—
|
|
|||
Net income attributable to Morningstar, Inc.
|
|
$
|
123,529
|
|
|
$
|
108,079
|
|
|
$
|
98,357
|
|
|
|
|
|
|
|
|
||||||
Net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Basic:
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
2.68
|
|
|
$
|
2.12
|
|
|
$
|
1.96
|
|
Discontinued operations
|
|
—
|
|
|
0.11
|
|
|
—
|
|
|||
|
|
$
|
2.68
|
|
|
$
|
2.23
|
|
|
$
|
1.96
|
|
Diluted:
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
2.66
|
|
|
$
|
2.10
|
|
|
$
|
1.92
|
|
Discontinued operations
|
|
—
|
|
|
0.10
|
|
|
—
|
|
|||
|
|
$
|
2.66
|
|
|
$
|
2.20
|
|
|
$
|
1.92
|
|
Dividends per common share:
|
|
|
|
|
|
|
||||||
Dividends declared per common share
|
|
$
|
0.545
|
|
|
$
|
0.425
|
|
|
$
|
0.25
|
|
Dividends paid per common share
|
|
$
|
0.375
|
|
|
$
|
0.525
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
||||||
Basic
|
|
46,158
|
|
|
48,497
|
|
|
50,032
|
|
|||
Diluted
|
|
46,491
|
|
|
49,148
|
|
|
50,988
|
|
|
|
|
|
|
|
|
||||||
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
(1) Includes stock-based compensation expense of:
|
|
|
|
|
|
|
|
|||||
Cost of revenue
|
|
$
|
6,870
|
|
|
$
|
6,416
|
|
|
$
|
6,236
|
|
Sales and marketing
|
|
1,975
|
|
|
1,937
|
|
|
1,871
|
|
|||
General and administrative
|
|
6,198
|
|
|
10,552
|
|
|
7,196
|
|
|||
Total stock-based compensation expense
|
|
$
|
15,043
|
|
|
$
|
18,905
|
|
|
$
|
15,303
|
|
Year ended December 31 (in thousands)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
|
|
|
|
|
|
|
||||||
Consolidated net income
|
|
$
|
123,407
|
|
|
$
|
107,962
|
|
|
$
|
98,314
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
|
(4,539
|
)
|
|
6,838
|
|
|
(2,345
|
)
|
|||
Unrealized gains (losses) on securities:
|
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
|
2,408
|
|
|
1,455
|
|
|
(773
|
)
|
|||
Reclassification of gains included in net income
|
|
(2,631
|
)
|
|
(344
|
)
|
|
(166
|
)
|
|||
Other comprehensive income (loss)
|
|
(4,762
|
)
|
|
7,949
|
|
|
(3,284
|
)
|
|||
|
|
|
|
|
|
|
||||||
Comprehensive income
|
|
118,645
|
|
|
115,911
|
|
|
95,030
|
|
|||
Comprehensive (income) loss attributable to noncontrolling interest
|
|
345
|
|
|
268
|
|
|
(179
|
)
|
|||
Comprehensive income attributable to Morningstar, Inc.
|
|
$
|
118,990
|
|
|
$
|
116,179
|
|
|
$
|
94,851
|
|
As of December 31 (in thousands except share amounts)
|
|
2013
|
|
|
2012
|
|
||
Assets
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
168,160
|
|
|
$
|
163,889
|
|
Investments
|
|
130,407
|
|
|
157,529
|
|
||
Accounts receivable, less allowance of $1,089 and $569, respectively
|
|
114,131
|
|
|
114,361
|
|
||
Deferred tax asset, net
|
|
3,892
|
|
|
3,741
|
|
||
Income tax receivable, net
|
|
3,942
|
|
|
14,267
|
|
||
Other
|
|
26,361
|
|
|
20,823
|
|
||
Total current assets
|
|
446,893
|
|
|
474,610
|
|
||
Property, equipment, and capitalized software, net
|
|
104,986
|
|
|
84,022
|
|
||
Investments in unconsolidated entities
|
|
38,714
|
|
|
35,305
|
|
||
Goodwill
|
|
326,450
|
|
|
320,845
|
|
||
Intangible assets, net
|
|
103,909
|
|
|
116,732
|
|
||
Other assets
|
|
9,716
|
|
|
10,438
|
|
||
Total assets
|
|
$
|
1,030,668
|
|
|
$
|
1,041,952
|
|
|
|
|
|
|
||||
Liabilities and equity
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
|
$
|
52,877
|
|
|
$
|
43,777
|
|
Accrued compensation
|
|
71,403
|
|
|
67,317
|
|
||
Deferred revenue
|
|
149,225
|
|
|
146,015
|
|
||
Other current liabilities
|
|
6,786
|
|
|
256
|
|
||
Total current liabilities
|
|
280,291
|
|
|
257,365
|
|
||
Accrued compensation
|
|
8,193
|
|
|
8,281
|
|
||
Deferred tax liability, net
|
|
23,755
|
|
|
21,583
|
|
||
Deferred rent
|
|
13,192
|
|
|
15,368
|
|
||
Other long-term liabilities
|
|
13,947
|
|
|
12,460
|
|
||
Total liabilities
|
|
339,378
|
|
|
315,057
|
|
||
|
|
|
|
|
||||
Equity:
|
|
|
|
|
|
|
||
Morningstar, Inc. shareholders’ equity:
|
|
|
|
|
|
|
||
Common stock, no par value, 200,000,000 shares authorized, of which 44,967,423 and 46,541,571 shares were outstanding as of December 31, 2013 and December 31, 2012, respectively
|
|
5
|
|
|
5
|
|
||
Treasury stock at cost, 7,202,896 shares as of December 31, 2013 and 5,214,070 shares as of December 31, 2012
|
|
(449,054
|
)
|
|
(301,839
|
)
|
||
Additional paid-in capital
|
|
539,507
|
|
|
521,285
|
|
||
Retained earnings
|
|
594,626
|
|
|
496,354
|
|
||
Accumulated other comprehensive income (loss):
|
|
|
|
|
||||
Currency translation adjustment
|
|
4,609
|
|
|
8,925
|
|
||
Unrealized gain on available-for-sale investments
|
|
564
|
|
|
787
|
|
||
Total accumulated other comprehensive income
|
|
5,173
|
|
|
9,712
|
|
||
Total Morningstar, Inc. shareholders’ equity
|
|
690,257
|
|
|
725,517
|
|
||
Noncontrolling interest
|
|
1,033
|
|
|
1,378
|
|
||
Total equity
|
|
691,290
|
|
|
726,895
|
|
||
Total liabilities and equity
|
|
$
|
1,030,668
|
|
|
$
|
1,041,952
|
|
|
|
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, 2010
|
|
49,874,392
|
|
|
$
|
5
|
|
|
$
|
(6,641
|
)
|
|
$
|
458,426
|
|
|
$
|
323,408
|
|
|
$
|
5,118
|
|
|
$
|
1,109
|
|
|
$
|
781,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss)
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98,357
|
|
|
—
|
|
|
(43
|
)
|
|
98,314
|
|
|||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Unrealized gain on available-for-sale investments, net of tax of $447
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(773
|
)
|
|
—
|
|
|
(773
|
)
|
|||||||
Reclassification of adjustments for gains included in net income, net of income tax of $94
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(166
|
)
|
|
—
|
|
|
(166
|
)
|
|||||||
Foreign currency translation adjustment, net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,567
|
)
|
|
222
|
|
|
(2,345
|
)
|
|||||||
Other comprehensive income (loss), net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,506
|
)
|
|
222
|
|
|
(3,284
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
|
931,667
|
|
|
—
|
|
|
612
|
|
|
8,090
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,702
|
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
12,765
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,765
|
|
|||||||
Stock-based compensation — restricted stock
|
|
|
|
—
|
|
|
—
|
|
|
2,196
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,196
|
|
||||||||
Stock-based compensation — stock options
|
|
|
|
—
|
|
|
—
|
|
|
342
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
342
|
|
||||||||
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
9,525
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,525
|
|
|||||||
Common shares repurchased
|
|
(722,119
|
)
|
|
—
|
|
|
(40,672
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40,672
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,550
|
)
|
|
—
|
|
|
—
|
|
|
(12,550
|
)
|
||||||||
Dividends declared — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
184
|
|
|
(193
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||||||
Adjustment to noncontrolling interest
|
|
|
|
|
—
|
|
|
—
|
|
|
(96
|
)
|
|
—
|
|
|
—
|
|
|
358
|
|
|
262
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2011
|
|
50,083,940
|
|
|
5
|
|
|
(46,701
|
)
|
|
491,432
|
|
|
409,022
|
|
|
1,612
|
|
|
1,646
|
|
|
857,016
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss)
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
108,079
|
|
|
—
|
|
|
(117
|
)
|
|
107,962
|
|
|||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Unrealized gain on available-for-sale investments, net of tax of $614
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,455
|
|
|
—
|
|
|
1,455
|
|
|||||||
Reclassification of adjustments for gains included in net income, net of income tax of $194
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(344
|
)
|
|
—
|
|
|
(344
|
)
|
|||||||
Foreign currency translation adjustment, net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,989
|
|
|
(151
|
)
|
|
6,838
|
|
|||||||
Other comprehensive income (loss), net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,100
|
|
|
(151
|
)
|
|
7,949
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
|
715,888
|
|
|
—
|
|
|
1,342
|
|
|
3,467
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,809
|
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
13,451
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,451
|
|
|||||||
Stock-based compensation — restricted stock
|
|
|
|
|
—
|
|
|
—
|
|
|
5,013
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,013
|
|
|||||||
Stock-based compensation — stock-options
|
|
|
|
—
|
|
|
—
|
|
|
441
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
441
|
|
||||||||
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
7,210
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,210
|
|
|||||||
Common shares repurchased
|
|
(4,258,257
|
)
|
|
—
|
|
|
(256,480
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(256,480
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,420
|
)
|
|
—
|
|
|
—
|
|
|
(20,420
|
)
|
|||||||
Dividends declared — restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
271
|
|
|
(327
|
)
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
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)
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123,529
|
|
|
—
|
|
|
(122
|
)
|
|
123,407
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Unrealized loss on available-for-sale investments, net of income tax of $1,469
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,408
|
|
|
—
|
|
|
2,408
|
|
||||||||
Reclassification of adjustments for gains included in net income, net of income tax of $1,576
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,631
|
)
|
|
—
|
|
|
(2,631
|
)
|
||||||||
Foreign currency translation adjustment, net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,316
|
)
|
|
(223
|
)
|
|
(4,539
|
)
|
||||||||
Other comprehensive income (loss), net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,539
|
)
|
|
(223
|
)
|
|
(4,762
|
)
|
||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
|
437,263
|
|
|
—
|
|
|
1,633
|
|
|
(2,908
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,275
|
)
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
14,163
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,163
|
|
||||||||
Stock-based compensation — restricted stock
|
|
|
|
—
|
|
|
—
|
|
|
388
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
388
|
|
||||||||
Stock-based compensation — stock-options
|
|
|
|
—
|
|
|
—
|
|
|
492
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
492
|
|
||||||||
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
5,898
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,898
|
|
||||||||
Common shares repurchased
|
|
(2,011,411
|
)
|
|
—
|
|
|
(148,848
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(148,848
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,977
|
)
|
|
—
|
|
|
—
|
|
|
(24,977
|
)
|
||||||||
Dividends declared — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
(280
|
)
|
|
—
|
|
|
—
|
|
|
(91
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2013
|
|
44,967,423
|
|
|
$
|
5
|
|
|
$
|
(449,054
|
)
|
|
$
|
539,507
|
|
|
$
|
594,626
|
|
|
$
|
5,173
|
|
|
$
|
1,033
|
|
|
$
|
691,290
|
|
Year ended December 31 (in thousands)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
|
|
|
|
|
|
|
||||||
Operating activities
|
|
|
|
|
|
|
|
|
||||
Consolidated net income
|
|
$
|
123,407
|
|
|
$
|
107,962
|
|
|
$
|
98,314
|
|
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
45,693
|
|
|
43,096
|
|
|
42,913
|
|
|||
Deferred income taxes
|
|
(1,133
|
)
|
|
6,316
|
|
|
(4,436
|
)
|
|||
Stock-based compensation expense
|
|
15,043
|
|
|
18,905
|
|
|
15,303
|
|
|||
Provision for bad debt
|
|
825
|
|
|
1,016
|
|
|
1,237
|
|
|||
Equity in net income of unconsolidated entities
|
|
(1,428
|
)
|
|
(2,027
|
)
|
|
(1,848
|
)
|
|||
Excess tax benefits from stock-option exercises and vesting of restricted stock units
|
|
(5,898
|
)
|
|
(7,210
|
)
|
|
(9,525
|
)
|
|||
Gain on sale of discontinued operations, net of tax
|
|
—
|
|
|
(5,188
|
)
|
|
—
|
|
|||
Loss on sale of cost-method investment
|
|
—
|
|
|
2,034
|
|
|
—
|
|
|||
Holding gain upon acquisition of additional ownership of equity-method investments
|
|
(3,635
|
)
|
|
—
|
|
|
—
|
|
|||
Other, net
|
|
(1,830
|
)
|
|
142
|
|
|
592
|
|
|||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
||||||
Accounts receivable
|
|
(1,593
|
)
|
|
(17,124
|
)
|
|
(3,858
|
)
|
|||
Other assets
|
|
(2,302
|
)
|
|
223
|
|
|
2,728
|
|
|||
Accounts payable and accrued liabilities
|
|
(1,244
|
)
|
|
1,173
|
|
|
(4,821
|
)
|
|||
Accrued compensation
|
|
3,153
|
|
|
(8,861
|
)
|
|
10,176
|
|
|||
Income taxes—current
|
|
16,794
|
|
|
(1,205
|
)
|
|
10,751
|
|
|||
Deferred revenue
|
|
3,658
|
|
|
7,769
|
|
|
9,578
|
|
|||
Deferred rent
|
|
(1,484
|
)
|
|
407
|
|
|
(1,030
|
)
|
|||
Other liabilities
|
|
(1,368
|
)
|
|
(1,432
|
)
|
|
(1,098
|
)
|
|||
Cash provided by operating activities
|
|
186,658
|
|
|
145,996
|
|
|
164,976
|
|
|||
|
|
|
|
|
|
|
||||||
Investing activities
|
|
|
|
|
|
|
|
|
||||
Purchases of investments
|
|
(140,051
|
)
|
|
(145,491
|
)
|
|
(383,281
|
)
|
|||
Proceeds from maturities and sales of investments
|
|
171,243
|
|
|
260,317
|
|
|
297,956
|
|
|||
Capital expenditures
|
|
(33,583
|
)
|
|
(30,039
|
)
|
|
(23,322
|
)
|
|||
Acquisitions, net of cash acquired
|
|
(11,079
|
)
|
|
—
|
|
|
300
|
|
|||
Proceeds from sale of a business, net
|
|
957
|
|
|
5,734
|
|
|
—
|
|
|||
Purchases of equity- and cost-method investments
|
|
(2,751
|
)
|
|
(10,304
|
)
|
|
(2,450
|
)
|
|||
Other, net
|
|
403
|
|
|
(25
|
)
|
|
30
|
|
|||
Cash provided by (used for) investing activities
|
|
(14,861
|
)
|
|
80,192
|
|
|
(110,767
|
)
|
|||
|
|
|
|
|
|
|
||||||
Financing activities
|
|
|
|
|
|
|
|
|
||||
Proceeds from stock-option exercises
|
|
4,532
|
|
|
9,101
|
|
|
12,866
|
|
|||
Employee taxes withheld for restricted stock units
|
|
(5,807
|
)
|
|
(4,292
|
)
|
|
(4,164
|
)
|
|||
Excess tax benefits from stock-option exercises and vesting of restricted stock units
|
|
5,898
|
|
|
7,210
|
|
|
9,525
|
|
|||
Common shares repurchased
|
|
(153,514
|
)
|
|
(251,813
|
)
|
|
(40,672
|
)
|
|||
Dividends paid
|
|
(17,425
|
)
|
|
(25,487
|
)
|
|
(10,041
|
)
|
|||
Other, net
|
|
(56
|
)
|
|
105
|
|
|
(110
|
)
|
|||
Cash used for financing activities
|
|
(166,372
|
)
|
|
(265,176
|
)
|
|
(32,596
|
)
|
|||
|
|
|
|
|
|
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
|
(1,154
|
)
|
|
2,440
|
|
|
(1,352
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
4,271
|
|
|
(36,548
|
)
|
|
20,261
|
|
|||
Cash and cash equivalents—beginning of period
|
|
163,889
|
|
|
200,437
|
|
|
180,176
|
|
|||
Cash and cash equivalents—end of period
|
|
$
|
168,160
|
|
|
$
|
163,889
|
|
|
$
|
200,437
|
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
||||
Cash paid for income taxes
|
|
$
|
40,364
|
|
|
$
|
47,355
|
|
|
$
|
38,054
|
|
Supplemental information of non-cash investing and financing activities:
|
|
|
|
|
|
|
||||||
Unrealized gain (loss) on available-for-sale investments
|
|
$
|
(328
|
)
|
|
$
|
1,723
|
|
|
$
|
(1,480
|
)
|
Equipment obtained under long-term financing arrangement
|
|
$
|
4,860
|
|
|
$
|
4,551
|
|
|
$
|
—
|
|
1.
|
Description of Business
|
ASC
|
Accounting Standards Codification
|
ASU
|
Accounting Standards Update
|
EITF
|
Emerging Issues Task Force
|
FASB
|
Financial Accounting Standards Board
|
SEC
|
Securities and Exchange Commission
|
•
|
Held-to-maturity: We classify certain investments, primarily certificates of deposit, as held-to-maturity securities, based on our intent and ability to hold these securities to maturity. We record held-to-maturity investments at amortized cost in our Consolidated Balance Sheets.
|
•
|
Trading: We classify certain other investments, primarily equity securities, as trading securities, primarily to satisfy the requirements of one of our wholly owned subsidiaries, which is a registered broker-dealer. We include realized and unrealized gains and losses associated with these investments as a component of our operating income in our Consolidated Statements of Income. We record these securities at their fair value in our Consolidated Balance Sheets.
|
•
|
Available-for-sale: Investments not considered held-to-maturity or trading securities are classified as available-for-sale securities. Available-for-sale securities primarily consist of fixed-income securities. We report unrealized gains and losses for available-for-sale securities as other comprehensive income (loss), net of related income taxes. We record these securities at their fair value in our Consolidated Balance Sheets.
|
•
|
Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that the company has the ability to access.
|
•
|
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
•
|
Level 3: Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Capitalized software development costs
|
|
$
|
8,142
|
|
|
$
|
8,527
|
|
|
$
|
5,315
|
|
•
|
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.
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Advertising expense
|
|
$
|
6,939
|
|
|
$
|
6,306
|
|
|
$
|
8,210
|
|
(in thousands, except per share amounts)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
|
|
|
|
|
|
|
||||||
Basic net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Net income attributable to Morningstar, Inc.:
|
|
$
|
123,529
|
|
|
$
|
108,079
|
|
|
$
|
98,357
|
|
Less: Distributed earnings available to participating securities
|
|
(10
|
)
|
|
(41
|
)
|
|
(40
|
)
|
|||
Less: Undistributed earnings available to participating securities
|
|
(36
|
)
|
|
(47
|
)
|
|
(259
|
)
|
|||
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
|
|
$
|
123,483
|
|
|
$
|
107,991
|
|
|
$
|
98,058
|
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
|
46,158
|
|
|
48,497
|
|
|
50,032
|
|
|||
|
|
|
|
|
|
|
||||||
Basic net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
2.68
|
|
|
$
|
2.12
|
|
|
$
|
1.96
|
|
Discontinued operations
|
|
—
|
|
|
0.11
|
|
|
—
|
|
|||
Total
|
|
$
|
2.68
|
|
|
$
|
2.23
|
|
|
$
|
1.96
|
|
|
|
|
|
|
|
|
||||||
Diluted net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Numerator for basic net income per share — undistributed and distributed earnings available to common shareholders
|
|
$
|
123,483
|
|
|
$
|
107,991
|
|
|
$
|
98,058
|
|
Add: Undistributed earnings allocated to participating securities
|
|
36
|
|
|
47
|
|
|
259
|
|
|||
Less: Undistributed earnings reallocated to participating securities
|
|
(36
|
)
|
|
(46
|
)
|
|
(254
|
)
|
|||
Numerator for diluted net income per share — undistributed and distributed earnings available to common shareholders
|
|
$
|
123,483
|
|
|
$
|
107,992
|
|
|
$
|
98,063
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding
|
|
46,158
|
|
|
48,497
|
|
|
50,032
|
|
|||
Net effect of dilutive stock options and restricted stock units
|
|
333
|
|
|
651
|
|
|
956
|
|
|||
Weighted average common shares outstanding for computing diluted income per share
|
|
46,491
|
|
|
49,148
|
|
|
50,988
|
|
|||
|
|
|
|
|
|
|
|
|
||||
Diluted net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
2.66
|
|
|
$
|
2.10
|
|
|
$
|
1.92
|
|
Discontinued operations
|
|
—
|
|
|
0.10
|
|
|
—
|
|
|||
Total
|
|
$
|
2.66
|
|
|
$
|
2.20
|
|
|
$
|
1.92
|
|
(in thousands)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Weighted average stock options
|
|
—
|
|
|
83
|
|
|
55
|
|
Weighted average restricted stock units
|
|
17
|
|
|
7
|
|
|
—
|
|
Weighted average restricted stock
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
17
|
|
|
90
|
|
|
55
|
|
External revenue by geographical area
|
|
|
|
|
|
|
||||||
|
|
Year ended December 31
|
||||||||||
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
United States
|
|
$
|
500,730
|
|
|
$
|
466,947
|
|
|
$
|
446,470
|
|
|
|
|
|
|
|
|
||||||
United Kingdom
|
|
56,298
|
|
|
56,794
|
|
|
53,427
|
|
|||
Continental Europe
|
|
57,580
|
|
|
49,844
|
|
|
49,507
|
|
|||
Australia
|
|
35,289
|
|
|
38,229
|
|
|
39,761
|
|
|||
Canada
|
|
31,845
|
|
|
30,664
|
|
|
27,808
|
|
|||
Asia
|
|
13,860
|
|
|
13,765
|
|
|
13,188
|
|
|||
Other
|
|
2,664
|
|
|
2,045
|
|
|
1,239
|
|
|||
Total International
|
|
197,536
|
|
|
191,341
|
|
|
184,930
|
|
|||
|
|
|
|
|
|
|
||||||
Consolidated revenue
|
|
$
|
698,266
|
|
|
$
|
658,288
|
|
|
$
|
631,400
|
|
Long-lived assets by geographical area
|
|
|
|
|
||||
|
|
As of December 31
|
||||||
($000)
|
|
2013
|
|
|
2012
|
|
||
United States
|
|
$
|
84,321
|
|
|
$
|
60,371
|
|
|
|
|
|
|
||||
United Kingdom
|
|
6,873
|
|
|
7,435
|
|
||
Continental Europe
|
|
1,873
|
|
|
2,356
|
|
||
Australia
|
|
1,051
|
|
|
1,402
|
|
||
Canada
|
|
1,275
|
|
|
1,773
|
|
||
Asia
|
|
9,479
|
|
|
10,529
|
|
||
Other
|
|
114
|
|
|
156
|
|
||
Total International
|
|
20,665
|
|
|
23,651
|
|
||
|
|
|
|
|
||||
Consolidated property, equipment, and capitalized software, net
|
|
$
|
104,986
|
|
|
$
|
84,022
|
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Available-for-sale
|
|
$
|
91,461
|
|
|
$
|
125,786
|
|
Held-to-maturity
|
|
31,214
|
|
|
$
|
26,357
|
|
|
Trading securities
|
|
7,732
|
|
|
$
|
5,386
|
|
|
Total
|
|
$
|
130,407
|
|
|
$
|
157,529
|
|
|
|
As of December 31, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||||||||||
($000)
|
|
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
||||||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Government obligations
|
|
$
|
19,693
|
|
|
$
|
8
|
|
|
$
|
(3
|
)
|
|
$
|
19,698
|
|
|
$
|
40,669
|
|
|
$
|
29
|
|
|
$
|
(608
|
)
|
|
$
|
40,090
|
|
Corporate bonds
|
|
49,913
|
|
|
22
|
|
|
(124
|
)
|
|
49,811
|
|
|
49,339
|
|
|
36
|
|
|
(292
|
)
|
|
49,083
|
|
||||||||
Foreign obligations
|
|
505
|
|
|
—
|
|
|
(2
|
)
|
|
503
|
|
|
2,437
|
|
|
1
|
|
|
(19
|
)
|
|
2,419
|
|
||||||||
Commercial paper
|
|
9,482
|
|
|
7
|
|
|
—
|
|
|
9,489
|
|
|
2,000
|
|
|
—
|
|
|
—
|
|
|
2,000
|
|
||||||||
Equity securities and exchange-traded funds
|
|
8,872
|
|
|
1,011
|
|
|
(141
|
)
|
|
9,742
|
|
|
19,613
|
|
|
1,359
|
|
|
(323
|
)
|
|
20,649
|
|
||||||||
Mutual funds
|
|
2,095
|
|
|
221
|
|
|
(98
|
)
|
|
2,218
|
|
|
10,499
|
|
|
1,092
|
|
|
(46
|
)
|
|
11,545
|
|
||||||||
Total
|
|
$
|
90,560
|
|
|
$
|
1,269
|
|
|
$
|
(368
|
)
|
|
91,461
|
|
|
$
|
124,557
|
|
|
$
|
2,517
|
|
|
$
|
(1,288
|
)
|
|
$
|
125,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit
|
|
$
|
31,214
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,214
|
|
|
$
|
26,357
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,357
|
|
|
|
As of December 31, 2013
|
|
As of December 31, 2012
|
||||||||||||
($000)
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
45,486
|
|
|
$
|
45,402
|
|
|
$
|
87,599
|
|
|
$
|
86,784
|
|
Due in one to two years
|
|
34,107
|
|
|
34,099
|
|
|
6,846
|
|
|
6,808
|
|
||||
Equity securities, exchange-traded funds, and mutual funds
|
|
10,967
|
|
|
11,960
|
|
|
30,112
|
|
|
32,194
|
|
||||
Total
|
|
$
|
90,560
|
|
|
$
|
91,461
|
|
|
$
|
124,557
|
|
|
$
|
125,786
|
|
|
|
|
|
|
|
|
|
|
||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
31,210
|
|
|
$
|
31,210
|
|
|
$
|
26,352
|
|
|
$
|
26,352
|
|
Due in one to three years
|
|
4
|
|
|
4
|
|
|
5
|
|
|
5
|
|
||||
Total
|
|
$
|
31,214
|
|
|
$
|
31,214
|
|
|
$
|
26,357
|
|
|
$
|
26,357
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Realized gains
|
|
$
|
5,550
|
|
|
$
|
1,671
|
|
|
$
|
761
|
|
Realized losses
|
|
(1,343
|
)
|
|
(1,133
|
)
|
|
(501
|
)
|
|||
Realized gains, net
|
|
$
|
4,207
|
|
|
$
|
538
|
|
|
$
|
260
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Unrealized gains (losses), net
|
|
$
|
827
|
|
|
$
|
269
|
|
|
$
|
(387
|
)
|
|
|
Fair Value
|
|
Fair Value Measurements as of December 31, 2013
|
||||||||||||
|
|
as of
|
|
Using Fair Value Hierarchy
|
||||||||||||
($000)
|
|
December 31, 2013
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Available-for-sale investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government obligations
|
|
$
|
19,698
|
|
|
$
|
—
|
|
|
$
|
19,698
|
|
|
$
|
—
|
|
Corporate bonds
|
|
49,811
|
|
|
—
|
|
|
49,811
|
|
|
—
|
|
||||
Foreign obligations
|
|
503
|
|
|
—
|
|
|
503
|
|
|
—
|
|
||||
Commercial paper
|
|
9,489
|
|
|
—
|
|
|
9,489
|
|
|
—
|
|
||||
Equity securities and exchange-traded funds
|
|
9,742
|
|
|
9,742
|
|
|
—
|
|
|
—
|
|
||||
Mutual funds
|
|
2,218
|
|
|
2,218
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
7,732
|
|
|
7,732
|
|
|
—
|
|
|
—
|
|
||||
Cash equivalents
|
|
925
|
|
|
925
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
100,118
|
|
|
$
|
20,617
|
|
|
$
|
79,501
|
|
|
$
|
—
|
|
|
|
Fair Value
|
|
Fair Value Measurements as of December 31, 2012
|
||||||||||||
|
|
as of
|
|
Using Fair Value Hierarchy
|
||||||||||||
($000)
|
|
December 31, 2012
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Available-for-sale investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government obligations
|
|
$
|
40,090
|
|
|
$
|
—
|
|
|
$
|
40,090
|
|
|
$
|
—
|
|
Corporate bonds
|
|
49,083
|
|
|
—
|
|
|
49,083
|
|
|
—
|
|
||||
Foreign obligations
|
|
2,419
|
|
|
—
|
|
|
2,419
|
|
|
—
|
|
||||
Commercial paper
|
|
2,000
|
|
|
—
|
|
|
2,000
|
|
|
—
|
|
||||
Equity securities and exchange-traded funds
|
|
20,649
|
|
|
20,649
|
|
|
—
|
|
|
—
|
|
||||
Mutual funds
|
|
11,545
|
|
|
11,545
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
5,386
|
|
|
5,386
|
|
|
—
|
|
|
—
|
|
||||
Cash equivalents
|
|
398
|
|
|
398
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
131,570
|
|
|
$
|
37,978
|
|
|
$
|
93,592
|
|
|
$
|
—
|
|
Level 1:
|
Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
|
Level 2:
|
Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
Level 3:
|
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
|
|
($000)
|
|
|
Weighted Average Useful Life (years)
|
|
Customer-related assets
|
|
$
|
9,700
|
|
|
14
|
Total intangible assets
|
|
$
|
9,700
|
|
|
14
|
|
|
($000)
|
|
|
Balance as of January 1, 2012
|
|
$
|
318,492
|
|
Sale of Morningstar Investor Relations and other businesses
|
|
(937
|
)
|
|
Other, primarily currency translation
|
|
3,290
|
|
|
Balance as of December 31, 2012
|
|
$
|
320,845
|
|
Acquisition of remaining ownership in Morningstar Sweden
|
|
8,911
|
|
|
Other, primarily currency translation
|
|
(3,306
|
)
|
|
Balance as of December 31, 2013
|
|
$
|
326,450
|
|
|
|
As of December 31, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||||||
($000)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
||||||
Intellectual property
|
|
$
|
29,477
|
|
|
$
|
(23,128
|
)
|
|
$
|
6,349
|
|
|
9
|
|
$
|
30,621
|
|
|
$
|
(21,527
|
)
|
|
$
|
9,094
|
|
|
9
|
Customer-related assets
|
|
141,833
|
|
|
(74,311
|
)
|
|
67,522
|
|
|
12
|
|
132,798
|
|
|
(63,005
|
)
|
|
69,793
|
|
|
12
|
||||||
Supplier relationships
|
|
240
|
|
|
(108
|
)
|
|
132
|
|
|
20
|
|
240
|
|
|
(96
|
)
|
|
144
|
|
|
20
|
||||||
Technology-based assets
|
|
80,489
|
|
|
(50,673
|
)
|
|
29,816
|
|
|
9
|
|
81,333
|
|
|
(43,809
|
)
|
|
37,524
|
|
|
9
|
||||||
Non-competition agreement
|
|
1,661
|
|
|
(1,571
|
)
|
|
90
|
|
|
4
|
|
1,765
|
|
|
(1,588
|
)
|
|
177
|
|
|
4
|
||||||
Total intangible assets
|
|
$
|
253,700
|
|
|
$
|
(149,791
|
)
|
|
$
|
103,909
|
|
|
10
|
|
$
|
246,757
|
|
|
$
|
(130,025
|
)
|
|
$
|
116,732
|
|
|
10
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Amortization expense
|
|
$
|
21,454
|
|
|
$
|
23,944
|
|
|
$
|
27,267
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Gain on sales of businesses
|
|
$
|
—
|
|
|
$
|
6,193
|
|
|
$
|
—
|
|
Income tax expense
|
|
—
|
|
|
1,005
|
|
|
—
|
|
|||
Earnings from discontinued operations, net of tax
|
|
$
|
—
|
|
|
$
|
5,188
|
|
|
$
|
—
|
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Investment in MJKK
|
|
$
|
21,782
|
|
|
$
|
20,540
|
|
Other equity method investments
|
|
6,166
|
|
|
6,288
|
|
||
Investments accounted for using the cost method
|
|
10,766
|
|
|
8,477
|
|
||
Total investments in unconsolidated entities
|
|
$
|
38,714
|
|
|
$
|
35,305
|
|
|
|
As of December 31
|
|
|
||||
|
|
2013
|
|
|
2012
|
|
||
Morningstar’s approximate ownership of MJKK
|
|
34
|
%
|
|
34
|
%
|
||
Approximate market value of Morningstar’s ownership in MJKK:
|
|
|
|
|
|
|
||
Japanese yen (¥000)
|
|
¥
|
9,824,068
|
|
|
¥
|
3,109,579
|
|
Equivalent U.S. dollars ($000)
|
|
$
|
94,999
|
|
|
$
|
36,227
|
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Computer equipment
|
|
$
|
47,830
|
|
|
$
|
42,312
|
|
Capitalized software
|
|
50,360
|
|
|
39,643
|
|
||
Furniture and fixtures
|
|
23,259
|
|
|
22,804
|
|
||
Leasehold improvements
|
|
52,512
|
|
|
51,333
|
|
||
Telephone equipment
|
|
2,032
|
|
|
1,951
|
|
||
Construction in progress
|
|
35,159
|
|
|
13,489
|
|
||
Property, equipment, and capitalized software, at cost
|
|
211,152
|
|
|
171,532
|
|
||
Less accumulated depreciation
|
|
(106,166
|
)
|
|
(87,510
|
)
|
||
Property, equipment, and capitalized software, net
|
|
$
|
104,986
|
|
|
$
|
84,022
|
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Capitalized software development costs not yet placed into service
|
|
$
|
11,345
|
|
|
$
|
6,478
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Depreciation expense
|
|
$
|
24,239
|
|
|
$
|
19,152
|
|
|
$
|
15,646
|
|
Minimum Future Rental Commitments
|
|
($000)
|
|
|
2014
|
|
$
|
18,987
|
|
2015
|
|
17,656
|
|
|
2016
|
|
16,918
|
|
|
2017
|
|
16,001
|
|
|
2018
|
|
13,908
|
|
|
Thereafter
|
|
42,592
|
|
|
Total
|
|
$
|
126,062
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Rent expense
|
|
$
|
22,169
|
|
|
$
|
20,736
|
|
|
$
|
20,122
|
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Deferred rent
|
|
$
|
26,157
|
|
|
$
|
27,783
|
|
Liability for Vacant Office Space
|
|
($000)
|
|
|
Balance as of December 31, 2011
|
|
$
|
919
|
|
Reduction of liability for lease and other related payments
|
|
(774
|
)
|
|
Balance as of December 31, 2012
|
|
145
|
|
|
Reduction of liability for lease and other related payments
|
|
(14
|
)
|
|
Balance as of December 31, 2013
|
|
$
|
131
|
|
|
|
As of December 31
|
|
(000)
|
|
2013
|
|
Shares available for future grants
|
|
4,501
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Restricted stock units
|
|
$
|
14,163
|
|
|
$
|
13,451
|
|
|
$
|
12,765
|
|
Restricted stock
|
|
388
|
|
|
5,013
|
|
|
2,196
|
|
|||
Stock options
|
|
492
|
|
|
441
|
|
|
342
|
|
|||
Total stock-based compensation expense
|
|
$
|
15,043
|
|
|
$
|
18,905
|
|
|
$
|
15,303
|
|
|
|
|
|
|
|
|
||||||
Income tax benefit related to the stock-based compensation expense
|
|
$
|
4,027
|
|
|
$
|
3,686
|
|
|
$
|
3,535
|
|
|
|
Unrecognized stock-based compensation expense ($000)
|
|
|
Expected amortization period (months)
|
|
Restricted stock units
|
|
$
|
31,306
|
|
|
33
|
Restricted stock
|
|
517
|
|
|
16
|
|
Stock options
|
|
585
|
|
|
16
|
|
Total unrecognized stock-based compensation expense
|
|
$
|
32,408
|
|
|
32
|
Restricted Stock Units (RSUs)
|
|
Unvested
|
|
|
Vested but
Deferred
|
|
|
Total
|
|
|
Weighted
Average
Grant Date Value
per RSU
|
|
|
RSUs Outstanding - January 1, 2011
|
|
777,666
|
|
|
45,189
|
|
|
822,855
|
|
|
$
|
47.14
|
|
Granted
|
|
292,398
|
|
|
—
|
|
|
292,398
|
|
|
57.36
|
|
|
Dividend equivalents
|
|
2,673
|
|
|
—
|
|
|
2,673
|
|
|
48.57
|
|
|
Vested
|
|
(256,623
|
)
|
|
—
|
|
|
(256,623
|
)
|
|
48.28
|
|
|
Vested but deferred
|
|
(1,753
|
)
|
|
1,753
|
|
|
—
|
|
|
—
|
|
|
Issued
|
|
—
|
|
|
(26,866
|
)
|
|
(26,866
|
)
|
|
46.69
|
|
|
Forfeited
|
|
(73,318
|
)
|
|
—
|
|
|
(73,318
|
)
|
|
47.59
|
|
|
RSUs Outstanding - December 31, 2011
|
|
741,043
|
|
|
20,076
|
|
|
761,119
|
|
|
50.66
|
|
|
Granted
|
|
341,282
|
|
|
—
|
|
|
341,282
|
|
|
56.26
|
|
|
Dividend equivalents
|
|
6,405
|
|
|
130
|
|
|
6,535
|
|
|
52.02
|
|
|
Vested
|
|
(270,695
|
)
|
|
—
|
|
|
(270,695
|
)
|
|
50.12
|
|
|
Vested but deferred
|
|
(892
|
)
|
|
892
|
|
|
—
|
|
|
—
|
|
|
Issued
|
|
—
|
|
|
(2,316
|
)
|
|
(2,316
|
)
|
|
73.28
|
|
|
Forfeited
|
|
(89,998
|
)
|
|
—
|
|
|
(89,998
|
)
|
|
50.84
|
|
|
RSUs Outstanding - December 31, 2012
|
|
727,145
|
|
|
18,782
|
|
|
745,927
|
|
|
53.37
|
|
|
Granted
|
|
287,848
|
|
|
—
|
|
|
287,848
|
|
|
72.04
|
|
|
Dividend equivalents
|
|
2,773
|
|
|
157
|
|
|
2,930
|
|
|
57.39
|
|
|
Vested
|
|
(278,549
|
)
|
|
—
|
|
|
(278,549
|
)
|
|
50.41
|
|
|
Issued
|
|
—
|
|
|
(2,257
|
)
|
|
(2,257
|
)
|
|
49.40
|
|
|
Forfeited
|
|
(59,215
|
)
|
|
—
|
|
|
(59,215
|
)
|
|
57.58
|
|
|
RSUs Outstanding - December 31, 2013
|
|
680,002
|
|
|
16,682
|
|
|
696,684
|
|
|
62.02
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|||||||||
Options Granted At an Exercise Price Below the Fair Value Per Share on the Grant Date
|
|
Underlying
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Underlying
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Underlying
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|||
Options outstanding—beginning of year
|
|
282,695
|
|
|
$
|
20.55
|
|
|
398,859
|
|
|
$
|
19.72
|
|
|
648,885
|
|
|
$
|
18.91
|
|
Granted
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Canceled
|
|
(250
|
)
|
|
21.48
|
|
|
(650
|
)
|
|
14.70
|
|
|
—
|
|
|
—
|
|
|||
Exercised
|
|
(102,886
|
)
|
|
21.09
|
|
|
(115,514
|
)
|
|
20.19
|
|
|
(250,026
|
)
|
|
19.25
|
|
|||
Options outstanding—end of year
|
|
179,559
|
|
|
21.47
|
|
|
282,695
|
|
|
20.55
|
|
|
398,859
|
|
|
19.72
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Options exercisable—end of year
|
|
179,559
|
|
|
$
|
21.47
|
|
|
282,695
|
|
|
$
|
20.55
|
|
|
398,859
|
|
|
$
|
19.72
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|||||||||
All Other Option Grants, Excluding Activity Shown Above
|
|
Underlying
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Underlying
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Underlying
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|||
Options outstanding—beginning of year
|
|
391,784
|
|
|
$
|
28.98
|
|
|
818,552
|
|
|
$
|
22.76
|
|
|
1,207,540
|
|
|
$
|
17.09
|
|
Granted
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92,201
|
|
|
57.42
|
|
|||
Canceled
|
|
(1,352
|
)
|
|
16.19
|
|
|
(22,330
|
)
|
|
39.75
|
|
|
(1,960
|
)
|
|
16.04
|
|
|||
Exercised
|
|
(136,460
|
)
|
|
16.84
|
|
|
(404,438
|
)
|
|
16.60
|
|
|
(479,229
|
)
|
|
16.17
|
|
|||
Options outstanding—end of year
|
|
253,972
|
|
|
36.48
|
|
|
391,784
|
|
|
28.98
|
|
|
818,552
|
|
|
22.76
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Options exercisable—end of year
|
|
219,449
|
|
|
$
|
33.18
|
|
|
337,684
|
|
|
$
|
24.42
|
|
|
726,351
|
|
|
$
|
18.36
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Intrinsic value of options exercised
|
|
$
|
12,801
|
|
|
$
|
22,526
|
|
|
$
|
29,899
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||||||||||||
Range of Exercise Prices
|
|
Number of Options
|
|
|
Weighted
Average
Remaining
Contractual
Life (years)
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
($000)
|
|
|
Exercisable Shares
|
|
|
Weighted Average Remaining Contractual Life (years)
|
|
Weighted Average Exercise Price
|
|
|
Aggregate Intrinsic Value ($000)
|
|
||||
$14.70
|
|
285
|
|
|
0.93
|
|
$
|
14.70
|
|
|
$
|
18
|
|
|
285
|
|
|
0.93
|
|
$
|
14.70
|
|
|
$
|
18
|
|
$21.40 - $48.90
|
|
361,571
|
|
|
1.17
|
|
24.88
|
|
|
19,238
|
|
|
361,571
|
|
|
1.17
|
|
24.88
|
|
|
19,238
|
|
||||
$57.28 - $59.35
|
|
71,675
|
|
|
7.52
|
|
57.46
|
|
|
1,479
|
|
|
37,152
|
|
|
7.52
|
|
57.45
|
|
|
710
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
$14.70 - $59.35
|
|
433,531
|
|
|
2.22
|
|
30.26
|
|
|
$
|
20,735
|
|
|
399,008
|
|
|
1.76
|
|
27.91
|
|
|
$
|
19,966
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Vested or Expected to Vest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$14.70 - $59.35
|
|
433,531
|
|
|
2.22
|
|
$
|
30.26
|
|
|
$
|
20,735
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Excess tax benefits related to stock-based compensation
|
|
$
|
5,898
|
|
|
$
|
7,210
|
|
|
$
|
9,525
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
401(k) matching contributions
|
|
$
|
6,879
|
|
|
$
|
6,642
|
|
|
$
|
5,601
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Interest income
|
|
$
|
2,940
|
|
|
$
|
5,464
|
|
|
$
|
3,679
|
|
Interest expense
|
|
(228
|
)
|
|
(311
|
)
|
|
(1,318
|
)
|
|||
Gain on sale of investments, net
|
|
4,207
|
|
|
538
|
|
|
260
|
|
|||
Holding gain upon acquisition of additional ownership of equity-method investments
|
|
3,635
|
|
|
—
|
|
|
—
|
|
|||
Other expense, net
|
|
(3,198
|
)
|
|
(2,734
|
)
|
|
(912
|
)
|
|||
Non-operating income, net
|
|
$
|
7,356
|
|
|
$
|
2,957
|
|
|
$
|
1,709
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Income before income taxes and equity in net income of unconsolidated entities
|
|
$
|
178,010
|
|
|
$
|
153,625
|
|
|
$
|
140,124
|
|
Equity in net income of unconsolidated entities
|
|
1,428
|
|
|
2,027
|
|
|
1,848
|
|
|||
Net (income) loss attributable to the noncontrolling interest
|
|
122
|
|
|
117
|
|
|
43
|
|
|||
Total
|
|
$
|
179,560
|
|
|
$
|
155,769
|
|
|
$
|
142,015
|
|
Income tax expense
|
|
$
|
56,031
|
|
|
$
|
52,878
|
|
|
$
|
43,658
|
|
Effective tax rate
|
|
31.2
|
%
|
|
33.9
|
%
|
|
30.7
|
%
|
|
|
2013
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|||||||||
($000, except percentages)
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|||
Income tax expense at U.S. federal rate
|
|
$
|
62,845
|
|
|
35.0
|
%
|
|
$
|
54,519
|
|
|
35.0
|
%
|
|
$
|
49,705
|
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
|
3,029
|
|
|
1.7
|
|
|
1,510
|
|
|
1.0
|
|
|
1,376
|
|
|
1.0
|
|
|||
Stock-based compensation activity
|
|
254
|
|
|
0.1
|
|
|
516
|
|
|
0.3
|
|
|
440
|
|
|
0.3
|
|
|||
Non-U.S. withholding taxes, net of federal income tax effect, and foreign tax credits
|
|
310
|
|
|
0.2
|
|
|
307
|
|
|
0.2
|
|
|
346
|
|
|
0.2
|
|
|||
Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses
|
|
(1,842
|
)
|
|
(1.0
|
)
|
|
(630
|
)
|
|
(0.4
|
)
|
|
394
|
|
|
0.3
|
|
|||
Difference between U.S. federal statutory and foreign tax rates
|
|
(2,513
|
)
|
|
(1.4
|
)
|
|
(2,777
|
)
|
|
(1.8
|
)
|
|
(2,393
|
)
|
|
(1.7
|
)
|
|||
Change in unrecognized tax benefits
|
|
(211
|
)
|
|
(0.1
|
)
|
|
967
|
|
|
0.6
|
|
|
3,126
|
|
|
2.2
|
|
|||
Credits and incentives
|
|
(4,374
|
)
|
|
(2.5
|
)
|
|
(1,494
|
)
|
|
(1.0
|
)
|
|
(7,734
|
)
|
|
(5.4
|
)
|
|||
Recognition of deferred tax assets
|
|
(1,448
|
)
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
(1,778
|
)
|
|
(1.3
|
)
|
|||
Other - net
|
|
(19
|
)
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|
176
|
|
|
0.1
|
|
|||
Total income tax expense
|
|
$
|
56,031
|
|
|
31.2
|
%
|
|
$
|
52,878
|
|
|
33.9
|
%
|
|
$
|
43,658
|
|
|
30.7
|
%
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
Current tax expense:
|
|
|
|
|
|
|
||||||
U.S.
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
42,808
|
|
|
$
|
38,821
|
|
|
$
|
41,520
|
|
State
|
|
3,882
|
|
|
1,997
|
|
|
1,808
|
|
|||
Non-U.S.
|
|
10,456
|
|
|
5,719
|
|
|
5,756
|
|
|||
Current tax expense
|
|
57,146
|
|
|
46,537
|
|
|
49,084
|
|
|||
Deferred tax expense (benefit):
|
|
|
|
|
|
|
||||||
U.S.
|
|
|
|
|
|
|
||||||
Federal
|
|
2,630
|
|
|
6,287
|
|
|
(1,011
|
)
|
|||
State
|
|
814
|
|
|
334
|
|
|
(242
|
)
|
|||
Non-U.S.
|
|
(4,559
|
)
|
|
(280
|
)
|
|
(4,173
|
)
|
|||
Deferred tax expense (benefit), net
|
|
(1,115
|
)
|
|
6,341
|
|
|
(5,426
|
)
|
|||
Income tax expense
|
|
$
|
56,031
|
|
|
$
|
52,878
|
|
|
$
|
43,658
|
|
($000)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|||
U.S.
|
|
$
|
144,065
|
|
|
$
|
128,920
|
|
|
$
|
123,390
|
|
Non-U.S.
|
|
33,945
|
|
|
24,705
|
|
|
16,734
|
|
|||
Income before income taxes and equity in net income of unconsolidated entities
|
|
$
|
178,010
|
|
|
$
|
153,625
|
|
|
$
|
140,124
|
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Deferred tax assets:
|
|
|
|
|
||||
Stock-based compensation expense
|
|
$
|
3,479
|
|
|
$
|
4,019
|
|
Accrued liabilities
|
|
9,805
|
|
|
8,402
|
|
||
Net operating loss carryforwards - U.S. federal and state
|
|
851
|
|
|
930
|
|
||
Net operating loss carryforwards - Non-U.S.
|
|
9,229
|
|
|
12,386
|
|
||
Research and development
|
|
—
|
|
|
246
|
|
||
Deferred royalty revenue
|
|
366
|
|
|
383
|
|
||
Allowance for doubtful accounts
|
|
758
|
|
|
515
|
|
||
Deferred rent
|
|
8,673
|
|
|
9,031
|
|
||
Other
|
|
—
|
|
|
846
|
|
||
Total deferred tax assets
|
|
33,161
|
|
|
36,758
|
|
||
|
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
|
||||
Acquired intangible assets
|
|
(12,967
|
)
|
|
(14,535
|
)
|
||
Property, equipment, and capitalized software
|
|
(15,525
|
)
|
|
(14,615
|
)
|
||
Unrealized exchange gains, net
|
|
(395
|
)
|
|
(444
|
)
|
||
Prepaid expenses
|
|
(4,299
|
)
|
|
(3,694
|
)
|
||
Investments in unconsolidated entities
|
|
(12,009
|
)
|
|
(9,905
|
)
|
||
Other
|
|
(373
|
)
|
|
—
|
|
||
Total deferred tax liabilities
|
|
(45,568
|
)
|
|
(43,193
|
)
|
||
Net deferred tax asset (liability) before valuation allowance
|
|
(12,407
|
)
|
|
(6,435
|
)
|
||
Valuation allowance
|
|
(7,456
|
)
|
|
(11,407
|
)
|
||
Net deferred tax liability
|
|
$
|
(19,863
|
)
|
|
$
|
(17,842
|
)
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Deferred tax asset, net - current
|
|
$
|
3,892
|
|
|
$
|
3,741
|
|
Deferred tax liability, net - non-current
|
|
(23,755
|
)
|
|
(21,583
|
)
|
||
Net deferred tax liability
|
|
$
|
(19,863
|
)
|
|
$
|
(17,842
|
)
|
|
|
As of December 31
|
|
|
|
|||||
($000)
|
|
|
2013
|
|
|
2012
|
||||
|
|
|
Expiration Date
|
|
|
Expiration Date
|
||||
U.S. federal NOLs subject to expiration dates
|
|
$
|
2,136
|
|
12/31/2023
|
|
$
|
2,362
|
|
12/31/2023
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Non-U.S. NOLs subject to expiration dates from 2014 through 2032
|
|
$
|
5,314
|
|
|
$
|
6,064
|
|
Non-U.S. NOLs with no expiration date
|
|
40,054
|
|
|
44,504
|
|
||
Total
|
|
$
|
45,368
|
|
|
$
|
50,568
|
|
|
|
|
|
|
||||
Non-U.S. NOLs not subject to valuation allowances
|
|
$
|
8,759
|
|
|
$
|
4,031
|
|
($000)
|
|
2013
|
|
|
2012
|
|
||
Gross unrecognized tax benefits - beginning of the year
|
|
$
|
12,699
|
|
|
$
|
12,189
|
|
Increases as a result of tax positions taken during a prior-year period
|
|
791
|
|
|
445
|
|
||
Decreases as a result of tax positions taken during a prior-year period
|
|
(146
|
)
|
|
(1,153
|
)
|
||
Increases as a result of tax positions taken during the current period
|
|
2,887
|
|
|
2,008
|
|
||
Decreases relating to settlements with tax authorities
|
|
(2,779
|
)
|
|
(299
|
)
|
||
Reductions as a result of lapse of the applicable statute of limitations
|
|
(494
|
)
|
|
(491
|
)
|
||
Gross unrecognized tax benefits - end of the year
|
|
$
|
12,958
|
|
|
$
|
12,699
|
|
|
|
As of December 31
|
|
|
||||
($000)
|
|
2013
|
|
|
2012
|
|
||
Liabilities for interest and penalties
|
|
$
|
1,865
|
|
|
$
|
2,232
|
|
Date
|
|
Increase
|
|
|
Total program
|
|
||
September 2010
|
|
$
|
100
|
million
|
|
$
|
100
|
million
|
December 2011
|
|
$
|
200
|
million
|
|
$
|
300
|
million
|
December 2012
|
|
$
|
200
|
million
|
|
$
|
500
|
million
|
December 2013
|
|
$
|
200
|
million
|
|
$
|
700
|
million
|
|
|
2012
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
||||||||||||||
(in thousands except per share amounts)
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
||||||||
Revenue
|
|
$
|
160,759
|
|
|
$
|
165,968
|
|
|
$
|
160,952
|
|
|
$
|
170,609
|
|
|
$
|
168,856
|
|
|
$
|
175,428
|
|
|
$
|
173,482
|
|
|
$
|
180,500
|
|
|
Total operating expense (1)
|
|
130,360
|
|
|
124,832
|
|
|
121,088
|
|
|
131,340
|
|
|
128,296
|
|
|
131,844
|
|
|
128,869
|
|
|
138,603
|
|
|
||||||||
Operating income
|
|
30,399
|
|
|
41,136
|
|
|
39,864
|
|
|
39,269
|
|
|
40,560
|
|
|
43,584
|
|
|
44,613
|
|
|
41,897
|
|
|
||||||||
Non-operating income (expense), net
|
|
659
|
|
|
995
|
|
|
1,880
|
|
|
(577
|
)
|
|
945
|
|
|
3,111
|
|
|
771
|
|
|
2,529
|
|
|
||||||||
Income before income taxes and equity in net income of unconsolidated entities
|
|
31,058
|
|
|
42,131
|
|
|
41,744
|
|
|
38,692
|
|
|
41,505
|
|
|
46,695
|
|
|
45,384
|
|
|
44,426
|
|
|
||||||||
Income tax expense
|
|
11,511
|
|
|
14,744
|
|
|
15,186
|
|
|
11,437
|
|
|
12,427
|
|
|
15,955
|
|
|
14,265
|
|
|
13,384
|
|
|
||||||||
Equity in net income (loss) of unconsolidated entities
|
|
566
|
|
|
497
|
|
|
478
|
|
|
486
|
|
|
497
|
|
|
360
|
|
|
315
|
|
|
256
|
|
|
||||||||
Consolidated net income from continuing operations
|
|
20,113
|
|
|
27,884
|
|
|
27,036
|
|
|
27,741
|
|
|
29,575
|
|
|
31,100
|
|
|
31,434
|
|
|
31,298
|
|
|
||||||||
Gain on sale of discontinued operations, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,188
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||
Consolidated net income
|
|
20,113
|
|
|
27,884
|
|
|
27,036
|
|
|
32,929
|
|
|
29,575
|
|
|
31,100
|
|
|
31,434
|
|
|
31,298
|
|
|
||||||||
Net (income) loss attributable to the noncontrolling interests
|
|
24
|
|
|
4
|
|
|
34
|
|
|
55
|
|
|
43
|
|
|
21
|
|
|
29
|
|
|
29
|
|
|
||||||||
Net income attributable to Morningstar, Inc.
|
|
$
|
20,137
|
|
|
$
|
27,888
|
|
|
$
|
27,070
|
|
|
$
|
32,984
|
|
|
$
|
29,618
|
|
|
$
|
31,121
|
|
|
$
|
31,463
|
|
|
$
|
31,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income per share attributable to Morningstar, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Continuing operations
|
|
$
|
0.40
|
|
|
$
|
0.57
|
|
|
$
|
0.56
|
|
|
$
|
0.59
|
|
|
$
|
0.64
|
|
|
$
|
0.67
|
|
|
$
|
0.68
|
|
|
$
|
0.68
|
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||
|
|
$
|
0.40
|
|
|
$
|
0.57
|
|
|
$
|
0.56
|
|
|
$
|
0.70
|
|
|
$
|
0.64
|
|
|
$
|
0.67
|
|
|
$
|
0.68
|
|
|
$
|
0.68
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Continuing operations
|
|
$
|
0.40
|
|
|
$
|
0.56
|
|
|
$
|
0.56
|
|
|
$
|
0.58
|
|
|
$
|
0.63
|
|
|
$
|
0.66
|
|
|
$
|
0.68
|
|
|
$
|
0.68
|
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||
|
|
$
|
0.40
|
|
|
$
|
0.56
|
|
|
$
|
0.56
|
|
|
$
|
0.69
|
|
|
$
|
0.63
|
|
|
$
|
0.66
|
|
|
$
|
0.68
|
|
|
$
|
0.68
|
|
|
Dividends per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Dividends declared per common share
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.125
|
|
|
$
|
0.125
|
|
|
$
|
0.125
|
|
|
$
|
—
|
|
|
$
|
0.295
|
|
|
Dividends paid per common share
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.225
|
|
|
$
|
—
|
|
|
$
|
0.125
|
|
|
$
|
0.125
|
|
|
$
|
0.125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
|
49,938
|
|
|
49,195
|
|
|
47,975
|
|
|
46,913
|
|
|
46,406
|
|
|
46,400
|
|
|
46,080
|
|
|
45,756
|
|
|
||||||||
Diluted
|
|
50,758
|
|
|
49,856
|
|
|
48,481
|
|
|
47,511
|
|
|
46,814
|
|
|
46,853
|
|
|
46,519
|
|
|
46,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
2012
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
||||||||||||||
(in thousands)
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
||||||||
(1) Includes stock-based compensation expense of:
|
|
$
|
3,866
|
|
|
$
|
3,734
|
|
|
$
|
3,994
|
|
|
$
|
7,311
|
|
|
$
|
3,783
|
|
|
$
|
3,954
|
|
|
$
|
3,416
|
|
|
$
|
3,890
|
|
|
Report of KPMG LLP, Independent Registered Public Accounting Firm
|
|
|
|
Financial Statements:
|
|
|
Consolidated Statements of Income—Years ended December 31, 2013, 2012, and 2011
|
|
Consolidated Statements of Comprehensive Income—Years ended December 31, 2013, 2012, and 2011
|
|
Consolidated Balance Sheets—December 31, 2013 and 2012
|
|
Consolidated Statements of Equity—Years ended December 31, 2013, 2012, and 2011
|
|
Consolidated Statements of Cash Flows—Years ended December 31, 2013, 2012, and 2011
|
|
Notes to Consolidated Financial Statements
|
($000)
|
|
Balance at Beginning of Year
|
|
Charged (Credited) to Costs & Expenses
|
|
Additions (Deductions) Including Currency Translations
|
|
Balance at End of Year
|
||||||||
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
||||||||
Year ended December 31,
|
|
|
|
|
|
|
|
|
||||||||
2013
|
|
$
|
569
|
|
|
$
|
825
|
|
|
$
|
(305
|
)
|
|
$
|
1,089
|
|
2012
|
|
835
|
|
|
1,016
|
|
|
(1,282
|
)
|
|
569
|
|
||||
2011
|
|
1,056
|
|
|
1,237
|
|
|
(1,458
|
)
|
|
835
|
|
Exhibit
|
|
|
Description
|
3.1
|
|
|
Amended and Restated Articles of Incorporation of Morningstar are incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1, as amended, Registration No. 333-115209 (the Registration Statement).
|
3.2
|
|
|
By-laws of Morningstar, as in effect on July 28, 2006, are incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K that we filed with the SEC on July 31, 2006.
|
4.1
|
|
|
Specimen Common Stock Certificate is incorporated by reference to Exhibit 4.1 to the Registration Statement.
|
10.1*
|
|
|
Form of Indemnification Agreement is incorporated by reference to Exhibit 10.1 to the Registration Statement.
|
10.2*†
|
|
|
Morningstar Incentive Plan, as amended and restated effective January 1, 2014
|
10.3*
|
|
|
Morningstar 2004 Stock Incentive Plan, as amended and restated effective as of July 24, 2009, is incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
|
10.4*
|
|
|
Morningstar 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.
|
10.5*
|
|
|
Form of Morningstar 2004 Stock Incentive Plan Stock Option Agreement is incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K for the year ended December 31, 2005.
|
10.6*
|
|
|
Form of Morningstar 2004 Stock Incentive Plan Restricted Stock Unit Award Agreement for awards made prior to November 15, 2007 is incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (the March 2006 10-Q).
|
10.7*
|
|
|
Form of Morningstar 2004 Stock Incentive Plan Restricted Stock Unit Award Agreement for awards made on and after November 15, 2007 and prior to January 1, 2009 is incorporated by reference to Exhibit 10.8 to our Annual Report Form 10-K for the year ended December 31, 2007 (the 2007 10-K).
|
10.8*
|
|
|
Form of Morningstar 2004 Stock Incentive Plan Restricted Stock Unit Award Agreement for awards made on and after January 1, 2009 is incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the year ended December 31, 2008 (the 2008 10-K).
|
10.9*
|
|
|
Form of Morningstar 2004 Stock Incentive Plan Stock Option Agreement for awards made on May 15, 2011 is incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the June 2011 10-Q).
|
10.10*
|
|
|
Form of Morningstar 2004 Stock Incentive Plan Director Stock Option Agreement for awards made on May 15, 2011 is incorporated by reference to Exhibit 10.2 to the June 2011 10-Q.
|
10.11*
|
|
|
Form of Morningstar 2004 Stock Incentive Plan Deferral Election Form is incorporated by reference to Exhibit 10.3 to the March 2006 10-Q.
|
10.12*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Restricted Stock Unit Award Agreement for awards made prior to May 15, 2013 is incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (the September 2011 10-Q).
|
10.13*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Director Restricted Stock Unit Award Agreement for awards made prior to May 15, 2013 is incorporated by reference to Exhibit 10.1 to the September 2011 10-Q.
|
10.14*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Stock Option Agreement is incorporate by reference to Exhibit 10.18 to our Annual Report on Form 10-K for the year ended December 31, 2011 (the 2011 10-K)
|
10.15*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Director Stock Option Agreement is incorporated by reference to Exhibit 10.19 to the 2011 10-K.
|
10.16*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Restricted Stock Award Agreement for awards made on and after May 15, 2013 is incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (the June 2013 10-Q).
|
10.17*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Director Restricted Stock Unit Award Agreement for awards made on and after May 15, 2013 is incorporated by reference to Exhibit 10.2 to the June 2013 10-Q.
|
10.18*
|
|
|
Separation Agreement dated as of January 27, 2011 between Morningstar and Tao Huang is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K that we filed with the SEC on January 28, 2011.
|
10.19*†
|
|
|
Letter Agreement dated as of January 27, 2014 between Morningstar and Scott Cooley.
|
21.1†
|
|
|
Subsidiaries of Morningstar.
|
23.1†
|
|
|
Consent of KPMG LLP.
|
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 Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 28, 2014, formatted in XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statement of Equity, (v) Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
|
|
|
MORNINGSTAR, INC.
|
|
|
|
|
|
|
By:
|
/s/ Joe Mansueto
|
|
|
|
Joe Mansueto
|
|
|
|
Title: Chairman of the Board and Chief Executive Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Joe Mansueto
|
|
Chairman of the Board and Chief Executive
|
|
February 28, 2014
|
Joe Mansueto
|
|
Officer (principal executive officer)
|
|
|
|
|
|
|
|
/s/ Stéphane Biehler
|
|
Chief Financial Officer (principal
|
|
February 28, 2014
|
Stéphane Biehler
|
|
accounting and financial officer)
|
|
|
|
|
|
|
|
/s/ Donald J. Phillips II
|
|
Director
|
|
February 28, 2014
|
Donald J. Phillips II
|
|
|
|
|
|
|
|
|
|
/s/ Cheryl Francis
|
|
Director
|
|
February 28, 2014
|
Cheryl Francis
|
|
|
|
|
|
|
|
|
|
/s/ Steven Kaplan
|
|
Director
|
|
February 28, 2014
|
Steven Kaplan
|
|
|
|
|
|
|
|
|
|
/s/ Gail Landis
|
|
Director
|
|
February 28, 2014
|
Gail Landis
|
|
|
|
|
|
|
|
|
|
/s/ Bill Lyons
|
|
Director
|
|
February 28, 2014
|
Bill Lyons
|
|
|
|
|
|
|
|
|
|
/s/ Jack Noonan
|
|
Director
|
|
February 28, 2014
|
Jack Noonan
|
|
|
|
|
|
|
|
|
|
/s/ Paul Sturm
|
|
Director
|
|
February 28, 2014
|
Paul Sturm
|
|
|
|
|
|
|
|
|
|
/s/ Hugh Zentmyer
|
|
Director
|
|
February 28, 2014
|
Hugh Zentmyer
|
|
|
|
|
2.1
|
"Affiliate"
means any parent, subsidiary or other entity that is (directly or indirectly) controlled by, or controls, the Company.
|
2.2
|
"Board"
means the Morningstar, Inc. Board of Directors.
|
2.3
|
"Bonus"
means the incentive compensation determined under Section 4.4 of the Plan payable in cash.
|
2.4
|
"Bonus Pool"
means an amount that may be established for the Company or a Business Unit, all or a portion of which may be allocated among the Eligible Employees of the Company or such Business Unit.
|
2.5
|
"Business Unit"
means an organizational unit of business within the Company or any of its Affiliates, as identified by the Company.
|
2.6
|
"Code"
means the Internal Revenue Code of 1986, as amended.
|
2.7
|
"Committee"
means the Compensation Committee of the Board or any successor committee with responsibility for compensation, or any subcommittee thereof. The Company intends that the number of Committee members and their qualifications shall at all times be sufficient to meet the applicable requirements for "outside directors" under Section 162(m) and the regulations thereunder and the independence requirements of the NASDAQ Marketplace Rules or any other applicable exchange on which Morningstar, Inc.'s common equity is at the time listed, in each case as in effect from time to time.
|
2.8
|
"Company"
means Morningstar, Inc.
|
2.9
|
"Covered Employee"
means an Executive Officer who is a "covered employee" for purposes of Section 162(m).
|
2.10
|
"Disability
" means permanent and total disability as defined in the Company's long term disability plan, or if no such plan is then in effect, as defined in Section 22(e)(3) of the Code.
|
2.11
|
"Employee"
means any person employed on a full-time or part-time basis by the Company or an Affiliate in a common law employee-employer relationship. A Participant shall not cease to be an Employee for purposes of this Plan in the case of (i) any leave of absence approved by the Company or an Affiliate, or (ii) transfers between locations of the Company or among the Company, its Affiliates or any successor.
|
2.12
|
"Executive Officer"
means an Employee who is an "executive officer" as defined in Rule 3b-7 promulgated under the Exchange Act.
|
2.13
|
"Exchange Act"
means the Securities Exchange Act of 1934, as amended.
|
2.14
|
"
Participant
" means an Executive Officer or Employee as described in Article 3 of this Plan.
|
2.15
|
"Performance Period
" means the period for which a Bonus may be paid. Unless otherwise specified by the Committee, the Performance Period shall be a calendar year, beginning on January 1 and ending on December 31 of any year. No Bonus shall be payable under this Plan, as amended and restated as set forth herein, for a Performance Period beginning on or after January 1, 2014 unless and until the Plan has been approved by the Company's shareholders.
|
2.16
|
"Plan,"
except where the context clearly indicates otherwise, means the Morningstar, Inc. Incentive Plan, as stated herein and as may be amended from time to time.
|
2.17
|
"SEC"
means the U.S. Securities and Exchange Commission.
|
2.18
|
"Section 162(m)"
means Section 162(m) of the Code and regulations promulgated thereunder by the Secretary of the Treasury.
|
4.1
|
Objective Performance Goals.
The Committee shall establish written, objective performance goals for a Performance Period not later than 90 days after the beginning of the Performance Period (but not after more than 25% of the Performance Period has elapsed); provided that the outcome is substantially uncertain at the time the Committee establishes the performance goal. The objective performance goals shall be stated as specific amounts of, or specific changes in, one or more of the financial measures described in Section 4.2. Objective performance goals may also include strategic business criteria, consisting of one or more objectives based on meeting specified goals relating to customer acquisition, business expansion, cost targets, reductions in errors and omissions, reductions in lost business, acquisitions, divestitures management of employment practices and employee benefits, supervision of litigation and information technology, quality and quality audit scores, safety, diversity and efficiency, or any combination of the foregoing. The objective performance goals need not be the same for different Performance Periods and for any Performance Period may be stated: (a) as goals for Morningstar, Inc., for one or more of its Affiliates, Business Units, divisions, organizational units, or for any combination of the foregoing; (b) on an absolute basis or relative to the performance of other companies or of a specified index or indices, or be based on any combination of the foregoing; and (c) separately for one or more Participants or Business Units, or in any combination of the two.
|
4.2
|
Financial Measures.
The Committee shall use any one or more of the following financial measures to establish objective performance goals under Section 4.1: earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization (EBITDA); net earnings; operating earnings or income; earnings growth; net income (absolute or competitive growth rates comparative); net income per share; cash flow, including operating cash flow, free cash flow, discounted cash flow return on investment, and cash flow in excess of cost of capital; earnings per share; return on shareholders' equity (absolute or peer-group comparative); stock price (absolute or peer-group comparative); absolute and/or relative return on common shareholders' equity; absolute and/or relative return on capital; absolute and/or relative return on assets; economic value added (income in excess of cost of capital); customer satisfaction; expense reduction; ratio of operating expenses to operating revenues; gross revenue or revenue by pre-defined business segment (absolute or competitive growth rates comparative); revenue backlog; margins realized on delivered services; total shareholder return; dept-to-capital ratio or market share. The Committee may specify any reasonable definition of the financial measures it uses. Such definitions may provide for reasonable adjustments and may include or exclude items, including but not limited to: realized investment gains and losses; extraordinary, unusual or non-recurring items; gains or losses on the sale of assets; changes in accounting principles or the application thereof; currency fluctuations, acquisitions, divestitures, or necessary financing activities; recapitalizations, including stock splits and dividends; expenses for restructuring or productivity initiatives; and other non-operating items
.
|
4.3
|
Performance Evaluation.
Within a reasonable time after the close of a Performance Period, the Committee shall determine, and with respect to Executive Officers certify in writing, whether the objective performance goals established for that Performance Period have been met by the respective Company, Affiliate, Business Unit, Executive Officers, Employees or otherwise subject to such performance goals, and the extent to which such performance goals may have been exceeded.
|
4.4
|
Bonus.
If the Committee has determined, and with respect to Executive Officers certified in writing, that objective performance goals established for a Performance Period have been satisfied, the Committee will determine in its discretion the amount of bonuses payable by the Company. Bonus amounts determined by the Committee may be expressed as individual Bonuses payable to a Participant or as one or more Bonus Pools, all or a portion of which may be allocated as individual Bonuses to Participants employed in one or more Business Units. Such allocation may be made by the Committee or, to the extent permitted by applicable law, rule or regulation, and only with respect to Bonuses payable to Participants other than Covered Employees, by the senior executive of such Business Unit (or his or her designee) or other individuals as may be designated by the Committee.
|
4.5
|
Eligibility for Payments.
|
4.6
|
Payment or Deferral of the Bonus.
|
5.1
|
General Administration and Delegation of Authority.
This Plan shall be administered by the Committee, subject to such requirements for review and approval or ratification by the Board as the Board may establish. As permitted by applicable law and the Company, and subject to the application of Section 162(m) of the Code, the Committee may delegate any of its duties and authority under the Plan.
|
5.2
|
Administrative Rules.
The Committee shall have full power and authority to adopt, amend and rescind administrative guidelines, rules and regulations pertaining to this Plan and to interpret this Plan and rule on any questions respecting any of its provisions, terms and conditions.
|
5.3
|
Committee Members Not Eligible.
No member of the Committee shall be eligible to participate in this Plan.
|
5.4
|
Committee Members Not Liable.
The Committee and each of its members shall be entitled to rely upon certificates of appropriate officers of the Company with respect to financial and statistical data in order to determine if the objective performance goals for a Performance Period have been met. Neither the Committee nor any member shall be liable for any action or determination made in good faith with respect to this Plan or any Bonus paid hereunder.
|
5.5
|
Decisions Binding.
All decisions, actions and interpretations of the Committee concerning this Plan shall be final and binding on Morningstar, Inc. and its Affiliates and their respective boards of directors, and on all Participants and other persons claiming rights under this Plan.
|
7.1
|
Bonuses Not Assignable
. No Bonus or any right thereto shall be assignable or transferable by a Participant except by will or by the laws of descent and distribution. Any other attempted assignment or alienation shall be void and of no force or effect.
|
7.2
|
Participant's Rights.
The right of any Participant to receive any Bonus granted or allocated to such Participant pursuant to the provisions of this Plan shall be an unsecured claim against the general assets of the Company. This Plan shall not create, nor be construed in any manner as having created, any right by a Participant to any Bonus or portion of a Bonus Pool for a Performance Period because of a Participant’s participation in this Plan for any prior Performance Period or employment during such Performance Period. The application of the Plan to one Participant shall not create, nor be construed in any manner as having created, any right by another Participant to similar or uniform treatment under the Plan.
|
7.3
|
Termination of Employment.
The Company and its Affiliates retain the right to terminate the employment of any Participant or other Employee at any time for any reason or no reason, and a Bonus is not, and shall not be construed in any manner to be, a waiver of such right.
|
7.4
|
Exclusion from Benefits.
Bonuses under this Plan shall not constitute compensation for the purpose of determining participation or benefits under any other plan of the Company or its Affiliates unless specifically included as compensation in such plan.
|
7.5
|
Successors.
Any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of Morningstar, Inc.'s business or assets, shall assume Morningstar, Inc.'s liabilities under this Plan and perform any duties and responsibilities in the same manner and to the same extent that Morningstar, Inc. would be required to perform if no such succession had taken place.
|
7.6
|
Law Governing Construction.
The construction and administration of this Plan and all questions pertaining thereto shall be governed by the laws of the State of Illinois, except to the extent that such law is preempted by Federal law.
|
7.7
|
Headings Not a Part Hereto.
Any headings preceding the text of the several Articles, Sections, subsections, or paragraphs hereof are inserted solely for convenience of reference and shall not constitute a part of this Plan, nor shall they affect its meaning, construction or effect.
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7.8
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Severability of Provisions.
If any provision of this Plan is determined to be void by any court of competent jurisdiction, this Plan shall continue to operate and, for the purposes of the jurisdiction of the court only, shall be deemed not to include the provision determined to be void.
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7.9
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Offsets.
The Company and its Affiliates shall have the right to offset from any Bonus payable hereunder any amount that the Participant owes to the Company or any Affiliate without the consent of the Participant (or his Beneficiary, in the event of the Participant's death).
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7.10
|
Dispute Resolution.
Notwithstanding any employee agreement in effect between a Participant and the Company or any Affiliate, if a Participant or Beneficiary brings a claim that relates to benefits under this Plan, regardless of the basis of the claim (including but not limited to, actions under Title VII, wrongful discharge, breach of employment agreement, etc.), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association ("AAA") and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Arbitration must be initiated by serving or mailing a written notice of the complaint to the other party describing the facts and claims for each claim. Written notice shall be provided within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint, unless the applicable statute of limitation provides for a longer period of time. If the complaint is not properly submitted within the appropriate time frame, all rights and claims that the complaining party has or may have against the other party shall be waived and void. Notice will be deemed given according to the date of any postmark or the date of time of any personal delivery. Each party may be represented in the arbitration by an attorney or other representative selected by the party. The Company or Affiliate shall be responsible for its own costs, the AAA filing fee and all other fees, costs and expenses of the arbitrator and AAA for administering the arbitration. The claimant shall be responsible for his attorney's or representative's fees, if any. However, if any party prevails on a statutory claim which allows the prevailing party costs and/or attorneys' fees, the arbitrator may award costs and reasonable attorneys' fees as provided by such statute.
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7.11
|
Section 409A.
All Bonuses paid hereunder are intended to be "short-term deferrals" that are exempt from Section 409A of the Code and the applicable regulations and guidance thereunder. The Plan shall be administered and interpreted consistently with such intent.
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7.12
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Clawback
.
Notwithstanding any provision in the Plan to the contrary, the payments provided under the Plan shall be subject to a clawback to the extent necessary to comply with applicable law including, without limitation, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any Securities and Exchange Commission rule.
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•
|
Your non-statutory stock option, granted on May 15, 2011, to purchase 8,000 shares of Morningstar common stock, will remain outstanding and continue to vest during your approved leave of absence.
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•
|
Your restricted stock unit award, granted on May 15, 2011, with respect to 3,317 restricted stock units, together with all dividend equivalents units accruing with respect to such award, will remain outstanding and continue to vest during your approved leave of absence.
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•
|
Your restricted stock unit award, granted on May 15, 2010, with respect to 5,748 restricted stock units, was terminated as of November 16, 2013, resulting in the forfeiture on such date of 1,437 unvested restricted stock units and 24.9392 unvested dividend equivalent units accruing under such award.
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•
|
Your restricted stock unit award, granted on May 15, 2012, with respect to 6,855 restricted stock units, was terminated as of November 16, 2013, resulting in the forfeiture on such date of 5,142 unvested restricted stock units and 53.7262 unvested dividend equivalent units accruing under such award.
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Subsidiary
|
|
Jurisdiction of Formation
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Corporate Fundamentals, Inc.
|
|
Delaware
|
Morningstar Global LLC
|
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Delaware
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Morningstar Associates, LLC
|
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Delaware
|
Morningstar Investment Services, Inc.
|
|
Delaware
|
Morningstar Commodity Data, Inc.
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Illinois
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Ibbotson Associates, Inc.
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Illinois
|
Morningstar Credit Ratings, LLC
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Pennsylvania
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Aegis Equity Research Pty Ltd (1)
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Australia
|
Aegis Investment Partners Pty Ltd (1)
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Australia
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Ibbotson Pty Limited (1)
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Australia
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Ibbotson Associates Australia Limited (2)
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Australia
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Morningstar Australasia Pty Limited (3)
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Australia
|
Morningstar Direct Investments (4)
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Australia
|
Morningstar Group Australia Pty Limited (5)
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Australia
|
Share Analysis Pty Ltd (1)
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Australia
|
Morningstar Brazil Financial Information Ltda. (5)
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Brazil
|
Morningstar Associates, Inc. (6)
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Canada
|
Morningstar Canada Group, Inc. (5)
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|
Canada
|
Morningstar Research, Inc. (6)
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Canada
|
Servicios Morningstar Chile Ltd. (5)
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Chile
|
Morningstar Research (Shenzhen) Ltd. (7)
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China
|
Morningstar Danmark A/S (8)
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Denmark
|
Morningstar Danmark Holdings Aps (5)
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Denmark
|
Morningstar France Holding SAS (5)
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France
|
Morningstar France Fund Information SARL (9)
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France
|
Seeds Group SAS (9)
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|
France
|
Morningstar Investment Consulting France SAS (10)
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|
France
|
Morningstar Deutschland GmbH (5)
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Germany
|
Morningstar Asia, Ltd. (5)
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Hong Kong
|
Morningstar Investment Management Asia Limited (17)
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Hong Kong
|
Morningstar India Private Limited (11)
|
|
India
|
Morningstar Investment Adviser India Private Limited (17)
|
|
India
|
Morningstar Italy, S.R.L. (5)
|
|
Italy
|
Ibbotson Associates Japan K.K. (12)
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Japan
|
Morningstar Korea, Ltd. (13)
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|
Korea
|
Morningstar Associates Korea Co., Ltd. (14)
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Korea
|
Morningstar Luxembourg SARL (5)
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|
Luxembourg
|
Investigaciones MS Mexico, S. de R.L. de C.V. (5)
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|
Mexico
|
Servicios MStar Global, S. de R.L. de C.V. (5)
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|
Mexico
|
Morningstar Europe, B.V. (15)
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|
The Netherlands
|
Morningstar Holland, B.V. (16)
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|
The Netherlands
|
MStar Holdings C.V.
|
|
The Netherlands
|
Morningstar Research Limited (3)
|
|
New Zealand
|
Morningstar Norge AS (5)
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Norway
|
Morningstar Research PTE Limited (7)
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Singapore
|
Morningstar Research (Proprietary) Limited (5)
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South Africa
|
Morningstar Network, S.L. (5)
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Spain
|
Morningstar HoldCo AB (5)
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Sweden
|
Morningstar Sweden AB (18)
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Sweden
|
Morningstar Switzerland GmbH (5)
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Switzerland
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Morningstar Research Thailand Limited
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Thailand
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Morningstar (Dubai) LLC (5)
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United Arab Emirates
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Morningstar Investment Management Europe Limited (17)
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|
United Kingdom
|
Morningstar Europe, Ltd. (5)
|
|
United Kingdom
|
Morningstar U.K., Ltd. (5)
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|
United Kingdom
|
Morningstar Real-Time Data Limited (19)
|
|
United Kingdom
|
Morningstar Real-Time Data Holdings Limited (20)
|
|
United Kingdom
|
Old Broad Street Research Limited (19)
|
|
United Kingdom
|
OBSR Advisory Services Limited (21)
|
|
United Kingdom
|
Date:
|
February 28, 2014
|
|
/s/ Joe Mansueto
|
|
|
|
|
Joe Mansueto
|
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
Date:
|
February 28, 2014
|
|
/s/ Stéphane Biehler
|
|
|
|
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Stéphane Biehler
|
|
|
|
|
Chief Financial Officer
|
1.
|
The Company's Annual Report on Form 10-K for the year ended December 31, 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
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2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Joe Mansueto
|
|||
Joe Mansueto
|
|
||
Chairman of the Board and Chief Executive Officer
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|||
|
|||
Date: February 28, 2014
|
|
1.
|
The Company's Annual Report on Form 10-K for the year ended December 31, 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/ Stéphane Biehler
|
|
||
Stéphane Biehler
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|
||
Chief Financial Officer
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|
||
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|
||
Date: February 28, 2014
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