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FORM 10-K
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||||
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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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
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(State or Other Jurisdiction of
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(I.R.S. Employer
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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
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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•
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Advisor (including independent financial advisors as well as those affiliated with broker-dealers or other intermediaries);
|
•
|
Asset management (including fund companies, insurance companies, and other companies that build and manage portfolios of securities for their clients);
|
•
|
Workplace/retirement (including retirement plan providers and plan sponsors);
|
•
|
Individual investor; and
|
•
|
Private/institutional investor.
|
•
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Morningstar Investment Profiles: pre-made or custom-generated investment fact sheets institutions can use for investor communications;
|
•
|
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;
|
•
|
Print and online publications;
|
•
|
ByAllAccounts, which provides innovative data aggregation technology for financial applications;
|
•
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Investment conferences;
|
•
|
Morningstar Enterprise Data Management: customized data aggregation and performance reporting solutions that help clients integrate data more effectively;
|
•
|
Market data and desktop software; and
|
•
|
Other investment software for financial advisors and institutions.
|
HelloWallet®
|
|
Morningstar® Ownership Zone
SM
|
Morningstar® Advisor Workstation
SM
|
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Morningstar® Portfolio X-Ray®
|
Morningstar Analyst Rating
TM
|
|
Morningstar Rating™
|
Morningstar® ByAllAccounts®
|
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Morningstar® Retirement Manager
SM
|
Morningstar® Data
|
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Morningstar® Stewardship Grade
SM
|
Morningstar Direct
SM
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Morningstar Style Box™
|
Morningstar® Enterprise Components
SM
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Morningstar Sustainability Rating™
|
Morningstar® Managed Portfolios
SM
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Morningstar.com®
|
Morningstar Market Barometer
SM
|
|
PitchBook®
|
Morningstar Office
SM
|
|
|
Name
|
|
Age
|
|
Position
|
Joe Mansueto
|
|
60
|
|
Executive Chairman
|
Kunal Kapoor
|
|
41
|
|
Chief Executive Officer
|
Stéphane Biehler *
|
|
49
|
|
Chief Financial Officer
|
Bevin Desmond
|
|
50
|
|
Head of Global Markets and Human Resources
|
Danny Dunn
|
|
41
|
|
Chief Revenue Officer
|
Haywood Kelly
|
|
48
|
|
Head of Global Research
|
Patrick Maloney
|
|
59
|
|
General Counsel
|
Daniel Needham
|
|
38
|
|
President and Chief Investment Officer, Investment Management
|
Tricia Rothschild
|
|
50
|
|
Chief Product Officer
|
|
|
|
2016
|
|
|
|
2015
|
|
||||||
|
|
High
|
|
Low
|
|
|
High
|
|
Low
|
|
||||
First Quarter
|
|
$
|
88.66
|
|
$
|
74.78
|
|
|
$
|
78.51
|
|
$
|
62.14
|
|
Second Quarter
|
|
89.44
|
|
76.57
|
|
|
80.93
|
|
71.89
|
|
||||
Third Quarter
|
|
85.49
|
|
73.84
|
|
|
86.88
|
|
76.60
|
|
||||
Fourth Quarter
|
|
79.30
|
|
67.74
|
|
|
84.99
|
|
77.61
|
|
|
|
|
2016
|
|
|
|
2015
|
|
||||||
|
|
Dividends declared
|
|
Dividends paid
|
|
|
Dividends declared
|
|
Dividends paid
|
|
||||
First Quarter
|
|
$
|
0.22
|
|
$
|
0.22
|
|
|
$
|
0.19
|
|
$
|
0.19
|
|
Second Quarter
|
|
0.22
|
|
0.22
|
|
|
0.19
|
|
0.19
|
|
||||
Third Quarter
|
|
0.22
|
|
0.22
|
|
|
0.19
|
|
0.19
|
|
||||
Fourth Quarter
|
|
0.23
|
|
0.22
|
|
|
0.22
|
|
0.19
|
|
Period:
|
|
Total number
of shares
purchased
|
|
|
Average
price paid
per share
|
|
|
Total number
of shares
purchased as
part of publicly
announced
programs
|
|
|
Approximate
dollar value of
shares that
may yet be
purchased
under the
programs
|
|
||
Cumulative through September 30, 2016
|
|
9,880,917
|
|
|
$
|
67.00
|
|
|
9,880,917
|
|
|
$
|
337,736,737
|
|
October 1, 2016 - October 31, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
337,736,737
|
|
|
November 1, 2016 - November 30, 2016
|
|
137,951
|
|
|
72.49
|
|
|
137,951
|
|
|
$
|
327,734,047
|
|
|
December 1, 2016 - December 31, 2016
|
|
9,257
|
|
|
73.33
|
|
|
9,257
|
|
|
$
|
327,055,039
|
|
|
Total
|
|
10,028,125
|
|
|
$
|
67.09
|
|
|
10,028,125
|
|
|
|
|
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, 2017
|
|
|
Projected
Beneficial
Ownership (1)
|
|
|
Gail Landis Director
|
|
11/15/2016
|
|
2/28/2018
|
|
1,500
|
|
|
Shares to be sold under the plan on specified dates
|
|
—
|
|
|
3,018
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
48.5
|
|
|
46.2
|
|
|
44.7
|
|
|
44.2
|
|
|
43.0
|
|
|
|||||
Diluted
|
|
49.1
|
|
|
46.5
|
|
|
44.9
|
|
|
44.3
|
|
|
43.3
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Cash Flow Data (in millions)
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by operating activities
|
|
$
|
153.2
|
|
|
$
|
192.6
|
|
|
$
|
136.6
|
|
(1)
|
$
|
241.5
|
|
|
$
|
213.7
|
|
|
Capital expenditures
|
|
(30.0
|
)
|
|
(33.6
|
)
|
|
(58.3
|
)
|
|
(57.3
|
)
|
|
(62.8
|
)
|
|
|||||
Free cash flow (3)
|
|
$
|
123.2
|
|
|
$
|
159.0
|
|
|
$
|
78.3
|
|
(1)
|
$
|
184.2
|
|
|
$
|
150.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by (used for) investing activities (4)
|
|
$
|
80.2
|
|
|
$
|
(14.9
|
)
|
|
$
|
(31.2
|
)
|
|
$
|
(79.5
|
)
|
|
$
|
(274.2
|
)
|
|
Cash provided by (used for) financing activities (5)
|
|
$
|
(272.4
|
)
|
|
$
|
(172.3
|
)
|
|
$
|
(76.1
|
)
|
|
$
|
(127.5
|
)
|
|
$
|
123.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As of December 31 (in millions)
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents, and investments
|
|
$
|
321.4
|
|
|
$
|
298.6
|
|
|
$
|
224.6
|
|
|
$
|
248.6
|
|
|
$
|
304.0
|
|
|
Working capital
|
|
213.5
|
|
|
173.5
|
|
|
97.0
|
|
|
105.5
|
|
|
177.1
|
|
|
|||||
Total assets
|
|
1,038.3
|
|
|
1,026.8
|
|
|
1,010.3
|
|
|
1,029.0
|
|
|
1,350.9
|
|
|
|||||
Deferred revenue (6)
|
|
146.0
|
|
|
149.2
|
|
|
146.0
|
|
|
152.0
|
|
|
179.5
|
|
|
|||||
Long-term liabilities
|
|
54.0
|
|
|
66.0
|
|
|
62.1
|
|
|
84.0
|
|
|
359.2
|
|
(7)
|
|||||
Total equity
|
|
726.9
|
|
|
691.3
|
|
|
654.4
|
|
|
640.6
|
|
|
696.8
|
|
|
•
|
liability for any losses that result from an actual or claimed breach of our fiduciary duties;
|
•
|
failing to maintain and protect our brand, independence, and reputation;
|
•
|
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;
|
•
|
trends in the asset management industry, including the increasing popularity of passively managed investment vehicles.
|
•
|
liability related to the storage of personal information related to individuals as well as portfolio and account-level information;
|
•
|
liability relating to the acquisition or redistribution of data or information we acquire or errors included therein;
|
•
|
compliance failures, regulatory action, or changes in laws applicable to our investment advisory or credit rating operations;
|
•
|
the failure of acquisitions and other investments to produce the results we anticipate;
|
•
|
downturns in the financial sector, global financial markets, and global economy;
|
•
|
the effect of market volatility on revenue from asset-based fees;
|
•
|
a prolonged outage of our database, technology-based products and services, or network facilities; and
|
•
|
challenges faced by our non-U.S. operations, including the concentration of data and development work at our offshore facilities in China and India.
|
|
|
|
As of December 31,
|
|
|
|
|
||||||||||||
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016 Change
|
|
|
2015 Change
|
|
|||
Our business
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Morningstar.com Premium Membership subscriptions (U.S.)
|
|
118,339
|
|
|
120,557
|
|
|
123,274
|
|
|
(1.8
|
)%
|
|
(2.2
|
)%
|
||||
Morningstar.com registered users (U.S.)
|
|
8,892,203
|
|
|
8,529,792
|
|
|
8,189,569
|
|
|
4.2
|
%
|
|
4.2
|
%
|
||||
Advisor Workstation clients (U.S.)
|
|
175
|
|
|
189
|
|
|
181
|
|
|
(7.4
|
)%
|
|
4.4
|
%
|
||||
Morningstar Office licenses (U.S.)
|
|
4,286
|
|
|
4,342
|
|
|
4,268
|
|
|
(1.3
|
)%
|
|
1.7
|
%
|
||||
Morningstar Direct licenses
|
|
12,492
|
|
|
11,428
|
|
|
10,055
|
|
|
9.3
|
%
|
|
13.7
|
%
|
||||
Assets under management and advisement (approximate) ($bil) (1)
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Workplace Solutions (Retirement)
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Managed Accounts (2)
|
|
46.9
|
|
|
40.3
|
|
|
36.8
|
|
|
16.4
|
%
|
|
9.5
|
%
|
|||
|
Plan Sponsor Advice
|
|
34.3
|
|
|
30.7
|
|
|
26.7
|
|
|
11.7
|
%
|
|
15.0
|
%
|
|||
|
Custom Models
|
|
23.2
|
|
|
18.7
|
|
|
13.3
|
|
|
24.1
|
%
|
|
40.6
|
%
|
|||
|
Workplace Solutions (total)
|
|
$
|
104.4
|
|
|
$
|
89.7
|
|
|
$
|
76.8
|
|
|
16.4
|
%
|
|
16.8
|
%
|
|
Morningstar Investment Management
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Morningstar Managed Portfolios (3)
|
|
29.8
|
|
|
25.8
|
|
|
23.9
|
|
|
15.5
|
%
|
|
7.9
|
%
|
|||
|
Institutional Asset Management
|
|
58.0
|
|
|
59.4
|
|
(4)
|
64.2
|
|
(4)
|
(2.4
|
)%
|
|
(7.5
|
)%
|
|||
|
Asset Allocation Services
|
|
7.2
|
|
|
7.6
|
|
(4)
|
4.9
|
|
(4)
|
(5.3
|
)%
|
|
55.1
|
%
|
|||
|
Manager Selection Services
|
|
1.2
|
|
|
2.1
|
|
(4)
|
2.2
|
|
(4)
|
(42.9
|
)%
|
|
(4.5
|
)%
|
|||
|
Morningstar Investment Management (total)
|
|
$
|
96.2
|
|
|
$
|
94.9
|
|
|
$
|
95.2
|
|
|
1.4
|
%
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Average assets under management and advisement ($bil)
|
|
$
|
192.6
|
|
|
$
|
179.7
|
|
|
$
|
167.3
|
|
|
7.2
|
%
|
|
7.4
|
%
|
|
Number of commercial mortgage-backed securities (CMBS) new-issue ratings completed
|
|
27
|
|
|
56
|
|
|
52
|
|
|
(51.8
|
)%
|
|
7.7
|
%
|
|||
|
Asset value of CMBS new-issue ratings ($bil)
|
|
$
|
17.9
|
|
|
$
|
46.4
|
|
|
$
|
33.7
|
|
|
(61.4
|
)%
|
|
37.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Our employees (approximate)
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Worldwide headcount
|
|
4,595
|
|
(5)
|
3,930
|
|
|
3,760
|
|
|
16.9
|
%
|
|
4.5
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Year ended December 31,
|
|
|
|
|
||||||||||||
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016 Change
|
|
|
2015 Change
|
|
|||
|
Key product revenue (6)
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Morningstar Data
|
|
$
|
152.1
|
|
|
$
|
144.5
|
|
|
$
|
139.5
|
|
|
5.3
|
%
|
|
3.6
|
%
|
|
Morningstar Direct
|
|
110.5
|
|
|
101.7
|
|
|
91.8
|
|
|
8.7
|
%
|
|
10.8
|
%
|
|||
|
Morningstar Investment Management
|
|
98.4
|
|
|
98.8
|
|
|
95.3
|
|
|
(0.4
|
)%
|
|
3.6
|
%
|
|||
|
Morningstar Advisor Workstation
|
|
82.4
|
|
|
81.4
|
|
(7)
|
79.8
|
|
(7)
|
1.2
|
%
|
|
1.9
|
%
|
|||
|
Workplace Solutions
|
|
71.3
|
|
|
66.6
|
|
|
57.3
|
|
|
7.0
|
%
|
|
16.3
|
%
|
Key Metrics (in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016 Change
|
|
|
2015 Change
|
|
|
|||
Revenue
|
|
$
|
798.6
|
|
|
$
|
788.8
|
|
|
$
|
760.1
|
|
|
1.2
|
%
|
|
3.8
|
%
|
|
Operating income
|
|
$
|
180.8
|
|
|
$
|
190.6
|
|
|
$
|
105.6
|
|
(1)
|
(5.2
|
)%
|
|
80.5
|
%
|
|
Operating margin
|
|
22.6
|
%
|
|
24.2
|
%
|
|
13.9
|
%
|
|
(1.6
|
)
|
pp
|
10.3
|
|
pp
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash used for investing activities
|
|
$
|
(274.2
|
)
|
|
$
|
(79.5
|
)
|
|
$
|
(31.2
|
)
|
|
244.9
|
%
|
|
154.8
|
%
|
|
Cash provided by (used for) financing activities
|
|
$
|
123.7
|
|
|
$
|
(127.5
|
)
|
|
$
|
(76.1
|
)
|
|
(197.0
|
)%
|
|
67.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash provided by operating activities
|
|
$
|
213.7
|
|
|
$
|
241.5
|
|
|
$
|
136.6
|
|
(1)
|
(11.5
|
)%
|
|
76.8
|
%
|
|
Capital expenditures
|
|
(62.8
|
)
|
|
(57.3
|
)
|
|
(58.3
|
)
|
|
9.6
|
%
|
|
(1.7
|
)%
|
|
|||
Free cash flow
|
|
$
|
150.9
|
|
|
$
|
184.2
|
|
|
$
|
78.3
|
|
(1)
|
(18.1
|
)%
|
|
135.2
|
%
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016 Change
|
|
|
2015 Change
|
|
|
|||
Consolidated revenue
|
|
$
|
798.6
|
|
|
$
|
788.8
|
|
|
$
|
760.1
|
|
|
1.2
|
%
|
|
3.8
|
%
|
|
2016 vs. 2015 (in millions)
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||
Consolidated revenue
|
|
$
|
798.6
|
|
|
$
|
788.8
|
|
|
1.2
|
%
|
Less: acquisitions
|
|
(5.5
|
)
|
|
—
|
|
|
NMF
|
|
||
Less: divestitures
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Unfavorable effect of foreign currency translations
|
|
9.5
|
|
|
—
|
|
|
NMF
|
|
||
Organic revenue
|
|
$
|
802.6
|
|
|
$
|
788.8
|
|
|
1.7
|
%
|
2015 vs. 2014 (in millions)
|
|
2015
|
|
|
2014
|
|
|
Change
|
|
||
Consolidated revenue
|
|
$
|
788.8
|
|
|
$
|
760.1
|
|
|
3.8
|
%
|
Less: acquisitions
|
|
(4.1
|
)
|
|
—
|
|
|
NMF
|
|
||
Less: divestitures
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Unfavorable effect of foreign currency translations
|
|
26.9
|
|
|
—
|
|
|
NMF
|
|
||
Organic revenue
|
|
$
|
811.6
|
|
|
$
|
760.1
|
|
|
6.8
|
%
|
|
|
Year ended December 31
|
|
|
|
|
||||||||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016 Change
|
|
|
2015 Change
|
|
|||
United States
|
|
$
|
590.5
|
|
|
$
|
585.1
|
|
|
$
|
550.8
|
|
|
0.9
|
%
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
United Kingdom
|
|
61.1
|
|
|
64.2
|
|
|
61.8
|
|
|
(4.8
|
)%
|
|
3.9
|
%
|
|||
Continental Europe
|
|
62.6
|
|
|
58.8
|
|
|
62.7
|
|
|
6.5
|
%
|
|
(6.2
|
)%
|
|||
Australia
|
|
32.2
|
|
|
30.5
|
|
|
35.0
|
|
|
5.6
|
%
|
|
(12.9
|
)%
|
|||
Canada
|
|
28.2
|
|
|
27.9
|
|
|
30.8
|
|
|
1.1
|
%
|
|
(9.4
|
)%
|
|||
Asia
|
|
20.0
|
|
|
18.5
|
|
|
15.8
|
|
|
8.1
|
%
|
|
17.1
|
%
|
|||
Other
|
|
4.0
|
|
|
3.8
|
|
|
3.2
|
|
|
5.3
|
%
|
|
18.8
|
%
|
|||
Total International
|
|
208.1
|
|
|
203.7
|
|
|
209.3
|
|
|
2.2
|
%
|
|
(2.7
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consolidated revenue
|
|
$
|
798.6
|
|
|
$
|
788.8
|
|
|
$
|
760.1
|
|
|
1.2
|
%
|
|
3.8
|
%
|
2016 vs. 2015 (in millions)
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||
International revenue
|
|
$
|
208.1
|
|
|
$
|
203.7
|
|
|
2.2
|
%
|
Less: acquisitions
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Less: divestitures
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Unfavorable effect of foreign currency translations
|
|
9.5
|
|
|
—
|
|
|
NMF
|
|
||
International organic revenue
|
|
$
|
217.6
|
|
|
$
|
203.7
|
|
|
6.8
|
%
|
2015 vs. 2014 (in millions)
|
|
2015
|
|
|
2014
|
|
|
Change
|
|
||
International revenue
|
|
$
|
203.7
|
|
|
$
|
209.3
|
|
|
(2.7
|
)%
|
Less: acquisitions
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Less: divestitures
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Unfavorable effect of foreign currency translations
|
|
26.9
|
|
|
—
|
|
|
NMF
|
|
||
International organic revenue
|
|
$
|
230.6
|
|
|
$
|
209.3
|
|
|
10.2
|
%
|
|
|
|
|
|
||||||||||||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016 Change
|
|
|
|
2015 Change
|
|
|
|||
Cost of revenue
|
|
$
|
344.3
|
|
|
$
|
330.1
|
|
|
$
|
318.6
|
|
|
4.3
|
%
|
|
|
3.6
|
%
|
|
% of revenue
|
|
43.1
|
%
|
|
41.9
|
%
|
|
41.9
|
%
|
|
1.2
|
pp
|
|
—
|
|
pp
|
||||
Sales and marketing
|
|
97.6
|
|
|
96.6
|
|
|
111.1
|
|
|
1.0
|
%
|
|
|
(13.1
|
)%
|
|
|||
% of revenue
|
|
12.2
|
%
|
|
12.2
|
%
|
|
14.6
|
%
|
|
—
|
|
pp
|
|
(2.4)
|
pp
|
||||
General and administrative
|
|
105.2
|
|
|
107.1
|
|
|
108.9
|
|
|
(1.7
|
)%
|
|
|
(1.7
|
)%
|
|
|||
% of revenue
|
|
13.2
|
%
|
|
13.6
|
%
|
|
14.3
|
%
|
|
(0.4)
|
pp
|
|
(0.7)
|
pp
|
|||||
Depreciation and amortization
|
|
70.7
|
|
|
64.4
|
|
|
54.9
|
|
|
9.9
|
%
|
|
|
17.3
|
%
|
|
|||
% of revenue
|
|
8.9
|
%
|
|
8.2
|
%
|
|
7.2
|
%
|
|
0.7
|
pp
|
|
1.0
|
pp
|
|||||
Litigation settlement
|
|
—
|
|
|
—
|
|
|
61.0
|
|
|
—
|
%
|
|
|
NMF
|
|
|
|||
% of revenue
|
|
—
|
%
|
|
—
|
%
|
|
8.0
|
%
|
|
—
|
|
|
|
NMF
|
|
|
|||
Total operating expense
|
|
$
|
617.8
|
|
|
$
|
598.2
|
|
|
$
|
654.5
|
|
|
3.3
|
%
|
|
|
(8.6
|
)%
|
|
% of revenue
|
|
77.4
|
%
|
|
75.8
|
%
|
|
86.1
|
%
|
|
1.6
|
pp
|
|
(10.3)
|
pp
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|||
Operating income
|
|
$
|
180.8
|
|
|
$
|
190.6
|
|
|
$
|
105.6
|
|
|
% change
|
|
(5.2
|
)%
|
|
80.5
|
%
|
|
(38.1
|
)%
|
|
|||
Operating margin
|
|
22.6
|
%
|
|
24.2
|
%
|
|
13.9
|
%
|
|
|||
Change
|
|
(1.6
|
)
|
pp
|
10.3
|
|
pp
|
(10.5
|
)
|
pp
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Interest income
|
|
$
|
1.8
|
|
|
$
|
1.8
|
|
|
$
|
2.6
|
|
Interest expense
|
|
(1.5
|
)
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|||
Gain on sale of investments, net
|
|
0.6
|
|
|
0.6
|
|
|
1.0
|
|
|||
Holding gain upon acquisition of additional ownership of equity-method investments
|
|
37.1
|
|
|
—
|
|
|
5.2
|
|
|||
Other income, net
|
|
6.1
|
|
|
1.2
|
|
|
0.1
|
|
|||
Non-operating income, net
|
|
$
|
44.1
|
|
|
$
|
3.1
|
|
|
$
|
8.4
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Equity in net income (loss) of unconsolidated entities
|
|
$
|
(0.2
|
)
|
|
$
|
1.8
|
|
|
$
|
—
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Income before income taxes and equity in net income (loss) of unconsolidated entities
|
|
$
|
224.9
|
|
|
$
|
193.7
|
|
|
$
|
114.0
|
|
Equity in net income (loss) of unconsolidated entities
|
|
(0.2
|
)
|
|
1.8
|
|
|
—
|
|
|||
Net income attributable to the noncontrolling interest
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|||
Total
|
|
$
|
224.7
|
|
|
$
|
195.3
|
|
|
$
|
114.0
|
|
Income tax expense
|
|
$
|
63.7
|
|
|
$
|
62.7
|
|
|
$
|
35.7
|
|
Effective tax rate
|
|
28.3
|
%
|
|
32.1
|
%
|
|
31.3
|
%
|
•
|
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 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 on the present value 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.
|
(in millions)
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
Thereafter
|
|
|
Total
|
|
|||||||
Minimum commitments on non-cancelable operating lease obligations (1)
|
|
$
|
23.9
|
|
|
$
|
22.0
|
|
|
$
|
17.9
|
|
|
$
|
17.5
|
|
|
$
|
16.0
|
|
|
$
|
27.4
|
|
|
$
|
124.7
|
|
Minimum payments related to long-term financing agreements
|
|
9.0
|
|
|
7.2
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.6
|
|
|||||||
Minimum payments on credit facility (2)
|
|
4.8
|
|
|
4.8
|
|
|
254.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
263.6
|
|
|||||||
Unrecognized tax benefits (3)
|
|
8.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8.9
|
|
|||||||
Total
|
|
$
|
46.6
|
|
|
$
|
34.0
|
|
|
$
|
272.3
|
|
|
$
|
17.5
|
|
|
$
|
16.0
|
|
|
$
|
27.4
|
|
|
$
|
413.8
|
|
|
|
|
||||||||||||||
(in millions, except foreign currency rates)
|
|
Euro
|
|
British Pound
|
|
Australian Dollar
|
|
Other Foreign Currencies
|
||||||||
Foreign currency rate in U.S. dollars as of December 31, 2016
|
|
1.0525
|
|
|
1.2346
|
|
|
0.7207
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Foreign denominated percentage of revenue
|
|
5.2
|
%
|
|
7.7
|
%
|
|
3.9
|
%
|
|
9.3
|
%
|
||||
Foreign denominated percentage of operating income
|
|
7.9
|
%
|
|
0.2
|
%
|
|
2.1
|
%
|
|
(10.2
|
)%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Estimated effect of a 10% adverse currency fluctuation on revenue
|
|
$
|
(5.9
|
)
|
|
$
|
(10.9
|
)
|
|
$
|
(4.1
|
)
|
|
$
|
(9.0
|
)
|
Estimated effect of a 10% adverse currency fluctuation on operating income
|
|
$
|
(2.1
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
2.7
|
|
|
|
|
||||||||||||||
(in millions)
|
|
Euro
|
|
British Pound
|
|
Australian Dollar
|
|
Other Foreign Currencies
|
||||||||
Assets, net of unconsolidated entities
|
|
$
|
72.8
|
|
|
$
|
128.7
|
|
|
$
|
71.1
|
|
|
$
|
153.4
|
|
Liabilities
|
|
30.6
|
|
|
36.9
|
|
|
50.4
|
|
|
63.8
|
|
||||
Net currency position
|
|
$
|
42.2
|
|
|
$
|
91.8
|
|
|
$
|
20.7
|
|
|
$
|
89.6
|
|
|
|
|
|
|
|
|
|
|
||||||||
Estimated effect of a 10% adverse currency fluctuation on equity
|
|
$
|
(4.2
|
)
|
|
$
|
(9.2
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(9.0
|
)
|
Year ended December 31 (in millions except per share amounts)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Revenue
|
|
$
|
798.6
|
|
|
$
|
788.8
|
|
|
$
|
760.1
|
|
|
|
|
|
|
|
|
||||||
Operating expense:
|
|
|
|
|
|
|
||||||
Cost of revenue
|
|
344.3
|
|
|
330.1
|
|
|
318.6
|
|
|||
Sales and marketing
|
|
97.6
|
|
|
96.6
|
|
|
111.1
|
|
|||
General and administrative
|
|
105.2
|
|
|
107.1
|
|
|
108.9
|
|
|||
Depreciation and amortization
|
|
70.7
|
|
|
64.4
|
|
|
54.9
|
|
|||
Litigation settlement
|
|
—
|
|
|
—
|
|
|
61.0
|
|
|||
Total operating expense
|
|
617.8
|
|
|
598.2
|
|
|
654.5
|
|
|||
|
|
|
|
|
|
|
||||||
Operating income
|
|
180.8
|
|
|
190.6
|
|
|
105.6
|
|
|||
|
|
|
|
|
|
|
||||||
Non-operating income:
|
|
|
|
|
|
|
||||||
Interest income, net
|
|
0.3
|
|
|
1.3
|
|
|
2.1
|
|
|||
Gain on sale of investments, reclassified from other comprehensive income
|
|
0.6
|
|
|
0.6
|
|
|
1.0
|
|
|||
Holding gain upon acquisition of additional ownership of equity method investments
|
|
37.1
|
|
|
—
|
|
|
5.2
|
|
|||
Other income, net
|
|
6.1
|
|
|
1.2
|
|
|
0.1
|
|
|||
Non-operating income, net
|
|
44.1
|
|
|
3.1
|
|
|
8.4
|
|
|||
|
|
|
|
|
|
|
||||||
Income before income taxes and equity in net income (loss) of unconsolidated entities
|
|
224.9
|
|
|
193.7
|
|
|
114.0
|
|
|||
|
|
|
|
|
|
|
||||||
Equity in net income (loss) of unconsolidated entities
|
|
(0.2
|
)
|
|
1.8
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
Income tax expense
|
|
63.7
|
|
|
62.7
|
|
|
35.7
|
|
|||
|
|
|
|
|
|
|
||||||
Consolidated net income
|
|
161.0
|
|
|
132.8
|
|
|
78.3
|
|
|||
|
|
|
|
|
|
|
||||||
Net income attributable to noncontrolling interest
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
Net income attributable to Morningstar, Inc.
|
|
$
|
161.0
|
|
|
$
|
132.6
|
|
|
$
|
78.3
|
|
|
|
|
|
|
|
|
||||||
Net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
3.74
|
|
|
$
|
3.00
|
|
|
$
|
1.75
|
|
Diluted
|
|
$
|
3.72
|
|
|
$
|
3.00
|
|
|
$
|
1.74
|
|
|
|
|
|
|
|
|
||||||
Dividends per common share:
|
|
|
|
|
|
|
||||||
Dividends declared per common share
|
|
$
|
0.89
|
|
|
$
|
0.79
|
|
|
$
|
0.70
|
|
Dividends paid per common share
|
|
$
|
0.88
|
|
|
$
|
0.76
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
||||||
Basic
|
|
43.0
|
|
|
44.2
|
|
|
44.7
|
|
|||
Diluted
|
|
43.3
|
|
|
44.3
|
|
|
44.9
|
|
Year ended December 31 (in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Consolidated net income
|
|
$
|
161.0
|
|
|
$
|
132.8
|
|
|
$
|
78.3
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
|
(27.8
|
)
|
|
(28.2
|
)
|
|
(29.8
|
)
|
|||
Unrealized gains (losses) on securities:
|
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during period
|
|
3.3
|
|
|
(1.0
|
)
|
|
0.4
|
|
|||
Reclassification of gains included in net income
|
|
(2.4
|
)
|
|
(0.4
|
)
|
|
(0.6
|
)
|
|||
Other comprehensive loss
|
|
(26.9
|
)
|
|
(29.6
|
)
|
|
(30.0
|
)
|
|||
|
|
|
|
|
|
|
||||||
Comprehensive income
|
|
134.1
|
|
|
103.2
|
|
|
48.3
|
|
|||
Comprehensive (income) loss attributable to noncontrolling interest
|
|
—
|
|
|
(0.4
|
)
|
|
0.1
|
|
|||
Comprehensive income attributable to Morningstar, Inc.
|
|
$
|
134.1
|
|
|
$
|
102.8
|
|
|
$
|
48.4
|
|
As of December 31 (in millions except share amounts)
|
|
2016
|
|
|
2015
|
|
||
Assets
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
259.1
|
|
|
$
|
207.1
|
|
Investments
|
|
44.9
|
|
|
41.5
|
|
||
Accounts receivable, less allowance of $2.1 and $1.8, respectively
|
|
145.8
|
|
|
139.3
|
|
||
Other
|
|
22.2
|
|
|
22.0
|
|
||
Total current assets
|
|
472.0
|
|
|
409.9
|
|
||
Property, equipment, and capitalized software, net
|
|
152.1
|
|
|
134.5
|
|
||
Investments in unconsolidated entities
|
|
40.3
|
|
|
35.6
|
|
||
Goodwill
|
|
556.8
|
|
|
364.2
|
|
||
Intangible assets, net
|
|
120.9
|
|
|
74.2
|
|
||
Other assets
|
|
8.8
|
|
|
10.6
|
|
||
Total assets
|
|
$
|
1,350.9
|
|
|
$
|
1,029.0
|
|
|
|
|
|
|
||||
Liabilities and equity
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
|
$
|
44.6
|
|
|
$
|
39.2
|
|
Accrued compensation
|
|
71.7
|
|
|
80.9
|
|
||
Deferred revenue
|
|
165.4
|
|
|
140.7
|
|
||
Short-term debt
|
|
—
|
|
|
35.0
|
|
||
Other current liabilities
|
|
13.2
|
|
|
8.6
|
|
||
Total current liabilities
|
|
294.9
|
|
|
304.4
|
|
||
Accrued compensation
|
|
10.3
|
|
|
8.9
|
|
||
Deferred tax liability, net
|
|
38.2
|
|
|
19.8
|
|
||
Long-term debt
|
|
250.0
|
|
|
—
|
|
||
Deferred rent
|
|
24.8
|
|
|
25.4
|
|
||
Other long-term liabilities
|
|
35.9
|
|
|
29.9
|
|
||
Total liabilities
|
|
654.1
|
|
|
388.4
|
|
||
|
|
|
|
|
||||
Equity:
|
|
|
|
|
|
|
||
Morningstar, Inc. shareholders’ equity:
|
|
|
|
|
|
|
||
Common stock, no par value, 200,000,000 shares authorized, of which 42,932,994 and 43,403,076 shares were outstanding as of December 31, 2016 and December 31, 2015, respectively
|
|
—
|
|
|
—
|
|
||
Treasury stock at cost, 10,106,249 and 9,478,449 shares as of December 31, 2016 and December 31, 2015, respectively
|
|
(667.9
|
)
|
|
(619.8
|
)
|
||
Additional paid-in capital
|
|
584.0
|
|
|
575.5
|
|
||
Retained earnings
|
|
861.9
|
|
|
739.2
|
|
||
Accumulated other comprehensive loss:
|
|
|
|
|
||||
Currency translation adjustment
|
|
(81.3
|
)
|
|
(53.5
|
)
|
||
Unrealized loss on available-for-sale investments
|
|
(0.2
|
)
|
|
(1.1
|
)
|
||
Total accumulated other comprehensive loss
|
|
(81.5
|
)
|
|
(54.6
|
)
|
||
Total Morningstar, Inc. shareholders’ equity
|
|
696.5
|
|
|
640.3
|
|
||
Noncontrolling interest
|
|
0.3
|
|
|
0.3
|
|
||
Total equity
|
|
696.8
|
|
|
640.6
|
|
||
Total liabilities and equity
|
|
$
|
1,350.9
|
|
|
$
|
1,029.0
|
|
|
|
Morningstar, Inc. Shareholders’ Equity
|
|
|
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
|
|
|
|
||||||||||||||||
|
|
Common Stock
|
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
|
|
Non
Controlling
Interest
|
|
|
|
|||||||||||||||
(in millions, except share amounts)
|
|
Shares
Outstanding
|
|
|
Par
Value
|
|
|
Treasury
Stock
|
|
|
|
Retained
Earnings
|
|
|
|
|
Total
Equity
|
|
|||||||||||||
Balance as of December 31, 2013
|
|
44,967,423
|
|
|
$
|
—
|
|
|
$
|
(449.0
|
)
|
|
$
|
539.6
|
|
|
$
|
594.6
|
|
|
$
|
5.1
|
|
|
$
|
1.0
|
|
|
$
|
691.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
78.3
|
|
|
—
|
|
|
—
|
|
|
78.3
|
|
|||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Unrealized gain on available-for-sale investments, net of tax of $0.2
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|||||||
Reclassification of adjustments for gains included in net income, net of income tax of $0.4
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
(0.6
|
)
|
|||||||
Foreign currency translation adjustment, net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29.7
|
)
|
|
(0.1
|
)
|
|
(29.8
|
)
|
|||||||
Other comprehensive loss, net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29.9
|
)
|
|
(0.1
|
)
|
|
(30.0
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
|
452,344
|
|
|
—
|
|
|
1.4
|
|
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
16.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.3
|
|
|||||||
Stock-based compensation — restricted stock
|
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
||||||||
Stock-based compensation — performance share awards
|
|
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|||||||
Stock-based compensation — stock options
|
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
||||||||
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|||||||
Common shares repurchased
|
|
(1,074,004
|
)
|
|
—
|
|
|
(76.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(76.7
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31.2
|
)
|
|
—
|
|
|
—
|
|
|
(31.2
|
)
|
||||||||
Dividends declared — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2014
|
|
44,345,763
|
|
|
—
|
|
|
(524.3
|
)
|
|
561.1
|
|
|
641.5
|
|
|
(24.8
|
)
|
|
0.9
|
|
|
654.4
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
132.6
|
|
|
—
|
|
|
0.2
|
|
|
132.8
|
|
|||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Unrealized loss on available-for-sale investments, net of tax of $0.4
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
(1.0
|
)
|
|||||||
Reclassification of adjustments for gains included in net income, net of income tax of $0.1
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
(0.4
|
)
|
|||||||
Foreign currency translation adjustment, net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28.4
|
)
|
|
0.2
|
|
|
(28.2
|
)
|
|||||||
Other comprehensive income (loss), net
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29.8
|
)
|
|
0.2
|
|
|
(29.6
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
|
298,435
|
|
|
—
|
|
|
1.5
|
|
|
(3.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.7
|
)
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
16.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.1
|
|
|||||||
Stock-based compensation — restricted stock
|
|
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|||||||
Stock-based compensation — performance share awards
|
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
||||||||
Stock-based compensation — stock-options
|
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
||||||||
Excess tax benefit derived from stock-option exercises and vesting of restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|||||||
Common shares repurchased
|
|
(1,241,122
|
)
|
|
—
|
|
|
(97.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(97.0
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34.8
|
)
|
|
—
|
|
|
—
|
|
|
(34.8
|
)
|
|||||||
Dividends declared — restricted stock units
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||||||
Purchase of remaining interest in majority-owned investment
|
|
|
|
—
|
|
|
—
|
|
|
(2.4
|
)
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
(3.4
|
)
|
||||||||
Balance as of December 31, 2015
|
|
43,403,076
|
|
|
—
|
|
|
(619.8
|
)
|
|
575.5
|
|
|
739.2
|
|
|
(54.6
|
)
|
|
0.3
|
|
|
640.6
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
161.0
|
|
|
—
|
|
|
—
|
|
|
161.0
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Unrealized gain on available-for-sale investments, net of income tax of $1.3
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.3
|
|
|
—
|
|
|
3.3
|
|
||||||||
Reclassification of adjustments for gains included in net income, net of income tax of $1.8
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.4
|
)
|
|
—
|
|
|
(2.4
|
)
|
||||||||
Foreign currency translation adjustment, net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27.8
|
)
|
|
—
|
|
|
(27.8
|
)
|
||||||||
Other comprehensive income (loss), net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26.9
|
)
|
|
—
|
|
|
(26.9
|
)
|
||||||||
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net
|
|
174,911
|
|
|
—
|
|
|
1.4
|
|
|
(6.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.6
|
)
|
|||||||
Stock-based compensation — restricted stock units
|
|
|
|
—
|
|
|
—
|
|
|
14.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14.6
|
|
||||||||
Stock-based compensation — performance share awards
|
|
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||||||
Common shares repurchased
|
|
(644,993
|
)
|
|
—
|
|
|
(49.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(49.5
|
)
|
|||||||
Dividends declared — common shares outstanding
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38.3
|
)
|
|
—
|
|
|
—
|
|
|
(38.3
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2016
|
|
42,932,994
|
|
|
$
|
—
|
|
|
$
|
(667.9
|
)
|
|
$
|
584.0
|
|
|
$
|
861.9
|
|
|
$
|
(81.5
|
)
|
|
$
|
0.3
|
|
|
$
|
696.8
|
|
Year ended December 31 (in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Operating activities
|
|
|
|
|
|
|
|
|
||||
Consolidated net income
|
|
$
|
161.0
|
|
|
$
|
132.8
|
|
|
$
|
78.3
|
|
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
70.7
|
|
|
64.4
|
|
|
54.9
|
|
|||
Deferred income taxes
|
|
4.7
|
|
|
2.9
|
|
|
3.0
|
|
|||
Stock-based compensation expense
|
|
14.5
|
|
|
17.4
|
|
|
17.6
|
|
|||
Provision for bad debt
|
|
1.3
|
|
|
0.5
|
|
|
0.5
|
|
|||
Equity in net (income) loss of unconsolidated entities
|
|
0.2
|
|
|
(1.8
|
)
|
|
—
|
|
|||
Gain on sale of cost-method investment
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|||
Holding gain upon acquisition of additional ownership of equity-method investments
|
|
(37.1
|
)
|
|
—
|
|
|
(5.2
|
)
|
|||
Other, net
|
|
(6.8
|
)
|
|
(1.1
|
)
|
|
(0.7
|
)
|
|||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
||||||
Accounts receivable
|
|
(0.1
|
)
|
|
(6.9
|
)
|
|
(25.9
|
)
|
|||
Other assets
|
|
1.1
|
|
|
0.7
|
|
|
(5.3
|
)
|
|||
Accounts payable and accrued liabilities
|
|
3.4
|
|
|
4.7
|
|
|
(2.0
|
)
|
|||
Accrued compensation
|
|
(8.8
|
)
|
|
7.0
|
|
|
19.5
|
|
|||
Income taxes—current
|
|
1.0
|
|
|
10.1
|
|
|
2.3
|
|
|||
Deferred revenue
|
|
6.7
|
|
|
10.6
|
|
|
(1.7
|
)
|
|||
Deferred rent
|
|
(2.9
|
)
|
|
(0.3
|
)
|
|
3.0
|
|
|||
Other liabilities
|
|
4.8
|
|
|
0.5
|
|
|
(1.3
|
)
|
|||
Cash provided by operating activities
|
|
213.7
|
|
|
241.5
|
|
|
136.6
|
|
|||
|
|
|
|
|
|
|
||||||
Investing activities
|
|
|
|
|
|
|
|
|
||||
Purchases of investments
|
|
(32.0
|
)
|
|
(34.7
|
)
|
|
(20.4
|
)
|
|||
Proceeds from maturities and sales of investments
|
|
28.6
|
|
|
30.0
|
|
|
111.6
|
|
|||
Capital expenditures
|
|
(62.8
|
)
|
|
(57.3
|
)
|
|
(58.3
|
)
|
|||
Acquisitions, net of cash acquired
|
|
(191.6
|
)
|
|
(11.1
|
)
|
|
(64.4
|
)
|
|||
Purchases of equity- and cost-method investments
|
|
(16.5
|
)
|
|
(6.2
|
)
|
|
—
|
|
|||
Other, net
|
|
0.1
|
|
|
(0.2
|
)
|
|
0.3
|
|
|||
Cash used for investing activities
|
|
(274.2
|
)
|
|
(79.5
|
)
|
|
(31.2
|
)
|
|||
|
|
|
|
|
|
|
||||||
Financing activities
|
|
|
|
|
|
|
|
|
||||
Common shares repurchased
|
|
(48.8
|
)
|
|
(97.0
|
)
|
|
(76.7
|
)
|
|||
Dividends paid
|
|
(37.9
|
)
|
|
(33.7
|
)
|
|
(30.5
|
)
|
|||
Proceeds from short-term debt
|
|
40.0
|
|
|
50.0
|
|
|
30.0
|
|
|||
Repayment of short-term debt
|
|
(15.0
|
)
|
|
(45.0
|
)
|
|
—
|
|
|||
Proceeds from long-term debt
|
|
190.0
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from stock-option exercises
|
|
0.4
|
|
|
3.9
|
|
|
6.6
|
|
|||
Employee taxes withheld for restricted stock units
|
|
(5.0
|
)
|
|
(5.6
|
)
|
|
(5.8
|
)
|
|||
Other, net
|
|
—
|
|
|
(0.1
|
)
|
|
0.3
|
|
|||
Cash provided by (used for) financing activities
|
|
123.7
|
|
|
(127.5
|
)
|
|
(76.1
|
)
|
|||
|
|
|
|
|
|
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
|
(11.2
|
)
|
|
(12.6
|
)
|
|
(12.3
|
)
|
|||
Net increase in cash and cash equivalents
|
|
52.0
|
|
|
21.9
|
|
|
17.0
|
|
|||
Cash and cash equivalents—beginning of period
|
|
207.1
|
|
|
185.2
|
|
|
168.2
|
|
|||
Cash and cash equivalents—end of period
|
|
$
|
259.1
|
|
|
$
|
207.1
|
|
|
$
|
185.2
|
|
|
|
|
|
|
|
|
||||||
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
||||
Cash paid for income taxes
|
|
$
|
58.0
|
|
|
$
|
50.1
|
|
|
$
|
30.4
|
|
Cash paid for interest
|
|
$
|
1.2
|
|
|
$
|
0.4
|
|
|
$
|
0.3
|
|
Supplemental information of non-cash investing and financing activities:
|
|
|
|
|
|
|
||||||
Unrealized gain (loss) on available-for-sale investments
|
|
$
|
1.2
|
|
|
$
|
(2.0
|
)
|
|
$
|
(0.4
|
)
|
Software obtained under long-term financing arrangement
|
|
$
|
9.0
|
|
|
$
|
5.3
|
|
|
$
|
—
|
|
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 as these relate mainly to investments tracking the strategies of our newsletter portfolios. 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 equity securities, exchange-traded funds, and mutual funds. 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.
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Internally developed software depreciation expense
|
|
$
|
20.0
|
|
|
$
|
13.0
|
|
|
$
|
5.9
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Capitalized software development costs
|
|
$
|
28.2
|
|
|
$
|
21.8
|
|
|
$
|
18.8
|
|
•
|
There is persuasive evidence of an arrangement, as evidenced by a signed contract;
|
•
|
Delivery of our products and services has taken place. If arrangements include an acceptance provision, we generally begin recognizing revenue when we receive 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.
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Advertising expense
|
|
$
|
7.6
|
|
|
$
|
8.3
|
|
|
$
|
7.5
|
|
(in millions, except per share amounts)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
|
|
|
|
|
|
|
||||||
Basic net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Net income attributable to Morningstar, Inc.
|
|
$
|
161.0
|
|
|
$
|
132.6
|
|
|
$
|
78.3
|
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
|
43.0
|
|
|
44.2
|
|
|
44.7
|
|
|||
|
|
|
|
|
|
|
||||||
Basic net income per share attributable to Morningstar, Inc.
|
|
$
|
3.74
|
|
|
$
|
3.00
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
||||||
Diluted net income per share attributable to Morningstar, Inc.:
|
|
|
|
|
|
|
||||||
Net income attributable to Morningstar, Inc.
|
|
$
|
161.0
|
|
|
$
|
132.6
|
|
|
$
|
78.3
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding
|
|
43.0
|
|
|
44.2
|
|
|
44.7
|
|
|||
Net effect of dilutive stock options and restricted stock units
|
|
0.3
|
|
|
0.1
|
|
|
0.2
|
|
|||
Weighted average common shares outstanding for computing diluted income per share
|
|
43.3
|
|
|
44.3
|
|
|
44.9
|
|
|||
|
|
|
|
|
|
|
|
|
||||
Diluted net income per share attributable to Morningstar, Inc.
|
|
$
|
3.72
|
|
|
$
|
3.00
|
|
|
$
|
1.74
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Weighted average restricted stock units
|
|
13
|
|
|
38
|
|
|
47
|
|
Weighted average performance share awards
|
|
—
|
|
|
4
|
|
|
6
|
|
Total
|
|
13
|
|
|
42
|
|
|
53
|
|
External revenue by geographical area
|
|
|
|
|
|
|
||||||
|
|
Year ended December 31
|
||||||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
United States
|
|
$
|
590.5
|
|
|
$
|
585.1
|
|
|
$
|
550.8
|
|
|
|
|
|
|
|
|
||||||
United Kingdom
|
|
61.1
|
|
|
64.2
|
|
|
61.8
|
|
|||
Continental Europe
|
|
62.6
|
|
|
58.8
|
|
|
62.7
|
|
|||
Australia
|
|
32.2
|
|
|
30.5
|
|
|
35.0
|
|
|||
Canada
|
|
28.2
|
|
|
27.9
|
|
|
30.8
|
|
|||
Asia
|
|
20.0
|
|
|
18.5
|
|
|
15.8
|
|
|||
Other
|
|
4.0
|
|
|
3.8
|
|
|
3.2
|
|
|||
Total International
|
|
208.1
|
|
|
203.7
|
|
|
209.3
|
|
|||
|
|
|
|
|
|
|
||||||
Consolidated revenue
|
|
$
|
798.6
|
|
|
$
|
788.8
|
|
|
$
|
760.1
|
|
Long-lived assets by geographical area
|
|
|
|
|
||||
|
|
As of December 31
|
||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
United States
|
|
$
|
139.1
|
|
|
$
|
116.9
|
|
|
|
|
|
|
||||
United Kingdom
|
|
6.6
|
|
|
8.6
|
|
||
Continental Europe
|
|
1.9
|
|
|
2.2
|
|
||
Australia
|
|
0.6
|
|
|
0.9
|
|
||
Canada
|
|
0.4
|
|
|
0.7
|
|
||
Asia
|
|
3.4
|
|
|
5.2
|
|
||
Other
|
|
0.1
|
|
|
—
|
|
||
Total International
|
|
13.0
|
|
|
17.6
|
|
||
|
|
|
|
|
||||
Consolidated property, equipment, and capitalized software, net
|
|
$
|
152.1
|
|
|
$
|
134.5
|
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Available-for-sale
|
|
$
|
27.7
|
|
|
$
|
17.3
|
|
Held-to-maturity
|
|
15.7
|
|
|
15.3
|
|
||
Trading securities
|
|
1.5
|
|
|
8.9
|
|
||
Total
|
|
$
|
44.9
|
|
|
$
|
41.5
|
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||||||||||
(in millions)
|
|
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
||||||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Equity securities and exchange-traded funds
|
|
$
|
25.6
|
|
|
$
|
1.3
|
|
|
$
|
(1.5
|
)
|
|
$
|
25.4
|
|
|
$
|
17.4
|
|
|
$
|
0.3
|
|
|
$
|
(1.6
|
)
|
|
$
|
16.1
|
|
Mutual funds
|
|
2.2
|
|
|
0.1
|
|
|
—
|
|
|
2.3
|
|
|
1.3
|
|
|
—
|
|
|
(0.1
|
)
|
|
1.2
|
|
||||||||
Total
|
|
$
|
27.8
|
|
|
$
|
1.4
|
|
|
$
|
(1.5
|
)
|
|
$
|
27.7
|
|
|
$
|
18.7
|
|
|
$
|
0.3
|
|
|
$
|
(1.7
|
)
|
|
$
|
17.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit
|
|
$
|
13.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13.8
|
|
|
$
|
15.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15.3
|
|
Convertible note
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
$
|
15.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15.7
|
|
|
$
|
15.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15.3
|
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
(in millions)
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities, exchange-traded funds, and mutual funds
|
|
$
|
27.8
|
|
|
$
|
27.7
|
|
|
$
|
18.7
|
|
|
$
|
17.3
|
|
Total
|
|
$
|
27.8
|
|
|
$
|
27.7
|
|
|
$
|
18.7
|
|
|
$
|
17.3
|
|
|
|
|
|
|
|
|
|
|
||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
13.8
|
|
|
$
|
13.8
|
|
|
$
|
15.3
|
|
|
$
|
15.3
|
|
Due in one to three years
|
|
1.9
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
15.7
|
|
|
$
|
15.7
|
|
|
$
|
15.3
|
|
|
$
|
15.3
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Realized gains
|
|
$
|
1.6
|
|
|
$
|
1.3
|
|
|
$
|
1.5
|
|
Realized losses
|
|
(1.0
|
)
|
|
(0.7
|
)
|
|
(0.5
|
)
|
|||
Realized gains, net
|
|
$
|
0.6
|
|
|
$
|
0.6
|
|
|
$
|
1.0
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Unrealized losses, net
|
|
$
|
—
|
|
|
$
|
(0.8
|
)
|
|
$
|
(0.2
|
)
|
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.
|
|
|
Fair Value
|
|
Fair Value Measurements as of December 31, 2016
|
||||||||||||
|
|
as of
|
|
Using Fair Value Hierarchy
|
||||||||||||
(in millions)
|
|
December 31, 2016
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Available-for-sale investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities and exchange-traded funds
|
|
$
|
25.4
|
|
|
$
|
25.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mutual funds
|
|
2.3
|
|
|
2.3
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
1.5
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
||||
Cash equivalents
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
29.4
|
|
|
$
|
29.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Fair Value
|
|
Fair Value Measurements as of December 31, 2015
|
||||||||||||
|
|
as of
|
|
Using Fair Value Hierarchy
|
||||||||||||
(in millions)
|
|
December 31, 2015
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Available-for-sale investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities and exchange-traded funds
|
|
$
|
16.1
|
|
|
$
|
16.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mutual funds
|
|
1.2
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
8.9
|
|
|
8.9
|
|
|
—
|
|
|
—
|
|
||||
Cash equivalents
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
26.4
|
|
|
$
|
26.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
(in millions)
|
|
|
Weighted Average Useful Life (years)
|
|
Customer-related assets
|
|
$
|
17.1
|
|
|
10
|
Technology-based assets
|
|
40.8
|
|
|
5
|
|
Intellectual property (trademarks and trade names)
|
|
2.8
|
|
|
4
|
|
Total intangible assets
|
|
$
|
60.7
|
|
|
6
|
Unaudited Pro Forma Financial Information (in millions)
|
|
2016
|
|
|
2015
|
|
||
Revenue
|
|
$
|
834.1
|
|
|
$
|
813.3
|
|
Operating income
|
|
$
|
157.7
|
|
|
$
|
170.0
|
|
Net income
|
|
$
|
105.5
|
|
|
$
|
117.1
|
|
|
|
|
|
|
||||
Basic net income per share attributable to Morningstar, Inc.
|
|
$
|
2.45
|
|
|
$
|
2.65
|
|
Diluted net income per share attributable to Morningstar, Inc.
|
|
$
|
2.44
|
|
|
$
|
2.65
|
|
|
|
(in millions)
|
|
|
Weighted Average Useful Life (years)
|
|
Technology-based assets
|
|
$
|
6.7
|
|
|
5
|
Intellectual property (trademarks and trade names)
|
|
0.2
|
|
|
3
|
|
Non-competition agreement
|
|
2.6
|
|
|
5
|
|
Total intangible assets
|
|
$
|
9.5
|
|
|
5
|
|
|
(in millions)
|
|
|
Weighted Average Useful Life (years)
|
|
Customer-related assets
|
|
$
|
5.5
|
|
|
24
|
Technology-based assets
|
|
3.0
|
|
|
4.5
|
|
Intellectual property (trademarks and trade names)
|
|
0.1
|
|
|
1
|
|
Non-competition agreement
|
|
0.1
|
|
|
3
|
|
Total intangible assets
|
|
$
|
8.7
|
|
|
19
|
|
|
(in millions)
|
|
|
Balance as of January 1, 2015
|
|
$
|
370.1
|
|
Other, primarily foreign currency translation
|
|
(5.9
|
)
|
|
Balance as of December 31, 2015
|
|
$
|
364.2
|
|
Acquisition of PitchBook
|
|
193.6
|
|
|
Other acquisitions and foreign currency translation
|
|
(1.0
|
)
|
|
Balance as of December 31, 2016
|
|
$
|
556.8
|
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||||||
(in millions)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
||||||
Intellectual property
|
|
$
|
30.9
|
|
|
$
|
(27.4
|
)
|
|
$
|
3.5
|
|
|
9
|
|
$
|
28.3
|
|
|
$
|
(26.7
|
)
|
|
$
|
1.6
|
|
|
9
|
Customer-related assets
|
|
152.0
|
|
|
(97.7
|
)
|
|
54.3
|
|
|
12
|
|
137.5
|
|
|
(92.3
|
)
|
|
45.2
|
|
|
12
|
||||||
Supplier relationships
|
|
0.2
|
|
|
(0.1
|
)
|
|
0.1
|
|
|
20
|
|
0.2
|
|
|
(0.1
|
)
|
|
0.1
|
|
|
20
|
||||||
Technology-based assets
|
|
133.2
|
|
|
(72.1
|
)
|
|
61.1
|
|
|
7
|
|
89.5
|
|
|
(64.4
|
)
|
|
25.1
|
|
|
8
|
||||||
Non-competition agreements
|
|
5.0
|
|
|
(3.1
|
)
|
|
1.9
|
|
|
5
|
|
4.6
|
|
|
(2.4
|
)
|
|
2.2
|
|
|
5
|
||||||
Total intangible assets
|
|
$
|
321.3
|
|
|
$
|
(200.4
|
)
|
|
$
|
120.9
|
|
|
10
|
|
$
|
260.1
|
|
|
$
|
(185.9
|
)
|
|
$
|
74.2
|
|
|
10
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Amortization expense
|
|
$
|
19.4
|
|
|
$
|
22.0
|
|
|
$
|
22.3
|
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Investment in MJKK
|
|
$
|
25.1
|
|
|
$
|
24.3
|
|
Other-equity method investments
|
|
13.5
|
|
|
3.7
|
|
||
Investments accounted for using the cost method
|
|
1.7
|
|
|
7.6
|
|
||
Total investments in unconsolidated entities
|
|
$
|
40.3
|
|
|
$
|
35.6
|
|
|
|
As of December 31
|
|
|
||||
|
|
2016
|
|
|
2015
|
|
||
Morningstar’s approximate ownership of MJKK
|
|
34
|
%
|
|
34
|
%
|
||
Approximate market value of Morningstar’s ownership in MJKK:
|
|
|
|
|
|
|
||
Japanese yen (¥ in millions)
|
|
¥
|
8,558.2
|
|
|
¥
|
8,200.5
|
|
Equivalent U.S. dollars ($ in millions)
|
|
$
|
73.2
|
|
|
$
|
68.1
|
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Computer equipment
|
|
$
|
70.1
|
|
|
$
|
60.3
|
|
Capitalized software
|
|
189.8
|
|
|
144.0
|
|
||
Furniture and fixtures
|
|
26.0
|
|
|
24.3
|
|
||
Leasehold improvements
|
|
69.0
|
|
|
61.9
|
|
||
Telephone equipment
|
|
2.1
|
|
|
2.1
|
|
||
Construction in progress
|
|
9.9
|
|
|
11.7
|
|
||
Property, equipment, and capitalized software, at cost
|
|
366.9
|
|
|
304.3
|
|
||
Less accumulated depreciation
|
|
(214.8
|
)
|
|
(169.8
|
)
|
||
Property, equipment, and capitalized software, net
|
|
$
|
152.1
|
|
|
$
|
134.5
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Depreciation expense
|
|
$
|
51.3
|
|
|
$
|
42.4
|
|
|
$
|
32.6
|
|
Minimum Future Rental Commitments
|
|
(in millions)
|
|
|
2017
|
|
$
|
23.9
|
|
2018
|
|
22.0
|
|
|
2019
|
|
17.9
|
|
|
2020
|
|
17.5
|
|
|
2021
|
|
16.0
|
|
|
Thereafter
|
|
27.4
|
|
|
Total
|
|
$
|
124.7
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Rent expense
|
|
$
|
26.3
|
|
|
$
|
27.1
|
|
|
$
|
24.5
|
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Deferred rent
|
|
$
|
28.4
|
|
|
$
|
28.5
|
|
|
|
As of December 31
|
|
(in millions)
|
|
2016
|
|
Shares available for future grants
|
|
3.7
|
|
|
|
Year ended December 31
|
||||||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Restricted stock units
|
|
$
|
14.6
|
|
|
$
|
16.1
|
|
|
$
|
16.3
|
|
Restricted stock
|
|
—
|
|
|
0.1
|
|
|
0.4
|
|
|||
Performance share awards
|
|
(0.1
|
)
|
|
1.0
|
|
|
0.5
|
|
|||
Stock options
|
|
—
|
|
|
0.2
|
|
|
0.4
|
|
|||
Total stock-based compensation expense
|
|
$
|
14.5
|
|
|
$
|
17.4
|
|
|
$
|
17.6
|
|
|
|
|
|
|
|
|
||||||
Income tax benefit related to the stock-based compensation expense
|
|
$
|
4.3
|
|
|
$
|
5.0
|
|
|
$
|
5.1
|
|
|
|
Year ended December 31
|
||||||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Cost of revenue
|
|
$
|
7.5
|
|
|
$
|
8.1
|
|
|
$
|
7.8
|
|
Sales and marketing
|
|
1.9
|
|
|
2.2
|
|
|
2.1
|
|
|||
General and administrative
|
|
5.1
|
|
|
7.1
|
|
|
7.7
|
|
|||
Total stock-based compensation expense
|
|
$
|
14.5
|
|
|
$
|
17.4
|
|
|
$
|
17.6
|
|
|
|
Unrecognized stock-based compensation expense (in millions)
|
|
|
Weighted average expected amortization period (months)
|
|
Restricted stock units
|
|
$
|
31.4
|
|
|
33
|
Performance share awards
|
|
6.2
|
|
|
12
|
|
Total unrecognized stock-based compensation expense
|
|
$
|
37.6
|
|
|
29
|
Restricted Stock Units (RSUs)
|
|
Unvested
|
|
|
Vested but
Deferred
|
|
|
Total
|
|
|
Weighted
Average
Grant Date Value
per RSU
|
|
|
RSUs Outstanding - December 31, 2013
|
|
680,002
|
|
|
16,682
|
|
|
696,684
|
|
|
$
|
62.02
|
|
Granted
|
|
279,524
|
|
|
—
|
|
|
279,524
|
|
|
72.68
|
|
|
Dividend equivalents
|
|
2,621
|
|
|
150
|
|
|
2,771
|
|
|
55.70
|
|
|
Vested
|
|
(268,115
|
)
|
|
—
|
|
|
(268,115
|
)
|
|
58.91
|
|
|
Issued
|
|
—
|
|
|
(2,054
|
)
|
|
(2,054
|
)
|
|
53.54
|
|
|
Forfeited
|
|
(38,098
|
)
|
|
—
|
|
|
(38,098
|
)
|
|
65.21
|
|
|
RSUs Outstanding - December 31, 2014
|
|
655,934
|
|
|
14,778
|
|
|
670,712
|
|
|
$
|
67.51
|
|
Granted
|
|
235,213
|
|
|
—
|
|
|
235,213
|
|
|
77.17
|
|
|
Dividend equivalents
|
|
1,409
|
|
|
146
|
|
|
1,555
|
|
|
56.42
|
|
|
Vested
|
|
(253,038
|
)
|
|
—
|
|
|
(253,038
|
)
|
|
64.65
|
|
|
Forfeited
|
|
(66,992
|
)
|
|
—
|
|
|
(66,992
|
)
|
|
53.61
|
|
|
RSUs Outstanding - December 31, 2015
|
|
572,526
|
|
|
14,924
|
|
|
587,450
|
|
|
$
|
72.14
|
|
Granted
|
|
241,609
|
|
|
—
|
|
|
241,609
|
|
|
77.82
|
|
|
Dividend equivalents
|
|
370
|
|
|
136
|
|
|
506
|
|
|
56.52
|
|
|
Vested
|
|
(225,590
|
)
|
|
—
|
|
|
(225,590
|
)
|
|
69.39
|
|
|
Issued
|
|
—
|
|
|
(5,312
|
)
|
|
(5,312
|
)
|
|
44.47
|
|
|
Forfeited
|
|
(47,670
|
)
|
|
—
|
|
|
(47,670
|
)
|
|
74.45
|
|
|
RSUs Outstanding - December 31, 2016
|
|
541,245
|
|
|
9,748
|
|
|
550,993
|
|
|
$
|
75.77
|
|
|
|
As of December 31, 2016
|
|
|
Target performance share awards granted
|
|
117,386
|
|
|
Weighted average fair value per award
|
|
$
|
78.23
|
|
Number of shares that would be issued based on current performance levels
|
|
1,287
|
|
|
Unamortized expense, based on current performance levels (in millions)
|
|
$
|
(0.7
|
)
|
|
|
As of December 31, 2016
|
|
|
Target performance share awards granted
|
|
100,924
|
|
|
Weighted average fair value per award
|
|
$
|
74.31
|
|
Number of shares that would be issued based on current performance levels
|
|
100,924
|
|
|
Unamortized expense, based on current performance levels (in millions)
|
|
$
|
6.9
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|||||||||
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
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
179,559
|
|
|
$
|
21.47
|
|
Granted
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Canceled
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(150
|
)
|
|
22.24
|
|
|||
Exercised
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(179,409
|
)
|
|
22.08
|
|
|||
Options outstanding—end of year
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Options exercisable—end of year
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|||||||||
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
|
|
52,096
|
|
|
$
|
57.52
|
|
|
169,810
|
|
|
$
|
40.20
|
|
|
253,972
|
|
|
$
|
36.48
|
|
Granted
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Canceled
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(526
|
)
|
|
38.61
|
|
|||
Exercised
|
|
(6,095
|
)
|
|
59.35
|
|
|
(117,714
|
)
|
|
32.91
|
|
|
(83,636
|
)
|
|
30.82
|
|
|||
Options outstanding—end of year
|
|
46,001
|
|
|
$
|
57.28
|
|
|
52,096
|
|
|
$
|
57.52
|
|
|
169,810
|
|
|
$
|
40.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Options exercisable—end of year
|
|
46,001
|
|
|
$
|
57.28
|
|
|
52,096
|
|
|
$
|
57.52
|
|
|
154,864
|
|
|
$
|
38.53
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Intrinsic value of options exercised
|
|
$
|
0.1
|
|
|
$
|
5.1
|
|
|
$
|
12.0
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||||||||||||
Range of Exercise Prices
|
|
Number of Options
|
|
|
Weighted
Average
Remaining
Contractual
Life (years)
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
(in millions)
|
|
|
Exercisable Shares
|
|
|
Weighted Average Remaining Contractual Life (years)
|
|
Weighted Average Exercise Price
|
|
|
Aggregate
Intrinsic
Value
(in millions)
|
|
||||
$57.28
|
|
46,001
|
|
|
4.37
|
|
$
|
57.28
|
|
|
$
|
0.7
|
|
|
46,001
|
|
|
4.37
|
|
$
|
57.28
|
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Vested or Expected to Vest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$57.28
|
|
46,001
|
|
|
4.37
|
|
$
|
57.28
|
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
401(k) matching contributions
|
|
$
|
9.0
|
|
|
$
|
8.3
|
|
|
$
|
7.5
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Income before income taxes and equity in net income (loss) of unconsolidated entities
|
|
$
|
224.9
|
|
|
$
|
193.7
|
|
|
$
|
114.0
|
|
Equity in net income (loss) of unconsolidated entities
|
|
(0.2
|
)
|
|
1.8
|
|
|
—
|
|
|||
Net income attributable to the noncontrolling interest
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|||
Total
|
|
$
|
224.7
|
|
|
$
|
195.3
|
|
|
$
|
114.0
|
|
Income tax expense
|
|
$
|
63.7
|
|
|
$
|
62.7
|
|
|
$
|
35.7
|
|
Effective tax rate
|
|
28.3
|
%
|
|
32.1
|
%
|
|
31.3
|
%
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|||||||||
(in millions, except percentages)
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|||
Income tax expense at U.S. federal rate
|
|
$
|
78.6
|
|
|
35.0
|
%
|
|
$
|
68.4
|
|
|
35.0
|
%
|
|
$
|
39.9
|
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
|
4.5
|
|
|
2.0
|
|
|
6.6
|
|
|
3.4
|
|
|
2.1
|
|
|
1.9
|
|
|||
Stock-based compensation activity
|
|
(0.6
|
)
|
|
(0.3
|
)
|
|
0.4
|
|
|
0.2
|
|
|
0.1
|
|
|
0.1
|
|
|||
Holding gain upon acquisition of additional ownership of equity method investments
|
|
(12.1
|
)
|
|
(5.4
|
)
|
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|
(1.2
|
)
|
|||
Net change in valuation allowance related to non-U.S. deferred tax assets, primarily net operating losses
|
|
(0.1
|
)
|
|
—
|
|
|
(2.0
|
)
|
|
(1.0
|
)
|
|
(0.6
|
)
|
|
(0.5
|
)
|
|||
Difference between U.S. federal statutory and foreign tax rates
|
|
(5.3
|
)
|
|
(2.4
|
)
|
|
(4.4
|
)
|
|
(2.3
|
)
|
|
(4.0
|
)
|
|
(3.5
|
)
|
|||
Change in unrecognized tax benefits
|
|
2.6
|
|
|
1.2
|
|
|
(1.4
|
)
|
|
(0.7
|
)
|
|
1.5
|
|
|
1.3
|
|
|||
Credits and incentives
|
|
(3.7
|
)
|
|
(1.6
|
)
|
|
(5.1
|
)
|
|
(2.6
|
)
|
|
(2.9
|
)
|
|
(2.6
|
)
|
|||
Recognition of deferred tax assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|||
Other - net
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
0.2
|
|
|
0.1
|
|
|
1.1
|
|
|
0.9
|
|
|||
Total income tax expense
|
|
$
|
63.7
|
|
|
28.3
|
%
|
|
$
|
62.7
|
|
|
32.1
|
%
|
|
$
|
35.7
|
|
|
31.3
|
%
|
|
|
Year ended December 31
|
||||||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
Current tax expense:
|
|
|
|
|
|
|
||||||
U.S.
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
42.8
|
|
|
$
|
42.8
|
|
|
$
|
20.8
|
|
State
|
|
6.5
|
|
|
8.3
|
|
|
2.0
|
|
|||
Non-U.S.
|
|
9.7
|
|
|
8.7
|
|
|
9.6
|
|
|||
Current tax expense
|
|
59.0
|
|
|
59.8
|
|
|
32.4
|
|
|||
Deferred tax expense (benefit):
|
|
|
|
|
|
|
||||||
U.S.
|
|
|
|
|
|
|
||||||
Federal
|
|
5.1
|
|
|
4.3
|
|
|
3.7
|
|
|||
State
|
|
0.4
|
|
|
1.8
|
|
|
1.3
|
|
|||
Non-U.S.
|
|
(0.8
|
)
|
|
(3.2
|
)
|
|
(1.7
|
)
|
|||
Deferred tax expense, net
|
|
4.7
|
|
|
2.9
|
|
|
3.3
|
|
|||
Income tax expense
|
|
$
|
63.7
|
|
|
$
|
62.7
|
|
|
$
|
35.7
|
|
|
|
Year ended December 31
|
||||||||||
(in millions)
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||
U.S.
|
|
$
|
186.5
|
|
|
$
|
160.6
|
|
|
$
|
80.4
|
|
Non-U.S.
|
|
38.4
|
|
|
33.1
|
|
|
33.6
|
|
|||
Income before income taxes and equity in net income (loss) of unconsolidated entities
|
|
$
|
224.9
|
|
|
$
|
193.7
|
|
|
$
|
114.0
|
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Deferred tax assets:
|
|
|
|
|
||||
Stock-based compensation expense
|
|
$
|
2.6
|
|
|
$
|
3.1
|
|
Accrued liabilities
|
|
19.0
|
|
|
14.3
|
|
||
Deferred revenue
|
|
5.1
|
|
|
0.9
|
|
||
Net operating loss carryforwards - U.S. federal and state
|
|
12.9
|
|
|
7.6
|
|
||
Net operating loss carryforwards - Non-U.S.
|
|
3.0
|
|
|
3.7
|
|
||
Credits and incentive carryforwards
|
|
0.6
|
|
|
0.6
|
|
||
Deferred royalty revenue
|
|
0.3
|
|
|
0.3
|
|
||
Allowance for doubtful accounts
|
|
1.2
|
|
|
1.0
|
|
||
Deferred rent
|
|
10.3
|
|
|
8.9
|
|
||
Unrealized exchange losses, net
|
|
—
|
|
|
0.4
|
|
||
Total deferred tax assets
|
|
55.0
|
|
|
40.8
|
|
||
|
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
|
||||
Acquired intangible assets
|
|
(34.3
|
)
|
|
(13.2
|
)
|
||
Property, equipment, and capitalized software
|
|
(37.6
|
)
|
|
(28.1
|
)
|
||
Unrealized exchange gains, net
|
|
(0.1
|
)
|
|
—
|
|
||
Prepaid expenses
|
|
(5.3
|
)
|
|
(4.3
|
)
|
||
Investments in unconsolidated entities
|
|
(14.0
|
)
|
|
(13.7
|
)
|
||
Other
|
|
(0.3
|
)
|
|
(0.1
|
)
|
||
Total deferred tax liabilities
|
|
(91.6
|
)
|
|
(59.4
|
)
|
||
Net deferred tax liability before valuation allowance
|
|
(36.6
|
)
|
|
(18.6
|
)
|
||
Valuation allowance
|
|
(1.6
|
)
|
|
(1.2
|
)
|
||
Deferred tax liability, net
|
|
$
|
(38.2
|
)
|
|
$
|
(19.8
|
)
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Deferred tax liability, net
|
|
$
|
(38.2
|
)
|
|
$
|
(19.8
|
)
|
|
|
As of December 31
|
|
|
|
|||||
(in millions)
|
|
|
2016
|
|
|
2015
|
||||
|
|
|
Expiration Dates
|
|
|
Expiration Dates
|
||||
U.S. federal NOLs subject to expiration dates
|
|
$
|
36.9
|
|
2023-2036
|
|
$
|
21.6
|
|
2023-2034
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Non-U.S. NOLs subject to expiration dates from 2019 through 2036
|
|
$
|
3.8
|
|
|
$
|
2.9
|
|
Non-U.S. NOLs with no expiration date
|
|
10.8
|
|
|
15.5
|
|
||
Total
|
|
$
|
14.6
|
|
|
$
|
18.4
|
|
|
|
|
|
|
||||
Non-U.S. NOLs not subject to valuation allowances
|
|
$
|
6.8
|
|
|
$
|
12.1
|
|
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Gross unrecognized tax benefits - beginning of the year
|
|
$
|
14.5
|
|
|
$
|
11.9
|
|
Increases as a result of tax positions taken during a prior-year period
|
|
2.2
|
|
|
4.4
|
|
||
Decreases as a result of tax positions taken during a prior-year period
|
|
(0.1
|
)
|
|
(0.7
|
)
|
||
Increases as a result of tax positions taken during the current period
|
|
2.4
|
|
|
2.4
|
|
||
Decreases relating to settlements with tax authorities
|
|
—
|
|
|
(1.8
|
)
|
||
Reductions as a result of lapse of the applicable statute of limitations
|
|
(0.6
|
)
|
|
(1.7
|
)
|
||
Gross unrecognized tax benefits - end of the year
|
|
$
|
18.4
|
|
|
$
|
14.5
|
|
|
|
As of December 31
|
|
|
||||
(in millions)
|
|
2016
|
|
|
2015
|
|
||
Liabilities for interest and penalties
|
|
$
|
1.6
|
|
|
$
|
1.2
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
||||||||||||||
(in millions except per share amounts)
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
||||||||
Revenue
|
|
$
|
189.8
|
|
|
$
|
202.1
|
|
|
$
|
195.3
|
|
|
$
|
201.6
|
|
|
$
|
192.1
|
|
|
$
|
198.2
|
|
|
$
|
196.1
|
|
|
$
|
212.2
|
|
|
Total operating expense
|
|
145.3
|
|
|
152.4
|
|
|
149.1
|
|
|
151.5
|
|
|
149.8
|
|
|
153.8
|
|
|
151.9
|
|
|
162.3
|
|
|
||||||||
Operating income
|
|
44.5
|
|
|
49.7
|
|
|
46.2
|
|
|
50.1
|
|
|
42.3
|
|
|
44.4
|
|
|
44.2
|
|
|
49.9
|
|
|
||||||||
Non-operating income (expense), net
|
|
(0.4
|
)
|
|
0.6
|
|
|
1.4
|
|
|
1.4
|
|
|
0.5
|
|
|
3.0
|
|
|
2.1
|
|
|
38.5
|
|
(1)
|
||||||||
Income before income taxes and equity in net income (loss) of unconsolidated entities
|
|
44.1
|
|
|
50.3
|
|
|
47.6
|
|
|
51.5
|
|
|
42.8
|
|
|
47.4
|
|
|
46.3
|
|
|
88.4
|
|
|
||||||||
Equity in net income (loss) of unconsolidated entities
|
|
0.5
|
|
|
0.6
|
|
|
0.5
|
|
|
0.3
|
|
|
0.5
|
|
|
(0.2
|
)
|
|
0.4
|
|
|
(0.9
|
)
|
|
||||||||
Income tax expense
|
|
14.8
|
|
|
18.7
|
|
|
14.6
|
|
|
14.5
|
|
|
14.6
|
|
|
15.4
|
|
|
16.5
|
|
|
17.2
|
|
|
||||||||
Consolidated net income
|
|
29.8
|
|
|
32.2
|
|
|
33.5
|
|
|
37.3
|
|
|
28.7
|
|
|
31.8
|
|
|
30.2
|
|
|
70.3
|
|
|
||||||||
Net income attributable to the noncontrolling interests
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||
Net income attributable to Morningstar, Inc.
|
|
$
|
29.7
|
|
|
$
|
32.2
|
|
|
$
|
33.5
|
|
|
$
|
37.3
|
|
|
$
|
28.7
|
|
|
$
|
31.8
|
|
|
$
|
30.2
|
|
|
$
|
70.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income per share attributable to Morningstar, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
|
$
|
0.67
|
|
|
$
|
0.73
|
|
|
$
|
0.76
|
|
|
$
|
0.85
|
|
|
$
|
0.67
|
|
|
$
|
0.74
|
|
|
$
|
0.70
|
|
|
$
|
1.63
|
|
|
Diluted
|
|
$
|
0.67
|
|
|
$
|
0.72
|
|
|
$
|
0.76
|
|
|
$
|
0.85
|
|
|
$
|
0.67
|
|
|
$
|
0.73
|
|
|
$
|
0.70
|
|
|
$
|
1.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Dividends per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Dividends declared per common share
|
|
$
|
0.19
|
|
|
$
|
0.19
|
|
|
$
|
0.19
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.23
|
|
|
Dividends paid per common share
|
|
$
|
0.19
|
|
|
$
|
0.19
|
|
|
$
|
0.19
|
|
|
$
|
0.19
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
|
44.3
|
|
|
44.3
|
|
|
44.2
|
|
|
43.8
|
|
|
43.0
|
|
|
43.0
|
|
|
43.1
|
|
|
43.0
|
|
|
||||||||
Diluted
|
|
44.5
|
|
|
44.4
|
|
|
44.3
|
|
|
43.9
|
|
|
43.1
|
|
|
43.3
|
|
|
43.3
|
|
|
43.2
|
|
|
Report of KPMG LLP, Independent Registered Public Accounting Firm
|
|
|
|
Financial Statements:
|
|
|
Consolidated Statements of Income—Years ended December 31, 2016, 2015, and 2014
|
|
Consolidated Statements of Comprehensive Income—Years ended December 31, 2016, 2015, and 2014
|
|
Consolidated Balance Sheets—December 31, 2016 and 2015
|
|
Consolidated Statements of Equity—Years ended December 31, 2016, 2015, and 2014
|
|
Consolidated Statements of Cash Flows—Years ended December 31, 2016, 2015, and 2014
|
|
Notes to Consolidated Financial Statements
|
(in millions)
|
|
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,
|
|
|
|
|
|
|
|
|
||||||||
2016
|
|
$
|
1.8
|
|
|
$
|
1.3
|
|
|
$
|
(1.0
|
)
|
|
$
|
2.1
|
|
2015
|
|
1.5
|
|
|
0.5
|
|
|
(0.2
|
)
|
|
1.8
|
|
||||
2014
|
|
1.1
|
|
|
0.5
|
|
|
(0.1
|
)
|
|
1.5
|
|
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 September 30, 2016, are incorporated by reference to Exhibit 3.2.1 to our Current Report on Form 8-K that we filed with the SEC on October 4, 2016.
|
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, is incorporated by reference to Exhibit 10.2 to our Annual Report on Form 10-K for the year ended December 31, 2013.
|
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 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).
|
10.6*
|
|
|
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.
|
10.7*
|
|
|
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).
|
10.8*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Director Restricted Stock Unit Award Agreement, as amended and restated effective December 3, 2015 is incorporated by reference to Exhibit 10.12 to our Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 10-K).
|
10.9*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Performance Share Award Agreement, as amended and restated effective December 3, 2015, for awards made on March 15, 2014 is incorporated by reference to Exhibit 10.13 to the 2015 10-K.
|
10.10*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan Performance Share Award Agreement, as amended and restated effective December 3, 2015, for awards made on and after March 15, 2015 is incorporated by reference to Exhibit 10.14 to the 2015 10-K.
|
10.11†*
|
|
|
Form of Morningstar 2011 Stock Incentive Plan CEO Restricted Stock Unit Award Agreement for award made on January 3, 2017.
|
10.12
|
|
|
Settlement Agreement dated July 17, 2014 between Morningstar, Ibbotson Associates, and Business Logic is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K that we filed with the SEC on July 17, 2014.
|
10.13
|
|
|
Amended and Restated Credit Agreement dated as of November 4, 2016 among Morningstar, Inc., certain subsidiaries of Morningstar, Inc., and Bank of America, N.A. is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K that we filed with the SEC on November 8, 2016.
|
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, 2016, filed with the SEC on February 28, 2017, formatted in XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
|
|
|
MORNINGSTAR, INC.
|
|
|
|
|
|
|
By:
|
/s/ Kunal Kapoor
|
|
|
|
Kunal Kapoor
|
|
|
|
Title: Chief Executive Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Kunal Kapoor
|
|
Chief Executive Officer
|
|
February 28, 2017
|
Kunal Kapoor
|
|
(principal executive officer) and Director
|
|
|
|
|
|
|
|
/s/ Stéphane Biehler
|
|
Chief Financial Officer (principal
|
|
February 28, 2017
|
Stéphane Biehler
|
|
financial and accounting officer)
|
|
|
|
|
|
|
|
/s/ Joe Mansueto
|
|
Chairman of the Board
|
|
February 28, 2017
|
Joe Mansueto
|
|
|
|
|
|
|
|
|
|
/s/ Robin Diamonte
|
|
Director
|
|
February 28, 2017
|
Robin Diamonte
|
|
|
|
|
|
|
|
|
|
/s/ Cheryl Francis
|
|
Director
|
|
February 28, 2017
|
Cheryl Francis
|
|
|
|
|
|
|
|
|
|
/s/ Steven Kaplan
|
|
Director
|
|
February 28, 2017
|
Steven Kaplan
|
|
|
|
|
|
|
|
|
|
/s/ Gail Landis
|
|
Director
|
|
February 28, 2017
|
Gail Landis
|
|
|
|
|
|
|
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/s/ Bill Lyons
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Director
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February 28, 2017
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Bill Lyons
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/s/ Jack Noonan
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Director
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February 28, 2017
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Jack Noonan
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/s/ Paul Sturm
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Director
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February 28, 2017
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Paul Sturm
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/s/ Hugh Zentmyer
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Director
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February 28, 2017
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Hugh Zentmyer
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(1)
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MORNINGSTAR, INC.,
an Illinois corporation (the “Company”); and
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(2)
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The Participant identified in the Grant Notice.
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1.1
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In accordance with the terms of the Plan and subject to the terms and conditions of this Award Agreement, the Company hereby grants to the Participant the number of Restricted Stock Units specified in the Grant Notice.
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1.2
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Each Restricted Stock Unit is a notional amount that represents one unvested share of common stock, no par value, of the Company (a “Share”). Each Restricted Stock Unit constitutes the right, subject to the terms and conditions of the Plan and this Award Agreement, to distribution of a Share if and when the Restricted Stock Unit vests.
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1.3
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This Award Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Participant hereby agrees to be bound by the terms of this Award Agreement and the Plan.
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1.4
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Subject to, and except as otherwise provided by, this Award Agreement, including Section 3.2 hereof, the Restricted Stock Units subject to this Award Agreement shall vest in installments, with each installment becoming vested on the “Vesting Date” shown below, if the Participant has remained in continuous Service (as defined in Section 3.3 hereof) until that Vesting Date. Notwithstanding the foregoing, the Board or the Committee may cause
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Percentage of Restricted Stock Units
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Vesting Date
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20%
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First anniversary of Grant Date
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20%
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Second Anniversary of Grant Date
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20%
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Third Anniversary of Grant Date
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20%
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Fourth Anniversary of Grant Date
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20%
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Fifth Anniversary of Grant Date
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1.5
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Further details of the Restricted Stock Units granted to the Participant under the terms of this Award Agreement are set forth in the Grant Notice.
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2
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RIGHTS AS A SHAREHOLDER
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2.1
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Unless and until a Restricted Stock Unit has vested and the Share underlying it has been distributed to the Participant, the Participant will not be entitled to vote that Share or have any right to dividends, dividend equivalents or other distributions with respect to that Share; provided that the number and class of securities subject to this Award Agreement shall be subject to adjustment in accordance with Section 5.7 of the Plan.
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3
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TERMINATION OF SERVICE AND OTHER CHANGES IN SERVICE STATUS
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3.1
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If the Participant ceases to be Chief Executive Officer of the Company for any reason other than Disability or death, the Participant will forfeit the right to receive Shares underlying any Restricted Stock Units that have not vested at that time. Notwithstanding anything in the Plan to the contrary, for purposes of this Award Agreement, “Disability” shall mean the condition of being “disabled” as provided in Code Section 409A(a)(2)(C).
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3.2
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If the Participant ceases to be Chief Executive Officer of the Company on account of the Disability or death of the Participant, the Shares underlying all of the Restricted Stock Units awarded hereunder shall become immediately vested and be distributed to the Participant or the Participant’s beneficiary under the Plan as soon as practicable in accordance with Section 4.1 of this Award Agreement.
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4
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TIMING AND FORM OF PAYMENT
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4.1
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Once a Restricted Stock Unit vests, the Participant will be entitled to receive a Share in its place. Delivery of the Share will be made as soon as administratively feasible after its associated Restricted Stock Unit vests, but no later than 2½ months from the end of the calendar year in which such vesting occurs.
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5
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WITHHOLDING OBLIGATIONS
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5.1
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Without limiting the Company’s power or rights pursuant to Section 5.5 of the Plan, amounts required by tax law or regulation to be withheld by the Company with respect to any taxable event arising under this Award Agreement will be satisfied by having Shares withheld in accordance with Section 5.5 of the Plan. In addition, the Participant may elect to deliver to the Company the necessary funds to satisfy the withholding obligation, in which case there will be no reduction in the Shares otherwise distributable to the Participant.
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6
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NOTICES
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6.1
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Any notice or other communication required or permitted under this Award Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, or sent by overnight courier, at the sender's expense. Notice will be deemed given when delivered personally or, if mailed, three days after the date of deposit or, if sent by overnight courier, on the regular business day following the date sent. Notice to the Company should be sent to Morningstar, Inc., 22 West Washington Street, Chicago, Illinois, 60602, Attention: General Counsel. Notice to the Participant should be sent to the address of the Participant contained in the Company’s records. Either party may change the person and/or address to whom the other party must give notice by giving such other party written notice of such change, in accordance with the procedures described above.
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7
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CONSTRUCTION
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7.1
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The Restricted Stock Units granted hereunder are subject to any rules and regulations promulgated by the Committee pursuant to the Plan, now or hereafter in effect.
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7.2
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The Company and the Participant may amend this Award Agreement only by a written instrument signed by both parties, provided, that the Company may amend this Award Agreement without further action by the Participant if (i) such amendment is deemed by the Company to be advisable or necessary to comply with applicable law, rule, or, regulation, including Section 409A of the Code, or (ii) if such amendment is not to the detriment of the Participant.
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7.3
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The Participant shall agree to the terms of this Award Agreement by accepting the Grant Notice at the time and in the manner specified by the Company.
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Subsidiary
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Jurisdiction of Formation
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Corporate Fundamentals, Inc.
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Delaware
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HelloWallet Holdings, Inc.
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Delaware
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HelloWallet, LLC (1)
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Delaware
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Morningstar Global LLC
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Delaware
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Morningstar Investment Management LLC
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Delaware
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Morningstar Investment Services LLC (2)
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Delaware
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Morningstar Research Services LLC
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Delaware
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Pitchbook Data, Inc.
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Delaware
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RequiSight, LLC
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Delaware
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Morningstar Commodity Data, Inc.
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Illinois
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InvestSoft Technology, Inc.
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Massachusetts
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Morningstar Credit Ratings, LLC
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Pennsylvania
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Ibbotson Pty Limited (3)
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Australia
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Morningstar Investment Management Australia Limited (4)
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Australia
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Morningstar Australasia Pty Limited (5)
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Australia
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Morningstar Direct Investments (6)
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Australia
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Morningstar Group Australia Pty Limited (7)
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Australia
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Morningstar Brazil Financial Information Ltda. (7)
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Brazil
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Morningstar Associates, Inc. (8)
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Canada
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Morningstar Canada Group, Inc. (7)
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Canada
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Morningstar Research, Inc. (8)
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Canada
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Servicios Morningstar Chile Ltd. (7)
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Chile
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Morningstar Research (Shenzhen) Ltd. (9)
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China
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Morningstar Danmark A/S (10)
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Denmark
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Morningstar Danmark Holdings Aps (7)
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Denmark
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Morningstar France Holding SAS (7)
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France
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Morningstar France Fund Information SARL (11)
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France
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Seeds Group SAS (11)
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France
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Morningstar Investment Consulting France SAS (12)
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France
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Morningstar Deutschland GmbH (7)
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Germany
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Morningstar Asia, Ltd. (7)
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Hong Kong
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Morningstar Investment Management Asia Limited (2)
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Hong Kong
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Morningstar India Private Limited (13)
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India
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Morningstar Investment Adviser India Private Limited (2)
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India
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Morningstar Italy, S.R.L. (7)
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Italy
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Ibbotson Associates Japan K.K. (2)
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Japan
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Morningstar Korea, Ltd. (14)
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Korea
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Morningstar Associates Korea Co., Ltd. (15)
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Korea
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Morningstar Luxembourg SARL (7)
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Luxembourg
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Investigaciones MS Mexico, S. de R.L. de C.V. (7)
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Mexico
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Servicios MStar Global, S. de R.L. de C.V. (7)
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Mexico
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Morningstar Europe, B.V. (16)
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The Netherlands
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Morningstar Holland, B.V. (17)
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The Netherlands
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MStar Holdings C.V.
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The Netherlands
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Morningstar Research Limited (5)
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New Zealand
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Morningstar Norge AS (7)
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Norway
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Morningstar Investment Adviser Singapore Pte Limited (9).
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Singapore
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Morningstar Research Pte Limited (9)
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Singapore
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Morningstar Research (Proprietary) Limited (7)
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South Africa
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Morningstar Investment Management South Africa (Pty) Limited (2)
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South Africa
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Morningstar Network, S.L. (7)
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Spain
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Morningstar HoldCo AB (7)
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Sweden
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Morningstar Sweden AB (18)
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Sweden
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Morningstar Switzerland GmbH (7)
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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 (7)
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United Arab Emirates
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Morningstar Investment Management Europe Limited (2)
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United Kingdom
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Morningstar Europe, Ltd. (7)
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United Kingdom
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Morningstar U.K., Ltd. (7)
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United Kingdom
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Morningstar Real-Time Data Limited (19)
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United Kingdom
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Pitchbook Data Limited (20)
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United Kingdom
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Date:
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February 28, 2017
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/s/ Kunal Kapoor
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Kunal Kapoor
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Chief Executive Officer
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Date:
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February 28, 2017
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/s/ Stéphane Biehler
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Stéphane Biehler
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Chief Financial Officer
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1.
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The Company's Annual Report on Form 10-K for the year ended
December 31, 2016
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.
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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/ Kunal Kapoor
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Kunal Kapoor
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Chief Executive Officer
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Date: February 28, 2017
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1.
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The Company's Annual Report on Form 10-K for the year ended
December 31, 2016
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.
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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/ Stéphane Biehler
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Stéphane Biehler
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Chief Financial Officer
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Date: February 28, 2017
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