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Illinois
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36-3297908
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification Number)
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22 West Washington Street
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Chicago, Illinois
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60602
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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(Do not check if a smaller reporting company)
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Unaudited Condensed Consolidated Statements of Income for the three and six months ended June 30, 2017 and 2016
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Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016
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Unaudited Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016
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Unaudited Condensed Consolidated Statement of Equity for the six months ended June 30, 2017
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Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016
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PART 1.
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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Three months ended June 30
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Six months ended June 30
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||||||||||||
(in millions except per share amounts)
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2017
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2016
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2017
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2016
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Revenue
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$
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229.2
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$
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198.2
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$
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438.7
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$
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390.3
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Operating expense:
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Cost of revenue
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95.3
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86.1
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192.3
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171.4
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Sales and marketing
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36.7
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25.7
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69.1
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48.0
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General and administrative
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29.7
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24.7
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59.9
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50.3
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Depreciation and amortization
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21.5
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17.3
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43.0
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33.9
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Total operating expense
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183.2
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153.8
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364.3
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303.6
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Operating income
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46.0
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44.4
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74.4
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86.7
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Non-operating income:
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Interest income (expense), net
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(0.8
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)
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0.1
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(1.7
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)
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0.3
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Gain on sale of investments, reclassified from other comprehensive income
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0.3
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0.3
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0.8
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0.2
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Gain on sale of business
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17.5
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—
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17.5
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—
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Other income (expense), net
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(1.7
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)
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2.6
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(2.6
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)
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3.0
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Non-operating income, net
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15.3
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3.0
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14.0
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3.5
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Income before income taxes and equity in net income (loss) of unconsolidated entities
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61.3
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47.4
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88.4
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90.2
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Equity in net income (loss) of unconsolidated entities
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(0.2
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)
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(0.2
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)
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(1.0
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)
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0.3
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Income tax expense
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15.0
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15.4
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23.3
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30.0
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Consolidated net income
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$
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46.1
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$
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31.8
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$
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64.1
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$
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60.5
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Net income per share:
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Basic
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$
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1.07
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$
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0.74
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$
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1.49
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$
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1.41
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Diluted
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$
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1.07
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$
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0.73
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$
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1.49
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$
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1.40
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Dividends per common share:
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Dividends declared per common share
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$
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0.23
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$
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0.22
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$
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0.46
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$
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0.44
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Dividends paid per common share
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$
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0.23
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$
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0.22
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$
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0.46
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$
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0.44
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Weighted average shares outstanding:
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Basic
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42.9
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43.0
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42.9
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43.0
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Diluted
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43.1
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43.3
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43.2
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43.3
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Three months ended June 30
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Six months ended June 30
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||||||||||||
(in millions)
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2017
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2016
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2017
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2016
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||||
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Consolidated net income
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$
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46.1
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$
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31.8
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$
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64.1
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$
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60.5
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||||||||
Other comprehensive income (loss):
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||||||||
Foreign currency translation adjustment
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12.5
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(12.6
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)
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19.9
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(8.1
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)
|
||||
Unrealized gains (losses) on securities, net of tax:
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Unrealized holding gains arising during period
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1.0
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—
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2.6
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0.5
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|
||||
Reclassification gains included in net income
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(0.2
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)
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(0.3
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)
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(0.5
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)
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(0.2
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)
|
||||
Other comprehensive income (loss)
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13.3
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(12.9
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)
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22.0
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(7.8
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)
|
||||
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||||||||
Comprehensive income
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$
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59.4
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$
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18.9
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$
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86.1
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$
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52.7
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As of June 30
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As of December 31
|
||||
(in millions except share amounts)
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2017
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2016
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|
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Assets
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Current assets:
|
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Cash and cash equivalents
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$
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285.6
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$
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259.1
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Investments
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54.0
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44.9
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|
||
Accounts receivable, less allowance of $2.6 and $2.1, respectively
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143.6
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145.8
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|
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Other current assets
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24.2
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22.2
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Total current assets
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507.4
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472.0
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|
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Property, equipment, and capitalized software, less accumulated depreciation and amortization of $246.5 and $214.8, respectively
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153.9
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152.1
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|
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Investments in unconsolidated entities
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37.1
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40.3
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|
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Goodwill
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561.5
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556.8
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|
||
Intangible assets, net
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105.8
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120.9
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|
||
Other assets
|
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10.3
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|
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8.8
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|
||
Total assets
|
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$
|
1,376.0
|
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$
|
1,350.9
|
|
|
|
|
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|
||||
Liabilities and equity
|
|
|
|
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|
||
Current liabilities:
|
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|
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|
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Accounts payable and accrued liabilities
|
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$
|
46.2
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$
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44.6
|
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Accrued compensation
|
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63.7
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|
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71.7
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|
||
Deferred revenue
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185.3
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|
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165.4
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|
||
Other current liabilities
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6.6
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|
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13.2
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|
||
Total current liabilities
|
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301.8
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294.9
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|
||
Accrued compensation
|
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10.8
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|
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10.3
|
|
||
Deferred tax liability, net
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38.6
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|
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38.2
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|
||
Long-term debt
|
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230.0
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250.0
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|
||
Deferred rent
|
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23.4
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|
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24.8
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|
||
Other long-term liabilities
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32.3
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35.9
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|
||
Total liabilities
|
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636.9
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654.1
|
|
||
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|
||||
Equity:
|
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|
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|
||
Morningstar, Inc. shareholders’ equity:
|
|
|
|
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|
||
Common stock, no par value, 200,000,000 shares authorized, of which 42,656,167 and 42,932,994 shares were outstanding as of June 30, 2017 and December 31, 2016, respectively
|
|
—
|
|
|
—
|
|
||
Treasury stock at cost, 10,501,079 and 10,106,249 shares as of June 30, 2017 and December 31, 2016, respectively
|
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(697.6
|
)
|
|
(667.9
|
)
|
||
Additional paid-in capital
|
|
589.9
|
|
|
584.0
|
|
||
Retained earnings
|
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906.3
|
|
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861.9
|
|
||
Accumulated other comprehensive loss:
|
|
|
|
|
||||
Currency translation adjustment
|
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(61.4
|
)
|
|
(81.3
|
)
|
||
Unrealized gain (loss) on available-for-sale investments
|
|
1.9
|
|
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(0.2
|
)
|
||
Total accumulated other comprehensive loss
|
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(59.5
|
)
|
|
(81.5
|
)
|
||
Total Morningstar, Inc. shareholders’ equity
|
|
739.1
|
|
|
696.5
|
|
||
Noncontrolling interest
|
|
—
|
|
|
0.3
|
|
||
Total equity
|
|
739.1
|
|
|
696.8
|
|
||
Total liabilities and equity
|
|
$
|
1,376.0
|
|
|
$
|
1,350.9
|
|
|
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Morningstar, Inc. Shareholders’ Equity
|
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|||||||||||||||||||||||||
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Accumulated
Other
Comprehensive
Loss
|
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|
||||||||||||||||
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Common Stock
|
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|
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Additional
Paid-in
Capital
|
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Non-
Controlling
Interest
|
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|
|||||||||||||||
(in millions, except share amounts)
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Shares
Outstanding
|
|
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Par
Value
|
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Treasury
Stock
|
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|
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Retained
Earnings
|
|
|
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Total
Equity
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|||||||||||||||
Balance as of December 31, 2016
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42,932,994
|
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$
|
—
|
|
|
$
|
(667.9
|
)
|
|
$
|
584.0
|
|
|
$
|
861.9
|
|
|
$
|
(81.5
|
)
|
|
$
|
0.3
|
|
|
$
|
696.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64.1
|
|
|
—
|
|
|
—
|
|
|
64.1
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|||||||||||||||
Unrealized gain on available-for-sale investments, net of income tax of $0.9
|
|
|
|
—
|
|
|
—
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|
|
—
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|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
2.6
|
|
||||||||
Reclassification of adjustments for gain included in net income, net of income tax of $0.3
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
(0.5
|
)
|
||||||||
Foreign currency translation adjustment, net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19.9
|
|
|
—
|
|
|
19.9
|
|
||||||||
Other comprehensive income, net
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22.0
|
|
|
—
|
|
|
22.0
|
|
||||||||
Issuance of common stock related to option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units
|
|
130,086
|
|
|
—
|
|
|
1.0
|
|
|
(4.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.2
|
)
|
|||||||
Stock-based compensation
|
|
|
|
—
|
|
|
—
|
|
|
11.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11.0
|
|
||||||||
Common shares repurchased
|
|
(406,913
|
)
|
|
—
|
|
|
(30.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30.7
|
)
|
|||||||
Dividends declared
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19.7
|
)
|
|
—
|
|
|
—
|
|
|
(19.7
|
)
|
||||||||
Purchase of additional interest in majority-owned investment
|
|
|
|
—
|
|
|
—
|
|
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
(1.2
|
)
|
||||||||
Balance as of June 30, 2017
|
|
42,656,167
|
|
|
$
|
—
|
|
|
$
|
(697.6
|
)
|
|
$
|
589.9
|
|
|
$
|
906.3
|
|
|
$
|
(59.5
|
)
|
|
$
|
—
|
|
|
$
|
739.1
|
|
|
|
Six months ended June 30
|
||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
||
|
|
|
|
|
||||
Operating activities
|
|
|
|
|
|
|||
Consolidated net income
|
|
$
|
64.1
|
|
|
$
|
60.5
|
|
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
43.0
|
|
|
33.9
|
|
||
Deferred income taxes
|
|
(0.3
|
)
|
|
(0.2
|
)
|
||
Stock-based compensation expense
|
|
11.0
|
|
|
7.8
|
|
||
Provision for bad debt
|
|
1.0
|
|
|
0.2
|
|
||
Equity in net income (loss) of unconsolidated entities
|
|
1.0
|
|
|
(0.3
|
)
|
||
Gain on sale of business
|
|
(17.5
|
)
|
|
—
|
|
||
Other, net
|
|
1.8
|
|
|
(3.2
|
)
|
||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
3.3
|
|
|
1.0
|
|
||
Other assets
|
|
(5.0
|
)
|
|
(4.0
|
)
|
||
Accounts payable and accrued liabilities
|
|
(1.9
|
)
|
|
1.6
|
|
||
Accrued compensation
|
|
(8.4
|
)
|
|
(28.3
|
)
|
||
Income taxes—current
|
|
(5.3
|
)
|
|
(0.2
|
)
|
||
Deferred revenue
|
|
18.7
|
|
|
13.6
|
|
||
Deferred rent
|
|
(1.2
|
)
|
|
(1.4
|
)
|
||
Other liabilities
|
|
(2.1
|
)
|
|
1.8
|
|
||
Cash provided by operating activities
|
|
102.2
|
|
|
82.8
|
|
||
|
|
|
|
|
||||
Investing activities
|
|
|
|
|
|
|||
Purchases of investments
|
|
(16.2
|
)
|
|
(18.0
|
)
|
||
Proceeds from maturities and sales of investments
|
|
12.2
|
|
|
15.6
|
|
||
Capital expenditures
|
|
(33.3
|
)
|
|
(29.4
|
)
|
||
Acquisitions, net of cash acquired
|
|
(1.0
|
)
|
|
(15.8
|
)
|
||
Proceeds from sale of a business
|
|
23.7
|
|
|
—
|
|
||
Purchases of equity- and cost-method investments
|
|
(0.3
|
)
|
|
(16.4
|
)
|
||
Other, net
|
|
0.4
|
|
|
0.1
|
|
||
Cash used for investing activities
|
|
(14.5
|
)
|
|
(63.9
|
)
|
||
|
|
|
|
|
||||
Financing activities
|
|
|
|
|
|
|||
Common shares repurchased
|
|
(28.6
|
)
|
|
(38.8
|
)
|
||
Dividends paid
|
|
(19.7
|
)
|
|
(19.0
|
)
|
||
Proceeds from short-term debt
|
|
—
|
|
|
40.0
|
|
||
Repayment of long-term debt
|
|
(20.0
|
)
|
|
—
|
|
||
Proceeds from stock-option exercises
|
|
0.2
|
|
|
0.4
|
|
||
Employee taxes paid from withholding of restricted stock units
|
|
(3.4
|
)
|
|
(4.4
|
)
|
||
Other, net
|
|
(0.3
|
)
|
|
—
|
|
||
Cash used for financing activities
|
|
(71.8
|
)
|
|
(21.8
|
)
|
||
|
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
|
10.6
|
|
|
(1.8
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
26.5
|
|
|
(4.7
|
)
|
||
Cash and cash equivalents—beginning of period
|
|
259.1
|
|
|
207.1
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
285.6
|
|
|
$
|
202.4
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|||
Cash paid for income taxes
|
|
$
|
28.9
|
|
|
$
|
30.5
|
|
Cash paid for interest
|
|
$
|
2.5
|
|
|
$
|
0.5
|
|
Supplemental information of non-cash investing and financing activities:
|
|
|
|
|
||||
Unrealized gain on available-for-sale investments
|
|
$
|
2.7
|
|
|
$
|
0.4
|
|
Software and equipment obtained under long-term financing arrangement
|
|
$
|
2.0
|
|
|
$
|
3.4
|
|
|
|
(in millions)
|
|
|
Balance as of December 31, 2016
|
|
$
|
556.8
|
|
Divestiture of HelloWallet (See Note 5)
|
|
(2.4
|
)
|
|
Adjustments to purchase price allocation and foreign currency translation
|
|
7.1
|
|
|
Balance as of June 30, 2017
|
|
$
|
561.5
|
|
|
|
As of June 30, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
(in millions)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted
Average
Useful Life
(years)
|
||||||
Intellectual property
|
|
$
|
31.3
|
|
|
$
|
(28.3
|
)
|
|
$
|
3.0
|
|
|
9
|
|
$
|
30.9
|
|
|
$
|
(27.4
|
)
|
|
$
|
3.5
|
|
|
9
|
Customer-related assets
|
|
154.9
|
|
|
(103.3
|
)
|
|
51.6
|
|
|
12
|
|
152.0
|
|
|
(97.7
|
)
|
|
54.3
|
|
|
12
|
||||||
Supplier relationships
|
|
0.3
|
|
|
(0.2
|
)
|
|
0.1
|
|
|
20
|
|
0.2
|
|
|
(0.1
|
)
|
|
0.1
|
|
|
20
|
||||||
Technology-based assets
|
|
127.4
|
|
|
(76.8
|
)
|
|
50.6
|
|
|
7
|
|
133.2
|
|
|
(72.1
|
)
|
|
61.1
|
|
|
7
|
||||||
Non-competition agreements
|
|
2.4
|
|
|
(1.9
|
)
|
|
0.5
|
|
|
5
|
|
5.0
|
|
|
(3.1
|
)
|
|
1.9
|
|
|
5
|
||||||
Total intangible assets
|
|
$
|
316.3
|
|
|
$
|
(210.5
|
)
|
|
$
|
105.8
|
|
|
10
|
|
$
|
321.3
|
|
|
$
|
(200.4
|
)
|
|
$
|
120.9
|
|
|
10
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Amortization expense
|
|
$
|
6.1
|
|
|
$
|
4.7
|
|
|
$
|
12.6
|
|
|
$
|
9.8
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions, except per share amounts)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
||||||
Consolidated net income
|
|
$
|
46.1
|
|
|
$
|
31.8
|
|
|
$
|
64.1
|
|
|
$
|
60.5
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
42.9
|
|
|
43.0
|
|
|
42.9
|
|
|
43.0
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share
|
|
$
|
1.07
|
|
|
$
|
0.74
|
|
|
$
|
1.49
|
|
|
$
|
1.41
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per share:
|
|
|
|
|
|
|
|
|
||||||||
Consolidated net income
|
|
$
|
46.1
|
|
|
$
|
31.8
|
|
|
$
|
64.1
|
|
|
$
|
60.5
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
42.9
|
|
|
43.0
|
|
|
42.9
|
|
|
43.0
|
|
||||
Net effect of dilutive stock options, restricted stock units, and performance share awards
|
|
0.2
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
||||
Weighted average common shares outstanding for computing diluted income per share
|
|
43.1
|
|
|
43.3
|
|
|
43.2
|
|
|
43.3
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per share
|
|
$
|
1.07
|
|
|
$
|
0.73
|
|
|
$
|
1.49
|
|
|
$
|
1.40
|
|
External revenue by geographical area
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
United States
|
|
$
|
174.7
|
|
|
$
|
145.3
|
|
|
$
|
331.6
|
|
|
$
|
287.1
|
|
|
|
|
|
|
|
|
|
|
||||||||
United Kingdom
|
|
15.6
|
|
|
15.3
|
|
|
30.5
|
|
|
30.6
|
|
||||
Continental Europe
|
|
16.5
|
|
|
15.8
|
|
|
32.8
|
|
|
31.3
|
|
||||
Australia
|
|
8.6
|
|
|
8.9
|
|
|
16.7
|
|
|
15.8
|
|
||||
Canada
|
|
7.2
|
|
|
6.9
|
|
|
14.5
|
|
|
13.5
|
|
||||
Asia
|
|
5.5
|
|
|
5.0
|
|
|
10.4
|
|
|
10.1
|
|
||||
Other
|
|
1.1
|
|
|
1.0
|
|
|
2.2
|
|
|
1.9
|
|
||||
Total International
|
|
54.5
|
|
|
52.9
|
|
|
107.1
|
|
|
103.2
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Consolidated revenue
|
|
$
|
229.2
|
|
|
$
|
198.2
|
|
|
$
|
438.7
|
|
|
$
|
390.3
|
|
Long-lived assets by geographical area
|
|
|
|
|
||||
|
|
As of June 30
|
|
As of December 31
|
||||
(in millions)
|
|
2017
|
|
|
2016
|
|
||
United States
|
|
$
|
139.6
|
|
|
$
|
139.1
|
|
|
|
|
|
|
||||
United Kingdom
|
|
6.3
|
|
|
6.6
|
|
||
Continental Europe
|
|
1.8
|
|
|
1.9
|
|
||
Australia
|
|
0.5
|
|
|
0.6
|
|
||
Canada
|
|
0.3
|
|
|
0.4
|
|
||
Asia
|
|
5.3
|
|
|
3.4
|
|
||
Other
|
|
0.1
|
|
|
0.1
|
|
||
Total International
|
|
14.3
|
|
|
13.0
|
|
||
|
|
|
|
|
||||
Consolidated property, equipment, and capitalized software, net
|
|
$
|
153.9
|
|
|
$
|
152.1
|
|
|
|
As of June 30
|
|
As of December 31
|
||||
(in millions)
|
|
2017
|
|
|
2016
|
|
||
Available-for-sale
|
|
$
|
31.3
|
|
|
$
|
27.7
|
|
Held-to-maturity
|
|
21.1
|
|
|
15.7
|
|
||
Trading securities
|
|
1.6
|
|
|
1.5
|
|
||
Total
|
|
$
|
54.0
|
|
|
$
|
44.9
|
|
|
|
As of June 30, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||||||||||
(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
|
|
$
|
26.5
|
|
|
$
|
2.8
|
|
|
$
|
(0.4
|
)
|
|
$
|
28.9
|
|
|
$
|
25.6
|
|
|
$
|
1.3
|
|
|
$
|
(1.5
|
)
|
|
$
|
25.4
|
|
Mutual funds
|
|
2.1
|
|
|
0.3
|
|
|
—
|
|
|
2.4
|
|
|
2.2
|
|
|
0.1
|
|
|
—
|
|
|
2.3
|
|
||||||||
Total
|
|
$
|
28.6
|
|
|
$
|
3.1
|
|
|
$
|
(0.4
|
)
|
|
$
|
31.3
|
|
|
$
|
27.8
|
|
|
$
|
1.4
|
|
|
$
|
(1.5
|
)
|
|
$
|
27.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Certificates of deposit
|
|
$
|
19.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19.2
|
|
|
$
|
13.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13.8
|
|
Convertible note
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
||||||||
Total
|
|
$
|
21.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21.1
|
|
|
$
|
15.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15.7
|
|
|
|
As of June 30, 2017
|
|
As of December 31, 2016
|
||||||||||||
(in millions)
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities, exchange-traded funds, and mutual funds
|
|
$
|
28.6
|
|
|
$
|
31.3
|
|
|
$
|
27.8
|
|
|
$
|
27.7
|
|
Total
|
|
$
|
28.6
|
|
|
$
|
31.3
|
|
|
$
|
27.8
|
|
|
$
|
27.7
|
|
|
|
|
|
|
|
|
|
|
||||||||
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
19.0
|
|
|
$
|
19.0
|
|
|
$
|
13.8
|
|
|
$
|
13.8
|
|
Due in one to three years
|
|
2.1
|
|
|
2.1
|
|
|
1.9
|
|
|
1.9
|
|
||||
Total
|
|
$
|
21.1
|
|
|
$
|
21.1
|
|
|
$
|
15.7
|
|
|
$
|
15.7
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Realized gains
|
|
$
|
0.4
|
|
|
$
|
0.6
|
|
|
$
|
0.9
|
|
|
$
|
1.1
|
|
Realized losses
|
|
(0.1
|
)
|
|
(0.3
|
)
|
|
(0.1
|
)
|
|
(0.9
|
)
|
||||
Realized gains, net
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
|
$
|
0.8
|
|
|
$
|
0.2
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Unrealized gains, net
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
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 June 30, 2017
|
||||||||||||
|
|
as of
|
|
Using Fair Value Hierarchy
|
||||||||||||
(in millions)
|
|
June 30, 2017
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity securities and exchange-traded funds
|
|
$
|
28.9
|
|
|
$
|
28.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mutual funds
|
|
2.4
|
|
|
2.4
|
|
|
—
|
|
|
—
|
|
||||
Trading securities
|
|
1.6
|
|
|
1.6
|
|
|
—
|
|
|
—
|
|
||||
Cash equivalents
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
33.2
|
|
|
$
|
33.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
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
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Cost of revenue
|
|
$
|
2.3
|
|
|
$
|
2.0
|
|
|
$
|
4.4
|
|
|
$
|
4.0
|
|
Sales and marketing
|
|
0.7
|
|
|
0.5
|
|
|
1.4
|
|
|
1.0
|
|
||||
General and administrative
|
|
2.7
|
|
|
1.3
|
|
|
5.2
|
|
|
2.8
|
|
||||
Total stock-based compensation expense
|
|
$
|
5.7
|
|
|
$
|
3.8
|
|
|
$
|
11.0
|
|
|
$
|
7.8
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Income before income taxes and equity in net income (loss) of unconsolidated entities
|
|
$
|
61.3
|
|
|
$
|
47.4
|
|
|
$
|
88.4
|
|
|
$
|
90.2
|
|
Equity in net income (loss) of unconsolidated entities
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
(1.0
|
)
|
|
0.3
|
|
||||
Total
|
|
$
|
61.1
|
|
|
$
|
47.2
|
|
|
$
|
87.4
|
|
|
$
|
90.5
|
|
Income tax expense
|
|
$
|
15.0
|
|
|
$
|
15.4
|
|
|
$
|
23.3
|
|
|
$
|
30.0
|
|
Effective tax rate
|
|
24.5
|
%
|
|
32.7
|
%
|
|
26.7
|
%
|
|
33.2
|
%
|
|
|
As of June 30
|
|
As of December 31
|
||||
(in millions)
|
|
2017
|
|
|
2016
|
|
||
Gross unrecognized tax benefits
|
|
$
|
19.0
|
|
|
$
|
18.4
|
|
Gross unrecognized tax benefits that would affect income tax expense
|
|
$
|
15.4
|
|
|
$
|
14.4
|
|
Decrease in income tax expense upon recognition of gross unrecognized tax benefits
|
|
$
|
14.2
|
|
|
$
|
13.3
|
|
|
|
As of June 30
|
|
As of December 31
|
||||
Liabilities for Unrecognized Tax Benefits (in millions)
|
|
2017
|
|
|
2016
|
|
||
Current liability
|
|
$
|
9.1
|
|
|
$
|
8.9
|
|
Non-current liability
|
|
6.3
|
|
|
5.4
|
|
||
Total liability for unrecognized tax benefits
|
|
$
|
15.4
|
|
|
$
|
14.3
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
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;
|
•
|
allegations about possible conflicts of interest;
|
•
|
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 associated with 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;
|
•
|
an 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.
|
•
|
Subscriptions and license agreements, which typically generate recurring revenue;
|
•
|
Asset-based fees for our investment management business; and
|
•
|
Transaction-based revenue for products that involve one-time, non-recurring revenue.
|
|
|
|
As of June 30
|
|
|
|
|
|
|
||||||||||||||
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
|
|
|
|
|
||||||||
Our business
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Morningstar.com Premium Membership subscriptions (U.S.)
|
|
118,571
|
|
|
119,019
|
|
|
(0.4
|
)%
|
|
|
|
|
|
|
||||||||
Morningstar.com average monthly unique users (U.S.)
|
|
1,917,739
|
|
|
1,947,247
|
|
|
(1.5
|
)%
|
|
|
|
|
|
|
||||||||
Advisor Workstation clients (U.S.)
|
|
185
|
|
|
187
|
|
|
(1.1
|
)%
|
|
|
|
|
|
|
||||||||
Morningstar Office licenses (U.S.)
|
|
4,274
|
|
|
4,157
|
|
|
2.8
|
%
|
|
|
|
|
|
|
||||||||
Morningstar Direct licenses
|
|
13,222
|
|
|
12,064
|
|
|
9.6
|
%
|
|
|
|
|
|
|
||||||||
PitchBook Platform licenses
|
|
11,309
|
|
|
8,269
|
|
(1)
|
36.8
|
%
|
|
|
|
|
|
|
||||||||
Assets under advisement and management (approximate) ($bil)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Workplace Solutions (Retirement)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Managed Accounts
(3)
|
|
$
|
50.2
|
|
|
$
|
43.3
|
|
|
15.9
|
%
|
|
|
|
|
|
|
|||||
|
Plan Sponsor Advice
|
|
38.2
|
|
|
32.0
|
|
|
19.4
|
%
|
|
|
|
|
|
|
|||||||
|
Custom Models
|
|
25.8
|
|
|
19.7
|
|
|
31.0
|
%
|
|
|
|
|
|
|
|||||||
|
Workplace Solutions (total)
|
|
$
|
114.2
|
|
|
$
|
95.0
|
|
|
20.2
|
%
|
|
|
|
|
|
|
|||||
|
Morningstar Investment Management
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Morningstar Managed Portfolios
|
|
$
|
35.0
|
|
|
$
|
27.8
|
|
(4)
|
25.9
|
%
|
|
|
|
|
|
|
|||||
|
Institutional Asset Management
|
|
53.7
|
|
|
58.6
|
|
(5)
|
(8.4
|
)%
|
|
|
|
|
|
|
|||||||
|
Asset Allocation Services
|
|
8.3
|
|
|
8.7
|
|
(5)
|
(4.6
|
)%
|
|
|
|
|
|
|
|||||||
|
Manager Selection Services
|
|
1.3
|
|
|
1.3
|
|
(5)
|
—
|
%
|
|
|
|
|
|
|
|||||||
|
Morningstar Investment Management (total)
|
|
$
|
98.3
|
|
|
$
|
96.4
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Our employees (approximate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Worldwide headcount
|
|
4,675
|
|
(6)
|
4,010
|
|
(7)
|
16.6
|
%
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
||||||
Key product revenue
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Morningstar Data
|
|
$
|
40.6
|
|
|
$
|
38.2
|
|
|
6.2
|
%
|
|
$
|
78.9
|
|
|
$
|
74.8
|
|
|
5.4
|
%
|
|
Morningstar Direct
|
|
30.7
|
|
|
27.3
|
|
|
12.7
|
%
|
|
59.8
|
|
|
54.3
|
|
|
10.1
|
%
|
|||||
Morningstar Investment Management
|
|
26.8
|
|
|
24.5
|
|
|
9.7
|
%
|
|
51.8
|
|
|
49.1
|
|
|
5.5
|
%
|
|||||
Morningstar Advisor Workstation
|
|
22.8
|
|
|
20.6
|
|
|
10.6
|
%
|
|
42.6
|
|
|
41.2
|
|
|
3.4
|
%
|
|||||
Workplace Solutions
|
|
19.0
|
|
|
16.7
|
|
|
13.4
|
%
|
|
36.9
|
|
|
33.0
|
|
|
12.0
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue by Type
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
License-based
(9)
|
|
$
|
165.6
|
|
|
$
|
142.1
|
|
|
16.5
|
%
|
|
$
|
321.0
|
|
|
$
|
281.5
|
|
|
14.0
|
%
|
|
Asset-based
(10)
|
|
46.9
|
|
|
41.3
|
|
|
13.5
|
%
|
|
90.5
|
|
|
82.2
|
|
|
10.1
|
%
|
|||||
Transaction-based
(11)
|
|
16.7
|
|
|
14.8
|
|
|
13.1
|
%
|
|
27.2
|
|
|
26.6
|
|
|
2.1
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Average assets under management and advisement ($bil)
|
|
$
|
209.4
|
|
|
$
|
185.7
|
|
|
12.8
|
%
|
|
$
|
206.6
|
|
|
$
|
187.1
|
|
|
10.4
|
%
|
|
Number of new-issue ratings completed
(12)
|
|
20
|
|
|
15
|
|
|
33.3
|
%
|
|
27
|
|
|
26
|
|
|
3.8
|
%
|
|||||
Asset value of new-issue ratings ($bil)
(12)
|
|
$
|
8.6
|
|
|
$
|
4.8
|
|
|
79.2
|
%
|
|
$
|
14.5
|
|
|
$
|
10.3
|
|
|
40.8
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
Key Metrics (in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
||||
Revenue
|
|
$
|
229.2
|
|
|
$
|
198.2
|
|
|
15.6
|
%
|
|
$
|
438.7
|
|
|
$
|
390.3
|
|
|
12.4
|
%
|
|
Operating income
|
|
$
|
46.0
|
|
|
$
|
44.4
|
|
|
3.4
|
%
|
|
$
|
74.4
|
|
|
$
|
86.7
|
|
|
(14.2
|
)%
|
|
Operating margin
|
|
20.0
|
%
|
|
22.4
|
%
|
|
(2.4
|
)
|
pp
|
17.0
|
%
|
|
22.2
|
%
|
|
(5.2
|
)
|
pp
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by operating activities
|
|
$
|
55.7
|
|
|
$
|
71.4
|
|
|
(22.0
|
)%
|
|
$
|
102.2
|
|
|
$
|
82.8
|
|
|
23.4
|
%
|
|
Capital expenditures
|
|
(19.0
|
)
|
|
(15.9
|
)
|
|
19.5
|
%
|
|
(33.3
|
)
|
|
(29.4
|
)
|
|
13.3
|
%
|
|
||||
Free cash flow
|
|
$
|
36.7
|
|
|
$
|
55.5
|
|
|
(33.9
|
)%
|
|
$
|
68.9
|
|
|
$
|
53.4
|
|
|
29.0
|
%
|
|
•
|
consolidated revenue excluding acquisitions, divestitures, and the effect of foreign currency translations (organic revenue);
|
•
|
consolidated international revenue excluding acquisitions, divestitures, and the effect of foreign currency translations (international organic revenue);
|
•
|
consolidated operating income excluding PitchBook (adjusted operating income);
|
•
|
consolidated operating margin excluding PitchBook (adjusted operating margin); and
|
•
|
free cash flow.
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
||||
Consolidated revenue
|
|
$
|
229.2
|
|
|
$
|
198.2
|
|
|
15.6
|
%
|
|
$
|
438.7
|
|
|
$
|
390.3
|
|
|
12.4
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
||||
Consolidated revenue
|
|
$
|
229.2
|
|
|
$
|
198.2
|
|
|
15.6
|
%
|
|
$
|
438.7
|
|
|
$
|
390.3
|
|
|
12.4
|
%
|
Less: acquisitions
|
|
(15.2
|
)
|
|
—
|
|
|
NMF
|
|
|
(28.5
|
)
|
|
—
|
|
|
NMF
|
|
||||
Less: divestitures
|
|
—
|
|
|
—
|
|
|
NMF
|
|
|
—
|
|
|
—
|
|
|
NMF
|
|
||||
Unfavorable effect of foreign currency translations
|
|
2.5
|
|
|
—
|
|
|
NMF
|
|
|
4.4
|
|
|
—
|
|
|
NMF
|
|
||||
Organic revenue
|
|
$
|
216.5
|
|
|
$
|
198.2
|
|
|
9.2
|
%
|
|
$
|
414.6
|
|
|
$
|
390.3
|
|
|
6.2
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
||||
United States
|
|
$
|
174.7
|
|
|
$
|
145.3
|
|
|
20.2
|
%
|
|
$
|
331.6
|
|
|
$
|
287.1
|
|
|
15.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
United Kingdom
|
|
15.6
|
|
|
15.3
|
|
|
2.0
|
%
|
|
30.5
|
|
|
30.6
|
|
|
(0.3
|
)%
|
||||
Continental Europe
|
|
16.5
|
|
|
15.8
|
|
|
4.4
|
%
|
|
32.8
|
|
|
31.3
|
|
|
4.8
|
%
|
||||
Australia
|
|
8.6
|
|
|
8.9
|
|
|
(3.4
|
)%
|
|
16.7
|
|
|
15.8
|
|
|
5.7
|
%
|
||||
Canada
|
|
7.2
|
|
|
6.9
|
|
|
4.3
|
%
|
|
14.5
|
|
|
13.5
|
|
|
7.4
|
%
|
||||
Asia
|
|
5.5
|
|
|
5.0
|
|
|
10.0
|
%
|
|
10.4
|
|
|
10.1
|
|
|
3.0
|
%
|
||||
Other
|
|
1.1
|
|
|
1.0
|
|
|
10.0
|
%
|
|
2.2
|
|
|
1.9
|
|
|
15.8
|
%
|
||||
Total International
|
|
54.5
|
|
|
52.9
|
|
|
3.0
|
%
|
|
107.1
|
|
|
103.2
|
|
|
3.8
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated revenue
|
|
$
|
229.2
|
|
|
$
|
198.2
|
|
|
15.6
|
%
|
|
$
|
438.7
|
|
|
$
|
390.3
|
|
|
12.4
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
||||
Cost of revenue
|
|
$
|
95.3
|
|
|
$
|
86.1
|
|
|
10.7
|
%
|
|
$
|
192.3
|
|
|
$
|
171.4
|
|
|
12.2
|
%
|
|
% of consolidated revenue
|
|
41.6
|
%
|
|
43.4
|
%
|
|
(1.8
|
)
|
pp
|
43.8
|
%
|
|
43.9
|
%
|
|
(0.1
|
)
|
pp
|
||||
Sales and marketing
|
|
36.7
|
|
|
25.7
|
|
|
42.8
|
%
|
|
69.1
|
|
|
48.0
|
|
|
43.9
|
%
|
|
||||
% of consolidated revenue
|
|
16.0
|
%
|
|
13.0
|
%
|
|
3.0
|
|
pp
|
15.7
|
%
|
|
12.3
|
%
|
|
3.4
|
|
pp
|
||||
General and administrative
|
|
29.7
|
|
|
24.7
|
|
|
20.3
|
%
|
|
59.9
|
|
|
50.3
|
|
|
19.2
|
%
|
|
||||
% of consolidated revenue
|
|
13.0
|
%
|
|
12.5
|
%
|
|
0.5
|
|
pp
|
13.7
|
%
|
|
12.9
|
%
|
|
0.8
|
|
pp
|
||||
Depreciation and amortization
|
|
21.5
|
|
|
17.3
|
|
|
24.6
|
%
|
|
43.0
|
|
|
33.9
|
|
|
27.1
|
%
|
|
||||
% of consolidated revenue
|
|
9.4
|
%
|
|
8.7
|
%
|
|
0.7
|
|
pp
|
9.8
|
%
|
|
8.7
|
%
|
|
1.1
|
|
pp
|
||||
Total operating expense
|
|
$
|
183.2
|
|
|
$
|
153.8
|
|
|
19.2
|
%
|
|
$
|
364.3
|
|
|
$
|
303.6
|
|
|
20.0
|
%
|
|
% of consolidated revenue
|
|
80.0
|
%
|
|
77.6
|
%
|
|
2.4
|
|
pp
|
83.0
|
%
|
|
77.8
|
%
|
|
5.2
|
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
||||
Operating income
|
|
$
|
46.0
|
|
|
$
|
44.4
|
|
|
3.4
|
%
|
|
$
|
74.4
|
|
|
$
|
86.7
|
|
|
(14.2
|
)%
|
|
% of revenue
|
|
20.0
|
%
|
|
22.4
|
%
|
|
(2.4
|
)
|
pp
|
17.0
|
%
|
|
22.2
|
%
|
|
(5.2
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
($000)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
||||
Operating income
|
|
$
|
46.0
|
|
|
$
|
44.4
|
|
|
3.4
|
%
|
|
$
|
74.4
|
|
|
$
|
86.7
|
|
|
(14.2
|
)%
|
Add back: management bonus plan expense
|
|
1.8
|
|
|
—
|
|
|
—
|
|
|
3.5
|
|
|
—
|
|
|
—
|
|
||||
Add back: intangible amortization
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
—
|
|
||||
Add back: other operating income, net for PitchBook
|
|
(2.8
|
)
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
||||
Adjusted operating income
|
|
$
|
47.7
|
|
|
$
|
44.4
|
|
|
7.1
|
%
|
|
$
|
81.6
|
|
|
$
|
86.7
|
|
|
(5.9
|
)%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||||||
($000)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
Operating margin
|
|
20.0
|
%
|
|
22.4
|
%
|
|
(2.4
|
)
|
pp
|
17.0
|
%
|
|
22.2
|
%
|
|
(5.2
|
)
|
pp
|
Add back: management bonus plan expense
|
|
0.6
|
%
|
|
—
|
%
|
|
0.6
|
|
pp
|
0.7
|
%
|
|
—
|
%
|
|
0.7
|
|
pp
|
Add back: intangible amortization
|
|
1.0
|
%
|
|
—
|
%
|
|
1.0
|
|
pp
|
1.1
|
%
|
|
—
|
%
|
|
1.1
|
|
pp
|
Add back: other operating income, net for PitchBook
|
|
0.6
|
%
|
|
—
|
%
|
|
0.6
|
|
pp
|
1.1
|
%
|
|
—
|
%
|
|
1.1
|
|
pp
|
Adjusted operating margin
|
|
22.2
|
%
|
|
22.4
|
%
|
|
(0.2
|
)
|
pp
|
19.9
|
%
|
|
22.2
|
%
|
|
(2.3
|
)
|
pp
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Interest income
|
|
$
|
0.5
|
|
|
$
|
0.4
|
|
|
$
|
0.8
|
|
|
$
|
0.8
|
|
Interest expense
|
|
(1.3
|
)
|
|
(0.3
|
)
|
|
(2.5
|
)
|
|
(0.5
|
)
|
||||
Gain on sale of investments, net
|
|
0.3
|
|
|
0.3
|
|
|
0.8
|
|
|
0.2
|
|
||||
Gain on sale of business
|
|
17.5
|
|
|
—
|
|
|
17.5
|
|
|
—
|
|
||||
Other income (expense), net
|
|
(1.7
|
)
|
|
2.6
|
|
|
(2.6
|
)
|
|
3.0
|
|
||||
Non-operating income, net
|
|
$
|
15.3
|
|
|
$
|
3.0
|
|
|
$
|
14.0
|
|
|
$
|
3.5
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Equity in net income (loss) of unconsolidated entities
|
|
$
|
(0.2
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
0.3
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Income before income taxes and equity in net income (loss) of unconsolidated entities
|
|
$
|
61.3
|
|
|
$
|
47.4
|
|
|
$
|
88.4
|
|
|
$
|
90.2
|
|
Equity in net income (loss) of unconsolidated entities
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
(1.0
|
)
|
|
0.3
|
|
||||
Total
|
|
$
|
61.1
|
|
|
$
|
47.2
|
|
|
$
|
87.4
|
|
|
$
|
90.5
|
|
Income tax expense
|
|
$
|
15.0
|
|
|
$
|
15.4
|
|
|
$
|
23.3
|
|
|
$
|
30.0
|
|
Effective tax rate
|
|
24.5
|
%
|
|
32.7
|
%
|
|
26.7
|
%
|
|
33.2
|
%
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
||||||||||||||||||
(in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
||||
Cash provided by operating activities
|
|
$
|
55.7
|
|
|
$
|
71.4
|
|
|
(22.0
|
)%
|
|
$
|
102.2
|
|
|
$
|
82.8
|
|
|
23.4
|
%
|
Capital expenditures
|
|
(19.0
|
)
|
|
(15.9
|
)
|
|
19.5
|
%
|
|
(33.3
|
)
|
|
(29.4
|
)
|
|
13.3
|
%
|
||||
Free cash flow
|
|
$
|
36.7
|
|
|
$
|
55.5
|
|
|
(33.9
|
)%
|
|
$
|
68.9
|
|
|
$
|
53.4
|
|
|
29.0
|
%
|
Name and Position
|
|
Date of
Plan
|
|
Plan Termination Date
|
|
Number of
Shares
to be
Sold under
the Plan
|
|
|
Timing of Sales under the Plan
|
|
Number of Shares Sold under the Plan through July 15, 2017
|
|
|
Projected
Beneficial
Ownership (1)
|
|
Bevin Desmond Head of Global Markets & HR
|
|
5/26/2017
|
|
12/31/2017
|
|
3,002
|
|
|
Shares to be sold under the plan on specified dates
|
|
—
|
|
|
29,363
|
|
Steven Kaplan Director
|
|
4/25/2017
|
|
12/21/2017
|
|
7,500
|
|
|
Shares to be sold under the plan on specified dates
|
|
—
|
|
|
43,003
|
|
Gail Landis Director
|
|
11/15/2016
|
|
2/28/2018
|
|
1,500
|
|
|
Shares to be sold under the plan if the stock reaches specified prices
|
|
—
|
|
|
4,703
|
|
Tricia Rothschild Chief Product Officer
|
|
5/16/2017
|
|
8/31/2017
|
|
500
|
|
|
Shares to be sold under the plan on a specified date
|
|
—
|
|
|
4,840
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
|
|
Six months ended June 30, 2017
|
||||||||||||||
(in millions, except foreign currency rates)
|
|
Euro
|
|
British Pound
|
|
Australian Dollar
|
|
Other Foreign Currencies
|
||||||||
Currency rate in U.S. dollars as of June 30, 2017
|
|
1.1424
|
|
|
1.3004
|
|
|
0.7687
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Percentage of revenue
|
|
4.9
|
%
|
|
6.9
|
%
|
|
3.7
|
%
|
|
8.9
|
%
|
||||
Percentage of operating income (loss)
|
|
10.9
|
%
|
|
(0.1
|
)%
|
|
4.6
|
%
|
|
(9.3
|
)%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Estimated effect of a 10% adverse currency fluctuation on revenue
|
|
$
|
(1.1
|
)
|
|
$
|
(2.2
|
)
|
|
$
|
(1.4
|
)
|
|
$
|
(3.1
|
)
|
Estimated effect of a 10% adverse currency fluctuation on operating income (loss)
|
|
$
|
(0.4
|
)
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
|
$
|
0.8
|
|
|
|
As of June 30, 2017
|
||||||||||||||
(in millions)
|
|
Euro
|
|
British Pound
|
|
Australian Dollar
|
|
Other Foreign Currencies
|
||||||||
Assets, net of unconsolidated entities
|
|
$
|
83.6
|
|
|
$
|
137.9
|
|
|
$
|
77.2
|
|
|
$
|
156.4
|
|
Liabilities
|
|
34.6
|
|
|
35.2
|
|
|
52.1
|
|
|
52.8
|
|
||||
Net currency position
|
|
$
|
49.0
|
|
|
$
|
102.7
|
|
|
$
|
25.1
|
|
|
$
|
103.6
|
|
|
|
|
|
|
|
|
|
|
||||||||
Estimated effect of a 10% adverse currency fluctuation on equity
|
|
$
|
(4.9
|
)
|
|
$
|
(10.3
|
)
|
|
$
|
(2.5
|
)
|
|
$
|
(10.4
|
)
|
Item 4.
|
Controls and Procedures
|
(a)
|
Evaluation and Disclosure Controls and Procedures
|
(b)
|
Changes in Internal Control Over Financial Reporting
|
PART 2.
|
OTHER INFORMATION
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period:
|
|
Total number
of shares
purchased
|
|
|
Average
price paid
per share
|
|
|
Total number
of shares
purchased as
part of publicly
announced
programs
|
|
|
Approximate
dollar value of
shares that
may yet be
purchased
under the
programs
|
|
||
Cumulative through March 31, 2017
|
|
10,030,919
|
|
|
$
|
67.09
|
|
|
10,030,919
|
|
|
$
|
326,849,705
|
|
April 1, 2017 - April 30, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
326,849,705
|
|
|
May 1, 2017 - May 31, 2017
|
|
163,214
|
|
|
73.95
|
|
|
163,214
|
|
|
$
|
314,777,579
|
|
|
June 1, 2017 - June 30, 2017
|
|
240,905
|
|
|
76.29
|
|
|
240,905
|
|
|
$
|
296,393,814
|
|
|
Total
|
|
10,435,038
|
|
|
$
|
67.41
|
|
|
10,435,038
|
|
|
|
|
Item 6.
|
Exhibits
|
|
|
MORNINGSTAR, INC.
|
|
|
|
|
|
Date: July 28, 2017
|
By:
|
/s/ Jason Dubinsky
|
|
|
|
Jason Dubinsky
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
Exhibit No
|
|
Description of Exhibit
|
10.1
|
|
Form of Morningstar 2011 Stock Incentive Plan Market Stock Unit Award Agreement
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101
|
|
The following financial information from Morningstar, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on July 28, 2017 formatted in XBRL: (i) Unaudited Condensed Consolidated Statements of Income, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (iii) Unaudited Condensed Consolidated Balance Sheets, (iv) Unaudited Condensed Consolidated Statement of Equity, (v) Unaudited Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements
|
(1)
|
MORNINGSTAR, INC.,
an Illinois corporation (the “Company”); and
|
(2)
|
The Participant identified in the Grant Notice.
|
1.1
|
In accordance with the terms of the Plan and subject to the terms and conditions of this Award Agreement, the Company hereby grants to the Participant a Market Stock Unit Award with respect to the target number of Market Stock Units (“MSUs”) set forth in the Grant Notice (the “Target MSUs”). The number of MSUs that are earned shall be equal to a percentage of the Target MSUs, which shall be determined in accordance with the performance conditions specified in Section 2 (the “Performance Conditions”). The MSUs shall constitute performance-based Restricted Stock Units granted pursuant to Section 3.3 of the Plan.
|
1.2
|
Each MSU is a notional amount that represents one unvested share of common stock, no par value, of the Company (a “Share”). Each MSU constitutes the right, subject to the terms and conditions of the Plan and this Award Agreement, to distribution of a Share if and to the extent the Performance Conditions are satisfied and the MSUs become vested.
|
1.3
|
This Award Agreement is subject to the provisions of the Plan and shall be interpreted in accordance therewith. The Participant hereby agrees to be bound by the terms of this Award Agreement and the Plan.
|
1.4
|
Further details of the MSUs granted to the Participant under the terms of this Award Agreement are set forth in the Grant Notice.
|
2
|
PERFORMANCE CONDITIONS
|
2.1
|
Subject to the terms of the Award Agreement and the Plan, the number of MSUs that are earned shall be based on the Company’s Cumulative Total Shareholder Return for the Performance Period set forth in the Grant Notice (the “Company Cumulative TSR”), as follows:
|
|
Company Cumulative TSR
|
Shares Earned as a
Percentage of Target MSUs |
Threshold TSR
|
[ ]
|
[ ]
|
Target TSR
|
[ ]
|
[ ]
|
Maximum TSR
|
[ ]
|
[ ]
|
2.2
|
If the Company TSR exceeds the Threshold TSR and is less than the Target TSR, the percentage of the Target MSUs earned shall be [ ]%, reduced by [ ]% for each [ ]% decrease in Company TSR below [ ]%. For example, if the Company TSR is [ ]%, then [ ]% of Target MSUs would be earned. If the Company TSR exceeds the Target TSR and is less than the Maximum TSR, the percentage of the Target MSUs earned shall be [ ]%, increased by [ ]%
|
2.3
|
No MSUs shall be earned pursuant to this Award Agreement if the Company TSR is less than [ ]%, and the maximum number of MSUs earned pursuant to this Award Agreement shall be [ ]% of the Target MSUs.
|
2.4
|
For purposes of this Award Agreement, the Company TSR for the Performance Period shall be measured by dividing (A) the sum of (i) the increase or decrease in the Stock Price, as defined below, from the beginning of the Performance Period to the end of the Performance Period, and (ii) the cumulative value of dividends paid during the Performance Period, assuming such dividends are reinvested in Shares, by (B) the Stock Price determined at the beginning of the Performance Period.
|
2.5
|
For purposes of computing Company TSR, the “Stock Price” at the beginning of the Performance Period shall be the average closing price of a Share over the 30 consecutive calendar days immediately prior to the first day of the Performance Period, and the “Stock Price” at the end of the Performance Period shall be the average closing price of a Share over the 30 consecutive calendar days ending on and including the last day of the Performance Period, adjusted for changes in capitalization in accordance with Section 5.7 of the Plan.
|
2.6
|
The Committee may, in its sole discretion, reduce, but not increase, the percentage of MSUs that are earned at any level of performance.
|
2.7
|
Subject to, and except as otherwise provided by, the Award Agreement, including Section 4.2 and Section 4.3 thereof, the MSUs that are earned pursuant to the attainment of the Performance Conditions set forth in Section 2 shall vest only if the Participant has remained in continuous Service until the last day of the Performance Period.
|
3
|
RIGHTS AS A SHAREHOLDER
|
3.1
|
Unless and until an MSU has been earned and 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.
|
4
|
TERMINATION OF SERVICE AND OTHER CHANGES IN SERVICE STATUS
|
4.1
|
If the Participant’s Service (as defined in Section 4.7) terminates for any reason other than Disability (as defined in Section 4.6), death or a termination by the Company without Cause (as defined in Section 4.5), the Participant will forfeit the right to receive Shares underlying any MSUs that have not been earned and vested at that time.
|
4.2
|
If the Participant’s Service terminates on account of the Disability or death of the Participant, the Performance Conditions shall be deemed to have been satisfied at the target levels set forth in Section 2, and the Participant shall become vested in a prorated number of MSUs, based on the number of whole months in the Performance Period prior to the termination of the Participant’s Service. The Shares underlying such vested MSUs shall be distributed to the Participant or the Participant’s beneficiary under the Plan as soon as practicable, but in no event later than 2½ months after the last day of the calendar year in which the Participant’s Service terminates in accordance with this Section 4.2.
|
4.3
|
If the Participant’s Service is terminated by the Company without Cause, the Participant at the end of the Performance Period shall be entitled to receive the number of MSUs that would have been earned had the Participant’s employment continued through the last day of the Performance Period, based on the actual attainment of the Performance Conditions for the entire Performance Period, but prorated to reflect the number of whole months in the Performance Period prior to the termination of the Participant’s Service. The Shares underlying such vested MSUs shall be distributed to the Participant in accordance with Section 5.1 of this Award Agreement.
|
4.4
|
For purposes of this Award Agreement, "
Affiliate
” means an entity that is (directly or indirectly) controlled by, or controls, the Company.
|
4.5
|
For purposes of this Award Agreement, “
Cause
” shall mean the Participant’s: (i) willful neglect of or continued failure to substantially perform his or her duties with or obligations for the Company or an Affiliate in any material respect (other than any such failure resulting from his or her incapacity due to physical or mental illness); (ii) commission of a willful or grossly negligent act or the willful or grossly negligent omission to act that causes or is reasonably likely to cause material harm to the Company or an Affiliate; or (iii) commission or conviction of, or plea of nolo contendere to, any felony or any crime significantly injurious to the Company or an Affiliate. An act or omission is "willful" for this purpose if it was knowingly done, or knowingly omitted, by the Participant in bad faith and without reasonable belief that the act or omission was in the best interest of the Company or an Affiliate. Determination of Cause shall be made by the Committee in its sole discretion.
|
4.6
|
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).
|
4.7
|
For purposes of this Award Agreement “
Service
” means the provision of services to the Company or its Affiliates in the capacity of an employee or a member of the Board but not as a consultant to the Company or an Affiliate. For purposes of this Award Agreement, the transfer of an employee from the Company to an Affiliate, from an Affiliate to the Company or from an Affiliate to another Affiliate shall not be a termination of Service. However, if the Affiliate for which an employee is providing services ceases to be an Affiliate of the Company due to a sale, transfer or other reason, and the employee ceases to perform services for the Company or any Affiliate, the employee shall incur a termination of Service.
|
5
|
TIMING AND FORM OF PAYMENT
|
5.1
|
Once an MSU is earned and vested and the Committee has certified in writing the achievement of the Performance Conditions, 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 MSU vests, but no later than 2½ months from the end of the calendar year in which such vesting occurs. Shares delivered under this Award Agreement shall be subject to the Company’s share retention policy, as in effect from time to time.
|
6
|
RESPONSIBILITY FOR TAXES AND TAX WITHHOLDING OBLIGATIONS
|
6.1
|
The Participant acknowledges that, regardless of any action taken by the Company or the Employer, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Further, notwithstanding any contrary provision of this Award Agreement, no Shares will be issued to the Participant, unless and until satisfactory arrangements (as determined by the Committee) will have been made by the Participant with respect to the payment of any Tax-Related Items which the Company determines must be withheld with respect to the MSUs. The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the MSUs, including, but not limited to, the grant, vesting or settlement of the MSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the MSUs to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. In addition, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
|
6.2
|
The Participant shall, upon occurrence of any tax withholding event, pay to the Company or the Employer or make arrangements satisfactory to the Company for payment of any Tax-Related Items required by law to be withheld on account of such taxable event. Without limiting the Company’s power or rights pursuant to Section 5.5 of the Plan, amounts required by law or regulation to be withheld by the Company with respect to any taxable event arising under this Award Agreement will be satisfied by having Shares withheld in accordance with Section 5.5 of the Plan. In addition, the Participant may elect to deliver to the Company the necessary funds to satisfy the withholding obligation, in which case there will be no reduction in the Shares otherwise distributable to the Participant.
|
6.3
|
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Participant may receive a refund of any over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the
|
7
|
NOTICES
|
7.1
|
Any notice or other communication required or permitted under this Award Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, or sent by overnight courier, at the sender's expense. Notice will be deemed given when delivered personally or, if mailed, three days after the date of deposit or, if sent by overnight courier, on the regular business day following the date sent. Notice to the Company should be sent to Morningstar, Inc., 22 West Washington Street, Chicago, Illinois, 60602, USA, 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.
|
8
|
NATURE OF GRANT
|
a.
|
the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
|
b.
|
the grant of MSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of MSUs, or benefits in lieu of MSUs, even if MSUs have been granted in the past;
|
c.
|
all decisions with respect to future MSU or other award grants, if any, will be at the sole discretion of the Committee;
|
d.
|
the Participant is voluntarily participating in the Plan;
|
e.
|
the Participant’s participation in the Plan shall not create a right to further Service with the Employer and shall not interfere with the ability of the Employer to terminate Participant’s Service at any time with or without Cause;
|
f.
|
an MSU grant will not be interpreted to form an employment or service contract or relationship with the Company or an Affiliate;
|
g.
|
the grant of MSUs, the Shares subject to the MSUs, and the income and value of same, are not intended to replace any pension rights or compensation;
|
h.
|
the grant of MSUs, the Shares subject to the MSUs, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
|
i.
|
the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
|
j.
|
unless otherwise provided in the Plan or by the Company in its discretion, the MSUs and the benefits evidenced by this Award Agreement do not create any entitlement to have the MSUs or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares;
|
k.
|
unless otherwise agreed with the Company, the MSUs and the Shares subject to the MSUs, and the income and value of same, are not granted as consideration for, or in connection with, the Service the Participant may provide as a director of an Affiliate;
|
l.
|
no claim or entitlement to compensation or damages shall arise from forfeiture of the MSUs resulting from the termination of the Participant's Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment or service agreement, if any), and in consideration of the grant of MSUs, the Participant agrees not to institute any claim against the Company or any Affiliate; and
|
m.
|
neither the Company, the Employer nor any Affiliate shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the MSUs or of any amounts due to the Participant pursuant to the vesting of MSUs or the sale of Shares.
|
9
|
DATA PRIVACY
|
10
|
ELECTRONIC DELIVERY AND ACCEPTANCE
|
10.1
|
The Company may, in its sole discretion, decide to deliver any documents related to MSUs awarded under the Plan or future MSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party designated by the Company.
|
11
|
SEVERABILITY
|
11.1
|
The provisions of the Award Agreement (including the Country-Specific Terms and Conditions attached hereto as an Addendum), are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
|
12
|
NO ADVICE REGARDING GRANT
|
12.1
|
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of the underlying Shares. The Participant should consult with his or her own personal tax, legal and financial advisors regarding the Participant’s participation in the Plan before taking any action related to the Plan.
|
13
|
IMPOSITION OF OTHER REQUIREMENTS
|
13.1
|
The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on MSUs and on any Shares acquired under the Plan, to the extent
|
14
|
LANGUAGE
|
14.1
|
If the Participant received any document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
|
15
|
INSIDER TRADING/MARKET ABUSE LAWS
|
15.1
|
The Participant acknowledges that the Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect the Participant’s ability to acquire or sell Shares or rights to Shares (e.g., MSUs) under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Participant acknowledges that it is Participant’s responsibility to be informed of and compliant with such regulations, and Participant should speak to his or her personal advisor on this matter.
|
16
|
FOREIGN ASSET/ACCOUNT REPORTING REQUIREMENTS AND EXCHANGE CONTROLS
|
16.1
|
The Participant acknowledges that the Participant’s country may have certain foreign asset and/or foreign account reporting requirements and exchange controls which may affect the Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any dividends paid on Shares or sales proceeds from the sale of Shares acquired under the Plan) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in the Participant’s country. The Participant also may be required to repatriate sale proceeds or other funds received as a result of the Participant’s participation in the Plan to the Participant’s country through a designated bank or broker within a certain time after receipt. The Participant acknowledges that it is the Participant’s responsibility to be compliant with such regulations, and the Participant should consult his or her personal legal advisor for any details.
|
17
|
ADDENDUM
|
17.1
|
Notwithstanding any provisions in the Award Agreement, MSUs shall also be subject to the Country-Specific Terms and Conditions for the Participant’s country, if any, set forth in the Addendum attached hereto. Moreover, if the Participant relocates to one of the countries included in the Addendum, the special terms and conditions for such country will apply to the Participant, to the extent that the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons.
|
18
|
CONSTRUCTION
|
18.1
|
The MSUs granted hereunder are subject to any rules and regulations promulgated by the Committee pursuant to the Plan, now or hereafter in effect.
|
18.2
|
The Company and the Participant may amend this Award Agreement only by a written instrument signed by both parties, provided, that the Company may amend this Award Agreement without further action by the Participant if (i) such amendment is deemed by the Company to be advisable or necessary to comply with applicable law, rule, or, regulation, including Section 409A of the Code, or (ii) if such amendment is not to the detriment of the Participant.
|
18.3
|
The Participant shall agree to the terms of this Award Agreement by accepting the Grant Notice at the time and in the manner specified by the Company.
|
18.4
|
The Plan, the MSUs and this Award Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Illinois and construed in accordance therewith without giving effect to principles of conflicts of laws.
|
i.
|
a copy of the Company's most recent annual report (i.e., Form 10-K) is available at:
https://shareholders.morningstar.com/investor-relations/financials/sec-filings/default.aspx
; and
|
ii.
|
a copy of the Plan is available on the Company’s stock plan service provider’s website;
|
iii.
|
a copy of the Plan Prospectus is available on the Company’s stock plan service provider’s website.
|
Date: July 28, 2017
|
|
/s/ Kunal Kapoor
|
|
|
|
Kunal Kapoor
|
|
|
|
Chief Executive Officer
|
Date: July 28, 2017
|
|
/s/ Jason Dubinsky
|
|
|
|
Jason Dubinsky
|
|
|
|
Chief Financial Officer
|
1.
|
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
2.
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Kunal Kapoor
|
|||
Kunal Kapoor
|
|
||
Chief Executive Officer
|
|||
|
|||
Date: July 28, 2017
|
|
1.
|
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
2.
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Jason Dubinsky
|
|
||
Jason Dubinsky
|
|
||
Chief Financial Officer
|
|
||
|
|
||
Date: July 28, 2017
|
|