UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

FORM 8-K

 

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  April 1, 2011

 

MORNINGSTAR, INC.

(Exact name of registrant as specified in its charter)

 

 

 

(312) 696-6000

(Registrant’s telephone number, including area
code)

 

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Item 7.01.     Regulation FD Disclosure.

 

The following information is included in this Current Report on Form 8-K as a result of Morningstar, Inc.’s policy regarding public disclosure of corporate information. Answers to additional inquiries, if any, that comply with this policy are scheduled to become available on May 6, 2011.

 

Caution Concerning Forward-Looking Statements

 

This current report on Form 8-K contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations about future events or future financial performance. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue.” These statements involve known and unknown risks and uncertainties that may cause the events we discuss not to occur or to differ significantly from what we expect. For us, these risks and uncertainties include, among others, general industry conditions and competition, including current global financial uncertainty; the impact of market volatility on revenue from asset-based fees; damage to our reputation resulting from claims made about possible conflicts of interest; liability for any losses that result from an actual or claimed breach of our fiduciary duties; financial services industry consolidation; a prolonged outage of our database and network facilities; challenges faced by our non-U.S. operations; and the availability of free or low-cost investment information.

 

A more complete description of these risks and uncertainties can be found in our Annual Report on Form 10-K for the year ended December 31, 2010. If any of these risks and uncertainties materialize, our actual future results may vary significantly from what we expected. We do not undertake to update our forward-looking statements as a result of new information or future events.

 

Investor Questions and Answers: April 1, 2011

 

We plan to make written responses available addressing investor questions about our business on the first Friday of every month. The following answers respond to selected questions received through March 25, 2011. We intend to answer as many questions as time allows, although we will not answer product support questions through this channel. We may wait to respond to a given question until the following month if we need more time to research the answer.

 

If you would like to submit a question, please send an e-mail to investors@morningstar.com, contact us via fax at 312-696-6009, or write to us at the following address:

 

Morningstar, Inc.

Investor Relations

22 W. Washington

Chicago, IL 60602

 

Operating Margin for Acquired Operations

 

1.             In the 4Q earnings release you stated that acquisitions accounted for approximately 2% points of the margin decline for 2010. Based on this statement, if there were no acquisitions made in 2010 then non-acquired

 

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revenue of $507 mm would have earned a 23.8% operating margin or $121mm in operating income.

 

This indicates that acquired revenue in 2010 carried a 1% operating margin. Assuming that one-time integration costs were a factor, can you provide a normalized operating margin for revenue acquired in 2010? If you cannot provide a specific number then how do acquired operating margins compare relative to Morningstar’s average historical operating margin of 26%? Also, can you reconcile the material margin impact from acquisitions in 2010 with your statement that acquisitions did not significantly impact investment information segment margins in 4Q10?

 

In 2010, we had total operating expense of $434.3 million, approximately $46.2 million of which was related to acquisitions. Based on this expense total, the operating margin for acquired operations was 2.4%. However, this margin figure includes the effect of intangible amortization ($6.2 million), legal and professional fees (about $3 million total), and costs related to vacant office space. Excluding these items, the operating margin for acquired operations would have been closer to our consolidated operating margin.

 

Regarding the last part of your question, acquisitions did not have a significant impact on margins for the Investment Information segment in the fourth quarter because the largest cost related to acquisitions is intangible amortization, which we include as a corporate item instead of allocating it to our segments.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	MORNINGSTAR, INC.
Date: April 1, 2011	By:	/s/ Joe Mansueto
	Name:	Joe Mansueto
	Title:	Chairman and Chief Executive Officer

 

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