Press release from PR Newswire
Morningstar, Inc. Reports Third-Quarter 2012 Financial Results
Wednesday, October 24, 2012
Morningstar, Inc. Reports Third-Quarter 2012 Financial Results16:03 EDT Wednesday, October 24, 2012CHICAGO, Oct. 24, 2012 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced its third-quarter 2012 financial results. The company reported consolidated revenue of $161.0 million in the third quarter of 2012, a 0.6% increase from $160.1 million in the third quarter of 2011. Consolidated operating income was $39.9 million, an increase of 17.7% compared with $33.9 million in the same period a year ago. Net income was $27.1 million, or 56 cents per diluted share, compared with $21.4 million, or 42 cents per diluted share, in the third quarter of 2011. Excluding acquisitions and the effect of foreign currency translations, revenue rose 1.9%. Foreign currency translations had an unfavorable effect of $2.1 million. Revenue excluding acquisitions and foreign currency translations (organic revenue) is a non-GAAP measure; the accompanying financial tables contain a reconciliation to consolidated revenue.In the first nine months of 2012, consolidated revenue was $487.7 million, an increase of 3.1% compared with $472.8 million in the same period in 2011. Consolidated operating income was $111.4 million in the first nine months of 2012, an increase of 6.8% compared with $104.3 million in the same period a year ago. Net income was $75.1 million, or $1.51 per diluted share, in the first nine months of 2012, compared with $70.4 million, or $1.37 per diluted share, in the same period in 2011.Joe Mansueto, chairman and chief executive officer of Morningstar, said, "We had another challenging quarter, and much of the investment industry is still struggling. Still, Morningstar Direct, Morningstar Data, and Morningstar Advisor Workstation continued to show strong organic revenue growth. Meanwhile, our customers in the variable annuity business are facing near-record low interest rates and market volatility." Mansueto added, "During the quarter, we also launched municipal bond research and we hired a Microsoft veteran, James McClamroch, to lead Morningstar.com, our investment website. We've been clamping down on expenses, and we're seeing the benefits of greater cost control in areas such as travel, hiring, and advertising. We're also taking steps to streamline and simplify our product lines and have announced several small divestitures." International Operations: Revenue from international operations was $46.9 million in the third quarter of 2012, a slight decrease of 0.7% from the same period a year ago. Foreign currency translations reduced international revenue by $2.1 million. Excluding acquisitions and foreign currency translations, international revenue rose 3.7% in the third quarter. International revenue excluding acquisitions and foreign currency translations is a non-GAAP measure; the accompanying financial tables contain a reconciliation to international revenue. Operating Income: Consolidated operating income was $39.9 million in the third quarter of 2012, a 17.7% increase from the same period in 2011. Operating expense fell $5.1 million, or 4.0%, in the third quarter of 2012. In the first nine months of 2012, consolidated operating income rose 6.8% to $111.4 million compared with $104.3 million in the first nine months of 2011. Operating expense rose $7.7 million, or 2.1%, in the first nine months of 2012.The largest factor behind the operating expense decrease was bonus expense, which fell $2.6 million, or approximately 25.4%, in the third quarter of 2012. Morningstar reviews and updates its bonus expense quarterly based primarily on its expectations for full-year operating income versus budget. Operating margin was 24.8% in the third quarter of 2012, up from 21.2% in the same period in 2011. In the first nine months of 2012, operating margin was 22.8%, compared with 22.1% in the first nine months of 2011. Lower bonus expense had a favorable effect on margins of 1.7 percentage points in the third quarter and 1.3 percentage points in the first nine months of 2012. Morningstar had approximately 3,525 employees worldwide as of Sept. 30, 2012, compared with 3,490 employees as of June 30, 2012 and 3,395 as of Sept. 30, 2011. Headcount rose year over year because of hiring in the company's development center in India as well as in the United States. Morningstar hired about 35 employees in the United States in July as part of the Morningstar Development Program, a career development program for entry-level employees.Effective Tax Rate: Morningstar's effective tax rate in the third quarter of 2012 was 35.9%, compared with 36.6% in the same period in 2011. Year to date, the company's effective tax rate was 35.6% compared with 33.6% in the first nine months of 2011. The year-to-date increase is due primarily to lower credit incentives in the current year. Free Cash Flow: Morningstar generated free cash flow of $32.5 million in the third quarter of 2012, reflecting cash provided by operating activities of $37.5 million and $5.0 million of capital expenditures. Free cash flow declined by $6.3 million compared with the third quarter of 2011 as cash provided by operating activities declined $7.6 million and capital expenditures declined $1.3 million. In the first nine months of 2012, Morningstar generated free cash flow of $69.4 million, reflecting cash provided by operating activities of $92.3 million and capital expenditures of $22.9 million. Cash provided by operating activities in the first nine months of 2012 decreased $14.0 million, reflecting the negative cash effect of changes in operating assets and liabilities, and, to a lesser extent, a $5.3 million increase in bonuses paid in the first quarter. Higher net income (adjusted for non-cash items) partially offset the decline. Capital expenditures rose $8.2 million, primarily reflecting computer hardware and software purchases for the company's U.S. operations.Free cash flow is a non-GAAP measure; the accompanying financial tables contain a reconciliation to cash provided by operating activities. Morningstar defines free cash flow as cash provided by or used for operating activities less capital expenditures.As of Sept. 30, 2012, Morningstar had cash, cash equivalents, and investments of $343.1 million, compared with $470.2 million as of Dec. 31, 2011. In the first nine months of 2012, the company used $183.7 million of cash for its share repurchase program. Of the $300 million authorized under the program, Morningstar has purchased a total of 3,964,411 shares for $231.6 million as of Sept. 30, 2012. Morningstar ended the quarter with 47.5 million shares outstanding. On Oct. 31, 2012, the company will pay approximately $4.7 million for its regular quarterly dividend. Business Segment Performance Investment Information Segment: The largest products and services in this segment based on revenue are Morningstar® Data (formerly Licensed Data); Morningstar® Advisor WorkstationSM (including Morningstar Office); Morningstar DirectSM; and Morningstar.com®, including Premium Memberships and Internet advertising sales.Revenue was $129.4 million in the third quarter of 2012, a 2.8% increase from $125.8 million in the third quarter of 2011. Morningstar Direct was the primary driver of revenue growth, with licenses increasing 24.3% to 7,115. Morningstar Data and Morningstar Advisor Workstation (primarily Morningstar Office) also contributed to the revenue growth in the segment. Revenue for Morningstar.com was down because Internet advertising sales were lower and Premium Membership subscriptions for Morningstar.com fell 6.5% to 125,006. Operating income was $39.0 million in the third quarter of 2012, compared with $31.4 million in the same period in 2011. Operating expense in this segment fell $4.0 million, or 4.2%, primarily because of lower bonus expense and lower discretionary spending, including travel expense. Operating margin was 30.1% in the third quarter of 2012 versus 25.0% in the prior-year period. The margin increase reflects the higher revenue base and the decrease in operating expense. Investment Management Segment: The largest products in this segment based on revenue are Investment Advisory Services (formerly Investment Consulting); Retirement Solutions, including Advice by Ibbotson® and Morningstar® Retirement ManagerSM; and Morningstar® Managed PortfoliosSM.Revenue was $31.6 million in the third quarter of 2012, a 7.7% decrease from $34.2 million in the same period in 2011. The main reason for the revenue decline was the previously announced loss of business from a large client in the Investment Management segment that began managing several fund-of-funds portfolios in-house in April 2012. The loss of revenue from this client was partially offset by higher revenue from Morningstar Managed Portfolios and Retirement Solutions. The variable annuity industry, which accounted for approximately 15% of Investment Management segment revenue in the third quarter of 2012, continues to face challenges. Accordingly, Morningstar expects that there will be further pressure on revenue from clients in the variable annuity industry. Assets under advisement and management for Investment Advisory Services were $142.4 billion as of Sept. 30, 2012, compared with $119.3 billion as of Sept. 30, 2011. Assets now managed in-house by the client described above represented $11.3 billion, or 9.5%, of the company's Investment Advisory Services assets under advisement and management as of Sept. 30, 2011. Assets under management and advisement for Retirement Solutions were $45.4 billion as of Sept. 30, 2012, versus $36.3 billion as of Sept. 30, 2011. Assets under management and advisement for Morningstar Managed Portfolios were $4.0 billion as of Sept. 30, 2012, compared with $2.8 billion as of Sept. 30, 2011. Operating income was $14.8 million in the third quarter of 2012, a decrease of 17.8% compared with the third quarter of 2011. Operating expense in the segment was $16.8 million, an increase of $0.6 million, or 3.5%. Operating margin was 47.0% in the third quarter of 2012 versus 52.7% in the prior-year period. Intangible Amortization and Corporate Depreciation Expense: Morningstar does not allocate expense for intangible amortization or corporate depreciation to its operating segments. Intangible amortization, which represents the majority of the expense in this category, was $5.9 million in the third quarter of 2012, a decrease of $1.0 million compared with the same period in 2011. Corporate depreciation expense was $2.6 million in the third quarter, an increase of $0.7 million compared with the same period in 2011.Corporate Unallocated: This category includes costs related to corporate functions, including general management, information technology used to support corporate systems, legal, finance, human resources, marketing, and corporate communications. It also includes capitalization of internal product development costs. Costs in this category were $5.4 million in the third quarter of 2012, a decrease of $1.4 million, or 20.4%. The company capitalized $1.9 million of operating expense in the quarter for software development, compared with $1.6 million in the third quarter of 2011. The total expense recorded in this category benefited $1.0 million from the resolution of a prior-year business tax expense matter. Investor Communication Morningstar encourages all interested parties?including securities analysts, current shareholders, potential shareholders, and others?to submit questions in writing. Investors and others may send an email to firstname.lastname@example.org or write to Morningstar at: Morningstar, Inc.Investor Relations22 W. Washington StreetChicago, IL 60602Morningstar will make written responses to selected inquiries available to all investors at the same time in Form 8-Ks furnished to the Securities and Exchange Commission, generally on the first Friday of every month.About Morningstar, Inc.Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately $195 billion in assets under advisement and management as of Sept. 30, 2012. The company has operations in 27 countries.Caution Concerning Forward-Looking StatementsThis press release 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 discussed not to occur or to differ significantly from what we expected. 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; liability related to the storage of personal information about our users; 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 filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011. 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.Non-GAAP Financial MeasuresTo supplement Morningstar's consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Morningstar uses the following measures considered as non-GAAP by the Securities and Exchange Commission: free cash flow, consolidated revenue excluding acquisitions and foreign currency translations (organic revenue), and international revenue excluding acquisitions and foreign currency translations. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.Morningstar presents free cash flow solely as supplemental disclosure to help investors better understand how much cash is available after Morningstar spends money to operate its business. Morningstar uses free cash flow to evaluate its business. Free cash flow should not be considered an alternative to any measure required to be reported under GAAP (such as cash provided by (used for) operating, investing, and financing activities). For more information on free cash flow, please see the reconciliation from cash provided by operating activities to free cash flow included in the accompanying financial tables. Morningstar presents consolidated revenue excluding acquisitions and foreign currency translations (organic revenue) and international revenue excluding acquisitions and foreign currency translations because the company believes these non-GAAP measures help investors better compare period-to-period results. For more information, please see the reconciliation provided in the accompanying financial tables.All dollar and percentage comparisons, which are often accompanied by words such as "increase," "decrease," "grew," "declined, "or "was similar" refer to a comparison with the same period in the previous year unless otherwise stated.Contacts:Media: Margaret Kirch Cohen, 312-696-6383 or email@example.comInvestors may submit questions to firstname.lastname@example.org.©2012 Morningstar, Inc. All Rights Reserved.MORN-E Morningstar, Inc. and SubsidiariesUnaudited Condensed Consolidated Statements of IncomeThree months ended September 30Nine months ended September 30(in thousands, except per share amounts)20122011change20122011changeRevenue$ 160,952$ 160,0510.6%$487,679$ 472,8293.1%Operating expense1:Cost of goods sold47,71148,074(0.8%)147,479133,92910.1%Development12,85713,482(4.6%)38,66439,151(1.2%)Sales and marketing25,73227,253(5.6%)81,43180,5021.2%General and administrative23,96626,431(9.3%)77,09083,255(7.4%)Depreciation and amortization10,82210,947(1.1%)31,61631,712(0.3%) Total operating expense121,088126,187(4.0%)376,280368,5492.1%Operating income 39,86433,86417.7%111,399104,2806.8%Operating margin24.8%21.2%3.6pp22.8%22.1%0.7ppNon-operating income (expense), net:Interest income (expense), net1,719797115.7%3,8481,142237.0%Other income (expense), net161(1,376)NMF(314)(938)(66.5%) Non-operating income (expense), net1,880(579)NMF3,5342041632.4%Income before income taxes and equity in net income of unconsolidated entities41,74433,28525.4%114,933104,48410.0%Income tax expense15,18612,34323.0%41,44135,58516.5%Equity in net income of unconsolidated entities47842811.7%1,5411,39710.3%Consolidated net income27,03621,37026.5%75,03370,2966.7%Net loss attributable to noncontrolling interests3410240.0%62106(41.5%)Net income attributable to Morningstar, Inc.$ 27,070$ 21,38026.6%$75,095$ 70,4026.7%Net income per share attributable to Morningstar, Inc.:Basic$ 0.56$ 0.4233.3%$1.53$ 1.409.3%Diluted$ 0.56$ 0.4233.3%$1.51$ 1.3710.2%Weighted average common shares outstanding:Basic47,97550,27849,02850,082Diluted48,48151,12349,66451,071Three months ended September 30Nine months ended September 302012201120122011(1) Includes stock-based compensation expense of:Cost of goods sold$ 1,148$ 1,117$3,304$ 3,068Development4715451,4351,588Sales and marketing4934891,4331,392General and administrative1,8821,8005,4225,395 Total stock-based compensation expense$ 3,994$ 3,951$11,594$ 11,443NMF ? Not meaningful, pp ? percentage pointsMorningstar, Inc. and SubsidiariesOperating Expense as a Percentage of RevenueThree months ended September 30Nine months ended September 3020122011change20122011changeRevenue100.0%100.0%-100.0%100.0%-Operating expense1:Cost of goods sold29.6%30.0%(0.4)pp30.2%28.3%1.9ppDevelopment8.0%8.4%(0.4)pp7.9%8.3%(0.4)ppSales and marketing16.0%17.0%(1.0)pp16.7%17.0%(0.3)ppGeneral and administrative14.9%16.5%(1.6)pp15.8%17.6%(1.8)ppDepreciation and amortization6.7%6.8%(0.1)pp6.5%6.7%(0.2)ppTotal operating expense275.2%78.8%(3.6)pp77.2%77.9%(0.7)ppOperating margin24.8%21.2%3.6pp22.8%22.1%0.7ppThree months ended September 30Nine months ended September 3020122011change20122011change(1) Includes stock-based compensation expense of:Cost of goods sold0.7%0.7%-0.7%0.6%0.1ppDevelopment0.3%0.3%-0.3%0.3%-Sales and marketing0.3%0.3%-0.3%0.3%-General and administrative1.2%1.1%0.1pp1.1%1.1%-Total stock-based compensation expense22.5%2.5%-2.4%2.4%-(2) Sum of percentages may not equal total because of rounding. Morningstar, Inc. and SubsidiariesUnaudited Condensed Consolidated Statements of Cash FlowsThree months ended September 30Nine months ended September 30($000)2012201120122011Operating activitiesConsolidated net income$27,036$21,370$75,033$70,296Adjustments to reconcile consolidated net income to net cashflows from operating activities:Depreciation and amortization10,82210,94731,61631,712Deferred income taxes193(2,013)492(1,559)Stock-based compensation expense3,9943,95111,59411,443Equity in net income of unconsolidated entities(478)(428)(1,541)(1,397)Excess tax benefits from stock-option exercises and vesting of restricted stock units (459)(1,450)(5,007)(7,621)Other, net(130)2,7001,3322,683Changes in operating assets and liabilities, net of effects of acquisitions:Accounts receivable(2,175)(1,020)(6,569)(403)Other assets891,388(3,551)1,996Accounts payable and accrued liabilities(4,968)(15)(4,316)(5,275)Accrued compensation6,06911,286(20,851)(3,242)Deferred revenue(4,649)(7,579)7,684618Income taxes - current2,6956,7007,2209,442Deferred rent(177)(327)291(984)Other liabilities(335)(350)(1,111)(1,393) Cash provided by operating activities37,52745,16092,316106,316Investing activitiesPurchases of investments(1,041)(100,229)(134,929)(298,876)Proceeds from maturities and sales of investments 54,82772,239216,350222,599Capital expenditures(4,954)(6,271)(22,876)(14,689)Acquisitions, net of cash acquired-(269)-300Purchase of equity and cost method investments(3,554)-(10,304)-Other, net(4)90(4)875 Cash provided by (used for) investing activities45,274(34,440)48,237(89,791)Financing activitiesProceeds from stock-option exercises, net1,9791,9782,7606,630Excess tax benefits from stock-option exercises and vesting of restricted stock units4591,4505,0077,621Common shares repurchased(78,259)(28,417)(183,698)(28,526)Dividends paid(4,863)(2,528)(14,867)(7,539)Other, net2(149)(18)(363) Cash used for financing activities(80,682)(27,666)(190,816)(22,177)Effect of exchange rate changes on cash and cash equivalents2,563(3,807)2,007(254)Net increase (decrease) in cash and cash equivalents4,682(20,753)(48,256)(5,906)Cash and cash equivalents?Beginning of period147,499195,023200,437180,176Cash and cash equivalents?End of period$152,181$174,270$152,181$174,270Reconciliation from cash provided by operating activities to free cash flow (a non-GAAP measure):Three months ended September 30Nine months ended September 30($000)2012201120122011Cash provided by operating activities$37,527$45,160$92,316$106,316Less: Capital expenditures(4,954)(6,271)(22,876)(14,689)Free cash flow$32,573$38,889$69,440$91,627 Morningstar, Inc. and SubsidiariesUnaudited Condensed Consolidated Balance SheetsSeptember 30December 31($000)20122011AssetsCurrent assets:Cash and cash equivalents$ 152,181$ 200,437Investments190,899269,755Accounts receivable, net119,877113,312Deferred tax asset, net2,1565,104Income tax receivable, net5,2777,445Other22,54615,980 Total current assets492,936612,033Property, equipment, and capitalized software, net77,87368,196Investments in unconsolidated entities38,27827,642Goodwill321,134318,492Intangible assets, net122,832139,809Other assets8,3305,912Total assets$ 1,061,383$ 1,172,084Liabilities and equityCurrent liabilities:Accounts payable and accrued liabilities$ 40,356$ 41,403Accrued compensation55,13173,124Deferred revenue164,360155,494Other319612 Total current liabilities260,166270,633Accrued compensation6,8025,724Deferred tax liability, net14,26215,940Other long-term liabilities23,42222,771Total liabilities304,652315,068Total equity756,731857,016Total liabilities and equity$ 1,061,383$ 1,172,084 Morningstar, Inc. and SubsidiariesSegment InformationThree months ended September 30Nine months ended September 30($000)20122011change20122011changeRevenueInvestment Information$ 129,357$ 125,8042.8%$ 391,031$ 374,3194.5%Investment Management31,59534,247(7.7%)96,64898,510(1.9%)Consolidated revenue$ 160,952$ 160,0510.6%$ 487,679$ 472,8293.1%Revenue?U.S.$ 114,021$ 112,7901.1%$ 346,442$ 334,3953.6%Revenue?International$ 46,931$ 47,261(0.7%)$ 141,237$ 138,4342.0%Revenue?U.S. (percentage of consolidated revenue)70.8%70.5%0.3pp71.0%70.7%0.3ppRevenue?International (percentage of consolidated revenue)29.2%29.5%(0.3)pp29.0%29.3%(0.3)ppOperating income (loss)1Investment Information$ 38,957$ 31,42624.0%$ 110,644$ 100,8309.7%Investment Management14,84218,062(17.8%)45,60653,599(14.9%)Intangible amortization and corporate depreciation expense(8,495)(8,788)(3.3%)(24,668)(25,565)(3.5%)Corporate unallocated(5,440)(6,836)(20.4%)(20,183)(24,584)(17.9%)Consolidated operating income$ 39,864$ 33,86417.7%$ 111,399$ 104,2806.8%Operating margin1Investment Information30.1%25.0%5.1pp28.3%26.9%1.4ppInvestment Management47.0%52.7%(5.7)pp47.2%54.4%(7.2)ppConsolidated operating margin24.8%21.2%3.6pp22.8%22.1%0.7pp(1) Includes stock-based compensation expense allocated to each segment. Morningstar, Inc. and SubsidiariesSupplemental DataAs of September 3020122011% changeOur employeesWorldwide headcount (approximate)3,5253,3953.8%Number of worldwide equity and credit analysts (approximate)155155(1)0.0%Number of worldwide fund analysts (approximate)1101100.0%Our businessInvestment InformationMorningstar.com Premium Membership subscriptions (U.S.)125,006133,734(6.5%)Registered users for Morningstar.com (U.S.)7,440,8676,891,4068.0%U.S. Advisor Workstation and Morningstar Office licenses 161,957160,710(2)0.8%Principia subscriptions 27,69531,318(11.6%)Morningstar Direct licenses7,1155,72624.3%Investment ManagementAssets under advisement and management (approximate)Investment Advisory Services$142.4 bil$119.3 bil(1)19.4%Retirement Solutions$45.4 bil$36.3 bil25.1%Morningstar Managed Portfolios$4.0 bil$2.8 bil42.9%Ibbotson Australia$3.1 bil$2.8 bil10.7%(1) Revised(2) Revised to include licenses from the Annuity Intelligence businessThree months ended September 30Nine months ended September 30($000)2012201120122011Effective tax rateIncome before income taxes and equity in net income of unconsolidated entities$ 41,744$ 33,285$ 114,933$ 104,484Equity in net income of unconsolidated entities4784281,5411,397Net loss attributable to noncontrolling interests341062106Total$ 42,256$ 33,723$ 116,536$ 105,987Income tax expense$ 15,186$ 12,343$ 41,441$ 35,585Effective tax rate35.9%36.6%35.6%33.6% Morningstar, Inc. and SubsidiariesReconciliations of Non-GAAP Measures with the Nearest Comparable GAAP MeasuresReconciliation from consolidated revenue to revenue excluding acquisitions and foreign currency translations (organic revenue):Three months ended September 30Nine months ended September 30($000)20122011% change20122011% changeConsolidated revenue $160,952$160,0510.6%$487,679$472,8293.1%Less: acquisitions--n/a--n/aUnfavorable impact of foreign currency translations2,085-NMF4,912-NMFRevenue excluding acquisitions and foreign currency translations$163,037$160,0511.9%$492,591$472,8294.2%Reconciliation from international revenue to international revenue excluding acquisitions and foreign currency translations:Three months ended September 30Nine months ended September 30($000)20122011% change20122011% changeInternational revenue $46,931$47,261(0.7%)$141,237$138,4342.0%Less: acquisitions--n/a--n/aUnfavorable impact of foreign currency translations2,085-NMF4,912-NMFInternational revenue excluding acquisitions and foreign currency translations$49,016$47,2613.7%$146,149$138,4345.6%The following table summarizes the change in operating expense:Three months ended September 30Nine months ended September 30($000)20122011$ change20122011$ changeTotal operating expense$121,088$126,187$(5,099)$376,280$368,549$7,731Acquisitions$-$-Favorable impact of foreign currency translations(1,735)(3,946)All other changes in operating expense(3,364)11,677Total$(5,099)$7,731SOURCE Morningstar, Inc.