We generated positive free cash flow in 2010, 2009, and 2008 as  our cash provided by operating activities has consistently exceeded  our level of capital expenditures, as shown below: Because operating expense declined at a slower pace than revenue,  the 2009 operating margin was down about 1.6 percentage points  from 2008. The $9.5 million of operating expense described above  represented about 2 percentage points of the margin decline. Free cash flow increased $19.8 million in 2010 after declining $11.9  million in 2009. Cash provided by operating activities and capital  expenditures followed similar trends, increasing in 2010 after declin- ing in 2009. Cash provided by operating activities:  Cash provided by operating  activities increased $22.2 million in 2010, mainly because cash paid  in 2010 for bonuses was lower than in 2009. We made bonus pay- ments of $21.4 million in the first quarter of 2010, compared with  $58.9 million in the first quarter of 2009. The positive cash flow  impact of a lower bonus payment was partially offset by $4.9 million  in payments we made to one former and two current executives  related to adjusting the tax treatment of certain stock options  originally considered incentive stock options (ISOs). We recorded  the operating expense related to this matter in the fourth quarter  of 2009. Cash provided by operating activities decreased $48.1 million in  2009 compared with 2008. The decline in cash provided by operat- ing activities reflects a lower cash benefit from accrued compensa- tion as well as an increase of $9.6 million for bonus payments. We  made bonus payments of $58.9 million in the first quarter of 2009,  compared with $49.3 million in the first quarter of 2008. Bonuses  paid in the first quarter of 2009 included $10.0 million in payments  deferred from 2007. We revised our bonus program in January 2009  and no longer defer payment of a portion of bonuses recorded in  the prior year. In addition, cash provided by operating activities in 2008 included a $18.9 million benefit from deferred rent, primarily  for tenant improvement allowances related to the construction of  our new corporate headquarters. This benefit did not recur in 2009.  Excess tax benefits declined $17.9 million in 2009 because of a  reduction in the number of options exercised and lower average  stock prices on the exercise dates. We define free cash flow as cash provided by or used for operating  activities less capital expenditures. We present free cash flow solely  as supplemental disclosure to help investors better understand how  much cash is available after we spend money to operate our busi- ness. Our management team uses free cash flow to evaluate our  business. Free cash flow is not a measure of performance set forth  under GAAP. Also, the free cash flow definition we use may not be  comparable to similarly titled measures used by other companies. Consolidated Free Cash Flow 2010 2009  ($000)  2010 2009  2008  Change Change Cash provided $ 123,416 $ 101,256  $ 149,339  21.9% (32.2)% by operating activities Capital  (14,771)  (12,372)   (48,519)  19.4% (74.5)% expenditures Free cash flow  $108,645 $ 88,884  $ 100,820  22.2% (11.8)% Revenue % change 38.8%  38.1%  15.5%  (4.7%)  15.9% Operating income 66.8%  50.9%  18.7%  (10.2%)  (2.9%) % change Operating margin % 24.6%  26.9%  27.6%  26.0%  21.8% Change 4.1pp  2.3pp  0.7pp  (1.6)pp  (4.2)pp Consolidated Revenue and Operating Income ($000)  Consolidated revenue Operating  income  $315,175 $77,527 $435,107 $117,021 $502,457 $138,876 $478,996 $124,673 $555,351 $121,059 2006  2007  2008  2009  2010 Morningstar, Inc. 2010 Annual Report 79