v2.3.0.11
Document and Entity Information (USD $)
 9 Months Ended
Sep. 30, 2011
Oct. 31, 2011
Jun. 30, 2010
Document and Entity Information [Line Items]      
Entity Registrant Name INFORMATICA CORP    
Entity Trading Symbol INFA    
Entity Central Index Key 0001080099    
Document Type 10-Q    
Document Period End Date Sep. 30, 2011
Amendment Flag false    
Document Fiscal Year Focus 2011    
Document Fiscal Period Focus Q3    
Current Fiscal Year End Date --12-31    
Entity Well-Known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Public Float     $ 2,171,724,000
Entity Common Stock, Shares Outstanding   106,347,000  
v2.3.0.11
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands
Sep. 30, 2011
Dec. 31, 2010
Current assets:    
Cash and cash equivalents $ 248,714 $ 208,899
Short-term investments 305,173 262,047
Accounts receivable, net of allowances of $3,589 and $4,289, respectively 129,372 147,534
Deferred tax assets 18,868 22,664
Prepaid expenses and other current assets 36,340 32,321
Total current assets 738,467 673,465
Property and equipment, net 13,886 9,866
Goodwill 428,033 400,726
Other intangible assets, net 68,782 77,927
Long-term deferred tax assets 24,838 18,314
Other assets 6,061 9,343
Total assets 1,280,067 1,189,641
Current liabilities:    
Accounts payable 7,046 5,948
Accrued liabilities 47,495 50,199
Accrued compensation and related expenses 43,328 56,315
Accrued facilities restructuring charges 20,314 18,498
Deferred revenues 193,373 172,559
Convertible senior notes 0 200,693
Total current liabilities 311,556 504,212
Accrued facilities restructuring charges, less current portion 8,453 20,410
Long-term deferred revenues 6,505 6,987
Long-term deferred tax liabilities 172 311
Long-term income taxes payable 16,663 12,739
Other liabilities 7,376 0
Total liabilities 350,725 544,659
Commitments and contingencies (Note 12)    
Stockholders' equity:    
Common stock, $0.001 par value; 200,000 shares authorized; 106,058 shares and 94,461 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively 106 94
Additional paid-in capital 725,008 514,365
Accumulated other comprehensive loss (6,934) (5,530)
Retained earnings 211,162 136,053
Total stockholders' equity 929,342 644,982
Total liabilities and stockholders' equity $ 1,280,067 $ 1,189,641
v2.3.0.11
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Per Share data
Sep. 30, 2011
Dec. 31, 2010
Current assets:    
Accounts receivable, allowances $ 3,589 $ 4,289
Stockholders' equity:    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 200,000 200,000
Common stock, shares issued 106,058 94,461
Common stock, shares outstanding 106,058 94,461
v2.3.0.11
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $)
In Thousands, except Per Share data
 3 Months Ended 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Sep. 30, 2010
Revenues:        
License $ 83,736 $ 69,829 $ 241,580 $ 194,892
Service 112,151 91,421 315,066 257,149
Total revenues 195,887 161,250 556,646 452,041
Cost of revenues:        
License 1,011 1,124 3,669 3,232
Service 30,432 25,304 87,111 73,402
Amortization of acquired technology 5,156 3,445 14,334 9,833
Total cost of revenues 36,599 29,873 105,114 86,467
Gross profit 159,288 131,377 451,532 365,574
Operating expenses:        
Research and development 34,577 26,269 98,093 76,648
Sales and marketing 70,437 60,854 200,962 172,326
General and administrative 14,516 11,346 40,507 33,619
Amortization of intangible assets 1,886 2,280 5,959 7,345
Facilities restructuring charges (benefit) (282) 553 704 1,545
Acquisitions and other charges (benefit) 917 (2,323) (5) 1,326
Total operating expenses 122,051 98,979 346,220 292,809
Income from operations 37,237 32,398 105,312 72,765
Interest income 1,185 1,002 3,374 2,802
Interest expense (105) (1,575) (2,006) (4,731)
Other income (expense), net 685 (229) (795) 1,784
Income before income taxes 39,002 31,596 105,885 72,620
Income tax provision 12,012 9,125 30,776 20,928
Net income $ 26,990 $ 22,471 $ 75,109 $ 51,692
Basic net income per common share $ 0.25 $ 0.24 $ 0.73 $ 0.56
Diluted net income per common share $ 0.24 $ 0.21 $ 0.67 $ 0.50
Shares used in computing basic net income per common share 106,274 92,794 103,080 91,746
Shares used in computing diluted net income per common share 112,406 109,494 112,655 108,283
v2.3.0.11
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)
In Thousands
 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Operating activities:    
Net income $ 75,109 $ 51,692
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 4,303 4,614
Recovery of doubtful accounts (488) (27)
Gain on sale of investment in equity interest (706) (1,824)
Stock-based compensation 24,300 17,017
Deferred income taxes 633 2,113
Tax benefits from stock-based compensation 20,088 15,159
Excess tax benefits from stock-based compensation (19,795) (14,389)
Amortization of intangible assets and acquired technology 20,293 17,178
Non-cash facilities restructuring charges 704 1,545
Other non-cash items (1,702) (2,146)
Changes in operating assets and liabilities:    
Accounts receivable 18,910 23,240
Prepaid expenses and other assets (10,615) (2,307)
Accounts payable and accrued liabilities (14,104) (12,575)
Income taxes payable 3,793 (13,285)
Accrued facilities restructuring charges (10,723) (11,143)
Deferred revenues 20,247 13,060
Net cash provided by operating activities 130,247 87,922
Investing activities:    
Purchases of property and equipment (8,502) (4,584)
Purchases of investments (304,871) (211,977)
Purchase of investment in equity interest (164) (1,500)
Sale of investment in equity interest 706 4,824
Maturities of investments 102,524 220,390
Sales of investments 158,647 98,566
Business acquisitions, net of cash acquired (27,969) (168,777)
Net cash used in investing activities (79,629) (63,058)
Financing activities:    
Net proceeds from issuance of common stock 45,457 44,807
Repurchases and retirement of common stock (70,111) (10,651)
Redemption of convertible senior notes (4) 0
Withholding taxes related to restricted stock units net share settlement (5,701) (1,713)
Payment of issuance costs on credit facility 0 (1,881)
Excess tax benefits from stock-based compensation 19,795 14,389
Net cash provided by (used in) financing activities (10,564) 44,951
Effect of foreign exchange rate changes on cash and cash equivalents (239) (1,696)
Net increase in cash and cash equivalents 39,815 68,119
Cash and cash equivalents at beginning of period 208,899 159,197
Cash and cash equivalents at end of period $ 248,714 $ 227,316
v2.3.0.11
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2011
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements of Informatica Corporation (“Informatica,” or the “Company”) have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States of America. However, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial statements include all normal and recurring adjustments that are necessary to fairly present the results of the interim periods presented. All of the amounts included in this Quarterly Report on Form 10-Q related to the condensed consolidated financial statements and notes thereto as of and for the three and nine months ended September 30, 2011 and 2010 are unaudited. The interim results presented are not necessarily indicative of results for any subsequent interim period, the year ending December 31, 2011, or any other future period.
The preparation of the Company's condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions. The Company believes that the estimates, judgments, and assumptions upon which it relies are reasonable based on information available at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates and actual results, Informatica's financial statements would be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also instances that management's judgment in selecting an available alternative would not produce a materially different result.
These unaudited, condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2010 included in the Company's Annual Report on Form 10-K filed with the SEC. The condensed consolidated balance sheet as of December 31, 2010 has been derived from the audited consolidated financial statements of the Company.
The Company's significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. As discussed below, on January 1, 2011, the Company adopted an accounting pronouncement on multiple-deliverable revenue arrangements that are outside the scope of industry-specific revenue recognition guidance. There have been no other changes in our significant accounting policies since the end of fiscal year 2010.
Revenue Recognition
The Company derives its revenues from software license fees, maintenance fees, professional services, consisting of consulting and education services, and other revenues, primarily consisting of subscriptions for address validation and cloud services. The Company recognizes revenue in accordance with ASC 985-605, Software Revenue Recognition, ASC 605-35, Revenue Recognition for Construction-Type and Production-Type Contracts, the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104 (“SAB 104”), Revenue Recognition, and other authoritative accounting literature.
Under ASC 985-605-25, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection is probable.
Persuasive evidence of an arrangement exists.  The Company determines that persuasive evidence of an arrangement exists when it has a written contract, signed by both the customer and the Company, and written purchase authorization.
Delivery has occurred.  Software is considered delivered when title to the physical software media passes to the customer or, in the case of electronic delivery, when the customer has been provided with the access codes to download and operate the software.
Fee is fixed or determinable.  The Company considers arrangements with extended payment terms not to be fixed or determinable. If the license fee in an arrangement is not fixed or determinable, revenue is recognized as payments become due. The Company’s standard agreements do not contain product return rights.
Collection is probable.  The Company first assesses the credit-worthiness and collectability at a country level based on the country’s overall economic climate and general business risk. Then, for the customers in the countries that are deemed credit-worthy, it assesses credit and collectability based on their payment history and credit profile. When a customer is not deemed credit-worthy, revenue is recognized at the time that payment is received.
The Company requires evidence of sell-through from resellers and distributors for order acceptance. The Company then recognizes revenue from resellers and distributors upon shipment if all other revenue recognition criteria are met, which in substantially all cases is when cash is collected or when the reseller or distributor is deemed credit-worthy based on their payment history and credit profile to conclude that collectability is probable.
The Company also enters into Original Equipment Manufacturer (“OEM”) arrangements that provide for license fees based on inclusion of technology and/or products in the OEM’s products. These arrangements provide for fixed and irrevocable royalty payments. The Company recognizes royalty payments as revenues based on the royalty report that it receives from the OEMs. In the case of OEMs with fixed royalty payments, revenue is recognized upon execution of the agreement, delivery of the software, and when all other criteria for revenue recognition have been met.
Multiple contracts with a single counterparty executed within close proximity of each other are evaluated to determine if the contracts should be combined and accounted for as a single arrangement. The Company recognizes revenues net of applicable sales taxes, financing charges absorbed by the Company, and amounts retained by our resellers and distributors, if any.
The Company’s software license arrangements include the following multiple elements: license fees from our core software products and/or product upgrades that are not part of post-contract services, maintenance fees, consulting, and/or education services. The Company uses the residual method to recognize license revenue when the license arrangement includes elements to be delivered at a future date and vendor-specific objective evidence (“VSOE”) of fair value exists to allocate the fee to the undelivered elements of the arrangement. VSOE is based on the price charged when an element is sold separately. If VSOE does not exist for any undelivered software product element of the arrangement, all revenue is deferred until all elements have been delivered or VSOE is established. If VSOE does not exist for any undelivered services elements of the arrangement, all revenue is recognized ratably over the period that the services are expected to be performed. If the software arrangement includes significant modification or customization of the software, software license revenue is recognized as the consulting services revenue is recognized.
The Company recognizes maintenance revenues, which consist of fees for ongoing support and product updates, ratably over the term of the contract, typically one year.
Consulting revenues are primarily related to implementation services and product configurations performed on a time-and-materials basis and, occasionally, on a fixed fee basis. Education services revenues are generated from classes offered at both Company and customer locations. Revenues from consulting and education services are recognized as the services are performed.
Other revenues, primarily consisting of subscriptions for address validation and cloud services (which are not material for any period presented), are generally recognized as the services are delivered.
Deferred revenues include deferred license, maintenance, consulting, education, and other services revenues. For customers not deemed credit-worthy, the Company’s practice is to net unpaid deferred revenue for that customer against the related receivable balance.
Multiple Element Arrangements - Nonsoftware Arrangements or Arrangements with Software and Nonsoftware Elements
In October 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements, which amended the accounting standards applicable to revenue recognition for multiple-deliverable revenue arrangements that are outside the scope of industry-specific software revenue recognition guidance. The new guidance amends the criteria for allocating the consideration in multiple-deliverable revenue arrangements by establishing a selling price hierarchy. The selling price used for each deliverable will be based on VSOE if available, third-party evidence ("TPE") if VSOE is not available, or estimated selling price ("ESP") if neither VSOE nor TPE is available. The guidance also eliminates the use of the residual method of allocation and requires that the arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method.
The Company adopted this guidance on a prospective basis on January 1, 2011, and therefore, is applicable to relevant revenue arrangements entered into or materially modified on or after that date.
The Company's multiple-element arrangements are primarily software or software-related, which are excluded from the new guidance. Multiple-element arrangements that include non-software related elements and software or software-related elements, which are included in the new guidance, are not material to date.

For multiple element arrangements that include software and non-software related elements, for example, on-site software licenses sold together with subscriptions for the Company's cloud and hosted address validation services, the Company allocates revenue to each software and non-software element as a group based upon the relative selling price of each in accordance with the selling price hierarchy, which includes (i) VSOE if available, (ii) TPE if VSOE is not available, and (iii) ESP if neither VSOE nor TPE is available. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. The manner in which the Company accounts for multiple element arrangements that contain only software and software-related elements remains unchanged.
In certain limited instances, the Company is not able to establish VSOE for all deliverables in an arrangement with multiple elements. This may be due to the infrequent selling of each element separately, not pricing products or services within a narrow range, or only having a limited sales history. When VSOE cannot be established, the Company attempts to establish a selling price based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately.
When the Company is unable to establish a selling price using VSOE or TPE, the Company uses ESP in its allocation of the arrangement consideration. The Company determines ESP for a product or service by considering both market conditions and entity-specific factors. This includes, but is not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives, and pricing practices.
Given the nature of the Company's transactions, which are primarily software or software-related, the adoption of this new accounting guidance did not have a significant impact on the timing and pattern of revenue recognition when applied to multiple-element arrangements. Total net revenue as reported during the nine months ended September 30, 2011 is materially consistent with total net revenue that would have been reported if the transaction entered into or materially modified after December 31, 2010 were subject to previous accounting guidance. The new accounting guidance for revenue recognition, if applied in the same manner to the year ended December 31, 2010, would not have had a material impact on total net revenues for the fiscal year 2010.
Fair Value Measurement of Financial Assets and Liabilities
The following table summarizes financial assets and financial liabilities that the Company measures at fair value on a recurring basis as of September 30, 2011 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market funds (i)
$
58,953

 
$
58,953

 
$
—

 
$
—

Time deposits (ii)
12,081

 
12,081

 
—

 
—

Marketable debt securities (ii)
294,242

 
—

 
294,242

 
—

Total money market funds, time deposits, and marketable debt securities
365,276

 
71,034

 
294,242

 
—

Foreign currency derivatives (iii)
322

 
—

 
322

 
—

Total assets
$
365,598

 
$
71,034

 
$
294,564

 
$
—

Liabilities:
 

 
 

 
 

 
 

Foreign currency derivatives (iv)
$
603

 
$
—

 
$
603

 
$
—

Total liabilities
$
603

 
$
—

 
$
603

 
$
—

The following table summarizes financial assets and financial liabilities that the Company measures at fair value on a recurring basis as of December 31, 2010 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
 
 
Significant
Other
Observable
Inputs
(Level 2)
 
 
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market funds (i)
$
2,231

 
$
2,231

 
$
—

 
$
—

Marketable debt securities (ii)
271,546

 
—

 
271,546

 
—

Total money market funds and marketable debt securities
273,777

 
2,231

 
271,546

 
—

Foreign currency derivatives (iii)
152

 
—

 
152

 
—

Total assets
$
273,929

 
$
2,231

 
$
271,698

 
$
—

Liabilities:
 

 
 

 
 

 
 

Foreign currency derivatives (iv)
$
569

 
$
—

 
$
569

 
$
—

Convertible senior notes
452,663

 
452,663

 
—

 
—

Total liabilities
$
453,232

 
$
452,663

 
$
569

 
$
—

____________________
(i)
Included in cash and cash equivalents on the condensed consolidated balance sheets.
(ii)
Included in either cash and cash equivalents or short-term investments on the condensed consolidated balance sheets.
(iii)
Included in prepaid expenses and other current assets on the condensed consolidated balance sheets.
(iv)
Included in accrued liabilities on the condensed consolidated balance sheets.
Money Market Funds, Time Deposits, Marketable Securities, and Convertible Senior Notes
The Company uses a market approach for determining the fair value of all its Level 1 and Level 2 money market funds, time deposits, marketable securities, and Convertible Senior Notes.
To value its money market funds and time deposits, the Company values the funds at $1 stable net asset value, which is the market pricing convention for identical assets that the Company has the ability to access.
The Company's marketable securities consist of certificates of deposit, commercial paper, corporate notes and bonds, municipal securities, and U.S. government and agency notes and bonds. To value its certificates of deposit and commercial paper, the Company uses mathematical calculations to arrive at fair value for these securities, which generally have short maturities and infrequent secondary market trades. For example, in the absence of any observable transactions, the Company may accrete from purchase price at purchase date to face value at maturity. In the event that a transaction is observed on the same security in the marketplace, and the price on that subsequent transaction clearly reflects the market price on that day, the Company will adjust the price in the system to the observed transaction price and follow a revised accretion schedule to determine the daily price.
To determine the fair value of its corporate notes and bonds, municipal securities, and U.S. government and agency notes and bonds, the Company uses a “consensus price” or a weighted average price for each security. Market prices for these securities are received from a variety of industry standard data providers (e.g., Bloomberg), security master files from large financial institutions, and other third-party sources. These multiple prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value.
On March 18, 2011, the Company completed the redemption of its Convertible Senior Notes. The Company classified its convertible debt as Level 1 since it had quoted prices available in active markets. The estimated fair value of the Company’s Convertible Senior Notes as of December 31, 2010 was based on the Over-the-Counter market closing price of the Notes as of December 23, 2010 (the last trading day of the period), which was $452.7 million or $45.11 per share on an as converted basis.
Foreign Currency Derivatives and Hedging Instruments
The Company uses the income approach to value the derivatives using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present value amount, assuming that participants are motivated but not compelled to transact. Level 2 inputs are limited to quoted prices that are observable for the assets and liabilities, which include interest rates and credit risk. The Company uses mid-market pricing as a practical expedient for fair value measurements. Key inputs for currency derivatives are the spot rates, forward rates, interest rates, and credit derivative markets. The spot rate for each currency is the same spot rate used for all balance sheet translations at the measurement date and is sourced from the Federal Reserve Bulletin. The following values are interpolated from commonly quoted intervals available from Bloomberg: forward points and the London Interbank Offered Rate ("LIBOR") used to discount and determine the fair value of assets and liabilities. One-year credit default swap spreads identified per counterparty at month end in Bloomberg are used to discount derivative assets for counterparty non-performance risk, all of which have terms of four months or less. The Company discounts derivative liabilities to reflect the Company’s own potential non-performance risk to lenders and has used the spread over LIBOR on its most recent corporate borrowing rate.
The counterparties associated with the Company’s foreign currency forward contracts are large credit-worthy financial institutions, and the derivatives transacted with these entities are relatively short in duration; therefore, the Company does not consider counterparty concentration and non-performance to be material risks at this time. Both the Company and the counterparties are expected to perform under the contractual terms of the instruments.
See Note 5. Other Comprehensive Income, Note 6. Derivative Financial Instruments, and Note 12. Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements for a further discussion.
v2.3.0.11
Cash, Cash Equivalents, and Short-Term Investments
 9 Months Ended
Sep. 30, 2011
Cash, Cash Equivalents, and Short-term Investments [Abstract]  
Cash, Cash Equivalents, and Short-term Investments
Cash, Cash Equivalents, and Short-Term Investments
The Company's marketable securities are classified as available-for-sale as of the balance sheet date and are reported at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive income in stockholders' equity, net of tax. Realized gains or losses and other-than-temporary impairments, if any, on available-for-sale securities are reported in other income or expense as incurred. Realized gains recognized for the three months ended September 30, 2011 and 2010 were not significant. Realized gains recognized for the nine months ended September 30, 2011 and 2010 were approximately $0.3 million and $0.2 million, respectively. The cost of securities sold was determined based on the specific identification method.
The following table summarizes the Company’s cash, cash equivalents, and short-term investments as of September 30, 2011 (in thousands):
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
Cash
$
188,611

 
$
—

 
$
—

 
$
188,611

Cash equivalents:
 

 
 

 
 

 
 

Money market funds
58,953

 
—

 
—

 
58,953

Federal agency notes and bonds
600

 
—

 
—

 
600

U.S. government notes and bonds
550

 
—

 
—

 
550

Total cash equivalents
60,103

 
—

 
—

 
60,103

Total cash and cash equivalents
248,714

 
—

 
—

 
248,714

Short-term investments:
 

 
 

 
 

 
 

Certificates of deposit
4,762

 
5

 
—

 
4,767

Commercial paper
7,993

 
—

 
—

 
7,993

Corporate notes and bonds
158,459

 
189

 
(679
)
 
157,969

Federal agency notes and bonds
96,300

 
161

 
(67
)
 
96,394

Time deposits
12,081

 
—

 
—

 
12,081

U.S. government notes and bonds
2,894

 
22

 
—

 
2,916

Municipal notes and bonds
23,006

 
47

 
—

 
23,053

Total short-term investments
305,495

 
424

 
(746
)
 
305,173

Total cash, cash equivalents, and short-term investments (i)
$
554,209

 
$
424

 
$
(746
)
 
$
553,887

____________________
(i)
Total estimated fair value above included $365.3 million comprised of cash equivalents and short-term investments at September 30, 2011.

The following table summarizes the Company’s cash, cash equivalents, and short-term investments as of December 31, 2010 (in thousands):
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
Cash
$
197,169

 
$
—

 
$
—

 
$
197,169

Cash equivalents:
 

 
 

 
 

 
 

Money market funds
2,231

 
—

 
—

 
2,231

Federal agency notes and bonds
9,499

 
—

 
—

 
9,499

Total cash equivalents
11,730

 
—

 
—

 
11,730

Total cash and cash equivalents
208,899

 
—

 
—

 
208,899

Short-term investments:
 

 
 

 
 

 
 

Certificates of deposit
14,437

 
—

 
—

 
14,437

Commercial paper
10,977

 
—

 
—

 
10,977

Corporate notes and bonds
97,899

 
444

 
(86
)
 
98,257

Federal agency notes and bonds
105,120

 
40

 
(140
)
 
105,020

U.S. government notes and bonds
10,156

 
19

 
(10
)
 
10,165

Municipal notes and bonds
23,205

 
5

 
(19
)
 
23,191

Total short-term investments
261,794

 
508

 
(255
)
 
262,047

Total cash, cash equivalents, and short-term investments (i)
$
470,693

 
$
508

 
$
(255
)
 
$
470,946

____________________
(i)
Total estimated fair value above included $273.8 million comprised of cash equivalents and short-term investments at December 31, 2010.

See Note 1. Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of the Company's financial instruments.
The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category that have been in a continuous unrealized loss position for less than twelve months, at September 30, 2011 (in thousands):
 
Less Than 12 months
 
 
 
 
Fair Value
 
Gross
Unrealized
Losses
Corporate notes and bonds
$
103,894

 
$
679

Federal agency notes and bonds
48,027

 
67

Total
$
151,921

 
$
746


As of September 30, 2011, the Company did not have any investments that were in a continuous unrealized loss position for periods greater than 12 months. The changes in value of these investments are primarily related to changes in interest rates and are considered to be temporary in nature.
The following table summarizes the cost and estimated fair value of the Company’s short-term investments by contractual maturity at September 30, 2011 (in thousands):
 
Cost
 
Fair Value
Due within one year
$
137,057

 
$
136,919

Due in one year to two years
124,291

 
124,004

Due after two years
44,147

 
44,250

Total
$
305,495

 
$
305,173
v2.3.0.11
Intangible Assets and Goodwill
 9 Months Ended
Sep. 30, 2011
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets and Goodwill
Intangible Assets and Goodwill
The carrying amounts of the intangible assets other than goodwill as of September 30, 2011 and December 31, 2010 are as follows (in thousands, except years):
 
Intangible Assets, Gross
 
Accumulated Amortization
 
Intangible Assets, Net
 
Weighted
 
 
 
December 31,
2010
 
Additions
 
September 30,
2011
 
December 31,
2010
 
Expense
 
September 30,
2011
 
December 31,
2010
 
September 30,
2011
 
Average Useful Life
(Years)
Developed and core technology
$
90,497

 
$
9,569

 
$
100,066

 
$
(35,254
)
 
$
(14,319
)
 
$
(49,573
)
 
$
55,243

 
$
50,493

 
6
Customer relationships
33,501

 
642

 
34,143

 
(20,811
)
 
(3,960
)
 
(24,771
)
 
12,690

 
9,372

 
6
Vendor relationships
7,908

 
—

 
7,908

 
(2,659
)
 
(1,165
)
 
(3,824
)
 
5,249

 
4,084

 
5
Other:


 


 


 


 


 


 


 
 
 

Trade names
2,494

 
—

 
2,494

 
(1,286
)
 
(269
)
 
(1,555
)
 
1,208

 
939

 
5
Covenants not to compete
2,000

 
—

 
2,000

 
(1,617
)
 
(300
)
 
(1,917
)
 
383

 
83

 
5
Patents
3,720

 
—

 
3,720

 
(566
)
 
(280
)
 
(846
)
 
3,154

 
2,874

 
10
Total intangible assets subject to amortization
140,120

 
10,211

 
150,331

 
(62,193
)
 
(20,293
)
 
(82,486
)
 
77,927

 
67,845

 
 
In-process research and development
—

 
937

 
937

 
—

 
—

 
—

 
—

 
937

 
N.A.
Total intangible assets, net
$
140,120

 
$
11,148

 
$
151,268

 
$
(62,193
)
 
$
(20,293
)
 
$
(82,486
)
 
$
77,927

 
$
68,782

 
 

Total amortization expense related to intangible assets was $7.0 million and $5.7 million for the three months ended September 30, 2011 and 2010, respectively, and $20.3 million and $17.2 million for the nine months ended September 30, 2011 and 2010, respectively. Certain intangible assets were recorded in foreign currencies; and therefore, the gross carrying amount and accumulated amortization are subject to foreign currency translation adjustments.
As of September 30, 2011, the amortization expense related to identifiable intangible assets in future periods is expected to be as follows (in thousands):
 
 
 
Acquired
Technology
 
Other
Intangible
Assets
 
Total
Intangible
Assets
Remaining 2011
$
5,139

 
$
1,750

 
$
6,889

2012
20,460

 
5,876

 
26,336

2013
15,914

 
5,118

 
21,032

2014
5,752

 
2,421

 
8,173

2015
2,055

 
726

 
2,781

Thereafter
1,173

 
1,461

 
2,634

Total intangible assets subject to amortization
$
50,493

 
$
17,352

 
$
67,845


In the second quarter of 2011, in conjunction with our acquisition of WisdomForce, the Company recorded in-process research and development (IPR&D) of $1.6 million. The IPR&D capitalized costs were associated with software development efforts in process at the time of the business combination that had not yet achieved technological feasibility and no future alternative uses had been identified. Technological feasibility was achieved in August 2011 for a portion of the IPR&D valued at $0.7 million, which was reclassified to developed technology and is being amortized over its useful life.
The changes in the carrying amount of goodwill for the nine months ended September 30, 2011 are as follows (in thousands):
 
September 30,
2011
Beginning balance as of December 31, 2010
$
400,726

Goodwill from acquisitions
33,230

Subsequent goodwill adjustments
(5,923
)
Ending balance as of September 30, 2011
$
428,033


Subsequent goodwill adjustments of $5.9 million for the nine months ended September 30, 2011 include income tax related balance sheet adjustments within the measurement period related to the Siperian, 29West, ActiveBase, and WisdomForce acquisitions and foreign currency translation adjustments. See Note 15. Acquisitions for a further discussion of goodwill from acquisitions.
v2.3.0.11
Borrowings
 9 Months Ended
Sep. 30, 2011
Debt Disclosure [Abstract]  
Borrowings
Borrowings
Convertible Senior Notes
On March 8, 2006, the Company issued and sold Convertible Senior Notes (the "Notes") with an aggregate principal amount of $230.0 million due 2026. The Company paid interest at 3.0% per annum to holders of the Notes, payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2006. Each $1,000 principal amount of Notes was initially convertible, at the option of the holders, into 50 shares of the Company's common stock prior to the earlier of the maturity date (March 15, 2026) or the redemption or repurchase of the Notes. The initial conversion price represented a premium of 29.28% relative to the last reported sale price of common stock of the Company on the NASDAQ National Market of $15.47 on March 7, 2006. The conversion rate initially represented a conversion price of $20.00 per share. The balance of the Notes at December 31, 2010 was $200.7 million.
On February 14, 2011, the Company notified the holders of its Notes that it would exercise its option to redeem the principal amount outstanding on March 18, 2011. On or prior to the close of business on March 17, 2011, the holders had the option to convert their Notes into shares of the Company's common stock at a price of approximately $20 per share, or 50 shares of the Company's common stock per $1,000 principal amount of Notes. Holders of approximately $200.7 million in aggregate principal amount of the Notes converted their notes into approximately 10.0 million shares of the Company's common stock prior to the close of business on March 17, 2011. On March 18, 2011, the Company redeemed $4,000 principal amount of Notes not surrendered for conversion prior to the redemption date. As of March 31, 2011, none of the Notes were outstanding. From the second quarter of 2011 and beyond, the shares of the Company's common stock issued upon conversion are included in the denominator for both basic and diluted net income per common share, and there is no interest or amortization of issuance costs.
Credit Agreement
On September 29, 2010, the Company entered into a Credit Agreement (the "Credit Agreement") that matures on September 29, 2014. The Credit Agreement provides for an unsecured revolving credit facility in an amount of up to $220.0 million, with an option for the Company to request to increase the revolving loan commitments by an aggregate amount of up to $30.0 million with new or additional commitments, for a total credit facility of up to $250.0 million. No amounts were outstanding under the Credit Agreement as of September 30, 2011, and a total of $220.0 million remained available for borrowing.
Revolving loans accrue interest at a per annum rate based on either, at our election, (i) the base rate plus a margin ranging from 1.00% to 1.75% depending on the Company's consolidated leverage ratio, or (ii) LIBOR (based on 1-, 2-, 3-, or 6-month interest periods) plus a margin ranging from 2.00% to 2.75% depending on the Company's consolidated leverage ratio. The base rate is equal to the highest of (i) JPMorgan Chase Bank, N.A.'s prime rate, (ii) the federal funds rate plus a margin equal to 0.50%, and (iii) LIBOR for a 1-month interest period plus a margin equal to 1.00%. Revolving loans may be borrowed, repaid and reborrowed until September 29, 2014, at which time all amounts borrowed must be repaid. Accrued interest on the revolving loans is payable quarterly in arrears with respect to base rate loans and at the end of each interest rate period (or at each 3- month interval in the case of loans with interest periods greater than 3 months) with respect to LIBOR loans. The Company is also obligated to pay other customary closing fees, arrangement fees, administrative fees, commitment fees, and letter of credit fees. A quarterly commitment fee is applied to the average daily unborrowed amount under the credit facility at a per annum rate ranging from 0.35% to 0.50% depending on the Company's consolidated leverage ratio. The Company may prepay the loans or terminate or reduce the commitments in whole or in part at any time, without premium or penalty, subject to certain conditions including minimum amounts in the case of commitment reductions and reimbursement of certain costs in the case of prepayments of LIBOR loans.
The Credit Agreement contains customary representations and warranties, covenants, and events of default, including the requirement to maintain a maximum consolidated leverage ratio of 2.75 to 1.00 and a minimum consolidated interest coverage ratio of 3.50 to 1.00. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Credit Agreement at a per annum rate equal to 2.00% above the applicable interest rate for any overdue principal and 2.00% above the rate applicable for base rate loans for any other overdue amounts. The Company was in compliance with all covenants under the Credit Agreement as of September 30, 2011.
v2.3.0.11
Other Comprehensive Income
 9 Months Ended
Sep. 30, 2011
Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Other Comprehensive Income
Other Comprehensive Income
The components of other comprehensive income ("OCI"), net of taxes, for the three and nine months ended September 30, 2011 and 2010 were as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Net income, as reported
$
26,990

 
$
22,471

 
$
75,109

 
$
51,692

Other comprehensive income (loss):
 
 
 
 
 
 
 
 Unrealized gain (loss) on investments
(445
)
 
308

 
(357
)
 
210

 Cumulative translation adjustments
(9,805
)
 
9,315

 
(961
)
 
(2,336
)
 Derivative gain (loss)
416

 
115

 
(86
)
 
164

Total other comprehensive income (loss)
(9,834
)
 
9,738

 
(1,404
)
 
(1,962
)
Total comprehensive income, net of taxes
$
17,156

 
$
32,209

 
$
73,705

 
$
49,730


The change in cumulative translation adjustments for the three months ended September 30, 2011 compared to the same period in 2010 was primarily due to the strengthening of the U.S. dollar against the euro.
Accumulated other comprehensive loss, net of taxes, as of September 30, 2011 and December 31, 2010 consisted of the following (in thousands):
 
September 30,
2011
 
December 31,
2010
Net unrealized gain (loss) on available-for-sale investments
$
(200
)
 
$
157

Cumulative translation adjustments
(6,364
)
 
(5,403
)
Derivative loss
(370
)
 
(284
)
Accumulated other comprehensive loss, net of taxes
$
(6,934
)
 
$
(5,530
)

The Company did not have any other-than-temporary gain or loss reflected in accumulated other comprehensive income (loss) as of September 30, 2011 and December 31, 2010.
See Note 1. Summary of Significant Accounting Policies, Note 6. Derivative Financial Instruments, and Note 12. Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements for a further discussion.
v2.3.0.11
Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2011
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
The Company’s earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. The Company uses derivative instruments to manage its exposures to fluctuations in certain foreign currency exchange rates which exist as part of ongoing business operations. The Company and its subsidiaries do not enter into derivative contracts for speculative purposes.
Cash Flow Hedges
The Company enters into certain cash flow hedge programs in an attempt to reduce the impact of certain foreign currency fluctuations. These contracts are designated and documented as cash flow hedges. The purpose of these programs is to reduce the volatility of identified cash flow and expenses caused by movement in certain foreign currency exchange rates, in particular, the euro, Indian rupee and Israeli shekel. The Company is currently using foreign exchange forward contracts to hedge certain non-functional currency anticipated expenses and revenue reflected in the intercompany accounts between Informatica U.S. and its subsidiaries in Cayman, India, Israel, and the Netherlands. In December 2010, the Company entered into additional foreign exchange forward contracts with monthly expiration dates through January 17, 2012. The Company releases the amounts accumulated in other comprehensive income into earnings in the same period or periods during which the forecasted hedge transaction affects earnings.
The Company has forecasted the amount of its anticipated foreign currency expenses and intercompany revenue based on its historical performance and its 2011 financial plan. As of September 30, 2011, these foreign exchange contracts, carried at fair value, have a maturity of four months or less. During the nine months ended September 30, 2011, the Company did not enter into any new forward exchange contracts. The Company closes out approximately three foreign exchange contracts per month when the foreign currency denominated expenses are paid or intercompany revenue is received and any gain or loss is offset against expense.
The notional amount of these foreign exchange forward contracts was $20.4 million and $51.0 million as of September 30, 2011 and December 31, 2010, respectively.
Balance Sheet Hedges
In the second quarter of 2011, the Company also entered into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of its subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments. Changes in the value of the foreign exchange contracts are recognized in other income (expense) and offset the foreign currency gain or loss on the underlying monetary assets or liabilities. The notional amounts of foreign currency contracts were $5.0 million at September 30, 2011.
The following table reflects the fair value amounts for the foreign exchange contracts designated and not designated as hedging instruments at September 30, 2011 and December 31, 2010 (in thousands):
 
September 30, 2011
 
December 31, 2010
 
Fair Value
Derivative
Assets
(i)
 
Fair Value
Derivative
Liabilities
(ii)
 
Fair Value
Derivative
Assets
(i)
 
Fair Value
Derivative
Liabilities
(ii)
Derivatives designated as hedging instruments
$
—

 
$
452

 
$
102

 
$
569

Derivatives not designated as hedging instruments
322

 
151

 
50

 
—

Total fair value of derivative instruments
$
322

 
$
603

 
$
152

 
$
569

____________________
(i)
Included in prepaid expenses and other current assets on the condensed consolidated balance sheets.
(ii)
Included in accrued liabilities on the condensed consolidated balance sheets.
As of September 30, 2011, a derivative loss of $0.4 million was included in accumulated other comprehensive income, net of applicable taxes. The Company expects to reflect this amount in its condensed consolidated statements of income during the next three months.
The Company evaluates prospectively as well as retrospectively the effectiveness of its hedge programs using statistical analysis at the inception of the hedge. Informatica uses the spot price method and excludes the time value of derivative instruments for determination of hedge effectiveness.  
The effects of derivative instruments designated as cash flow hedges on the accumulated other comprehensive income and condensed consolidated statements of income for the three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
Amount of gain (loss) recognized in other comprehensive income (effective portion)
$
15

 
$
154

 
$
(1,750
)
 
$
265

Amount of gain (loss) reclassified from accumulated other comprehensive income to operating expenses (effective portion)
$
(654
)
 
$
(36
)
 
$
(1,610
)
 
$
(5
)
Amount of gain (loss) recognized in income on derivatives for the amount excluded from effectiveness testing located in operating expenses
$
20

 
$
84

 
$
483

 
$
61

The Company did not have any ineffective portion of the derivative recorded in the condensed consolidated statements of income.
The gain recognized in other income (expense), net for non-designated foreign currency forward contracts for the three and nine months ended September 30, 2011 and 2010 is as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
2011
 
2010
 
2011
 
2010
Gain recognized in interest and other income (expense), net
$
928

 
$
77

 
$
1,728

 
$
106


See Note 1. Summary of Significant Accounting Policies and Note 5. Other Comprehensive Income of Notes to Condensed Consolidated Financial Statements for a further discussion.
v2.3.0.11
Stock Repurchase Program
 9 Months Ended
Sep. 30, 2011
Stock Repurchase Program [Abstract]  
Stock Repurchase Program
Stock Repurchase Program
The Company's Board of Directors has approved a stock repurchase program for the Company to repurchase its common stock. The primary purpose of the program is to enhance shareholder value, including to offset the dilutive impact of stock based incentive plans. The number of shares to be purchased and the timing of the purchases are based on several factors, including the price of the Company's common stock, the Company's liquidity and working capital needs, general business and market conditions, and other investment opportunities. These purchases can be made from time to time in the open market and are funded from the Company’s available working capital.
This repurchase program does not have an expiration date. Repurchased shares are retired and reclassified as authorized and unissued shares of common stock. The Company may continue to repurchase shares from time to time, as determined by management under programs approved by the Board of Directors.
During the three months ended September 30, 2011, the Company repurchased approximately 1,110,000 shares of its common stock at a cost of $50.5 million. The Company did not repurchase any shares of its common stock during the three months ended September 30, 2010. During the nine months ended September 30, 2011 and 2010, the Company repurchased approximately 1,475,000 shares of its common stock at a cost of $70.1 million and approximately 435,000 shares of its common stock at a cost of $10.7 million, respectively. There were no repurchases of the Notes during the nine months ended September 30, 2011 and 2010. The Notes were redeemed on March 18, 2011. See Note 4. Borrowings - Convertible Senior Notes of Notes to Condensed Consolidated Financial Statements for a further discussion.
As of September 30, 2011, $6.4 million remained available for repurchase under this program.
v2.3.0.11
Stock-Based Compensation
 9 Months Ended
Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
The Company grants restricted stock units (“RSUs”) and stock options under its 2009 Employee Stock Incentive Plan. The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of each option award on the date of grant. The Company uses a blend of average historical and market-based implied volatilities for calculating the expected volatilities for employee stock options, and it uses market-based implied volatilities for its Employee Stock Purchase Plan (“ESPP”). The expected term of employee stock options granted is derived from historical exercise patterns of the options, and the expected term of ESPP is based on the contractual terms. The risk-free interest rate for the expected term of the options and ESPP is based on the U.S. Treasury yield curve in effect at the time of grant.
The Company records stock-based compensation for RSUs and options granted net of estimated forfeiture rates. The Company estimates forfeiture rates at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical forfeitures to estimate its future forfeiture rates.
The fair value of the Company’s stock-based awards was estimated based on the following assumptions:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Option grants:
 
 
 
 
 
 
 
Expected volatility
38
%
 
37
%
 
35 - 38%

 
34 - 38%

Weighted-average volatility
38
%
 
37
%
 
36
%
 
35
%
Expected dividends
—

 
—

 
—

 
—

Expected term of options (in years)
3.8

 
3.7

 
3.8

 
3.7

Risk-free interest rate
0.9
%
 
1.3
%
 
1.5
%
 
1.9
%
ESPP:*
 
 
 
 
 
 
 
Expected volatility
38
%
 
36
%
 
35 - 38%

 
34
%
Weighted-average volatility
38
%
 
36
%
 
36
%
 
34
%
Expected dividends
—

 
—

 
—

 
—

Expected term of ESPP (in years)
0.5

 
0.5

 
0.5

 
0.5

Risk-free interest rate
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
____________________
*
ESPP purchases are made on the last day of January and July of each year.

The allocations of the stock-based compensation, net of income tax benefit, for the three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Cost of service revenues
$
874

 
$
641

 
$
2,599

 
$
1,956

Research and development
2,825

 
1,925

 
7,878

 
5,285

Sales and marketing
2,616

 
1,817

 
7,503

 
5,383

General and administrative
2,318

 
1,573

 
6,320

 
4,393

Total stock-based compensation
8,633

 
5,956

 
24,300

 
17,017

Tax benefit of stock-based compensation
(2,219
)
 
(1,263
)
 
(6,169
)
 
(3,558
)
Total stock-based compensation, net of tax benefit
$
6,414

 
$
4,693

 
$
18,131

 
$
13,459
v