2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in Preparation of Condensed Consolidated Financial Statements. The preparation of the accompanying Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Postage. We pass through to our clients the cost of postage that is incurred on behalf of those clients, and typically require an advance payment on expected postage costs. These advance payments are included in "client deposits" in the accompanying Condensed Consolidated Balance Sheets and are classified as current liabilities regardless of the contract period. We net the cost of postage against the postage reimbursements, and include the net amount in processing and related services revenues. The cost of postage that has been shown net of the postage reimbursements from our clients for the second quarter of 2011 and 2010 was $65.3 million and $66.2 million, respectively, and for the six months ended June 30, 2011 and 2010 was $133.1 million and $135.2 million, respectively.

Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less at the date of the purchase to be cash equivalents. As of June 30, 2011, our cash equivalents consist primarily of institutional money market funds, commercial paper and time deposits held at major banks.

As of June 30, 2011, we had $5.1 million of restricted cash that serves to collateralize outstanding letters of credit. This restricted cash is included in Cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheet.

Short-term Investments and Other Financial Instruments. Our financial instruments as of June 30, 2011 include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, interest rate swaps, and debt. Because of their short maturities, the carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate their fair value.

Certain of our short-term investments and cash equivalents are considered "available-for-sale" and are reported at fair value in our accompanying Condensed Consolidated Balance Sheets, with unrealized gains and losses, net of the related income tax effect, excluded from earnings and reported in a separate component of stockholders' equity. Realized and unrealized gains and losses were not material in any period presented.

Our short-term investments at June 30, 2011, and December 31, 2010, consisted of the following (in thousands):


	June 30, 2011		December 31, 2010
Commercial paper	$	17,494	$	17,692
Certificates of deposit		2,501		—

Total	$	19,995	$	17,692

All short-term investments held by us as of June 30, 2011, have contractual maturities of less than one year from the time of acquisition. Proceeds from the sale/maturity of short-term investments for the six months ended June 30, 2011 and 2010 were $17.7 million and $34.9 million, respectively.

The following table represents the fair value hierarchy based upon three levels of inputs, of which Levels 1 and 2 are considered observable and Level 3 is unobservable, for financial assets and liabilities measured at fair value on a recurring basis (in thousands):


	June 30, 2011						December 31, 2010
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Money market funds (1)	$	43,536	$	—	$	43,536	$	91,002	$	—	$	91,002
Commercial paper (2)		—		25,992		25,992		—		26,590		26,590

Total	$	43,536	$	25,992	$	69,528	$	91,002	$	26,590	$	117,592


Liabilities:
Interest rate swap contracts (3)		—		684		684		—		—		—

Total	$	—	$	684	$	684	$	—	$	—	$	—

(1)	As of June 30, 2011 and December 31, 2010, all of the money market funds were classified on our Condensed Consolidated Balance Sheet in cash equivalents.

(2)

As of June 30, 2011 and December 31, 2010, of the total commercial paper, $8.5 million and $8.9 million, respectively, were classified on our Condensed Consolidated Balance Sheet in cash equivalents, and $17.5 and $17.7 million, respectively, were classified on our Condensed Consolidated Balance Sheet in short term investments.

(3)	As of June 30, 2011, the fair value of the interest rate swap contracts were classified on our Condensed Consolidated Balance Sheet in other non-current liabilities.

Valuation inputs used to measure the fair values of our money market funds were derived from quoted market prices. The fair values of all other financial instruments are based upon pricing provided by third-party pricing services. These prices were derived from observable market inputs.

We have chosen not to measure our debt at fair value, with changes recognized in earnings each reporting period. As of June 30, 2011, the estimated fair value of our Credit Agreement long-term debt of $195 million (carrying value including current maturities) was approximately $200 million, and was estimated using a discounted cash flow methodology. As of June 30, 2011, the estimated fair value of our $151 million (par value) convertible debt, based upon quoted market prices or recent sales activity, was approximately $153 million.

Adoption of New Guidance on Revenue Recognition Related to Multiple-Deliverable Revenue Arrangements. On January 1, 2011, new guidance on revenue recognition related to multiple-deliverable revenue arrangements became effective. The new guidance changed the criteria for separating deliverables in multiple element revenue arrangements that do not fall within the scope of specific authoritative accounting literature.

Our processing and related services revenues relate primarily to the outsourced, customer care and billing processing and related services we provide to our North American cable and direct broadcast satellite clients under long-term master processing agreements. Under those agreements, on a monthly basis, we provide multiple services, to include billing and processing services; credit management and collection services; and customer statement invoice printing and mailing services. Since there are essentially no processing and related services elements that are undelivered at the end of each month, other than the future months' repetition of those same services which will be billed for and recognized as revenues in those future months when the services are provided, the new guidance did not impact the manner in which we are recognizing our processing and related services revenues.

The revenue recognition for our software licenses, software maintenance services (also known as post-contract customer support), and our professional services that involve the implementation of the software licenses, fall within the scope of specific authoritative accounting literature and are not impacted by the new guidance on revenue recognition related to multiple-deliverable revenue arrangements.