Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Use of Estimates in Preparation of Financial Statements

Use of Estimates in Preparation of Financial Statements. The preparation of the accompanying 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 our Financial Statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Reclassification

Reclassifications. Maintenance revenues, as well as the cost of maintenance revenues, previously included in software, maintenance and service revenues and software, maintenance and services costs of revenues, respectively, have been presented separately in our Condensed Consolidated Statements of Income (“Income Statements” or “Income Statement”) for the quarter and nine months ended September 30, 2013. In addition, certain other 2013 amounts have been reclassified to conform to the 2014 presentation.

Cash and Cash Equivalents

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 September 30, 2014 and December 31, 2013, our cash equivalents consist primarily of institutional money market funds, commercial paper, and time deposits held at major banks.

As of September 30, 2014 and December 31, 2013, we had $4.8 million and $4.5 million, respectively, of restricted cash that serves to collateralize outstanding letters of credit. This restricted cash is included in cash and cash equivalents in our Condensed Consolidated Balance Sheets (“Balance Sheets” or “Balance Sheet”).

Short-term Investments and Other Financial Instruments

Short-term Investments and Other Financial Instruments. Our financial instruments as of September 30, 2014 and December 31, 2013 include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, an interest rate swap contract, and debt. Because of their short maturities, the carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate their fair value.

Our short-term investments and certain of our cash equivalents are considered “available-for-sale” and are reported at fair value in our 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.

Primarily all short-term investments held by us as of September 30, 2014 and December 31, 2013 have contractual maturities of less than two years from the time of acquisition. Our short-term investments as of September 30, 2014 and December 31, 2013 consisted almost entirely of fixed income securities. Proceeds from the sale/maturity of short-term investments for the nine months ended September 30, 2014 and 2013 were $146.4 million and $62.7 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 our financial assets and liabilities measured at fair value (in thousands):

	September 30, 2014						December 31, 2013
	Level 1			Level 2		Total	Level 1		Level 2		Total
Assets:
Cash equivalents:
Money market funds	$	9,810	$	—	$	9,810	$	13,761	$	—	$	13,761
Commercial paper		—		13,248		13,248		—		19,629		19,629
Short-term investments:
Corporate debt securities		—		62,105		62,105		—		76,786		76,786
Municipal bonds		—		19,317		19,317		—		29,106		29,106
U.S. government agency bonds		—		14,027		14,027		—		18,050		18,050
Asset-backed securities		—		12,437		12,437				4,209		4,209
Total	$	9,810	$	121,134	$	130,944	$	13,761	$	147,780	$	161,541
Liabilities:
Interest rate swap contract (1)	$	—	$	—	$	—	$	—	$	154	$	154
Total	$	—	$	—	$	—	$	—	$	154	$	154

(1) As of December 31, 2013, the fair value of the interest rate swap contract was classified on our Balance Sheet in other 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.  The following table indicates the carrying value and estimated fair value of our debt as of the indicated periods (in thousands):

	September 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Credit Agreement (carrying value including current maturities)	$	123,750	$	123,750	$	135,000	$	135,000
Convertible debt (par value)		150,000		187,065		150,000		199,800

The fair value for our Credit Agreement was estimated using a discounted cash flow methodology, while the fair value for our convertible debt was estimated based upon quoted market prices or recent sales activity, both of which are considered Level 2 inputs.

Income Taxes

Income Taxes.   Our current income tax provisions for the quarter and nine months ended September 30, 2014 do not reflect any benefit from research and development (“R&D”) tax credits, as they have not yet received Congressional approval for 2014.  If enacted prior to the end of the year, we will include those income tax benefits in our 2014 effective income tax rate.

For the third quarter and nine months ended September 30, 2013, the effective income tax rate was unusually low driven mainly by incremental R&D income tax credits claimed for the development activities from previous years and partially by the reduction of certain tax allowances related to foreign operations.

Accounting Pronouncement Issued but Not yet Effective

Accounting Pronouncement Issued But Not Yet Effective. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606).  This ASU is a single comprehensive model which supersedes nearly all existing revenue recognition guidance under U.S. GAAP.  Under the new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services.  The ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updated accounting guidance is effective for annual and interim reporting periods in fiscal years beginning after December 15, 2016.  Early adoption is not permitted.  An entity may choose to adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the standard.  We are currently in the process of evaluating the impact that this new guidance will have on our consolidated financial statements and our method of adoption.