ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

Annual Depreciation Rates of Property, Plant and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:


		%
Computers, software and equipment		15-33
Office furniture and equipment		7-25
Leasehold improvements		10
		(the shorter of the expected lease term or useful economic life)

Assumptions Used to Estimate Fair Value of Stock Options Granted

The fair value for the Company’s stock options and SARs (other than share issuances in connection with the employee stock purchase plan, as detailed below) granted to employees and non-employees directors was estimated using the following assumptions:


	2011	2012	2013
Expected dividend yield	0%	0%	0%
Expected volatility	39%-58%	43%-58%	38%-54%
Risk-free interest rate	0.1%-2.7%	0.1%-1.2%	0.1%-2.5%
Expected forfeiture (employees)	10%	10%	10%
Expected forfeiture (executives)	5%	5%	5%
Contractual term of up to	10 years	10 years	10 years
Suboptimal exercise multiple (employees)	2.0-2.1	2.1	2.1
Suboptimal exercise multiple (executives)	2.3	2.4	2.4

Assumptions Used to Estimate Fair Value of Employee Stock Purchase Plan

The fair value for rights to purchase shares of common stock under the Company’s employee stock purchase plan was estimated on the date of grant using the following assumptions:


	2011	2012	2013
Expected dividend yield	0%	0%	0%
Expected volatility	41%-50%	41%-61%	34%-53%
Risk-free interest rate	0.2%-1.8%	0.1%-0.6%	0.1%-0.2%
Expected forfeiture	0%	0%	0%
Contractual term of up to	24 months	24 months	24 months

Equity-Based Compensation Expenses Related to Stock Options, SARs and Employee Stock Purchase Plan

During the years ended December 31, 2011, 2012 and 2013, the Company recognized equity-based compensation expense related to stock options, SARs and employee stock purchase plan as follows:


	Year ended December 31,
	2011		2012		2013
Cost of revenue	$	239	$	241	$	312
Research and development, net		1,934		1,810		2,014
Sales and marketing		1,094		1,036		1,311
General and administrative		1,891		1,996		2,283

Total equity-based compensation expense	$	5,158	$	5,083	$	5,920

Calculation of Numerator and Denominator in Earnings Per Share

Diluted net income per share is computed based on the weighted average number of shares of common stock outstanding during each year, plus dilutive potential shares of common stock considered outstanding during the year, in accordance with FASB ASC No. 260, “Earnings Per Share.”


	Year ended December 31,
	2011		2012		2013
Numerator:
Net income	$	18,562	$	13,685	$	6,685
Denominator (in thousands):
Weighted-average common stock outstanding		23,173		22,798		22,009
Effect of stock options and stock appreciation rights		980		559		456

Diluted weighted-average common stock outstanding		24,153		23,357		22,465

Basic net income per share	$	0.80	$	0.60	$	0.30

Diluted net income per share	$	0.77	$	0.59	$	0.30