NOTE 13: ACQUISITIONS

De Novo Legal LLC

In connection with the acquisition of De Novo on December 28, 2011, a portion of the purchase price was deferred and was being held as security for potential indemnification claims. During the third quarter of 2013 we paid $3.1 million of the deferred purchase price, adjusted for indemnification claims to the sellers. As of December 31, 2012, $3.5 million was recorded in "Current maturities of long-term obligations" related to the holdback. In connection with the De Novo acquisition, contingent consideration was potentially payable to the sellers if performance measures based on operating revenue objectives were achieved. The undiscounted amount of all potential future payments that could be required under the De Novo contingent consideration opportunity was between $0 and $29.1 million over the remaining measurement period which ended on December 31, 2013.

A portion of the De Novo contingent consideration was contingent upon certain of the sellers remaining employees of Epiq and is therefore recognized as compensation expense. If those sellers did not remain employees of Epiq, the portion of the contingent consideration to which they were entitled was forfeited and was not allocated to the remaining sellers. The portion of the contingent consideration tied to certain sellers' continued employment is recognized as compensation expense. The portion of the contingent consideration that was not tied to continued employment was considered to be part of the total consideration transferred for the purchase of De Novo and was measured as of the acquisition date and recognized at fair value. The fair value of potential contingent consideration was determined using a present value calculation combined with the probability of the potential payouts based on projected revenue. Subsequent changes in fair value, measured quarterly, up to the end of the final measurement period were recognized in earnings.

Based on operating revenue recorded during the 2013 measurement period, as defined in the purchase agreement, a portion of the De Novo contingent consideration opportunity was achieved during the fourth quarter of 2013. As a result, we recorded a total adjustment of $3.4 million to the contingent consideration obligation as of December 31, 2013 of which $2.6 million is included in "Fair value adjustment to contingent consideration" related to non-employee sellers and $0.8 million related to sellers who are Epiq employees is included in "Selling, general and administrative expense" in the Consolidated Statements of Income for the year ended December 31, 2013.

During 2012, the employment ended for one of the De Novo employees entitled to a portion of the contingent consideration and the portion of the contingent consideration subject to the continued employment of this employee was forfeited in its entirety. Also during 2012, based on projected revenue over the remainder of the measurement period, we recorded a total decrease in the fair value of the contingent consideration obligation of $17.2 million for the year ended December 31, 2012 which is included in "Fair value adjustment to contingent consideration" in the Consolidated Statements of Income and approximately $3.4 million of accrued compensation expense was reversed during the year ended December 31, 2012 which is included in "Selling, general and administrative" expense on the Consolidated Statement of Income. For the year ended December 31, 2012 compensation expense related to this obligation was $0.

The change in fair value of the De Novo contingent consideration also includes $1.1 million related to accretion expense, which is included in "Interest expense" in the Consolidated Statement of Income for the year ended December 31, 2012.

Transaction related costs, which were expensed during the period in which they were incurred, are reflected in "Other operating expense" in the Consolidated Statements of Income, and totaled $3.5 million for the year ended December 31, 2011, for this acquisition.

The acquisition of De Novo on December 28, 2011, did not have a material impact on our results of operations for the year ended December 31, 2011.

Encore Discovery Solutions

Transaction related costs, related to the April 4, 2011 acquisition of Encore Discovery Solutions ("Encore") were expensed during the period in which they were incurred, and are reflected in "Other operating expense" in the Consolidated Statement of Income, and totaled $3.9 million for the year ended December 31, 2011, for this acquisition.

For the year ended December 31, 2011, our consolidated results of operations, included $42.2 million and $8.3 million of operating revenue and operating income, respectively, related to the Encore legal entity subsequent to the acquisition date. These amounts are not necessarily reflective of the actual impact of the Encore acquisition on our results of operations due to post-acquisition integration with our legal entities.

Jupiter eSources LLC

In connection with the acquisition of Jupiter eSources LLC ("Jupiter eSources"), we withheld $8.4 million of the purchase price for any claims for indemnification and purchase price adjustments that was subsequently paid in May 2012 and is included as "Payment of deferred acquisition consideration" on the Consolidated Statements of Cash Flows for the year ended December 31, 2012.

As a result of a contingent consideration opportunity based on future revenue growth related to the October 1, 2010 acquisition of Jupiter eSources, we also have potential future contingent consideration. The potential undiscounted amount of all future payments that we could be required to make under the contingent consideration opportunity is between $0 and $10 million over the remaining measurement period through December 2014. Based on our assessments of projected revenue over the remainder of the measurement period, we determined that it is not likely that any contingent consideration for Jupiter eSources will be realized and as such there is no liability recorded related to this contingent consideration as of December 31, 2013 or 2012.

Pro forma financial information

The following unaudited condensed pro forma financial information presents consolidated results of operations as if the De Novo and Encore acquisitions had taken place on January 1, 2010 (in thousands). These amounts were prepared in accordance with the acquisition method of accounting under existing standards and are not necessarily indicative of the results of operations that would have occurred if our acquisitions of De Novo and Encore had been completed on January 1, 2010, nor are they indicative of our future operating results.

	Year Ended December 31, 2011

Total revenue	$	356,954
Operating revenue		334,893
Net income		22,759