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## Stock-Based Compensation 

We have two stock-based compensation plans, as described in further detail in Note 13 to our Consolidated Financial Statements. For new awards issued and awards modified, repurchased or canceled, the compensation expense is equal to the fair value of the award at the date of the grant and is recognized in the Consolidated Statement of Operations for those awards earned over the requisite service period of the award. 

## Earnings Per Share 

We compute basic earnings per common share by dividing net income attributable to Core Laboratories N.V. by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common share include additional shares in the weighted average share calculations associated with the incremental effect of dilutive employee stock options, restricted stock awards and contingently issuable shares, as determined using the treasury stock method. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share (in thousands): 

## For the Years Ended December 31, 

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## Reclassifications 

Certain reclassifications were made to prior year amounts in order to conform to the current year’s presentation. These reclassifications had no impact on reported net income or cash flows for the years ended December 31, 2012 and 2011. 

## 3. ACQUISITIONS 

In 2011, we acquired a business providing additional manufacturing capacity for our Canadian operations for $18.8 million in cash. We have accounted for this acquisition by allocating the purchase price to the net assets acquired based on their estimated fair values at the date of acquisition, resulting in an increase to goodwill of $8.6 million and an increase of $0.5 million in intangible assets. In 2012, a post-closing adjustment was recorded that increased the purchase price and goodwill by $0.6 million. The acquisition was recorded in the Production Enhancement business segment. The acquisition of this business did not have a material impact on our Consolidated Balance Sheet or Consolidated Statements of Operations. 

## 4. INVENTORIES 

Inventories consisted of the following at December 31, 2013 and 2012 (in thousands): 

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We include freight costs incurred for shipping inventory to our clients in the Cost of product sales caption in the accompanying Consolidated Statements of Operations. 

