ACQUISITION

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Acquisition

3. ACQUISITION

Cuattro Veterinary USA, LLC

On February 24, 2013, the Company acquired a 54.6% interest in Cuattro Veterinary USA, LLC

("Cuattro Vet USA") for approximately $7.6 million in cash and stock, including more than $4 million in cash (the "Acquisition"). Immediately following and as a result of the transaction, former Cuattro Vet USA unit holders owned approximately 7.2% of the Company's Public Common Stock. The remaining minority position (45.4%) in Cuattro Vet USA is subject to purchase by Heska under performance-based puts and calls following calendar year 2015, 2016 and 2017. Since the exercise of any put option is out of the Company’s control, authoritative guidance requires the non-controlling interest, which includes the value of the put option, to be displayed outside of the equity section of the Company’s consolidated balance sheet. Should Heska undergo a change in control, as defined, prior to the end of 2017, Cuattro Vet USA minority unit holders will be entitled to sell their Cuattro Vet USA units to Heska at the highest call value they could have otherwise obtained. The Company's position in Cuattro Vet USA is subject to premium repurchase or discounted sale under calls and puts expiring 18 months following the closing of the transaction.

Cuattro Vet USA was subsequently renamed Heska Imaging US, LLC ("Heska Imaging") and markets, sells and supports digital radiography and ultrasound products along with embedded software and support, data hosting and other services.

Shawna M. Wilson, Clint Roth, DVM, Steven M. Asakowicz, Rodney A. Lippincott, Kevin S. Wilson and Cuattro, LLC own approximately 29.75%, 8.39%, 4.09%, 3.07%, 0.05% and 0.05% of Heska Imaging, respectively. Kevin S. Wilson is the President and Chief Operating Officer of the Company and the spouse of Shawna M. Wilson. Steven M. Asakowicz serves as Executive Vice President, Companion Animal Health Sales for the Company. Rodney A. Lippincott serves as Executive Vice President, Companion Animal Health Sales for the Company. Mr. Wilson, Mrs. Wilson and trusts for their children and family own a 100% interest in Cuattro, LLC.

The aggregate position in Heska Imaging of the unit holders who hold the 45.4% of Heska Imaging that Heska Corporation does not own (the “Put Value”) is being accreted to its estimated redemption value in accordance with Heska Imaging’s Operating Agreement. The adjustment to increase or decrease the Put Value to its expected redemption value each reporting period is recorded to retained earnings in accordance with United States Generally Accepted Accounting Principles.

The Company accounted for the acquisition pursuant to ASC No. 805, "Business Combinations." Accordingly, it recorded assets acquired, liabilities assumed and non-controlling interests at their fair values. The following summarizes the aggregate consideration paid by the Company and the allocation of the purchase price based on current estimates as the Company continues to gather information to evaluate the appropriate accounting result (in thousands):

Consideration
	Cash		$	4,073
	Stock			3,571
		Total	$	7,644

Inventories		$	1,466
Note from Cuattro Veterinary, LLC, due March 15, 2016			1,360
Other tangible assets			1,278
Intangible assets			688
Goodwill			19,994
Notes payable and other borrowings			(1,527	)
Accounts payable			(1,424	)
Other assumed liabilities			(2,399	)
		$	19,436
Non-controlling interest			(11,792	)
	Total	$	7,644

Intangible assets and their amortization periods are as follows:

	Useful Life (in years)		Fair Value
Trade name		2.75	$	688
			$	688

Cuattro Vet USA generated net revenue of $6.7 million and net loss of $1.0 million, inclusive of net loss of $464 thousand attributable to non-controlling interest, for the period from February 24, 2013 to September 30, 2013. The following unaudited pro forma financial information presents the combined results of the Company and Cuattro Vet USA as if the Acquisition had closed on January 1, 2012.

		Nine Months Ended September 30,
		2012	2013
Revenue, net	$	59,308	$	55,735
Net income (loss) attributable to Heska Corporation		663		(2,830	)
Basic earnings (loss) per share attributable to Heska Corporation	$	0.12	$	(0.49	)
Diluted earnings (loss) per share attributable to Heska Corporation		0.11		(0.49	)