Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

a.    Leases

We operate many of our animal hospitals from premises that are leased under operating leases with terms, including renewal options, ranging from five to 35 years. Certain leases include fair-value purchase options that can be exercised at our discretion at various times within the lease terms.

The future minimum lease payments on operating leases at December 31, 2011 are as follows (in thousands):

2012	$	59,024
2013		59,159
2014		58,445
2015		58,841
2016		58,692
Thereafter		698,031
Total	$	992,192

Rent expense totaled $55.2 million, $51.9 million and $46.7 million in 2011, 2010 and 2009, respectively. Rental income totaled $920,000, $726,000 and $564,000 in 2011, 2010 and 2009, respectively.

b.    Purchase Commitments

Under the terms of certain purchase agreements, we have aggregate commitments to purchase approximately $26.2 million of products and services through 2016.

c.    Earn-out Payments

We have contractual arrangements in connection with certain acquisitions, whereby additional cash may be paid to former owners of acquired companies upon attainment of specified financial criteria as set forth in the respective agreements. The amount to be paid cannot be determined until the earn-out periods expire and the attainment of criteria is established. If the specified financial criteria are attained, we will be obligated to pay an additional $925,000.

Contingent consideration, such as earn-out liabilities, is recognized as part of the consideration transferred on the acquisition date and a corresponding liability is recorded based on the fair value of the liability if the fair value is known or determinable. The changes in fair value are recognized in earnings where applicable at each reporting period.

d.    Holdbacks

In connection with certain acquisitions, we withheld a portion of the purchase price, or the holdback, as security for indemnification obligations of the sellers under the acquisition agreement. The amounts withheld are typically payable within a 12-month period. The total outstanding holdbacks at both December 31, 2011 and 2010 were $1.5 million and $1.8 million, respectively, and are included in other accrued liabilities.

We paid $1.8 million, $3.3 million and $5.0 million in 2011, 2010 and 2009, respectively, to sellers for the unused portion of holdbacks.

e.    Other Contingencies

We have certain contingent liabilities resulting from litigation and claims incident to the ordinary course of our business. We believe that the probable resolution of such contingencies will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.