

13.	Noncontrolling Interests

We own some of our animal hospitals in partnerships with noncontrolling interest holders. We consolidate our partnerships in our consolidated financial statements because our ownership interest in these partnerships is equal to or greater than 50.1% and we control these entities. We record noncontrolling interest in income of subsidiaries equal to our partners’ percentage ownership of the partnerships’ income. We also record changes in the redemption value of our redeemable noncontrolling interests in net income attributable to noncontrolling interests in our consolidated income statements. Noncontrolling interest in income of subsidiaries was $5.2 million, $5.4 million and $5.2 million in 2014, 2013 and 2012, respectively. In addition, we reflect our noncontrolling partners’ cumulative share in the equity of the respective partnerships as either noncontrolling interests in equity, mandatorily redeemable noncontrolling interests in other liabilities, or redeemable noncontrolling interests in temporary equity (mezzanine) in our consolidated balance sheets.

a. Mandatorily Redeemable Noncontrolling Interests

The terms of some of our partnership agreements require us to purchase the partner’s equity in the partnership in the event of the partner’s death. We report these redeemable noncontrolling interests at their estimated redemption value, which approximates fair value and classify them as liabilities due to the certainty of the related event. Estimated redemption value is determined using either a contractually stated formula or a discounted cash flow technique, both of which are used as an approximation of fair value. The discounted cash flow inputs used to determine the redemption value are level 3 and include forecasted growth rates, valuation multiples, and the weighted average cost of capital. We recognize changes in the obligation as an interest cost in the consolidated income statement.



13.	Noncontrolling Interests, continued

The following table provides a summary of mandatorily redeemable noncontrolling interests included in other liabilities in our consolidated balance sheets (in thousands):



	Income Statement Impact		Mandatorily Redeemable Noncontrolling Interests
Balance as of December 31, 2011			$	3,111
Noncontrolling interest expense	1,555
Redemption value change	37		1,592
Formation of noncontrolling interests			8,161
Distribution to noncontrolling interests			(1,714		)
Currency translation adjustment			(103		)
Balance as of December 31, 2012			$	11,047

Noncontrolling interest expense	$	2,003
Redemption value change	74		2,077
Formation of noncontrolling interests			80
Purchase of noncontrolling interests			(1,703		)
Dissolution of noncontrolling interests			(357		)
Distribution to noncontrolling interests			(1,833		)
Currency translation adjustment			44
Balance as of December 31, 2013			$	9,355

Noncontrolling interest expense	$	1,625
Redemption value change	312		1,937
Distribution to noncontrolling interests			(1,418		)
Currency translation adjustment			(469		)
Balance as of December 31, 2014			$	9,405

b. Redeemable Noncontrolling Interests

We also enter into partnership agreements whereby the noncontrolling interest partner is issued certain “put” rights. These rights are normally exercisable at the sole discretion of the noncontrolling interest partner. We report these redeemable noncontrolling interests at their estimated redemption value and classify them in temporary equity (mezzanine). We recognize changes in the obligation in net income attributable to noncontrolling interests.



13.	Noncontrolling Interests, continued

The following table provides a summary of redeemable noncontrolling interests (in thousands):



	Income Statement Impact			Redeemable Noncontrolling Interests
Balance as of December 31, 2011				$	6,964
Noncontrolling interest	$	806
Redemption value change	156			962
Distribution to noncontrolling interests				(935		)
Balance as of December 31, 2012				6,991

Noncontrolling interest	$	1,146
Redemption value change	87			1,233
Formation of noncontrolling interests				3,601
Distribution to noncontrolling interests				(1,147		)
Balance as of December 31, 2013				10,678

Noncontrolling interest	$	1,226
Redemption value change	(16		)	1,210
Formation of noncontrolling interests				855
Purchase of noncontrolling interests				(356		)
Distribution to noncontrolling interests				(1,310		)
Balance as of December 31, 2014				$	11,077