**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q**

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**(Mark One)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe quarterly period ended March 31, 2006**

**or**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe transition period from                              to                              **

**Commissionfile number:  333-124100**

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**CDRV INVESTORS, INC.**

(Exact name of registrantas specified in its charter)

| **Delaware**                              |   | **56-2445503**       |
|-------------------------------------------|--------|----------------------|
| (State or other  jurisdiction of          |   | (I.R.S. Employer     |
| incorporation or  organization)           |   | Identification  No.) |
| **1310 Goshen Parkway**                   |   | ** **           |
| **P.O. Box  2656**                   |   | ** **           |
| **West  Chester, PA**                     |   | **19380**            |
| (Address of  principal executive offices) |   | (Zip code)           |

 

**(610) 431-1700**

(Registrant’s telephonenumber, including area code)

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes o   Nox

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):

Large accelerated filer o         Acceleratedfiler o         Non-acceleratedfiler x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   Nox

Asof March 31, 2006, there was no established public market for theregistrant’s common stock, par value $0.01 per share. The number of shares ofthe registrant’s common stock outstanding at May 5, 2006 was 5,771,300.

 

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**CDRV INVESTORS, INC.FORM 10-QFOR THE QUARTER ENDED MARCH 31, 2006**

**INDEX**

|                                         |   |                                                                                                                                                      |   | **Page No.** |
|-----------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|
| **PART I. FINANCIAL INFORMATION:** |   |                                                                                                                                                      |
| Item 1.                                 |   | Financial  Statements:                                                                                                                                    |   |              |
|                                    |   | Consolidated  Balance Sheets—as of March 31, 2006 (Unaudited) and December 31, 2005                                                   |   | 3                 |
|                                    |   | Consolidated  Statements of Operations (Unaudited)—for the three months ended March 31,  2006 and 2005                                     |   | 4                 |
|                                    |   | Consolidated  Statement of Stockholders’ Equity and Other Comprehensive Income (Unaudited)—for  the three months ended March 31, 2006 |   | 5                 |
|                                    |   | Consolidated  Statements of Cash Flows (Unaudited)—for the three months ended March 31,  2006 and 2005                                     |   | 6                 |
|                                    |   | Notes  to Consolidated Financial Statements (Unaudited)                                                                                                   |   | 7                 |
| Item 2.                                 |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                               |   | 19                |
| Item 3.                                 |   | Quantitative  and Qualitative Disclosures about Market Risk                                                                                               |   | 28                |
| Item 4.                                 |   | Controls  and Procedures                                                                                                                                  |   | 28                |
| **PART II. OTHER INFORMATION:**    |   |                                                                                                                                                      |
| Item 1.                                 |   | Legal  Proceedings                                                                                                                                        |   | 29                |
| Item 1A.                                |   | Risk Factors                                                                                                                                              |   | 29                |
| Item 5.                                 |   | Other  Information                                                                                                                                        |   | 29                |
| Item 6.                                 |   | Exhibits                                                                                                                                                  |   | 29                |
| Signature                               |   | 30                                                                                                                                                        |

 

2

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**PART I—FINANCIALINFORMATION**

**Item 1—*Financial Statements***

**CDRV INVESTORS, INC.Consolidated Balance Sheets(Dollars in millions, except share data)**

| ** **                                                                                                                                                                                                                | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                                                                                                | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                                                                                                                |       |               |       |                  |       |   |   |   |   |
| Current Assets:                                                                                                                                                                                                           |       |               |       |                  |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                                 |       |               | $          | 123.1                 |       |   |   | $ | 126.1 |   |   |
| Trade accounts  receivable, less reserves of $7.2 and $6.6, respectively                                                                                                                                                  |       |               | 441.0      |                  |       |   | 407.3 |   |   |
| Other receivables                                                                                                                                                                                                         |       |               | 21.4       |                  |       |   | 31.0 |   |   |
| Inventories                                                                                                                                                                                                               |       |               | 259.7      |                  |       |   | 270.4 |   |   |
| Other current assets                                                                                                                                                                                                      |       |               | 32.8       |                  |       |   | 30.6 |   |   |
| Total current assets                                                                                                                                                                                                      |       |               | 878.0      |                  |       |   | 865.4 |   |   |
| Property and equipment,  net                                                                                                                                                                                              |       |               | 158.9      |                  |       |   | 156.8 |   |   |
| Investments                                                                                                                                                                                                               |       |               | 7.9        |                  |       |   | 7.8 |   |   |
| Goodwill                                                                                                                                                                                                                  |       |               | 915.0      |                  |       |   | 910.0 |   |   |
| Other intangible assets,  net                                                                                                                                                                                             |       |               | 551.8      |                  |       |   | 552.7 |   |   |
| Deferred income taxes                                                                                                                                                                                                     |       |               | 9.9        |                  |       |   | 8.7 |   |   |
| Other assets                                                                                                                                                                                                              |       |               | 45.7       |                  |       |   | 45.9 |   |   |
| Total assets                                                                                                                                                                                                              |       |               | $          | 2,567.2               |       |   |   | $ | 2,547.3 |   |   |
| **Liabilities and Stockholders’ Equity**                                                                                                                                                                             | ** ** |               |       |                  |       |   |   |   |   |
| Current Liabilities:                                                                                                                                                                                                      |       |               |       |                  |       |   |   |   |   |
| Short-term portion of  bank debt and current portion of capital lease  obligations                                                                                                                                        |       |               | $          | 1.2                   |       |   |   | $ | 45.5 |   |   |
| Accounts payable                                                                                                                                                                                                          |       |               | 382.8      |                  |       |   | 370.3 |   |   |
| Accrued expenses                                                                                                                                                                                                          |       |               | 159.2      |                  |       |   | 139.1 |   |   |
| Total current liabilities                                                                                                                                                                                                 |       |               | 543.2      |                  |       |   | 554.9 |   |   |
| Long-term debt                                                                                                                                                                                                            |       |               | 1,354.6    |                  |       |   | 1,342.9 |   |   |
| Capital lease obligations                                                                                                                                                                                                 |       |               | 4.8        |                  |       |   | 5.0 |   |   |
| Other long-term  liabilities                                                                                                                                                                                              |       |               | 89.8       |                  |       |   | 87.1 |   |   |
| Deferred income taxes                                                                                                                                                                                                     |       |               | 233.0      |                  |       |   | 233.5 |   |   |
| Total liabilities                                                                                                                                                                                                         |       |               | 2,225.4    |                  |       |   | 2,223.4 |   |   |
| Common stock purchase  subject to guarantee agreement                                                                                                                                                                     |       |               | 2.4        |                  |       |   | 2.6 |   |   |
| Commitments and contingences                                                                                                                                                                                              |       |               |       |                  |       |   |   |   |   |
| Stockholders’ equity:                                                                                                                                                                                                |       |               |       |                  |       |   |   |   |   |
| Common stock, $0.01 par  value; 7,000,000 shares authorized; 5,801,230 shares issued and 5,756,450  outstanding at March 31, 2006; 5,779,178 shares issued and  5,753,428 outstanding at December 31, 2005 |       |               | 0.1        |                  |       |   | 0.1 |   |   |
| Additional paid-in  capital                                                                                                                                                                                               |       |               | 268.3      |                  |       |   | 268.0 |   |   |
| Retained earnings                                                                                                                                                                                                         |       |               | 54.6       |                  |       |   | 43.6 |   |   |
| Unamortized value of  restricted stock issued                                                                                                                                                                             |       |               | —     |                  |       |   | (1.6 | ) |   |
| Accumulated other  comprehensive income                                                                                                                                                                                   |       |               | 19.4       |                  |       |   | 12.7 |   |   |
| Treasury stock, at cost,  44,780 shares at March 31, 2006 and 25,750 shares at December 31,  2005                                                                                                               |       |               | (3.0       | )                     |       |   | (1.5 | ) |   |
| Total stockholders’  equity                                                                                                                                                                                          |       |               | 339.4      |                  |       |   | 321.3 |   |   |
| Total liabilities and stockholders’ equity                                                                                                                                                                           |       |               | $          | 2,567.2               |       |   |   | $ | 2,547.3 |   |   |

 

See accompanying notes to consolidated financial statements.

3

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**CDRV INVESTORS, INC.Consolidated Statements of Operations(Dollars in millions)(Unaudited)**

| ** **                                    | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                    | ** ** | **   2006   **     | ** ** | **   2005   ** | ** ** |
| Net sales                                     |       |                                             | $          | 795.8 |   |   |   | $ | 754.1 |   |   |
| Cost of goods  sold                           |       |                                             | 581.4      |   |   |   | 561.4 |   |   |
| Gross profit                                  |       |                                             | 214.4      |   |   |   | 192.7 |   |   |
| Selling, general  and administrative expenses |       |                                             | 168.5      |   |   |   | 165.6 |   |   |
| Restructuring  (credits) charges              |       |                                             | (0.2       | ) |   |   | 2.1 |   |   |
| Operating income                              |       |                                             | 46.1       |   |   |   | 25.0 |   |   |
| Interest income                               |       |                                             | (1.3       | ) |   |   | (0.6 | ) |   |
| Interest expense                              |       |                                             | 28.7       |   |   |   | 25.7 |   |   |
| Other expense  (income), net                  |       |                                             | 0.8        |   |   |   | (1.0 | ) |   |
| Income before income taxes                    |       |                                             | 17.9       |   |   |   | 0.9 |   |   |
| Income tax  provision                         |       |                                             | 6.9        |   |   |   | 0.4 |   |   |
| Net income                                    |       |                                             | $          | 11.0 |   |   |   | $ | 0.5 |   |   |

 

See accompanying notes to consolidated financial statements.

4

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**CDRV INVESTORS, INC.Consolidated Statement of Stockholders’ Equity and Other Comprehensive IncomeThree Months Ended March 31, 2006(Dollars in millions)(Unaudited)**

| ** **                                                                        | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **     | ** ** | **Unamortized**       | ** ** | **Accumulated**  | ** ** | ** **               | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------|------------|-------------|------------|----------------|------------|----------------|------------|-----------------------|------------|------------------|------------|--------------------------|------------|------------|------------|------------|------------|
| ** **                                                                        | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **     | ** ** | **value of**     | ** ** | **other**        | ** ** | **Treasury Stock,** | ** ** | ** ** | ** ** |
| ** **                                                                        | ** ** | **Common Stock** | ** ** | **paid-in** | ** ** | **Retained**   | ** ** | **restricted** | ** ** | **comprehensive**     | ** ** | **at cost** | ** ** | ** **               | ** ** |
| ** **                                                                        | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **capital**    | ** ** | **earnings**   | ** ** | **stock issued** | ** ** | **income**       | ** ** | **Shares**               | ** ** | **Amount** | ** ** | **Total**  | ** ** |
| Balance at December 31, 2005                                                 |       | 5,779,178             |       |        | $          | 0.1            |       |           |       | $                     | 268.0      |             |       |                     | $          | 43.6       |       |       |       | $ | (1.6 | ) |   |   | $ | 12.7 |   |   |   | 25,750 |   |   |   | $ | (1.5 | ) |   | $ | 321.3 |   |
| Equity reclassification (Note 3(b))                                               |       | —                |       |        | —     |           |       |           | (1.6       | )                     |       |             | —     |                     |       |       | 1.6        |       |       |   | — |   |   |   | — |   |   |   | — |   |   | — |   |
| Issuance of common stock in connection with our stock  incentive plan        |       | 20,692                |       |        | —     |           |       |           | 1.1        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 1.1 |   |
| Exercise of stock options                                                         |       | 1,360                 |       |        | —     |           |       |           | 0.1        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 0.1 |   |
| Compensation expense recognized for options                                  |       | —                |       |        | —     |           |       |           | 0.4        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 0.4 |   |
| Compensation expense recognized for amortization  of restricted common stock |       | —                |       |        | —     |           |       |           | 0.1        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 0.1 |   |
| Reduction of common stock purchase subject to  guarantee agreement           |       | —                |       |        | —     |           |       |           | 0.2        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 0.2 |   |
| Acquisition of treasury stock                                                     |       | —                |       |        | —     |           |       |           | —     |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | 19,030 |   |   |   | (1.5 | ) |   | (1.5 | ) |
| Comprehensive  income                                                             |       |                  |       |        |       |           |       |           |       |                  |       |             |       |                     |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                        |       | —                |       |        | —     |           |       |           | —     |                  |       |             | 11.0       |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 11.0 |   |
| Foreign currency translation adjustment                                           |       | —                |       |        | —     |           |       |           | —     |                  |       |             | —     |                     |       |       | —     |       |       |   | 6.2 |   |   |   | — |   |   |   | — |   |   | 6.2 |   |
| Unrealized gain on derivatives, net of tax                                   |       | —                |       |        | —     |           |       |           | —     |                  |       |             | —     |                     |       |       | —     |       |       |   | 0.5 |   |   |   | — |   |   |   | — |   |   | 0.5 |   |
| Total comprehensive income                                                        |       |                  |       |        |       |           |       |           |       |                  |       |             |       |                     |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   | 17.7 |   |
| Balance at  March 31, 2006                                                   |       | 5,801,230             |       |        | $          | 0.1            |       |           |       | $                     | 268.3      |             |       |                     | $          | 54.6       |       |       |       | $ | — |   |   |   | $ | 19.4 |   |   |   | 44,780 |   |   |   | $ | (3.0 | ) |   | $ | 339.4 |   |

 

See accompanying notes to consolidated financial statements.

5

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**CDRV INVESTORS, INC.Consolidated Statements of Cash Flows(Dollars in millions)(Unaudited)**

| ** **                                                                         | ** ** | **Three Months Ended**                         | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **March 31,**                                       | ** ** |
| ** **                                                                         | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** |
| Cash flows from operating  activities:                                             |       |                                                     |       |   |   |   |   |   |   |
| Net income                                                                         |       |                                                     | $          | 11.0 |   |   |   | $ | 0.5 |   |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                                                     |       |   |   |   |   |   |   |
| Depreciation and amortization                                                      |       |                                                     | 8.2        |   |   |   | 8.4 |   |   |
| Gain on sale of assets                                                             |       |                                                     | (0.1       | ) |   |   | (0.2 | ) |   |
| Non-cash interest accretion                                                        |       |                                                     | 8.0        |   |   |   | 7.3 |   |   |
| Non-cash (credit) provision for restructuring                                      |       |                                                     | (0.2       | ) |   |   | 2.1 |   |   |
| Non-cash equity compensation expense                                               |       |                                                     | 0.5        |   |   |   | — |   |   |
| Amortization of debt issuance costs                                                |       |                                                     | 1.5        |   |   |   | 1.5 |   |   |
| Deferred income tax expense                                                        |       |                                                     | (0.3       | ) |   |   | 2.5 |   |   |
| Provision for doubtful accounts                                                    |       |                                                     | 0.7        |   |   |   | 0.9 |   |   |
| Changes  in working capital:                                                       |       |                                                     |       |   |   |   |   |   |   |
| Trade accounts receivable                                                          |       |                                                     | (30.2      | ) |   |   | (7.8 | ) |   |
| Other receivables                                                                  |       |                                                     | 9.9        |   |   |   | (1.7 | ) |   |
| Inventories                                                                        |       |                                                     | 12.5       |   |   |   | 9.3 |   |   |
| Other assets                                                                       |       |                                                     | (2.8       | ) |   |   | (4.4 | ) |   |
| Accounts payable                                                                   |       |                                                     | 19.5       |   |   |   | 47.9 |   |   |
| Other liabilities                                                                  |       |                                                     | 19.0       |   |   |   | 0.9 |   |   |
| Net cash provided by operating activities                                          |       |                                                     | 57.2       |   |   |   | 67.2 |   |   |
| Cash flows from investing  activities:                                             |       |                                                     |       |   |   |   |   |   |   |
| Capital expenditures                                                               |       |                                                     | (4.8       | ) |   |   | (4.3 | ) |   |
| Transaction costs                                                                  |       |                                                     | (0.2       | ) |   |   | — |   |   |
| Proceeds from sales of property and equipment                                      |       |                                                     | 0.2        |   |   |   | 0.2 |   |   |
| Net cash used in investing activities                                              |       |                                                     | (4.8       | ) |   |   | (4.1 | ) |   |
| Cash flows from financing  activities:                                             |       |                                                     |       |   |   |   |   |   |   |
| Proceeds from debt                                                                 |       |                                                     | 0.1        |   |   |   | 0.3 |   |   |
| Repayment of debt                                                                  |       |                                                     | (45.3      | ) |   |   | (4.4 | ) |   |
| Net change in bank checks outstanding                                              |       |                                                     | (9.9       | ) |   |   | (26.8 | ) |   |
| Proceeds from stock incentive plan                                                 |       |                                                     | 1.2        |   |   |   | 0.1 |   |   |
| Cash paid for debt issuance costs                                                  |       |                                                     | —     |   |   |   | (0.2 | ) |   |
| Acquisition of treasury stock                                                      |       |                                                     | (1.5       | ) |   |   | — |   |   |
| Net cash used in financing activities                                              |       |                                                     | (55.4      | ) |   |   | (31.0 | ) |   |
| Effect of exchange rate changes on cash                                            |       |                                                     | —     |   |   |   | (1.9 | ) |   |
| Net (decrease) increase in cash and cash equivalents                               |       |                                                     | (3.0       | ) |   |   | 30.2 |   |   |
| Cash and cash equivalents beginning of period                                      |       |                                                     | 126.1      |   |   |   | 116.9 |   |   |
| Cash and cash equivalents end of period                                            |       |                                                     | $          | 123.1 |   |   |   | $ | 147.1 |   |   |
| Supplemental  disclosures of cash flow information:                                |       |                                                     |       |   |   |   |   |   |   |
| Cash  paid during the period for:                                                  |       |                                                     |       |   |   |   |   |   |   |
| Interest                                                                           |       |                                                     | $          | 9.8 |   |   |   | $ | 6.8 |   |   |
| Income taxes paid,  net                                                            |       |                                                     | $          | 3.1 |   |   |   | $ | 3.1 |   |   |

 

See accompanying notes to consolidated financial statements.

6

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except share data) (Unaudited)**

**(1)   Natureof Operations, Background and Basis of Presentation**

***(a) Nature of Operations***

CDRV Investors, Inc.(“CDRV”, the “Company”, “we” or “our”), through its indirect wholly-ownedsubsidiary VWR International, Inc. (“VWR”), distributes scientific supplies,chemicals, and equipment, primarily in North America and Europe. The businessis diversified across products and services, customer groups, and geography. Wereport financial results on the basis of the following three business segments:North American laboratory distribution (“North American Lab”), Europeanlaboratory distribution (“European Lab”) and Science Education. Both the NorthAmerican Lab and European Lab segments are comprised of the distribution ofscientific supplies to customers engaged in pharmaceuticals, biotechnology,chemicals, technology, and food processing; governmental agencies; colleges anduniversities; and environmental organizations. Science Education is comprisedof the distribution of scientific supplies and specialized kits to primary andsecondary schools as well as distribution of scientific supplies touniversities and research institutes.

***(b) Background***

On April 7, 2004, Merck KGaA sold all of theoutstanding shares of capital stock of VWR’s predecessor, VWR International Corporation,to CDRV Acquisition Corporation (“CDRVA”), a wholly-owned subsidiary ofCDRV Holdings, Inc., a wholly-owned subsidiary of the Company (the “Acquisition”).In connection with the Acquisition, CDRVA issued $200.0 of 67¤8%Unsecured Senior Notes due 2012 and $320.0 of 8% Unsecured Senior SubordinatedNotes due 2014 (the “VWR Notes”) and obtained financing under a new seniorsecured credit facility (the “Senior Secured Credit Facility”). Following thecompletion of the Acquisition, there were a series of internal reorganizations,pursuant to which, among other things, (i) VWR International Corporationmerged with and into VWR, with VWR surviving, and (ii) thereafter,CDRVA merged with and into VWR, with VWR surviving and assuming the obligationsof CDRVA.

On December 16, 2004,we issued $481.0 of 95¤8%Senior Discount Notes due 2015 (“Senior Discount Notes”). Prior to thisissuance, we had not had any significant operating, investing or financingactivities other than being the holding company of CDRV Holdings, Inc.,which in turn, had not had any significant operating, investing or financingactivities other than being the holding company of VWR and the indirect holderof the approximately 6% equity ownership in VWR International Immobilien GmbHthat VWR did not hold. The net proceeds from the issuance of the SeniorDiscount Notes of approximately $297.9 were used to pay a cash dividend to theholders of our common stock.

***(c) Basis of Presentation***

The accompanying consolidated financial statements includethe accounts of CDRV and its subsidiaries after elimination of all intercompanybalances and transactions. The financial statements included herein have beenprepared by the Company without audit, pursuant to the rules andregulations of the Securities and Exchange Commission. Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America have been condensed or omitted pursuant to such rules andregulations. The 

7

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

December 31, 2005balance sheet is the balance sheet included in the audited financial statementsas shown in the Company’s 2005 Annual Report on Form 10-K for theyear ended December 31, 2005. The Company believes that the disclosuresincluded herein are adequate to make the information presented not misleadingwhen read in conjunction with the financial statements, footnotes and relateddisclosures included in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2005.

The financial information presented herein reflectsall adjustments (consisting only of normal-recurring adjustments) that are, inthe opinion of management, necessary for a fair presentation of the****results for the interim periods presented.The results for interim periods are not necessarily indicative of the resultsto be expected for the full year.

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. While actual results coulddiffer from those estimates, management believes that the estimates arereasonable.

Certain amounts from priorperiods have been reclassified to conform to the current presentation.

**(2)   NewAccounting Standards**

During November 2004, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)No. 151, *Inventory Costs*.This Statement clarifies the accounting for abnormal amounts of idle facilityexpenses, freight handling costs, and spoilage. This Statement requires suchexcess costs be charged as current-period expenses. This Statement alsospecifies that allocated overhead costs to inventory must be based on normalcapacity measures. This Statement became effective for inventory costs incurredbeginning January 1, 2006. The adoption of this Statement did notmaterially impact the Company.

Effective December 31,2005, we adopted FASB Interpretation No. 47, *Accounting for Conditional Asset Retirement Obligations* (“FIN47”). FIN 47 clarifies that the term conditional asset retirement obligationrefers to a legal obligation to perform an asset retirement activity in whichthe timing and/or method of settlement are conditional on a future event thatmay or may not be within the control of the Company. FIN 47 requires that aliability for the fair value of a conditional asset retirement obligation berecognized if the fair value of the liability can be reasonably estimated. Theimpact of FIN 47 for the three months ended March 31, 2006 was an increaseto selling, general and administrative expenses of $0.1.

**(3)   Stock-BasedCompensation**

***(a) Stock Options***

We adopted the CDRVInvestors, Inc. Stock Incentive Plan (the “Stock Plan”). Under the StockPlan, our board of directors may grant rights to purchase shares of our commonstock and options to purchase shares of our common stock to any of ourexecutive officers or other employees, including our named executive officers.Under the Stock Plan, the board of directors may also grant shares of commonstock, 

8

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

rights to purchase sharesof common stock and other share-based awards to our directors, who are not alsoour employees or associated with Clayton, Dubilier & Rice (“CD&R”).Options granted under the plan vest in equal annual installments on each of thefirst five anniversaries of the grant date and expire ten years from the grantdate. As of March 31, 2006, there were 909,271 shares of common stockavailable for all types of awards. Based on shares issued, options outstandingand restricted units granted under the Stock Plan as of March 31, 2006,there are 82,071 shares available for future awards.

During the three months ended March 31, 2006, wehad the following stock transactions with our employees, directors and formeremployees: (1) closed an offering with our new President and ChiefExecutive Officer for the purchase of 19,643 shares at $56.00 per share(during the fourth quarter of 2005 when these shares were offered we recordedcompensation expense of $0.7 using the intrinsic value guidance of AccountingPrinciples Board Opinion No. 25, *Accountingfor Stock Issued to Employees* (“APB 25”) for all shares offeredat a discount from the $75.00 per share fair market value) and granted optionsto purchase 58,929 shares at $75.00 per share, (2) issued 1,049 shares tocertain directors who are not also our employees or associated with CD&Rfor director compensation and (3) issued 1,360 shares at $50.52 per sharein connection with the exercise of stock options. During the three months endedMarch 31, 2005, we closed an offering with 1 of our directors for446 shares at $56.00 per share and issued 1,313 shares to certaindirectors who are not also our employees or associated with CD&R fordirector compensation.

Effective January 1, 2006, the Company adoptedSFAS No. 123 Revised, *Share-BasedPayment* (“SFAS 123R”), which requires companies to recognize in theincome statement, the grant date value of stock options and other forms ofequity-based compensation issued to employees. The Company previously accountedfor stock options using the intrinsic value method of APB 25. Under APB 25, theCompany did not recognize compensation expense for options because such optionshad an exercise price equal to their fair market value on the date of grant.

The Company adopted SFAS 123R using the modifiedprospective transition method. Under this transition method, compensation costincludes the cost for all options granted prior to, but not yet vested as of January 1,2006 and all prospective awards without restatement of prior periods. Theimpact of adopting SFAS 123R for the three months ended March 31, 2006 wasan increase to selling, general and administrative expenses of $0.4 and areduction to income tax provision of $0.1.

Hadcompensation expense for stock options granted been determined based on thefair value at the grant date for awards under the plan, consistent with theprovisions of SFAS 123R, the Company’s net income for the three months ended March 31,2005 would have approximated the pro-forma amounts indicated below:

| Net income, as  reported                                                                                            |   | $    | 0.5 |   |
|---------------------------------------------------------------------------------------------------------------------|--------|------|-----|--------|
| Deduct:  stock-based compensation expense determined using fair value based method for  all awards, net of tax |   | (0.3 | )   |
| Pro-forma net income                                                                                                |   | $    | 0.2 |   |

 

9

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

Thefair value of each option was estimated using the Black-Scholes option-pricingmodel. No options were granted during the three months ended March 31,2005. The fair value of options granted and the assumptions used during thethree months ended March 31, 2006 were as follows:

| Fair value of  options granted |   | $         | 33.61  |   |
|--------------------------------|--------|-----------|--------|--------|
| Risk-free  interest rate       |   | 4.76      | %      |
| Expected life of  options      |   | 6.5 years |   |
| Volatility                     |   | 35        | %      |
| Expected dividend yield        |   | 0.0       | %      |

 

The risk-free interest rate is based on the U.S.treasury yield curve in effect at the time of grant, the expected life iscalculated using the “simplified” method allowable under SEC Staff AccountingBulletin No. 107, and volatility is estimated based on historical industrydata.

We recognize compensation expense for stock options,which are considered fixed awards with pro-rata vesting, on astraight-line basis.

Informationregarding stock options granted under the Stock Plan for the three months endedMarch 31, 2006 is as follows:

| ** **                          | ** ** | ** ** | ** ** | **Weighted** | ** ** |
|-------------------------------------|------------|------------|------------|--------------|------------|
| ** **                          | ** ** | **Number** | ** ** | **Average**  | ** ** |
| ** **                          | ** ** | **of**     | ** ** | **Exercise** | ** ** |
| ** **                          | ** ** | **Shares** | ** ** | **Price**    | ** ** |
| Outstanding at  beginning of period |       | 483,728    |       |         | $          | 51.24 |   |   |
| Granted                             |       | 58,929     |       |         | 75.00      |   |   |
| Forfeited                           |       | (36,408    | )          |         | 50.52      |   |   |
| Canceled                            |       | (252       | )          |         | 50.52      |   |   |
| Exercised                           |       | (1,360     | )          |         | 50.52      |   |   |
| Outstanding at  end of period       |       | 504,637    |       |         | $          | 54.07 |   |   |
| Exercisable at end of  period       |       | 92,786     |       |         | $          | 50.52 |   |   |

 

Informationregarding unvested stock options for the three months ended March 31, 2006is as follows:

| ** **                                  | ** ** | ** ** | ** ** | **Weighted** | ** ** |
|---------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                                  | ** ** | **Number** | ** ** | **Average**  | ** ** |
| ** **                                  | ** ** | **of**     | ** ** | **Fair**     | ** ** |
| ** **                                  | ** ** | **Shares** | ** ** | **Value**    | ** ** |
| Unvested options  at December 31, 2005 |       | 398,330    |       |         | $          | 17.18 |   |   |
| Granted                                     |       | 58,929     |       |         | 33.61      |   |   |
| Forfeited                                   |       | (36,408    | )          |         | 15.58      |   |   |
| Vested                                      |       | (9,000     | )          |         | 15.58      |   |   |
| Unvested options at  March 31, 2006    |       | 411,851    |       |         | $          | 19.70 |   |   |

 

10

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

Thefollowing is a summary of outstanding stock options as of March 31, 2006.

| ** **   | ** ** | **Weighted**    | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** ** | ** ** | ** **    | ** ** |
|--------------|------------|-----------------|------------|------------------------------|------------|------------------------------|------------|------------|------------|---------------|------------|
| ** **   | ** ** | **Average**     | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
| ** **   | ** ** | **Remaining**   | ** ** | **Number**                   | ** ** | **Aggregate**                | ** ** | **Number** | ** ** | **Aggregate** | ** ** |
| **Exercise** | ** ** | **Contractual** | ** ** | **of**                       | ** ** | **Intrinsic**                | ** ** | **of**     | ** ** | **Intrinsic** | ** ** |
| ** **   | **Price**  | ** **      | ** ** | **Life (Years)**        | ** ** | **Shares**                   | ** ** | **Value**  | ** ** | **Shares**    | ** ** | **Value** | ** ** |
| $50.52       |       |            |       | 8.5                          |       |                         | 381,930    |       |       | $             | 9.4        |   |   |   | 92,786 |   |   |   | $ | 2.3 |   |   |
| 56.00        |       |            |       | 9.1                          |       |                         | 63,778     |       |       | 1.2           |       |   |   | — |   |   |   | — |   |   |
| 75.00        |       |            |       | 9.9                          |       |                         | 58,929     |       |       | —        |       |   |   | — |   |   |   | — |   |   |
|         |       |            |       |                         |       | 504,637                      |       |       | $          | 10.6          |       |   |   | 92,786 |   |   |   | $ | 2.3 |   |   |
|              |            |                 |            |                              |            |                              |            |            |            |               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

***(b) Restricted Stock Units***

In 2005, we granted 21,333 restricted stock units witha total fair value of approximately $1.6 to certain of our officers and otherkey executives that will vest in equal annual installments over a five-yearperiod. The restricted units will all vest earlier in certain circumstances ifwe have a change in control. The granting of these units was reflected in the December 31,2005 financial statements by increasing additional paid-in capital by $1.6 anda contra-equity account of unamortized value of restricted stock issued of$1.6. In accordance with the provisions of SFAS 123R, the unamortized value ofrestricted stock issued of $1.6 as of the adoption date of January 1, 2006was eliminated against additional paid-in capital. The unearned compensation isbeing amortized as compensation expense over the five-year vesting periodof the restricted units granted. Compensation expense related to theserestricted stock units was $0.1 for the three months ended March 31, 2006.

As of March 31, 2006, the aggregate estimatedfuture compensation expense related to nonvested options outstanding and theunamortized value of restricted stock issued is $8.4. This expense will berecognized over a weighted average period of 4.1 years.

It is our policy to issuenew shares upon share option exercise or restricted stock unit conversion.

**(4)   Restructuring**

***(a) Restructuring as a Result of the Acquisition***

Subsequent to the Acquisition, we initiatedrestructuring activities designed to reduce operating costs and improve theoperating and administrative capabilities of the Company. These charges havebeen recorded as adjustments to acquisition costs (increases to goodwill)pursuant to the provisions of Emerging Issues Task Force Issue No. 95-3,*Recognition of Liabilities in Connectionwith a Purchase Business Combination*.

11

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

Thefollowing table sets forth the activity associated with the Company’sliabilities for restructuring as a result of the Acquisition.

| ** **                      | ** ** | **Severance**   | ** ** | ** **     | ** ** | ** ** | ** ** |
|---------------------------------|------------|-----------------|------------|----------------|------------|------------|------------|
| ** **                      | ** ** | **and**         | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                      | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                      | ** ** | **benefits**    | ** ** | **related**    | ** ** | **Total**  | ** ** |
| Balance at January 1, 2006 |       |            | $          | 7.6            |       |       |       | $ | 5.6 |   |   | $ | 13.2 |   |
| Cash payments/other             |       |            | (1.2       | )              |       |       | (0.3       | ) |   | (1.5 | ) |
| Currency translation changes    |       |            | 0.1        |           |       |       | 0.1        |   |   | 0.2 |   |
| Balance at March 31, 2006  |       |            | $          | 6.5            |       |       |       | $ | 5.4 |   |   | $ | 11.9 |   |

 

***(b) Other restructuring activities***

In addition, we initiated several cost reductionprograms in response to relatively static market conditions and implementedreductions in force and other cost containment measures during 2005. Inconnection with these actions, we recorded accruals and charges to operationsfor the three months ended March 31, 2005 related to severance andtermination benefits of approximately $2.1. For the three months endedMarch 31, 2006 we reversed $0.2 of these accruals and credited operations.

Thefollowing table sets forth the activity associated with the Company’sliabilities for these cost reduction programs.

| ** **                                                                  | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| ** **                                                                  | ** ** | **Severance**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | **Severance** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                  | ** ** | **and**                                              | ** ** | ** ** | ** ** | ** ** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                  | ** ** | **termination**                                      | ** ** | **Facilities** | ** ** | ** ** | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                                                                  | ** ** | **benefits**                                         | ** ** | **related** | ** ** | **Total** | ** ** | **benefits** | ** ** | **related** | ** ** | **Total** | ** ** |
| Balance at  beginning of period                                             |       |                                                 | $          | 9.8 |   |   |   | $ | 0.3 |   |   | $ | 10.1 |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |
| Accruals (credited) charged to earnings by segment North American  Lab |       |                                                 | (0.2       | ) |   |   | — |   |   | (0.2 | ) |   | 2.1 |   |   |   | — |   |   |   | 2.1 |   |   |
| European Lab                                                                |       |                                                 | —     |   |   |   | — |   |   | — |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Science Education                                                           |       |                                                 | —     |   |   |   | — |   |   | — |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Cash payments/other                                                         |       |                                                 | (5.4       | ) |   |   | (0.2 | ) |   | (5.6 | ) |   | — |   |   |   | — |   |   |   | — |   |   |
| Balance at end of period                                                    |       |                                                 | $          | 4.2 |   |   |   | $ | 0.1 |   |   | $ | 4.3 |   |   | $ | 2.1 |   |   |   | $ | — |   |   |   | $ | 2.1 |   |   |

 

At March 31, 2006,$9.9 of our aggregate restructuring liabilities are included in accruedexpenses and $6.3 are included in other long-term liabilities. AtDecember 31, 2005, $16.6 of our aggregate restructuring liabilities areincluded in accrued expenses and $6.7 are included in other long-termliabilities.

12

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

**(5)   Goodwilland Other Intangible Assets**

***(a) Goodwill***

Goodwill represents the excess of costs over fairvalue of assets of businesses acquired. Goodwill included in the financialstatements primarily represents the excess of acquisition costs over the fairvalue of net assets acquired in connection with the Acquisition.

Changesin the carrying amount of goodwill by segment for the three months ended March 31,2006 are as follows:

| ** **                       | ** ** | **North  American Lab** | ** ** | **European  Lab** | ** ** | **Science  Education** | ** ** | **Total** | ** ** |
|----------------------------------|------------|------------------------------|------------|-------------------|------------|------------------------|------------|-----------|------------|
| Balance at January 1,  2006 |       |                         | $          | 647.3             |       |                   |       | $         | 195.0      |   |   |   | $ | 67.7 |   |   | $ | 910.0 |   |
| Currency translation changes     |       |                         | (0.1       | )                 |       |                   | 5.1        |      |       |   | — |   |   | 5.0 |   |
| Balance at  March 31, 2006  |       |                         | $          | 647.2             |       |                   |       | $         | 200.1      |   |   |   | $ | 67.7 |   |   | $ | 915.0 |   |

 

***(b) Other Intangible Assets***

Otherintangible assets, net for each of the reporting periods is shown in the tablebelow:

| ** **                                                                                                  | ** ** | **Weighted**     | ** ** | ** **         | ** ** | ** **            | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **Average**      | ** ** | ** **         | ** ** | ** **            | ** ** |
| ** **                                                                                                  | ** ** | **Amortization** | ** ** | ** **         | ** ** | ** **            | ** ** |
| ** **                                                                                                  | ** ** | **Period**       | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                  | ** ** | **(Years)**      | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| Amortizable intangible  assets:                                                                             |       |             |       |               |       |                  |       |   |   |   |   |   |   |
| Customer relationships in North America (net of accumulated  amortization of $15.1 and $13.2, respectively) |       |             | 32.8       |               |       |                  | $          | 230.8 |   |   |   | $ | 232.7 |   |   |
| Customer relationships in Europe (net of accumulated  amortization of $7.4 and $6.3, respectively)          |       |             | 20.5       |               |       |                  | 70.2       |   |   |   | 69.5 |   |   |
| Chemical supply agreements (net of accumulated  amortization of $6.1 and $5.2, respectively)                |       |             | 10.0       |               |       |                  | 24.0       |   |   |   | 24.2 |   |   |
| Other (net of accumulated amortization of $0.6 and  $0.4, respectively)                                     |       |             | 2.4        |               |       |                  | 0.8        |   |   |   | 0.8 |   |   |
| Total amortizable intangible assets (net of  accumulated amortization of $29.2 and $25.1, respectively)     |       |             |       |               |       |                  | 325.8      |   |   |   | 327.2 |   |   |
| Indefinite-lived  intangible assets:                                                                        |       |             |       |               |       |                  |       |   |   |   |   |   |   |
| Trademarks and tradenames                                                                                   |       |             |       |               |       |                  | 226.0      |   |   |   | 225.5 |   |   |
| Total intangible  assets, net                                                                               |       |             |       |               |       |                  | $          | 551.8 |   |   |   | $ | 552.7 |   |   |

 

Amortization expense forthe three months ended March 31, 2006 and 2005 was $3.9 and $3.6,respectively.

13

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

**(6)   Debt**

Thefollowing is a summary of ourdebt obligations:

| ** **                                       | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Senior Secured  Credit Facility                  |       |                     | $          | 496.4                       |       |   |   | $ | 537.1 |   |   |
| 67¤8%  Unsecured Senior Notes due 2012      |       |                     | 200.0      |                        |       |   | 200.0 |   |   |
| 8% Unsecured  Senior Subordinated Notes due 2014 |       |                     | 320.0      |                        |       |   | 320.0 |   |   |
| 95¤8%  Senior Discount Notes due 2015       |       |                     | 338.2      |                        |       |   | 330.2 |   |   |
| Bank loans                                       |       |                     | 0.1        |                        |       |   | 0.3 |   |   |
| Capital leases                                   |       |                     | 5.9        |                        |       |   | 5.8 |   |   |
| Total debt                                       |       |                     | 1,360.6    |                        |       |   | 1,393.4 |   |   |
| Less short-term  portion                         |       |                     | (1.2       | )                           |       |   | (45.5 | ) |   |
| Total long-term  portion                         |       |                     | $          | 1,359.4                     |       |   |   | $ | 1,347.9 |   |   |

 

***(a) Senior Secured Credit Facility***

The Senior Secured Credit Facility provides foraggregate maximum borrowings of approximately $646.4 under (1) a term loanfacility providing for a loan denominated in Euros in an aggregate principalamount currently outstanding of €121.8 million (orapproximately $147.8 on a U.S. dollar equivalent basis as of March 31, 2006), (2) a term loanfacility providing for a term loan denominated in U.S. dollars in an aggregateprincipal amount currently outstanding of $348.6, and (3) a multi-currencyrevolving credit facility, providing for up to $150.0 in multi-currencyrevolving loans (including standby and commercial letters of credit)outstanding at any time. Undrawn amounts under the multi-currency revolvingcredit facility will be available on a revolving credit basis for generalcorporate purposes. As of March 31,2006, we had $9.2 of undrawn letters of credit and our remaining borrowingavailability under the $150.0 multi-currency revolving credit facility was$140.8.

The term loan facilities will mature in 2011 and themulti-currency revolving credit facility will mature in 2009. The principalamount of the term loans are amortized in annual installments for the first sixyears and quarterly installments during the seventh year, subject toadjustments for prepayments.

Subject to certainexceptions, the Senior Secured Credit Facility is expected to be subject tomandatory prepayment and reduction in an amount equal to:

·       Thenet proceeds of (1) any permitted receivables securitization program, (2) certaindebt offerings, (3) certain asset sales and (4) certain insurancerecovery and condemnation events; and

·       50% of VWR’s excess cashflow (as defined) for any fiscal year unless certain leverage ratio targets aremet. A prepayment of $44.5 was made in March 2006 based on VWR’s excesscash flow (as defined) generated in 2005. This amount has been included inshort-term bank debt in our consolidated balance sheet at December 31,2005.

14

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

***Security; Guarantees***

The obligations under the Senior Secured CreditFacility are guaranteed by VWR’s parent, CDRV Holdings, Inc., andeach significant direct and indirect domestic subsidiary of VWR, as that termis defined in the credit agreement. As of March 31, 2006, none of the domestic subsidiaries of VWRmet the definition of significant subsidiary under the credit agreement. Inaddition, the Senior Secured Credit Facility and the guarantees thereunder aresecured by security interests in and pledges of or liens on substantially allof the tangible and intangible assets of VWR and its subsidiaries.

The Senior Secured CreditFacility and the guarantees thereunder are secured by a pledge of 65% of thecapital stock of the foreign subsidiary holding companies of CDRV Holdings, Inc.and VWR, which in turn hold the capital stock of certain of our foreignsubsidiaries.

***Interest***

At our election, the interest rates applicable to theU.S. dollar-denominated term loan can be based on a fluctuating rate ofinterest measured by reference to either (1) an adjusted London inter-bankoffered rate, or LIBOR, plus a borrowing margin or (2) an alternate baserate, or ABR, plus a borrowing margin. The interest rate applicable to theEuro-denominated term loan is based on a fluctuating rate of interest measuredby reference to an adjusted EURIBOR plus a borrowing margin. As of March 31, 2006, the interestrates on the U.S. dollar-denominated and Euro-denominated term loans were 7.12%and 5.26%, respectively.

Effective July 21,2004, VWR entered into an interest rate cap to hedge a portion of thevariability of cash flows related to potential changes in interest rates on €35.0million of our Euro-denominated term loan. The instrument has a 5.0% 3-monthEURIBOR cap that terminates on July 21, 2006. The 3-month EURIBORrate was approximately 2.8% as of March 31,2006.

***Covenants***

The Senior Secured CreditFacility contains a number of covenants that, among other things, limit orrestrict our ability to dispose of assets, incur additional indebtedness, incurguarantee obligations, prepay other indebtedness, make acquisitions, modifyterms of the indentures, engage in mergers or consolidations, change thebusiness conducted by us taken as a whole, make capital expenditures, or engagein certain transactions with affiliates. In addition, the Senior Secured CreditFacility requires VWR to comply with specified financial ratios and tests,including a minimum interest expense coverage ratio, a maximum leverage ratioand a maximum capital expenditures test. As of March 31, 2006, VWR was incompliance with all covenants.

***(b) The VWR Notes***

The 67¤8% UnsecuredSenior Notes mature on April 15, 2012. The 8% Unsecured SeniorSubordinated Notes mature on April 15, 2014. Both the senior and seniorsubordinated notes require semiannual cash interest payments on April 15and October 15 to holders of record at the close of business as of thepreceding April 1 and October 1. The senior subordinated notes aresubordinated in right of payment to all secured debt of the Company and thesenior notes.

15

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

Under the indentures forthe VWR Notes, additional securities may be issued in one or more series fromtime to time, subject to certain covenant limitations.

***(c) Senior Discount Notes***

On December 16, 2004, we issued $481.0 aggregateprincipal amount at maturity ($299.4 gross proceeds) of Senior Discount Notes.The notes are senior unsecured obligations of the Company and are structurallysubordinated to all obligations and other liabilities of the Company’s existingand future subsidiaries.

No cash interest will accrue on the Senior DiscountNotes prior to January 1, 2010. Thereafter, cash interest will accrue onthe notes and be payable semiannually in arrears on January 1, and July 1of each year, commencing on July 1, 2010, at the rate of 95¤8%per annum, provided that on any interest payment date, interest will be payableonly to the extent funds are available for distribution by our subsidiaries tous (net of applicable taxes and expenses) under specified provisions of theindentures governing the VWR Notes and applicable law. VWR does notguarantee the obligations under the Senior Discount Notes.

The indenture for theSenior Discount Notes contains covenants that, among other things, limits theamount of additional indebtedness CDRV Investors, Inc. may incur, pay cashdividends, sell assets and subsidiary stock, enter into transactions withaffiliates, place liens on assets, and make certain other payments. At March 31,2006, the Company was in compliance with all covenants.

**(7)   DefinedBenefit Plans**

The Company sponsors various retirement plans for mostfull-time employees. Pension plan benefits for the defined benefit plans arebased primarily on participants’ compensation and years of credited service. Ithas been the Company’s policy to fund the minimum amount required by localregulations of current and prior year service costs under its funded definedbenefit plans.

Netperiodic pension cost for our U.S. defined benefit plan and our significantNon-U.S. defined benefit plans in Germany, France and the UK include thefollowing components:

| ** **                      | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------------------|------------|------------------------------------------------------|------------|
| ** **                      | ** ** | **U.S. Plan**                                   | ** ** | **German, French  and UK Plans** | ** ** |
| ** **                      | ** ** | **2006**                                             | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                    |       | $                                                    | 0.7        |   | $ | 1.9 |   | $ | 0.7 |   | $ | 0.9 |   |
| Interest cost                   |       | 2.1                                                  |       | 2.2 |   | 0.9 |   | 1.1 |   |
| Expected return  on plan assets |       | (2.3                                                 | )          | (2.1 | ) | (0.9 | ) | (1.0 | ) |
| Recognized net  actuarial loss  |       | 0.1                                                  |       | — |   | 0.1 |   | — |   |
| Net periodic  pension cost      |       | $                                                    | 0.6        |   | $ | 2.0 |   | $ | 0.8 |   | $ | 1.0 |   |

 

Net periodic pension cost for the U.S. defined benefitplan is lower in 2006 than 2005 as a result of a curtailment of the planeffective June 1, 2005. Future benefits were frozen effective May 31,2005 for most participants. Most participants will earn no further benefitsunder the plan after that date.

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

The Company made combinedcontributions to the Non-U.S. defined benefit plans of approximately $0.3 forthe three months ended March 31,2006 and expects to make additional contributions to the U.S. plan and Non-U.S.plans of approximately $8.5 and $1.4, respectively, during the remainder of2006.

**(8)   ComprehensiveIncome (Loss)**

Comprehensiveincome (loss) is determined as follows:

| ** **                                 | ** ** | **Three Months Ended  March 31,**         | ** ** |
|--------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                 | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** |
| Net income                                 |       |                                                     | $          | 11.0 |   |   |   | $ | 0.5 |   |   |
| Other comprehensive  income (loss):        |       |                                                     |       |   |   |   |   |   |   |
| Foreign currency translation adjustment    |       |                                                     | 6.2        |   |   |   | (6.0 | ) |   |
| Unrealized gain on derivatives, net of tax |       |                                                     | 0.5        |   |   |   | 0.3 |   |   |
| Comprehensive income  (loss)               |       |                                                     | $          | 17.7 |   |   |   | $ | (5.2 | ) |   |

 

**(9)   Commitmentsand Contingencies**

The Company is involved in various environmental,contractual and product liability cases and claims which are considered routineto our business and from time to time we are is named as a defendant in casesas a result of our distribution of scientific supplies, including litigationresulting from the distribution of products containing asbestos by us andcertain of our predecessors. While the impact of this litigation has typicallybeen immaterial, there can be no assurance that the impact of the pending andany future claims will not be material to our business, financial condition orresults of operations in the future.

During 2005, the German Federal Cartel Officeinitiated an investigation with regard to our European Distribution Agreementwith Merck KGaA. The purpose of the investigation is to determine whether thisagreement violates or otherwise infringes the general prohibition ofanti-competitive agreements under either German or EU rules. The Company hassubmitted information to the German Federal Cartel Office and is awaitingfeedback in connection with this matter. At the current time we cannot assessthe likely outcome of the investigation or potential economic impact associatedwith an adverse ruling. In connection with the Acquisition, we recordedintangible assets of approximately €24.8 million (or$30.1 on a U.S. dollar equivalent basis as of March 31, 2006)related to our European Distribution Agreement with Merck KGaA. As of March 31,2006, the unamortized net book value of these intangible assets isapproximately €19.8million (or $24.0 on a U.S. dollar equivalent basis).

On March 28, 2006,the Company was served with a complaint filed in the United States DistrictCourt, Western District of New York, by Corning Incorporated alleging a breachof contract and unliquidated damages. The Company will vigorously defend itselfin this matter. Until further information is obtained we cannot assess thelikely outcome of this litigation.

**(10)   SegmentFinancial Information**

The Company reports financial results on the basis ofthe following three business segments: North American Lab, European Lab andScience Education. The Company’s operating segments have been 

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**CDRV INVESTORS, INC. Notes to Consolidated Financial Statements (Continued) (Dollars in millions, except share data) (Unaudited)**

identified givingconsideration to both geographic areas and the nature of products amongbusinesses within its geographic area.

Selectedsegment financial information and reconciliation of reported operating incomeby segment to income before income taxes are presented below. Inter-segmentactivity has been eliminated. Therefore, revenues reported for each operatingsegment are substantially all from external customers.

| ** **                  | ** ** | **Three Months Ended  March 31,**         | ** ** |
|-----------------------------|------------|----------------------------------------------------------|------------|
| ** **                  | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** |
| **Net  Sales**              | ** ** |                                                     | ** ** | ** ** |   |   | ** ** | ** ** |   |
| North American Lab          |       |                                                     | $          | 492.2 |   |   |   | $ | 460.9 |   |   |
| European Lab                |       |                                                     | 272.9      |   |   |   | 268.8 |   |   |
| Science Education           |       |                                                     | 30.7       |   |   |   | 24.4 |   |   |
| Total                       |       |                                                     | $          | 795.8 |   |   |   | $ | 754.1 |   |   |
| **Operating  Income**       | ** ** |                                                     | ** ** | ** ** |   |   | ** ** | ** ** |   |
| North American Lab          |       |                                                     | $          | 29.4 |   |   |   | $ | 14.5 |   |   |
| European Lab                |       |                                                     | 14.3       |   |   |   | 11.1 |   |   |
| Science Education           |       |                                                     | 2.4        |   |   |   | (0.6 | ) |   |
| Total                       |       |                                                     | 46.1       |   |   |   | 25.0 |   |   |
| Interest income             |       |                                                     | (1.3       | ) |   |   | (0.6 | ) |   |
| Interest expense            |       |                                                     | 28.7       |   |   |   | 25.7 |   |   |
| Other income, net           |       |                                                     | 0.8        |   |   |   | (1.0 | ) |   |
| Income before  income taxes |       |                                                     | $          | 17.9 |   |   |   | $ | 0.9 |   |   |

 

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**Item 2—*Management’s Discussion and Analysis of Financial Condition and Resultsof Operations***

**Overview**

Our net sales are derived primarily from the sale ofscientific supplies, including laboratory supplies, research chemicals,apparatus, and to a lesser extent laboratory furniture and services. Freightcosts that are billed to our customers are also included in net sales.

Our cost of sales consists primarily of the cost ofinventory shipped and the cost of labor for services we provide on-site at ourcustomer’s locations, such as storeroom management and product delivery. Costof sales also includes freight expenses incurred to deliver products tocustomers as well as credits for rebates earned from suppliers.

Selling, general and administrative expenses primarilyreflect the costs of operations dedicated to generating new sales, maintainingexisting customer relationships, enhancing technology capabilities, receivingcustomer orders and operating our distribution center facilities. Theseexpenses also include depreciation and amortization.

We acquired AGB ScientificLtd. (“AGB”) and Advanced Instruments Sales & Service, Inc. (“AI”)on April 1, 2005 and Technical Service Lab B.V. (“TSL”) on July 1,2005. The results of AGB and TSL have been included in the European Lab segmentand the results of AI have been included in the North American Lab segment fromthe date of the acquisitions. AGB had net sales of $7.9 million, gross profitof $2.3 million and operating income of $0.4 million for the three months endedMarch 31, 2006. AI had net sales of $3.4 million, gross profit of $1.5million and operating loss of $0.2 million for the three months ended March 31,2006. TSL had net sales of $0.5 million, gross profit of $0.4 million andbreak-even operating results for the three months ended March 31, 2006.

**Compliance with theSarbanes-Oxley Act**

We launched a compliance program to address therequirements of Section 404 of the Sarbanes-Oxley Act in anticipation ofthe mandatory compliance date of December 31, 2007. Compliance with theserequirements requires significant incremental internal resources and financialinvestments including, but not limited to, use of outside experts, additionalaudit fees, and potential changes in systems design, security and structure.

A component of thisprogram will also focus on the quality, security, and functionality of ourinformation systems. While we have developed sound plans to address all of ourcompliance requirements, there can be no assurance that such efforts will nothave an impact on, or otherwise distract our management team from, day-to-dayactivities.

**Constant CurrencyAnalysis**

We maintain operations inNorth America and in Europe. Approximately 42% of our net sales originate incurrencies other than the U.S. dollar, principally the Euro, the British poundsterling and the Canadian dollar. As a result, changes in our revenues andoperating profits include the impact of changes in foreign currency exchangerates. We provide “constant currency” disclosures in the following discussionand analysis to quantify the impact of the fluctuation in foreign exchangerates and utilize constant currency results in our analysis of segmentperformance. We believe that this calculation is a useful measure, indicatingtrue operating performance. Earnings from our subsidiaries are not generallyrepatriated to the United States, and we typically do not incur significantgains or losses on foreign currency transactions with our subsidiaries.Therefore, changes in foreign currency exchange rates primarily impact onlyreported earnings and not our financial position.

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**Restructuring**

Since the Acquisition, we have initiated variousrestructuring activities designed to rationalize operating costs and improveour operating and administrative capabilities. We recorded restructuringaccruals of $29.7 million in 2004, primarily related to reductions in headcountin Europe due to the reorganization of our European sales and marketing functions.In early 2005, we recorded additional restructuring accruals of $24.5 million,primarily for severance and other exit costs including estimates forenvironmental remediation associated with cessation of manufacturing operationsat a plant in France and severance costs associated with the consolidation ofcertain sales and marketing personnel in our German and UK operations. Thesecharges have been recorded as adjustments to acquisition costs (increases togoodwill) pursuant to the provisions of Emerging Issues Task Force Issue No. 95-3,*Recognition of Liabilities in Connectionwith a Purchase Business Combination*.

Throughout 2005, theCompany recorded various restructuring charges in response to relatively staticmarket conditions and implemented reductions in force and other costcontainment measures that did not qualify as acquisition costs. In connectionwith these actions, we recorded restructuring charges related to severance andfacility exit costs totaling approximately $20.6 million for the year ended December 31,2005. These programs arecomplete and no such charges were recorded in the first quarter of 2006. Duringthe three months ended March 31, 2006 we reversed $0.2 million of theseaccruals related to North American Lab programs. For the three months ended March 31,2005 we recorded $2.1 million of suchcharges related to North American Lab programs.

**Business Segments**

We report our financialresults on the basis of the following three business segments: North AmericanLab, European Lab, and Science Education. Both the North American Lab andEuropean Lab segments are comprised of the distribution of scientific suppliesto customers in pharmaceuticals, biotechnology, chemicals, technology, and foodprocessing; governmental agencies; colleges and universities; and environmentalorganizations. Science Education is comprised of the manufacture anddistribution of scientific supplies and specialized kits principally to primaryand secondary schools in North America.

**Results ofOperations**

***Net Sales***

Thefollowing table presents net sales and changes in net sales by reportablesegment for the three months ended March 31, 2006 and 2005 (dollars inmillions):

| ** **          | ** ** | **Three Months Ended** | ** ** |
|---------------------|------------|----------------------------------|------------|
| ** **          | ** ** | **March 31,**               | ** ** |
| ** **          | ** ** | **2006**                         | ** ** | **% Change** | ** ** | **2005** | ** ** |
| North American  Lab |       | $                                | 492.2      |   |   | 6.8 | % |   | $ | 460.9 |   |
| European Lab        |       | 272.9                            |       |   | 1.5 | % |   | 268.8 |   |
| Science Education   |       | 30.7                             |       |   | 25.8 | % |   | 24.4 |   |
| Total               |       | $                                | 795.8      |   |   | 5.5 | % |   | $ | 754.1 |   |

 

Net sales for the three months ended March 31,2006 increased $41.7 million over the comparable period of 2005. Foreign currencyunfavorably impacted net sales by $21.1 million and the acquisitions of AGB, AIand TSL favorably impacted net sales by $11.8 million for the three monthsended March 31, 2006. Excluding these effects, net sales increased by 6.8%from the comparable period of 2005 reflecting a few additional billing days andimproved pricing, particularly in North American Lab.

Net sales in the North American Lab segment for thethree months ended March 31, 2006 increased $31.3 million over thecomparable period of 2005. The acquisition of AI and the effects of foreigncurrency 

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each accounted for $3.4million of the increase. Excluding these effects, net sales increased 5.3% fromthe comparable period of 2005 reflecting two additional billing days andimproved pricing. For the three months ended March 31, 2006 our net salesin the bio-pharmaceutical and education markets experienced low-single digitgrowth, our net sales in the industrial market achieved mid-single digit growthand our net sales in the production safety and clinical markets achieved growthof approximately 11%.

Net sales in the European Lab segment for the threemonths ended March 31, 2006 increased $4.1 million over thecomparable period of 2005. Foreign currency unfavorably impacted net sales by$24.5 million and the acquisitions of AGB and TSL favorably impacted netsales by $8.4 million for the three months ended March 31, 2006. Excludingthese effects, net sales increased 7.5% from the comparable period of 2005reflecting approximately three additional billing days, improved pricing, andgrowth in private label consumables and equipment sales. For the three monthsended March 31, 2006 our net sales in the bio-pharmaceutical marketachieved mid-single digit growth, our net sales in the industrial marketachieved growth of approximately 13% and our net sales in the education marketexperienced low-single digit growth. These increases were partially offset bydeclines in our resellers and clinical markets.

Net sales in the ScienceEducation segment for the three months ended March 31, 2006 increased $6.3 millionor 25.8% over the comparable period of 2005. This increase was primarily drivenby significant increases in our publishers market and the fulfillment of a largeinternational order.

***Gross Profit***

Thefollowing table presents gross profit for the three months ended March 31,2006 and 2005 (dollars in millions):

| ** **                              | ** ** | **Three Months Ended**             | ** ** |
|-----------------------------------------|------------|----------------------------------------------|------------|
| ** **                              | ** ** | **March 31,**                           | ** ** |
| ** **                              | ** ** | **   2006   ** | ** ** | **    2005   ** | ** ** |
| Gross profit                            |       |                                         | $          | 214.4 |   |   |   | $ | 192.7 |   |   |
| Percentage of net sales  (gross margin) |       |                                         | 26.9       | % |   |   | 25.6 | % |   |

 

Gross profit for the threemonths ended March 31, 2006 increased $21.7 million over the comparableperiod of 2005. Foreign currency unfavorably impacted gross profit by $6.8million and the acquisitions of AGB, AI and TSL favorably impacted gross profitby $4.2 million for the three months ended March 31, 2006. Excluding theseeffects, gross profit increased 12.6% from the comparable period of 2005reflecting the additional billing days and improved pricing discussed above.Our gross margin percentages improved significantly in our North American Laband Science Education segments and slightly in our European Lab segment. Thegross margin increase in North American Lab is primarily a result of favorablepricing, better mix and improved recovery of freight costs. The gross marginincrease in Science Education is primarily a result of increased marginsrelated to our publishers business, partially offset by increased internationalnet sales with lower margins.

***Selling, General, and Administrative Expenses***

Thefollowing table presents selling, general, and administrative expenses (“SG&A”) for the three monthsended March 31, 2006 and 2005 (dollars in millions):

| ** **                                    | ** ** | **Three Months Ended**             | ** ** |
|-----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                    | ** ** | **March 31,**                           | ** ** |
| ** **                                    | ** ** | **   2006   ** | ** ** | **   2005   ** | ** ** |
| Selling, general  and administrative expenses |       |                                         | $          | 168.5 |   |   |   | $ | 165.6 |   |   |
| Percentage of net sales                       |       |                                         | 21.2       | % |   |   | 22.0 | % |   |

 

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SG&A for the threemonths ended March 31, 2006 increased $2.9 million over the comparableperiod of 2005. Foreign currency favorably impacted SG&A by $5.7 millionand the acquisitions of AGB, AI and TSL unfavorably impacted SG&A by $4.0million for the three months ended March 31, 2006. Excluding theseeffects, SG&A increased $4.6 million or 2.8% from the comparable period of2005. This increase includes costs associated with a one-time bonus for ourPresident and Chief Executive Officer of $1.1 million, duplicateexpenditures incurred in our UK operations related to the transition of certainservices of $0.8 million, severance for certain personnel of $0.5 million andstock-based compensation of $0.4 million. The balance of the increase reflectsspending in selected areas and inflation; partially offset by savings from ourprior restructuring programs.

***Operating Income***

Thefollowing table presents operating income and operating income as a percentageof net sales by reportable segment for the three months ended March 31,2006 and 2005 (dollars in millions):

| ** **          | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------|------------|------------------------------------------------------|------------|
| ** **          | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| ** **          | ** ** | ** **                                           | ** ** | **% of** | ** ** | ** ** | ** ** | **% of** | ** ** |
| ** **          | ** ** | **Amount**                                           | ** ** | **Net Sales** | ** ** | **Amount** | ** ** | **Net Sales** | ** ** |
| North American  Lab |       |                                                 | $          | 29.4 |   |   |   | 6.0 | % |   |   | $ | 14.5 |   |   |   | 3.1 | % |   |
| European Lab        |       |                                                 | 14.3       |   |   |   | 5.2 | % |   |   | 11.1 |   |   |   | 4.1 | % |   |
| Science Education   |       |                                                 | 2.4        |   |   |   | 7.8 | % |   |   | (0.6 | ) |   |   | (2.5 | %) |   |
| Total               |       |                                                 | $          | 46.1 |   |   |   | 5.8 | % |   |   | $ | 25.0 |   |   |   | 3.3 | % |   |

 

As a result of the factors described above, operatingincome for the three months ended March 31, 2006 increased $21.1 millionover the comparable period of 2005. The restructuring programs and acquisitionsdiscussed above favorably impacted operating income by $2.3 million and $0.2million, respectively, and foreign currency unfavorably impacted operatingincome by $1.1 million from the comparable period of 2005. Excluding theseeffects, operating income increased $19.7 million or 72.7% from the comparableperiod of 2005. This increase was the result of a gross profit increase of$24.3 million, partially offset by an SG&A increase of $4.6 million.

Operating income in the North American Lab segment forthe three months ended March 31, 2006 increased $14.9 million over thecomparable period of 2005. The restructuring programs discussed above andforeign currency favorably impacted operating income by $2.3 million and $0.2million, respectively, and the acquisition of AI unfavorably impacted operatingincome by $0.2 million from the comparable period of 2005. Excluding theseeffects, operating income increased $12.6 million or 75.9% from the comparableperiod of 2005. This increase was the result of a gross profit increase of$14.2 million, partially offset by an SG&A increase of $1.6 million.

Operating income in the European Lab segment for thethree months ended March 31, 2006 increased $3.2 million over thecomparable period of 2005. Foreign currency unfavorably impacted operatingincome by $1.3 million and the acquisitions of AGB and TSL favorably impactedoperating income by $0.4 million from the comparable period of 2005. Excludingthese effects, operating income increased $4.1 million or 36.9% from thecomparable period of 2005. This increase was the result of a gross profitincrease of $7.0 million, partially offset by an SG&A increase of $2.9million.

Operating income in theScience Education segment for the three months ended March 31, 2006increased $3.0 million over the comparable period of 2005. The increase for thethree months ended March 31, 2006 is the result of increased gross profitof $3.1 million, partially offset by an SG&A increase of $0.1 million.

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***Interest Expense, net of Interest Income***

Interest expense, net ofinterest income, for the three months ended March 31, 2006, increased to$27.4 million from $25.1 million for the comparable period of 2005. Thisincrease is due to higher variable interest rates on the Senior Secured CreditFacility term loans, partially offset by increased interest income earned onour cash and cash equivalents.

***Other Expense (Income), net***

Other expense, net was$0.8 million for the three months ended March 31, 2006 compared to otherincome, net of $1.0 million for the comparable period of 2005. The change isprimarily due to a net exchange loss of $1.0 million in 2006 and a net exchangegain of $0.7 million in 2005.

***Income Taxes***

The effective income taxrate for the three months ended March 31, 2006 was 38.8% compared to 38.0%for the comparable period of 2005.

**Liquidity andCapital Resources**

We broadly define liquidity as our ability to generatesufficient funds from both internal and external sources to meet ourobligations and commitments. In addition, liquidity includes the ability toobtain appropriate debt and equity financing. Therefore, liquidity cannot beconsidered separately from capital resources that consist of current orpotentially available funds for use in achieving long-range objectives andmeeting debt service commitments.

Our significant liquidity and capital funding needsare working capital, operating expenses, capital expenditures, contractualobligations, and commercial commitments. Liquidity and capital resource needsare met through cash flows from operations and borrowings under the SeniorSecured Credit Facility.

Based on current operations and expectations as tofuture growth, we believe that cash generated from operations, together withamounts available under the revolving credit facility, will be adequate topermit us to meet our debt service obligations, capital expenditure programrequirements, ongoing operating costs and working capital needs, although noassurance can be given in this regard.

Working capital, excluding cash and debt, was $212.9million and $229.9 million at March 31, 2006 and December 31, 2005,respectively. Trade receivables, inventories and accounts payable, threeimportant elements of working capital, are discussed below.

***Trade AccountsReceivable.***   Days sales outstanding inaccounts receivable were 49.9**daysand 48.2 days for the quarterly periods ended March 31, 2006 and December 31,2005, respectively. Trade receivables are higher in Europe due to the extendedpayment practices in several of the countries in which we operate. The increasein our trade receivables as of March 31, 2006 from December 31, 2005is primarily due to net sales growth.

***Inventories.***   Dayssupply of inventory were 40.2**daysand 43.1 days for the quarterly periods ended March 31, 2006 and December 31,2005, respectively, due to focused efforts to reduce our inventories on hand.

***Accounts Payable.***   Dayspayables outstanding were 59.3**daysand 59.1 days for the quarterly periods ended March 31, 2006 and December 31,2005, respectively. Trade accounts payable are primarily with suppliers whoseproducts we distribute. Payment terms are negotiated and in cases whereeconomic early payment discounts are offered, we typically time our payments toearn the discounts. Days payables outstanding are generally higher in Europedue to the extended payment practices in certain countries in 

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which we operate.Depending on the timing of payments and inventory purchases, trade accountspayable can vary each quarter and from year to year.

**Historical CashFlows**

Thefollowing table presents cash flow from operations before investing andfinancing activities related to operations and working capital (dollars in millions):

| ** **                                            | ** ** | **Three Months Ended**                         | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                            | ** ** | **March 31,**                                       | ** ** |
| ** **                                            | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** |
| Cash flow from  operations, excluding working capital |       |                                                     | $          | 29.3 |   |   |   | $ | 25.1 |   |   |
| Cash flow from  working capital changes, net          |       |                                                     | 27.9       |   |   |   | 44.2 |   |   |
| Cash flow from  operations                            |       |                                                     | $          | 57.2 |   |   |   | $ | 69.3 |   |   |

 

We generated $57.2 million of cash flow fromoperations during the three months ended March 31, 2006 compared to $69.3million during the comparable period of 2005. The decrease in cash flow fromoperations is primarily the result of lower cash flow from working capitalchanges, partially offset by the increase in net income.

Net cash used in investing activities was $4.8 millionfor the three months ended March 31, 2006 compared to $4.1 million for thecomparable period of 2005. This increase is primarily due to increased capitalexpenditures of $0.5 million. We anticipate increased capital expenditures in2006 over 2005 amounts.

Net cash used in financing activities was $55.4million for the three months ended March 31, 2006 compared to cash used infinancing activities of $31.0 million for the comparable period of 2005. Thisincrease is primarily comprised of increased net debt payments of $41.1million, which includes the $44.5 million principal payment on the SeniorSecured Credit Facility, partially offset by a decrease in net change in bankchecks outstanding of $16.9 million.

Under the credit agreement for the Senior SecuredCredit Facility, beginning in 2006, VWR’s Excess Cash Flow (as defined in thecredit agreement) from the prior year will be required to be used to prepaycredit agreement debt. On March 31, 2006, VWR prepaid $44.5 million on theSenior Secured Credit Facility term loans as required by the Excess Cash Flowprovisions. Based upon current levels of operations and expectations as tofuture growth, we believe that cash on hand, cash to be generated fromoperations, together with amounts available under the $150.0 million five yearmulti-currency revolving credit facility, which is a component of the SeniorSecured Credit Facility, will be adequate to permit us to meet our debt serviceobligations, capital expenditure requirements, ongoing operating costs andworking capital needs until the maturity of the Senior Secured Credit Facility,although no assurance can be given in this regard. Our future financial andoperating performance, ability to service or refinance our debt and ability tocomply with covenants and restrictions contained in our debt agreements will besubject to future economic conditions and to financial, business and otherfactors, many of which are beyond our control and will be substantiallydependent on the global economy, demand for our products, and our ability tosuccessfully implement our overall business and profitability strategies. As ofMarch 31, 2006, we had $123.1 million of cash and cash equivalents onhand.

As of March 31, 2006, we had outstandingindebtedness of $1,360.6 million, which consists primarily of $520.0 millionaggregate principal amount of the VWR Notes, $338.2 million of accreted valueof the Senior Discount Notes, a $348.6 million U.S. dollar-denominated termloan, and a $147.8 million Euro-denominated term loan.

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**Indebtedness**

***Senior SecuredCredit Facility.***   The Senior Secured CreditFacility consists of (1) a term loan facility providing for a loandenominated in Euros, in an aggregate principal amount currently outstanding at€121.8million (approximately $147.8 million on a U.S. dollar equivalent basis as of March 31,2006), (2) a term loan facility denominated in U.S. dollars in anaggregate principal amount currently outstanding at $348.6 million, and (3) amulti-currency revolving credit facility, providing for up to $150.0 million inmulti-currency revolving loans (including standby and commercial letters ofcredit) outstanding at any time. As of March 31, 2006, there was nooutstanding balance on the multi-currency revolving credit facility. Undrawnamounts under the multi-currency revolving credit facility are available on arevolving credit basis for general corporate purposes of the borrower and itssubsidiaries. As of March 31, 2006, we had $9.2 million of undrawn lettersof credit and our remaining borrowing availability under the $150.0 millionmulti-currency revolving credit facility was $140.8 million.

***VWR Notes.******  ***The 67¤8%senior notes and 8% senior subordinated notes mature on April 15, 2012 andApril 15, 2014, respectively, in aggregate principal amounts of $200.0million and $320.0 million, respectively.

The indentures governing the VWR Notes contain certaincovenants that limit VWR’s ability to incur additional indebtedness, pay cashdividends and make certain other payments. The indentures also require VWR tomaintain certain financial covenants, including a specified debt toConsolidated EBITDA leverage ratio and a specified Consolidated EBITDA tointerest expense coverage ratio. At March 31, 2006, VWR was in compliancewith all such covenants.

***Senior DiscountNotes.******  ***On December 16, 2004, we issued$481.0 million aggregate principal amount at maturity ($299.4 million grossproceeds) of Senior Discount Notes. The proceeds, net of $1.5 million of debtissuance costs, were used to pay a cash dividend to holders of our common stockin December 2004. The notes are senior unsecured obligations of theCompany and are structurally subordinated to all obligations and otherliabilities of the Company’s existing and future subsidiaries.

No cash interest will accrue on the Senior DiscountNotes prior to January 1, 2010. Thereafter, cash interest will accrue onthe notes and be payable semiannually in arrears on January 1, and July 1of each year, commencing on July 1, 2010, at the rate of 95¤8%per annum, provided that on any interest payment date, interest will be payableonly to the extent funds are available for distribution by our subsidiaries tous (net of applicable taxes and expenses) under specified provisions of theindentures governing the VWR Notes and applicable law. As of March 31,2006, the accreted value of the Senior Discount Notes was $338.2 million. VWRdoes not guarantee the obligations under the Senior Discount Notes.

The indenture for the Senior Discount Notes containscovenants that, among other things, limit the amount of additional indebtednessCDRV Investors, Inc. may incur, pay cash dividends, sell assets and subsidiarystock, enter into transactions with affiliates, place liens on assets, and makecertain other payments. At March 31, 2006, the Company was in compliancewith all covenants. The terms of the Senior Secured Credit Facility and theindentures governing the VWR Notes significantly restrict VWR from makingdistributions and otherwise transferring assets to us.

***European Subsidiaries.***   OurEuropean subsidiaries operate without formal agreements with foreign banks.There are no existing financial covenants related to the bank loans to thesesubsidiaries.

**Credit AgreementFinancial Covenants; Credit Agreement EBITDA**

Borrowings under the Senior Secured Credit Facilityare a key source of our liquidity. Our ability to borrow under the SeniorSecured Credit Facility is dependent upon, among other things, VWR’s compliancewith the financial covenants that limit VWR’s ability to incur additionalindebtedness, pay cash dividends and make certain other payments as set forthin the credit agreement for the Senior Secured 

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Credit Facility. Thefinancial covenants include a specified debt to Credit Agreement EBITDAleverage ratio and a specified Credit Agreement EBITDA to interest expensecoverage ratio for specified periods, as those terms are defined and relate toVWR. Failure of VWR to comply with these financial ratio covenants would resultin a default under the credit agreement for the Senior Secured Credit Facilityand, absent a waiver or an amendment from our lenders, would permit theacceleration of all outstanding borrowings under the Senior Secured CreditFacility. VWR was in compliance with these financial covenants as of March 31,2006.

Credit Agreement EBITDA as presented herein is a VWRfinancial performance measure that is used in the credit agreement for theSenior Secured Credit Facility. Credit Agreement EBITDA is not a defined termunder U.S. GAAP and should not be considered as an alternative to operatingincome or net income as a measure of operating results or cash flows as ameasure of liquidity. Credit Agreement EBITDA differs from the term “EBITDA” asit is commonly used. Credit Agreement EBITDA generally is defined as consolidatednet income before consolidated net interest expense, consolidated income taxes,consolidated depreciation and amortization, other non-cash charges deducted indetermining consolidated net income (loss), non-cash provisions for reservesfor discontinued operations, extraordinary, unusual or non-recurring items,gain or loss associated with the sale or write down of assets not in theordinary course of business and the cumulative effect of accounting changes andearnings of, but including cash dividends or distributions from, non-controlledaffiliates. Credit Agreement EBITDA is reduced by the amount of certainpermitted dividends from VWR to CDRV Holdings, Inc.

Credit Agreement EBITDA is not used in the indenturesfor the notes. The term “Consolidated EBITDA” is used in the indentures as partof the calculation of the term “Consolidated Coverage Ratio”, which is used fora number of purposes, including determining our ability to incur additionalindebtedness, and may include certain cost savings or synergies. “ConsolidatedEBITDA” is not the same as Credit Agreement EBITDA.

The followingtable presents a calculation of VWR’s Credit Agreement EBITDA for the twelvemonths ended March 31, 2006 (dollars in millions):

| ** **                                                              | ** ** | **(Unaudited)** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------|------------|
| Income before  cumulative effect of a change in accounting principle(1) |       |            | $          | 52.8 |   |   |
| Income tax  provision(1)                                                |       |            | 37.6       |   |   |
| Interest expense,  net(1)                                               |       |            | 75.9       |   |   |
| Depreciation and  amortization(1)                                       |       |            | 33.7       |   |   |
| Non-cash charges(2)                                                     |       |            | 12.5       |   |   |
| Other  extraordinary, unusual or non-recurring items(3)                 |       |            | 18.1       |   |   |
| Credit Agreement EBITDA                                                 |       |            | $          | 230.6 |   |   |

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(1)          Theseamounts include the four quarters during the twelve months ended March 31,2006 as reported in the respective Form 10-Q or Form 10-K.

(2)          Non-cash charges includepension, postretirement and post employment benefit expenses, net of cashcontributed to the respective benefit plans in that year; amortization ofdirect response catalog costs for those catalogs with useful lives greater thanone year; charges for equity compensation; and LIFO adjustments.

(3)          Other extraordinary,unusual or non-recurring items include one-time severance costs; non-routineinventory reserve adjustments; gains or losses on the sale of businesses orfacilities; and other extraordinary, unusual or non-recurring gains, losses,charges or credits.

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Thefinancial covenants specify, among other things, the following requirements foreach four-quarter period ended during the following test periods:

| ** **                                       | ** ** | **Debt to Credit Agreement** | ** **   | **Credit Agreement EBITDA**  | ** ** |
|--------------------------------------------------|------------|---------------------------------------------|--------------|----------------------------------------|------------|
| ** **                                       | ** ** | **EBITDA Leverage**                    | ** **   | **to Interest Expense**      | ** ** |
| **Test Period**                             | ** ** | ** **                                  | ** **   | **Ratio Not More Than** | ** ** | **Ratio Not Less Than** | ** ** |
| December 31,  2005 - December 30, 2006 |       |                                        | 7.00 to 1.00 |                                   |       |   | 1.90 to 1.00 |   |   |
| December 31,  2006 - December 30, 2007 |       |                                        | 6.50 to 1.00 |                                   |       |   | 2.00 to 1.00 |   |   |
| December 31,  2007 - December 30, 2008 |       |                                        | 6.00 to 1.00 |                                   |       |   | 2.10 to 1.00 |   |   |
| December 31,  2008 - December 30, 2009 |       |                                        | 5.50 to 1.00 |                                   |       |   | 2.20 to 1.00 |   |   |
| December 31,  2009 - December 30, 2010 |       |                                        | 5.00 to 1.00 |                                   |       |   | 2.30 to 1.00 |   |   |
| December 31, 2010  and thereafter           |       |                                        | 5.00 to 1.00 |                                   |       |   | 2.40 to 1.00 |   |   |
|                                                  |            |                                             |              |                                        |            |  |  |  |  |  |  |

 

Thetable below sets forth VWR’s specified debt to Credit Agreement EBITDA leverageratio and Credit Agreement EBITDA to interest expense ratio for the twelvemonths ended March 31, 2006:

| ** **                                                             | ** ** | **(Unaudited)** | ** ** |
|------------------------------------------------------------------------|------------|-----------------|------------|
| Consolidated Debt  to Credit Agreement EBITDA Leverage Ratio           |       |            | 4.4        |   |   |
| Credit Agreement EBITDA  to Credit Agreement Interest Expense Ratio(1) |       |            | 3.3        |   |   |

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(1)          Forpurposes of calculating the compliance ratio noted above, credit agreementinterest expense was based on actual interest expense, net of interest income,reduced by amortization of deferred financing fees.

**Critical AccountingPolicies**

The discussion andanalysis of our financial condition and results of operations are based on ourfinancial statements, which have been prepared in accordance with accountingprinciples generally accepted in the United States of America. The preparationof these financial statements requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and the disclosureof contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period. Onan ongoing basis, management evaluates its estimates and judgments, including,among others, those related to environmental liabilities, reserves for accountsreceivable and inventories, impairment of goodwill and intangible assets,pension plans, rebates from suppliers, agreements with customers, and productliability. Those estimates and assumptions are based on our historicalexperience, our observance of trends in the industry, and various other factorsthat are believed to be reasonable under the circumstances and form the basisfor making judgments about the carrying values of assets and liabilities thatare not readily apparent from other sources. Actual results may differ fromthese estimates under different assumptions or conditions. Refer to “Item 7—Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inour annual report on Form 10-K for the year ended December 31,2005 for the Company’s critical accounting policies.

**Forward-LookingStatements**

This Form 10-Q contains forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. All statementsother than statements of historical fact included in this Form 10-Qmay constitute forward-looking statements. We have based these forward-lookingstatements on our current expectations and projections about future events. Althoughwe believe that our assumptions made in connection with the forward-lookingstatements are reasonable, there can be no assurances that the assumptions andexpectations will prove to be correct.

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Forward-lookingstatements are inherently subject to risks, uncertainties and assumptions.Forward-looking statements are not guarantees of performance. You should notplace undue reliance on these statements. You should understand that thefollowing important factors, in addition to those discussed in “Item 1A—RiskFactors” in our annual report on Form 10-K for the year ended December 31,2005 and elsewhere in our Form 10-K and in this Form 10-Q,could affect our future results and could cause those results or other outcomesto differ materially from those expressed or implied in our forward-lookingstatements:

·       actionsby manufacturers, customers, carriers and other third parties;

·       ourability to maintain our relationships with manufacturers;

·       lossof our key executive officers;

·       ourability to consummate and integrate potential acquisitions;

·       theeffect of political and economic conditions, inflation and interest ratesworldwide;

·       theeffect of changes in laws and regulations, including changes in accountingstandards, trade, tax, price controls and other regulatory matters; and

·       increasedcompetition from other companies in our industry and our ability to retain orincrease our market shares in our principal geographical markets.

All forward-lookingstatements attributable to us or persons acting on our behalf are expresslyqualified in their entirety by the foregoing cautionary statements. You arecautioned not to place undue reliance on the forward-looking statements, whichspeak only as of the date of this Quarterly Report on Form 10-Q. Weundertake no obligations to update or revise publicly any forward-lookingstatements, whether as a result of new information, future events or otherwise.

**Item 3—*Quantitative and Qualitative Disclosures about Market Risk***

Refer to “Item 7A—Quantitativeand Qualitative Disclosures about Market Risk” included in our annual report onForm 10-K for the year ended December 31, 2005, for the Company’squantitative and qualitative disclosure about market risk. There was nomaterial change in such information as of March 31, 2006.

**Item 4—*Controls and Procedures***

In connection with the preparation of this QuarterlyReport on Form 10-Q, management carried out an evaluation, with theparticipation of the Chief Executive Officer and the Chief Financial Officer,of the effectiveness of the disclosure controls and procedures pursuant to Rule 13a-15of the Securities and Exchange Act of 1934. Based on that evaluation, the ChiefExecutive Officer and the Chief Financial Officer concluded that our disclosurecontrols and procedures were effective at a reasonable assurance level as of March 31,2006.

There were no changes in our internal control overfinancial reporting that occurred during the quarter ended March 31, 2006that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

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**Part II—OTHERINFORMATION**

**Item 1—*Legal Proceedings***

For information regardinglegal proceedings, see Note 9 in Item 1 of this quarterly report on Form 10-Q,which information is incorporated herein by reference into this item.

**Item 1A—*Risk Factors***

There have been nomaterial changes to the risk factors that are included in our annual report on Form 10-Kfor the year ended December 31, 2005 that could affect our business,results of operations or financial condition.

**Item 5—*Other Information***

The form of Restricted Stock Unit Agreement (the “Agreement”)that will be used to grant awards of restricted stock units pursuant to theCDRV Investors, Inc. Stock Incentive Plan was amended to comply withtransition rules promulgated under § 409A of the Internal Revenue Code.The amendment provides that the restricted stock units will not be settled in2006 as a result of a change of control or termination of a grantee’semployment due to the grantee’s death or disability.

This description of theAgreement is qualified in its entirety by the actual terms of the Agreement,which is attached hereto as Exhibit 10.1 and incorporated herein by thisreference.

**Item6—*Exhibits***
| Exhibit  Number | ** ** | **Description of Documents**                                                                                                    | ** ** | **Method of Filing** |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|
| 10.1            |       | Form of Restricted Stock Unit Agreement under  CDRV Investors, Inc. Stock Incentive Plan                              |       | Filed herewith.      |
| 31.1            |       | Certification of  Principal Executive Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                  |       | Filed herewith.      |
| 31.2            |       | Certification of  Principal Financial Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                  |       | Filed herewith.      |
| 32.1            |       | Certification of  Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of  the Sarbanes-Oxley Act of 2002). |       | Furnished herewith.  |
| 32.2            |       | Certification of  Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the  Sarbanes-Oxley Act of 2002).      |       | Furnished herewith.  |

 

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**SIGNATURE**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                   | CDRV INVESTORS,  INC. |
|-------------------|-----------------------|
|              | By:                   |   /s/ JACK L. WYSZOMIERSKI |
|              | Name:                 | Jack L. Wyszomierski |
|              | Title:                | *Executive Vice President and  Chief Financial Officer* |
|              |                  | *(Principal Financial Officer and Duly Authorized  Officer)* |
| May 11, 2006 |                  |   |

 

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