**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 September 30, 2005**

**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  incorporation or organization) | (I.R.S.  Employer  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 x  No o

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Act). Yes o  No x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Act). Yes o  No x

Asof September 30, 2005, 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 November 14, 2005 was5,753,822.

 

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**CDRV INVESTORS,INC.FORM 10-QFOR THE QUARTER ENDED SEPTEMBER 30, 2005**

**INDEX**

**PART I.FINANCIAL INFORMATION (Predecessor and Successor):**

The following financial statements of CDRV Investors, Inc.(Successor) and VWR International Corporation (Predecessor) for the periodsindicated are included in this Quarterly Report on Form 10-Q.

Theterm “Successor” refers to CDRV Investors, Inc. following the Acquisition(as defined in Note 1(a)). The term “Predecessor” refers to VWRInternational Corporation prior to the Acquisition. See also “Background andBasis of Presentation” in Note 1 to the financial statements.

|                                      | ** **                                                                                                                                                                                  | **Page No.** |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|
| Item 1.                              | Financial  Statements:                                                                                                                                                                      |              |
|                                 | Consolidated  Balance Sheets—September 30, 2005 (Unaudited) and December 31, 2004                                                                                            | 3                 |   |
|                                 | Consolidated  Statements of Operations (Unaudited)—for the three months ended  September 30, 2005 and 2004                                                                        | 4                 |   |
|                                 | Consolidated  Statements of Operations (Unaudited)—for the nine months ended  September 30, 2005 and the periods included in the nine months ended  September 30, 2004  | 5                 |   |
|                                 | Consolidated  Statement of Stockholders’ Equity and Other Comprehensive Income (Unaudited)—for  the nine months ended September 30, 2005                                     | 6                 |   |
|                                 | Consolidated  Statements of Cash Flows (Unaudited)—for the nine months ended  September 30, 2005 and the periods included in the nine months ended  September 30, 2004  | 7                 |   |
|                                 | Notes  to Consolidated Financial Statements (Unaudited)                                                                                                                                     | 8                 |   |
| Item 2.                              | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                 | 20                |   |
| Item 3.                              | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                 | 32                |   |
| Item 4.                              | Controls  and Procedures                                                                                                                                                                    | 32                |   |
| **PART II. OTHER INFORMATION:** |                                                                                                                                                                                        |              |
| Item 6.                              | Exhibits                                                                                                                                                                                    | 33                |   |
| Signature                            | 34                                                                                                                                                                                          |              |

 

2

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**PART I—FINANCIAL INFORMATION**

***Item 1—*FinancialStatements**

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

| ** **                                                                                                                                                                                                               | ** ** | ** September 30,   2005** | ** ** | ** December 31,   2004** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                                                                                                                                                               | ** ** | **(Unaudited)**                          | ** ** | ** **                              | ** ** |
| **Assets**                                                                                                                                                                                                               |       |                                     |       |                                    |       |   |   |   |   |
| Current Assets:                                                                                                                                                                                                          |       |                                     |       |                                    |       |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                                |       |                                     | $          | 58.9                                    |       |   |   | $ | 116.9 |   |   |
| Trade accounts receivable, less reserves of $7.0 and  $6.0, respectively                                                                                                                                                 |       |                                     | 459.3      |                                    |       |   | 413.4 |   |   |
| Other receivables                                                                                                                                                                                                        |       |                                     | 27.9       |                                    |       |   | 19.7 |   |   |
| Inventories                                                                                                                                                                                                              |       |                                     | 267.3      |                                    |       |   | 248.9 |   |   |
| Other current assets                                                                                                                                                                                                     |       |                                     | 22.5       |                                    |       |   | 27.8 |   |   |
| Total current assets                                                                                                                                                                                                     |       |                                     | 835.9      |                                    |       |   | 826.7 |   |   |
| Property and equipment, net                                                                                                                                                                                              |       |                                     | 155.5      |                                    |       |   | 154.4 |   |   |
| Investments                                                                                                                                                                                                              |       |                                     | 8.0        |                                    |       |   | 8.7 |   |   |
| Goodwill                                                                                                                                                                                                                 |       |                                     | 921.5      |                                    |       |   | 907.0 |   |   |
| Other intangible assets, net                                                                                                                                                                                             |       |                                     | 551.6      |                                    |       |   | 570.8 |   |   |
| Deferred income taxes                                                                                                                                                                                                    |       |                                     | 37.8       |                                    |       |   | 34.4 |   |   |
| Other assets                                                                                                                                                                                                             |       |                                     | 48.3       |                                    |       |   | 46.5 |   |   |
| Total assets                                                                                                                                                                                                             |       |                                     | $          | 2,558.6                                 |       |   |   | $ | 2,548.5 |   |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                                                           |       |                                     |       |                                    |       |   |   |   |   |
| Current Liabilities:                                                                                                                                                                                                     |       |                                     |       |                                    |       |   |   |   |   |
| Short-term bank debt and current portion of capital  lease obligations                                                                                                                                                   |       |                                     | $          | 9.5                                     |       |   |   | $ | 12.9 |   |   |
| Accounts payable                                                                                                                                                                                                         |       |                                     | 357.4      |                                    |       |   | 333.8 |   |   |
| Accrued expenses                                                                                                                                                                                                         |       |                                     | 155.9      |                                    |       |   | 151.7 |   |   |
| Total current liabilities                                                                                                                                                                                                |       |                                     | 522.8      |                                    |       |   | 498.4 |   |   |
| Long-term debt                                                                                                                                                                                                           |       |                                     | 1,377.2    |                                    |       |   | 1,380.1 |   |   |
| Capital lease obligations                                                                                                                                                                                                |       |                                     | 4.6        |                                    |       |   | 6.1 |   |   |
| Other long-term liabilities                                                                                                                                                                                              |       |                                     | 63.6       |                                    |       |   | 81.3 |   |   |
| Deferred income taxes                                                                                                                                                                                                    |       |                                     | 250.9      |                                    |       |   | 241.1 |   |   |
| Total liabilities                                                                                                                                                                                                        |       |                                     | 2,219.1    |                                    |       |   | 2,207.0 |   |   |
| Common stock purchase subject to guarantee agreement                                                                                                                                                                     |       |                                     | 2.7        |                                    |       |   | 2.9 |   |   |
| Commitments and  contingencies                                                                                                                                                                                           |       |                                     |       |                                    |       |   |   |   |   |
| Stockholders’ equity:                                                                                                                                                                                               |       |                                     |       |                                    |       |   |   |   |   |
| Common stock, $0.01 par value; 7,000,000 shares  authorized; 5,777,772 shares issued and 5,753,822 outstanding at  September 30, 2005; 5,741,217 shares issued and 5,740,517 outstanding at  December 31, 2004 |       |                                     | 0.1        |                                    |       |   | 0.1 |   |   |
| Additional paid-in capital                                                                                                                                                                                               |       |                                     | 265.6      |                                    |       |   | 263.4 |   |   |
| Retained earnings                                                                                                                                                                                                        |       |                                     | 39.7       |                                    |       |   | 22.1 |   |   |
| Unamortized value of restricted stock issued                                                                                                                                                                             |       |                                     | (0.3       | )                                       |       |   | (0.3 | ) |   |
| Accumulated other comprehensive income                                                                                                                                                                                   |       |                                     | 33.1       |                                    |       |   | 53.4 |   |   |
| Treasury stock, at cost, 23,950 shares at  September 30, 2005 and 700 shares at December 31, 2004                                                                                                              |       |                                     | (1.4       | )                                       |       |   | (0.1 | ) |   |
| Total stockholders’ equity                                                                                                                                                                                          |       |                                     | 336.8      |                                    |       |   | 338.6 |   |   |
| Total liabilities  and stockholders’ equity                                                                                                                                                                         |       |                                     | $          | 2,558.6                                 |       |   |   | $ | 2,548.5 |   |   |

 

See accompanying notes to consolidated financial statements.

3

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

| ** **                                    | ** ** | **Successor  Three Months Ended  September 30,** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                    | ** ** | **   2005   **                    | ** ** | **   2004   ** | ** ** |
| Net sales                                     |       |                                                            | $          | 812.0 |   |   |   | $ | 760.5 |   |   |
| Cost of goods  sold                           |       |                                                            | 602.4      |   |   |   | 562.8 |   |   |
| Gross profit                                  |       |                                                            | 209.6      |   |   |   | 197.7 |   |   |
| Selling, general  and administrative expenses |       |                                                            | 162.3      |   |   |   | 156.5 |   |   |
| Operating income                              |       |                                                            | 47.3       |   |   |   | 41.2 |   |   |
| Interest income                               |       |                                                            | (0.8       | ) |   |   | (0.3 | ) |   |
| Interest expense                              |       |                                                            | 27.1       |   |   |   | 17.2 |   |   |
| Other (income)  expense, net                  |       |                                                            | (1.3       | ) |   |   | (1.1 | ) |   |
| Income before income taxes                    |       |                                                            | 22.3       |   |   |   | 25.4 |   |   |
| Income tax  provision                         |       |                                                            | 10.0       |   |   |   | 11.8 |   |   |
| Net income                                    |       |                                                            | $          | 12.3 |   |   |   | $ | 13.6 |   |   |

 

 

See accompanying notes to consolidated financial statements.

4

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**CDRV INVESTORS, INC.Consolidated Statementsof Operations (Continued)(Dollars in millions)(Unaudited)**

| ** **                                    | ** ** | **Successor**          | ** ** | **Nine  Months Ended  September 30, 2004** | ** ** |
|-----------------------------------------------|------------|------------------------|------------|-------------------------------------------------|------------|
| ** **                                    | ** ** | **Nine Months**   | ** ** | **Successor**                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                    | ** ** | **Ended**              | ** ** | **April 7-**                               | ** ** | ** ** | ** ** | **Predecessor** | ** ** |
| ** **                                    | ** ** | **September 30,** | ** ** | **September 30,**                          | ** ** | ** ** | ** ** | **January 1-** | ** ** |
| ** **                                    | ** ** | **2005**               | ** ** | **2004**                                        | ** ** | ** ** | ** ** | **April 6, 2004** | ** ** |
| Net sales                                     |       |                   | $          | 2,360.9                                         |       |   |   | $ | 1,436.5 |   |   |   |   |   | $ | 793.2 |   |   |
| Cost of goods  sold                           |       |                   | 1,757.8    |                                            |       |   | 1,067.7 |   |   |   |   |   | 588.0 |   |   |
| Gross profit                                  |       |                   | 603.1      |                                            |       |   | 368.8 |   |   |   |   |   | 205.2 |   |   |
| Selling, general  and administrative expenses |       |                   | 498.0      |                                            |       |   | 295.9 |   |   |   |   |   | 163.7 |   |   |
| Operating income                              |       |                   | 105.1      |                                            |       |   | 72.9 |   |   |   |   |   | 41.5 |   |   |
| Interest income                               |       |                   | (1.8       | )                                               |       |   | (0.4 | ) |   |   |   |   | (0.2 | ) |   |
| Interest expense:                             |       |                   |       |                                            |       |   |   |   |   |   |   |   |   |   |   |
| Interest on third party debt                  |       |                   | 78.8       |                                            |       |   | 33.2 |   |   |   |   |   | 1.7 |   |   |
| Interest on push down debt                    |       |                   | —     |                                            |       |   | — |   |   |   |   |   | 4.1 |   |   |
| Other (income)  expense, net                  |       |                   | (3.1       | )                                               |       |   | (0.6 | ) |   |   |   |   | 0.1 |   |   |
| Income before income taxes                    |       |                   | 31.2       |                                            |       |   | 40.7 |   |   |   |   |   | 35.8 |   |   |
| Income tax  provision                         |       |                   | 13.6       |                                            |       |   | 18.6 |   |   |   |   |   | 15.1 |   |   |
| Net income                                    |       |                   | $          | 17.6                                            |       |   |   | $ | 22.1 |   |   |   |   |   | $ | 20.7 |   |   |

 

See accompanying notes to consolidated financial statements.

5

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**CDRV INVESTORS, INC.Consolidated Statementof Stockholders’ Equity and Other Comprehensive IncomeNine Months Ended September 30, 2005(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 January 1,  2005                                        |       | 5,741,217             |       |        | $          | 0.1            |       |           |       | $                     | 263.4      |             |       |                     | $          | 22.1       |       |       |       | $ | (0.3 | ) |   |   | $ | 53.4 |   |   |   | 700 |   |   |   | $ | (0.1 | ) |   | $ | 338.6 |   |
| Reduction of common stock purchase subject to  guarantee agreement |       | —                |       |        | —     |           |       |           | 0.2        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 0.2 |   |
| Issuance of common stock in connection with  acquisition (Note 5)  |       | 8,929                 |       |        | —     |           |       |           | 0.5        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 0.5 |   |
| Issuance of common stock in connection with our stock  incentive plan   |       | 27,626                |       |        | —     |           |       |           | 1.5        |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 1.5 |   |
| Acquisition of treasury stock                                      |       | —                |       |        | —     |           |       |           | —     |                  |       |             | —     |                     |       |       | —     |       |       |   | — |   |   |   | 23,250 |   |   |   | (1.3 | ) |   | (1.3 | ) |
| Comprehensive  income (loss) (Note 8):                        |       |                  |       |        |       |           |       |           |       |                  |       |             |       |                     |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                              |       | —                |       |        | —     |           |       |           | —     |                  |       |             | 17.6       |                     |       |       | —     |       |       |   | — |   |   |   | — |   |   |   | — |   |   | 17.6 |   |
| Foreign currency translation adjustment                                 |       | —                |       |        | —     |           |       |           | —     |                  |       |             | —     |                     |       |       | —     |       |       |   | (20.0 | ) |   |   | — |   |   |   | — |   |   | (20.0 | ) |
| Unrealized loss on derivatives, net of tax                              |       | —                |       |        | —     |           |       |           | —     |                  |       |             | —     |                     |       |       | —     |       |       |   | (0.3 | ) |   |   | — |   |   |   | — |   |   | (0.3 | ) |
| Total comprehensive (loss)                                              |       |                  |       |        |       |           |       |           |       |                  |       |             |       |                     |       |       |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   | (2.7 | ) |
| Balance at  September 30, 2005                                     |       | 5,777,772             |       |        | $          | 0.1            |       |           |       | $                     | 265.6      |             |       |                     | $          | 39.7       |       |       |       | $ | (0.3 | ) |   |   | $ | 33.1 |   |   |   | 23,950 |   |   |   | $ | (1.4 | ) |   | $ | 336.8 |   |

 

See accompanying notes to consolidated financial statements.

6

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

| ** **                                                                                | ** ** | ** **             | ** ** | **Nine Months Ended**  | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------------------|------------|
| ** **                                                                                | ** ** | **Successor**          | ** ** | **September 30, 2004** | ** ** |
| ** **                                                                                | ** ** | **Nine Months**   | ** ** | **Successor**                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                | ** ** | **Ended**              | ** ** | **April 7 -**          | ** ** | ** ** | ** ** | **Predecessor** | ** ** |
| ** **                                                                                | ** ** | **September 30,** | ** ** | **September 30,**           | ** ** | ** ** | ** ** | **January 1 -** | ** ** |
| ** **                                                                                | ** ** | **2005**               | ** ** | **2004**                         | ** ** | ** ** | ** ** | **April 6, 2004** | ** ** |
| Cash flows from operating activities:                                                     |       |                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                |       |                   | $          | 17.6                             |       |   |   | $ | 22.1 |   |   |   |   |   | $ | 20.7 |   |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:        |       |                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                                                            |       |                   | 25.2       |                             |       |   | 16.8 |   |   |   |   |   | 8.9 |   |   |
| Gain on sale of  assets                                                                   |       |                   | (0.1       | )                                |       |   | — |   |   |   |   |   | — |   |   |
| Interest on push  down debt, net of tax                                                   |       |                   | —     |                             |       |   | — |   |   |   |   |   | 2.5 |   |   |
| Noncash interest  accretion                                                               |       |                   | 22.1       |                             |       |   | — |   |   |   |   |   | — |   |   |
| Amortization of  debt issuance costs                                                      |       |                   | 4.1        |                             |       |   | 2.3 |   |   |   |   |   | — |   |   |
| Deferred income  tax expense                                                              |       |                   | 6.0        |                             |       |   | 1.4 |   |   |   |   |   | 0.9 |   |   |
| Provision for  doubtful accounts                                                          |       |                   | 2.6        |                             |       |   | 2.2 |   |   |   |   |   | 0.6 |   |   |
| Changes in working  capital:                                                              |       |                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Trade accounts  receivable                                                                |       |                   | (61.9      | )                                |       |   | (15.8 | ) |   |   |   |   | (26.8 | ) |   |
| Other receivables                                                                         |       |                   | (6.9       | )                                |       |   | (1.3 | ) |   |   |   |   | 8.7 |   |   |
| Inventories                                                                               |       |                   | (24.2      | )                                |       |   | 16.9 |   |   |   |   |   | 17.5 |   |   |
| Other assets                                                                              |       |                   | (3.3       | )                                |       |   | (9.7 | ) |   |   |   |   | 1.9 |   |   |
| Accounts payable                                                                          |       |                   | 35.0       |                             |       |   | 18.1 |   |   |   |   |   | 61.7 |   |   |
| Other liabilities                                                                         |       |                   | (2.0       | )                                |       |   | 29.6 |   |   |   |   |   | 0.9 |   |   |
| Net cash provided  by operating activities                                                |       |                   | 14.2       |                             |       |   | 82.6 |   |   |   |   |   | 97.5 |   |   |
| Cash flows from investing activities:                                                     |       |                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Payment to Merck KGaA and  affiliates to acquire business, net of cash acquired of $130.8 |       |                   | —     |                             |       |   | (1,539.1 | ) |   |   |   |   | — |   |   |
| Transaction costs                                                                         |       |                   | (1.2       | )                                |       |   | (19.4 | ) |   |   |   |   | — |   |   |
| Acquisitions of  businesses, net of cash acquired                                         |       |                   | (44.5      | )                                |       |   | (2.7 | ) |   |   |   |   | — |   |   |
| Capital expenditures                                                                      |       |                   | (12.1      | )                                |       |   | (6.9 | ) |   |   |   |   | (3.3 | ) |   |
| Proceeds from sale of  property and equipment                                             |       |                   | 0.3        |                             |       |   | 0.2 |   |   |   |   |   | 0.4 |   |   |
| Net cash used in  investing activities                                                    |       |                   | (57.5      | )                                |       |   | (1,567.9 | ) |   |   |   |   | (2.9 | ) |   |
| Cash flows from financing activities:                                                     |       |                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Proceeds from debt                                                                        |       |                   | 2.9        |                             |       |   | 1,164.8 |   |   |   |   |   | 13.3 |   |   |
| Repayment of debt                                                                         |       |                   | (11.3      | )                                |       |   | (109.1 | ) |   |   |   |   | (6.8 | ) |   |
| Decrease in notes  receivable from Merck KGaA and affiliates                              |       |                   | —     |                             |       |   | — |   |   |   |   |   | 4.1 |   |   |
| Net change in bank checks  outstanding                                                    |       |                   | (3.1       | )                                |       |   | (0.8 | ) |   |   |   |   | (2.1 | ) |   |
| Issuance of 5,500,000  shares of common stock, net                                        |       |                   | —     |                             |       |   | 531.3 |   |   |   |   |   | — |   |   |
| Proceeds from stock  incentive plan, net                                                  |       |                   | 1.3        |                             |       |   | 20.9 |   |   |   |   |   | — |   |   |
| Cash paid for debt  issuance costs                                                        |       |                   | (0.8       | )                                |       |   | (37.8 | ) |   |   |   |   | — |   |   |
| Acquisition of treasury  stock                                                            |       |                   | (1.3       | )                                |       |   | — |   |   |   |   |   | — |   |   |
| Net cash (used in)  provided by financing activities                                      |       |                   | (12.3      | )                                |       |   | 1,569.3 |   |   |   |   |   | 8.5 |   |   |
| Effect of exchange  rate changes on cash                                                  |       |                   | (2.4       | )                                |       |   | 0.6 |   |   |   |   |   | (0.6 | ) |   |
| Net (decrease)  increase in cash and cash equivalents                                     |       |                   | (58.0      | )                                |       |   | 84.6 |   |   |   |   |   | 102.5 |   |   |
| Cash and cash  equivalents beginning of period                                            |       |                   | 116.9      |                             |       |   | — |   |   |   |   |   | 28.3 |   |   |
| Cash and cash  equivalents end of period                                                  |       |                   | $          | 58.9                             |       |   |   | $ | 84.6 |   |   |   |   |   | $ | 130.8 |   |   |
| Supplemental disclosures of cash flow information:                                        |       |                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Cash paid during the period for:                                                          |       |                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                  |       |                   | $          | 42.0                             |       |   |   | $ | 11.5 |   |   |   |   |   | $ | 1.3 |   |   |
| Income taxes paid,  net                                                                   |       |                   | $          | 13.1                             |       |   |   | $ | 26.2 |   |   |   |   |   | $ | 4.2 |   |   |

 

See accompanying notes to consolidated financial statements.

7

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

**(1)   Background and Basis of Presentation**

***(a)******         Background***

CDRV Investors, Inc. (the “Company,” “CDRV,” “we”or “our”) is the ultimate parent company of VWR International, Inc. VWRInternational, Inc. and its predecessor, VWR International Corporation, (“VWR”)distribute scientific supplies, chemicals, and equipment, primarily in NorthAmerica and Europe. Prior to April 7, 2004, Merck KGaA was VWR’s ultimateparent company. On April 7, 2004, Merck KGaA sold all of the outstandingshares of capital stock of VWR International Corporation to CDRV AcquisitionCorporation (“CDRVA”), a wholly-owned subsidiary of CDRV Holdings, Inc., awholly-owned subsidiary of CDRV, for a purchase price of approximately$1,684.2, consisting of approximately $1,669.9 in cash and approximately $14.3of assumed debt (the “Acquisition”). In addition, direct acquisition costs ofapproximately $77.5 were incurred. CDRVA financed the Acquisition through a$550.0 equity investment, approximately $1,110.5 in various debt instruments,acquired cash of $70.1 and accrued expenses of $16.8.

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 and obtained financing under a new senior secured credit facility (the “SeniorSecured Credit Facility”). Following the completion of the Acquisition, therewere a series of internal reorganizations, pursuant to which, among otherthings, (i) VWR International Corporation merged with and into VWRInternational, Inc., with VWR International, Inc. surviving, and (ii) thereafter,CDRVA merged with and into VWR International, Inc., with VWR International, Inc.surviving and assuming the obligations of CDRVA.

On December 16, 2004, CDRV issued $481.0 of 95¤8%senior discount notes due 2015. Prior to this issuance, CDRV had not had anysignificant operating, investing or financing activities other than being theholding company of CDRV Holdings, Inc., which in turn, had not had anysignificant operating, investing or financing activities other than being theholding company of VWR and the indirect holder of the approximately 6% equityownership in VWR International Immobilien GmbH that VWR did not hold. The netproceeds from the issuance of these notes of approximately $297.9 were used topay a dividend to the holders of the Company’s common stock.

The term “successor” refers to CDRV following theAcquisition. The term “predecessor” refers to VWR International Corporationprior to the change in control on April 7, 2004. CDRVA had no operationsprior to the Acquisition.

The financial statements, for all periods presentedprior to the Acquisition, do not include allocations of Merck KGaA generalcorporate expenses or charges for financial reporting, tax, and treasury services,as such costs had not been charged to VWR. Management does not believe thatcharges from Merck KGaA for such services would have been material.

Thefinancial statements, for all periods presented prior to the Acquisition,reflect the push down of the purchase price previously paid by Merck KGaA forVWR to the VWR financial statements that resulted in the recognition of pushdown debt due to Merck KGaA or a contribution to stockholders’ equity for cashconsideration. Interest expense was recorded on this push down debt based uponMerck KGaA’s intercompany interest rates, which are not necessarily indicativeof rates VWR would have 

8

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

obtained if it were not an ultimate subsidiary ofMerck KGaA. Interest expense, including tax effects on push down debt, has beenincluded in the statements of operations, and presented as a non-cash item inthe accompanying statements of cash flows.

***(b)******          Basis of Presentation***

The accompanying consolidated financial statementsinclude the accounts of CDRV and its subsidiaries after elimination of allintercompany balances and transactions. The financial statements includedherein have been prepared by the Company without audit, pursuant to the rules andregulations of the Securities and Exchange Commission (“SEC”). Certain informationand footnote 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 December 31, 2004 balance sheet is the balance sheetincluded in the audited financial statements as shown in the Company’sRegistration Statement on Form S-4 filed on April 15, 2005, asamended. The Company believes that the disclosures included herein are adequateto make the information presented not misleading when read in conjunction withthe financial statements, footnotes and related disclosures included in theCompany’s Registration Statement on Form S-4 filed on April 15,2005, as amended.

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.

Certainamounts from prior periods have been reclassified to conform to the currentpresentation.

**(2)   New Accounting Standards**

During December 2004, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”)No. 123 Revised, *Share-Based Payment*.This Statement requires companies to recognize in the income statement, thegrant value of stock options and other forms of equity-based compensationissued to employees. The provisions of this Statement become effective at thebeginning of 2006. During August 2004, the Company introduced ashare-based compensation arrangement as a component of its compensation plansfor our employees. Management is in the process of evaluating but has notreached a conclusion on the impact this Statement will have on the Company’sresults of operations.

In March 2005,the FASB issued Interpretation No. 47, *AnInterpretation of FASB No. 143*. SFAS No. 143, *Accounting for Assets Retirement Obligations*(“SFAS No. 143”), which addresses financial 

9

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

accounting and reporting for obligations associatedwith the retirement of tangible long-lived assets and the associated assetretirement costs. SFAS No. 143 requires recognition of a liability at fairvalue and an increase to the carrying value of the related asset for anyretirement obligation. This amount would then be amortized over the life of theasset. The liability would be adjusted at the end of each period to reflect thepassage of time and changes in the estimated future cash flows. ThisInterpretation addresses the legal obligation to retire an asset when thetiming and (or) method of settlement are conditional on a future event that mayor may not be within the control of the Company. This Interpretation iseffective December 31, 2005. We have not yet determined whether theadoption of this Interpretation will have a material impact on our financialcondition or results of operations.

**(3)   Stock-Based Compensation**

TheCompany measures compensation expense for the stock-based employee compensationplan using the intrinsic value method of Accounting Principals Board Opinion No. 25,*Accounting for Stock Issued to Employees*.The Company has adopted the disclosure-only provisions of SFAS No. 148, *Accounting for Stock-Based Compensation-Transitionand Disclosure, an amendment of FASB Statement No. 123* (“SFAS No. 148”).Therefore, the Company has not recognized compensation expense for its optionsgranted because such options had an exercise price equal to their fair marketvalue on the date of grant. Had compensation expense for the Company’s stockoption plans been determined based on the fair value at the grant date forawards under the Company’s stock plans, consistent with the methodologyprescribed under SFAS No. 148, the Company’s net income would haveapproximated the pro-forma amounts indicated below:

| ** **                                                                                                          | ** ** | **Three Months**  | ** ** | **Nine Months**   | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                                          | ** ** | **Ended**              | ** ** | **Ended**              | ** ** |
| ** **                                                                                                          | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                                          | ** ** | **2005**               | ** ** | **2005**               | ** ** |
| Net income as  reported                                                                                             |       |                   | $          | 12.3                   |       |   |   | $ | 17.6 |   |   |
| Deduct:  stock-based compensation expense determined using fair value based  method for all awards, net of tax |       |                   | (0.3       | )                      |       |   | (0.9 | ) |   |
| Pro-forma net income                                                                                                |       |                   | $          | 12.0                   |       |   |   | $ | 16.7 |   |   |

 

Thefair value of the Company’s stock options was estimated using the Black-Scholesoption-pricing model with the following weighted average assumptions:

| Risk free  interest rate  |   | 4.00    | %      |
|---------------------------|--------|---------|--------|
| Expected life of  options |   | 4 years |   |
| Volatility                |   | 20      | %      |
| Expected dividend yield   |   | 0.0     | %      |

 

10

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

**(4)   Restructuring**

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

The Acquisition was accounted for under the purchasemethod of accounting in accordance with SFAS No. 141, *BusinessCombinations.*Under purchase accounting, tangible and identifiableintangible assets acquired and liabilities assumed have been recorded at theirrespective fair values based on third party valuations.

During the first half of 2005, we implemented variousrestructuring plans that were formulated in 2004 and were in the planning andevaluation stages. Accordingly, we recorded additional restructuring accrualsof approximately $24.5 in the first half of 2005, which have been recorded asadjustments to acquisition costs (increases to goodwill) pursuant to theprovisions of Emerging Issues Task Force Issue No. 95-3, *Recognition of Liabilities in Connection with aPurchase Business Combination*(“EITF 95-3”). These chargesprimarily reflect 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.

The charge for environmental remediation in France ofapproximately $6.4 is based on estimates obtained from environmentalengineering firms considering requirements set forth under existing rules andregulations in France. There can be no assurance that such estimates willultimately be sufficient to cover actual remediation costs, which may berequired by regulatory authorities.

Thefollowing table sets forth the activity associated with the Company’sliabilities for restructuring as a result of the Acquisition during the nine months ended September 30, 2005.

| ** **                          | ** ** | **Balance as of** | ** ** | **Accruals**        | ** ** | **Cash**      | ** ** | ** **      | ** ** | **Balance as of** | ** ** |
|-------------------------------------|------------|-----------------------------|------------|---------------------|------------|---------------|------------|-----------------|------------|-----------------------------|------------|
| ** **                          | ** ** | **January 1,**         | ** ** | **Charged to** | ** ** | **Payments/** | ** ** | **Translation** | ** ** | **September 30,**      | ** ** |
| ** **                          | ** ** | **2005**                    | ** ** | **Goodwill**        | ** ** | **Other**     | ** ** | **Adjustments** | ** ** | **2005**                    | ** ** |
| Severance and  termination benefits |       |                        | $          | 21.0                |       |          |       | $               | 13.4       |                        |       |   | $ | (22.1 | ) |   |   | $ | (2.0 | ) |   |   | $ | 10.3 |   |   |
| Facilities  related                 |       |                        | 0.5        |                |       |          | 10.9       |            |       |                        | (1.6       | ) |   |   | (0.8 | ) |   |   | 9.0 |   |   |
| Other                               |       |                        | 0.3        |                |       |          | 0.2        |            |       |                        | (0.5       | ) |   |   | — |   |   |   | — |   |   |
| Totals                              |       |                        | $          | 21.8                |       |          |       | $               | 24.5       |                        |       |   | $ | (24.2 | ) |   |   | $ | (2.8 | ) |   |   | $ | 19.3 |   |   |

 

Themajority of these accrued expenses will be paid out by the end of 2006.

***(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 the nine monthsended September 30, 2005. In connection with these actions, we recordedaccruals in the nine-month period ended September 30, 2005 related toseverance and other costs totaling approximately $11.5 ($2.1, $5.1 and $4.3 forthe quarters ended March 31, June 30, and September 30, 2005,respectively). In addition, we incurred approximately $0.8 for duplicateexpenditures incurred in our UK operations related to the transition of certainservices. These amounts are included in selling, general and administrativeexpenses in the accompanying statements of operations.

11

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

Thefollowing table sets forth the activity associated with the Company’sliabilities for these cost reduction programs during the nine months ended September 30, 2005.

| ** **                          | ** ** | **Balance as of** | ** ** | **Accruals**        | ** ** | **Cash**      | ** ** | ** **      | ** ** | **Balance as of** | ** ** |
|-------------------------------------|------------|-----------------------------|------------|---------------------|------------|---------------|------------|-----------------|------------|-----------------------------|------------|
| ** **                          | ** ** | **January 1,**         | ** ** | **Charged to** | ** ** | **Payments/** | ** ** | **Translation** | ** ** | **September 30,**      | ** ** |
| ** **                          | ** ** | **2005**                    | ** ** | **Earnings**        | ** ** | **Other**     | ** ** | **Adjustments** | ** ** | **2005**                    | ** ** |
| Severance and  termination benefits |       |                        | $          | —              |       |          |       | $               | 10.3       |                        |       |   | $ | (5.4 | ) |   |   | $ | — |   |   |   | $ | 4.9 |   |   |
| Facilities  related                 |       |                        | —     |                |       |          | 1.2        |            |       |                        | —     |   |   |   | — |   |   |   | 1.2 |   |   |
| Totals                              |       |                        | $          | —              |       |          |       | $               | 11.5       |                        |       |   | $ | (5.4 | ) |   |   | $ | — |   |   |   | $ | 6.1 |   |   |

 

Themajority of these accrued expenses will be paid out by the end of 2006.

**(5)   Acquisitions, Goodwill and Other Intangibles**

***(a)******         Acquisition of VWR International Corporationby CDRVA***

As discussed above, the Acquisition was accounted forunder the purchase method of accounting in accordance with SFAS No. 141, *Business Combinations*.The excess investment made by CDRVA over the estimates of the fairmarket value of the identifiable assets and liabilities of the Company as of April 7,2004 was approximately $859.6. As of December 31, 2004, goodwillassociated with the Acquisition including the effects of purchase accountingadjustments and currency translation was $907.0.

Thefollowing unaudited pro-forma financial information presents a summary of consolidatedresults of operations of the Company for the nine months ended September 30,2004 as if the Acquisition and the issuance of the senior discount notesdiscussed in Note 6(c) had occurred as of January 1, 2004.

| Net sales                   |   | $    | 2,229.7 |   |
|-----------------------------|--------|------|---------|--------|
| Income before income  taxes |   | 40.0 |    |
| Net income                  |   | 19.8 |    |

 

Theseunaudited pro-forma results have been prepared for comparative purposes onlyand primarily include adjustments for a consulting advisory fee, interestexpense, depreciation, amortization and income taxes. These results do notpurport to be indicative of the results of operations which actually would haveresulted had the Acquisition occurred at the beginning of 2004, or of thefuture results of operations of the successor Company.

***(b)******          Acquisition of AGB Scientific Ltd., AdvancedInstruments Sales & Service, Inc. and Technical Service Lab B.V.***

On April 1, 2005, the Company acquired AGBScientific Ltd. (“AGB”) for initial cash consideration of approximately $23.8. AGBdistributes scientific supplies and is headquartered in Dublin, Ireland. Theresults of AGB have been included in the European Lab segment from the date ofacquisition.

On April 1, 2005, the Company acquired AdvancedInstruments Sales & Service, Inc. (“AI”) for initial cashconsideration of approximately $16.8 and CDRV stock of approximately $0.5. AIperforms services and distributes scientific supplies to the Puerto Ricanmarket and is headquartered in San Juan, 

12

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

Puerto Rico. Theresults of AI have been included in the North American Lab segment from thedate of acquisition.

On July 1, 2005, the Company acquired TechnicalService Lab B.V. (“TSL”) for initial cash consideration of approximately $3.1. TSLperforms technical services on laboratory equipment in the Netherlands,Germany, Belgium and France. The results of TSL have been included in theEuropean Lab segment from the date of acquisition.

Cash consideration for these acquisitions was fundedfrom cash and cash equivalents on hand.

Had these acquisitionsoccurred at the beginning of 2004, the pro-forma consolidated statements ofoperations would not have been materially different from the amounts reported.

***(c)******           Goodwill and Other Intangibles***

Changesin the carrying amount of goodwill by segment for the nine months ended September 30,2005 are as follows:

| ** **                                                                   | ** ** | **North**             | ** ** | **European** | ** ** | **Science**   | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------|------------|--------------|------------|---------------|------------|------------|------------|
| ** **                                                                   | ** ** | **American Lab** | ** ** | **Lab**      | ** ** | **Education** | ** ** | **Total**  | ** ** |
| Balance as of  January 1, 2005                                          |       |                  | $          | 645.0        |       |          |       | $          | 192.8      |   |   |   | $ | 69.2 |   |   | $ | 907.0 |   |
| Changes as a result of purchase accounting adjustments  for the Acquisition: |       |                  |       |         |       |          |       |       |       |   |   |   |   |   |   |
| Restructuring charges, net of tax                                            |       |                  | 1.1        |         |       |          | 19.2       |       |       |   | 0.2 |   |   | 20.5 |   |
| Curtailment of benefit plans, net of tax(1)                             |       |                  | (12.1      | )            |       |          | —     |       |       |   | — |   |   | (12.1 | ) |
| Other adjustments, net(2)                                                    |       |                  | (3.6       | )            |       |          | —     |       |       |   | (1.6 | ) |   | (5.2 | ) |
| Other acquisitions(3)                                                        |       |                  | 7.1        |         |       |          | 22.4       |       |       |   | — |   |   | 29.5 |   |
| Currency translation changes                                                 |       |                  | 5.8        |         |       |          | (24.0      | )          |       |   | — |   |   | (18.2 | ) |
| Balance as of  September 30, 2005                                       |       |                  | $          | 643.3        |       |          |       | $          | 210.4      |   |   |   | $ | 67.8 |   |   | $ | 921.5 |   |

----

(1)          During the first quarterof 2005, the Company finalized its plans with regard to the curtailment ofcertain U.S. benefit plans. In accordance with EITF 95-3, the curtailmentgains of $12.1, net of tax, were recorded as reductions to goodwill. See Note 7for further information.

(2)          Other adjustments, netreflect the resolution of certain pre-Acquisition tax contingencies in NorthAmerican Lab and an adjustment to purchase price allocation for ScienceEducation.

(3)          The allocation ofpurchase price for the AGB, AI and TSL acquisitions have been made based uponmanagement estimates and third-party valuations that have not been finalized. Accordingly,the purchase price allocations are preliminary and revisions will be necessary.

13

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

Thefollowing schedule sets forth the major classes of intangible assets held at September 30,2005:

| ** **                              | ** ** | **Lives** | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-----------|------------|------------|------------|
| Amortized Intangibles:                  |       |      |       |       |       |
| Customer Relationships in North America |       | 20 -  33  |       | $          | 245.8      |   |
| Customer Relationships in Europe        |       | 20        |       | 69.8       |       |
| Chemical Supply Agreements              |       | 10        |       | 29.9       |       |
| Other                                   |       | various   |       | 4.5        |       |
| Less: Accumulated Amortization          |       |      |       | (21.1      | )          |
| Amortized Intangibles, net              |       |      |       | 328.9      |       |
| Unamortized Intangibles:                |       |      |       |       |       |
| Trademarks and Tradenames               |       |      |       | 222.7      |       |
| Total Intangible Assets                 |       |      |       | $          | 551.6      |   |

 

**(6)   Long-Term Borrowings and Senior Secured Credit Facilities**

Followingis a summary of our debtobligations:

| ** **                                                                                   | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                   | ** ** | **2005**               | ** ** | **2004**              | ** ** |
| Senior Secured  Credit Facility                                                              |       |                   | $          | 539.9                 |       |   |   | $ | 559.5 |   |   |
| 67¤8%  Unsecured Senior Notes due 2012                                                  |       |                   | 200.0      |                  |       |   | 200.0 |   |   |
| 8% Unsecured  Senior Subordinated Notes due 2014                                             |       |                   | 320.0      |                  |       |   | 320.0 |   |   |
| $481.0 aggregate  principal amount at maturity of 95¤8%  Senior Discount Notes due 2015 |       |                   | 322.7      |                  |       |   | 300.6 |   |   |
| Bank loans                                                                                   |       |                   | 2.4        |                  |       |   | 11.9 |   |   |
| Capital leases                                                                               |       |                   | 6.3        |                  |       |   | 7.1 |   |   |
| Total debt                                                                                   |       |                   | 1,391.3    |                  |       |   | 1,399.1 |   |   |
| Less short-term  portion                                                                     |       |                   | (9.5       | )                     |       |   | (12.9 | ) |   |
| Total long-term  portion                                                                     |       |                   | $          | 1,381.8               |       |   |   | $ | 1,386.2 |   |   |

 

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

The Senior Secured Credit Facility provides foraggregate maximum borrowings of approximately $689.9 under (1) a term loanfacility providing for a loan denominated in Euros in an aggregate principalamount currently outstanding of €132.7 million (or approximately$160.0 and $179.6 on a U.S. dollar equivalent basis as of September 30, 2005 and December 31, 2004,respectively), (2) a term loan facility providing for a term loandenominated in U.S. dollars in an aggregate principal amount currentlyoutstanding of $379.9, and (3) a multi-currency revolving credit facility,providing for up to $150.0 in multi-currency revolving loans (including standbyand commercial letters of credit) outstanding at any time. Undrawn amountsunder the multi-currency revolving credit facility will be available on arevolving credit basis for general corporate purposes. As of September 30, 2005, we had $11.6of undrawn letters of credit and our remaining borrowing availability under the$150.0 multi-currency revolving credit facility was $138.4.

14

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

The term loan facilities will mature in 2011 and themulti-currency revolving credit facility will mature in 2009. The principalamount of the term loans will be amortized in annual installments for the firstsix years and quarterly installments during the seventh year.

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 excess operatingcash flow (as defined) for any fiscal year unless certain leverage ratiotargets are met (payment beginning in 2006 for fiscal 2005).

***Security; Guarantees***

The obligations under the Senior Secured CreditFacility are guaranteed by VWR’s parent; CDRV Holdings, Inc.; and eachsignificant direct and indirect domestic subsidiary of VWR, as that term isdefined in the credit agreement. As of September 30, 2005, none of the domestic subsidiaries ofVWR met 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 per annumapplicable to the U.S. dollar-denominated term loan can be based on afluctuating rate of interest measured by reference to either (1) anadjusted London inter-bank offered rate, or LIBOR, plus a borrowing margin or (2) analternate base rate, or ABR, plus a borrowing margin. The interest rate perannum applicable to the Euro-denominated term loan is based on a fluctuatingrate of interest measured by reference to an adjusted EURIBOR plus a borrowingmargin. As of September 30,2005, the interest rates on the U.S. dollar-denominated and Euro-denominatedterm loans were 6.14% and 4.88%, 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 2.2% as of September 30,2005.

***Covenants***

Our 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 

15

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

engagein certain transactions with affiliates. In addition, the Senior Secured Creditfacility requires us 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 September 30, 2005, the Companywas in compliance with all of these covenants.

***(b)******          The Senior and Senior Subordinated 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.

Under the Senior Indentureand the Senior Subordinated Indenture, additional securities may be issued inone or more series from time to time, subject to certain covenant limitations.

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

On December 16, 2004, CDRV issued $481.0aggregate principal amount at maturity ($299.4 proceeds) of 95¤8%Senior Discount Notes due January 1, 2015 (“Senior Discount Notes”). Theproceeds, net of $1.5 of debt issuance costs, were used to pay a cash dividendon our common stock in December 2004.

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, andJuly 1 of 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 CDRV’s subsidiariesto CDRV (net of applicable taxes and expenses) under applicable law andspecified provisions of the indentures governing the unsecured notes as ineffect on the issue date of the notes.

Theindenture for the Senior Discount Notes contains covenants that, among otherthings, limits the amount of additional indebtedness we may incur, pay cashdividends, sell assets and subsidiary stock, enter into transactions withaffiliates, place liens on assets, and make certain other payments. AtSeptember 30, 2005, the Company was in compliance with all covenants.

**(7)   Defined Benefit 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.

16

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

Netperiodic pension cost of the Company’s U.S. defined benefit plan includes thefollowing components:

| ** **                      | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | ** **              | ** ** | **Nine Months Ended**  | ** ** |
|---------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|----------------------------------|------------|
| ** **                      | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | **Successor**           | ** ** | **September 30, 2004** | ** ** |
| ** **                      | ** ** | **Successor**                                            | ** ** | **Nine Months**                         | ** ** | **Successor**           | ** ** | ** **                       | ** ** |
| ** **                      | ** ** | **Three Months Ended**                         | ** ** | **Ended**                                    | ** ** | **April 7 -** | ** ** | **Predecessor**                  | ** ** |
| ** **                      | ** ** | **September 30,**                                   | ** ** | **September 30,**                       | ** ** | **September 30,**  | ** ** | **January 1 -**        | ** ** |
| ** **                      | ** ** | **    2005    ** | ** ** | **   2004   ** | ** ** | **2005**                | ** ** | **2004**                         | ** ** | **April 6, 2004** | ** ** |
| Service cost                    |       |                                                     | $          | 0.6                                          |       |                    |       | $                                | 1.7        |   |   |   | $ | 3.9 |   |   |   | $ | 3.3 |   |   |   | $ | 1.8 |   |   |
| Interest cost                   |       |                                                     | 1.9        |                                         |       |                    | 2.2        |                             |       |   | 6.2 |   |   |   | 4.0 |   |   |   | 2.2 |   |   |
| Expected return  on plan assets |       |                                                     | (2.1       | )                                            |       |                    | (2.1       | )                                |       |   | (6.3 | ) |   |   | (3.8 | ) |   |   | (2.5 | ) |   |
| Recognized net  actuarial loss  |       |                                                     | —     |                                         |       |                    | —     |                             |       |   | — |   |   |   | — |   |   |   | 0.8 |   |   |
| Net periodic  pension cost      |       |                                                     | $          | 0.4                                          |       |                    |       | $                                | 1.8        |   |   |   | $ | 3.8 |   |   |   | $ | 3.5 |   |   |   | $ | 2.3 |   |   |

 

The Company does not plan to make a contribution tothe U.S. defined benefit plan during 2005.

During 2004, we launched a comprehensive study of ourU.S. employee benefits programs. The study was designed to both benchmark ourbenefits from a competitive perspective and assess the balance of the programcomponents in terms of employee needs. The Board of Directors approved a numberof benefit changes during February 2005 that were implemented effective June 1,2005. The most significant changes involved the curtailment of our U.S. pensionplan, improvements in the rate of employer matching contributions to our 401(k) definedcontribution plan, increased rates of employee contributions to fund ongoingmedical benefits, and the elimination of carryover vacation days by the end of2006. These changes are expected to modestly reduce our benefit costs,prospectively.

As a result of the decision to curtail the pensionplan, future benefits were frozen effective May 31, 2005 for mostparticipants. Most participants will earn no further benefits under the planafter that date. As a result, there was a reduction in the plan’s projectedbenefit obligation of $19.4 that was recorded as a reduction to pensionliabilities. Goodwill and deferred tax assets were reduced by $11.9 and $7.5,respectively.

Netperiodic pension cost of the Company’s significant Non-U.S. defined benefitplans in Germany, France and the UK include the following components:

| ** **                      | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | ** **              | ** ** | **Nine Months Ended**  | ** ** |
|---------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|----------------------------------|------------|
| ** **                      | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | **Successor**           | ** ** | **September 30, 2004** | ** ** |
| ** **                      | ** ** | **Successor**                                            | ** ** | **Nine Months**                         | ** ** | **Successor**           | ** ** | ** **                       | ** ** |
| ** **                      | ** ** | **Three Months Ended**                         | ** ** | **Ended**                                    | ** ** | **April 7 -** | ** ** | **Predecessor**                  | ** ** |
| ** **                      | ** ** | **September 30,**                                   | ** ** | **September 30,**                       | ** ** | **September 30,**  | ** ** | **January 1 -**        | ** ** |
| ** **                      | ** ** | **    2005    ** | ** ** | **   2004   ** | ** ** | **2005**                | ** ** | **2004**                         | ** ** | **April 6, 2004** | ** ** |
| Service cost                    |       |                                                     | $          | 0.8                                          |       |                    |       | $                                | 0.5        |   |   |   | $ | 2.6 |   |   |   | $ | 1.1 |   |   |   | $ | 0.1 |   |   |
| Interest cost                   |       |                                                     | 1.0        |                                         |       |                    | 0.3        |                             |       |   | 3.2 |   |   |   | 0.6 |   |   |   | 0.3 |   |   |
| Expected return  on plan assets |       |                                                     | (0.9       | )                                            |       |                    | —     |                             |       |   | (2.9 | ) |   |   | — |   |   |   | — |   |   |
| Net periodic  pension cost      |       |                                                     | $          | 0.9                                          |       |                    |       | $                                | 0.8        |   |   |   | $ | 2.9 |   |   |   | $ | 1.7 |   |   |   | $ | 0.4 |   |   |

 

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

TheCompany made combined contributions to the Non-U.S. defined benefit plans ofapproximately $1.8 for the nine months ended September 30, 2005 and expects tomake additional contributions to the Non-U.S. defined benefit plans ofapproximately $0.8 during the remainder of 2005.

**(8)   Comprehensive Income (Loss)**

Comprehensiveincome (loss) is determined as follows:

| ** **                                        | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | ** **              | ** ** | **Nine Months Ended**  | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|----------------------------------|------------|
| ** **                                        | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | **Successor**           | ** ** | **September 30, 2004** | ** ** |
| ** **                                        | ** ** | **Successor**                                            | ** ** | **Nine Months**                         | ** ** | **Successor**           | ** ** | ** **                       | ** ** |
| ** **                                        | ** ** | **Three Months Ended**                         | ** ** | **Ended**                                    | ** ** | **April 7 -** | ** ** | **Predecessor**                  | ** ** |
| ** **                                        | ** ** | **September 30,**                                   | ** ** | **September 30,**                       | ** ** | **September 30,**  | ** ** | **January 1 -**        | ** ** |
| ** **                                        | ** ** | **    2005    ** | ** ** | **   2004   ** | ** ** | **2005**                | ** ** | **2004**                         | ** ** | **April 6, 2004** | ** ** |
| Net income                                        |       |                                                     | $          | 12.3                                         |       |                    |       | $                                | 13.6       |   |   |   | $ | 17.6 |   |   |   | $ | 22.1 |   |   |   | $ | 20.7 |   |   |
| Other  comprehensive income (loss):               |       |                                                     |       |                                         |       |                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment           |       |                                                     | 13.4       |                                         |       |                    | 12.1       |                             |       |   | (20.0 | ) |   |   | 14.5 |   |   |   | (3.7 | ) |   |
| Unrealized (loss) gain on derivatives, net of tax |       |                                                     | (1.0       | )                                            |       |                    | (0.1       | )                                |       |   | (0.3 | ) |   |   | (0.1 | ) |   |   | 0.2 |   |   |
| Comprehensive income  (loss)                      |       |                                                     | $          | 24.7                                         |       |                    |       | $                                | 25.6       |   |   |   | $ | (2.7 | ) |   |   | $ | 36.5 |   |   |   | $ | 17.2 |   |   |

 

**(9)   Segment Financial Information**

The Company reports financial results on the basis ofthe following three business segments: North American laboratory distribution,or North American Lab, European laboratory distribution, or European Lab, andScience Education. Both the North American Lab and European Lab segments arecomprised of the distribution of scientific supplies to customers engaged inpharmaceuticals, biotechnology, chemicals, technology, and food processing;governmental agencies; colleges and universities; and environmentalorganizations. Science Education is comprised of the distribution of scientificsupplies and specialized kits to primary and secondary schools as well asdistribution of scientific supplies to universities and research institutes.

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

Selectedbusiness segment financial information and reconciliation of reported operatingincome by 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.

| ** **                   | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | ** **              | ** ** | **Nine Months Ended**  | ** ** |
|------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|----------------------------------|------------|
| ** **                   | ** ** | ** **                                               | ** ** | ** **                                   | ** ** | **Successor**           | ** ** | **September 30, 2004** | ** ** |
| ** **                   | ** ** | **Successor**                                            | ** ** | **Nine Months**                         | ** ** | **Successor**           | ** ** | ** **                       | ** ** |
| ** **                   | ** ** | **Three Months Ended**                         | ** ** | **Ended**                                    | ** ** | **April 7 -** | ** ** | **Predecessor**                  | ** ** |
| ** **                   | ** ** | **September 30,**                                   | ** ** | **September 30,**                       | ** ** | **September 30,**  | ** ** | **January 1 -**        | ** ** |
| ** **                   | ** ** | **    2005    ** | ** ** | **   2004   ** | ** ** | **2005**                | ** ** | **2004**                         | ** ** | **April 6, 2004** | ** ** |
| **Net  Sales**               |       |                                                     |       |                                         |       |                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab           |       |                                                     | $          | 490.0                                        |       |                    |       | $                                | 464.0      |   |   |   | $ | 1,430.4 |   |   |   | $ | 891.6 |   |   |   | $ | 486.5 |   |   |
| European Lab                 |       |                                                     | 264.4      |                                         |       |                    | 242.4      |                             |       |   | 814.4 |   |   |   | 463.5 |   |   |   | 283.0 |   |   |
| Science Education            |       |                                                     | 57.6       |                                         |       |                    | 54.1       |                             |       |   | 116.1 |   |   |   | 81.4 |   |   |   | 23.7 |   |   |
| Total                        |       |                                                     | $          | 812.0                                        |       |                    |       | $                                | 760.5      |   |   |   | $ | 2,360.9 |   |   |   | $ | 1,436.5 |   |   |   | $ | 793.2 |   |   |
| **Operating  Income**        |       |                                                     |       |                                         |       |                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab           |       |                                                     | $          | 28.7                                         |       |                    |       | $                                | 24.7       |   |   |   | $ | 63.0 |   |   |   | $ | 50.3 |   |   |   | $ | 28.5 |   |   |
| European Lab                 |       |                                                     | 7.1        |                                         |       |                    | 5.6        |                             |       |   | 28.6 |   |   |   | 9.2 |   |   |   | 13.1 |   |   |
| Science Education            |       |                                                     | 11.5       |                                         |       |                    | 10.9       |                             |       |   | 13.5 |   |   |   | 13.4 |   |   |   | (0.1 | ) |   |
| Total                        |       |                                                     | 47.3       |                                         |       |                    | 41.2       |                             |       |   | 105.1 |   |   |   | 72.9 |   |   |   | 41.5 |   |   |
| Interest income              |       |                                                     | (0.8       | )                                            |       |                    | (0.3       | )                                |       |   | (1.8 | ) |   |   | (0.4 | ) |   |   | (0.2 | ) |   |
| Interest expense:            |       |                                                     |       |                                         |       |                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest on third party debt |       |                                                     | 27.1       |                                         |       |                    | 17.2       |                             |       |   | 78.8 |   |   |   | 33.2 |   |   |   | 1.7 |   |   |
| Interest on push down debt   |       |                                                     | —     |                                         |       |                    | —     |                             |       |   | — |   |   |   | — |   |   |   | 4.1 |   |   |
| Other (income)  expense, net |       |                                                     | (1.3       | )                                            |       |                    | (1.1       | )                                |       |   | (3.1 | ) |   |   | (0.6 | ) |   |   | 0.1 |   |   |
| Income before  income taxes  |       |                                                     | $          | 22.3                                         |       |                    |       | $                                | 25.4       |   |   |   | $ | 31.2 |   |   |   | $ | 40.7 |   |   |   | $ | 35.8 |   |   |

 

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**Item 2—*Management’s Discussionand Analysis of Financial Condition and Results of Operations***

This Form 10-Qcontains forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933 and Section 21E of the Securities Exchange Actof 1934. All statements other than statements of historical fact included inthis Form 10-Q may constitute forward-looking statements. We havebased these forward-looking statements on our current expectations andprojections about future events. Although we believe that our assumptions madein connection with the forward-looking statements are reasonable, there can beno assurances that the assumptions and expectations will prove to be correct. Certainfactors that might cause such a difference include those discussed in thesection entitled “Forward-Looking Statements” contained in ourRegistration Statement on Form S-4 filed on April 15, 2005, asamended. We undertake no obligation to publicly update or revise anyforward-looking statements, whether as a result of new information, futureevents or otherwise. In light of these risks, uncertainties and assumptions,the forward-looking events discussed in the report might not occur.

**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 of inventoryshipped and the cost of labor for services we provide on-site at our customer’slocations, such as storeroom management and product delivery. Cost of salesalso includes freight expenses incurred to deliver products to customers aswell 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.

The AGB and AIacquisitions were completed on April 1, 2005. The TSL acquisition wascompleted on July 1, 2005. The results of AGB and TSL have been includedin the European Lab segment and the results of AI have been included in theNorth American Lab segment from the date of the acquisitions. AGB had net salesof $8.4 million and $17.1 million, gross profit of $2.6 million and $5.2million and operating income of $0.6 million and $1.1 million for the three andnine months ended September 30, 2005, respectively. AI had net sales of$4.4 million and $9.0 million, gross profit of $2.0 million and $4.2 millionand operating income of $0.3 million and $0.8 million for the three and ninemonths ended September 30, 2005, respectively. TSL had net sales of $0.4million, gross profit of $0.2 million and operating income of $0.1 million forthe three months ended September 30, 2005.

**Compliancewith the Sarbanes-Oxley Act**

We have 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.

During the third quarter of 2005, the SEC issuedguidance that extended our compliance date by one year from December 31,2006 to December 31, 2007. For the nine months ended September 30,2005, we expensed approximately $2.6 million of external assistance related toour Sarbanes-Oxley compliance program.

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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 senior financial team from, ouroperations.

**Basisof Financial Statement Presentation**

Prior to April 7, 2004, Merck KGaA was VWR’sultimate parent company. On April 7, 2004, Merck KGaA sold itsinvestment in VWR to CDRVA. As a result of the Acquisition, the financialstatements for the periods included in our September 30, 2004 interimfinancial statements reflect the results of operations, cash flows, andstatements of stockholders’ equity and other comprehensive income (loss) usingpredecessor and successor time periods. In order to provide a meaningful basisof comparing our results of operations for the nine months ended September 30,2004, the results of operations for the “predecessor” period (January 1,2004 through April 6, 2004) have been combined with the results ofoperations for the “successor” period (April 7, 2004 through September 30,2004). All intercompany accounts and transactions have been eliminated.

The purchase price paid by Merck KGaA for the businesseswas pushed down to VWR International Corporation’s financial statements fromthe date of acquisition and resulted in the allocation of the purchase price tothe assets and liabilities acquired and the recognition of either push downdebt due Merck KGaA or a contribution to stockholders’ equity for cashconsideration. Interest expense was recorded on this push down debt based uponMerck KGaA’s intercompany interest rates, which are not necessarily indicativeof rates we would have obtained if we were not an ultimate subsidiary of Merck KGaA.Interest expense, including tax effects, on push down debt has been included inthe statements of operations, and presented as a non-cash item in theaccompanying statements of cash flows, as this interest was not required to bepaid to Merck KGaA.

The financial statements,for all periods up to April 6, 2004, do not include allocations of MerckKGaA general corporate expenses or charges for financial reporting, tax, andtreasury services, as such costs were not charged to us. Management does notbelieve that charges from Merck KGaA for such services would have beenmaterial. The historical financial information does not reflect the added coststhat we incur as a separate company. These additional costs include costs fornew information technology systems to operate as a separate company, costs ofperiodic reporting to the SEC, as well as the costs related to a global tax andtreasury staff and compliance with the Sarbanes-Oxley Act. This historicalfinancial information also does not reflect the incremental costs associatedwith changes that occured in our capital structure and operations.

**Effects of the Acquisition**

The Acquisition has been accounted for using thepurchase method of accounting. As such, our assets and liabilities wereadjusted, as of the date of the Acquisition, to their respective fair values.This resulted in the recognition of significant identified intangible assetsrelating to customer relationships, trademarks and tradenames, an increase inpension and post-retirement liabilities for existing plans, the recognition ofother fair value adjustments and the impact of the new debt and equitystructure.

The recognition of thefair value of assets acquired resulted in higher net non-cash depreciation andamortization expense. The new debt outstanding resulted in a significantincrease in interest expense. The cash outflow for interest expense will bepartially offset by tax deductions associated with such interest expense.

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**Constant Currency Analysis**

We maintain operations in North America and in fifteenEuropean countries. Approximately 41% of our net sales originate in currenciesother than the U.S. dollar, principally the Euro, the British pound sterlingand the Canadian dollar. As a result, changes in our revenues and operatingprofits include the impact of changes in foreign currency exchange rates. Weprovide “constant currency” disclosures in this Report on Form 10-Qto remove the impact of the fluctuation in foreign exchange rates.

We utilize constant currencyresults in our analysis of segment performance. This means that we havetranslated financial data for a period into U.S. dollars using the same foreigncurrency exchange rates that we used to translate financial data for theprevious comparable period. We believe that this calculation is a usefulmeasure, indicating the actual growth of our operations. Earnings from oursubsidiaries are not generally repatriated to the United States, and wetypically do not incur significant gains or losses on foreign currencytransactions with our subsidiaries. Therefore, changes in foreign currencyexchange rates primarily impact only reported earnings and not our actual cashflow or economic condition.

**Business Segments**

We report our financialresults on the basis of the following three business segments: North Americanlaboratory distribution, or North American Lab, European laboratorydistribution, or European Lab, and Science Education. Both the North AmericanLab and European Lab segments are comprised of the distribution of scientificsupplies to customers in pharmaceuticals, biotechnology, chemicals, technology,and food processing; governmental agencies; colleges and universities; andenvironmental organizations. Science Education is comprised of the manufactureand distribution of scientific supplies and specialized kits principally toprimary and secondary schools in North America.

**Results of Operations**

***Net Sales***

Thefollowing table presents net sales and changes in net sales by reportablesegment for the three and nine months ended September 30, 2005 and 2004(dollars in millions):

| ** **         | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **         | ** ** | **2005**                                                 | ** ** | **  % Change  **               | ** ** | **2004** | ** ** | **2005** | ** ** | **% Change** | ** ** | **2004** | ** ** |
| Net Sales          |       |                                                     |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab |       | $                                                        | 490.0      |                                                    |       | 5.6 | % |   | $ | 464.0 |   | $ | 1,430.4 |   |   | 3.8 | % |   | $ | 1,378.1 |   |
| European Lab       |       | 264.4                                                    |       |                                                    | 9.1        | % |   | 242.4 |   | 814.4 |   |   | 9.1 | % |   | 746.5 |   |
| Science Education  |       | 57.6                                                     |       |                                                    | 6.5        | % |   | 54.1 |   | 116.1 |   |   | 10.5 | % |   | 105.1 |   |
| Total              |       | $                                                        | 812.0      |                                                    |       | 6.8 | % |   | $ | 760.5 |   | $ | 2,360.9 |   |   | 5.9 | % |   | $ | 2,229.7 |   |

 

Net sales for the three and nine months ended September 30,2005 increased $51.5 million and $131.2 million, respectively, over thecomparable periods of 2004. Foreign currency changes accounted for $4.8 millionand $34.2 million of the increase for the three and nine months ended September 30,2005, respectively. The current year acquisitions of AGB, AI and TSL favorablyimpacted net sales by $13.2 million and $26.5 million for the three andnine months ended September 30, 2005, respectively. Excluding theseeffects, net sales increased by 4.4% and 3.2%, respectively, from thecomparable periods of 2004. Each of our segments experienced net sales growthfor both periods.

Net sales in the North American Lab segment for thethree and nine months ended September 30, 2005 increased $26.0 million and$52.3 million, respectively, over the comparable periods of 2004. Foreigncurrency changes accounted for $4.5 million and $11.3 million of the increasefor the three and nine months ended September 30, 2005, respectively. Thecurrent year acquisition of AI favorably impacted net 

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sales by $4.4 million and$9.0 million for the three and nine months ended September 30, 2005,respectively. Excluding these effects, net sales increased by 3.7% and 2.3%,respectively, from the comparable periods of 2004. For the three months ended September 30,2005 our net sales in the bio-pharmaceutical market were relatively flat,our net sales in the education market experienced low single-digit growth andour net sales in the industrial market achieved high-single digit growth. Forthe nine months ended September 30, 2005 these three markets experiencedlow single-digit growth.

Net sales in the European Lab segment for the threeand nine months ended September 30, 2005 increased $22.0 million and $67.9million, respectively, over the comparable periods of 2004. Foreign currencychanges accounted for $0.3 million and $22.9 million of the increase for thethree and nine months ended September 30, 2005, respectively. The currentyear acquisitions of AGB and TSL favorably impacted net sales by $8.8 millionand $17.5 million for the three and nine months ended September 30, 2005,respectively. Excluding these effects, net sales increased by 5.3% and 3.7%,respectively, from the comparable periods of 2004. Our European Lab segmentoperates in fifteen countries and its results are heavily influenced by thelarger countries in which we operate such as Germany, the UK, France, andBelgium. These large markets experienced sluggish economic growth, whichsuppressed demand for our products during the first quarter of 2005. Theselarge markets and the majority of our smaller operations, in other countriesexperienced growth during the second and third quarters of 2005. This growthwas primarily driven by our bio-pharmaceutical and industrial markets. Thisgrowth was partially offset by a decline in our resellers market.

Net sales in the ScienceEducation segment for the three and nine months ended September 30, 2005increased $3.5 million and $11.0 million, respectively, over the comparableperiods of 2004. These increases were primarily driven by increased sales inour education and publishers markets. This segment is highly seasonal andhistorically earns a disproportionately high share of its net sales andoperating income in the third quarter of each year.

***Gross Profit***

Thefollowing table presents gross profit for the three and nine months ended September 30,2005 and 2004 (dollars in millions):

| ** **                              | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                              | ** ** | **   2005   **         | ** ** | **   2004   **        | ** ** | **   2005   ** | ** ** | **   2004   ** | ** ** |
| Gross profit                            |       |                                                 | $          | 209.6                                               |       |   |   | $ | 197.7 |   |   |   | $ | 603.1 |   |   |   | $ | 574.0 |   |   |
| Percentage of net sales  (gross margin) |       |                                                 | 25.8       | %                                                   |       |   | 26.0 | % |   |   | 25.5 | % |   |   | 25.7 | % |   |

 

Gross profit for the threeand nine months ended September 30, 2005 increased $11.9 million and $29.1million, respectively, over the comparable periods of 2004. Foreign currencychanges accounted for $1.2 million and $9.6 million of the increase for thethree and nine months ended September 30, 2005, respectively. The current yearacquisitions of AGB, AI and TSL favorably impacted gross profit by $4.8 millionand $9.6 million for the three and nine months ended September 30, 2005,respectively. Excluding these effects, gross profit increased by $5.9 millionand $9.9 million, respectively, from the comparable periods of 2004. During thefirst three quarters of 2005, our North American Lab margins improved slightlywhile both the European Lab and Science Education margins declined. TheEuropean Lab gross margin percentages decreased slightly as a result of productmix and pricing pressures. Science Education gross margin percentages decreasedas a result of product mix, pricing pressures and a customer buying patternshift to more products being purchased through a bid process.

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

Thefollowing table presents selling, general, and administrative expenses (“SG&A”) for the three and ninemonths ended September 30, 2005 and 2004 (dollars in millions):

| ** **                                     | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                     | ** ** | **   2005   **         | ** ** | **   2004   **        | ** ** | **   2005   ** | ** ** | **   2004   ** | ** ** |
| Selling, general  and administrative  expenses |       |                                                 | $          | 162.3                                               |       |   |   | $ | 156.5 |   |   |   | $ | 498.0 |   |   |   | $ | 459.6 |   |   |   |
| Percentage of net sales                        |       |                                                 | 20.0       | %                                                   |       |   | 20.6 | % |   |   | 21.1 | % |   |   | 20.6 | % |   |   |

 

Since the Acquisition in April 2004, we madesignificant investments in sales, marketing, and sourcing personnel to supportour revenue and strategic growth plans and expanded our finance andadministrative capabilities to support the Company as a stand-alone entity. Atthe same time, we also implemented various restructuring and cost reductionprograms to partially offset the costs of these investments, redirect resourcesto align with our strategy and improve operating effectiveness. As a result,SG&A expense has increased in comparison to the corresponding periods ofthe proceeding year. Partially offsetting the cost increases are savings fromour restructuring efforts that primarily reduced SG&A in our European Labsegment.

For the three months ended September 30, 2005,SG&A increased $5.8 million over the comparable period of 2004. Foreigncurrency changes increased these expenses by $0.5 million and the current yearacquisitions of AGB, AI and TSL added $3.8 million. Further increasing SG&Awere $0.5 million of charges, primarily severance, associated with a costreduction program in the North American Lab segment and $4.6 million of chargesin the European Lab segment primarily related to severances and related costsfor personnel in our operations in Germany, Nordic, Italy, and the UK andduplicate expenditures incurred in our UK operations related to the transitionof certain services. Excluding these effects, SG&A costs decreased by $3.6million or 2.3% for the three months ended September 30, 2005 from thethree months ended September 30, 2004.

On a sequential basis, SG&A for the third quarterof 2005, excluding the cost reduction programs discussed above, the $0.2million effect of the TSL acquisition and a decrease due to foreign currency changes of $2.0 million fromthe second quarter of 2005, was $159.0 million. SG&A for the secondquarter of 2005, excluding the second quarter cost reduction program of $5.1million, was $163.0 million. This decline of $4.0 million or 2.5% reflectsincremental savings from the Company’s 2004 restructuring program, the 2005cost reduction programs, and ongoing spending controls.

For the nine months endedSeptember 30, 2005, SG&A increased $38.4 million over the comparableperiod of 2004. Foreign currency changes increased these expenses by $7.4million and the current year acquisitions of AGB, AI and TSL added $7.6million. Further increasing SG&A were $4.4 million of charges, primarilyseverance, associated with cost reduction programs in the North American Labsegment and $7.9 million of charges in the European Lab segment primarilyrelated to the closing of a facility in the UK and severances and related costsfor personnel in our UK, German, French, Nordic, Swedish and Italianoperations. Excluding these effects, SG&A costs increased by $11.1 millionor 2.4% for the nine months ended September 30, 2005 over the nine monthsended September 30, 2004. This increase primarily reflects ouraforementioned investments in personnel, inflation, partially offset by savingsfrom the 2004 restructuring program and 2005 cost reduction programs.

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***Operating Income***

Thefollowing table presents operating income and operating income as a percentageof net sales by reportable segment for the three and nine months ended September 30,2005 and 2004 (dollars in millions):

|                    | ** ** | **Three Months Ended September 30,** | ** **  | **Nine Months Ended September 30,** | ** ** |
|--------------------|------------|----------------------------------------------------------|-------------|---------------------------------------------------------|------------|
| ** **         | ** ** | **2005**                                                 | ** **  | **2004**                                                | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **         | ** ** | ** **                                               | ** **  | **% of**                                           | ** ** | ** ** | ** ** | **% of** | ** ** | ** ** | ** ** | **% of** | ** ** | ** ** | ** ** | **% of** | ** ** |
| ** **         | ** ** | **Amount**                                               | ** **  | **Net Sales**                                      | ** ** | **Amount** | ** ** | **Net Sales** | ** ** | **Amount** | ** ** | **Net Sales** | ** ** | **Amount** | ** ** | **Net Sales** | ** ** |
| Operating Income   |       |                                                     |        |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab |       |                                                     | $ 28.7 |                                                    |       |   | 5.9 | % |   |   | $ 24.7 |   |   |   | 5.3 | % |   |   | $ 63.0 |   |   |   | 4.4 | % |   |   | $ 78.8 |   |   |   | 5.7 | % |   |
| European Lab       |       |                                                     | 7.1         |                                                    |       |   | 2.7 | % |   |   | 5.6 |   |   |   | 2.3 | % |   |   | 28.6 |   |   |   | 3.5 | % |   |   | 22.3 |   |   |   | 3.0 | % |   |
| Science Education  |       |                                                     | 11.5        |                                                    |       |   | 20.0 | % |   |   | 10.9 |   |   |   | 20.1 | % |   |   | 13.5 |   |   |   | 11.6 | % |   |   | 13.3 |   |   |   | 12.7 | % |   |
| Total              |       |                                                     | $ 47.3 |                                                    |       |   | 5.8 | % |   |   | $ 41.2 |   |   |   | 5.4 | % |   |   | $ 105.1 |   |   |   | 4.5 | % |   |   | $ 114.4 |   |   |   | 5.1 | % |   |

 

As a result of the factors described above, operatingincome increased $6.1 million and decreased $9.3 million for the three and nine months ended September 30,2005, respectively, from the comparable periods of 2004. Foreigncurrency changes increased operating income by $0.7 million and $2.2 millionfor the three and nine months ended September 30, 2005, respectively. Thecurrent year acquisitions of AGB, AI and TSL favorably impacted operatingincome by $1.0 million and $2.0 million for the three and nine months ended September 30,2005, respectively. The restructuring programs discussed above decreasedoperating income by $5.1 million and $12.3 million for the three and ninemonths ended September 30, 2005, respectively. Excluding these effects,operating income increased by $9.5million and decreased by $1.2 million, respectively, from the comparableperiods of 2004. The increase for the three months ended September 30,2005 was the result of a gross profit increase of $5.9 million primarilyattributable to sales volume and an SG&A decrease of $3.6 million. The decrease for the nine months endedSeptember 30, 2005 was the result of an SG&A increase of $11.1 millionthat is partially offset by a gross profit increase of $9.9 million primarilyattributable to sales volume.

Operating income in the North American Lab segmentincreased $4.0 million and decreased $15.8 million for the three and nine months ended September 30,2005, respectively, from the comparable periods of 2004. Foreigncurrency changes increased operating income by $0.5 million and $1.2 millionfor the three and nine months ended September 30, 2005, respectively. Thecurrent year acquisition of AI favorably impacted operating income by $0.3million and $0.8 million for the three and nine months ended September 30,2005, respectively. The restructuring programs discussed above decreasedoperating income by $0.5 million and $4.4 million for the three and nine monthsended September 30, 2005, respectively. Excluding these effects, operatingincome increased by $3.7 million anddecreased by $13.4 million, respectively, from the comparable periods of 2004. Theincrease for the three months ended September 30, 2005 was theresult of a gross profit increase of $4.2 million primarily attributable tosales volume, partially offset by an SG&A increase of $0.5 million. The decrease for the nine months endedSeptember 30, 2005 was the result of an SG&A increase of $21.9million, partially offset by a gross profit increase of $8.5 million primarilyattributable to sales volume. The significant increase in SG&A expenses for the nine months ended September 30,2005 over the comparable period of 2004 reflects our increasedinvestments in the business and our corporate structure that occurred after theAcquisition.

Operating income in the European Lab segment for thethree and nine months ended September 30, 2005 increased $1.5 million and$6.3 million, respectively, over the comparable periods of 2004. Foreigncurrency changes increased operating income by $0.2 million and $1.0 millionfor the three and nine months ended September 30, 2005, respectively. Thecurrent year acquisitions of AGB and TSL favorably impacted operating income by$0.7 million and $1.2 million for the three and nine months ended September 30,2005, respectively. The restructuring programs discussed above decreasedoperating income 

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by $4.6 million and $7.9million for the three and nine months ended September 30, 2005,respectively. Excluding these effects, operating income increased by $5.2million and $12.0 million, respectively, from the comparable periods of 2004. Theincrease for the three months ended September 30, 2005 is the result ofincreased gross profit of $0.6 million attributable to sales volume, partiallyoffset by a negative price variance and an SG&A decrease of $4.6 milliondue to our various restructuring efforts. The increase for the nine monthsended September 30, 2005 is primarily the result of savings from ourvarious restructuring programs that more than offset a decrease in gross profitof $1.4 million that resulted from a softer first quarter of 2005.

Operating income in theScience Education segment for the three and nine months ended September 30,2005 increased $0.6 million and $0.2 million, respectively, over the comparableperiods of 2004. The increase for the three months ended September 30,2005 is the result of increased gross profit of $1.1 million attributable toincreased sales volume, partially offset by a negative price variance, and anincrease in SG&A of $0.5 million. The increase for the nine months ended September 30,2005 is the result of increased gross profit of $2.8 million attributable toincreased sales volume, partially offset by a negative price variance, and anincrease in SG&A of $2.6 million. This segment’s increased SG&Aexpenses reflect investments in its sales force and warehouse support. As notedpreviously, this segment’s operating results are highly seasonal and biased tothe third quarter of every fiscal year.

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

Interest expense, net ofinterest income, for the three and nine months ended September 30, 2005increased to $26.3 million and $77.0 million, respectively, from $16.9 millionand $38.4 million for the comparable periods of 2004. These increases are dueto the new capital structure established in connection with the Acquisition on April 7,2004 and the issuance of the Senior Discount Notes on December 16, 2004that resulted in a higher level of outstanding debt and higher interest rates. Theincrease in interest rates in the successor periods reflect market rates forthird party debt as compared to the predecessor period where substantially alldebt was intercompany. In addition, the variable interest rates on our SeniorSecured Credit Facility were higher during the second and third quarters of2005 than the comparable periods of 2004.

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

Other income, net was $1.3million and $3.1 million for the three and nine months ended September 30,2005, respectively, compared to other income, net of $1.1 million and $0.5million for the comparable periods of 2004. The increases in other income, netin 2005 are due to increased exchange gains in 2005.

***Income Taxes***

The effective income taxrate for the three months and nine months ended September 30, 2005 was44.8% and 43.5%, respectively, compared to 46.5% and 44.1% for the comparableperiods of 2004. The 2004 effective tax rates were adversely impacted by lossesand related valuation allowances associated with our operations in France. In2005, we do not anticipate such a significant unfavorable impact. The 2005effective tax rate increased because of the inability to recognize state taxbenefits for the interest expense on the Senior Discount Notes.

**Liquidity and Capital 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 and to convert into cash thoseassets that are no longer required to 

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meet existing strategicand financial objectives. Therefore, liquidity cannot be considered separatelyfrom capital resources that consist of current or potentially available fundsfor use in achieving long-range objectives and meeting debt servicecommitments.

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, borrowings under our Senior SecuredCredit Facility, and credit terms from our suppliers, which approximatereceivable terms to our customers.

Based on current operations and expectations as tofuture growth, we believe that cash generated from operations, together withamounts available under our 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 $263.7million and $224.3 million at September 30, 2005 and December 31,2004, respectively. Trade receivables, inventories and accounts payable, threeimportant elements of working capital, are discussed below.

***Trade AccountsReceivable.***   Days sales outstanding inaccounts receivable were 52.0**daysand 49.0 days for the quarterly periods ended September 30, 2005 and December 31,2004, respectively. Trade receivables are higher in Europe due to the extendedpayment practices in several of the countries in which we operate and tradereceivables tend to increase in the third quarter as a result of higher salesof our Science Education segment.

The following factors have contributed to the increasein our trade receivables as of September 30, 2005 from December 31,2004: net sales growth in 2005, including growth due to acquisitions, partiallyoffset by the favorable impact of foreign currency changes have increased ourtrade receivables by approximately $5 million and increased time lags in collectingcustomer remittances have increased our trade receivables by approximately $41million. This increased collection time is partially attributable to temporarydisruptions due to certain changes related to on-going restructuring efforts;fewer customers taking early pay discounts; and certain customers being grantedlonger payment terms.

***Inventories.***   Dayssupply of inventory were 40.8**daysand 39.1 days for the quarterly periods ended September 30, 2005 and December 31,2004, respectively. The reasons for this increase include a shift in oursupplier network, primarily as a result of the termination of a supplyagreement with a major supplier earlier in 2005, and accelerated purchases incertain locations to support system conversions and growth in our exportbusiness. This increase more than offset the normal seasonal decline ininventories in our Science Education segment.

***Accounts Payable.***   Dayspayables outstanding were 54.6**daysand 52.5 days for the quarterly periods ended September 30, 2005 and December 31,2004, respectively, mainly due to continued efforts to improve working capital.Trade accounts payable are primarily with suppliers whose products wedistribute. Payment terms are negotiated and in cases where economic earlypayment discounts are offered, we make payments to earn the discounts. Dayspayable outstanding are generally higher in Europe due to the extended paymentpractices in certain countries in which we operate. Depending on the timing ofpayments and inventory purchases, trade accounts payable can vary each quarterand from year to year. The increase in accounts payable is consistent with ourcost of goods sold growth.

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**Historical CashFlows**

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

| ** **                                            | ** ** | **Nine Months Ended**              | ** **  |
|-------------------------------------------------------|------------|----------------------------------------------|-------------|
| ** **                                            | ** ** | **September 30,**                       | ** **  |
| ** **                                            | ** ** | **   2005   ** | ** **  | **   2004    ** | ** ** |
| Cash flow from  operations, excluding working capital |       |                                         | $ 77.5 |   |   |   | $ 78.4 |   |   |
| Cash flow from  working capital changes, net          |       |                                         | (63.3       | ) |   |   | 101.7 |   |   |
| Cash flow from  operations                            |       |                                         | $ 14.2 |   |   |   | $ 180.1 |   |   |

 

We generated $14.2 million of cash flow fromoperations during the nine months ended September 30, 2005 compared to$180.1 million during the comparable period of 2004. The significant cash flowfrom operations in 2004 was the result of programs implemented during 2004 toimprove working capital management. Cash flow from working capital changes wasnegative in 2005 primarily because of increases in our trade accountsreceivable and inventories discussed above. These cash usages were partiallyoffset by an increase in our accounts payable. To a lesser extent, reductionsin net income in 2005 compared to 2004 have also resulted in lower cash flowfrom operations.

Net cash used in investing activities was $57.5million for the nine months ended September 30, 2005 compared to $1,570.8million for the comparable period of 2004. This decrease was the result of theAcquisition, partially offset by investments to acquire businesses during 2005.

Net cash used in financing activities was $12.3million for the nine months ended September 30, 2005 compared to cashprovided by financing activities of $1,577.8 million for the comparable periodof 2004. The 2005 cash usage is primarily comprised of net debt payments of$8.4 million and a net decrease in our bank checks outstanding of $3.1 million.Net cash provided in 2004 was primarily due to the Acquisition and the newcapital structure we established.

Prior to the Acquisition on April 7, 2004, cashflow from operating activities and after investing activities was used to paydown debt or to pay dividends to Merck KGaA. Under the credit agreement for ourSenior Secured Credit Facility, beginning in the first quarter of fiscal 2006,Excess Cash Flow (as defined in the credit agreement) will be required to beused to prepay credit agreement debt, in addition to scheduled principalpayments. Based upon current levels of operations and expectations as to futuregrowth, we believe that cash generated from operations, together with amountsavailable under our $150.0 million five year multi-currency revolving creditfacility, which is a component of our Senior Secured Credit Facility, will beadequate to permit us to meet our debt service obligations, capital expenditurerequirements, ongoing operating costs and working capital needs until thematurity of our Senior Secured Credit Facility, although no assurance can begiven in this regard. Our future financial and operating performance, abilityto service or refinance our debt and ability to comply with covenants andrestrictions contained in our debt agreements will be subject to futureeconomic conditions and to financial, business and other factors, many of whichare beyond our control and will be substantially dependent on the globaleconomy, demand for our products, and our ability to successfully implement ouroverall business and profitability strategies. As of September 30, 2005,we had $58.9 million of cash and cash equivalents on hand.

As of September 30,2005, we had outstanding indebtedness of $1,391.3 million, which consistsprimarily of $520.0 million aggregate principal amount of senior and seniorsubordinated notes, $322.7 million of accreted value of Senior Discount Notes,a $379.9 million U.S. dollar-denominated term loan, and a $160.0 millionEuro-denominated term loan.

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**IndebtednessPrior to the Acquisition**

Substantially all indebtednessprior to the Acquisition was intercompany debt with Merck KGaA.

**IndebtednessFollowing the Acquisition**

***Senior SecuredCredit Facility.***   On April 7, 2004, weentered into the Senior Secured Credit Facility, which consists of (1) aterm loan facility providing for a loan denominated in Euros, in an aggregateprincipal amount currently outstanding at €132.7 million(approximately $160.0 million on a U.S. dollar equivalent basis as of September 30,2005), (2) a term loan facility denominated in U.S. dollars in anaggregate principal amount currently outstanding at $379.9 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 September 30, 2005, 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 September 30, 2005, we had $11.6 million of undrawnletters of credit and our remaining borrowing availability under the $150.0million multi-currency revolving credit facility was $138.4 million.

The credit agreement governing the Senior SecuredCredit Facility contains certain covenants that limit the Company’s ability toincur additional indebtedness, pay cash dividends and make certain otherpayments. The senior secured credit agreement also requires the Company tomaintain certain financial covenants, including a specified debt to CreditAgreement EBITDA leverage ratio and a specified Credit Agreement EBITDA tointerest expense coverage ratio for specified periods. See “Credit AgreementFinancial Covenants; Credit Agreement EBITDA” below. As of September 30,2005, the Company was in compliance with all such covenants.

***Senior and Senior SubordinatedNotes.******  ***On April 7, 2004, we issued 67¤8%senior notes and 8% senior subordinated notes that mature on April 15,2012 and April 15, 2014, respectively, in the aggregate principal amountsof $200.0 million and $320.0 million, respectively, to finance a portion of theAcquisition.

The indentures governing the senior notes and thesenior subordinated notes contain certain covenants that limit the Company’sability to incur additional indebtedness, pay cash dividends and make certainother payments. The indentures also require the Company to maintain certainfinancial covenants, including a specified debt to Consolidated EBITDA leverageratio and a specified Consolidated EBITDA to interest expense coverage ratio.At September 30, 2005, the Company was in compliance with all suchcovenants.

***Senior DiscountNotes.******  ***On December 16, 2004, CDRV issued$481.0 million aggregate principal amount at maturity ($297.9 million in netproceeds) of 95¤8%senior discount notes due January 1, 2015. The net proceeds of theissuance were used to pay a dividend to the holders of our common stock. TheSenior Discount Notes are senior unsecured obligations of CDRV and arestructurally subordinated to all obligations and other liabilities of CDRV’sexisting and future subsidiaries. No cash interest will accrue on the SeniorDiscount Notes prior to January 1, 2010. Thereafter, cash interest willaccrue and be payable semiannually, only to the extent funds are available fordistribution to CDRV under specified provisions of the indentures governing oursenior notes and senior subordinated notes and applicable law.

The terms of the Senior Secured Credit Facility andthe indentures governing our senior notes and senior subordinated notessignificantly restrict VWR from making distributions and otherwise transferringassets to CDRV.

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

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**CreditAgreement Financial Covenants; Credit Agreement EBITDA**

Borrowings under our Senior Secured Credit Facilityare a key source of our liquidity. Our ability to borrow under our SeniorSecured Credit Facility is dependent upon, among other things, our compliancewith the financial covenants set forth in the credit agreement for our SeniorSecured Credit Facility. The financial covenants include a specified debt toCredit Agreement EBITDA leverage ratio and a specified Credit Agreement EBITDAto interest expense coverage ratio for specified periods, as those terms aredefined and relate to VWR. Failure of VWR to comply with these financial ratiocovenants would result in a default under the credit agreement for our SeniorSecured Credit Facility and, absent a waiver or an amendment from our lenders,would permit the acceleration of all outstanding borrowings under our SeniorSecured Credit Facility. We were in compliance with these financial covenantsas of September 30, 2005.

Credit Agreement EBITDA as presented herein is a VWRfinancial measure that is used in the credit agreement for our Senior SecuredCredit Facility. Credit Agreement EBITDA is not a defined term under U.S. GAAPand should not be considered as an alternative to operating income or netincome as a measure of operating results or cash flows as a measure ofliquidity. Credit Agreement EBITDA differs from the term “EBITDA” as it iscommonly used. Credit Agreement EBITDA generally is defined as consolidated netincome 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 to CDRV Holdings, Inc.

Credit Agreement EBITDA is not used in the indenturesfor the senior notes, senior subordinated notes, and senior discount notes. Theterm “Consolidated EBITDA” is used in the indentures as part of the calculationof the term “Consolidated Coverage Ratio”, which is used for a number ofpurposes, including determining our ability to incur additional indebtedness,and may include certain cost savings or synergies. “Consolidated EBITDA” is notthe same as Credit Agreement EBITDA.

Thecalculation of VWR’s Credit Agreement EBITDA for the period indicated is setforth below.

| ** **                                                   | ** ** | **12 Months Ended**       | ** **   |
|--------------------------------------------------------------|------------|-------------------------------------|--------------|
| ** **                                                   | ** ** | **September 30, 2005**    | ** **   |
| ** **                                                   | ** ** | **(Unaudited)**                     | ** **   |
| ** **                                                   | ** ** | **(Dollars in millions)** | ** **   |
| Net income                                                   |       |                                | $ 41.7  |   |   |
| Income tax  provision                                        |       |                                | 26.4         |   |   |
| Interest expense,  net                                       |       |                                | 72.8         |   |   |
| Depreciation and  amortization                               |       |                                | 34.2         |   |   |
| Non-cash  charges(1)                                         |       |                                | 13.5         |   |   |
| Other  extraordinary, unusual or non-recurring items(2)      |       |                                | 11.5         |   |   |
| Adjustment for  pro-forma effect of material acquisitions(3) |       |                                | 1.9          |   |   |
| Credit Agreement EBITDA                                      |       |                                | $ 202.0 |   |   |

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(1)          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; and LIFO adjustments.

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(2)          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.

(3)          Adjustmentfor pro-forma effect of material acquisitions, as defined, is reflected in thecalculation of Credit Agreement EBITDA on a pro-forma basis as if theacquisitions of AGB and AI occurred on October 1, 2004.

Thetest periods for compliance with the financial covenants in the creditagreement for our Senior Secured Credit Facility began on July 1, 2004.The financial covenants specify, among other things, the following requirementsfor each four-quarter period ended during the following test periods:

| **Test Period**                                | ** ** | ** ** | ** **   | **Consolidated Debt to  Credit Agreement EBITDA  Leverage Ratio Not More Than** | ** ** | **Credit Agreement EBITDA  to Interest Expense Ratio  Not Less Than** | ** **   |
|-----------------------------------------------------|------------|------------|--------------|-------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|--------------|
| July 1,  2004—December 30, 2005      |       |       | 7.25 to 1.00 |                                                                                                                    |       |                                                                                                     | 1.80 to 1.00 |   |   |
| 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 the specified debt to Credit Agreement EBITDA leverageratio and Credit Agreement EBITDA to interest expense ratio for the periodindicated.

| ** **                                                             | ** ** | **12 Months Ended  September 30, 2005** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                             | ** ** | **(Unaudited)**                                             | ** ** |
| Consolidated Debt  to Credit Agreement EBITDA Leverage Ratio           |       |                                                        | 5.3        |   |   |
| Credit Agreement EBITDA  to Credit Agreement Interest Expense Ratio(1) |       |                                                        | 3.0        |   |   |

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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 Accounting Policies**

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 revenue recognition, environmental liabilities,reserves for accounts receivable and inventories, impairment of goodwill andintangible assets, pension plans, rebates from suppliers, agreements withcustomers, and product liability. Those estimates and assumptions are based onour historical experience, our observance of trends in the industry, andvarious other factors that are believed to be reasonable under thecircumstances and form the basis for making judgments about the carrying valuesof assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions or conditions.Refer to the section entitled “Management’s Discussion and Analysis of Financial 

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Conditionand Results of Operations” in our Registration Statement on Form S-4 filedon April 15, 2005, as amended, for the Company’s critical accountingpolicies. 

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

Refer to the sectionentitled  “Quantitative and QualitativeDisclosures about Market Risk” in our Registration Statement on Form S-4filed on April 15, 2005, as amended, for the Company’s quantitative andqualitative disclosure about market risk. There was no material change in suchinformation as of September 30, 2005.

**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 Executive Vice Presidentand Chief Financial Officer, of the effectiveness of the disclosure controlsand procedures pursuant to Rule 13a-15 of the Securities and Exchange Actof 1934. Based on that evaluation, the Chief Executive Officer and theExecutive Vice President and Chief Financial Officer have concluded that ourdisclosure controls and procedures were effective at a reasonable level as ofSeptember 30, 2005.

There were no changes inour internal control over financial reporting that occurred during the quarterended September 30, 2005 that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

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**Part II. OTHERINFORMATION**

**Item 6—*Exhibits***

| Exhibit  Number | ** ** | ** ** | ** **                                                                                                                                                      | **Description of Documents** | ** **          | **Method of Filing** |
|-----------------|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------|---------------------|----------------------|
|            | 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 and 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 Sections 13 or 15(d) of the Securities Exchange Actof 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.
|                        | CDRV  INVESTORS, INC. |
|------------------------|-----------------------|
|                   | By:                   | /s/ JACK L. WYSZOMIERSKI |
|                   | Name:                 | Jack L. Wyszomierski |
|                   | Title:                | *Executive Vice President and  Chief Financial Officer* |
|                   |                  | *(Principal Financial and Accounting Officer)* |
| November 14, 2005 |                  |   |

 

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