**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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FORM 10-K

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended December 31, 2004**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**Commissionfile number:  333-118658**

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VWR INTERNATIONAL, INC.

(Exact name of registrantas specified in its charter)

| Delaware                                 | **91-1319190**                       |
|------------------------------------------|--------------------------------------|
| (State of incorporation)                 | (I.R.S. Employer Identification No.) |
| **1310  Goshen Parkway**                 | ** **                           |
| **PO. Box 2656**                         | ** **                           |
| **West Chester, PA**                     | **19380**                            |
| (Address of principal executive offices) | (Zip code)                           |

 

Registrant’s telephone number, including area code:

**(610)431-1700**

Securities registered pursuant to Section 12(b) ofthe Act:

**None**

Securities registered pursuant to Section 12(g) ofthe Act:

**None**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x  No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. o

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

As of December 31,2004, there was no established public market for the registrant’s common stock,par value $0.01 per share. As of March 28, 2005, 100 shares of theregistrant’s common stock were outstanding.

**DOCUMENTS INCORPORATED BYREFERENCE**

None

 

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**TABLE OF CONTENTS**
| ** **    | ** **                                                                                       | Page   |
|---------------|--------------------------------------------------------------------------------------------------|--------|
| PART I   |                                                                                             |   |
| ITEM 1.       | BUSINESS                                                                                         | 1      |   |
| ITEM 2.       | PROPERTIES                                                                                       | 16     |   |
| ITEM 3.       | LEGAL  PROCEEDINGS                                                                               | 16     |   |
| ITEM  4.      | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                             | 17     |   |
| PART II  |                                                                                             |   |
| ITEM 5.       | MARKET  FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                      | 18     |   |
| ITEM  6.      | SELECTED  FINANCIAL DATA                                                                         | 18     |   |
| ITEM  7.      | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS     | 20     |   |
| ITEM  7A.     | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET  RISK                                     | 38     |   |
| ITEM  8.      | FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA                                                     | 39     |   |
| ITEM  9.      | CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE            | 83     |   |
| ITEM  9A.     | CONTROLS  AND PROCEDURES                                                                         | 83     |   |
| ITEM 9B.      | OTHER  INFORMATION                                                                               | 83     |   |
| PART III |                                                                                             |   |
| ITEM 10.      | DIRECTORS  AND EXECUTIVE OFFICERS OF THE REGISTRANT                                              | 83     |   |
| ITEM  11.     | EXECUTIVE  COMPENSATION                                                                          | 88     |   |
| ITEM  12.     | SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER  MATTERS | 93     |   |
| ITEM  13.     | CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS                                                  | 94     |   |
| ITEM  14.     | PRINCIPAL  ACCOUNTANTS FEES AND SERVICES FOR 2004 AND 2003                                       | 97     |   |
| PART IV  |                                                                                             |   |
| ITEM 15.      | EXHIBITS  AND FINANCIAL STATEMENT SCHEDULES                                                      | 98     |   |

 

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In this Form 10-K,unless the context requires otherwise, references to “we,” “us” and “our” meanVWR International, Inc. and its consolidated subsidiaries, and referencesto the “Company” mean VWR International, Inc.

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**PART I**

**ITEM 1.**                BUSINESS

**Overview**

We are a leader in the global research laboratoryindustry. We provide distribution and other value-added services to a highlyfragmented supply chain by offering in excess of 750,000 products from morethan 5,000 manufacturers to over 250,000 customers. Our business is highlydiversified across products and services, geographic regions and customersegments. Products we distribute include chemicals, glassware, instruments,protective clothing and other assorted laboratory products. We support ourcustomers by providing customized services, including storeroom management,product procurement, supply chain systems integration and laboratory bench topdelivery. We maintain operations in North America and in 15 European countriesand process an average of 50,000 order lines daily from 16 strategicallylocated distribution centers. Our principal customers are major pharmaceutical,biotechnology, chemical, technology, food processing and consumer productcompanies; universities and research institutes; governmental agencies;environmental testing organizations; and primary and secondary schools.

The roots of our business date back to 1852. Followinga series of business combinations over the years, we became part of UnivarCorporation. In 1986, we became a publicly-traded company following a spin-offfrom Univar and embarked on a substantial expansion program, which includedboth internal and acquisition growth initiatives. Our most significantacquisition occurred in 1995 when we purchased Baxter International’sindustrial distribution business, more than doubling our revenue base. Inconnection with this acquisition, Merck KGaA acquired 49.9% of our outstandingshares and in 1999, Merck KGaA took us private by acquiring the remainder. Duringthe period from 1995 through 1999, Merck KGaA actively built its scientificsupplies distribution business in Europe through a series of acquisitions. In2001, Merck KGaA combined the operations of the two businesses, and in 2002,consolidated them under a common U.S. parent company, creating a leader in theglobal research laboratory industry.

On April 7, 2004, we were acquired from MerckKGaA by CDRV Holdings, Inc. (the “Acquisition”). In connection with theAcquisition, we issued $200.0 million senior notes due 2012 and $320.0 millionsenior subordinated notes due 2014 and entered into a senior secured creditfacility (the “Senior Secured Credit Facility”), consisting of a $150.0 millionmulti-currency revolving credit facility, as well as a U.S. dollar-denominatedterm loan and a Euro-denominated term loan. The term loans were initially$415.0 million and €145.0 million in principalamount, respectively, which were subsequently reduced through prepayments on July 30,2004 to $379.9 million and €132.7 million (approximately $179.6 millionas of December 31, 2004, on a U.S. dollar equivalent basis), respectively.

On December 16, 2004,our indirect parent, CDRV Investors, Inc. issued $481.0 million aggregateprincipal amount at maturity ($299.4 million gross proceeds) of 95¤8%senior discount notes due 2015. See “Item 7—Management’s Discussion andAnalysis of Financial Condition and Results of Operations—Debt of CDRVInvestors, Inc.”

**Customers andMarkets**

We estimate that the 2004 industry-wide revenues ofthe global research laboratory market in which our North American Lab andEuropean Lab segments operate were approximately $23 billion. Managementestimates that the industry has grown at mid-single digit rates. We expect thisgrowth to continue in the future, driven by increasing Research and Development(“R&D”) spending from a diversified collection of end-markets, includingpharmaceutical, biotechnology, chemical, education, medical research,government and environmental testing. Our net sales are influenced by, but notdirectly correlated with, the growth of R&D spending, and we expect thatresults may vary by end-market.

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In relation to our Science Education segment, weestimate that the 2004 revenues for the North American market for scientificsupplies for primary and secondary schools were approximately $450.0 million. Industrysales levels are subject to fluctuations driven by changes in state and localgovernment funding, the timing of the state-by-state new textbook adoptioncycle and population changes.

We maintain a diverse and stable customer base. Our250,000 customers include major pharmaceutical, biotechnology, chemical,technology, food processing and consumer products companies. They also includeuniversities and research institutes, governmental agencies, environmentaltesting organizations and primary and secondary schools. While we serve ourcustomers through our operations in North America and in 15 European countries,we also export products from our distribution facilities in North America andEurope to customers in Central America, South America, British Commonwealthcountries, North Africa, the Middle East and the Pacific Rim. For financialinformation about our operating segments and geographic regions, see “Item7—Management’s Discussion and Analysis of Financial Condition and Results ofOperations.”

We seek to be the principal provider of scientificsupplies to our customer base. We are a principal provider of scientificsupplies to a majority of the world’s 20 largest pharmaceutical companies, aswell as three of the largest North American biotechnology buying consortia. Pharmaceuticaland biotechnology companies represented approximately 37% of our 2004 netsales, and together with universities and colleges, accounted for approximately50% of our 2004 net sales. In 2004, our top 20 customers accounted forapproximately 21% of our net sales, with no single customer representing morethan 3% of our net sales.

We have developedlong-term relationships with our customers. We provide a wide array ofvalue-added services that closely integrates us with our customers, which webelieve, provides our customers with meaningful incentives to continuepurchasing through us. Our customized service offerings include outsourcing ofcustomer’s purchasing, delivery, receiving and inventory management functions,which creates a tightly integrated relationship between us and our customers,strengthening our position in the research laboratory market. See below under “—Productsand Managed Services—Managed Services.”

**Products andManaged Services**

***Products***

We offer more than 750,000 products, includingchemicals, glassware, plasticware, instruments and other laboratory equipment,protective clothing, laboratory furniture and scientific educational materialsfor primary and secondary schools. The vast majority of our products cost lessthan $1,000. Many of our products, including chemicals, laboratory consumables,production supplies and science education products, are consumable in nature. Theseproducts are basic and essential supplies required by research laboratories andrepresented approximately 75% of our net sales in 2002, 2003 and 2004. Historically,this aspect of our business has resulted in a predictable stream of revenuethat is relatively insulated from R&D budget fluctuations. We also offerdurable products, including centrifuges, fume hoods and workstations, ovens,microscopes and cold storage equipment. We also have a strong market positionfor the distribution of chemical supplies, especially in Europe.

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Thefollowing table summarizes our product lines:
| **Product Line**                  | ** ** | ** **                                                                                                                                                                                        | ** ** | **Products** |
|-----------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------|
| Laboratory Consumables            |       | Glassware/plasticware,  test kits, beakers, test tubes, life science disposable products, equipment  accessories and other less technical equipment required by all research  laboratories        |
| Chemicals                         |       | Over 200,000  chemical products for various academic, research and industrial markets,  including high purity chemicals, reagents and specialty products for the life  sciences market            |
| Equipment &  Instruments |       | Laboratory  equipment and instrumentation, including centrifuges, spectrometers,  microplate readers, fume hoods and workstations, liquid handling,  meters/probes and chromatography instruments |
| Production Supplies               |       | Products in clean  room environments, primarily in the semiconductor, electronic, medical device  and pharmaceutical markets                                                                      |
| Science Education                 |       | Educational products,  tools and support materials (excluding textbooks) for the educational system,  from elementary to college level                                                            |

 

We offer customers a largeselection of products designed to meet their individual needs for a combinationof premium, “value-for-money” and lower cost products. In 2004, approximately90% of our current global net sales consist of manufacturer branded products,with the remainder comprised of our private label products, primarily in the “value-for-money”category. Our management continually seeks to update and improve productofferings to address current customer requirements. While there will continueto be differences in products from market to market due to local suppliers andbuying preferences, we intend to continue to increase the standardization ofour product offerings from country to country to further enhance economies ofscale and operating efficiencies.

***Managed Services***

We offer servicesthat can be tailored to meet the diversified needs of customers ranging fromsingle-site laboratories to large multinational corporations. These servicesinclude the following:

·       softwaresolutions for all aspects of on-site supply-chain management includinginventorymanagement, demand monitoring, procurement and replenishment;

·       paperlesse-business solutions to integrate customer systems with our systems, providingcustomized reporting and order tracking;

·       hazardousmaterials tracking systems which automate regulatory paperwork and data flow;

·       storeroommanagement operations including deliveries, usage tracking, order replenishmentand billing by utilizing our on-site personnel and stockroom management system;and

·       purchasesfrom third parties of products not normally supplied by us.

**DistributionNetwork**

Ourdistribution network consists of 16 strategically located distribution centers,more than 20 smaller regional service centers and additional “Just-In-Time”facilities for customer specific requirements. Most of our distribution centersinclude a customer contact center. The distribution centers receive productsfrom manufacturers, manage inventory and fill and ship customer orders. The customercontact centers have responsibility for order entry and customer service. Wealso contract with Merck KGaA and other third parties to provide us withadditional distribution facilities and services in Europe, including facilities

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in Darmstadt, Germany, Mollet del Valles, Spain andMilan, Italy. The table below lists our 16 strategically located distributioncenters:
| **North America**             | ** ** | **Europe**                   |
|-------------------------------|------------|------------------------------|
| Batavia, Illinois             |       | Briare, France               |
| Bridgeport, New Jersey        |       | Bruchsal, Germany            |
| Brisbane, California          |       | Darmstadt, Germany           |
| Buffalo, New York             |       | Haasrode, Belgium            |
| Denver, Colorado              |       | Karlskoga, Sweden            |
| Mississauga, Ontario,  Canada |       | Lutterworth, United  Kingdom |
| Rochester, New York           |       | Milan, Italy                 |
| Suwanee, Georgia              |       | Mollet del Valles, Spain     |

 

Our distribution centers are operated with warehousemanagement systems, most of which are paperless. The paperless system usesradio frequency hand-held electronic devices and bar-coded labels that identifylocation, routing and inventory picking and replacement, allowing us to monitorinventory and track individual customer orders throughout our distributionsystem. These systems provide customized levels of customer service whileallowing us to operate the centers efficiently and economically.

Our regional service centers and “Just-in-Time”facilities are adjacent to selected customer locations and are designed tosupply a limited number of products to those customers that requirehigher-than-standard service levels.

We ship our productsprimarily through more than 60 third-party carriers, such as UPS, AirborneExpress, FedEx and others. We do not have exclusive relationships with any ofour service providers, as we seek to mitigate potential service disruptionsstemming from reliance on a single vendor. Our largest service provider inNorth America represented less than 25% of our North American net sales in2004.

**Sales and Marketing**

We market to customers through our global sales force,our websites, and our library of catalogs. We have a global sales force of over1,400 employees, with approximately 450 employees providing key services,including storeroom management, product management, product procurement, supplychain systems integration and laboratory bench top delivery. Our field salesorganization is divided into two groups. The first group is focused onservicing large or global accounts and the second group is responsible forgeneral sales. Supporting the field sales organization are specialist groupsfor e-business integrations, customized services, laboratory furniture, safety,environment, microbiology, chromatography and life science.

The Internet has become an increasingly important toolfor us. During 2004, approximately 25% of our net sales were derived frome-business sales and marketing channels. Our websites feature a fully indexedand searchable catalog covering our entire product line of over 750,000products and is available in 11 languages and has been custom-designed for 17countries. This electronic catalog includes product descriptions, technicalspecifications and cross-referenced data in a variety of different languagesthrough individual country sites. This website allows customers to enter ordersdirectly and enables us to communicate new product releases, promotions andother news to our customers.

In addition to our websites, we have, as part of ourintegrated business services capability, a growing e-business offeringthat covers order creation, authorization, order status, billing and reporting.These capabilities provide direct data transfer to customers’ systems andintegration with third-party marketplaces used by some of our customers.

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Although we are a leaderin providing action-based and content-rich web-based information, we continueto see a need for printed catalogs and other printed materials following thepreferences of many customers. Our general catalogs are printed in 11 languagesand include up to 46,000 products per printed catalog. The general catalogs aresupplemented by several specialty catalogs for life sciences products, safetyproducts, production supplies and services applications, science education andspecific laboratory focus areas.

**Manufacturers**

We distribute products from more than 5,000manufacturers. This includes substantially all of the major manufacturers oflaboratory chemicals, glassware, plasticware, instruments and other laboratoryequipment, protective clothing and laboratory furniture who sell throughdistributors. In many cases, we believe we are a principal distributor forthese major manufacturers. We are also the exclusive distributor of Merck KGaA’schemical products in the laboratory field in many Western European countries. MerckKGaA, our largest manufacturer, supplied products that accounted forapproximately 12.9% of our net sales in 2004. Our distribution arrangementswith Merck KGaA are summarized below.

***Merck KGaA EuropeanDistribution Agreement.  ***In connection with theAcquisition, we entered into a distribution agreement with Merck KGaA tocontinue distributing its chemical products in many European countries onsubstantially the same terms as those governing the distribution of suchproducts prior to the Acquisition. Under this agreement, we have exclusivedistribution rights in the laboratory field, and non-exclusive distributionrights in the production field, in these European countries. We may notdistribute other manufacturers’ similar chemical products in the laboratoryfield in these countries, except pursuant to certain requests by customers, andwe may continue to sell our private label products. Conversely, Merck KGaA maynot sell directly to or appoint another distributor to sell its chemicalproducts in thelaboratory field, or sell its chemical products directlyto our current customers in the production field, in these countries.

The prices and purchase targets are agreed uponannually, taking into account market, economic and regulatory developments orreasonably foreseeable extraordinary events that are likely to have an impacton the industry pricing or sales growth in relevant products and marketsegments.If our aggregate purchases of certain chemical products from Merck KGaA grow ata rate that is less than the agreed-upon Europe-wide growth rate (subject to a50% shortfall as compared to the agreed-upon growth rate) in each of twoconsecutive years, and such aggregate purchases are less than 92.5% of theEurope-wide purchase targets in each such consecutive year, we will lose ourexclusive rights in the laboratory field. The purchase targets and purchases areadjusted from time to time to reflect events outside our control, includingcustomer consolidations, material adverse effects on the industry, includingpricing and demand, and new product introductions by other manufacturers notmatched by Merck KGaA.

The initial term of the agreement is five years, whichcommenced on April 7, 2004. We may extend the agreement for a secondfive-year term if we satisfy certain conditions, including achieving at least95% of the cumulative Europe-wide sales targets and maintaining our marketshare during the initial term. Merck KGaA has the right to terminate thedistribution agreement if certain events occur including, among others, if weacquire a controlling interest in certain competitive manufacturers, or certaincompetitive manufacturers acquire a controlling interest in us.

***Other Merck KGaADistribution Agreements.  ***In connection with theAcquisition, we entered into a five-year distribution agreement with Merck KGaAto distribute its chemical products in North America on substantially the sameterms as those governing their distribution prior to the Acquisition. We do nothave exclusive distribution rights in North America, but we are Merck KGaA’spreferred distributor of its chemical products. As Merck KGaA’s preferreddistributor, we are entitled to, among other things, the lowest transfer pricesfrom Merck KGaA for so long as we maintain our market share in the laboratory 

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field. We have the rightto extend the agreement for a second five-year term unless Merck KGaA submits atermination notice at least 12 months prior to the expiration of the initialterm. Merck KGaA may terminate the distribution agreement if certain eventsoccur including, among others, if we acquire a controlling interest in certaincompetitive manufacturers.

In connection with theAcquisition, we have also entered into other distribution agreements with MerckKGaA, including five-year distribution agreements with Merck KGaA to distributeits bioscience products in Europe and North America. These distributionarrangements in Europe and North America are exclusive and non-exclusive,respectively. In addition, we have entered into a supply agreement with MerckKGaA, pursuant to which it has agreed to continue to manufacture certain of ourprivate label products for a period of three years from April 7, 2004, andthereafter to provide technical assistance in transitioning their manufactureto other manufacturers. These products are primarily sold in the U.K., and wehave agreed to use our commercially reasonable efforts to convert theseproducts to Merck KGaA-branded products to the extent that the conversion wouldbe economically equivalent to us.

**Manufacturing**

We have specializedmanufacturing facilities in Briare, France; Haasrode, Belgium; Buffalo, NewYork and Rochester, New York. The Briare site repackages chemicals and alimited assortment of our branded glassware. Our Haasrode site produces ourbranded chemicals. Buffalo assembles specialized kits for our science educationcustomers. The Rochester site is involved in the preparation of educational andnatural science products. Products manufactured by us accounted forapproximately 2% of our net sales in 2004.

**Transition andOther Services**

We and Merck KGaA have historically performedcorporate services for each other, including certain financial, administrativeand information technology functions. In order to maintain continuous andefficient operations, effective as of April 7, 2004, we have entered intoa transition services agreement and an information services master agreementwith Merck KGaA to maintain these relationships following the Acquisition untilsuch time as these services can be obtained internally or from other sources. Theterm of the transition services agreement is three years and will expire on April 6,2007, although the recipient of the services has in most cases the right toterminate individual services upon notice. We and Merck KGaA will also continueto provide each other with certain environmental and other regulatorycompliance services for a transition period following the Acquisition.

Following the completion of the Acquisition, we and MerckKGaA have also continued to provide certain information technology services toeach other consistent with the arrangements in place prior to the Acquisition,including Merck KGaA’s operation and support of the main enterprise resourceplanning and business warehouse software and databases for our Europeancompanies. The information services master agreement will continue for aninitial five-year period from the closing date of the Acquisition and willexpire on April 6, 2009, although individual services may be terminatedduring the term following a notice period.

Merck KGaA may terminate each of the transitionservices agreement and the information services master agreement if certainevents occur including, among others, if we acquire a controlling interest incertain competitive manufacturers, or if certain competitive manufacturersacquire a controlling interest in us.

The transition services agreement does not apply tocertain arrangements involving Merck KGaA and us that were in place prior tothe Acquisition, which continue on for their existing terms. For example, MerckKGaA continues to provide logistics services to certain of our subsidiariesuntil the end of 2007. 

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Unless earlier terminatedfollowing a notice period, such logistics service arrangements will beautomatically renewed for an additional three years.

Certain subsidiaries ofMerck KGaA and certain of our subsidiaries have continued to lease or subleasefrom one another, or otherwise share, space in various offices and warehousesin Europe and in Mexico since the completion of the Acquisition. The terms ofthese leasing and subleasing arrangements range from less than one year to upto six or more years and are generally at market rents and conditions. Certainother existing contracts have also remained in place since the Acquisition, andwere not replaced by transition services agreements.

**Trademarks andTrade Names**

We have more than 50 different registered andunregistered service marks and trademarks for our products and services. The marks*VWR*, *VWR International* and the *VWR*logo are material to our business. Other trademarks that we considersignificant to our business include *VWRBioMarke*, *VWR Stocktracker*,*BDH*, *Prolabo*, *Cryopro*,*Sargent Welch, Boreal*, *Astroscan*, *Scholar*, *Science Kit*,*Scientifics*, *Cenco*, *Citri-Pure*and *Vial to Volume*. Generally,registered trademarks have perpetual life, provided that they are renewed on atimely basis and continue to be used properly as trademarks, subject only tothe rights of third parties to seek cancellation of the marks.

A significant number of our marks are owned by MerckKGaA. In connection with the Acquisition, Merck KGaA agreed that it wouldtransfer, and cause its affiliates to transfer, ownership of registrations andapplications for marks owned by a Merck KGaA entity but used primarily in ourbusiness to us at Merck KGaA’s cost. The transfer of ownership of registrationsand applications is ongoing. We have not registered and in some cases do notown the existing applications and registrations for our material trademarks orservice marks in every country in which we do business.

Our business is notdependent to a material degree on patents, copyrights or trade secrets althoughwe consider our catalogs, websites and proprietary software integral to ouroperations. Although we believe we have adequate policies and procedures inplace to protect our intellectual property, we have not sought patentprotection for our processes nor have we registered the copyrights in any ofour catalogues, websites or proprietary software. Other than licenses tocommercially available third-party software, we have no licenses tointellectual property that are significant to the business.

**Competition**

We operate in a highly competitive environment. Wecompete in the scientific supplies distribution business primarily with oneother major distributor, Fisher Scientific International Inc., and with manysmaller regional, local and specialty distributors, as well as withmanufacturers selling directly to their customers. Competitive factors includeprice, service and delivery, breadth of product line, customer support,e-business capabilities and the ability to meet the special requirements ofcustomers. We believe we compete favorably on all of these factors. We also believethat our competitive position depends not on a single factor, but upon acombination of traditional distribution services, customized services andtechnological innovation, practiced on a global basis.

Some of our competitorsare increasing their manufacturing operations both internally and throughacquisitions of manufacturers, including manufacturers that supply products tous. As a result, we expect that some manufacturers that currently distributetheir products through these competitors may transition some or all of theirdistribution arrangements to distributors like us that do not compete with them.To date, we have not experienced an adverse impact on our ability to continueto source products from manufacturers that have been vertically integrated,although there is no assurance that we will not experience such an impact inthe future.

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**GovernmentRegulation**

Some of the products weoffer and our operations are subject to a number of complex and stringent lawsand regulations governing the production, handling, transportation anddistribution of chemicals, drugs and other similar products, including theoperating and security standards of the United States Drug EnforcementAdministration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, theFood and Drug Administration, the Bureau of Industry and Security and variousstate boards of pharmacy as well as comparable state and foreign agencies. Inaddition, our logistics activities must comply with the rules andregulations of the Department of Transportation, the Federal AviationAdministration and similar foreign agencies. While we believe we are incompliance in all material respects with such laws and regulations, anynon-compliance could result in substantial fines or otherwise restrict our abilityto provide competitive distribution services and thereby have an adverse impacton our financial condition. For information on environmental, health and safetymatters, see below under “—Environmental, Health and Safety Matters.”

**Employees**

As of December 31,2004, we had approximately 6,000 employees, including approximately 3,300employees in North America and approximately 2,700 employees in Europe. Approximately7% of our employees in North America are represented by unions and virtuallyall of our employees in Europe are represented by workers’ councils and unions.We believe our relations with our employees are good.

**Environmental,Health and Safety Matters**

We are subject to a broad range of foreign, federal,state and local environmental, health and safety laws and regulations,including those pertaining to air emissions, water discharges, the handling,disposal and transport of solid and hazardous materials and wastes, theinvestigation and remediation of contamination and otherwise relating to healthand safety and the protection of the environment and natural resources. As ourglobal operations involve and have involved the handling, transport anddistribution of materials that are or could be classified as toxic orhazardous, there is some risk of contamination and environmental damageinherent in our operations and the products we handle, transport anddistribute. Our environmental, health and safety liabilities and obligationsmay result in significant capital expenditures and other costs, which couldnegatively impact our business, financial condition and results of operations.We may be fined or penalized by regulators for failing to comply withenvironmental, health and safety laws and regulations. In addition,contamination resulting from our current or past operations may triggerinvestigation or remediation obligations, which may have a material impact onour business, financial condition and results of operations.

Based on current information, we believe that anycosts we may incur relating to environmental matters will not be material. Wecannot be certain, however, that identification of presently unidentifiedenvironmental conditions, more vigorous enforcement by regulatory authoritiesor other unanticipated events will not arise in the future and give rise toadditional environmental liabilities, compliance costs or penalties which couldhave a material impact on our business, financial condition or results ofoperations. In addition, environmental laws and regulations are constantlyevolving and it is not possible to predict accurately the effect they may havein future periods.

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***Our business is subject to anumber of important risks and uncertainties which are described below. Youshould carefully consider these risks and all other information included inthis Annual Report on Form 10-K.***

**RiskFactors Related to Our Capital Structure**

**We have substantial existing debt and may incursubstantial additional debt, which could adversely affect our financial healthand our ability to obtain financing in the future, react to changes in ourbusiness and make payments on our debt.**

As of December 31,2004, we had an aggregate principal amount of debt outstanding of $1,099.2million.

The agreements governingour debt permit us to incur or guarantee additional indebtedness, includingindebtedness under the Senior Secured Credit Facility, subject to specifiedlimitations. We have additional borrowing capacity on a revolving credit basisunder the Senior Secured Credit Facility of $142.0 million as of December 31,2004, which these limitations permit us to incur. We may incur substantial additionaldebt in the future.

Oursubstantial debt could have important consequences to us. Because of oursubstantial debt:

·  our ability to engage in acquisitions withoutraising additional equity or obtaining additional debt financing may beimpaired in the future;

·  our ability to obtain additional financing forworking capital, capital expenditures, acquisitions or general corporatepurposes and our ability to satisfy our obligations with respect to ourindebtedness may be impaired in the future;

·  a substantial portion of our cash flow fromoperations must be dedicated to the payment of principal and interest on ourindebtedness, thereby reducing the funds available to us for other purposes;

·  we will be exposed to the risk of increasedinterest rates because a portion of our borrowings will be at variable rates ofinterest; and

·  our flexibility to adjust to changing marketconditions and ability to withstand competitive pressures could be limited, andwe may be more vulnerable to a downturn in general economic conditions or ourbusiness or be unable to carry out capital spending that is necessary orimportant to our growth strategy and our efforts to improve operating margins.

**Our ability togenerate the significant amount of cash needed to pay interest and principal onour debt when due and our ability to refinance all or a portion of ourindebtedness or obtain additional financing, may depend on many factors beyondour control.**

Ourability to make scheduled payments or to refinance our obligations with respectto our debt depends on our financial and operating performance which, in turn,is subject to prevailing economic and competitive conditions and to thefollowing financial and business factors, some of which may be beyond ourcontrol:

·       operatingdifficulties;

·       increasedoperating costs;

·       decreaseddemand for our products;

·       marketcyclicality;

·       productprices;

·       theresponse of competitors;

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·       regulatorydevelopments;

·       failureto successfully integrate acquisitions; and

·       delaysin implementing strategic projects.

If our cash flow andcapital resources are insufficient to fund our debt service obligations, we maybe forced to further reduce or delay capital expenditures, sell assets or seekto obtain additional equity capital, or restructure our debt. In the future,our cash flow and capital resources may not be sufficient for payments ofinterest on and principal of our debt, and such alternative measures may not besuccessful and may not permit us to meet our scheduled debt service obligations.We also cannot assure you that we will be able to refinance any of ourindebtedness or obtain additional financing, particularly because of our highlevels of debt and the debt incurrence restrictions imposed by the agreementsgoverning our debt, as well as prevailing market conditions. In the absence ofsuch operating results and resources, we could face substantial liquidityproblems and might be required to dispose of material assets or operations tomeet our debt service and other obligations. If required, we cannot be sure asto the timing of such sales or the proceeds that we could realize therefrom.

**RiskFactors Related to Our Business**

**A significant stockholder controls our business andits interests may not be in line with yours.**

As of March 28, 2005, Clayton,Dubilier & Rice Fund VI Limited Partnership (“CD&R Fund VI”) is asignificant stockholder that beneficially owns approximately 73.14% of theoutstanding common stock of CDRV Investors, Inc., the Company’s indirectparent, and exercises control over matters requiring stockholders’ approval andcontrol over our policies and affairs. It has the right to nominate forelection all members of our Board of Directors. In addition, Clayton, Dubilier &Rice, Inc. (“CD&R”), which manages CD&R Fund VI, provides us withfinancial advisory and management consulting services. See “Item 13—CertainRelationships and Related Transactions.” We have not instituted any formalplans to address any conflicts of interest that may arise.

**The demand for our products depends on the level ofour customers’ R&D and other scientific endeavors. Our business, financialcondition and results of operations may be harmed if our customers spend lesson these activities.**

Our customers are engagedin research, development and production in the pharmaceutical, biotechnology,industrial, education and other markets. The amount of customer spending onresearch, development and production has a large impact on our sales andprofitability. Our customers determine the amounts that they will spend on thebasis of, among other things, available resources and their need to develop newproducts, which, in turn, is dependent upon a number of factors, includingtheir competitors’ research, development and production initiatives. Inaddition, consolidation in the industries in which our customers operate mayhave an impact on such spending as customers integrate acquired operations,including R&D departments and their budgets. Our customers finance theirR&D spending from private and public sources. Government funding ofscientific research and education has varied for several reasons, includinggeneral economic conditions, growth in population, political priorities,changes in the number of students and other demographic changes. A reduction inspending by our customers could have a material adverse effect on our business,financial condition and results of operations.

**We compete in a highly competitive market. Failure tocompete successfully could have a material adverse effect on our business, financialcondition and results of operations.**

We compete with one othermajor distributor, Fisher Scientific International Inc., as well as manysmaller regional, local and specialty distributors, and with manufacturersselling directly to their customers. The bases upon which we compete includeprice, service and delivery, breadth of customer support, e-businesscapabilities and the ability to meet the special requirements of customers.

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Some of our competitorsmay have greater financial and other resources than we do. Most of our productsare available from several sources, and some of our customers haverelationships with several distributors. Our agreements with customersgenerally provide that the customer can terminate the agreement or reduce thescope of services provided pursuant to the agreement with short or no notice.The unavailability of products, stemming from either our inability to acquireproducts or interruptions in the supply of products from manufacturers, couldhave a material adverse effect on our ability to compete. Our competitors couldalso obtain exclusive rights to distribute some products, thereby foreclosingour ability to distribute these products. Vertically integrated distributorsmay also have an advantage with respect to the total delivered product cost ofcertain of their captive products. Additionally, manufacturers could increasetheir efforts to sell directly to consumers and effectively bypass distributorslike us. Consolidation in the research laboratory distribution business couldresult in existing competitors increasing their market share through businesscombinations, which could have a material adverse effect on our business,financial condition and results of operations. The entry of new distributors inthe industry could also have a material adverse effect on our ability tocompete.

**Our business, financial condition and results ofoperations depend upon maintaining our relationships with manufacturers.**

We currently offerapproximately 750,000 products from approximately 5,000 manufacturers. We aredependent on these manufacturers for our supply of products. Merck KGaA, whichis our largest manufacturer, supplied products that accounted for approximately12.9% and 13.6% of our net sales for the years ending December 31, 2004and 2003, respectively. Our ten largest manufacturers, excluding Merck KGaA,accounted for approximately 34% and 25% of our net sales in 2004 and 2003,respectively.

Our ability to sustain our gross margins has been, andwill continue to be, dependent in part upon our ability to obtain favorableterms from our manufacturers. These terms may be subject to changes from timeto time by manufacturers and such changes could adversely affect our grossmargins over time.

The loss of one or more of our large manufacturers, amaterial reduction in their supply of products to us, or material changes inthe terms we obtain from them, could have a material adverse effect on ourbusiness, financial condition and results of operations. For example, in January 2005,one of our major suppliers provided notice of termination of their supplyarrangements. Although we have arranged alternative suppliers for a majority ofthe products provided by this supplier, there is no assurance that thistermination will not cause disruptions in our business and customerrelationships. See Note 19 to the Consolidated/Combined Financial Statementsincluded elsewhere in this Annual Report on Form 10-K.

Some of our competitors, including Fisher ScientificInternational Inc., are increasing their manufacturing operations bothinternally and through acquisitions of manufacturers, including manufacturersthat supply products to us. To date, we have not experienced an adverse impacton our ability to continue to source products from manufacturers that have beenvertically integrated, although there is no assurance that we will notexperience such an impact in the future. Fisher Scientific International Inc.recently acquired Apogent Technologies, Inc. These two companies, takentogether, supplied us with products that accounted for approximately 10% and 7%of our net sales in 2004 and 2003, respectively.

**We may be unable to manage certain operationalfunctions of our business if we are not able to replace the transition,administrative and other services that are provided to us by Merck KGaA afterour agreements with them expire or are terminated. Further, any disruptions inMerck KGaA’s operations may negatively impact our operations.**

We are dependent on Merck KGaA to provide us with certainof our administrative and other services pursuant to a three-year transitionservices agreement entered into in connection with the Acquisition. Theseservices include accounting, financial reporting and other services we requirein the ordinary course of business. We are also dependent on Merck KGaA forcertain information technology services pursuant 

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to a five-year informationservices master agreement as well as warehousing and logistics servicespursuant to a logistics service level agreement. For our European subsidiaries,these services comprise a significant portion of our operationalinfrastructure, including the operation and support of the main enterpriseresource planning and business warehouse software and databases. If Merck KGaAterminates any of these agreements at the end of their respective terms orotherwise, we will need to find an alternative supplier of, or create our owninfrastructure for, these services. While we have already replaced some ofthese services, we may not be able to create our own infrastructure in a timelyor cost-effective manner or obtain replacement services for the remainingservices on terms that are as favorable to us as the current arrangements or onacceptable terms, if at all. In addition, any disruptions in the operationalinfrastructure or operations of Merck KGaA may negatively impact ouroperations.

**If we do not comply with or become subject to moreonerous government regulations, we could be adversely affected.**

Some of the products we offer and our operations aresubject to a number of complex and stringent laws and regulations governing theproduction, handling, transportation and distribution of chemicals, drugs andother similar products, including the operating and security standards of theUnited States Drug Enforcement Administration, the Bureau of Alcohol, Tobacco,Firearms and Explosives, the Food and Drug Administration, the Bureau ofIndustry and Security and various state boards of pharmacy as well ascomparable state and foreign agencies. In addition, our logistics activitiesmust comply with the rules and regulations of the Department ofTransportation, the Federal Aviation Administration and similar foreignagencies. While we believe we are in compliance in all material respects withsuch laws and regulations, any non-compliance could result in substantial finesor otherwise restrict our ability to provide competitive distribution servicesand thereby have an adverse impact on our financial condition.

We cannot assure you that existing laws andregulations will not be revised or that new more restrictive laws will not beadopted or become applicable to us or the products that we distribute. Wecannot assure you that the manufacturers of products that may become subject tomore stringent laws will not try to recover any or all increased costs ofcompliance from us by increasing the prices at which we purchase products fromthem, or, that we will be able to recover any such increased prices from ourcustomers. We cannot further assure you that our business and financialcondition will not be materially and adversely affected by future changes inapplicable laws and regulations.

**If any of our operations are found not to comply withapplicable antitrust or competition laws, our business may suffer.**

Our operations are subject to applicable antitrust andcompetition laws in the countries in which we conduct our business, inparticular the U.S. and the European Union. These laws prohibit, among otherthings, anticompetitive agreements and practices. If any of our commercialagreements are found to violate or infringe such laws, we may be subject tocivil and other penalties and/or third party claims for damages. Further,agreements that infringe these laws may be void and unenforceable, in whole orin part, or require modification in order to be lawful and enforceable. If weare unable to enforce any of our commercial agreements, whether at all or inmaterial part, our business could be adversely affected.

**We are subject to environmental, health and safetylaws and regulations, and costs to comply with such laws and regulations, orany liability or obligation imposed under such laws or regulations, couldnegatively impact our business, financial condition and results of operations.**

We are subject to a broad range of foreign, federal,state and local environmental, health and safety laws and regulations,including those pertaining to air emissions, water discharges, the handling,disposal and transport of solid and hazardous materials and wastes, the investigationand remediation of contamination and otherwise relating to health and safetyand the protection of the environment and natural resources. As our globaloperations involve and have involved the handling, transport and 

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distribution of materialsthat are or could be classified as toxic or hazardous, there is some risk ofcontamination and environmental damage inherent in our operations and theproducts we handle, transport and distribute. Our environmental, health andsafety liabilities and obligations may result in significant capitalexpenditures and other costs, which could negatively impact our business,financial condition and results of operations. We may be fined or penalized byregulators for failing to comply with environmental, health and safety laws andregulations. In addition, contamination resulting from our current or pastoperations may trigger investigation or remediation obligations, which may havea material adverse effect on our business, financial condition and results ofoperations.

Based on current information, we believe that anycosts we may incur relating to environmental matters will not be material. Wecannot be certain, however, that identification of presently unidentifiedenvironmental conditions, more vigorous enforcement by regulatory authoritiesor other unanticipated events will not arise in the future and give rise toadditional environmental liabilities, compliance costs or penalties which couldhave a material adverse effect on our business, financial condition or resultsof operations. In addition, environmental laws and regulations are constantlyevolving and it is not possible to predict accurately the effect they may havein future periods.

**We are subject to product liability and other claimsin the ordinary course of business.**

Our business involves a risk of product liability andother claims in the ordinary course of business. We maintain insurancepolicies, including product liability insurance, and in many cases we haveindemnification rights against such claims from the manufacturers of theproducts we distribute. We cannot assure you that our insurance coverage or themanufacturers’ indemnity will be available in all pending or any future casesbrought against us. In addition, our ability to recover under insurance orindemnification arrangements is subject to the financial viability of theinsurers and manufacturers. Insurance for some liabilities, including asbestos,is not available. Accordingly, we could be subject to uninsured andunindemnified future liabilities, and an unfavorable result in a case for whichadequate insurance or indemnification is not available could result in amaterial adverse effect on our business, financial condition and results ofoperations.

From time to time, we are named as a defendant incases as a result of our distribution of scientific supplies, includinglitigation resulting from the distribution of products containing asbestos byus and certain of our predecessors. While the impact of this litigation on ushas typically been immaterial, there can be no assurance that the impact of thepending and any future claims will not be material to our business, financialcondition and results of operations in the future. For further information, see“Item 3—Legal Proceedings.”

**The loss of key personnel could harm our business,financial condition and results of operations.**

We depend heavily on the services of our seniormanagement, including our President and Chief Executive Officer, WalterZywottek. We believe that our future success will depend upon the continuedservices of our management. Our business may be harmed by the loss of one ormore members of our management. We currently do not maintain key-man lifeinsurance with respect to our executive officers.

**Our international operations pose currency risks.**

While we report our financial results in U.S. dollars,we derive a significant portion of our sales and incur costs in foreigncurrencies from our operations outside the United States. For example, in 2004and 2003, approximately 40.3% and 39.3% of our net sales respectively, camefrom our operations outside the United States, primarily from our operations inEurope and Canada. Because the majority of our debt is denominated in U.S.dollars, fluctuations in exchange rates between non-U.S. currencies(principally the Euro, the British pound sterling and the Canadian dollar)relative to the U.S. dollar could make it more difficult for us to pay amountsdue on our debt.

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**The international scope of our operations mayadversely affect our business.**

We deriveapproximately 40.3% of our net sales from our operations outside the UnitedStates, and as such, we face certain risks, including:

·       restrictionson foreign ownership of subsidiaries;

·       tariffsand other trade barriers;

·       politicalrisks;

·       differinglaws or administrative practices; and

·       potentiallyadverse tax consequences of operating in multiple jurisdictions.

Further, an adverse change in laws or administrativepractices in countries within which we operate could have a material adverseeffect on us.

**Failure of our information technology systems couldsignificantly disrupt our operations, which could reduce our customer base andcould harm our business, financial condition and results of operations.**

Our success depends, in part, on the secure anduninterrupted performance of our information technology systems. Our computersystems as well as those of our service providers are vulnerable to damage froma variety of sources, including telecommunications failures, malicious human actsand natural disasters. Moreover, despite network security measures, some of ourservers and those of our service providers are potentially vulnerable tophysical or electronic break-ins, computer viruses and similar disruptiveproblems. For example, certain of our service providers’ science educationwebsites were attacked in 2003 and several thousand credit card numbersbelonging to our customers were stolen. While we notified the properauthorities and the affected customers and we have taken appropriate steps toreinforce the security of our websites, there can be no guarantee that suchattacks will not occur in the future. Failure to maintain a secure web-basedprocurement system could have a material adverse effect on our business,financial condition and results of operations.

Despite the precautions we have taken, unanticipatedproblems may nevertheless cause failures in our information technology systems.Sustained or repeated system failures that interrupt our ability to processorders and deliver products in a timely manner could have a material adverseeffect on our business, financial condition and results of operations.

We are continuing to implement a single technologyplatform in Europe. If these technology systems upgrades are not properly executedor the upgraded systems encounter problems or fail, it could have a materialadverse effect on our business, financial condition and results of operations.

**We have not registered and in some cases do not ownthe existing applications and registrations for our material trademarks orservice marks in every country in which we do business.**

We maintain operations in 18 countries. We also exportproducts from our distribution facilities in North America and Europe tomarkets in Central America, South America, British Commonwealth countries,North Africa, the Middle East and the Pacific Rim. We have not sought toregister our material trademarks and service marks in all of these countriesand may be blocked from doing so by others who have already registeredidentical or similar marks for similar goods or services. In addition, if we dobusiness in countries where other companies may have registered identical orsimilar trademarks or service marks, we run the risk of being sued forinfringement.

We are not the record owner of a significant number ofour material trademarks or service marks used outside of the United States.Under the terms of the Acquisition, Merck KGaA continues to own theregistrations and applications for the *VWR, VWR International,*and other marks used in and identified with our business. While Merck KGaA andits affiliates are in the process of transferring these marks and the 

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registrations andapplications to us at its cost, the cost of recording these transfers could besubstantial and there is no guarantee that Merck KGaA will successfully causeits affiliates to actually assign these registrations and applications in atimely manner or that it will in all cases be able to do so. If we are notassigned ownership in a timely matter, we may not be able to appropriatelymaintain existing registrations and applications and may become subject toconflicts and claims of infringement if another company acquires registrationsor applications in the marks.

The failure to own and have enforceable rights in thetrademarks and service marks used in our business could have a material adverseeffect on our business, financial condition and results of operations.

**We may no longer receive the favorable rates ortreatment that were provided to us during our affiliation to Merck KGaA.**

As a wholly-owned subsidiary of Merck KGaA prior tothe consummation of the Acquisition, we were able to take advantage of MerckKGaA’s size and purchasing power in procuring various goods and services. MerckKGaA has agreed to assist us in obtaining third party suppliers’ consents tocontinue to benefit from its group purchasing contracts following thecompletion of the Acquisition. However, we cannot assure you that all suchconsents will be obtained and that we will be able to continue to obtain suchgoods and services on terms as favorable as those that were previouslyavailable to us.

**We rely upon third parties to manufacture and shipproducts to us and to our customers and interruptions in their operations couldharm our business, financial condition and results of operations.**

We are dependent on third-party manufacturers tosupply us products. In addition, we ship substantially all our orders throughvarious independent package delivery providers. Strikes or other serviceinterruptions by our manufacturers or carriers could cause our operatingexpenses to rise or seriously harm our ability to fulfill our customers’ ordersor deliver products on a timely basis or both, which could have a materialadverse effect on our business, financial condition and results of operations.

**If we engage in acquisitions or business combinations,we will be subject to a variety of other risks that could harm our business.**

We may engage inselective acquisitions from time to time. Any future acquisitions could resultin a variety of other risks:

·       wemay need to spend substantial operational, financial and management resourcesin integrating new businesses, technologies and products, and management mayencounter difficulties in integrating the operations, personnel or systems ofthe acquired business;

·       futureacquisitions or business combinations might have a material adverse effect onour business relationships with customers or manufacturers, or both, and couldlead to a termination of or otherwise affect our relationships with suchcustomers or manufacturers;

·       wemay assume substantial actual or contingent liabilities;

·       wemay incur substantial unanticipated costs or other problems associated withacquired businesses; and

·       wemay not be able to retain the key personnel, customers and suppliers of theacquired business.

**Available Information**

As a new U.S. Securities and Exchange Commission (“SEC”)Registrant, we will file annual and quarterly reports and other informationwith the SEC. You may read and copy any documents we file at the SEC’s publicreference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please callthe SEC at 1-800-SEC-0330 for further information on the public reference room.Our SEC filings are also available to the public free of charge at the SEC’swebsite at*www.sec.gov.*

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You may also access our press releases, financialinformation and reports filed with the SEC (for example, our Annual Report onForm 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form8-K and any amendments to those forms) online at *www.vwr.com.*Copies of any documents on our website are available without charge, andreports filed with or furnished to the SEC will be available as soon asreasonably practicable after they are filed with or furnished to the SEC. Theinformation found on our website is not part of this or any other report filedwith or furnished to the SEC.

**Corporate Information**

Our principal executiveoffices are located at 1310 Goshen Parkway, P.O. Box 2656, West Chester,PA 19380 and our telephone number is (610) 431-1700. Our Internet website islocated at *www.vwr.com.*

**ITEM 2.**                PROPERTIES

We ownand lease office and warehouse space in North America and Europe. We maintainour corporate headquarters in West Chester, Pennsylvania, where we lease 97,516square feet of office space for executive, financial, information systems,marketing and other administrative activities. We also lease 24,030 square feetof office space in Zaventem, Belgium for European executive, financial,information systems, marketing and other administrative activities. As of December 31,2004, the following table sets forth information with respect to oursignificant distribution, manufacturing and other office facilities:
| **Location**                  | ** ** | **Owned/Leased** | ** ** | **Size**        | ** ** | **Type of Facility**     | ** ** |
|-------------------------------|------------|------------------|------------|-----------------|------------|------------------------------------|------------|
| Batavia, Illinois             |       | Owned            |       | 300,000 sq. ft. |       | Distribution Center                |       |
| Briare, France                |       | Owned/Leased     |       | 358,675 sq. ft. |       | Distribution/Manufacturing  Center |       |
| Bridgeport, New Jersey        |       | Owned/Leased     |       | 466,776 sq. ft. |       | Distribution Center                |       |
| Brisbane, California          |       | Leased           |       | 248,280 sq. ft. |       | Distribution Center                |       |
| Bruchsal, Germany             |       | Owned            |       | 108,339 sq. ft. |       | Distribution Center                |       |
| Buffalo, New York             |       | Owned            |       | 127,000 sq. ft. |       | Distribution Center                |       |
| Darmstadt, Germany            |       | Leased           |       | 45,348 sq. ft.  |       | Offices                            |       |
| Denver, Colorado              |       | Leased           |       | 130,091 sq. ft. |       | Distribution Center                |       |
| Haasrode, Belgium             |       | Owned            |       | 201,447 sq. ft. |       | Distribution/Manufacturing  Center |       |
| Karlskoga, Sweden             |       | Leased           |       | 129,167 sq. ft. |       | Distribution Center                |       |
| Lutterworth, United  Kingdom  |       | Leased           |       | 183,205 sq. ft. |       | Distribution Center                |       |
| Milan, Italy                  |       | Leased           |       | 13,563 sq. ft.  |       | Distribution Center                |       |
| Mississauga, Ontario,  Canada |       | Leased           |       | 114,000 sq. ft. |       | Distribution Center                |       |
| Mollet del Valles, Spain      |       | Leased           |       | 33,480 sq. ft.  |       | Offices/Distribution  Center       |       |
| Rochester, New York           |       | Owned            |       | 286,260 sq. ft. |       | Distribution/Manufacturing  Center |       |
| Suwanee, Georgia              |       | Leased           |       | 168,925 sq. ft. |       | Distribution Center                |       |

 

We also lease over 20service centers in North America and Europe which support our sales andwarehouse functions.

**ITEM 3.**                LEGALPROCEEDINGS

Our business involves a risk of product liability andother claims in the ordinary course of business. We maintain insurancepolicies, including product liability insurance, and in many cases we haveindemnification rights against such claims from the manufacturers of theproducts we distribute. We cannot assure you that our insurance coverage or themanufacturers’ indemnities will be available in all pending or any future casesbrought against us. In addition, our ability to recover under insurance orindemnification arrangements is subject to the financial viability of theinsurers and manufacturers. Insurance for some liabilities, including asbestos,is not available. Accordingly, we could be subject to uninsured andunindemnified future liabilities, and an unfavorable result in a case for whichadequate insurance or indemnification is not available could result in amaterial impact on our business, financial condition and results of operations.

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From time to time, we arenamed as a defendant in cases as a result of our distribution of scientificsupplies, including litigation resulting from the distribution of productscontaining asbestos by us and certain of our predecessors. Until 1987, wedistributed certain asbestos-containing products primarily for use inlaboratories, including pads, protective clothing and laboratory equipment. Individualswho were exposed to these asbestos-containing products have, from time to time,brought claims against us for asbestos-related injuries. We believe that theliabilities associated with asbestos-related claims currently pending againstus are not material. While liabilities arising from potential future claimscould become material, we currently believe, on the basis of our claims historyand related factors, that such potential future claims are not likely to have amaterial impact on our business, financial condition and results of operations.

**ITEM4.**                SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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**PART II**

**ITEM5.**                MARKETFOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is no establishedpublic trading market for our common stock. We are a wholly-owned indirect subsidiaryof CDRV Investors, Inc. We did not pay any dividends on our common stockduring 2004 or 2003. Our debt instruments restrict our ability to pay dividends.See “Item 7—Management’s Discussion and Analysis of Financial Condition andResults of Operations—Indebtedness Following the Acquisition.”

**ITEM 6.**                SELECTEDFINANCIAL DATA

Theselected financial data below for each of the years in the five-year periodended December 31, 2004 are derived from our historical consolidated andcombined financial statements. Those consolidated and combined financialstatements for the years ended December 31, 2001, 2002, 2003 and 2004 havebeen audited by KPMG LLP (“KPMG”), an independent registered public accountingfirm. You should read the following selected financial data in conjunction with“Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and the Financial Statements presented elsewhere herein. The term “predecessor”refers to VWR International Corporation prior to the Acquisition. The term “successor”refers to VWR International, Inc. following the Acquisition.
| ** **                                                                                         | ** ** | **Successor**                        | ** ** | **Predecessor** | ** **                          |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|-----------------|-------------------------------------|
| ** **                                                                                         | ** ** | **April 7-  December 31,** | ** ** | ** **      | **January 1-  April 6,**  | ** ** | **Year Ended December 31,** | ** ** |
| ** **                                                                                         | ** ** | **2004**                             | ** ** | ** **      | **2004**                            | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** |
| ** **                                                                                         | ** ** | **(Consolidated)**                   | ** ** | ** **      | **(Consolidated)**                  | ** ** | **(Consolidated)** | ** ** | **(Combined)** | ** ** | **(Combined)** | ** ** | **(Combined)** | ** ** |
| ** **                                                                                         | ** ** | ** **                           | ** ** | ** **      | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **(Unaudited)** | ** ** |
| ** **                                                                                         | ** ** | ** **                           | ** ** | ** **      | **(Dollars in millions)** | ** ** |
| **Income Statement Data:**                                                                         |       |                                 |       |            |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                                                                          |       |                                 | $          | 2,212.2         |                                |   |   |   | $ | 793.2 |   |   |   | $ | 2,794.2 |   |   |   | $ | 2,624.1 |   |   |   | $ | 2,522.4 |   |   |   | $ | 2,295.3 |   |   |
| Cost of goods sold                                                                                 |       |                                 | 1,652.7    |            |                                |   |   | 588.0 |   |   |   | 2,078.1 |   |   |   | 1,950.1 |   |   |   | 1,886.1 |   |   |   | 1,693.3 |   |   |
| Gross profit                                                                                       |       |                                 | 559.5      |            |                                |   |   | 205.2 |   |   |   | 716.1 |   |   |   | 674.0 |   |   |   | 636.3 |   |   |   | 602.0 |   |   |
| Selling, general  and administrative expenses(1)                                                   |       |                                 | 455.4      |            |                                |   |   | 163.7 |   |   |   | 583.4 |   |   |   | 560.0 |   |   |   | 573.7 |   |   |   | 565.2 |   |   |
| Restructuring and  other charges(2)                                                                |       |                                 | —     |            |                                |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 11.5 |   |   |   | 22.4 |   |   |
| Operating income                                                                                   |       |                                 | 104.1      |            |                                |   |   | 41.5 |   |   |   | 132.7 |   |   |   | 114.0 |   |   |   | 51.1 |   |   |   | 14.4 |   |   |
| Interest expense,  net                                                                             |       |                                 | 50.7       |            |                                |   |   | 5.6 |   |   |   | 24.4 |   |   |   | 39.4 |   |   |   | 74.1 |   |   |   | 99.2 |   |   |
| Other (income)  expense, net(3)                                                                    |       |                                 | (2.0       | )               |                                |   |   | 0.1 |   |   |   | (3.0 | ) |   |   | 0.6 |   |   |   | 2.4 |   |   |   | 19.5 |   |   |
| Income (loss)  before income taxes and cumulative effect of a change in accounting  principle |       |                                 | 55.4       |            |                                |   |   | 35.8 |   |   |   | 111.3 |   |   |   | 74.0 |   |   |   | (25.4 | ) |   |   | (104.3 | ) |   |
| Income tax  provision (benefit)                                                                    |       |                                 | 23.5       |            |                                |   |   | 15.1 |   |   |   | 46.2 |   |   |   | 29.7 |   |   |   | 7.0 |   |   |   | (31.7 | ) |   |
| Income (loss)  before cumulative effect of a change in accounting principle              |       |                                 | 31.9       |            |                                |   |   | 20.7 |   |   |   | 65.1 |   |   |   | 44.3 |   |   |   | (32.4 | ) |   |   | (72.6 | ) |   |
| Cumulative effect  of a change in accounting principle(1)                                     |       |                                 | —     |            |                                |   |   | — |   |   |   | — |   |   |   | (43.8 | ) |   |   | — |   |   |   | — |   |   |
| Net income (loss)                                                                                  |       |                                 | $          | 31.9            |                                |   |   |   | $ | 20.7 |   |   |   | $ | 65.1 |   |   |   | $ | 0.5 |   |   |   | $ | (32.4 | ) |   |   | $ | (72.6 | ) |   |
| **Other Financial Data:**                                                                          |       |                                 |       |            |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization(1)                                                                  |       |                                 | $          | 25.8            |                                |   |   |   | $ | 8.9 |   |   |   | $ | 32.9 |   |   |   | $ | 32.6 |   |   |   | $ | 82.6 |   |   |   | $ | 82.3 |   |   |
| Capital  expenditures                                                                              |       |                                 | 13.1       |            |                                |   |   | 3.3 |   |   |   | 16.6 |   |   |   | 41.0 |   |   |   | 28.2 |   |   |   | 29.6 |   |   |
| Gross profit as a  percentage of net sales                                                    |       |                                 | 25.3       | %               |                                |   |   | 25.9 | % |   |   | 25.6 | % |   |   | 25.7 | % |   |   | 25.2 | % |   |   | 26.2 | % |   |
| Ratio of earnings  to fixed  charges(4)                                                            |       |                                 | 1.9        | x               |                                |   |   | 5.1 | x |   |   | 4.1 | x |   |   | 2.4 | x |   |   | — |   |   |   | — |   |   |

 

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| ** **                 | ** ** | **Successor**         | ** ** | ** ** | **Predecessor**                     | ** ** |
|----------------------------|------------|-----------------------|------------|------------|-------------------------------------|------------|
| ** **                 | ** ** | **December 31,** | ** ** | ** ** | **December 31,**               | ** ** |
| ** **                 | ** ** | **2004**              | ** ** | ** ** | **2003**                            | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** |
| ** **                 | ** ** | **(Consolidated)**    | ** ** | ** ** | **(Consolidated)**                  | ** ** | **(Combined)** | ** ** | **(Combined)** | ** ** | **(Combined)** | ** ** |
| ** **                 | ** ** | ** **            | ** ** | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** | **(Unaudited)** | ** ** |
| ** **                 | ** ** | ** **            | ** ** | ** ** | **(Dollars in millions)** | ** ** |
| **Balance Sheet Data:**    |       |                  |       |       |                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets               |       |                  | $          | 2,546.0    |                                |       |   |   | $ | 1,767.9 |   |   |   | $ | 1,705.2 |   |   |   | $ | 1,783.9 |   |   |   | $ | 1,836.9 |   |   |
| Total debt                 |       |                  | 1,099.2    |       |                                |       |   | 1,026.0 |   |   |   | 1,100.6 |   |   |   | 1,239.5 |   |   |   | 1,348.5 |   |   |
| Shareholders’  equity |       |                  | 637.3      |       |                                |       |   | 265.4 |   |   |   | 176.9 |   |   |   | 170.2 |   |   |   | 171.8 |   |   |
|                            |            |                       |            |            |                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)           We adopted SFAS 142, *Goodwill andOther Intangible Assets*, effective January 1, 2002. SFAS No. 142requires that goodwill and certain intangibles with indefinite lives not beamortized, but subject to an impairment test on an annual basis or when factsand circumstances suggest that such assets may be impaired. As a result of thetransitional goodwill impairment evaluation as of January 1, 2002, werecognized a non-cash transitional impairment loss of $43.8 million, which wasnot deductible for tax purposes. In addition, we ceased amortization ofgoodwill effective January 1, 2002. Included in selling, general andadministrative expenses in 2000 and 2001 is amortization expense of $51.9million and $52.0 million, respectively, for goodwill.

(2)           During 2000, we recorded a pre-tax restructuring chargeof $4.8 million and a provision of $17.6 million related to the write down ofcertain North American Lab segment trade accounts receivables.

During 2001, we recorded a pre-tax restructuring chargeof $11.5 million that included a $3.7 million charge for a reorganization ofthe businesses and a charge of $7.8 million for the impairment of certain tradenames in the North American Lab segment.

(3)           During 2000, we recognized a pre-tax loss of $19.6million related to an impairment and sale of an investment in NexPrise, Inc.(formerly known as Ventro Corporation).

(4)           For purposes of calculating the ratio of earnings tofixed charges, (1) earnings is defined as income before income taxes andcumulative effect of a change in accounting principle and equity methodearnings or losses plus fixed charges and distributed earnings of investees,and (2) fixed charges is defined as interest expense (includingamortization of debt issuance costs) and one-third of rental expense (which webelieve is representative of the interest component of rent expense). Earningswere insufficient to cover fixed charges for the years ended December 31,2000 and 2001 by $104.3 million and $25.4 million, respectively.

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**ITEM 7.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

**Overview**

We generate our net sales through the sale of morethan 750,000 products and the provision of value-added services to the globalresearch laboratory market. We generate approximately 75% of our net sales fromthe sale of consumable products. We offer both private label and brandedproducts that we source from more than 5,000 manufacturers.

We have over 250,000 customers. Our customers includepharmaceutical and biotechnology companies, universities and researchinstitutes, governmental agencies and environmental testing organizations. Ourlargest customer accounted for less than 3% of our 2004 net sales.

Our operating and financial strategy emphasizes fiscaldiscipline, profitable revenue growth opportunities and free cash flowgeneration. The principal tenets of our strategy are outlined below.

***IncreaseProductivity and Profitability.  ***We believe thatthere are opportunities to further increase the productivity and profitabilityof our operations. For example, we believe that we can increase theproductivity of our sales force by revising its compensation structure andimproving its training programs. We believe that additional “back-office”administrative function centralization in Europe could provide meaningful costreduction opportunities. We also believe that increasing customer use ofweb-based catalogs and purchasing systems may enable us to rationalize ourfacilities and call centers. We plan to continue implementing working capitalimprovement initiatives designed to improve our free cash flow generation.

***Optimize ProductPortfolio.  ***We currently maintain a 750,000 productportfolio, which creates significant complexity in inventory management. Webelieve that a substantial opportunity exists to optimize our product portfoliothrough a selective review of our products to identify those with lowerprofitability and market potential. In addition, we intend to continue applyingour knowledge of customer needs and purchasing patterns to assist manufacturersin rationalizing and enhancing their product lines.

***Improve SourcingStrategy*****.**   By utilizingour global scale, strong relationships with our multinational customers and ourprimary focus on distribution, we intend to continue developing mutuallybeneficial relationships with our leading manufacturers, while strategicallyrationalizing those relationships with low profitability and eliminatingunnecessary duplicative sourcing of products to maximize purchasing economicsof scale.

***Increase Sales ofPrivate Label Products*****.**   Weintend to intensify our sales and marketing efforts to grow sales of ourprivate label products, which accounted for approximately 10.2% of our netsales in 2004. We believe that this strategy represents a significantprofitability enhancement opportunity, as private label product sales generatehigher gross margins than comparable third-party product sales.

***Expand intoCurrently Under-Penetrated, Growing Market Segments******.****  *We plan to increase our focus onmarkets with higher than average growth rates. As part of this strategy, weexpect to intensify our sales initiatives, expand our product offerings, andtarget select opportunistic acquisitions, in under-penetrated market segments,including universities, food and beverage, public institutions, clinical laboratoriesand safety and contract research organizations. We believe that our increasedfocus, existing market position and broad product offering, combined withsuperior customer service, will lead to an increased share of these marketsegments.

***PursueCross-Selling Opportunities.  ***We will continue ourefforts to utilize the strength of the Merck KGaA brands to cross-sell ournon-chemical product offerings to increase our market share in currentlyunder-penetrated categories, such as equipment and consumables in Europe andNorth America. We believe that this cross-selling opportunity presentssubstantial revenue and profitability potential for us.

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***Utilize GlobalScale to Increase Market Share.  ***We are a leadingdistributor in the global research laboratory industry. We believe that a largemajority of the industry is served by many smaller regional and specialtydistributors and by manufacturers selling direct, many of which we believe lackthe in-house sales, distribution and logistics capabilities of the scalesufficient to compete with us on a global basis. As a result, there is asignificant opportunity to increase our market share.

We have implemented this strategy through investmentsin our Sales and Strategic Sourcing organizations and have dedicated significantresources to identify strategic acquisition opportunities in 2005. Theseinvestments have significantly increased our selling, general andadministrative expenses subsequent to the Acquisition. Activities associatedwith these personnel investments can involve long lead times and therefore, thepayback on these personnel investments may not occur until later in 2005 orduring 2006. We did not engage in any significant acquisitions in 2002, 2003and 2004.

Subsequent to the Acquisition, we initiatedrestructuring activities designed to reduce operating costs and improve ouroperating and administrative capabilities of the Company. The initial focus wason the Company’s European operations and organization structure and, to alesser extent, the operations in North America. In connection with this initialfocus, we recorded restructuring charges of $29.7 million primarily related toreductions in headcount in Europe. These reductions were primarily due to thereorganization of our European sales and marketing functions. During the firstquarter of 2005, as a result of finalizing these activities, we expect torecord additional restructuring charges associated with changes to benefitplans, closure of selected facilities and severance costs. Charges related tothese efforts have been recorded as adjustments to Acquisition costs (increasesto goodwill) pursuant to the provisions of Emerging Issues Task Force Issue No. 95-3,*Recognition of Liabilities in Connectionwith a Purchase Business Combination*.

***Compliancewith Sarbanes-Oxley Act.  ***We have launched acompliance program to address the requirements of Section 404 of theSarbanes-Oxley Act in anticipation of the compliance date of December 31, 2006.Compliance with these requirements require significant incremental internalresources and financial investments including, but not limited to, use ofoutside experts, additional audit fees, and potential changes in systemsdesign, security and structure. For example, we have expanded our finance andaccounting team to include a new position of Vice President of Internal Audit.We also expect to spend in excess of $5 million over the next twelve toeighteen months in conducting our internal assessment of our internal controlsover financial reporting. A component of this study will also focus on thequality, security, and functionality of our information systems. While we havedeveloped sound plans to address our compliance requirements, there can be noassurance that such efforts will not have an impact on, or otherwise distractour senior financial team from, our operations or require additional spendingabove and beyond our initial budget expectations.

**Basisof Financial Statement Presentation**

On December 31, 2002, Merck KGaA entered into aseries of reorganization transactions whereby all of its legal entities thatcomprised our North American and European businesses were contributed to VWRInternational Corporation and became its wholly-owned subsidiaries. Thesereorganization transactions are referred to in this Form 10-K as the “Reorganization.”The formation of VWR International Corporation and the transfer of our NorthAmerican and European businesses to it through the Reorganization weretransactions between companies under common control and have been accounted forin a manner similar to a pooling of interests. The financial statements for theyear ended December 31, 2002 represent the combined financial statementsof the two businesses that have been derived from the consolidated financialstatements and accounting records of Merck KGaA using the historical results ofoperations and historical basis of the assets and liabilities of the individualbusinesses following a carve-out process for the European business in 2002. Thefinancial statements for the year ended December 31, 2003 are consolidatedas they consist of the financial statements of the wholly-owned subsidiaries ofVWR International Corporation. Merck KGaA sold its investment in us to CDRVAcquisition Corporation on 

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April 7, 2004. As aresult of the Acquisition, the financial statements for the periods included inthe year ended December 31, 2004 reflect the results of operations, cashflows, and statements of shareholders’ equity and other comprehensive income(loss) using predecessor and successor time periods. In order to provide ameaningful basis of comparing our results of operations for the year ended December 31,2004, 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 December 31,2004). 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 has resulted in the allocation of the purchaseprice to the assets and liabilities acquired and the recognition of either pushdown debt due Merck KGaA or a contribution to shareholders’ equity for cashconsideration. Interest expense is 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 MerckKGaA. 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 and a capital contribution in thestatement of shareholders’ equity, as this interest is not required to be paidto Merck KGaA.

Equity transactions with Merck KGaA represent cash andnon-cash transactions between us and Merck KGaA associated with carve-out, pushdown, and other equity transactions prior totheReorganization. Because adirect ownership relationship did not exist among allthe various units comprising us prior to December 31, 2002, Merck KGaA’snet investment in us is shown as Invested Equity in the combined financialstatements prior to the Reorganization. We began accumulating retained earningssubsequent to the date of the Reorganization.

Management believes theassumptions underlying the 2002 combined financial statements are reasonable. However,the financial statements, for all periods up to April 6, 2004, do notinclude allocations of Merck KGaA general corporate expenses or charges forfinancial reporting, tax, and treasury services, as such costs were not chargedto us. Management does not believe that charges for such services would havebeen material. The historical financial information does not reflect the addedcosts that we will incur as a separate company. These additional costs willinclude costs for new information technology systems to operate as a separatecompany, costs of periodic reporting to the SEC, as well as the costs relatedto a global tax and treasury staff and compliance with the Sarbanes-Oxley Actof 2002. The historical financial information also does not reflect theincremental costs associated with changes that will occur in our capitalstructure 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 Acquisition, to their respective fair values. Thisresulted 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 reduced current income taxes payable, to the extent theyoffset current taxes payable generated from operations.

**Constant Currency Analysis**

We maintain operations in North America and in 15European countries. Approximately 40% of our net sales for the year ended December 31,2004 originated in currencies other than the U.S. dollar, 

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principally the Euro, theBritish pound sterling and the Canadian dollar. As a result, changes in ourrevenues and operating profits include the impact of changes in foreigncurrency exchange rates. We provide “constant currency” calculations in thisAnnual Report on Form 10-K to remove the impact of the fluctuation inforeign exchange rates.

When we use the term “constantcurrency”, it means that we have translated financial data for a period intoU.S. dollars using the same foreign currency exchange rates that we used totranslate financial data for the previous period. We believe that thiscalculation is a useful measure, indicating the actual growth of our operations.We utilize constant currency results in our analysis of segment performance. Earningsfrom our subsidiaries are not generally repatriated to the United States, andwe typically 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 financial results on the basis of thefollowing three business segments: North American laboratory distribution, orNorth American Lab, European laboratory distribution, or European Lab, and ScienceEducation. Both the North American Lab and European Lab segments are comprisedof the distribution of scientific supplies to customers in the pharmaceutical,biotechnology, chemical, technology, food processing, governmental agencies,colleges and universities and environmental organizations. Science Education iscomprised of the manufacture and distribution of scientific supplies andspecialized kits principally to primary and secondary schools in North America.

In 2003, the NorthAmerican Lab segment recorded operating income as a percentage of net sales, oroperating margins, that was approximately 92 basis points (or 0.92%) higherthan the European Lab segment operating margin. While the European Lab segment’soperating income has historically been lower than North American Lab operatingincome, the European Lab segment has historically generated higher gross profitas a percentage of net sales, or gross margins, due to a more fragmentedcustomer base and greater concentration of high quality, higher margin chemicalsales. These higher gross margins in Europe, however, are offset by higherselling, general and administrative expenses required to maintain theappropriate infrastructure to serve a multi-lingual and multi-culturalmarketplace, resulting in lower operating margins than in the North AmericanLab segment. For the yearended December 31, 2004,this differential between the two segments increased to 152 basis points (or1.52%), mainly because of increased losses in France and higher product costsfor certain chemicals. The increased French losses were mainly a result of anapproximate 6% sales decline on a constant currency basis for the year ended December 31,2004 compared to the year ended December 31, 2003, while operatinginfrastructure costs remained relatively constant. Science Education operatingmargins benefit from the segment’s positioning as both a manufacturer and adistributor, thus benefiting from the profitability characteristics of bothaspects of the supply chain.

**Seasonality**

Our results of operationsare subject to seasonal trends primarily affecting our Science Educationsegment, which tend to result in increased net sales and operating income inthe third quarter in comparison to other quarters of the year. For example, in 2004and 2003, approximately 28% and 30%, respectively, of our total operatingincome was generated in the quarter ending September 30. This strongerquarterly performance is typically due to higher sales and operating income inour Science Education segment, as schools purchase supplies in preparation forthe beginning of the new school year, offset by a seasonal slowdown in ourEuropean Lab segment. Quarterly sales are also influenced by the number ofshipping days in a given fiscal quarter.

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**Results of Operations**

Our net sales are derived primarily from the sale ofscientific supplies, including laboratory supplies, research chemicals,apparatus, laboratory furniture and services. Freight costs that are billed toour customers are also included in net sales.

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

Selling, general and administrative expenses (“SG&A”)primarily reflect the costs of operations dedicated to generating new sales,maintaining existing customer relationships, enhancing technology capabilities,receiving customer orders and maintaining our distribution center facilities. Theseexpenses also include depreciation and amortization.

During the years ended December 31,2004, 2003 and 2002, inflation has not had a significant impact on our resultsof operations.

***Sales***

Thefollowing table presents sales and sales growth by reportable segment for theyears ended December 31, 2004, 2003 and 2002 (dollars in millions):
| ** **         | ** ** | **Year Ended December 31,** | ** ** |
|--------------------|------------|--------------------------------------------|------------|
| ** **         | ** ** | **2004**                                   | ** ** | **%  Change** | ** ** | **2003** | ** ** | **%  Change** | ** ** | **2002** | ** ** |
| **Net Sales**      |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab |       | $                                          | 1,837.2    |   |   | 5.9 | % |   | $ | 1,734.3 |   |   | 2.4 | % |   | $ | 1,694.1 |   |
| European Lab       |       | 1,035.3                                    |       |   | 11.0 | % |   | 932.6 |   |   | 17.4 | % |   | 794.1 |   |
| Science Education  |       | 132.9                                      |       |   | 4.4 | % |   | 127.3 |   |   | (6.3 | )% |   | 135.9 |   |
| Total              |       | $                                          | 3,005.4    |   |   | 7.6 | % |   | $ | 2,794.2 |   |   | 6.5 | % |   | $ | 2,624.1 |   |

 

Net sales for 2004increased to $3,005.4 million from $2,794.2 million in 2003, an increase of$211.2 million, or 7.6%. Excluding the effects of foreign exchange totaling$108.2 million for 2004, net sales increased by 3.7%, from 2003. The vastmajority of the growth expressed in local currencies was from the North AmericanLab segment while net sales in the European Lab segment were flat. Net salesfor 2003 increased to $2,794.2 million from $2,624.1 million in 2002, anincrease of $170.1 million, or 6.5%. The increase was driven primarily by salesgrowthin the North American Lab segment and the impact offavorable currency exchange rates on the European Lab segment, partially offsetby a decline in our Science Education segment.

Sales in the NorthAmerican Lab segment for 2004 increased to $1,837.2 million from $1,734.3million in 2003, an increase of $102.9 million, or 5.9%. Foreign currencychanges accounted for $11.8 million of the increase for 2004. Organic growthfor North America was relatively broad based across most product groups,especially chemicals and equipment/instruments. Sales in the North American Labsegment for 2003 increased to $1,734.3 million from $1,694.1 million in 2002,an increase of $40.2 million, or 2.4%. The increase was primarily driven byhigher sales to our pharmaceutical, biotechnology, university and governmentcustomers. North American Lab sales also benefited from strong sales growth inCanada, a portion of which was the result of favorable currency exchange ratemovements between the U.S. dollar and Canadian dollar.

Sales in the European Labsegment for 2004 increased to $1,035.3 million from $932.6 million in 2003, anincrease of $102.7 million, or 11.0%. The increase was due to the impact offavorable currency exchange 

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rates,as sluggish economic conditions throughout Europe caused net sales expressed inlocal currencies to be essentially flat. Foreign currency changes accounted for$96.4 million of the 2004 increase. Sales in the European Lab segment for 2003increased to $932.6 million from $794.1 million in 2002, an increase of $138.5million, or 17.4%. The increase was substantially due to the impact offavorable currency exchange rates, as sluggish economic conditions throughoutEurope caused growth in net sales expressed in local currencies to beessentially flat.

Sales in the ScienceEducation segment for 2004 increased to $132.9 million from $127.3 million in2003, an increase of $5.6 million, or 4.4%. The increase for 2004 was mainlyattributable to a strong selling season especially during the third quarter.The positive sales growth during the third quarter of 2004 helped offset thesales decline this segment had experienced during the first half of 2004, whichwas driven primarily by budget constraints by several state and localgovernments, which limited the amount of funds available for the purchase ofscientific supplies for school laboratories. Sales in the Science Educationsegment for 2003 declined to $127.3 million from $135.9 million in 2002, adecrease of $8.6 million, or 6.3%. The decline was primarily driven by budgetreductions by several state and local governments, which limited the amount offunds available for the purchase of scientific supplies for school laboratories.Industry-wide textbook publisher sales also declined in 2003, which had animpact on the sales of a portion of our products that are sold in connectionwith new textbooks.

***Gross Profit***

Thefollowing table presents gross profit for the years ended December 31,2004, 2003 and 2002 (dollars in millions):
| ** **              | ** ** | **Years Ended December 31,** | ** ** |
|-------------------------|------------|---------------------------------------------|------------|
| ** **              | ** ** | **2004**                                    | ** ** | **2003** | ** ** | **2002** | ** ** |
| Gross profit            |       | $                                           | 764.7      |   | $ | 716.1 |   | $ | 674.0 |   |
| Percentage of net sales |       | 25.4                                        | %          | 25.6 | % | 25.7 | % |
|                         |            |                                             |            |  |  |  |  |  |  |  |

 

Gross profit for 2004increased to $764.7 million from $716.1 million in 2003, an increase of $48.6million, or 6.8%. Approximately $32.7 million of this growth was attributableto the effect of currency translation and the balance was primarily comprisedof the margin effect associated with organic sales growth. For the year ended December 31,2004 compared to the year ended December 31, 2003, our North American Labmargin percentages improved slightly, mainly because of higher supplierrebates, while our European Lab margin percentages declined slightly, mainlybecause of higher product costs for certain chemicals.

Gross profit for 2003increased to $716.1 million from $674.0 million in 2002, an increase of $42.1million, or 6.2%, primarily as a result of the positive impact of currencyexchange rates and higher net sales in our North American Lab segment,partially offset by lower gross profit in our Science Education segment.

***Selling, Generaland Administrative Expenses***

Thefollowing table presents selling, general and administrative expenses, for theyears ended December 31, 2004, 2003 and 2002 (dollars in millions):
| ** **                                    | ** ** | **Years Ended December 31,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                    | ** ** | **2004**                                    | ** ** | **2003** | ** ** | **2002** | ** ** |
| Selling, general  and administrative expenses |       | $                                           | 619.1      |   | $ | 583.4 |   | $ | 560.0 |   |
| Percentage of net sales                       |       | 20.6                                        | %          | 20.9 | % | 21.3 | % |
|                                               |            |                                             |            |  |  |  |  |  |  |  |

 

SG&A expenses for 2004 increased to $619.1 millionfrom $583.4 million in 2003, an increase of $35.7 million, or 6.1%. Excludingthe effects of foreign exchange totaling $27.7 million for 2004, SG&A 

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increased by 1.4% from2003. Productivity improvements, initiated during the second and third quartersof 2003, permitted staffing reductions, which in turn resulted in modestdeclines in SG&A expenses during the first half of 2004. These declineswere subsequently offset during the third quarter of 2004 by increases in costsassociated with our investment in sales and other strategic and corporatepersonnel.

SG&A expenses for 2003increased to $583.4 million from $560.0 million in 2002, an increase of $23.4million, or 4.2%. The increase in SG&A expenses was primarily due to the impactof currency exchange rates, offset by lower expenses in the North American Labsegment, and lower expenses in the European Lab segment as expressed in localcurrencies. SG&A expenses as a percentage of net sales decreased from 21.3%in 2002 to 20.9% in 2003. This decline reflects ongoing productivity and costcontrol programs as well as economies of scale associated with our revenuegrowth. In the North American Lab segment, productivityimprovementscombined with lower product liability costs of $5.0 million offset increases inemployee benefit and insurance expenses of $7.3 million and bad debt expense of$1.9 million. In Europe, improvements were generated through increasedoperating efficiencies and cost containment programs primarily focused on centralizingfunctions, which reduced our logistics, field force and administrative expensesas expressed in local currencies. In addition, SG&A expenses in Europe for2003 benefited from adjustments to previously established reserves related toestimates of sales returns, severance payments and other items, which resultedin a decrease in SG&A expenses by $2.9 million in 2003. SG&A expensesas a percentage of our Science Education segment net sales increased slightlydue to lower sales volumes not offset by a corresponding decline in SG&Aexpenses.

***Operating Income***

Thefollowing table presents operating income and operating income as a percentageof net sales by reportable segment for the years ended December 31, 2004,2003 and 2002 (dollars in millions):
| ** **         | ** ** | **Years Ended December 31,** | ** ** | **Percent of Net Sales** | ** ** |
|--------------------|------------|---------------------------------------------|------------|-----------------------------------------|------------|
| ** **         | ** ** | **2004**                                    | ** ** | **2003**                                | ** ** | **2002** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| Operating Income   |       |                                        |       |                                    |       |   |   |   |   |   |   |   |   |
| North American Lab |       | $                                           | 93.8       |                                    | $          | 82.8 |   | $ | 71.2 |   | 5.1 | % | 4.8 | % | 4.2 | % |
| European Lab       |       | 37.2                                        |       | 35.9                                    |       | 24.0 |   | 3.6 | % | 3.8 | % | 3.0 | % |
| Science Education  |       | 14.6                                        |       | 14.0                                    |       | 18.8 |   | 11.0 | % | 11.0 | % | 13.8 | % |
| Total              |       | $                                           | 145.6      |                                    | $          | 132.7 |   | $ | 114.0 |   | 4.8 | % | 4.7 | % | 4.3 | % |

 

Operating income for 2004increased to $145.6 million from $132.7 million in 2003, an increase of $12.9million, or 9.7%. Excluding the effects of strengthening foreign currencies,operating income would have increased by 6.0% in 2004. Operating incomeexpressed as a percentage of net sales (“operating margin”) was 4.8% for 2004compared to 4.7% for 2003. The year-over-year improvement in operating marginswas primarily due to sales and gross profit growth rates exceeding the SG&Aexpense growth rate in the North American Lab segment. Primarily as a result ofthe factors described above, operating income for 2003 increased to $132.7million from $114.0 million in 2002, an increase of $18.7 million, or 16.4%. Theimprovement in operating margin to 4.7% in 2003 from 4.3% in 2002 was primarilydue to the decrease in SG&A expenses as a percentage of net sales.

Operating income in theNorth American Lab segment for 2004 increased to $93.8 million from $82.8million in 2003, an increase of $11.0 million, or 13.3%. Operating marginimproved to 5.1% for 2004 compared to 4.8% for 2003. The improvement inoperating margin was primarily due to higher supplier rebates and sales andgross profit growth rates exceeding the SG&A expense growth rate as theresult of productivity initiatives taken to reduce costs during the thirdquarter of 2003. Strengthening foreign currencies positively affected operatingincome by $1.8 million for 2004 compared to 2003. Operating income in the NorthAmerican Lab segment for 2003 increased to $82.8 million from $71.2 million in2002, an increase of $11.6 million, or 16.3%, primarily as a result of thefactors described above.

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Operating income in the EuropeanLab segment for 2004 increased to $37.2 million from $35.9 million in 2003, anincrease of $1.3 million, or 3.6%. Operating margin decreased slightlyto3.6% for 2004 compared to 3.8% for 2003. Strengthening European currenciespositively affected operating income by $3.2million for2004comparedto2003. The European Lab segment has been adversely affected by changes inpricing for certain chemicals purchased from Merck KGaA that we could notrecover through pricing increases and by losses of approximately $6.4 millionin our French operations in 2004 which exceeded the losses of approximately$3.2 million in both 2003 and 2002. Operating income in the European Labsegment for 2003 increased to $35.9 million from $24.0 million in 2002, anincrease of $11.9 million, or 49.6%, primarily as a result of the factorsdescribed above.

Operating income in theScience Education segment for 2004 increased to $14.6 million from $14.0million in 2003, an increase of $0.6 million, or 4.3%. For the year ended December 31,2004 compared to the year ended December 31, 2003, the Science Educationsegment experienced an increase in operating income mainly due to an increasein net sales. Operating income in the Science Education segment for 2003decreased to $14.0 million from $18.8 million in 2002, a decrease of $4.8million, or 25.5%, primarily as a result of the factorsdescribedabove.

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

Interest expense, net ofinterest income was $56.3 million, $24.4 million and $39.4 million for 2004,2003 and 2002, respectively. The 2004 increase was due to the new capitalstructure that was established in connection with the Acquisition that resultedin a higher level of outstanding debt and an increase in interest rates. The2003 decrease was a result of the reduction of debt through cash generated fromoperations and lower interest rates. Interest rates on push down debt declinedto 2.0% in 2003 from 3.4% in 2002. Interest on push down debt did not representa cash payment of interest to Merck KGaA and was recorded as a capitalcontribution by Merck KGaA, net of tax.

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

Other (income)/expense,net was ($1.9) million, ($3.0) million and $0.6 million for 2004, 2003 and2002, respectively. Income in 2004 included net exchange gains of ($1.5)million and equity income of ($0.5) million. Income in 2003 included net gainson sale of assets of ($1.4) million, ($1.0) million related to an insurancerecovery and equity income of ($0.6) million. The 2002 expense is primarily aresult of $1.0 million of costs incurred in connection with a discontinuedinitial public offering which offset equity income of ($0.5) million.

***Income TaxProvision***

The effective income taxrate for calendar year 2004 was 42.3% compared to 41.5% in 2003. The effectivetax rate for 2004 is slightly higher than the comparable period in 2003primarily as a result of larger pre-tax losses in France in 2004 as compared to2003, for which no tax benefit was recognized as a result of the need for avaluation allowance. In addition, there were increases in local taxesassociated with our Puerto Rican business as compared to prior periods as wellas the generation of excess foreign tax credits in our U.S. operations forwhich we have recorded a full valuation allowance. Our effective rate was 41.5%in 2003 up from 40.1% in 2002. This increase is primarily due to the lowereffective rates of foreign income taxes in 2003 offset by the increase in thevaluation allowance of $3.1 million for French and Mexican net operating losscarryforwards.

Prior to theReorganization as of December 31, 2002, we were, in certain cases,included in consolidated tax returns with Merck KGaA affiliates, and certain ofour entities were included in tax-sharing agreements. For purposes of theconsolidated and combined financial statements included elsewhere in this Form 10-K,our income taxes have been calculated on a separate tax return basis.

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***Impact of Goodwill Accounting***

Goodwill represents the excess of costs over fairvalue of assets of businesses acquired. We adopted the provisions of Statementof Financial Accounting Standards (SFAS) No. 142, *Goodwill and Other Intangible Assets*, asof January 1, 2002 and discontinued amortization of goodwill. SFAS No. 142also requires that goodwill be tested annually and between annual tests ifevents occur or circumstances change that would more likely than not reduce thefair value ofa reporting unit below its carryingamounts. We have elected to perform our annual test for indications of goodwillimpairment in the fourth quarter of each year.

Upon adoption of SFAS No. 142,in 2002, we recorded a transitional impairment charge of $43.8 million.

***Balance Sheet Structure-Post Acquisition***

As a result of theAcquisition, the Company’s balance sheet has changed. The most significantchanges relate directly to the allocation of the purchase price, restructuringof debt obligations and increases in intangible assets and deferred taxes.Prospectively, the Company expects to incur additional expense related to theamortization of intangible assets with finite lives and interest costs relatedto higher rates of interest on external debt obligations.

**Historical Cash Flows**

***Cash Flows from Operating Activities***

Thefollowing table presents cash flow from operations related to operations andworking capital (dollars in millions):
| ** **                                            | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash flow from  operations, excluding working capital |       | $        | 100.5      |     | $          | 123.7    |       | $ | 108.5 |   |
| Cash flow from  working capital changes, net          |       | 84.2     |       | 31.4     |       | 48.3     |       |
| Cash flow from  operations                            |       | $        | 184.7      |     | $          | 155.1    |       | $ | 156.8 |   |

 

We generated $184.7 million of cash flow fromoperations during 2004 compared to $155.1 million during 2003. The improvementin cash from operations was primarily the result of improvements in workingcapital management partially offset by a decline in net income resulting fromhigher interest expense. The significant improvement in cash flow from workingcapital changes was the result of increased focus by the Company’s managementin the areas of accounts payable and inventory that was partially offset by anincrease in trade accounts receivable.

During 2003, cash flows from operations declined $1.7million in comparison to 2002. Improved operating income in 2003 was theprimary factor influencing the $15.2 million improvement in cash flow fromoperations, excluding working capital. While the Company continued to generateadditional cash flow from changes in working capital of $31.4 million in 2003,reflecting ongoing improvements in receivables, inventory, and accounts payablemanagement, the rate of improvement was $16.9 million less than that realizedin 2002.

Days sales outstanding inaccounts receivable were 49.1, 48.9 and 49.7 days as of December 31, 2004,2003 and 2002, respectively. Trade receivables are higher in Europe due to theextended payment practices in the countries in which we operate. Days supply ofinventory declined to 39.1 days as of December 31, 2004 compared to 46.6days as of December 31, 2003 and 50.9 days as of December 31, 2002due primarily to continuous efforts to reduce inventory levels whilemaintaining customer service levels. Trade accounts payable are primarily withsuppliers whose products we distribute. Payment terms are negotiated and in 

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caseswhere economic early payment discounts are offered, we may make payments toearn the discounts. Days payable outstanding are generally higher in Europe dueto the extended payment practices in the countries in which we operate. Dependingon the timing of payments and inventory purchases, trade accounts payable canvary each quarter and from year to year. Days payable outstanding increased to52.5 days as of December 31, 2004 compared to 41.1 days as of December 31,2003 and 41.7 days as of December 31, 2002, mainly due to continuedefforts to reduce working capital in 2004. By increasing our days payableoutstanding, our accounts payable balances have increased, which has the effectof reducing our working capital.

***Cash Flows from Investing Activities***

Net cash used in investing activities was $1,576.3million for the year ended December 31, 2004 compared to $8.9 million forthe year ended December 31, 2003. This increase was primarily the result ofthe Acquisition.

Capital expendituresconsist of two principal components: expenditures for facilities, andexpenditures for technology to support the business. Capital expenditures were$16.4 million in 2004, $16.6 million in 2003 and $41.0 million in 2002. Capitalexpenditures decreased in 2003 from 2002 by $24.4 million primarily due tolower expenditures for both facilities and technology. The timing of warehouseexpansions may also cause a variance in year-to-year capital expenditures. Weanticipate 2005 capital expenditures to approximate $35.0 million.

***Cash Flows from Financing Activities***

Net cash provided by financing activities was $1,606.7million for the year ended December 31, 2004 compared to net cash used infinancing activities of $144.8 million for the year ended December 31,2003. The net cash provided in 2004 was primarily a result of the Acquisitionand the new capital structure we established. The 2003 usage was primarilyrelated to the net repayment of debt.

In connection with the Acquisition, CDRV Investors, Inc.(our ultimate parent company) adopted the CDRV Investors, Inc. StockIncentive Plan, and made an initial offering of awards under the plan tocertain of our officers, employees and non-employee directors. Certain officersand employees were offered the opportunity to purchase shares of CDRV Investors, Inc.common stock, and to receive a grant of a number of options to purchaseadditional shares based on the number of shares of common stock purchased. Aspart of the initial offering, directors who are not also our employees orassociated with CD&R were each offered the opportunity to purchase up to2,500 shares of CDRV Investors, Inc. common stock.

As of December 31, 2004, CDRV Investors, Inc. hadclosed the initial offering in respect of 196 of our officers and employees,and four of our directors. In the initial offering, these officers, employees,and directors purchased a total of 239,135 shares and were granted options topurchase 484,590 shares under the Plan. Upon the closing of the offering, thenet proceeds of approximately $23.7 million were paid to CDRV Investors, Inc.,who in turn contributed the approximately $23.7 million to the Company as anadditional investment.

In connection with the share purchase program, variousnon-executive officers and employees of the Company and its subsidiaries whochose to purchase stock of CDRV Investors, Inc. were provided the optionof participating in a loan program provided by Bank of America, N.A. to assistin the payment of a portion of the purchase price. The payment obligations ofborrowers under the Bank of America, N.A. loan program are guaranteed by theCompany up to an aggregate principal amount of $8.0 million. As a result of theclosings, the total amount of loans provided by Bank of America N.A. andguaranteed by the Company was $2.9 million. In certain limited cases, somenon-executive officers and employees of the 

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Company or itssubsidiaries received $0.3 million of loans directly from the Company of which$0.1 million is outstanding as of December 31, 2004.

See “Item 11—ExecutiveCompensation.”

**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 meet existing strategic and financialobjectives. Therefore, liquidity cannot be considered separately from capitalresources that consist of current or potentially available funds for use inachieving long-range objectives and meeting debt service commitments.

As of December 31, 2004, we had outstandingindebtedness of $1,099.2 million. The $1,099.2 million of total indebtednessconsists primarily of $520.0 million aggregate principal amount of notes, a$379.9 million U.S. dollar-denominated term loan and a $179.6 millionEuro-denominated term loan. Cash paid for interest during 2004 was $35.2million. Our debt levels increased slightly and related interest ratesincreased more significantly as a result of the Acquisition and our cash paidfor interest expense has increased significantly since April 7, 2004. Basedon borrowings outstanding and interest rates in effect as of December 31,2004, interest expense for the notes and the term loans is expected to beapproximately $70.8 million for the 12 months ended December 31, 2005(including $4.9 million of amortization of debt issue costs). Prior to theAcquisition, interest on our push down debt did not represent cash interest, aswe were not required to pay Merck KGaA interest. The interest expenseassociated with the push down debt was recorded as a capital contribution byMerck KGaA, net of tax.

As of December 31, 2004, we had $8.0 million ofundrawn letters of credit and our remaining borrowing availability under the$150.0 million multi-currency revolving credit facility forming part of ourSenior Secured Credit Facility was $142.0 million. Undrawn amounts under themulti-currency revolving credit facility will be available to meet futureworkingcapital and our other business needs. As borrowings under the multi-currencyrevolving credit facility may fluctuate with our working capital and otherbusiness needs, and the borrowings thereunder bear interest at variable rates,interest expense for this facility will fluctuate as well.

Prior to April 7,2004, cash flow from operating activities and after investing activities wasused to pay down debt or to pay dividends to Merck KGaA. Following theAcquisition on April 7, 2004, our capital structure changed significantly.Under the credit agreement for our Senior Secured Credit Facility, beginning inthe fiscal yearending December 31, 2006, ExcessCash Flow (as defined in the credit agreement) will berequired tobe used toprepay credit agreement debt, in addition to scheduled principal payments.Based upon current levels of operations and expectations as to future growth,we believe that cash on hand, generated from operations, together with amountsavailable under our $150.0 million multi-currency revolving credit facilitywhich is a component of our Senior Secured Credit Facility, will be adequate topermit 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 future economicconditions and to financial, business and other factors, many of which arebeyond our control and will be substantially dependent on the global economy,demand for our products, and our ability to successfully implement our overallbusiness and profitability strategies. As of December 31, 2004, we had$116.1 million of cash and cash equivalents on hand.

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**Scheduleof Contractual Obligations**

Thefollowing tables detail the payment schedule for debt, capital leases andoperating leases asof December 31, 2004:
| ** **                          | ** ** | **As of December 31, 2004**                   | ** ** |
|-------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                          | ** ** | **<1 year**                                               | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **>5 years** | ** ** | **Total** | ** ** |
| ** **                          | ** ** | **(Payments due by period in millions)** | ** ** |
| Senior Secured Credit  Facility     |       |                                                              | $          | — |   |   |   | $ | 11.4 |   |   |   | $ | 11.4 |   |   | $ | 536.7 |   | $ | 559.5 |   |
| Senior Notes                        |       |                                                              | —     |   |   |   | — |   |   |   | — |   |   | 200.0 |   | 200.0 |   |
| Senior Subordinated  Notes          |       |                                                              | —     |   |   |   | — |   |   |   | — |   |   | 320.0 |   | 320.0 |   |
| Loan from CDRV  Holdings, Inc. |       |                                                              | —     |   |   |   | — |   |   |   | — |   |   | 0.7 |   | 0.7 |   |
| Bank Loans                          |       |                                                              | 11.9       |   |   |   | — |   |   |   | — |   |   | — |   | 11.9 |   |
| Capital leases                      |       |                                                              | 1.0        |   |   |   | 1.8 |   |   |   | 1.4 |   |   | 2.9 |   | 7.1 |   |
| Operating leases                    |       |                                                              | 22.9       |   |   |   | 30.8 |   |   |   | 17.1 |   |   | 24.1 |   | 94.9 |   |
| Total                               |       |                                                              | $          | 35.8 |   |   |   | $ | 44.0 |   |   |   | $ | 29.9 |   |   | $ | 1,084.4 |   | $ | 1,194.1 |   |

 

**IndebtednessPrior to the Acquisition**

Thefollowing is a summary of our indebtedness as of December 31, 2003 priorto the Acquisition:
|                                       | ** ** | **Pricing**        | ** ** | **Amount  Outstanding** | ** ** | **Average Rate  2003** | ** ** | **Maturity** | ** ** |
|---------------------------------------|------------|--------------------|------------|-------------------------|------------|-----------------------------|------------|--------------|------------|
| ** **                            | ** ** | ** **         | ** ** | **(in millions)**  | ** ** | ** **                  | ** ** | ** **   | ** ** |
| Push down debt due Merck  KGaA        |       | Merck KGaA         |       |                    | $          | 773.3                       |       |         |       | 2.0 | % |   |   | 2005 |   |   |
|                                       |       | intercompany rates |       |                    |       |                        |       |         |       |   |   |   |   |   |   |
| Loans from Merck KGaA  and affiliates |       | Merck KGaA         |       |                    | 236.0      |                        |       |         | 2.8        | % |   |   | 2005 |   |   |
|                                  |       | intercompany rates |       |                    |       |                        |       |         |       |   |   |   |   |   |   |
| Bank loans                            |       | Various            |       |                    | 9.8        |                        |       |         | 2.8        | % |   |   | 2004 |   |   |

 

The push down debt reflects the debt incurred by MerckKGaA as a result of its acquisition of us. The push down debt had been classifiedas long-term because Merck KGaA represented to us in writing that it would notrequire payment on the debt before 12 months. We also had various loans fromMerck KGaA outstanding prior to the Acquisition. The contractual maturities ofthese loans are current, but these loans had been classified as long-termbecause Merck KGaA represented to us in writing that it would not requirepayment on the debt before 12 months. A portion of the cash consideration forthe Acquisition was used to repay all debt owing to Merck KGaA outstanding on April 7,2004.

**Indebtedness Following the Acquisition**

***Senior SecuredCredit Facility***.   On April 7, 2004, we, with asyndicate of lenders, led by Deutsche Bank AG, New York Branch, asadministrative agent, Citicorp North America Inc., as syndication agent andBank of America, N.A., BNP Paribas and Barclays Bank PLC, as documentationagents, entered into the Senior Secured Credit Facility. The Company is theborrower under the Senior Secured Credit Facility. The Senior Secured CreditFacility consists of (1) a term loan facility providing for a loandenominated in Euros, in an aggregate principal amount currently outstanding at€132.7million (approximately $179.6 million on a U.S. dollar equivalent basis as of December 31,2004), (2) a term loan facility providing for a term loan denominated inU.S. dollars in an aggregate principal amount currently outstanding at $379.9million, and (3) a multi-currency revolving credit facility, providing forup to $150.0 million in multi-currency revolving loans (including standby andcommercial letters of credit) outstanding at any time. The term loan principalamounts currently outstanding reflect a $50.0 million term loan prepayment on July 30,2004. As of December 31, 2004, nothing was drawn under the multi-currencyrevolving credit facility and we had $8.0 million in undrawn letters of credit.Undrawn amounts under the multi-currency revolving credit facility areavailable on a revolving credit basis for general corporate purposes of theborrower and its subsidiaries.

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The senior secured credit agreement governing theSenior Secured Credit Facility contains certain covenants that limit theCompany’s ability to incur additional indebtedness, pay cash dividends and makecertain other payments. The senior secured credit agreement also requires theCompany to maintain certain financial covenants, including a specified debt toCredit Agreement EBITDA leverage ratio and a specified Credit Agreement EBITDAto interest expense coverage ratio for specified periods. See “—Credit AgreementFinancial Covenants; Credit Agreement EBITDA.” As of December 31, 2004,the Company was in compliance with all covenants.

***Senior and SeniorSubordinated Notes.  ***On April 7, 2004, weissued 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 December 31, 2004, the Company was in compliance with all covenants.

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

**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. Failure to complywith these financial ratio covenants would result in a default under the creditagreement for our Senior Secured Credit Facility and, absent a waiver or anamendment from our lenders, would permit the acceleration of all outstandingborrowings under our Senior Secured Credit Facility. We are in compliance withthese financial covenants as of December 31, 2004.

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

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Thecalculation of Credit Agreement EBITDA for the years indicated is set forthbelow on a pro-forma basis.
| ** **                                              | ** ** | **Year Ended December 31,** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                              | ** ** | **2004**                                   | ** ** | **2003** | ** ** |
| ** **                                              | ** ** | **(Consolidated)  (Unaudited)**            | ** ** | **(Consolidated)  (Unaudited)** | ** ** |
| ** **                                              | ** ** | **(Dollars in millions)**        | ** ** |
| Net income(1)                                           |       |                                       | $          | 44.0 |   |   |   | $ | 34.4 |   |   |
| Income tax provision(1)                                 |       |                                       | 32.9       |   |   |   | 25.8 |   |   |
| Interest expense, net(1)                                |       |                                       | 69.2       |   |   |   | 70.4 |   |   |
| Depreciation and  amortization(1)                       |       |                                       | 35.7       |   |   |   | 36.5 |   |   |
| Non-cash charges(2)                                     |       |                                       | 8.8        |   |   |   | 12.7 |   |   |
| Other extraordinary,  unusual or non-recurring items(3) |       |                                       | 0.4        |   |   |   | 4.3 |   |   |
| Credit Agreement EBITDA                                 |       |                                       | $          | 191.0 |   |   |   | $ | 184.1 |   |   |

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(1)          Credit Agreement EBITDAfor the years ended December 31, 2004 and 2003 is calculated on apro-forma basis as if the credit agreement for our Senior Secured CreditFacility was in effect with respect to such periods.

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

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

Thetest periods for compliance with the financial covenants in the creditagreement for our Senior Secured Credit Facility began on July 1, 2004. Thefinancial covenants specify, among other things, the following requirements foreach 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 years endedDecember 31, 2004 and 2003, on a pro-forma basis.
| ** **                                                             | ** ** | **Year Ended December 31,**                                       | ** ** |
|------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                                             | ** ** | **      2004      ** | ** ** | **      2003      ** | ** ** |
| Consolidated Debt to  Credit Agreement EBITDA Leverage Ratio           |       |                                                                             | 5.8        |   |   |   | 6.1 |   |   |
| Credit Agreement EBITDA to Credit Agreement Interest  Expense Ratio(1) |       |                                                                             | 3.0        |   |   |   | 2.8 |   |   |

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(1)          For purposes ofcalculating the pro-forma compliance ratios noted above, credit agreementinterest expense for the year ended December 31, 2003 was based onpro-forma interest expense for the period then ended, net of interest incomeand reduced by amortization of deferred financing fees.

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For the year ended December 31,2004, credit agreement interest expense was based on actual interest expensefor the nine months ended December 31, 2004 (net of interest income andreduced by amortization of deferred financing fees) multiplied by 1.33, asdefined in the Credit Agreement.

**Debt of CDRV Investors, Inc.**

On December 16, 2004, CDRV Investors, Inc.,our indirect parent, issued $481.0 million aggregate principal amount atmaturity ($297.9 million in net proceeds) of 95¤8% seniordiscount notes due 2015 (“CDRV Senior Discount Notes”). The net proceeds of theissuance were used to pay a dividend to the holders of the common stock of CDRVInvestors, Inc. The CDRV Senior Discount Notes are senior unsecuredobligations of CDRV Investors, Inc. and are structurally subordinated toall obligations and other liabilities of CDRV Investors, Inc.’s existingand future subsidiaries, including us. No cash interest will accrue on the CDRVSenior Discount Notes prior to January 1, 2010. Thereafter, cash interestwill accrue and be payable semiannually, only to the extent of funds actuallyavailable for distribution to CDRV Investors, Inc. under specifiedprovisions of the indentures governing our senior notes and senior subordinatednotes and applicable law.

We do not guarantee theobligations under the CDRV Senior Discount Notes. The terms of the SeniorSecured Credit Facility and the indentures governing our senior notes andsenior subordinated notes, significantly restrict us from making distributionsand otherwise transferring assets to CDRV Investors, Inc.

**Critical Accounting Policies**

The policies discussed below are considered bymanagement to be critical to an understanding of our financial statementsbecause their application places the most significant demands on management’sjudgment, with financial reporting results relying on estimation about theeffect of matters that are inherently uncertain. Specific risks for thesecritical accounting policies are described in the following paragraphs. For allof these policies, management cautions that future events rarely developexactly as forecast, and the best estimates routinely require adjustment.

***Accounts Receivableand Reserves***.   The carrying amount of accountsreceivable reflects a reserve representing our best estimate of the amountsthat will not be collected for losses due to uncollectibility and for estimatedsales returns and allowances. In addition to reviewing delinquent accountsreceivable, we consider many factors in estimating our reserve, includinghistorical data, experience, customer types, credit worthiness, and economictrends. From time to time, we may adjust our assumptions for anticipatedchanges in any of these or other factors expected to affect collectibility.

***Inventories***.   Inventoriesare valued at the lower of cost or market, cost being determined principally bythe last-in, first-out (“LIFO”) method for the U.S. subsidiaries and theaverage cost or the first-in, first-out (“FIFO”) method for all othersubsidiaries. During the year, estimates of the impact of LIFO are used basedupon full year estimates of the impact of LIFO and such estimates may changeduring the course of the year based upon various factors such as priceincreases and inventory turnover. We review our inventory realization basedupon several factors, including customer demand, supply of inventory andcompetitive activity and record reserves for obsolescence based upon those andother factors. From time to time, we may adjust our assumptions for anticipatedchanges in any of these or other factors.

***Rebates fromSuppliers***.   We earn rebates from certain of oursuppliers for the achievement of certain goals or milestones such as salesgrowth and purchases. To the extent that rebates relate to inventory on hand,the inventory cost is reduced to reflect the lower cost. During the course ofthe year, estimates made concerning the achievement of these goals ormilestones can vary from quarter to quarter. Generally, a proportionally largeramount of rebates are earned in the fourth quarter of each year.

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***Agreements withCustomers***.   We have agreements with several of ourcustomers, which contain provisions related to pricing, volume purchaseincentives and other items. During the course of the year, estimates are madeconcerning customer contracts and changes in estimates related to thesecontracts may vary from quarter to quarter and are recorded as a reduction tosales.

***Goodwill andIntangible Assets***.   In accordance with Statement ofFinancial Accounting Standards (“SFAS”) No. 142, *Goodwill and Other Intangible Assets*,effective December 30, 2001, goodwill is no longer amortized, but rather,is evaluated for impairment on an annual basis. To accomplish this, we wererequired to identify our reporting units and determine the carrying value ofeach reporting unit by assigning the assets and liabilities, including theexisting goodwill and intangible assets, to those reporting units. We arerequired to determine the fair value of each reporting unit and compare it tothe carrying amount of the reporting unit during the fourth quarter of eachyear. Fair value of the reporting unit is determined using a combination ofdiscounted cash flows and multiple of earnings valuation techniques. To theextent the carrying amount of a reporting unit exceeded the fair value of thereporting unit, we would be required to perform the second step of thetransitional impairment test, as this is an indication that the reporting unitgoodwill may be impaired.

As a result of the Acquisition, we have recognizedsignificant intangible assets. In accordance with the provisions of SFAS No. 142,we reevaluate the estimated useful lives of our intangible assets annually. Thoseintangible assets considered to have indefinite useful lives are evaluated forimpairment on an annual basis, by comparing the fair value of the intangibleasset to its carrying value. In addition, whenever events or changes incircumstances indicate that the carrying value of intangible assets might beless than the fair value, we will perform an impairment review. Fair value ofintangible assets is determined using a discounted cash flow approach. Intangibleassets with estimable useful lives are amortized over their respectiveestimated useful lives to their estimated residual values, and reviewed forimpairment in accordance with FASB Statement No. 144, *Accounting for Impairment or Disposal of Long-LivedAssets*.

Our estimates are based upon historical trends,management’s knowledge and experience and overall economic factors. While webelieve our estimates are reasonable, different assumptions regarding itemssuch as future cash flows and volatility in the markets we serve could affectour evaluations and result in write-downs to the carrying amount of ourgoodwill and our intangible assets.

***Product Liability***.   Weare subject to product liability and other claims in the ordinary course ofbusiness. Our business involves a risk of product liability and other claims inthe ordinary course of business, and from time to time we are named as adefendant in cases as a result of our distribution of scientific supplies. Whilethe impact on us of this litigation has typically been immaterial, there can beno assurance that the impact of the pending and any future claims will not bematerial to our business, financial condition or results of operations in thefuture. For further information, see “Item 3—Legal Proceedings.”

***EnvironmentalLiabilities***.   We record accruals for environmentalliabilities based on current interpretations of environmental laws andregulations when it is probable that a liability has been incurred and theamount can be reasonably estimated. Our estimates are based upon severalfactors, including reports prepared by environmental specialists and management’sknowledge and experience with these environmental matters. Inherentuncertainties exist in these estimates due to unknown conditions, changing lawsand regulations and changes in the manner or method of enforcement of such lawsand regulations. Accrued liabilities and payments related to environmentalliabilities have not been material. Although management uses its best estimateswhen establishing accruals for environmental liabilities, if interpretations ofapplicable laws and regulations, cleanup methods or the extent of ourresponsibility change from our current estimates, revisions to our estimatedenvironmental liability may be required.

***Pension Plans***.   Wehave defined benefit pension plans covering a significant number of domesticand international employees. Accounting for these plans requires the use ofassumptions, including estimates 

35

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on the expected long-termrate of return on assets, discount rates and the average rate of increase inemployee compensation. In order to make informed assumptions, managementconsults with actuaries and reviews public market data and general economicinformation. We periodically assess these assumptions based on market conditions,and if those conditions change, our pension cost and pension obligation may beadjusted accordingly.

***Estimates and Other Accounting Policies***.   Thepreparation of financial statements in conformity with GAAP requires managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenues and expensesduring the reporting period. Management evaluates its estimates and judgments,including those related to product returns, investments, intangible assets,income taxes, warranty obligations, restructuring costs, insurance costs, andcontingencies and litigation. While actual results could differ from thoseestimates, management believes that the estimates are reasonable.

**New Accounting Standards**

During June 2004, the FASB issued *Proposed Interpretation Accounting for ConditionalAsset Retirement Obligations, an interpretation of FASB Statement No. 143*.This proposed Interpretation would clarify that a legal obligation to performan asset retirement activity that is conditional on a future event is withinthe scope of FASB Statement No. 143. If the Interpretation is issued, itsadoption is not expected to have a material effect on the Company’s financialposition or results of operations.

During December 2004, the FASB issued SFAS No. 123Revised (“123R”), *Shared-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 beginningJuly 1, 2005. During August 2004, CDRV Investors, Inc., ourultimate parent, introduced a share-based compensation arrangement as acomponent of its compensation plans for our employees. We estimate that theeffect on net income in the periods following adoption of SFAS No. 123Rwill be consistent with our pro-forma disclosure under SFAS No. 123,except the estimated forfeitures will be considered in the calculation ofcompensation expense under SFAS No. 123R. However, the actual effect onnet income will vary depending upon the number of grants of equity, if any. Further,we have not yet determined the actual model we will use to calculate fairvalue.

During November 2004,the FASB issued SFAS No. 151, *InventoryCosts*. This Statement clarifies the accounting for abnormal amountsof idle facility expenses, freight handling costs, and spoilage. This Statementrequires such excess costs be charged as current-period expenses. ThisStatement also specifies that allocated overhead costs to inventory must bebased on normal capacity measures. This Statement becomes effective in fiscalyears beginning after June 15, 2005. Management will evaluate what effect, ifany, this Statement will have, but does not expect the impact to be material.

**Forward-Looking Statements**

This Annual Reporton Form 10-K includes forward-looking statements regarding, amongother things, our plans, strategies and prospects, both business and financial.These statements are based on the beliefs and assumptions of our management. Althoughwe believe that our plans, intentions and expectations reflected in orsuggested by these forward-looking statements are reasonable, we cannot assureyou that we will achieve or realize these plans, intentions or expectations. Forward-lookingstatements are inherently subject to risks, uncertainties and assumptions. Generally,statements that are not historical facts, including statements concerning ourpossible or assumed future actions, business strategies, events or results ofoperations, are forward-looking statements. These statements may be precededby, followed by or include the words “believes,” “expects,” “anticipates,” “intends,”“plans,” 

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“estimates”or similar expressions. Forward-looking statements include the information inthis Annual Report on Form 10-K regarding, among other things:

·       managementforecasts;

·       efficienciesand cost savings;

·       incomeand margins;

·       growth;

·       economiesof scale;

·       theeconomy;

·       futureeconomic performance;

·       futureacquisitions and dispositions;

·       litigation;

·       potentialand contingent liabilities;

·       management’splans;

·       taxes;and

·       refinancingof debt.

Forward-lookingstatements are not guarantees of performance. You should not place unduereliance on these statements. You should understand that the followingimportant factors, in addition to those discussed elsewhere in this Form 10-K,could affect our future results and could cause those results or other outcomesto differ materially from those expressed or implied in our forward-lookingstatements:

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

·       ourability to maintain our relationships with manufacturers;

·       lossof our key executive officers;

·       ourability to consummate and integrate potential acquisitions;

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

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

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

All forward-looking statements attributable to us orpersons acting on our behalf are expressly qualified in their entirety by theforegoing cautionary statements. You are cautioned not to place undue relianceon the forward-looking statements, which speak only as of the date of thisAnnual Report on Form 10-K. We undertake no obligations to update orrevise publicly any forward-looking statements, whether as a result of newinformation, future events or otherwise.

For these statements, weclaim the protection of the safe harbor for forward-looking statementscontained in Section 27A of the Securities Act.

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**Market and Industry Data**

Information in this Form 10-Kabout the global research laboratory industry, including our generalexpectations concerning the industry, are based on estimates prepared usingdata from various sources and on assumptions made by us. We believe dataregarding the global research laboratory industry are inherently imprecise, butbased on management’s understanding of the markets in which we compete,management believes that such data is generally indicative of the industry. Ourestimates, in particular as they relate to our general expectations concerningthe global research laboratory industry, involve risks and uncertainties andare subject to change based on various factors, including those discussed underthe heading “—Risk Factors.”

**ITEM 7A.**        QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK

***Interest Rates***.   Weare exposed to changes in interest rates, primarily as a result of our existingshort-term and long-term debt with both fixed and floating interest rates. Priorto the Acquisition, we did not enter into agreements related to interest raterisk. A 100 basis point (or 1.00%) change in variable rate debt outstanding asof December 31, 2004 would, on an annualized basis, affect net income byapproximately $3.3 million.

In the future, we may use interest rate swaps or otherderivatives to manage interest rate risk on future income caused by interestrate changes on the variable rate facilities under our Senior Secured CreditFacility. If swaps are used, the differential to be paid or received under theagreements is recognized as an adjustment to interest expense related to thedebt. Our Senior Secured Credit Facility requires us to enter into interestrate protection agreements which, together with fixed interest rates thenapplicable to our consolidated funded indebtedness, will provide interest rateprotection with respect to at least 50% of our consolidated funded indebtednessfor a period of time. Effective July 21, 2004, we entered into an interestrate cap to hedge a portion of the variability of cash flows related topotential changes in interest rates on €35.0million of our Euro-denominated term loan facility.

***Foreign CurrencyHedging***.   The value of certain foreign currencies ascompared to the U.S. dollar may affect our financial results. Fluctuations inexchange rates may positively or negatively affect our net sales, grossmargins, operating expenses, cash flows and retained earnings, all of which areexpressed in U.S. dollars. However, net sales and costs tend to be incurred inthe same currency, and therefore, mitigate local currency risks.

Where we deem it prudent, we have engaged in hedgingprograms, using primarily foreign currency forward contracts, aimed at limitingthe impact of foreign currency exchange rate fluctuations on cash flows andearnings. Cash flows from currency forward contracts accounted for as hedgesare classified in the statement of cash flows in the same category as the itembeing hedged or on a basis consistent with the nature of the instrument. Theseactivities have not been material to our financial statements. We may purchaseshort-term foreign currency forward contracts to protect against currencyexchange risks associated with long-term intercompany loans due from ourinternational subsidiaries and the payment of merchandise purchases to foreignvendors. The majority of our debt, including the notes, is denominated in U.S.dollars, and accordingly, the majority of our future debt service needs will beU.S. dollar denominated. We have a Euro-denominated term loan in an aggregateprincipal amount equal to €132.7 million(approximately $179.6 million as of December 31, 2004, on a U.S. dollarequivalent basis) and a $150.0 million multi-currency revolving credit facilityforming part of our Senior Secured Credit Facility, as well as borrowings undercertain local credit facilities, each of which partially mitigates our currencyrisk with respect to future debt service. Net sales and costs tend to beincurred in the same currency, and therefore mitigate local currency risk.

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**ITEM 8.**                FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

The following financial statements and schedule of VWRInternational, Inc. (Successor) and VWR International Corporation(Predecessor) for the periods indicated are included in this 10-K.

Theterm “Successor” refers to VWR, International, Inc. following theAcquisition. The term “Predecessor” refers to VWR International Corporationprior to the Acquisition on April 7, 2004. See also “Basis of Presentationand Principles of Consolidation/Combination” in Note 1(b) to the financialstatements.
|                                                                                                                                                                                                                             | ** ** | **Page** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **VWR INTERNATIONAL, INC.  (Predecessor and Successor)**                                                                                                                                                                    |       |
| Report of  Independent Registered Public Accounting Firm                                                                                                                                                                    | 40         |
| Consolidated  Balance Sheets as of December 31, 2004 and 2003                                                                                                                                                          | 41         |
| Consolidated/Combined  Statements of Operations for the periods included in the year ended  December 31, 2004 and the years ended December 31, 2003 and 2002                                                      | 42         |
| Consolidated/Combined  Statement of Shareholders’ Equity and other Comprehensive Income (Loss) for  the periods included in the year ended December 31, 2004 and the years  ended December 31, 2003 and 2002 | 43         |
| Consolidated/Combined  Statements of Cash Flows for the periods included in the year ended December 31,  2004 and the years ended December 31, 2003 and 2002                                                      | 45         |
| Notes to Consolidated/Combined Financial Statements                                                                                                                                                                         | 46         |
| Schedule II—Valuation and Qualifying Accounts for  the periods included in the year ended December 31, 2004 and the years  ended December 31, 2003 and 2002                                                  | 103        |

 

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**Report of Independent Registered Public AccountingFirm**

TheBoard of Directors and Shareholders

VWR International, Inc.:

We have audited the accompanying consolidated balancesheet of VWR International, Inc. and subsidiaries (Successor) as of December 31,2004, and of VWR International Corporation and subsidiaries (Predecessor) as ofDecember 31, 2003, and the related consolidated/combined statements ofoperations, shareholders’ equity and other comprehensive income (loss), andcash flows for the period from April 7, 2004 to December 31, 2004(Successor period), and from January 1, 2004 to April 6, 2004, andfor the years ended December 31, 2003 and 2002 (Predecessor periods). Inconnection with our audits of the consolidated/combined financial statements,we also have audited the financial statement schedule for the Successor and Predecessorperiods. These consolidated/combined financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated/combined financial statements based on ouraudits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the aforementioned Successor consolidatedfinancial statements referred to above present fairly, in all materialrespects, the financial position of VWR International, Inc. andsubsidiaries as of December 31, 2004, and the results of their operationsand their cash flows for the Successor period in conformity with U.S. generallyaccepted accounting principles. Further, in our opinion, the aforementionedPredecessor consolidated/combined financial statements present fairly, in allmaterial respects, the financial position of VWR International Corporation andsubsidiaries as of December 31, 2003, and the results of their operationsand their cash flows for the Predecessor periods, in conformity with U.S.generally accepted accounting principles. Also in our opinion, the relatedconsolidated/combined financial statement schedule, when considered in relationto the basic consolidated/combined financial statements taken as a whole,presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1(a) to the consolidated/combinedfinancial statements, effective April 7, 2004, CDRV AcquisitionCorporation (which merged into VWR International, Inc.) acquired all ofthe outstanding stock of VWR International Corporation in a businesscombination accounted for as a purchase. As a result of the acquisition, theconsolidated financial information for the period after the acquisition ispresented on a different cost basis than that for the periods before theacquisition and, therefore, is not comparable.

As discussed in Note 2(e) tothe consolidated/combined financial statements, effective January 1, 2002,the Company adopted the provisions of Statement of Financial ReportingStandards No. 142, *Goodwill and OtherIntangible Assets*.

/s/ KPMG LLP

Philadelphia,Pennsylvania

March 31, 2005

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**VWR INTERNATIONAL, INC.Consolidated Balance Sheets(Dollars in millions, except share data)**
| ** **                                                                                                                                    | ** ** | **Successor**         | ** ** | ** ** | **Predecessor**       | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|------------|-----------------------|------------|
| ** **                                                                                                                                    | ** ** | **December 31,** | ** ** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                                                    | ** ** | **2004**              | ** ** | ** ** | **2003**              | ** ** |
| **Assets**                                                                                                                                    |       |                  |       |       |                  |       |   |   |   |   |
| Current Assets:                                                                                                                               |       |                  |       |       |                  |       |   |   |   |   |
| Cash and cash  equivalents                                                                                                                    |       |                  | $          | 116.1      |                  |       |   |   | $ | 28.3 |   |   |
| Trade accounts  receivable, less reserves of $6.0 and $7.8, respectively                                                                      |       |                  | 405.8      |       |                  |       |   | 371.1 |   |   |
| Trade accounts  receivable from Merck KGaA and affiliates                                                                                     |       |                  | 7.8        |       |                  |       |   | 8.9 |   |   |
| Other receivables                                                                                                                             |       |                  | 19.1       |       |                  |       |   | 18.9 |   |   |
| Notes receivable  from Merck KGaA and affiliates                                                                                              |       |                  | —     |       |                  |       |   | 10.3 |   |   |
| Inventories                                                                                                                                   |       |                  | 248.9      |       |                  |       |   | 270.9 |   |   |
| Other current  assets                                                                                                                         |       |                  | 28.9       |       |                  |       |   | 25.3 |   |   |
| Total current  assets                                                                                                                         |       |                  | 826.6      |       |                  |       |   | 733.7 |   |   |
| Property and  equipment, net                                                                                                                  |       |                  | 154.4      |       |                  |       |   | 158.3 |   |   |
| Investments                                                                                                                                   |       |                  | 8.7        |       |                  |       |   | 8.1 |   |   |
| Goodwill                                                                                                                                      |       |                  | 907.0      |       |                  |       |   | 819.9 |   |   |
| Other intangible  assets, net                                                                                                                 |       |                  | 570.8      |       |                  |       |   | 2.4 |   |   |
| Deferred income  taxes                                                                                                                        |       |                  | 34.4       |       |                  |       |   | 18.2 |   |   |
| Other assets                                                                                                                                  |       |                  | 44.1       |       |                  |       |   | 27.3 |   |   |
| Total assets                                                                                                                                  |       |                  | $          | 2,546.0    |                  |       |   |   | $ | 1,767.9 |   |   |
| **Liabilities and Shareholders’ Equity**                                                                                                 |       |                  |       |       |                  |       |   |   |   |   |
| Current Liabilities:                                                                                                                          |       |                  |       |       |                  |       |   |   |   |   |
| Short-term bank  debt and current portion of capital lease obligations                                                                        |       |                  | $          | 12.9       |                  |       |   |   | $ | 10.7 |   |   |
| Accounts payable                                                                                                                              |       |                  | 288.5      |       |                  |       |   | 188.5 |   |   |
| Accounts payable  to Merck KGaA and affiliates                                                                                                |       |                  | 45.3       |       |                  |       |   | 50.6 |   |   |
| Accrued expenses                                                                                                                              |       |                  | 150.4      |       |                  |       |   | 120.1 |   |   |
| Total current  liabilities                                                                                                                    |       |                  | 497.1      |       |                  |       |   | 369.9 |   |   |
| Long-term debt                                                                                                                                |       |                  | 1,080.2    |       |                  |       |   | — |   |   |
| Push down debt due  Merck KGaA                                                                                                                |       |                  | —     |       |                  |       |   | 773.3 |   |   |
| Loans from Merck  KGaA and affiliates                                                                                                         |       |                  | —     |       |                  |       |   | 236.0 |   |   |
| Capital lease  obligations                                                                                                                    |       |                  | 6.1        |       |                  |       |   | 6.0 |   |   |
| Other long term  liabilities                                                                                                                  |       |                  | 81.3       |       |                  |       |   | 53.3 |   |   |
| Deferred income  taxes                                                                                                                        |       |                  | 241.1      |       |                  |       |   | 64.0 |   |   |
| Total liabilities                                                                                                                             |       |                  | 1,905.8    |       |                  |       |   | 1,502.5 |   |   |
| Parent company  common stock purchase subject to guarantee agreement (Note 12)                                                      |       |                  | 2.9        |       |                  |       |   | — |   |   |
| Commitments and contingences (Note 14)                                                                                                        |       |                  |       |       |                  |       |   |   |   |   |
| Shareholders’ equity (Note 1):                                                                                                           |       |                  |       |       |                  |       |   |   |   |   |
| Common stock  (Successor), $0.01 par value; 100 shares authorized, issued and outstanding  at December 31, 2004                          |       |                  | —     |       |                  |       |   | — |   |   |
| Common stock  (Predecessor), $0.01 par value; 10,000 shares authorized; 1,479.9 shares  issued and outstanding at December 31, 2003 |       |                  | —     |       |                  |       |   | — |   |   |
| Additional paid-in  capital                                                                                                                   |       |                  | 552.3      |       |                  |       |   | 224.8 |   |   |
| Retained earnings                                                                                                                             |       |                  | 31.9       |       |                  |       |   | 65.1 |   |   |
| Unamortized value  of restricted stock issued                                                                                                 |       |                  | (0.3       | )          |                  |       |   | — |   |   |
| Accumulated other  comprehensive income (loss)                                                                                                |       |                  | 53.4       |       |                  |       |   | (24.5 | ) |   |
| Total  shareholders’ equity                                                                                                              |       |                  | 637.3      |       |                  |       |   | 265.4 |   |   |
| Total liabilities  and shareholders’ equity                                                                                              |       |                  | $          | 2,546.0    |                  |       |   |   | $ | 1,767.9 |   |   |

 

See accompanying notes to consolidated/combined financial statements.

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**VWR INTERNATIONAL, INC.Consolidated/CombinedStatements of Operations(Dollars in millions)**
| ** **                                                                            | ** ** | **Successor**           | ** ** | ** ** | **Predecessor**           | ** ** |
|---------------------------------------------------------------------------------------|------------|-------------------------|------------|------------|---------------------------|------------|
| ** **                                                                            | ** ** | **April 7 -** | ** ** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                                                                            | ** ** | **December 31,**   | ** ** | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                                                            | ** ** | **2004**                | ** ** | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                            | ** ** | **(Consolidated)**      | ** ** | ** ** | **(Consolidated)**        | ** ** | **(Consolidated)** | ** ** | **(Combined)** | ** ** |
| Net sales                                                                             |       |                    | $          | 2,212.2    |                      |       |   |   | $ | 793.2 |   |   |   | $ | 2,794.2 |   |   |   | $ | 2,624.1 |   |   |
| Cost of goods  sold                                                                   |       |                    | 1,652.7    |       |                      |       |   | 588.0 |   |   |   | 2,078.1 |   |   |   | 1,950.1 |   |   |
| Gross profit                                                                          |       |                    | 559.5      |       |                      |       |   | 205.2 |   |   |   | 716.1 |   |   |   | 674.0 |   |   |
| Selling, general  and administrative expenses                                         |       |                    | 455.4      |       |                      |       |   | 163.7 |   |   |   | 583.4 |   |   |   | 560.0 |   |   |
| Operating income                                                                      |       |                    | 104.1      |       |                      |       |   | 41.5 |   |   |   | 132.7 |   |   |   | 114.0 |   |   |
| Interest income                                                                       |       |                    | (0.8       | )          |                      |       |   | (0.2 | ) |   |   | (1.7 | ) |   |   | (2.4 | ) |   |
| Interest expense:                                                                     |       |                    |       |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest on push down debt                                                            |       |                    | —     |       |                      |       |   | 4.1 |   |   |   | 15.2 |   |   |   | 26.4 |   |   |
| All other interest                                                                    |       |                    | 51.5       |       |                      |       |   | 1.7 |   |   |   | 10.9 |   |   |   | 15.4 |   |   |
| Other (income)  expense, net                                                          |       |                    | (2.0       | )          |                      |       |   | 0.1 |   |   |   | (3.0 | ) |   |   | 0.6 |   |   |
| Income before income taxes and cumulative effect of  a change in accounting principle |       |                    | 55.4       |       |                      |       |   | 35.8 |   |   |   | 111.3 |   |   |   | 74.0 |   |   |
| Income tax provision                                                                  |       |                    | 23.5       |       |                      |       |   | 15.1 |   |   |   | 46.2 |   |   |   | 29.7 |   |   |
| Income before cumulative effect of a change in accounting  principle                  |       |                    | 31.9       |       |                      |       |   | 20.7 |   |   |   | 65.1 |   |   |   | 44.3 |   |   |
| Cumulative effect  of a change in accounting principle (Note 2)                       |       |                    | —     |       |                      |       |   | — |   |   |   | — |   |   |   | (43.8 | ) |   |
| Net income                                                                            |       |                    | $          | 31.9       |                      |       |   |   | $ | 20.7 |   |   |   | $ | 65.1 |   |   |   | $ | 0.5 |   |   |

 

See accompanying notes to consolidated/combined financial statements.

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**VWR INTERNATIONAL, INC.**

**Consolidated/Combined Statements of Shareholders’ Equity and Other Comprehensive Income (Loss)**

**(Dollars in millions, except share data)**

**Forthe Period January 1, 2002 - April 6, 2004 (Predecessor)**
| ** **                                                                                             | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | ** **               | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |   |
|--------------------------------------------------------------------------------------------------------|------------|------------|------------|----------------|------------|--------------|------------|--------------------------|------------|------------------------|------------|------------|------------|--------|
| ** **                                                                                             | ** ** | ** ** | ** ** | **Additional** | ** ** | ** **   | ** ** | ** **               | ** ** | **other**              | ** ** | ** ** | ** ** |   |
| ** **                                                                                             | ** ** | **Common** | ** ** | **paid-in**    | ** ** | **Retained** | ** ** | ** Invested ** | ** ** | **comprehensive**      | ** ** | ** ** | ** ** |   |
| ** **                                                                                             | ** ** | **stock**  | ** ** | **capital**    | ** ** | **earnings** | ** ** | **Equity**               | ** ** | **income (loss)** | ** ** | **Total**  | ** ** |   |
| Balance at  January 1, 2002                                                                       |       |       | $          | —         |       |         |       | $                        | —     |                   |       |       | $          | — |   |   |   | $ | 196.3 |   |   |   | $ | (26.1 | ) |   | $ | 170.2 |   |   |
| Comprehensive income  (loss):                                                                          |       |       |       |           |       |         |       |                     |       |                   |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                             |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | 0.5 |   |   |   | — |   |   | 0.5 |   |   |
| Minimum pension  liability, net of taxes of $13.3                                                      |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | — |   |   |   | (20.0 | ) |   | (20.0 | ) |   |
| Foreign currency  translation adjustment                                                               |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | — |   |   |   | 6.3 |   |   | 6.3 |   |   |
| Total  comprehensive (loss)                                                                            |       |       |       |           |       |         |       |                     |       |                   |       |       |       |   |   |   |   |   |   |   |   | (13.2 | ) |
| Capital  contributions from Merck KGaA and affiliates                                                  |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | 6.8 |   |   |   | — |   |   | 6.8 |   |   |
| Dividends paid to  Merck KGaA and  affiliates                                                          |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | (2.8 | ) |   |   | — |   |   | (2.8 | ) |   |
| Capital  contribution for interest expense on  push down debt, net of tax                              |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | 15.9 |   |   |   | — |   |   | 15.9 |   |   |
| Transfer of  invested equity to common stock  and additional paid-in capital related to reorganization |       |       | —     |           |       |         | 216.7      |                     |       |                   | —     |       |       |   | (216.7 | ) |   |   | — |   |   | — |   |   |
| Balance at  December 31, 2002                                                                     |       |       | —     |           |       |         | 216.7      |                     |       |                   | —     |       |       |   | — |   |   |   | (39.8 | ) |   | 176.9 |   |   |
| Comprehensive income  (loss):                                                                          |       |       |       |           |       |         |       |                     |       |                   |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                             |       |       | —     |           |       |         | —     |                     |       |                   | 65.1       |       |       |   | — |   |   |   | — |   |   | 65.1 |   |   |
| Minimum pension  liability, net of taxes of  $0.8                                                      |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | — |   |   |   | (1.2 | ) |   | (1.2 | ) |   |
| Foreign currency  translation adjustment                                                               |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | — |   |   |   | 16.8 |   |   | 16.8 |   |   |
| Unrealized loss on  derivatives, net of tax                                                            |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | — |   |   |   | (0.3 | ) |   | (0.3 | ) |   |
| Total  comprehensive income                                                                            |       |       |       |           |       |         |       |                     |       |                   |       |       |       |   |   |   |   |   |   |   |   | 80.4 |   |   |
| Transfers to Merck  KGaA and affiliates,  net                                                          |       |       | —     |           |       |         | (1.0       | )                        |       |                   | —     |       |       |   | — |   |   |   | — |   |   | (1.0 | ) |   |
| Capital  contribution for interest expense on  push down debt, net of tax                              |       |       | —     |           |       |         | 9.1        |                     |       |                   | —     |       |       |   | — |   |   |   | — |   |   | 9.1 |   |   |
| Balance at  December 31, 2003                                                                     |       |       | —     |           |       |         | 224.8      |                     |       |                   | 65.1       |       |       |   | — |   |   |   | (24.5 | ) |   | 265.4 |   |   |
| Comprehensive income  (loss):                                                                          |       |       |       |           |       |         |       |                     |       |                   |       |       |       |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                             |       |       | —     |           |       |         | —     |                     |       |                   | 20.7       |       |       |   | — |   |   |   | — |   |   | 20.7 |   |   |
| Foreign currency  translation adjustment                                                               |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | — |   |   |   | (3.7 | ) |   | (3.7 | ) |   |
| Unrealized gain on  derivatives, net of tax                                                            |       |       | —     |           |       |         | —     |                     |       |                   | —     |       |       |   | — |   |   |   | 0.2 |   |   | 0.2 |   |   |
| Total  comprehensive income                                                                            |       |       |       |           |       |         |       |                     |       |                   |       |       |       |   |   |   |   |   |   |   |   | 17.2 |   |   |
| Capital  contribution for interest expense on push down debt, net of tax                               |       |       | —     |           |       |         | 2.5        |                     |       |                   | —     |       |       |   | — |   |   |   | — |   |   | 2.5 |   |   |
| Balance at  April 6, 2004                                                                         |       |       | $          | —         |       |         |       | $                        | 227.3      |                   |       |       | $          | 85.8   |   |   |   | $ | — |   |   |   | $ | (28.0 | ) |   | $ | 285.1 |   |   |

** **

See accompanying notes to consolidated/combined financial statements.

43

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**VWR INTERNATIONAL, INC.**

**Consolidated/Combined Statements of Shareholders’ Equity and Other Comprehensive Income (Loss) (Continued)**

**(Dollars in millions, except share data)**

**For the Period April 7 - December 31, 2004(Successor)**
| ** **                                                         | ** ** | ** **             | ** ** | ** **     | ** ** | ** **   | ** ** | **Unamortized**       | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------|------------|------------------------|------------|----------------|------------|--------------|------------|-----------------------|------------|------------------------|------------|------------|------------|
| ** **                                                         | ** ** | ** **             | ** ** | **Additional** | ** ** | ** **   | ** ** | **value of**     | ** ** | **other**              | ** ** | ** ** | ** ** |
| ** **                                                         | ** ** | ** Common ** | ** ** | **paid-in**    | ** ** | **Retained** | ** ** | **restricted**        | ** ** | **comprehensive**      | ** ** | ** ** | ** ** |
| ** **                                                         | ** ** | **stock**              | ** ** | **capital**    | ** ** | **earnings** | ** ** | **stock issued** | ** ** | **income (loss)** | ** ** | **Total**  | ** ** |
| Balance at  April 7, 2004                                     |       |                   | $          | —         |       |         |       | $                     | —     |                   |       |       | $          | — |   |   |   | $ | — |   |   |   | $ | — |   |   | $ | — |   |
| Issuance of 100 shares of common stock, net of expenses            |       |                   | —     |           |       |         | 530.5      |                  |       |                   | —     |       |       |   | — |   |   |   | — |   |   | 530.5 |   |
| Capital contribution (Note 12)                                     |       |                   | —     |           |       |         | 21.5       |                  |       |                   | —     |       |       |   | — |   |   |   | — |   |   | 21.5 |   |
| Issuance of parent company restricted common stock,  net (Note 13) |       |                   | —     |           |       |         | 0.3        |                  |       |                   | —     |       |       |   | (0.3 | ) |   |   | — |   |   | — |   |
| Comprehensive  income (loss):                                      |       |                   |       |           |       |         |       |                  |       |                   |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                         |       |                   | —     |           |       |         | —     |                  |       |                   | 31.9       |       |       |   | — |   |   |   | — |   |   | 31.9 |   |
| Foreign currency translation  adjustment                           |       |                   | —     |           |       |         | —     |                  |       |                   | —     |       |       |   | — |   |   |   | 54.1 |   |   | 54.1 |   |
| Unrealized loss on derivatives, net of  tax                        |       |                   | —     |           |       |         | —     |                  |       |                   | —     |       |       |   | — |   |   |   | (0.7 | ) |   | (0.7 | ) |
| Total comprehensive income                                         |       |                   |       |           |       |         |       |                  |       |                   |       |       |       |   |   |   |   |   |   |   |   | 85.3 |   |
| Balance at  December 31, 2004                                 |       |                   | $          | —         |       |         |       | $                     | 552.3      |                   |       |       | $          | 31.9 |   |   |   | $ | (0.3 | ) |   |   | $ | 53.4 |   |   | $ | 637.3 |   |

 

See accompanying notes to consolidated/combined financial statements.

44

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**VWR INTERNATIONAL, INC.Consolidated/CombinedStatements of Cash Flows(Dollars in millions)**
| ** **                                                                                | ** ** | **Successor**           | ** ** | ** **   | **Predecessor**           | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------|------------|--------------|---------------------------|------------|
| ** **                                                                                | ** ** | **April 7 -** | ** ** | ** **   | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                                                                                | ** ** | **December 31,**   | ** ** | ** **   | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                                                                | ** ** | **2004**                | ** ** | ** **   | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                                | ** ** | **(Consolidated)**      | ** ** | ** **   | **(Consolidated)**        | ** ** | **(Consolidated)** | ** ** | **(Combined)** | ** ** |
| Cash flows from operating activities:                                                     |       |                    |       | *** *** |                      |       |   |   | *** *** |   |   |   | *** *** |   |   |   | *** *** |   |
| Net income                                                                                |       |                    | $          | 31.9         | *** ***              |       |   |   | $ | 20.7 | *** *** |   |   | $ | 65.1 | *** *** |   |   | $ | 0.5 | *** *** |   |
| Adjustments to reconcile  net income to net cash provided by operating activities:        |       |                    |       | *** *** |                      |       |   |   | *** *** |   |   |   | *** *** |   |   |   | *** *** |   |
| Depreciation and  amortization                                                            |       |                    | 25.8       | *** *** |                      |       |   | 8.9 | *** *** |   |   | 32.9 | *** *** |   |   | 32.6 | *** *** |   |
| Gain on sale of  assets                                                                   |       |                    | —     | *** *** |                      |       |   | — | *** *** |   |   | (1.4 | ) |   |   | (0.8 | ) |   |
| Cumulative effect  of a change in accounting principle                                    |       |                    | —     | *** *** |                      |       |   | — | *** *** |   |   | — |   |   |   | 43.8 |   |   |
| Interest on push  down debt, net of tax                                                   |       |                    | —     | *** *** |                      |       |   | 2.5 | *** *** |   |   | 9.1 |   |   |   | 15.9 |   |   |
| Noncash impairment  charges                                                               |       |                    | —     | *** *** |                      |       |   | — | *** *** |   |   | — |   |   |   | 0.7 |   |   |
| Amortization of  debt issuance costs                                                      |       |                    | 3.7        | *** *** |                      |       |   | — | *** *** |   |   | — |   |   |   | — |   |   |
| Deferred income  tax expense                                                              |       |                    | 3.0        | *** *** |                      |       |   | 0.9 | *** *** |   |   | 14.0 |   |   |   | 13.1 |   |   |
| Provision for  doubtful accounts                                                          |       |                    | 2.5        | *** *** |                      |       |   | 0.6 | *** *** |   |   | 4.0 |   |   |   | 2.7 |   |   |
| Changes in working  capital, net of effect of business acquisitions:                      |       |                    |       | *** *** |                      |       |   |   | *** *** |   |   |   |   |   |   |   |   |   |
| Trade accounts  receivable                                                                |       |                    | 4.9        | *** *** |                      |       |   | (26.8 | ) |   |   | 2.3 |   |   |   | 18.5 |   |   |
| Other receivables                                                                         |       |                    | (7.0       | )            |                      |       |   | 8.7 |   |   |   | 1.5 |   |   |   | 8.9 |   |   |
| Inventories                                                                               |       |                    | 20.5       |         |                      |       |   | 17.5 |   |   |   | 13.4 |   |   |   | 2.6 |   |   |
| Other assets                                                                              |       |                    | (0.9       | )            |                      |       |   | 1.9 |   |   |   | 7.8 |   |   |   | (9.8 | ) |   |
| Accounts payable  trade                                                                   |       |                    | 16.4       |         |                      |       |   | 53.3 |   |   |   | 12.3 |   |   |   | 26.6 |   |   |
| Accounts payable  to Merck KGaA and affiliates                                            |       |                    | (16.2      | )            |                      |       |   | 8.4 |   |   |   | (7.7 | ) |   |   | 8.6 |   |   |
| Other liabilities                                                                         |       |                    | 2.6        | *** *** |                      |       |   | 0.9 |   |   |   | 1.8 |   |   |   | (7.1 | ) |   |
| Net cash provided  by operating activities                                                |       |                    | 87.2       | *** *** |                      |       |   | 97.5 |   |   |   | 155.1 |   |   |   | 156.8 |   |   |
| Cash flows from investing activities:                                                     |       |                    |       | *** *** |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Payment to Merck  KGaA and affiliates to acquire business, net of cash acquired of $130.8 |       |                    | (1,538.3   | )            |                      |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Transaction costs                                                                         |       |                    | (20.5      | )            |                      |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Proceeds from sale  of business                                                           |       |                    | —     |         |                      |       |   | — |   |   |   | — |   |   |   | 3.0 |   |   |
| Science education  acquisition of a business                                              |       |                    | (2.7       | )            |                      |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Capital  expenditures                                                                     |       |                    | (13.1      | )            |                      |       |   | (3.3 | ) |   |   | (16.6 | ) |   |   | (41.0 | ) |   |
| Proceeds from sale  of property and equipment                                             |       |                    | 1.2        |         |                      |       |   | 0.4 |   |   |   | 7.7 |   |   |   | 0.4 |   |   |
| Net cash used in  investing activities                                                    |       |                    | (1,573.4   | )            |                      |       |   | (2.9 | ) |   |   | (8.9 | ) |   |   | (37.6 | ) |   |
| Cash flows from financing activities:                                                     |       |                    |       |         |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from debt                                                                        |       |                    | 1,168.2    |         |                      |       |   | 13.3 |   |   |   | 136.2 |   |   |   | 251.6 |   |   |
| Repayment of debt                                                                         |       |                    | (111.1     | )            |                      |       |   | (6.8 | ) |   |   | (265.5 | ) |   |   | (421.7 | ) |   |
| Decrease  (increase) in notes receivable from Merck KGaA and affiliates                   |       |                    | —     | *** *** |                      |       |   | 4.1 |   |   |   | (9.1 | ) |   |   | 25.0 |   |   |
| Net change in bank  checks outstanding                                                    |       |                    | 25.0       | *** *** |                      |       |   | (2.1 | ) |   |   | (5.4 | ) |   |   | (10.9 | ) |   |
| Capital  contributions from Merck KGaA                                                    |       |                    | —     | *** *** |                      |       |   | — |   |   |   | — |   |   |   | 6.8 |   |   |
| Dividends paid to  Merck KGaA                                                             |       |                    | —     | *** *** |                      |       |   | — |   |   |   | — |   |   |   | (2.8 | ) |   |
| Issuance of 100  shares of common stock, net of expenses                                  |       |                    | 530.5      | *** *** |                      |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Proceeds from  stock incentive plan                                                       |       |                    | 23.7       | *** *** |                      |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Cash paid for debt  issuance costs                                                        |       |                    | (38.1      | )            |                      |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Other                                                                                     |       |                    | —     | *** *** |                      |       |   | — |   |   |   | (1.0 | ) |   |   | — |   |   |
| Net cash provided  by (used in) financing activities                                      |       |                    | 1,598.2    | *** *** |                      |       |   | 8.5 |   |   |   | (144.8 | ) |   |   | (152.0 | ) |   |
| Effect of exchange  rate changes on cash                                                  |       |                    | 4.1        | *** *** |                      |       |   | (0.6 | ) |   |   | 2.2 |   |   |   | 3.1 |   |   |
| Net increase  (decrease) in cash and cash equivalents                                     |       |                    | 116.1      | *** *** |                      |       |   | 102.5 |   |   |   | 3.6 |   |   |   | (29.7 | ) |   |
| Cash and cash  equivalents beginning of period                                            |       |                    | —     | *** *** |                      |       |   | 28.3 |   |   |   | 24.7 |   |   |   | 54.4 |   |   |
| Cash and cash  equivalents end of period                                                  |       |                    | $          | 116.1        | *** ***              |       |   |   | $ | 130.8 |   |   |   | $ | 28.3 |   |   |   | $ | 24.7 |   |   |
| Supplemental disclosures of cash flow information:                                        |       |                    |       | *** *** |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid during the  period for:                                                         |       |                    |       | *** *** |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                  |       |                    | $          | 33.9         | *** ***              |       |   |   | $ | 1.3 |   |   |   | $ | 11.3 |   |   |   | $ | 14.7 |   |   |
| Income taxes paid,  net                                                                   |       |                    | $          | 29.1         | *** ***              |       |   |   | $ | 4.2 |   |   |   | $ | 33.9 |   |   |   | $ | 12.6 |   |   |

 

See accompanying notes to consolidated/combined financial statements.

45

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements December 31, 2004, 2003 and 2002 (Dollars in millions)**

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

***(a)   Background***

VWR International, Inc. and its predecessor, VWRInternational Corporation, (“VWR”, the “Company” or “we”), distributescientific supplies, chemicals, and equipment, primarily in North America andEurope. The business is diversified across products and services, customergroups, and geography. VWR’s principal customers are pharmaceutical,biotechnology, chemical, technology, food processing, and consumer productcompanies; universities and research institutes; government agencies;environmental testing organizations; and primary and secondary schools.

VWR operates in North America (United States, Canada,and Mexico) and in the following countries in Europe: Austria, Belgium,Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway,Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

VWR’s North American business was formerly the VWRScientific Products Corporation “VWRSP”. In 1995, Merck KGaA, VWR’s ultimateparent company until April 7, 2004, headquartered in Darmstadt, Germany,agreed to acquire approximately 49.9% of the then-outstanding shares of VWRSP.In 1999, following a tender offer for the remaining shares, VWRSP became awholly-owned subsidiary of Merck KGaA (collectively, the “VWRSP Acquisition”) (SeeNote 3 (d)).

Effective January 1, 2001, Merck KGaA combined,for management purposes only, VWR’s North American business with Merck KGaA’sEuropean business and the combined businesses operated under the name VWRInternational.

On December 6, 2002, VWR InternationalCorporation was incorporated in Delaware. On December 31, 2002, Merck KGaAentered into a series of reorganization transactions whereby all of the legalentities, which comprised the North American and European businesses, werecontributed to VWR International Corporation and became wholly-ownedsubsidiaries of VWR International Corporation (the “Reorganization”). VWRInternational Corporation was 100% owned by subsidiaries of Merck KGaA.

As of December 31, 2003 and 2002, 1,474.9 sharesof VWR International Corporation’s common stock, par value $0.01 per share,were issued and outstanding. These shares have been considered outstanding fromthe date of the Reorganization.

As more fully discussed in Note 3(a), on April 7,2004, Merck KGaA sold all of the outstanding shares of capital stock of VWRInternational Corporation to CDRV Acquisition Corporation (“CDRV”), awholly-owned subsidiary of a third party, for a purchase price of approximately$1,683.4, consisting of approximately $1,669.1 in cash and approximately $14.3of assumed debt (the “Acquisition”). In addition, direct acquisition costs ofapproximately $77.5 were incurred. CDRV financed the Acquisition through a$549.2 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, CDRV issued $200.0of 67¤8%Unsecured Senior Notes due 2012 and $320.0 of 8% Unsecured Senior SubordinatedNotes due 2014. Following the completion of the Acquisition, there were a series ofinternal reorganizations, pursuant to which, among other things, (i) VWRInternational Corporation merged with and into VWR International, Inc.,with VWR 

46

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

International, Inc. surviving, and (ii) thereafter,CDRV merged with and into VWR International, Inc., with VWR International, Inc.surviving and assuming the obligations of CDRV under the Senior Credit Facilityand the Unsecured Notes.

The term “successor”refers to VWR International, Inc. following the Acquisition. The term “predecessor”refers to VWR International Corporation prior to the change in control on April 7,2004. CDRV had no operations prior to the Acquisition.

***(b)   Basis of Presentation and Principles ofConsolidation/Combination***

The formation of VWR and the transfer of the NorthAmerican and European businesses to VWR through the Reorganization were betweencompanies under common control and have been accounted for in a manner similarto a pooling of interests. The financial statements for the year ended December 31,2002 represents the combined financial statements of the two businesses thathave been derived from the consolidated financial statements and accountingrecords of Merck KGaA using the historical results of operations and historicalbasis of the assets and liabilities of the individual businesses following acarve-out process for the European business. The 2004 and 2003 results areconsolidated as they consist of the financial statements of the wholly-ownedsubsidiaries of VWR. All intercompany accounts and transactions have beeneliminated.

Management believes the assumptions underlying the2002 combined financial statements are reasonable. However, the combinedfinancial statements included herein may not necessarily reflect VWR’s resultsof operations, financial position, and cash flows in the future or what itsresults of operations, financial position, and cash flows would have been hadVWR been a stand-alone company during the periods presented. Because a directownership relationship did not exist among all the various units comprising VWRprior to December 31, 2002, Merck KGaA’s net investment in VWR is shown asInvested Equity in the combined financial statements prior to theReorganization. VWR began accumulating retained earnings subsequent to the dateof the Reorganization.

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 treasuryservices, as such costs have not been charged to VWR. Management does notbelieve that charges for such services would have been material. See Note 15for a further discussion of transactions with Merck KGaA.

The purchase price paid by Merck KGaA for each of theVWR businesses was pushed down to the VWR financial statements from the date ofthe VWRSP Acquisition and has resulted in the allocation of the purchase priceto the assets and liabilities acquired and the recognition of push down debtdue Merck KGaA or a contribution to shareholders’ equity for cashconsideration. For all periods prior to the Acquisition, interest expense isrecorded on this push down debt based upon Merck KGaA’s intercompany interestrates, which are not necessarily indicative of rates VWR would have obtained ifit were not an ultimate subsidiary of Merck KGaA. Interest expense, includingtax effects on push down debt, has been included in the statements ofoperations, and presented as a non-cash item in the accompanying statements ofcash flows and a capital contribution in the statement of shareholders’ equity,as this interest was not required to be paid to Merck KGaA.

47

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Equity transactions withMerck KGaA and affiliates represent cash and non-cash transactions between VWRand Merck KGaA and its affiliates associated with carve-out, push down, andother equity transactions prior to the Reorganization.

**(2)   Summaryof Significant Accounting Policies**

The accounting policies asdescribed herein are applicable to both the predecessor and successor financialstatements unless specifically noted therein.

***(a)   Cash and Cash Equivalents***

Cash and cash equivalentsare comprised of highly liquid investments with insignificant interest raterisk and having original maturities of three months or less. The amount ofrestricted cash was $1.5 and $2.7 at December 31, 2004 and 2003,respectively.

***(b)   Trade Accounts Receivables Reserve***

The carrying amount ofaccounts receivable reflects a reserve representing our best estimate of theamounts that will not be collected and for estimated sales returns andallowances. In addition to reviewing delinquent accounts receivable, weconsider many factors in estimating our reserve, including historical data,experience, customer types, credit worthiness, and economic trends. From timeto time, we may adjust our assumptions for anticipated changes in any of theseor other factors expected to affect collectibility.

***(c)   Inventories***

Inventories are valued atthe lower of cost or market, cost being determined principally by the last-in,first-out (“LIFO”) method for the U.S. subsidiaries and the average cost or thefirst-in, first-out (“FIFO”) method for all other subsidiaries. The Companyperiodically reviews quantities of inventories on hand and compares theseamounts to the expected use of each product or product line. The Companyrecords a charge to cost of sales for the amount required to reduce thecarrying value of inventory to net realizable value. Costs associated with theprocurement and warehousing of inventories, such as inbound freight charges,purchasing and receiving costs, and internal transfer costs, are included inthe cost of sales line item within the statement of operations.

***(d)   Property and Equipment***

Property and equipment arerecorded at cost. Property and equipment held under capital leases are statedat the present value of minimum lease payments. Depreciation is computed usingthe straight-line method as follows: buildings and improvements, 10 to 40years; equipment and software, 3 to 10 years. Property and equipment held undercapital leases and leasehold improvements are amortized over the shorter of theremaining life of the lease or the useful lives of the improvements. Costs forrepairs and maintenance that do not significantly increase the value orestimated lives of property and equipment are treated as expense as suchexpenses are incurred.

48

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(e)   Goodwill and Intangible Assets***

Goodwill represents the excess of costs over fairvalue of assets of businesses acquired. VWR adopted the provisions of Statementof Financial Accounting Standards (“SFAS”) No. 142, *Goodwill and Other Intangible Assets*, asof January 1, 2002. Goodwill and intangible assets acquired in a purchasebusiness combination and determined to have an indefinite useful life are notamortized, but instead are tested for impairment at least annually inaccordance with the provisions of SFAS No. 142. SFAS No. 142 alsorequires that intangible assets with finite useful lives be amortized overtheir respective estimated useful lives to their estimated residual values, andreviewed for impairment in accordance with SFAS No. 144, *Accounting for Impairment or Disposal of Long-LivedAssets*.

In connection with SFAS No. 142’s transitionalgoodwill impairment evaluation, VWR performed an assessment of whether therewas an indication that goodwill was impaired as of the date of adoption. Toaccomplish this, VWR was required to identify its reporting units and determinethe carrying value of each reporting unit by assigning the assets andliabilities, including the existing goodwill and intangible assets, to thosereporting units as of January 1, 2002. VWR was required to determine thefair value of each reporting unit and compare it to the carrying amount of thereporting unit within six months of January 1, 2002. Fair value wasdetermined using a combination of discounted cash flows and multiple-of-earningsvaluation techniques. To the extent the carrying amount of a reporting unitexceeded the fair value of the reporting unit, VWR would be required to performthe second step of the transitional impairment test, as this is an indication thatthe reporting unit goodwill may be impaired. The second step was required forits French and Netherlands reporting units. In this step, VWR compared theimplied fair value of each reporting unit’s goodwill with the carrying amountof the reporting unit’s goodwill, both of which were measured as of the date ofadoption. The implied fair value of goodwill was determined by allocating thefair value of the reporting unit to all of the assets (recognized andunrecognized) and liabilities of the reporting unit in a manner similar to apurchase price allocation, in accordance with SFAS No. 141, *Business Combinations*. The residual fairvalue after this allocation was the implied fair value of the reporting unitgoodwill. The implied fair values of these reporting units were less than theircarrying amounts, and therefore VWR recognized a non-cash transitionalimpairment loss of $43.8, which is not deductible for tax purposes. Thisgoodwill impairment charge is presented in the statement of operations as thecumulative effect of a change in accounting principle as of January 1,2002.

SFAS No. 142 also requires that goodwill betested annually or between annual tests if events occur or circumstances changethat would more likely than not reduce the fair value of a reporting unit belowits carrying amounts. VWR has elected to perform its annual test forindications of goodwill impairment in the fourth quarter of each year.

Goodwill included in thesuccessor and predecessor financial statements primarily represents the excessof acquisition costs over the fair value of net assets acquired in connectionwith the Acquisition and the VWRSP Acquisition as discussed in Note 3(a) and3(d), respectively.

***(f)   Impairment of Long-Lived Assets***

VWR evaluates the recoverability of long-lived assetsused in operations when events or circumstances indicate a possible inabilityto recover carrying amounts. Such evaluations are based on 

49

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

undiscounted cash flow andprofitability projections. An impairment charge is recorded for the differencebetween the fair value and carrying value of the asset.

In August 2001, SFAS No. 144,*Accounting for the Impairment or Disposal ofLong-Lived Assets* was issued. SFAS No. 144 addresses financialaccounting and reporting for the impairment of long-lived assets to bedisposed of. It supersedes, with exceptions, SFAS No. 121, *Accounting for the Impairment of Long-Lived Assetsand for Long-Lived Assets to Be Disposed Of*, and is effective foryears beginning after December 15, 2001. SFAS No. 144 requires theuse of a single accounting model for long-lived assets to be disposed of bysale. VWR adopted this standard on January 1, 2002, and it did not have amaterial effect on its results of operations, cash flows, or financialposition.

***(g)***   Advertising

VWRexpenses advertising costs as incurred, except for certain direct-responseadvertising, which is capitalized and amortized over its expected period offuture benefit, generally from 12 to 48 months. Capitalized direct-responseadvertising, which is included in other current assets and other assets,consists of catalog production and mailing costs that are expensed from thedate catalogs are mailed. Capitalized direct expense advertising as of December31, 2004 and 2003 were $9.8 and $7.9, respectively. The table below shows totaladvertising expense for each of the reporting periods.
| ** **           | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|----------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **           | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **           | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **           | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Advertising  expense |       |                    | $          | 16.4                      |       |   |   | $ | 5.4 |   |   | $ | 23.2 |   | $ | 22.0 |   |
|                      |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

***(h)***   RevenueRecognition

VWR records revenue whenpersuasive evidence of an arrangement exists, the price is fixed ordeterminable, title and risk of loss have been transferred to the customer, andcollectibility of the resulting receivable is reasonably assured. Risk of lossis transferred at the time of shipment or upon delivery to customers, dependingupon the terms of the arrangement with the customer. Products are deliveredwithout significant post-sale obligations to the customer. Provisions fordiscounts, and rebates to customers, sales returns, and other adjustments areprovided for as a reduction of sales in the period the related sales arerecorded. Service revenue is recognized when the services are performed.

***(i)***   Shippingand Handling

VWR records shipping andhandling charges billed to customers in net sales and records shipping andhandling costs in cost of goods sold for all periods presented.

50

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(j)***   IncomeTaxes

Income taxes are accounted for under SFAS No. 109,*Accounting for Income Taxes*,which requires the asset and liability method under which deferred income taxesare recognized for the expected net tax effects of temporary differences betweenthe carrying amounts of assets and liabilities for financial reporting andincome tax purposes. Deferred tax assets and liabilities are measured using theenacted tax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or settled. The effecton deferred tax assets and liabilities of a change in tax rates is recognizedin income in the period that includes the enactment date. VWR records avaluation allowance to reduce deferred tax assets to the amount that is morelikely than not to be realized.

Prior to theReorganization on December 31, 2002, VWR was, in certain cases, includedin consolidated tax returns with Merck KGaA affiliates, and certain entities ofVWR were included in tax-sharing agreements. For purposes of the combinedfinancial statements in 2002, VWR’s income taxes have been calculated on aseparate tax return basis. Subsequent to the Reorganization, VWR has not filedconsolidated tax returns with any Merck KGaA affiliate.

***(k)***   Insurance

Certain insurable riskssuch as general liability, property damage, and workers’ compensation areself-insured by VWR. However, VWR has umbrella insurance coverage for certainrisk exposure subject to specified limits. Accruals for claims under VWR’sself-insurance program are recorded on a claims-incurred basis.

***(l)***   Pensionsand Other Postretirement Plans

VWR has defined benefitplans covering certain of its employees. The benefits include pension, salarycontinuance, severance, life insurance, and health care. Benefits are accruedover the employee’s service period.

***(m)***   Concentrationsof Credit Risk

Trade receivables reflectthe diverse customer base and the customer base’s wide geographic dispersion ofthe VWR businesses. As a result, no significant concentrations of credit riskexist.

51

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(n)***   Stock-BasedCompensation

TheCompany measures compensation expense for its stock-based employee compensationplan using the intrinsic value method. The Company has adopted thedisclosure-only provisions of SFAS No. 148, *Accounting for Stock-Based Compensation—Transition and Disclosure, anamendment of FASB Statement No. 123*. Therefore, the Company hasnot recognized compensation expense for its options granted because suchoptions had an exercise price equal to their fair market value on the date ofgrant. Had compensation expense for the Company’s stock option plans beendetermined based on the fair value at the grant date for awards under theCompany’s stock plans, consistent with the methodology prescribed under SFAS No. 148,the Company’s net income would have approximated the pro-forma amount indicatedbelow:
| ** **                                                                                               | ** ** | **Successor**           | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                               | ** ** | **April 7 -** | ** ** |
| ** **                                                                                               | ** ** | **December 31,**   | ** ** |
| ** **                                                                                               | ** ** | **2004**                | ** ** |
| Net income as  reported                                                                                  |       |                    | $          | 31.9 |   |   |
| Deduct:  stock-based compensation expense determined using fair based method for all awards,  net of tax |       |                    | (0.3       | ) |   |
| Pro-forma net income                                                                                     |       |                    | $          | 31.6 |   |   |

 

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  |   | 3.47    | %      |
|---------------------------|--------|---------|--------|
| Expected life of  options |   | 4 years |   |
| Volatility                |   | 20      | %      |
| Expected dividend yield   |   | 0.0     | %      |

 

***(o)***   ForeignCurrency Translation

Assetsand liabilities of VWR’s foreign subsidiaries, where the functional currency isthe local currency, are translated into U.S. dollars using period-endexchange rates, and income and expenses are translated using average exchangerates. Resulting translation adjustments are reported as a separate componentof shareholders’ equity. Foreign currency translation adjustments for exchangegains and losses on transactions are included in other (income) expense, net,and were as follows:
| ** **           | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|----------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **           | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **           | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **           | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Exchange gains,  net |       |                    | $          | 1.1                       |       |   |   | $ | 0.4 |   |   | $ | 0.1 |   | $ | 0.5 |   |
|                      |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

There have been nosignificant fluctuations in foreign currency exchange rates since December 31,2004.

52

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(p)***   FinancialInstruments and Derivatives

The Company accounts for derivative financialinstruments in accordance with SFAS No. 133, *Accounting for Derivative Instruments and Hedging Activities,*as amended. All derivatives, whether designated in hedging relationships ornot, are recorded on the balance sheet at fair value. If the derivative isdesignated as a fair value hedge, the changes in the fair value of thederivative and of the hedged item attributable to the hedged risk arerecognized in the results of operations. If the derivative is designated as acash flow hedge, the effective portions of changes in the fair value of thederivative are recorded in accumulated other comprehensive income and arerecognized in the results of operations when the hedged item affects earnings. Ineffectiveportions of changes in the fair value cash flow hedges are recognized in theresults of operations. For derivative instruments not designated as hedginginstruments, changes in fair value are recognized in the results of operationsin the current period.

VWR entered into forwardforeign currency contracts to hedge exposures to fluctuations in foreigncurrency rates that arose from purchasing of products that are denominated inforeign currencies. Typically, such arrangements have been entered into on anannual basis, however, the Company may augment the actions on an ongoing basis.Gains and losses on the forward foreign currency contracts generally offsetgains and losses on certain firm commitments. To the extent these forwardforeign currency contracts are considered effective hedges, gains and losses onthese positions are deferred and included in the basis of the transaction whenit is completed. Cash flows from forward foreign currency contracts accountedfor as hedges are classified in the statement of cash flows in the samecategory as the item being hedged or on a basis consistent with the nature ofthe instrument.

The Company uses an interest rate cap agreement tomanage its exposure to interest rate risk. This interest rate cap is designatedas a cash flow hedge of the Company’s variable rate debt. This agreement is fortwo years and matures July 2006. Amounts accumulated in other comprehensiveincome are reclassified into earnings as interest is accrued on the hedgetransactions. The amounts accumulated in other comprehensive income willfluctuate based on changes in the fair value of the Company’s derivatives ateach reporting period.

***(q)***   Investments

VWR accounts for its 24%investment in a business using the equity method of accounting.

***(r) Other Comprehensive Income (Loss)***

Components of othercomprehensive income (loss) are cumulative foreign currency translationadjustments, cumulative minimum pension liability adjustments, and unrealizedgain (loss) on derivatives. VWR reports other comprehensive income (loss) inits combined/consolidated statements of shareholders’ equity.

***(s)***   Reclassifications

Certain amounts from prioryears have been reclassified to conform to the current year’s presentation.

53

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(t)***   Useof Estimates

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. While actual results could differ from those estimates,management believes that the estimates are reasonable.

***(u)***   NewAccounting Standards

During June 2004, the FASB issued *Proposed Interpretation Accounting for ConditionalAsset Retirement Obligations, an interpretation of FASB Statement No. 143*.This proposed Interpretation would clarify that a legal obligation to performan asset retirement activity that is conditional on a future event is withinthe scope of FASB Statement No. 143. If the Interpretation is issued, itsadoption is not expected to have a material effect on the Company’s financialposition or results of operations.

During December 2004, the FASB issued SFAS No. 123Revised (“123R”), *Share-Based Payment*.This statement requires companies to recognize in the income statement, thegrant value of stock options and other forms of equity-based compensation issuedto employees. The provisions of this statement become effective beginning July 1,2005. During August 2004, our ultimate parent introduced a share-basedcompensation arrangement as a component of its compensation plans for ouremployees. We estimate that the effect on net income in the periods followingadoption of SFAS No. 123R will be consistent with our proforma disclosureunder SFAS No. 123, except that estimated forfeitures will be consideredin the calculation of compensation expense under SFAS No. 123R. However,the actual effect on net income will vary depending upon the number of grantsof equity in 2005, if any, compared to prior years. Further, we have not yetdetermined the actual model we will use to calculate fair value. Management isin the process of evaluating but has not reached a conclusion on the impactthis Standard will have on its results of operations.

During November 2004, the FASB issued SFAS No. 151,*Inventory Costs*. This Statementclarifies the accounting for abnormal amounts of idle facility expenses,freight handling costs, and spoilage. This Statement requires such excess costsbe charged as current-period expenses. This Statement also specifies thatallocated overhead costs to inventory must be based on normal capacity measures.This Statement becomes effective in fiscal years beginning after June 15, 2005.Management will evaluate what effect; if any, this Statement will have, butdoes not expect the impact to be material.

54

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

**(3)   BusinessCombinations, Acquisitions, and Divestiture**

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

On February 15, 2004, Merck KGaA and CDRV enteredinto a Stock Purchase Agreement, which was consummated on April 7, 2004. TheAcquisition was accounted for under the purchase method of accounting inaccordance with SFAS No. 141, *Business Combinations.*Underpurchase accounting, tangible and identifiable intangible assets acquired andliabilities assumed have been recorded at their respective fair values based onthird party valuations. The purchase accounting adjustments made in theaccompanying financial statements are preliminary and will be finalized in thefirst quarter of 2005 upon completion of the restructuring activities outlinedbelow. Once the final allocation is determined, in accordance with accountingprinciples generally accepted in the United States, any remaining excess of theinvestment over identifiable net assets acquired will be adjusted throughgoodwill.

Theexcess investment made by CDRV over the estimates of the fair market value ofthe identifiable assets and liabilities of the Company as of April 7, 2004was approximately $859.6 and is summarized below.
| Purchase price                     |   | $      | 1,669.1 |   |
|------------------------------------|--------|--------|---------|--------|
| Estimated Buyer  transaction costs |   | 20.5   |    |
| Net tangible  assets acquired      |   | (268.0 | )       |
| Intangible assets  acquired        |   | (562.0 | )       |
| Goodwill                           |   | $      | 859.6   |   |

 

55

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Subsequentto the Acquisition, we initiated restructuring activities designed to reduceoperating costs and improve the operating and administrative capabilities ofthe Company. The initial focus was on the Company’s European operations andorganization structure and, to a lesser extent, the operations in North America.In connection with this initial focus, we recorded restructuring charges of $29.7primarily related to reductions in headcount in Europe. These reductions wereprimarily due to the reorganization of the Company’s European sales andmarketing functions. During the first quarter of 2005, as a result offinalizing these activities, we expect to record additional restructuringcharges associated with changes to benefit plans, closure of selectedfacilities and severance costs. Charges related to these efforts have beenrecorded as adjustments to Acquisition costs (increases to goodwill) pursuantto the provisions of Emerging Issues Task Force Issue No. 95-3, *Recognition of Liabilities in Connection with aPurchase Business Combination*. The following table sets forth theactivity associated with the Company’s restructuring activities to December 31,2004.
| ** **                                                           | ** ** | ** **    | ** ** | ** **   | ** ** | **Cash**      | ** ** | ** **      | ** ** | ** **  | ** ** |
|----------------------------------------------------------------------|------------|---------------|------------|--------------|------------|---------------|------------|-----------------|------------|-------------|------------|
| ** **                                                           | ** ** | **Beginning** | ** ** | ** **   | ** ** | **Payments/** | ** ** | **Translation** | ** ** | **Ending**  | ** ** |
| ** **                                                           | ** ** | **Balance**   | ** ** | **Accruals** | ** ** | **Other**     | ** ** | **Adjustments** | ** ** | **Balance** | ** ** |
| **April 7, 2004 - December 31, 2004:** |       |          |       |         |       |          |       |            |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Severance and termination benefits                                   |       |          | $          | —       |       |          |       | $               | 28.2       |        |       |   | $ | (7.9 | ) |   |   | $ | 0.7 |   |   |   | $ | 21.0 |   |   |
| Facilities related                                                   |       |          | —     |         |       |          | 0.6        |            |       |        | (0.1       | ) |   |   | — |   |   |   | 0.5 |   |   |
| Other                                                                |       |          | —     |         |       |          | 0.9        |            |       |        | (0.6       | ) |   |   | — |   |   |   | 0.3 |   |   |
| Totals                                                               |       |          | $          | —       |       |          |       | $               | 29.7       |        |       |   | $ | (8.6 | ) |   |   | $ | 0.7 |   |   |   | $ | 21.8 |   |   |

 

Thefollowing unaudited pro-forma financial information presents a summary ofconsolidated results of operations of the Company as if the Acquisition hadoccurred as of January 1, 2003.
| ** **                  | ** ** | **Years Ended December 31,**                                      | ** ** |
|-----------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                  | ** ** | **      2004      ** | ** ** | **      2003      ** | ** ** |
| Net sales                   |       |                                                                             | $          | 3,005.4 |   |   |   | $ | 2,794.2 |   |   |
| Income before income  taxes |       |                                                                             | 76.9       |   |   |   | 60.2 |   |   |
| Net income                  |       |                                                                             | 44.0       |   |   |   | 34.4 |   |   |

 

These unaudited pro-formaresults have been prepared for comparative purposes only and primarily includeadjustments for a consulting advisory fee, interest expense, depreciation,amortization and income taxes. These results do not purport to be indicative ofthe results of operations which actually would have resulted had theAcquisition occurred at the beginning of 2003, or of the future results ofoperations of the successor Company.

***(b)   Accounting for Goodwill and IntangibleAssets***

As of December 31, 2004, the amounts assigned togoodwill and intangibles from the Acquisition are preliminary and subject tothe finalization of certain restructuring activities in the first quarter of2005. (See Note 3(a)).

56

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Thechanges in the carrying amount of goodwill by segment for the periods presentedare as follows:
| ** **                             | ** ** | **North**             | ** ** | **European** | ** ** | **Science**   | ** ** | ** ** | ** ** |
|----------------------------------------|------------|-----------------------|------------|--------------|------------|---------------|------------|------------|------------|
| ** **                             | ** ** | **American Lab** | ** ** | **Lab**      | ** ** | **Education** | ** ** | **Total**  | ** ** |
| **Predecessor:**                       |       |                  |       |         |       |          |       |       |       |   |   |   |   |   |   |
| Balance as of January 1, 2002     |       |                  | $          | 678.5        |       |          |       | $          | 87.4       |   |   |   | $ | 75.4 |   |   | $ | 841.3 |   |
| Transitional impairment loss           |       |                  | —     |         |       |          | (43.8      | )          |       |   | — |   |   | (43.8 | ) |
| Workforce reclassification, net of tax |       |                  | 2.0        |         |       |          | —     |       |       |   | — |   |   | 2.0 |   |
| Currency translation changes           |       |                  | —     |         |       |          | 8.2        |       |       |   | — |   |   | 8.2 |   |
| Balance as of December 31, 2002   |       |                  | 680.5      |         |       |          | 51.8       |       |       |   | 75.4 |   |   | 807.7 |   |
| Currency translation changes           |       |                  | 1.0        |         |       |          | 10.6       |       |       |   | 0.6 |   |   | 12.2 |   |
| Balance as of December 31, 2003   |       |                  | 681.5      |         |       |          | 62.4       |       |       |   | 76.0 |   |   | 819.9 |   |
| Currency translation changes           |       |                  | —     |         |       |          | (2.0       | )          |       |   | — |   |   | (2.0 | ) |
| Balance as of April 6, 2004       |       |                  | $          | 681.5        |       |          |       | $          | 60.4       |   |   |   | $ | 76.0 |   |   | $ | 817.9 |   |

 

The transitional impairment loss is described in Note2(e).

Thefollowing table provides a summary of goodwill established as of the date ofthe Acquisition and a roll forward of goodwill to December 31, 2004 asreflected in the accompanying consolidated balance sheet.
| ** **                                             | ** ** | **North**             | ** ** | **European** | ** ** | **Science**   | ** ** | ** ** | ** ** |
|--------------------------------------------------------|------------|-----------------------|------------|--------------|------------|---------------|------------|------------|------------|
| ** **                                             | ** ** | **American Lab** | ** ** | **Lab**      | ** ** | **Education** | ** ** | **Total**  | ** ** |
| **Successor:  Preliminary allocation**                 |       |                  |       |         |       |          |       |       |       |   |   |   |   |   |   |
| Balance as of April 7, 2004                       |       |                  | $          | 627.0        |       |          |       | $          | 164.3      |   |   |   | $ | 68.3 |   |   | $ | 859.6 |   |
| Change as a result of purchase accounting  adjustments |       |                  | 4.5        |         |       |          | 8.9        |       |       |   | 0.9 |   |   | 14.3 |   |
| Currency translation changes                           |       |                  | 13.5       |         |       |          | 19.6       |       |       |   | — |   |   | 33.1 |   |
| Balance as of  December 31, 2004                  |       |                  | $          | 645.0        |       |          |       | $          | 192.8      |   |   |   | $ | 69.2 |   |   | $ | 907.0 |   |

 

Thefollowing schedule sets forth the major classes of intangible assets held at December 31,2004:
| ** **                              | ** ** | ** ** | ** ** | **Successor**         | ** ** |
|-----------------------------------------|------------|------------|------------|-----------------------|------------|
| ** **                              | ** ** | ** ** | ** ** | **December 31,** | ** ** |
| ** **                              | ** ** | **Lives**  | ** ** | **2004**              | ** ** |
| Amortized Intangibles:                  |       |       |       |                  |       |   |   |
| Customer Relationships in North America |       | 33         |       |                  | $          | 241.8 |   |   |
| Customer Relationships in Europe        |       | 20         |       |                  | 78.3       |   |   |
| Chemical Supply Agreements              |       | 10         |       |                  | 33.6       |   |   |
| Other                                   |       | various    |       |                  | 4.5        |   |   |
| Less: Accumulated Amortization          |       |       |       |                  | (11.2      | ) |   |
| Amortized Intangibles, net              |       |       |       |                  | 347.0      |   |   |
| Unamortized Intangibles:                |       |       |       |                  |       |   |   |
| Trademarks and Tradenames               |       |       |       |                  | 223.8      |   |   |
| Total Intangible Assets                 |       |       |       |                  | $          | 570.8 |   |   |

 

57

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Other intangible assets as of December 31, 2003were primarily comprised of trademarks and the customer base related to theVWRSP Acquisition that is discussed further in Note 3(d).

Theestimated amortization expense for each of the five succeeding years andthereafter is as follows:
| Years ended  December 31: |   |   |   |
|--------------------------------|--------|--------|--------|
| 2005                           |   | $      | 14.7   |   |
| 2006                           |   | 14.4   |   |
| 2007                           |   | 14.3   |   |
| 2008                           |   | 14.3   |   |
| 2009                           |   | 14.2   |   |
| Thereafter                     |   | 275.1  |   |
|                           |   | $347.0 |   |
|                                |        |        |        |  |

 

***(c)   Science Education Acquisition***

On June 1, 2004, ourScience Education segment acquired certain assets of a business with annualrevenues of approximately $2.0 that focuses on providing math kits and suppliesprimarily to the publisher textbook market. The purchase price was $2.7 and wasfunded from operations. Based on the preliminary purchase price allocation, theCompany has recorded net working capital and equipment of $0.6 and otheramortizable intangible assets of $2.1. Had this acquisition occurred at thebeginning of 2003, the pro-forma consolidated statements of operations wouldnot have been materially different from the amounts reported.

***(d)   Acquisition of VWRSP in 1995 and 1999***

VWR’s North American business was formerly VWRSP. In1995, Merck KGaA, agreed to acquire approximately 49.9% of the then outstandingshares of VWRSP. In July 1999, affiliates of Merck KGaA acquired through apublic tender offer the remaining 50.1% of the issued and outstanding commonshares of VWRSP for $584.0 to increase its beneficial ownership to 100%. Thetotal cumulative purchase price paid by Merck KGaA for the 100% ownership was$792.0.

The 1999 acquisition has been accounted for under thepurchase method in the financial statements following the push down basis ofaccounting through April 7, 2004. After recording the purchase price inthe VWR statements, VWR had recorded $778.8 of goodwill, $17.5 of intangible assets,and $773.3 of push down debt in addition to recording other assets andliabilities at their fair values.

Interest expense wasrecorded on pushdown debt based upon Merck KGaA’s intercompany interest rates,which were not necessarily indicative of rates VWR would have obtained if itwere not an ultimate subsidiary of Merck KGaA. Interest expense, including taxeffects, on pushdown debt, has been included in the statements of operationsand presented as a non-cash item in the accompanying statements of cash flowsand a capital contribution in the statement of shareholders’ equity, as thisinterest was not required to be paid to Merck KGaA. The acquired intangibleassets of $17.5 included $9.7 of trademarks (useful life of 15 years), $3.3 forthe customer base (useful life of 10 years), and $4.5 for the value of theworkforce in place.

58

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(e)   Divestiture***

During November 2002,VWR sold a business for $3.0 that had revenues in 2002 of $7.3 and operatingincome of $0.9. The gain on the sale was $1.0 and is included in other (income)expense, net.

**(4)   Investments**

VWR has a 24% equity investment in an independentdistribution company and in connection with the Acquisition, acquired fromMerck KGaA the right for 18 months to an option to acquire the remaining 76%for $21.4. The carrying amount of VWR’s 24% investment (accounted for under theequity method) was $8.3 and $7.7 as of December 31, 2004 and December 31,2003, respectively. Equity income was $0.4 for the period April 7, 2004 toDecember 31, 2004, $0.1 for the period January 1, 2004 to April 6,2004, and $0.6 and $0.5 for the years ended December 31, 2003 and 2002,respectively, and is included in other (income) expense, net.

In December 2003, Merck KGaA transferred a cashdeposit in an independent bank in the amount of approximately $21.4 and acorresponding loan from Merck KGaA for the same amount to VWR. The 76%shareholder of the independent distribution company has loans (to entitiescontrolled by the 76% shareholder) from the same independent bank in the amountof approximately $21.4. Effective with the transfer of the cash to VWR, VWR wasrequired to maintain the cash deposit as long as the loans were outstanding. Ifthe 76% shareholder defaulted on the loan, the bank had the right to access thecash deposit. The cash deposit is included in other non-current assets at December 31,2003.

During the first quarterof 2004 and in connection with entering into the Stock Purchase Agreement as discussedin Note 3(a), VWR transferred the cash deposit back to Merck KGaA and recordeda reduction in the corresponding loan from Merck KGaA. In addition, VWRtransferred the option to acquire the remaining 76% to Merck KGaA. In return,VWR received a right for 18 months to acquire the 76% option from Merck KGaA inreturn for a $21.4 payment. The Company believes that its equity investmentdoes not qualify as a variable interest entity, as defined in December 2003by the FASB with its issuance of revised Interpretation No. 46, *Consolidation of Variable Interest Entities.*Thesetransactions are presented as noncash items in the accompanying consolidatedstatements of cash flows.

**(5)   FairValue of Financial Instruments**

VWR’s financial instruments consist primarily of cashand cash equivalents held at financial institutions, accounts receivables,accounts payable, short and long-term debt, forward foreign currency contractsand an interest rate cap.

The carrying amounts for cash and cash equivalents,accounts receivables, accounts payable and short-term debt approximate fairvalue due to the short-term nature of these instruments. The carrying values ofour outstanding 2003 intercompany loans to Merck KGaA approximate the fairvalue due to the short-term variable interest rate structures on these loans.

59

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Thecarrying amount and estimated fair values of our fixed rate long-term note debtinstruments is as follows:
| ** **                                     | ** ** | **Successor**                   | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|
| ** **                                     | ** ** | **December 31, 2004** | ** ** |
| ** **                                     | ** ** | ** Carrying **        | ** ** | **Fair** | ** ** |
| ** **                                     | ** ** | **Amount**                      | ** ** | **Value** | ** ** |
| Unsecured Senior  Notes—67¤8%        |       |                            | $          | 200.0 |   |   | $ | 209.0 |   |
| Unsecured Senior  Subordinated Notes—8.0% |       |                            | 320.0      |   |   | 328.0 |   |
|                                                |            |                                 |            |  |  |  |  |  |  |

 

The fair value of the long-term debt at December 31,2004 was estimated based on a quote from a bond trader making a market in thesedebt instruments.

Thefair value of the Company’s interest rate cap is not material. The table belowshows the outstanding forward foreign currency contracts fair values and pretaxearnings included in cost of goods sold, of these contracts for each of thereporting periods. The fair value of the forward foreign currency contracts wasestimated based on period-end spot rates.
| ** **                              | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|-----------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Outstanding  contracts (notional value) |       |                  | $          | 42.1                  |       |   |   | $ | 6.1 |   |   |
| Fair value of contracts                 |       |                  | (1.4       | )                     |       |   | (0.5 | ) |   |

 
| ** **              | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|-------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **              | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **              | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **              | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Pretax (loss)  earnings |       |                    | $          | (0.4                      | )          |   |   | $ | (0.1 | ) |   | $ | (0.7 | ) | $ | 0.6 |   |
|                         |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

None of VWR’s financial instruments represent aconcentration of credit risk because VWR and its subsidiaries deal with variousmajor banks worldwide, and its accounts receivable are spread among a number ofcustomers and geographic areas. None of the off-balance-sheet financialinstruments would result in a significant loss to VWR and its subsidiaries ifthe other party failed to perform according to the terms of its agreement, asany such loss would generally be limited to the extent of unrealized gain onany contract.

60

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

**(6)   Inventories**

Inventoriesconsist of purchased goods for sale and are valued at the lower of cost ormarket. The table below shows the percentage determined using the LIFO methodand amount that LIFO cost is greater or (less) than current cost for each period.
| ** **                                   | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|----------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                   | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Percent using LIFO  method                   |       |                  | 62         | %                     |       |   | 63 | % |   |
| Amount greater than (less than) current cost |       |                  | $          | 0.1                   |       |   |   | $ | (8.7 | ) |   |
|                                              |            |                       |            |                       |            |  |  |  |  |  |  |

 

The cost of the remaininginventories is determined using the average cost or FIFO methods.

**(7)   Property and Equipment**

Propertyand equipment, net, for each of the reporting periods is shown in the tablebelow:
| ** **                       | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|----------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                       | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                       | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Land                             |       |                  | $          | 12.6                  |       |   |   | $ | 10.8 |   |   |
| Buildings                        |       |                  | 68.5       |                  |       |   | 91.8 |   |   |
| Equipment and computer  software |       |                  | 83.6       |                  |       |   | 254.9 |   |   |
| Capital additions in  process    |       |                  | 4.9        |                  |       |   | 2.2 |   |   |
|                             |       |                  | 169.6      |                  |       |   | 359.7 |   |   |
| Less accumulated  depreciation   |       |                  | (15.2      | )                     |       |   | (201.4 | ) |   |
| Net property and equipment       |       |                  | $          | 154.4                 |       |   |   | $ | 158.3 |   |   |

 

The December 31, 2004amounts reflect the purchase price allocation from the Acquisition anddepreciation for the period April 7 to December 31, 2004.

Depreciationexpense for each of the reporting periods is shown in the table below:
| ** **           | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|----------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **           | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **           | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **           | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Depreciation expense |       |                    | $          | 15.2                      |       |   |   | $ | 8.5 |   |   | $ | 31.9 |   | $ | 30.7 |   |
|                      |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

**(8)**   AccruedExpenses

Thecomponents of accrued expenses for each of the reporting periods is shown inthe table below:
| ** **                      | ** ** | **Successor  December 31,  2004** | ** ** | **Predecessor  December 31,  2003** | ** ** |
|---------------------------------|------------|----------------------------------------|------------|------------------------------------------|------------|
| Employee-related  accruals      |       |                                   | $          | 48.0                                     |       |   |   | $ | 54.8 |   |   |
| Other accrued  expenses         |       |                                   | 36.4       |                                     |       |   | 36.4 |   |   |
| Restructuring-related  accruals |       |                                   | 21.8       |                                     |       |   | — |   |   |
| Income taxes  payable           |       |                                   | 16.9       |                                     |       |   | 20.6 |   |   |
| Deferred income  taxes          |       |                                   | 13.8       |                                     |       |   | 8.1 |   |   |
| Accrued interest                |       |                                   | 13.5       |                                     |       |   | 0.2 |   |   |
|                            |       |                                   | $          | 150.4                                    |       |   |   | $ | 120.1 |   |   |

 

61

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

**(9)   Long-TermBorrowings and Senior Secured Credit Facilities**

Thefollowing is a summary of our debt obligations:
| ** **                              | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|-----------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Senior Secured  Credit Facility         |       |                  | $          | 559.5                 |       |   |   | $ | — |   |   |
| 67¤8%  Unsecured Senior Notes      |       |                  | 200.0      |                  |       |   | — |   |   |
| 8% Unsecured  Senior Subordinated Notes |       |                  | 320.0      |                  |       |   | — |   |   |
| Pushdown debt due  Merck KGaA           |       |                  | —     |                  |       |   | 773.3 |   |   |
| Loans from Merck  KGaA and affiliates   |       |                  | —     |                  |       |   | 236.0 |   |   |
| Loan from CDRV  Holdings, Inc.     |       |                  | 0.7        |                  |       |   | — |   |   |
| Bank loans                              |       |                  | 11.9       |                  |       |   | 9.8 |   |   |
| Capital leases                          |       |                  | 7.1        |                  |       |   | 6.9 |   |   |
| Total debt                              |       |                  | 1,099.2    |                  |       |   | 1,026.0 |   |   |
| Less short-term  portion                |       |                  | (12.9      | )                     |       |   | (10.7 | ) |   |
| Total long  term-portion                |       |                  | $          | 1,086.3               |       |   |   | $ | 1,015.3 |   |   |

 

The following tablesummarizes the maturities of our debt obligations as of December 31, 2004:
| ** **                              | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | ** Thereafter ** | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------------------|------------|-----------|------------|
| Senior Secured  Credit Facility         |       | $        | —     |     | $          | 5.7      |       | $        | 5.7        |     | $          | 5.7                        |       | $         | 5.7        |   |   | $ | 536.7 |   |   | $ | 559.5 |   |
| 67¤8%  Unsecured Senior Notes      |       | —   |       | —   |       | —   |       | —   |       | —   |       |                       | 200.0      |      |       | 200.0 |   |
| 8% Unsecured  Senior Subordinated Notes |       | —   |       | —   |       | —   |       | —   |       | —   |       |                       | 320.0      |      |       | 320.0 |   |
| Loan from CDRV  Holdings, Inc.     |       | —   |       | —   |       | —   |       | —   |       | —   |       |                       | 0.7        |      |       | 0.7 |   |
| Bank loans                              |       | 11.9     |       | —   |       | —   |       | —   |       | —   |       |                       | —     |      |       | 11.9 |   |
| Capital leases                          |       | 1.0      |       | 1.0      |       | 0.8      |       | 0.7      |       | 0.7      |       |                       | 2.9        |      |       | 7.1 |   |
| Total                                   |       | $        | 12.9       |     | $          | 6.7      |       | $        | 6.5        |     | $          | 6.4                        |       | $         | 6.4        |   |   | $ | 1,060.3 |   |   | $ | 1,099.2 |   |

 

***(a)***   SeniorSecured Credit Facility

The Senior Secured Credit Facility provides foraggregate maximum borrowings of approximately $709.5 under (1) a term loanfacility providing for a loan denominated in Euros in an aggregate principalamount currently outstanding at €132.7 million (orapproximately $179.6 on a U.S. dollar equivalent basis as of December 31,2004), (2) a term loan facility providing for a term loan denominated inU.S. dollars in an aggregate principal amount currently outstanding at $379.9,and (3) a multi-currency revolving credit facility, providing for up to$150.0 in multi-currency revolving loans (including standby and commercialletters of credit) outstanding at any time. Undrawn amounts under themulti-currency revolving credit facility will be available on a revolvingcredit basis for general corporate purposes. As of December 31, 2004, wehad $8.0 of undrawn letters of credit and our remaining borrowing availabilityunder the $150.0 multi-currency revolving credit facility was $142.0.

62

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

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 operating cash flow (as defined) for any fiscal year unless certainleverage ratio targets are met.

***Security; Guarantees***

The obligations under the Senior Secured CreditFacility are guaranteed by our parent, CDRV Holdings, Inc., and eachsignificant direct and indirect domestic subsidiary of VWR, as that term isdefined in the credit agreement. As of December 31, 2004, none of thedomestic subsidiaries of VWR met the definition of significant under the creditagreement. In addition, the Senior Secured Credit Facility and the guaranteesthereunder are secured by security interests in and pledges of or liens onsubstantially all of the tangible and intangible assets of VWR and itssubsidiaries.

The Senior Secured CreditFacility and the guarantees thereunder will also be secured by a pledge of 65%of the capital stock of the foreign subsidiary holding companies of CDRVHoldings, Inc. and VWR, which in turn, will hold the capital stock ofcertain of our foreign subsidiaries.

***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 rates perannum applicable to the Euro denominated term loan are based on a fluctuatingrate of interest measured by reference to an adjusted EURIBOR plus a borrowingmargin. As of December 31, 2004, the interest rates on the U.S. dollar-denominatedand Euro-denominated term loans were 4.58% and 4.90%, 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% EURIBORcap that terminates on July 21, 2006. The EURIBOR rate was approximately2.1% as of December 31, 2004.

***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 

63

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

engagein certain transactions with affiliates. In addition, under our Senior SecuredCredit facility, beginning July 1, 2004 we are required to comply withspecified financial ratios and tests, including a minimum interest expensecoverage ratio, a maximum leverage ratio, and maximum capital expenditures test.As of December 31, 2004, the Company was in compliance with all 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 limitations set forth undercertain covenants.

***(c)***   PushDown Debt due Merck KGaA

The push down debt reflected the debt incurred byMerck KGaA as a result of its acquisition of VWRSP. The push down debt wasclassified as long-term because Merck KGaA had represented it would not requirepayment on the debt before 12 months. The average interest rates on the pushdown debt were:
| ** **             | ** ** | **January 1 -**   | ** ** | **Years Ended December 31,**                                      | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **             | ** ** | **April 6, 2004** | ** ** | **      2003      ** | ** ** | **      2002      ** | ** ** |
| Average interest  rate |       |                        | 2.0        | %                                                                                |       |   | 2.0 | % |   |   | 3.4 | % |   |
|                        |            |                             |            |                                                                                  |            |  |  |  |  |  |  |  |  |

 

Interest rates reflect therates charged by Merck KGaA related to intercompany borrowing. This debt wasextinguished in connection with the Acquisition.

***(d)   Loans from Merck KGaA and Affiliates***

VWR had various loans with Merck KGaA and itsaffiliates. The contractual maturities of these loans were current, but theseloans were classified as long-term because Merck KGaA had represented it wouldnot require payment on the debt before 12 months. Interest expense and theaverage interest rate at the end of period on these loans were as follows:
| ** **            | ** ** | **January 1 -**   | ** ** | **Years Ended December 31,**                                      | ** ** |
|-----------------------|------------|-----------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **            | ** ** | **April 6, 2004** | ** ** | **      2003      ** | ** ** | **      2002      ** | ** ** |
| Interest expense      |       |                        | $          | 1.4                                                                              |       |   |   | $ | 8.3 |   |   |   | $ | 9.8 |   |   |
| Average interest rate |       |                        | 2.6        | %                                                                                |       |   | 2.8 | % |   |   | 3.9 | % |   |

 

***(e)   Bank Loans***

VWR’s North American business entered into a two-year,$143.0 term loan agreement with a bank in August 2002. On November 29,2002, the loan was converted to a revolving credit loan (“Revolving Credit”)with a $100.0 limitation. The Revolving Credit bore interest at either the bank’sprime rate or its Eurodollar interbank rate plus 0.5% and matured on November 28,2003. Upon maturity, the Revolving 

64

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Credit was renewed until March 16,2004 with a $20.0 limitation. The Revolving Credit was guaranteed by MerckKGaA, for which Merck KGaA charged VWR 0.75% on the outstanding principal.There were no amounts outstanding under this agreement at December 31,2003.

Bank loans include amountsowed by certain European subsidiaries that are operating without formalagreements with foreign banks to fund short-term needs. The bank loans had anaverage interest rate of 2.8% as of December 31, 2004 and December 31,2003. This debt was assumed in connection with the Acquisition. VWR had nofinancial covenants related to bank loans as of December 31, 2004.

**(10)**   Income Taxes

Taxes on income beforecumulative effect of a change in accounting principle are based on incomebefore income taxes as follows:
| ** **    | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|---------------|------------|-------------------------|------------|---------------------------|------------|
| ** **    | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **    | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **    | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| United States |       |                    | $          | 26.7                      |       |   |   | $ | 20.0 |   |   | $ | 65.4 |   | $ | 49.2 |   |
| Foreign       |       |                    | 28.7       |                      |       |   | 15.8 |   |   | 45.9 |   | 24.8 |   |
| Total         |       |                    | $          | 55.4                      |       |   |   | $ | 35.8 |   |   | $ | 111.3 |   | $ | 74.0 |   |

 

The provision for incometaxes is as follows:
| ** **                              | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|-----------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                              | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                              | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                              | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Current:                                |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| Federal                                 |       |                    | $          | 4.6                       |       |   |   | $ | 10.1 |   |   | $ | 18.3 |   | $ | 15.4 |   |
| State                                   |       |                    | 1.6        |                      |       |   | 0.5 |   |   | 2.5 |   | 1.6 |   |
| Foreign                                 |       |                    | 14.3       |                      |       |   | 5.2 |   |   | 17.5 |   | 10.2 |   |
|                                    |       |                    | 20.5       |                      |       |   | 15.8 |   |   | 38.3 |   | 27.2 |   |
| Deferred:                               |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| Federal                                 |       |                    | 4.5        |                      |       |   | 0.3 |   |   | 8.1 |   | 9.9 |   |
| State                                   |       |                    | 0.2        |                      |       |   | — |   |   | 2.9 |   | 3.1 |   |
| Foreign                                 |       |                    | (1.7       | )                         |       |   | 0.6 |   |   | 3.0 |   | 0.1 |   |
|                                    |       |                    | 3.0        |                      |       |   | 0.9 |   |   | 14.0 |   | 13.1 |   |
| Tax benefit on push down  debt interest |       |                    | —     |                      |       |   | (1.6 | ) |   | (6.1 | ) | (10.6 | ) |
| Total tax provision                     |       |                    | $          | 23.5                      |       |   |   | $ | 15.1 |   |   | $ | 46.2 |   | $ | 29.7 |   |

 

The tax benefit on push down debt interest is anon-cash benefit, which is recorded in the statements of shareholders’ equity.

65

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

The reconciliation of taxcomputed at the U.S. federal statutory tax rate of 35% of income before incometaxes and cumulative effect of a change in accounting principle to the actualincome tax provision is as follows:
| ** **                                     | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                                     | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                                     | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                     | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Statutory tax expense                          |       |                    | $          | 19.4                      |       |   |   | $ | 12.6 |   |   | $ | 39.0 |   | $ | 25.9 |   |
| State income taxes net  of federal tax benefit |       |                    | 1.1        |                      |       |   | 0.1 |   |   | 2.7 |   | 1.7 |   |
| Foreign rate differential                      |       |                    | (1.9       | )                         |       |   | — |   |   | (1.5 | ) | 1.6 |   |
| Nondeductible fees                             |       |                    | 2.2        |                      |       |   | 0.4 |   |   | 1.6 |   | (0.3 | ) |
| Change in valuation  allowance                 |       |                    | 2.8        |                      |       |   | 2.2 |   |   | 3.1 |   | (0.2 | ) |
| Other, net                                     |       |                    | (0.1       | )                         |       |   | (0.2 | ) |   | 1.3 |   | 1.0 |   |
| Total tax provision                            |       |                    | $          | 23.5                      |       |   |   | $ | 15.1 |   |   | $ | 46.2 |   | $ | 29.7 |   |

 

Deferredtax liabilities and assets are comprised of the following:
| ** **                                              | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                              | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Deferred tax liabilities:                               |       |                  |       |                  |       |   |   |   |   |
| Depreciation                                            |       |                  | $          | 14.5                  |       |   |   | $ | 14.4 |   |   |
| Goodwill amortization                                   |       |                  | 6.0        |                  |       |   | 42.4 |   |   |
| Intangibles                                             |       |                  | 217.5      |                  |       |   | — |   |   |
| Inventory valuation                                     |       |                  | 13.6       |                  |       |   | 11.1 |   |   |
| Tax-exempt reserves                                     |       |                  | 2.9        |                  |       |   | 2.5 |   |   |
| Other, net                                              |       |                  | 0.4        |                  |       |   | 1.7 |   |   |
| Total deferred tax  liabilities                         |       |                  | 254.9      |                  |       |   | 72.1 |   |   |
| Deferred tax assets:                                    |       |                  |       |                  |       |   |   |   |   |
| Pensions                                                |       |                  | 26.6       |                  |       |   | 9.8 |   |   |
| Depreciation                                            |       |                  | 1.3        |                  |       |   | 3.6 |   |   |
| Deferred income                                         |       |                  | —     |                  |       |   | 1.4 |   |   |
| Other compensation  benefits                            |       |                  | 5.0        |                  |       |   | 3.6 |   |   |
| Net operating loss  carryforwards                       |       |                  | 16.0       |                  |       |   | 9.8 |   |   |
| Foreign tax credit  carryforwards                       |       |                  | 3.5        |                  |       |   | 0.2 |   |   |
| Inventory overhead  capitalization                      |       |                  | 1.5        |                  |       |   | 4.5 |   |   |
| Goodwill amortization                                   |       |                  | —     |                  |       |   | 0.9 |   |   |
| Accrued expenses                                        |       |                  | 7.9        |                  |       |   | — |   |   |
| Receivables                                             |       |                  | 1.9        |                  |       |   | 5.8 |   |   |
| Other, net                                              |       |                  | 1.2        |                  |       |   | 0.7 |   |   |
|                                                    |       |                  | 64.9       |                  |       |   | 40.3 |   |   |
| Valuation allowances                                    |       |                  | (21.6      | )                     |       |   | (12.4 | ) |   |
| Total deferred tax  assets, net of valuation allowances |       |                  | 43.3       |                  |       |   | 27.9 |   |   |
| Net deferred tax liabilities                            |       |                  | $211.6     |                  |       |   | $ | 44.2 |   |   |
|                                                         |            |                       |            |                       |            |  |  |  |  |  |  |

 

66

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Deferredincome taxes have been classified in the consolidated balance sheet as follows:
| ** **                                   | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|----------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                   | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Deferred tax liability  (asset)—current |       |                  | $          | 4.9                   |       |   |   | $ | (1.6 | ) |   |
| Deferred tax asset—noncurrent           |       |                  | (34.4      | )                     |       |   | (18.2 | ) |   |
| Deferred tax liability—noncurrent       |       |                  | 241.1      |                  |       |   | 64.0 |   |   |
| Net deferred tax liability                   |       |                  | $          | 211.6                 |       |   |   | $ | 44.2 |   |   |

 

The deferred tax (asset) liability—current is includedin other current assets and accrued expenses in the accompanying balancesheets.

VWR evaluates the realizability of deferred tax assetstaking into consideration such factors as the future reversals of existingtaxable temporary differences, projected future operating results, theavailable carryforward period, and other circumstances. Valuation allowanceshave been recorded for deferred tax assets related to foreign net operatingloss carryforwards, foreign tax credit carryforwards and other deferred taxassets that are not expected to be realizable. As of the Acquisition, theCompany had valuation allowances of $17.8 related primarily to preacquisitionforeign operating losses and tax credit carryforwards. Should such lossesultimately be recovered, the resultant reduction in the valuation allowancewill be recorded as a reduction to goodwill. Management believes it is morelikely than not that VWR will realize the benefits of these deductibledifferences, net of the existing valuation allowances.

Neither income taxes nor foreign withholding taxeshave been provided on approximately $53.1 of cumulative undistributed earningsof foreign subsidiaries at December 31, 2004. These earnings areconsidered permanently invested in the business and, under the tax laws, arenot subject to such taxes until distributed.

As of December 31, 2004, VWR has U.S. state netoperating loss carryforwards of approximately $21.7 that expire at varioustimes through 2020. In addition, VWR has foreign net operating losscarryforwards of approximately $1.1 that expire in 2010, $6.2 that expire in2014 and another $41.2 that have indefinite expirations. As of December 31,2004, foreign tax credit carryforwards of $3.5 will expire in 2014.

On October 22, 2004,the American Jobs Creation Act (the “AJCA”) was signed into law. The AJCAcontains certain tax provisions that affect us over the next several years asthose provisions become effective. We will review these provisions and theirapplication to some of our businesses to evaluate the effect these changes mayhave on income taxes included in our consolidated financial statements. Forexample, the AJCA provides for the deduction for U.S. federal income taxpurposes of 85% of certain foreign earnings that are repatriated, as defined inthe AJCA. We will commence an evaluation of the effects of this repatriationprovision along with other aspects of the AJCA in the first half of 2005, butdo not expect to complete this evaluation until after the U.S. TreasuryDepartment provides additional clarifying language on key elements of theprovision. We expect to complete our evaluation of the effects of the repatriationprovision as well as other provisions of the AJCA within a reasonable period oftime following the publication of the additional clarifying language. The rangeof possible amounts that could be repatriated under the provision of the AJCAis between zero and approximately $53.1. It is not practical to 

67

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

computethe related potential income tax that may be due upon any such repatriation,should the Company elect to do so.

**(11)**   RetirementBenefits

***(a)***   U.S.Defined Benefit Plan

VWRsponsors various retirement plans for most full-time employees. Pension planbenefits for the defined benefit plan are based primarily on participants’compensation and years of credited service. It has been VWR’s policy to fundthe minimum amount required by local regulations of current and prior yearservice costs under its funded defined benefit retirement plan. VWR uses a December 31measurement date for the plan. The change in benefit obligation, change in planassets, and reconciliation of funded status of VWR’s defined benefit plancovering substantially all of its U.S. employees, except for employees coveredby independently operated collective bargaining plans, were as follows:
| ** **                                          | ** ** | **Successor**                                    | ** ** | **Predecessor**                                | ** ** |
|-----------------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                          | ** ** | **April 7 -  December 31,  2004** | ** ** | **January 1 -  April 6,  2004** | ** ** | **Year Ended  December 31,  2003** | ** ** |
| Change in benefit obligation:                       |       |                                             |       |                                           |       |   |   |   |   |   |   |   |   |
| Benefit obligation—beginning  of period        |       |                                             | $          | 134.9                                          |       |   |   | $ | 132.3 |   |   |   | $ | 108.4 |   |   |
| Service cost                                        |       |                                             | 5.0        |                                           |       |   | 1.8 |   |   |   | 5.7 |   |   |
| Interest cost                                       |       |                                             | 5.9        |                                           |       |   | 2.2 |   |   |   | 7.4 |   |   |
| Actuarial loss (gain)                               |       |                                             | 8.6        |                                           |       |   | (0.3 | ) |   |   | 14.0 |   |   |
| Benefits paid                                       |       |                                             | (2.5       | )                                              |       |   | (1.1 | ) |   |   | (3.2 | ) |   |
| Benefit obligation—end  of period              |       |                                             | $          | 151.9                                          |       |   |   | $ | 134.9 |   |   |   | $ | 132.3 |   |   |
| Change in plan assets:                              |       |                                             |       |                                           |       |   |   |   |   |   |   |   |   |
| Fair value of plan  assets—beginning of period |       |                                             | $          | 94.7                                           |       |   |   | $ | 93.1 |   |   |   | $ | 78.7 |   |   |
| Actual gain on plan  assets                         |       |                                             | 6.8        |                                           |       |   | 2.7 |   |   |   | 17.6 |   |   |
| Company contributions                               |       |                                             | 6.1        |                                           |       |   | — |   |   |   | — |   |   |
| Benefits paid                                       |       |                                             | (2.5       | )                                              |       |   | (1.1 | ) |   |   | (3.2 | ) |   |
| Fair value of plan  assets—end of period       |       |                                             | $          | 105.1                                          |       |   |   | $ | 94.7 |   |   |   | $ | 93.1 |   |   |
| Reconciliation of funded status:                    |       |                                             |       |                                           |       |   |   |   |   |   |   |   |   |
| Unfunded status                                     |       |                                             | $          | (46.8                                          | )          |   |   | $ | (40.2 | ) |   |   | $ | (39.2 | ) |   |
| Unrecognized net loss                               |       |                                             | 7.3        |                                           |       |   | 54.4 |   |   |   | 55.7 |   |   |
| Unrecognized prior  service cost                    |       |                                             | —     |                                           |       |   | 0.5 |   |   |   | 0.5 |   |   |
| (Accrued) prepaid benefit cost—end of period   |       |                                             | $          | (39.5                                          | )          |   |   | $ | 14.7 |   |   |   | $ | 17.0 |   |   |

 

68

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Amountsrecognized in the consolidated balance sheet:
| ** **                              | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|-----------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Other long-term  liability              |       |                  | $          | (39.5                 | )          |   |   | $ | (18.8 | ) |   |
| Intangible asset                        |       |                  | —     |                  |       |   | 0.5 |   |   |
| Accumulated other  comprehensive income |       |                  | —     |                  |       |   | 35.3 |   |   |
| Net amount recognized at end of year    |       |                  | $          | (39.5                 | )          |   |   | $ | 17.0 |   |   |

 

The accumulatedbenefit obligation was $129.2 and $111.9 at December 31, 2004 and 2003,respectively.

Netperiodic pension cost includes the following components:
| ** **                          | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|-------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                          | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                          | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                          | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Service cost                        |       |                    | $          | 5.0                       |       |   |   | $ | 1.8 |   |   | $ | 5.7 |   | $ | 4.7 |   |
| Interest cost                       |       |                    | 5.9        |                      |       |   | 2.2 |   |   | 7.4 |   | 6.7 |   |
| Expected return on plan  assets     |       |                    | (5.6       | )                         |       |   | (2.5 | ) |   | (9.3 | ) | (9.4 | ) |
| Amortization of prior  service cost |       |                    | —     |                      |       |   | — |   |   | 0.1 |   | 0.1 |   |
| Recognized net actuarial  loss      |       |                    | —     |                      |       |   | 0.8 |   |   | 1.6 |   | — |   |
| Net periodic pension  cost          |       |                    | $          | 5.3                       |       |   |   | $ | 2.3 |   |   | $ | 5.5 |   | $ | 2.1 |   |

 

Inaddition to the net periodic cost above, the following increases in minimumliability are included in other comprehensive income:
| ** **                                                            | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|-----------------------------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                                                            | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                                                            | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                                            | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Increase in minimum  liability included in other comprehensive income |       |                    | $          | —                    |       |   |   | $ | — |   |   | $ | 2.0 |   | $ | 33.3 |   |
|                                                                       |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Thenet periodic pension cost and the projected benefit obligation were based onthe following assumptions:
| ** **                                                                                         | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                                                                                         | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                                                                                         | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                                                                         | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Discount rate for  benefit obligation                                                              |       |                    | 5.90       | %                         |       |   | 6.25 | % |   | 6.25 | % | 6.90 | % |
| Discount rate for net  periodic pension cost                                                       |       |                    | 6.25       | %                         |       |   | 6.25 | % |   | 6.90 | % | 7.40 | % |
| Expected rate of return  on plan assets for net periodic pension cost                              |       |                    | 8.25       | %                         |       |   | 9.00 | % |   | 9.00 | % | 9.00 | % |
| Assumed annual rate of compensation increase for benefit  obligation and net periodic pension cost |       |                    | 4.00       | %                         |       |   | 4.00 | % |   | 4.00 | % | 4.00 | % |

 

69

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Thetable below shows the asset allocation target range and the December 31,2004 and 2003 position for each asset class:
| ** **                 | ** ** | **Target range at** | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|----------------------------|------------|-------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **December 31,**         | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                 | ** ** | **2004**                      | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Domestic equity  funds     |       |                          | 40%-60     | %                     |       |                  | 59         | % |   |   | 62 | % |   |
| Fixed income fund          |       |                          | 20%-30     | %                     |       |                  | 25         | % |   |   | 27 | % |   |
| International  equity fund |       |                          | 0%-10      | %                     |       |                  | 10         | % |   |   | 9 | % |   |
| Money market  funds        |       |                          | 0%-20      | %                     |       |                  | 6          | % |   |   | 2 | % |   |
|                       |       |                          |       |                  |       |                  | 100        | % |   |   | 100 | % |   |

 

The principal investment objective is to obtain thehighest return (defined as income plus realized and unrealized capital gainsand losses) consistent with the long-term security of anticipated benefitpayments. This is to be achieved by (a) investing a substantial portion offund assets in equity investments; (b) investment costs and volatilitywill be limited by investing the fund’s core assets in passive or commingledfunds that participate in a range of widely diversified equity and non-equityinvestments; (c) active managers will control no more than a third of thefund’s assets; (d) in order to increase the stability of fund performancewhile maintaining expected returns, non-callable bonds, annuities or guaranteedinsurance contracts may be purchased to cover payments to retired participantswhenever the rate of return offered by such contracts significantly exceeds theaverage returns projected for other fund assets and (e) fund contributionswill be set to meet an asset funding target of 125% of the present value ofaccumulated pension benefits. The expected rate of return on plan assets wasbased on our historical returns.

The Company does not expect to make any contributionsto the plan in 2005.

Thefollowing benefit payments, which reflect expected future service, are expectedto be paid:
| 2005                  |   | $    | 4.1    |   |
|-----------------------|--------|------|--------|--------|
| 2006                  |   | 4.4  |   |
| 2007                  |   | 4.8  |   |
| 2008                  |   | 5.1  |   |
| 2009                  |   | 5.5  |   |
| 2010 - 2014 |   | 34.2 |   |

 

***(b)   OtherU.S. Benefit Plans***

VWRalso maintains a supplemental pension plan for certain senior officers.Expenses incurred under this plan were as follows:
| ** **             | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **             | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **             | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **             | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Pension plan  expenses |       |                    | $          | 0.4                       |       |   |   | $ | 0.2 |   |   | $ | 0.7 |   | $ | 0.5 |   |
|                        |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

70

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Certain employees arecovered under union-sponsored, collectively bargained plans. Expenses underthese plans as determined in accordance with negotiated labor contracts were asfollows:
| ** **            | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|-----------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **            | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **            | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **            | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Pension plan expenses |       |                    | $          | 1.3                       |       |   |   | $ | 0.4 |   |   | $ | 0.9 |   | $ | 0.9 |   |
|                       |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Benefitexpense recognized for defined contribution plans of VWR were as follows:
| ** **            | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|-----------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **            | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **            | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **            | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Pension plan expenses |       |                    | $          | 1.6                       |       |   |   | $ | 0.6 |   |   | $ | 2.0 |   | $ | 2.1 |   |
|                       |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

VWRprovides health benefits to certain retirees and a limited number of activeemployees and their spouses. These benefit plans are unfunded. Shown below arethe accumulated postretirement benefit obligation and the weighted averagediscount rate used in determining the accumulated postretirement benefitobligation. The annual cost of these plans is not material.
| ** **                                                                         | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                         | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Postretirement benefit  obligations                                                |       |                  | $          | 2.6                   |       |   |   | $ | 2.3 |   |   |
| Weighted average  discount rate                                                    |       |                  | 5.90       | %                     |       |   | 6.25 | % |   |
| Health care cost trend  rate assumed for next year                                 |       |                  | 11.50      | %                     |       |   | 13.00 | % |   |
| Rate to which the cost  trend rate is assumed to decline (the ultimate trend rate) |       |                  | 5.00       | %                     |       |   | 5.00 | % |   |
| Year that the rate reaches the ultimate trend rate                                 |       |                  | 2013       |                  |       |   | 2013 |   |   |

 

Assumedhealth care cost trend rates have a significant effect on the amounts reportedfor health care plans. A one-percentage-point change in assumed health carecost trend rates would have the following effects:
| ** **                                   | ** ** | **One Percentage Point** | ** ** |
|----------------------------------------------|------------|------------------------------------|------------|
| ** **                                   | ** ** | ** Increase **           | ** ** | ** Decrease ** | ** ** |
| Effect on  postretirement benefit obligation |       |                               | $          | 0.5 |   |   |   | $ | (0.4 | ) |   |
|                                              |            |                                    |            |  |  |  |  |  |  |  |  |

 

***(c)   Non-U.S.Benefit Plans***

VWR has defined benefit pension plans at variousforeign subsidiaries. VWR’s German subsidiary has two unfunded defined benefitpension plans for current employees and retirees. VWR’s French subsidiary has adefined benefit pension plan for a certain group of employees that is closed tonew participants. VWR’s UK and Switzerland subsidiaries have employees thatparticipated in Merck KGaA sponsored defined benefit pension plans, which weretreated as multiemployer plans. VWR’s combined contributions 

71

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

to these multiemployerplans were $0.3 for the period January 1, 2004 to April 6, 2004, and$2.3 and $2.5 for the years ended December 31, 2003 and 2002,respectively.

In connection with the Acquisition, Merck KGaA agreedto deliver fully funded plans to VWR if VWR withdrew from the UK andSwitzerland Merck KGaA sponsored defined benefit pension plans. As of December 31,2004, VWR was continuing to participate in the Switzerland Merck KGaA sponsoreddefined benefit pension plan and made contributions under this multiemployerplan arrangement of $0.4 for the period April 7, 2004 to December 31,2004.

EffectiveApril 7, 2004, VWR withdrew from the UK sponsored plans and establishedtwo defined benefit plans to provide for the benefits previously covered underthe Merck KGaA sponsored defined benefit plans. In addition, VWR has severalsmall defined benefit pension plans at other locations. VWR uses a December 31measurement date for these plans. Combined information for the German, Frenchand the UK plan changes effective April 7, 2004 in benefit obligation,change in plan assets, and reconciliation of funded status were as follows:
| ** **                                         | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|----------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                                         | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Year Ended** | ** ** |
| ** **                                         | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                         | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** |
| Change in benefit  obligation:                     |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| Benefit obligation—beginning of period        |       |                    | $          | 25.4                      |       |   |   | $ | 22.7 |   |   |   | $ | 18.3 |   |   |
| Acquisition of UK plan obligation                  |       |                    | 48.9       |                      |       |   | — |   |   |   | — |   |   |
| Service cost                                       |       |                    | 1.7        |                      |       |   | 0.1 |   |   |   | 0.4 |   |   |
| Interest cost                                      |       |                    | 1.0        |                      |       |   | 0.3 |   |   |   | 1.2 |   |   |
| Plan participants’ contributions              |       |                    | 0.3        |                      |       |   | — |   |   |   | — |   |   |
| Actuarial loss                                     |       |                    | 2.4        |                      |       |   | 0.1 |   |   |   | 0.1 |   |   |
| Benefits paid                                      |       |                    | (1.2       | )                         |       |   | (0.3 | ) |   |   | (1.1 | ) |   |
| Currency translation changes                       |       |                    | 5.6        |                      |       |   | (0.9 | ) |   |   | 3.8 |   |   |
| Benefit obligation—end of period              |       |                    | $          | 84.1                      |       |   |   | $ | 22.0 |   |   |   | $ | 22.7 |   |   |
| Change in plan  assets:                            |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| Fair value of plan assets—beginning of period |       |                    | $          | 1.6                       |       |   |   | $ | 1.6 |   |   |   | $ | 1.3 |   |   |
| Contribution of assets for UK plan                 |       |                    | 48.9       |                      |       |   | — |   |   |   | — |   |   |
| Actual gain on plan assets                         |       |                    | 0.9        |                      |       |   | 0.1 |   |   |   | — |   |   |
| Company contributions                              |       |                    | 1.9        |                      |       |   | 0.2 |   |   |   | 0.8 |   |   |
| Plan participants’ contributions              |       |                    | 0.3        |                      |       |   | — |   |   |   | — |   |   |
| Benefits paid                                      |       |                    | (0.7       | )                         |       |   | (0.2 | ) |   |   | (0.8 | ) |   |
| Currency translation changes                       |       |                    | 2.6        |                      |       |   | (0.1 | ) |   |   | 0.3 |   |   |
| Fair value of plan assets—end of period       |       |                    | $          | 55.5                      |       |   |   | $ | 1.6 |   |   |   | $ | 1.6 |   |   |
| Reconciliation of  funded status:                  |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| Unfunded status                                    |       |                    | $          | (28.6                     | )          |   |   | $ | (20.4 | ) |   |   | $ | (21.1 | ) |   |
| Unrecognized net loss                              |       |                    | 1.8        |                      |       |   | — |   |   |   | — |   |   |
| Accrued benefit  cost—end of period           |       |                    | $          | (26.8                     | )          |   |   | $ | (20.4 | ) |   |   | $ | (21.1 | ) |   |

 

72

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

The accrued benefit cost is included in otherlong-term liabilities. The combined accumulated benefit obligation was $74.5and $20.9 at December 31, 2004 and 2003, respectively.

Combinednet periodic pension cost includes the following components:
| ** **                      | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|---------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                      | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                      | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                      | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Service cost                    |       |                    | $          | 1.7                       |       |   |   | $ | 0.1 |   |   | $ | 0.4 |   | $ | 0.3 |   |
| Interest cost                   |       |                    | 1.0        |                      |       |   | 0.3 |   |   | 1.2 |   | 0.8 |   |
| Expected return  on plan assets |       |                    | (0.1       | )                         |       |   | — |   |   | (0.1 | ) | — |   |
| Recognized net  actuarial loss  |       |                    | —     |                      |       |   | — |   |   | 0.1 |   | — |   |
| Net periodic  pension cost      |       |                    | $          | 2.6                       |       |   |   | $ | 0.4 |   |   | $ | 1.6 |   | $ | 1.1 |   |

 

Thecombined net periodic pension cost and the combined projected benefitobligation were based on the following weighted average assumptions:
| ** **                                                                                        | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                                                                                        | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                                                                                        | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                                                                        | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Discount rate for  benefit obligation                                                             |       |                    | 5.05       | %                         |       |   | 5.72 | % |   | 5.83 | % | 5.60 | % |
| Discount rate for  net periodic pension cost                                                      |       |                    | 5.49       | %                         |       |   | 5.83 | % |   | 5.64 | % | 5.43 | % |
| Expected rate of  return on plan assets for net periodic pension cost (French and UK plans  only) |       |                    | 6.49       | %                         |       |   | 3.50 | % |   | 3.00 | % | 3.00 | % |
| Assumed annual  rate of compensation increase for benefit obligation                              |       |                    | 3.36       | %                         |       |   | 3.00 | % |   | 3.00 | % | 2.70 | % |
| Assumed annual rate of  compensation increase for net periodic pension cost                       |       |                    | 3.54       | %                         |       |   | 3.00 | % |   | 2.71 | % | 2.62 | % |

 

The Company expects to make contributions to theFrench and UK plans of approximately $2.5 in 2005.

Thetable below shows the combined asset allocation target range and the combined December 31,2004 position for each asset class:
| ** **        | ** ** | **Target range at** | ** ** | ** **            | ** ** |
|-------------------|------------|-------------------------------|------------|-----------------------|------------|
| ** **        | ** ** | **December 31,**         | ** ** | **December 31,** | ** ** |
| ** **        | ** ** | **2004**                      | ** ** | **2004**              | ** ** |
| Equity securities |       |                          | 63         | %                     |       |   | 63 | % |   |
| Debt securities   |       |                          | 33         | %                     |       |   | 32 | % |   |
| Other             |       |                          | 4          | %                     |       |   | 5 | % |   |
|              |       |                          |       |                  |       |   | 100 | % |   |

 

73

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Thefollowing combined benefit payments, which reflect expected future service, asappropriate, are expected to be paid:
| 2005      |   | $    | 1.1    |   |
|-----------|--------|------|--------|--------|
| 2006      |   | 2.6  |   |
| 2007      |   | 2.1  |   |
| 2008      |   | 1.9  |   |
| 2009      |   | 2.0  |   |
| 2010-2014 |   | 12.5 |   |

 

***(d)***   OtherNon-U.S. Postemployment Benefits

Certain of VWR’s Europeansubsidiaries provide post employment benefits in the form of lump-sum cashpayments to employees when they leave VWR, regardless of their reason forleaving. VWR estimates and accrues a liability for these benefits. The largestsuch plans are in France and Italy. The combined liability recorded for theseplans was $2.0 and $1.9 at December 31, 2004 and 2003, respectively.

**(12)   StockIncentive Plan**

In connection with the Acquisition, CDRV Investors, Inc.,our ultimate parent company, adopted the CDRV Investors, Inc. StockIncentive Plan (the “Plan”). Under the Plan, CDRV Investors, Inc.’s boardof directors may grant rights to purchase shares of CDRV Investors, Inc.common stock and options to purchase shares of CDRV Investors, Inc. commonstock to any of our executive officers or other employees, including our namedexecutive officers. Under the Plan, the board of directors may also grantshares of CDRV Investors, Inc. common stock, rights to purchase shares ofCDRV Investors, Inc. common stock and other share-based awards to ournon-employee directors. A total of 1,300,000 shares of CDRV Investors, Inc.common stock are available for all types of awards under the Plan. However, thenumber of available shares will be automatically reduced by shares covered byawards offered but not granted as part of our initial grants following theAcquisition. Shares subject to options that are forfeited, canceled orotherwise terminated will again be available for grant under the Plan.

Shares purchased by our officers and employees underthe Plan may generally be repurchased by CDRV Investors, Inc. and/orCD&R Fund VI for their fair market value upon a participant’s terminationof employment prior to a public offering (and, upon certain terminations ofemployment, our officers and employees may require CDRV Investors, Inc. torepurchase their purchased shares for their fair market value). Allparticipants may also be required to sell their shares at the same price and onthe same terms as CD&R Fund VI, if CD&R Fund VI enters into certaintransactions with a third-party purchaser at any time before there is a publicmarket for the shares of CDRV Investors, Inc.

In accordance with AICPAAccounting Interpretation 1, *Stock PlansEstablished by a Principal Shareholder,*of Accounting PrincipleBoard Opinion 25, *Accounting for StockIssued to Employees*(“APB No. 25”), the Company accounts forany stock options or awards granted to the Company’s employees under the Planin the Company’s financial statements. The Company accounts for awards underthe Plan using the intrinsic value guidance in APB No. 25. Refer to Note2(n) for disclosure of the pro-forma effect on net income for stock-based awardsas if the Company had adopted the fair value recognition provisions of SFAS No.123.

74

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***Initial Offering***

Shortly after the Acquisition, CDRV Investors, Inc.made an initial offering of awards under the Plan to certain of our officersand employees. Such participants were offered the opportunity to purchaseshares of CDRV Investors, Inc. common stock for a purchase price equal to$100.00 per share, which we believe was the fair market value of a share on theoffer date and equal to the fair market value as of the acquisition date. Thoseemployees who are not also executive officers of ours were offered financingassistance to help purchase their shares of common stock, either through a loanfacility that we arranged through a third-party financial institution or, incertain limited circumstances, directly from us. As part of the offer,participants who elected to purchase a number of shares within the range ofshares offered to them were granted options under the Plan to purchase twoadditional shares of CDRV Investors, Inc. common stock (certain of ournamed executive officers were granted options to purchase three shares for eachshare they purchased). All options were granted with an exercise price of$100.00 per share, a price we believe was equal to the fair market value ofCDRV Investors, Inc.’s common stock on the date of grant. The optionsgranted will vest in equal annual installments on each of the first fiveanniversaries of the grant date, and will expire ten years from the grant date.

As part of this initial offering, directors who arenot also our employees or associated with CD&R were each offered theopportunity to purchase up to 2,500 shares of CDRV Investors, Inc. commonstock. Such directors were not offered options.

As of December 31, 2004, CDRV Investors, Inc.had closed the initial offering in respect of 196 of our officers andemployees, and 4 of our directors. In the initial offering, these officers,employees, and directors purchased a total of 239,135 shares and weregranted options to purchase 484,590 shares under the Plan. Upon the closing ofthe offering, the net proceeds of approximately $23.7 were paid to CDRVInvestors Inc., who in turn contributed the $23.7 to the Company as anadditional investment. No additional shares were issued by the Company for thiscapital contribution. Because the option exercise price equaled the fair marketvalue per share of CDRV Investors, Inc. common stock at the time of grant,no compensation expense related to the stock options will be reflected in theCompany’s income statement. In connection with the December 16, 2004 offeringof Senior Discount Notes by CDRV Investors, Inc. the net proceeds of theoffering were paid as a special dividend to CDRV Investors, Inc.stockholders and the exercise price of each option was adjusted to $50.52 pershare pursuant to the antidilution provision of the CDRV Investors, Inc.Stock Incentive Plan. As a result of the special dividend distribution, theCompany recorded compensation expense of approximately $1.2.

In connection with the loan facility we arrangedthrough a third-party financial institution, we have guaranteed an aggregateprincipal amount of $2.9 as of December 31, 2004. The Company would becomeliable for such amounts in the event that a member of management would fail torepay the principal and interest when due. These loans mature on November 5,2008 and bear interest at the one month LIBOR plus 2.05%. In accordance withFASB Interpretation No. 45, *Guarantor’s**Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others,*the Company has determined that the obligation for the fair value of the guaranteeis immaterial. We have recorded $0.1 of compensation expense and acorresponding increase in paid-in-capital associated with the favorableinterest rate provided to individuals who have utilized the loan facility.

Given our guarantee of theloan balances, we have considered the proceeds received from the sale of theCDRV Investors, Inc. common stock to represent an obligation that may beredeemable upon the 

75

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

occurrenceof an event that is not within our control in accordance with Accounting Series ReleaseNo. 268 issued by the SEC. Therefore, to the extent the loans guaranteedby the Company are outstanding, we have presented the balance that may becomedue under the guarantee outside of shareholders’ equity. As loans are repaid bythe employees, the amount classified outside of shareholders’ equity will bereclassed to paid-in-capital. In addition, the Company provided direct loans of$0.3 to non-executive employees of the Company that were used to purchaseshares. These loans have been shown as contra-equity in the Company’s financialstatements thereby reducing the paid-in-capital. As these loans are repaid, thecontra-equity balance will be reduced and paid-in-capital will increase.

**(13)   RestrictedStock Unit Grant**

The Company granted 5,000CDRV Investors, Inc. restricted stock units to one of the Company’sexecutive officers that will generally vest on the seventh anniversary of hiscommencement of employment with the Company. The restricted units will all vestearlier in certain circumstances if the Company undergoes a public offering orif we are sold to a third party unrelated to CD&R. The granting of theseunits has been reflected in the Company’s financial statements by increasing theadditional paid in capital by $0.3 and a contra-equity account of unamortizedvalue of restricted units issued of $0.3. The unearned compensation will beamortized as compensation expense over the seven-year vesting period ofthe restricted units granted. No other such restricted units have been issuedto any other Company employees.

**(14)   Commitmentsand Contingencies**

VWRleases office and warehouse space and computer equipment under operatingleases, certain of which extend up to 15 years, subject to renewal options.Rental expense is shown in the table below.
| ** **     | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|----------------|------------|-------------------------|------------|---------------------------|------------|
| ** **     | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **     | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **     | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Rental expense |       |                    | $          | 24.9                      |       |   |   | $ | 9.1 |   |   | $ | 29.5 |   | $ | 31.9 |   |
|                |            |                         |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Futureminimum lease payments as of December 31, 2004, under noncancelableoperating leases having initial lease terms of more than one year are asfollows:
| Years ended  December 31: |   |   |   |
|--------------------------------|--------|--------|--------|
| 2005                           |   | $      | 22.9   |   |
| 2006                           |   | 16.9   |   |
| 2007                           |   | 13.9   |   |
| 2008                           |   | 10.5   |   |
| 2009                           |   | 6.6    |   |
| Thereafter                     |   | 24.1   |   |
| Total minimum payments         |   | $      | 94.9   |   |

 

76

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

VWR is involved in variousenvironmental, contractual and product liability cases and claims which areconsidered routine to VWR’s business and from time to time VWR is named as adefendant in cases as a result of our distribution of scientific supplies, includinglitigation resulting from the distribution of products containing asbestos byVWR and certain of its predecessors. While the impact of this litigation hastypically been immaterial, there can be no assurance that the impact of thepending and any future claims will not be material to our business, financialcondition or results of operations in the future.

**(15) Transactionswith Related Parties**

Merck KGaA (Merck KGaAand/or affiliates) and VWR have entered into various transactions and agreementsin the ordinary course of business. Prior to the entering into agreements withMerck KGaA, VWR and Merck KGaA conducted business with each other in a mannerthat was not materially different than those described below. In connectionwith the Acquisition, the Company entered into new agreements with Merck KGaAthat are described below. The following summarizes significant transactionsbetween VWR and Merck KGaA:

***(a) Sales to Merck KGaA***

VWR sells products toMerck KGaA for which it is paid in the normal course of business.

***(b) Purchases from Merck KGaA***

VWR purchases certain chemical products for resalefrom Merck KGaA for which it pays Merck KGaA in the normal course of business.VWR and Merck KGaA have entered into two contracts that provide for VWR to be theexclusive distributor of certain Merck KGaA products in certain countries(territories) and the nonexclusive distributor in certain other territories.These two contracts for North American and European territories expire on April 6,2009 and may be extended for an additional five-year term subject to theoccurrence of certain conditions.

In connection with theAcquisition, we have also entered into other distribution agreements with MerckKGaA, including five-year distribution agreements with Merck KGaA to distributeits bioscience products in Europe and North America. These distributionagreements in Europe and North America are exclusive and non-exclusive,respectively. In addition, we have entered into a supply agreement with MerckKGaA, pursuant to which it has agreed to continue to manufacture certain of ourprivate label products for a period of three years from April 7, 2004, andthereafter to provide technical assistance in transitioning their manufactureto other manufacturers. These products are primarily sold in the U.K., and wehave agreed to use our commercially reasonable efforts to convert theseproducts to Merck KGaA-branded products to the extent that the conversion wouldbe economically equivalent to us.

***(c) Logistics Services in Europe***

Under the terms of an agreement that expires on December 31,2007, Merck KGaA continues to provide logistics services to certain of oursubsidiaries. Unless earlier terminated following a notice period, suchlogistics service agreements will be automatically renewed for an additionalthree years.

77

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(d) Systems/TechnologyServices***

Following the completionof the Acquisition, we and Merck KGaA have also continued to provide certaininformation technology services to each other consistent with the arrangementsin place prior to the Acquisition, including Merck KGaA’s operation and supportof the main enterprise resource planning and business warehouse software anddatabases for our European companies. The information services master agreementwill continue for an initial five-year period from April 7, 2004, althoughindividual services may be terminated during the term following a noticeperiod.

***(e) Other Services Provided by VWR and by Merck KGaA***

We and Merck KGaA have historically performedcorporate services for each other, including certain financial andadministrative functions. In order to maintain continuous and efficientoperations following the completion of the Acquisition, we have entered into atransition services agreement with Merck KGaA to maintain these relationshipsfollowing the Acquisition until such time as these services can be obtainedinternally or from other sources. The term of the transition services agreementis three years from April 7, 2004, although the recipient of the serviceshas in most cases, the right to terminate individual services upon notice asearly as January 1, 2005. Certain services may be terminated on an earlierdate. If any required third-party consent is not obtained, we may no longerbenefit from certain group rates available to Merck KGaA. We and Merck KGaAwill also continue to provide each other with certain environmental and otherregulatory compliance services for a transition period following theAcquisition.

Certainsubsidiaries of Merck KGaA and certain of our subsidiaries have continued tolease or sublease from one another, or otherwise share, space in variousoffices and warehouses in Europe and Mexico since the completion of theAcquisition. The terms of these leasing and subleasing arrangements range fromless than one year to up to six or more years and are generally at market rentsand conditions. Certain other existing intercompany contracts have alsoremained in place since the Acquisition and were not replaced by the transitionservices agreement.

The followingtable summarized the transactions between VWR and Merck KGaA during the periodswhen VWR was a wholly-owned subsidiary of Merck KGaA:
| ** **                                                                                | ** ** | **January 1 -**   | ** ** | **Years Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                | ** ** | **April 6, 2004** | ** ** | **2003**                                    | ** ** | **2002** | ** ** |
| Sales to Merck  KGaA, included in net sales                                               |       |                        | $          | 8.4                                         |       |   | $ | 29.1 |   | $ | 21.4 |   |
| Purchases from  Merck KGaA, included in cost of goods sold and inventory                  |       |                        | 76.0       |                                        |       | 243.6 |   | 228.7 |   |
| Services provided  by Merck KGaA included in selling, general and administrative expenses |       |                        | 3.3        |                                        |       | 16.4 |   | 18.5 |   |
| Services provided to  Merck KGaA included in selling, general and administrative expenses |       |                        | 1.5        |                                        |       | 4.4 |   | 7.1 |   |
|                                                                                           |            |                             |            |                                             |            |  |  |  |  |  |  |  |

 

Merck KGaA continues to bea significant supplier to VWR. Purchases from Merck KGaA, included in cost ofgoods sold and inventory were approximately $191.2 for the period April 7,2004 to December 31, 2004.

78

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

***(f) Transactions with Clayton, Dubilier &Rice, Inc.***

Under the terms of aconsulting agreement between the Company and Clayton, Dubilier & Rice, Inc.(“CD&R”) dated April 7, 2004 the Company paid CD&R $18.0 for transactionservices rendered in connection with the Acquisition. In addition, theconsulting agreement includes an annual consulting fee of $1.5 for financialadvisory and management consulting services. The consulting agreementterminates upon the earlier of (1) April 7, 2014; (2) the dateon which an investment fund managed by CD&R no longer owns, directly orindirectly, any shares of the capital stock of the Company or its successorcompany; or (3) upon thirty days written notice of either party.

***(g) Services performed by Debevoise &Plimpton LLP***

The Company is providedlegal services by the above referenced law firm in which one of the members ofthe Company’s Board of Directors is related to a senior member of that law firm.Total fees for services rendered during 2004 aggregated approximately $7.4.

**(16) Accounts Payable**

VWR maintains acentralized cash management system for its U.S. accounts payable. Accordingly,included in accounts payable at December 31, 2004 and 2003 areapproximately $33.9 and $11.0, respectively, of remittances that had notcleared.

***(17) Segmentand Geographical Financial Information***

VWR reports financial results on the basis of thefollowing three business segments: North American laboratory distribution, orNorth 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 inpharmaceutical, biotechnology, chemical, technology, 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 as distributionof scientific supplies to universities and research institutes.

The Company’s operating segments have been identifiedgiving consideration to both geographic areas and the nature of products amongbusinesses within its geographic area. North American Lab and European Lab areorganized as distinct operating segments primarily because of geographicdispersion and the inherent differences in business models. The North AmericanLab segment is highly standardized and operated as an integrated business,whereas the European Lab business is more fragmented and its customer marketsmore localized. The Science Education operating segment has been differentiatedfrom the North American Lab segment because of its unique and specialized productlines, concentration of customers in the educational sector and the stronggross margins. Operations within North America (excluding Science Education)have been aggregated due to the similarity of economic characteristics, productlines, customers and distribution methods. Similarly, operations within theEuropean Lab segment have been aggregated because of common economiccharacteristics as well as the similarity among products, customers anddistribution networks.

79

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

TheCompany allocates its centralized management of corporate costs to itsoperating segments as follows:

·       Corporatecosts are allocated to its North American Lab and Science Education operatingsegments using allocation factors that management considers reasonable todistribute costs on the basis of usage.

·       Centralizedcosts related to the management of the European Lab operating segment areincurred within the segment structure and no inter-segment allocation isrequired.

Selectedbusiness segment financial information is presented below. Inter-segmentactivity has been eliminated. Therefore, revenues reported for each operatingsegment are substantially all from external customers.
| ** **                         | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                         | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                         | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                         | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| **Net Sales**                      |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| North American Lab                 |       |                    | $          | 1,350.7                   |       |   |   | $ | 486.5 |   |   | $ | 1,734.3 |   | $ | 1,694.1 |   |
| European Lab                       |       |                    | 752.3      |                      |       |   | 283.0 |   |   | 932.6 |   | 794.1 |   |
| Science Education                  |       |                    | 109.2      |                      |       |   | 23.7 |   |   | 127.3 |   | 135.9 |   |
| Total                              |       |                    | $          | 2,212.2                   |       |   |   | $ | 793.2 |   |   | $ | 2,794.2 |   | $ | 2,624.1 |   |
| **Operating  Income**              |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| North American Lab                 |       |                    | $          | 65.3                      |       |   |   | $ | 28.5 |   |   | $ | 82.8 |   | $ | 71.2 |   |
| European Lab                       |       |                    | 24.1       |                      |       |   | 13.1 |   |   | 35.9 |   | 24.0 |   |
| Science Education                  |       |                    | 14.7       |                      |       |   | (0.1 | ) |   | 14.0 |   | 18.8 |   |
| Total                              |       |                    | $          | 104.1                     |       |   |   | $ | 41.5 |   |   | $ | 132.7 |   | $ | 114.0 |   |
| **Capital  Expenditures**          |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| North American Lab                 |       |                    | $          | 6.5                       |       |   |   | $ | 1.2 |   |   | $ | 9.2 |   | $ | 21.6 |   |
| European Lab                       |       |                    | 6.2        |                      |       |   | 2.1 |   |   | 7.2 |   | 16.0 |   |
| Science Education                  |       |                    | 0.4        |                      |       |   | — |   |   | 0.2 |   | 3.4 |   |
| Total                              |       |                    | $          | 13.1                      |       |   |   | $ | 3.3 |   |   | $ | 16.6 |   | $ | 41.0 |   |
| **Depreciation  and Amortization** |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| North American Lab                 |       |                    | $          | 15.4                      |       |   |   | $ | 5.1 |   |   | $ | 19.3 |   | $ | 17.5 |   |
| European Lab                       |       |                    | 9.3        |                      |       |   | 3.6 |   |   | 12.6 |   | 14.1 |   |
| Science Education                  |       |                    | 1.1        |                      |       |   | 0.2 |   |   | 1.0 |   | 1.0 |   |
| Total                              |       |                    | $          | 25.8                      |       |   |   | $ | 8.9 |   |   | $ | 32.9 |   | $ | 32.6 |   |

 
| ** **         | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|--------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **         | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **         | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| **Assets**         |       |                  |       |                  |       |   |   |   |   |
| North American Lab |       |                  | $          | 1,616.6               |       |   |   | $ | 1,135.2 |   |   |
| European Lab       |       |                  | 769.6      |                  |       |   | 496.4 |   |   |
| Science Education  |       |                  | 159.8      |                  |       |   | 136.3 |   |   |
| Total              |       |                  | $          | 2,546.0               |       |   |   | $ | 1,767.9 |   |   |

 

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

Followingis a reconciliation of reported operating income by segment to income beforeincome taxes and cumulative effect of a change in accounting principle:
| ** **                                                                         | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|
| ** **                                                                         | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **                                                                         | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **                                                                         | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| Operating income                                                                   |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| North American Lab                                                                 |       |                    | $          | 65.3                      |       |   |   | $ | 28.5 |   |   | $ | 82.8 |   | $ | 71.2 |   |
| European Lab                                                                       |       |                    | 24.1       |                      |       |   | 13.1 |   |   | 35.9 |   | 24.0 |   |
| Science Education                                                                  |       |                    | 14.7       |                      |       |   | (0.1 | ) |   | 14.0 |   | 18.8 |   |
| Total                                                                              |       |                    | 104.1      |                      |       |   | 41.5 |   |   | 132.7 |   | 114.0 |   |
| Interest income                                                                    |       |                    | (0.8       | )                         |       |   | (0.2 | ) |   | (1.7 | ) | (2.4 | ) |
| Interest expense:                                                                  |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| Interest on push down debt                                                         |       |                    | —     |                      |       |   | 4.1 |   |   | 15.2 |   | 26.4 |   |
| All other interest                                                                 |       |                    | 51.5       |                      |       |   | 1.7 |   |   | 10.9 |   | 15.4 |   |
| Other (income)  expense, net                                                       |       |                    | (2.0       | )                         |       |   | 0.1 |   |   | (3.0 | ) | 0.6 |   |
| Income before  income taxes and cumulative effect of a change accounting principle |       |                    | $          | 55.4                      |       |   |   | $ | 35.8 |   |   | $ | 111.3 |   | $ | 74.0 |   |

 

Netsales, long-lived assets and total assets by geographic area are as follows:
| ** **     | ** ** | **Successor**           | ** ** | **Predecessor**           | ** ** |
|----------------|------------|-------------------------|------------|---------------------------|------------|
| ** **     | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** | **Years Ended** | ** ** |
| ** **     | ** ** | **December 31,**   | ** ** | **April 6,**         | ** ** | **December 31,** | ** ** |
| ** **     | ** ** | **2004**                | ** ** | **2004**                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| **Net  Sales** |       |                    |       |                      |       |   |   |   |   |   |   |   |   |
| United States  |       |                    | $          | 1,322.6                   |       |   |   | $ | 456.5 |   |   | $ | 1,683.4 |   | $ | 1,678.2 |   |
| International  |       |                    | 889.6      |                      |       |   | 336.7 |   |   | 1,110.8 |   | 945.9 |   |
| Total          |       |                    | $          | 2,212.2                   |       |   |   | $ | 793.2 |   |   | $ | 2,794.2 |   | $ | 2,624.1 |   |

 
| ** **            | ** ** | **Successor**         | ** ** | **Predecessor**       | ** ** |
|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **            | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **            | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| **Long-lived Assets** |       |                  |       |                  |       |   |   |   |   |
| United States         |       |                  | $          | 1,107.4               |       |   |   | $ | 865.8 |   |   |
| International         |       |                  | 612.0      |                  |       |   | 168.4 |   |   |
| Total                 |       |                  | $          | 1,719.4               |       |   |   | $ | 1,034.2 |   |   |
| **Assets**            |       |                  |       |                  |       |   |   |   |   |
| United States         |       |                  | $          | 1,517.6               |       |   |   | $ | 1,210.8 |   |   |
| International         |       |                  | 1,028.4    |                  |       |   | 557.1 |   |   |
| Total                 |       |                  | $          | 2,546.0               |       |   |   | $ | 1,767.9 |   |   |

 

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**VWR INTERNATIONAL, INC. Notes to Consolidated/Combined Financial Statements (Continued) December 31, 2004, 2003 and 2002 (Dollars in millions)**

**(18)   Unaudited Quarterly Financial Information**
| ** **                   | ** ** | **2004**        | ** ** |
|------------------------------|------------|-----------------|------------|
| ** **                   | ** ** | ** **      | ** ** | **Second** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | ** **      | ** ** | **Predecessor** | ** ** | **Successor** | ** ** |
| ** **                   | ** ** | ** **      | ** ** | **April 1 -** | ** ** | **April 7 -** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | **Predecessor** | ** ** | **April 6,** | ** ** | **June 30,** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | **First**       | ** ** | **2004** | ** ** | **2004** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
| Net sales                    |       |            | $          | 733.8 |   |   |   | $ | 59.4 |   |   | $ | 676.0 |   | $ | 760.5 |   | $ | 775.7 |   |
| Gross profit                 |       |            | 190.1      |   |   |   | 15.1 |   |   | 171.1 |   | 197.7 |   | 190.7 |   |
| Operating income             |       |            | 38.1       |   |   |   | 3.4 |   |   | 31.7 |   | 41.2 |   | 31.2 |   |
| Interest expense,  net       |       |            | 5.3        |   |   |   | 0.3 |   |   | 15.9 |   | 16.9 |   | 17.9 |   |
| Other (income)  expense, net |       |            | (0.3       | ) |   |   | 0.4 |   |   | 0.5 |   | (1.1 | ) | (1.4 | ) |
| Income before  income taxes  |       |            | 33.1       |   |   |   | 2.7 |   |   | 15.3 |   | 25.4 |   | 14.7 |   |
| Net income                   |       |            | 19.1       |   |   |   | 1.6 |   |   | 8.5 |   | 13.6 |   | 9.8 |   |
|                              |            |                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                   | ** ** | **2003—Predecessor** | ** ** |
|------------------------------|------------|---------------------------|------------|
| ** **                   | ** ** | **First**                 | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
| Net sales                    |       | $                         | 664.0      |   | $ | 699.7 |   | $ | 715.8 |   | $ | 714.7 |   |
| Gross profit                 |       | 172.4                     |       | 179.6 |   | 184.6 |   | 179.5 |   |
| Operating income             |       | 27.1                      |       | 32.8 |   | 39.7 |   | 33.1 |   |
| Interest expense,  net       |       | 7.2                       |       | 6.4 |   | 5.5 |   | 5.3 |   |
| Other (income)  expense, net |       | (1.7                      | )          | (0.8 | ) | (0.6 | ) | 0.1 |   |
| Income before  income taxes  |       | 21.6                      |       | 27.2 |   | 34.8 |   | 27.7 |   |
| Net income                   |       | 12.6                      |       | 15.9 |   | 20.3 |   | 16.3 |   |
|                              |            |                           |            |  |  |  |  |  |  |  |  |  |  |

 

**(19)   SubsequentEvents**

Since November 2004, the Company has been in adispute with a major supplier in respect of the payment by the supplier ofcertain rebates, approximating $2.5 that have been reflected as a receivablefrom the supplier. In January 2005, the Company received notice from thissupplier that it was terminating its distribution and supply arrangements withthe Company in both North America and Europe. Under the terms of thesearrangements, the terminations will be effective within 90 days. While theCompany believes that it is entitled to receive the aforementioned rebates andwill pursue payment from the supplier, a reserve was established in the fourthquarter for the full amount of the rebates receivable as of December 31,2004.

The Company is aggressively pursuing and arrangingalternative suppliers for the relevant products and continues to discuss thisdevelopment with its customers, to minimize disruption to the supply chain andour business. The Company believes that there are a range of alternative suppliersavailable to us, which the Company anticipates will enable us to continue tooffer our customers the full array of laboratory products. We cannot guaranteethat this development will not cause disruptions in our business and customerrelationships. We do not believe that this development will have a materialadverse effect on our business or results of operations.

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**ITEM 9.**                CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

**ITEM 9A.**        CONTROLS AND PROCEDURES

In connection with the preparation of this AnnualReport on Form 10-K, management carried out an evaluation, with theparticipation of the Chief Executive Officer and the Chief Financial Officer,of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15of the Securities and Exchange Act of 1934. Based on that evaluation, the ChiefExecutive Officer and the Chief Financial Officer concluded that our disclosurecontrols and procedures were effective at a reasonable assurance level as of December 31,2004.

There were no changes inour internal control over financial reporting that occurred during the quarterended December 31, 2004 that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

**ITEM 9B.**OTHER INFORMATION

None.

**PART III**

**ITEM 10.**         DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT

**Directors and Executive Officers**

Thefollowing chart sets forth certain information regarding our directors andexecutive officers:
| **Name**                     | ** ** | **Age** | ** ** | **Position**                                                  |
|------------------------------|------------|---------|------------|---------------------------------------------------------------|
| Walter W. Zywottek           |       | 57      |       | President and Chief  Executive Officer and Director           |
| Edward Orzetti               |       | 39      |       | Executive Vice President  and President, General Lab Business |
| Jack Wyszomierski            |       | 49      |       | Executive Vice President  and Chief Financial Officer         |
| Stephen Kunst                |       | 56      |       | Senior Vice President,  General Counsel and Secretary         |
| Gloria Keesee                |       | 53      |       | Senior Vice President  and Chief Information Officer          |
| Charles Canfield             |       | 55      |       | Senior Vice President,  Human Resources                       |
| Theodore Pulkownik           |       | 47      |       | Senior Vice President,  Strategy and Business Development     |
| Gerard J. Christian          |       | 36      |       | Vice President and  General Manager, Science Education        |
| B. Charles Ames              |       | 79      |       | Director                                                      |
| Joseph F.  Eckroth, Jr. |       | 46      |       | Director                                                      |
| Dr. Lewis S.  Edelheit  |       | 62      |       | Director                                                      |
| Brian P. Kelley              |       | 44      |       | Director                                                      |
| Joseph L. Rice, III     |       | 73      |       | Director                                                      |
| James W. Rogers              |       | 54      |       | Director                                                      |
| Axel Ruckert                 |       | 58      |       | Director                                                      |
| Richard J. Schnall           |       | 35      |       | Director                                                      |
| Carl T. Stocker              |       | 61      |       | Director                                                      |
| Robert J. Zollars            |       | 47      |       | Director                                                      |

 

Each of our directors will hold office until our nextannual meeting or until a successor is elected or appointed. None of ourexecutive officers or directors has any familial relationship with any otherdirector or executive officer. “Familial relationship” for the purposes of thissection means any relationship by blood, marriage or adoption, not more remotethan first cousin.

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*Walter W. Zywottek*is our President and our Chief Executive Officer, positions he has held since2002 and 2001 respectively. Mr. Zywottek has also been one of ourdirectors since 1995. Prior to the Acquisition, Mr. Zywottek had alsoserved as our Chairman, a position he held since July 2000. Since joiningMerck KGaA in 1967, Mr. Zywottek has served in a variety of positions withMerck KGaA, and its affiliates, including positions as President and ChiefExecutive Officer of EM Industries, Inc. in Hawthorne, New York, from 1994to 1998, and as Managing Director of Merck Eurolab in Brussels, Belgium, from1999 to 2000.

*Edward Orzetti* isour Executive Vice President and President, General Lab Business, positions hehas held since May 2004. Prior to joining us in 2004, Mr. Orzetti wasthe President of Textron Fluid & Power, one of Textron, Inc.’sindustrial business segments, from 2003 until 2004, and Textron’s VicePresident Enterprise Excellence from 2000 until 2003. From 1995 until 2000, Mr. Orzettiheld various positions with the General Electric Company, most recently servingas general manager, supply chain management, for GE Supply in 2000. While atGeneral Electric, Mr. Orzetti also directed its central European sourcingoperations in the Czech Republic. Mr. Orzetti served for several years asan officer and helicopter pilot in the U.S. Army and holds a Bachelor ofScience in mechanical engineering from the United States Military Academy atWest Point. Mr. Orzetti also holds a Masters of Science in administrationand human resource management from Central Michigan University and a Masters ofScience in management, operations and strategy from the Sloan School ofManagement at the Massachusetts Institute of Technology.

*Jack Wyszomierski*is our Executive Vice President and Chief Financial Officer, a position he hasheld since June 2004. Prior to joining us in 2004, Mr. Wyszomierskispent over 20 years at the Schering-Plough Corporation, a corporation thatdevelops and markets prescription drugs, animal health products,over-the-counter drugs and personal care products. Mr. Wyszomierski held avariety of positions at Schering-Plough, most recently serving as ExecutiveVice President and Chief Financial Officer from 1996 until 2003. Mr. Wyszomierskiis a member of the Board of Directors and the Chairman of the Audit Committeeof Exelixis Corporation. Mr. Wyszomierski holds a Bachelor of Science anda Masters of Science from Carnegie Mellon University.

*Stephen Kunst* isour Senior Vice President, General Counsel and Secretary, a position he hasheld since 2001. Mr. Kunst joined Merck KGaA’s U.S. group in 1984 and,prior to assuming his present position with us, he served as counsel for EMDiagnostic Systems, Inc. from 1987 to 1989, and EMD Chemicals, Inc.from 1989 to 2001, both of which were subsidiaries of Merck KGaA.

*Gloria Keesee* isour Senior Vice President and Chief Information Officer, a position she hasheld since March 2005, and has responsibility for our global informationservices. From 2000 until joining us in 2005, Ms. Keesee was the SeniorVice President of Information Technology for the Pharmaceutical Technologiesand Services segment at Cardinal Health. Before joining Cardinal Health, Ms. Keeseeheld the position of Vice President of Information Technology for AshlandChemical from 1997 until 2000, and was the Director of Information Technologyat Allied Signal from 1993 to 1997. From 1988 until 1993, Ms. Keesee hadincreasing responsibility positions of management at Ernst & Young.

*Charles Canfield*is our Senior Vice President, Human Resources, a position he has held since July 2004.Prior to joining us in 2004, Mr. Canfield was the Senior Vice President,Human Resources and Communications, of the Ondeo Nalco Company from 2001 until2003. Before joining Ondeo Nalco, Mr. Canfield had a long tenure withMoore Corporation Limited, a company specializing in the manufacture ofbusiness forms. Mr. Canfield began his career at Moore in 1973, mostrecently serving as the President of Moore’s Canadian operating division from1997 until 1998, and as Moore’s Vice President, Corporate Human Resources andCommunications, from 1988 until 1997 and from 1998 until 2001. Mr. Canfieldis a member of the Board of Directors of the Human Resources ManagementAssociation of Chicago. Mr. Canfield holds a Bachelor of Science fromCalifornia State University and a Masters of Business Administration from theUniversity of Toronto.

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*Theodore Pulkownik*is our Senior Vice President, Strategy and Business Development, a position hehas held since July 2004. Prior to joining us in 2004, Mr. Pulkownikheld two positions with Standard & Poors, which is a division of theMcGraw-Hill Companies. From 2002 until 2004, Mr. Pulkownik was a ManagingDirector of Standard & Poors Corporate Value Consulting, and from 2000to 2002, Mr. Pulkownik was the Senior Vice President, BusinessDevelopment, for Standard & Poors. Before joining Standard &Poors, Mr. Pulkownik was a Senior Vice President for Holberg Industries, adiversified private holding company located in Greenwich, Connecticut, from1999 until 2000. From 1997 until 1999, Mr. Pulkownik was a ManagingDirector, Corporate Business and Development, for General Electric CapitalCorporation. Mr. Pulkownik holds a Bachelor of Business Administrationfrom the University of Wisconsin and a Masters of Business Administration fromthe University of Michigan.

*Gerard J. Christian*is our Vice President and General Manager, Science Education, a position he hasheld since 2003. Commencing by the first quarter 2005, Mr. Christian assumedthe additional role of General Manager of the Canadian Lab Business. Mr. Christianwas the President of Ward’s Natural Science Establishment, Inc., which isone of our subsidiaries, from 1998 to 2003. Mr. Christian became thePresident of Ward’s Natural Science Establishment, Inc. following ouracquisition of the Science Kit companies. Mr. Christian originally startedwith Science Kit in 1993 after completing three years with KPMG Peat Marwick. AtScience Kit, Mr. Christian was the controller for their Canadian division,where his responsibilities included managing their restructuring, and was alsotheir Vice President of Special Projects, where his responsibilities includedmanaging acquisition-related due diligence. Mr. Christian is a CertifiedPublic Accountant and holds a Masters of Business Administration from theUniversity of Buffalo.

*B. Charles Ames* isone of our directors, a position he has held since the Acquisition. Mr. Amesis Vice Chairman and a principal of CD&R. Prior to joining CD&R in1987, Mr. Ames served as Chairman and Chief Executive Officer of RelianceElectric Company, Chief Executive Officer of Acme Cleveland Corporation, andChief Executive Officer and Chairman of The Uniroyal Goodrich Tire Company.Mr. Ames’ family trust is a limited partner of CD&R Associates VILimited Partnership. Mr. Ames is a director and shareholder of CD&RInvestment Associates VI, Inc. He also serves on the Boards of Directorsof Lexmark International, Inc. and Remington Arms Company, Inc. Mr. Amesholds a Ph.B. from Illinois Wesleyan University and a Masters of BusinessAdministration from Harvard Business School.

*Joseph F. Eckroth, Jr.*is one of our directors, a position he has held since November 9, 2004.Mr. Eckroth is the Chief Information Officer for Mattel, Inc., aposition he has held since 2000. Prior to joining Mattel, Inc., Mr. Eckrothserved as an information technology executive for the General Electric Companyfrom 1996 until 2000, where he was the Chief Information Officer for the GEMedical Systems and GE Industrial Systems business units. Prior to joiningGeneral Electric, Mr. Eckroth served in a variety of positions for theNorthrop Grumman Corporation from 1985 until 1996, most recently as Director ofInformation Systems and Technology. Mr. Eckroth holds a Bachelor ofScience from the University of La Verne and a Masters of BusinessAdministration from Pepperdine University School of Business and Management.

*Dr. Lewis S. Edelheit*is one of our directors, a position he has held since August 31, 2004.Dr. Edelheit retired from his position as the Senior Vice President,Corporate Research and Development, for the General Electric Company in 2001.Dr. Edelheit began his long tenure at General Electric as a physicist inthe General Electric Research and Development Center in 1969, and returned toGeneral Electric in 1991 to head its research and development efforts after astint as the President and Chief Executive Officer of Quantum Medical Systemsfrom 1986 until 1991. Dr. Edelheit is a member of the National Academy ofEngineering, and a Fellow of the American Physical Society. Dr. Edelheitserves as a director of Silicon Graphics, Inc., Sonic Innovations, Inc.and Hubspan, Inc. Dr. Edelheit holds a Bachelor of Science, a Mastersof Science and a Ph.D. from the University of Illinois.

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*Brian P. Kelley* isone of our directors, a position he has held since August 31, 2004.Mr. Kelley is the President and Chief Executive Officer of SIRVA, Inc.,a position he has held since 2002. Prior to joining SIRVA, Inc., Mr. Kelleywas an executive for the Ford Motor Company, serving as the President of Ford’sLincoln Mercury business from 2001 until 2002, and as Ford’s Vice President ofGlobal Consumer Services from 1998 until 2001. Prior to joining Ford, Mr. Kelleywas a senior executive for General Electric Company from 1994 until 1998.Mr. Kelley began his career at Procter & Gamble in 1983, where hewas ultimately responsible for some of the company’s most recognized brandnames. Mr. Kelley also serves as a director of SIRVA, Inc. Mr. Kelleyreceived a Bachelor of Arts in economics from The College of Holy Cross.

*Joseph L. Rice, III*is one of our directors, a position he has held since shortly after theAcquisition. Mr. Rice is one of the original partners of CD&R.Mr. Rice has spent the major portion of his business career in privateequity. After graduating from law school in 1960, Mr. Rice practiced lawwith Sullivan & Cromwell until 1966 when he entered the private equitybusiness. In 1969, Mr. Rice co-founded Gibbons, Green & Rice, andin 1978, CD&R. Mr. Rice is a Trustee of The Chapin School, a TrusteeEmeritus of Williams College and a member of the Board of Trustees of TheManhattan Institute, INSEAD’s International Council and the JPMorgan NationalAdvisory Board. Mr. Rice is a limited partner of CD&R Associates VILimited Partnership, and a director and shareholder of CD&R InvestmentAssociates VI, Inc. Mr. Rice is a Director of Italtel HoldingS.p.A. and Uniroyal Holding, Inc. After graduating from Williams in 1954, Mr. Riceenlisted in the United State Marine Corps and served as a Lieutenant from 1954to 1957. Mr. Rice then earned his law degree at Harvard Law School.

*James W. Rogers* isone of our directors, a position he has held since the Acquisition. Mr. Rogersis an operating principal of CD&R. Prior to joining CD&R in 1998, Mr. Rogerswas a Senior Vice President and a member of the Corporate Executive Council ofGeneral Electric Company. From 1995 to 1998, Mr. Rogers was President andChief Executive Officer of GE Industrial Control Systems. Mr. Rogers is alimited partner of CD&R Associates VI Limited Partnership, and a directorand shareholder of CD&R Investment Associates VI, Inc. Mr. Rogersis currently the Chairman of Brake Bros plc and the Chairman of the Board ofDirectors of SIRVA, Inc. Mr. Rogers holds a Bachelor of Arts ineconomics from Rutgers College.

*Axel Ruckert* isone of our directors, a position he has held since August 31, 2004.Mr. Ruckert is the President of Management Partenaires, a French firmspecializing in turn-around management of companies experiencing financialdifficulties. Since founding Management Partenaires in 1984, Mr. Ruckerthas held executive positions with several companies while working to implementstrategic restructurings of these companies, most recently serving as theChairman and Chief Executive Officer of Getronics, an information technologyservices company, in 2003. Prior to working at Getronics, Mr. Ruckert wasthe Chief Executive Officer of Philips Consumer Communications from 2001 until2002, and the Chief Operating Officer of BSN Glasspack, a European glasscontainer manufacturer, from 1999 until 2000. Mr. Ruckert received aMaster of Political Science and Economics at the Free University of Berlin andthe University of Cologne.

*Richard J. Schnall*is one of our directors, a position he has held since the Acquisition.Mr. Schnall is a financial principal of CD&R. Prior to joiningCD&R in 1996, he worked in the Investment Banking division of Donaldson,Lufkin & Jenrette, Inc. and Smith Barney & Co. Mr. Schnallis a limited partner of CD&R Associates VI Limited Partnership, and adirector and shareholder of CD&R Investment Associates VI, Inc. Heserves as a director of Brake Bros plc, and SIRVA, Inc. Mr. Schnallis a graduate of the Wharton School of Business at the University ofPennsylvania and holds a Masters of Business Administration from HarvardBusiness School.

*Carl T. Stocker* isone of our directors, a position he has held since August 31, 2004. Since1997, Mr. Stocker has owned and managed his own acquisition, investmentand consulting company, CTS 

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Enterprises, LLC. Prior tothat time, Mr. Stocker served as the chief financial executive of GeneralElectric’s Industrial Systems business from 1990 until 1996, and the chief informationexecutive from 1992 until 1996. Mr. Stocker was also a member of GeneralElectric’s Corporate Finance and Information Technology Councils during thesesame periods, and served as a senior integration leader for the Space SystemsDivision created by General Electric’s acquisition of RCA. Mr. Stocker isa director of SIRVA, Inc. Mr. Stocker graduated from Wright StateUniversity in 1970 after serving with the U.S. Army.

*RobertJ. Zollars* is one of our directors, a position he has heldsince August 31, 2004. Since 1999, Mr. Zollars has been the Chairmanand CEO of Neoforma, Inc., a healthcare technology company focusing on thesupply chain. Prior to joining Neoforma, Mr. Zollars was the EVP and GroupPresident of Cardinal Health, Inc., from 1997 until 1999, and wasresponsible for five of their wholly-owned subsidiaries. From 1992 until 1996, Mr. Zollarswas the President of the Hospital Supply and Scientific Product distributionbusiness at Baxter International. Mr. Zollars serves as a director of ForHealth Technologies and Alliance Medical Corp. Mr. Zollars is the Chairmanof the Center for Services Leadership at Arizona State University, and is amember of the Young Presidents Organization. Mr. Zollars is a graduate ofArizona State University and holds a Masters of Business Administration fromJohn F. Kennedy University.

**Compositionof our Board of Directors**

Our business and affairsare managed under the direction of our board of directors. Our board iscomposed of eleven directors, none of whom, with the exception of Mr. Zywottek,are executive officers of our company.

**Audit Committee**

Our audit committeecurrently consists of Dr. Lewis S. Edelheit, Joseph L. Rice, III,Axel Ruckert, Richard J. Schnall, and Carl T. Stocker. Our board of directors hasdetermined that Carl T. Stocker is the current audit committee financial expertserving on the audit committee for purposes of the Securities and Exchange Actof 1934. Mr. Stocker is an independent director within the meaning of theSecurities and Exchange Act of 1934. Our audit committee has responsibilityfor, among other things, assisting our board of directors in monitoring:

·       thequality of our financial reporting and other internal control processes,

·       thequality and integrity of our financial statements,

·       theindependent auditor’s qualifications and independence,

·       theperformance of our internal audit function and independent auditors, and

·       ourcompliance with legal and regulatory requirements and its code of conduct.

**Compensation of Directors**

Our directors who are not also our employees oremployees or principals of CD&R are compensated pursuant to our DirectorsCompensation Policy. Under this policy, such directors receive an annualretainer fee of $70,000, at least 50% of which is payable in shares of CDRVInvestors, Inc. common stock granted under the CDRV Investors, Inc.Stock Incentive Plan. Directors may elect to receive up to 100% percent oftheir annual retainer fee in shares granted under the CDRV Investors, Inc.Stock Incentive Plan.

Any director serving as the chair of any of thecommittees of our board of directors will receive an additional $10,000 annualcash retainer fee ($15,000 in the case of the chair of the audit committee ofour board of directors).

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We do not pay any additional remuneration to any ofour directors who are also our employees or who are employees or principals ofCD&R, however all such directors are reimbursed for reasonable travel andlodging expenses incurred to attend meetings of our board of directors or acommittee thereof.

The Company has adoptedthe VWR International, Inc. Code of Ethics and Conduct (the “Code”), acode of ethics as defined under Regulation S-K promulgated under the SecuritiesAct of 1933, that applies to all of the Company’s employees including theCompany’s Chief Executive Officer, Chief Financial Officer, CorporateController and all professionals in finance and finance-related departments. ThisCode is available on the Company’s website at *www.vwr.com*on the About VWR portion of the site. The Company intends to satisfy itsdisclosure obligations under Item 10 of Form 8-K by postinginformation about amendments to, or waivers from, a provision of the Code thatapply to the Company’s Chief Executive Officer, Chief Financial Officer, andCorporate Controller on the Company’s website at the address above.

**ITEM 11.**         EXECUTIVE COMPENSATION

The following table setsforth the compensation earned by our Chief Executive Officer and our fouradditional most highly compensated executive officers (each, a “named executiveofficer”) for the last two completed fiscal years.

**SummaryCompensation Table**
| Name and  Principal  Position  (4)(5)(6)                 | ** ** | ** ** | ** ** | **Year** | ** ** | **Salary($)** | ** ** | **Bonus($)** | ** ** | **Other Annual  Compensation  ($)(1)** | ** ** | **All Other  Compensation  ($)(2)** | ** ** | **Restricted  Stock Awards  ($)(3)** | ** ** | **Number of  Securities  Underlying  Options/SARS** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------|------------|---------------|------------|--------------|------------|---------------------------------------------|------------|------------------------------------------|------------|-------------------------------------------|------------|----------------------------------------------------------|------------|
| Walter Zywottek                                               |       | 2004       |       | $        | 560,273    |          | $          | 252,913      |       |                                        | $          | 14,890                                   |       |                                      |       | $                                                        | 70,348     |   |   |   | $ | — |   |   |   | 22,500 |   |   |
| Director, President and Chief Executive  Officer              |       | 2003       |       | 430,500  |       | 279,825       |       |         | 14,950     |                                        |       |                                     | 1,956      |                                      |       |                                                     | —     |   |   |   | — |   |   |
| Edward Orzetti                                                |       | 2004       |       | 343,763  |       | 344,138       |       |         | 20,465     |                                        |       |                                     | 109,260    |                                      |       |                                                     | 280,000    |   |   |   | 45,000 |   |   |
| Executive  Vice President and President, General Lab Business |       | 2003       |       | —   |       | —        |       |         | —     |                                        |       |                                     | —     |                                      |       |                                                     | —     |   |   |   | — |   |   |
| Jack Wyszomierski                                             |       | 2004       |       | 192,287  |       | 163,400       |       |         | 7,795      |                                        |       |                                     | 48,738     |                                      |       |                                                     | —     |   |   |   | 20,000 |   |   |
| Executive Vice President and  Chief Financial Officer         |       | 2003       |       | —   |       | —        |       |         | —     |                                        |       |                                     | —     |                                      |       |                                                     | —     |   |   |   | — |   |   |
| Stephen Kunst                                                 |       | 2004       |       | 252,380  |       | 75,911        |       |         | 14,190     |                                        |       |                                     | 22,898     |                                      |       |                                                     | —     |   |   |   | 4,800 |   |   |
| Senior  Vice President and General Counsel                    |       | 2003       |       | 246,000  |       | 173,015       |       |         | 10,643     |                                        |       |                                     | 5,832      |                                      |       |                                                     | —     |   |   |   | — |   |   |
| George Gunther                                                |       | 2004       |       | 229,560  |       | 42,950        |       |         | 14,190     |                                        |       |                                     | 16,086     |                                      |       |                                                     | —     |   |   |   | 3,000 |   |   |
| Former Senior  Vice President and Chief Information Officer   |       | 2003       |       | 222,900  |       | 171,335       |       |         | 14,190     |                                        |       |                                     | 3,550      |                                      |       |                                                     | —     |   |   |   | — |   |   |
|                                                               |            |            |            |          |            |               |            |              |            |                                             |            |                                          |            |                                           |            |                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)    Amounts reported include automobile allowances for 2004of $14,190 for Messrs. Zywottek, Kunst and Gunther and automobileallowances of $9,066 and $7,795 for Messrs. Orzetti and Wyszomierski. The2004 amount reported for Mr. Orzetti includes a housing allowance of$11,399. Amounts reported include automobile allowances for 2003 of $14,190 forMessrs. Zywottek and Gunther, and an automobile allowance of $10,643 for Mr. Kunst.

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(2)    Amountsreported for 2004 include (a) respective special payments of $54,450,$108,900, $48,400, $11,616 and $7,260 to Messrs. Zywottek, Orzetti,Wyszomierski, Kunst and Gunther earned in connection with the December 16,2004 issuance by CDRV Investors, Inc. of $481.0 million aggregateprincipal amount at maturity ($299.4 million gross proceeds) of 95¤8% senior discount notes due 2015 and arelated special distribution to CDRV Investors, Inc. shareholders, (b) paymentsto Messrs. Zywottek, Kunst, and Gunther of $13,240, $5,166 and $5,166 insettlement of our obligations under a predecessor bonus plan that wasterminated in connection with the Acquisition, (c) a contribution to our401(k) or other defined contribution retirement plan of $5,068 for Mr. Kunstand $3,444 for Mr. Gunther and (d) imputed value of guaranteed termlife insurance policies for Messrs. Zywottek, Orzetti, Wyszomierski, Kunstand Gunther of $2,658, $360, $338, $1,048 and $216. Amounts reported for 2003include (a) a contribution to our 401(k) or other definedcontribution retirement plan of $4,821 for Mr. Kunst and $3,343 for Mr. Guntherand (b) imputed value of guaranteed term life insurance policies for Messrs. Zywottek,Kunst and Gunther of $1,956, $1,011 and $207.

(3)    Mr. Orzettiwas granted 5,000 CDRV Investors, Inc. restricted stock units inconnection with his commencement of employment. The value of Mr. Orzetti’srestricted stock unit grant is shown based on the value of an unrestrictedshare of CDRV Investors, Inc. common stock as of December 31, 2004.Mr. Orzetti is not entitled to receive any dividends on his restrictedstock units.

(4)    Mr. Orzettibecame our Executive Vice President and President, General Lab Business in May 2004.

(5)    Mr. Wyszomierskibecame our Executive Vice President and Chief Financial Officer in June 2004.

(6)    Mr. Gunther was our Senior Vice President andChief Information Officer until March 2005.

**Option Grants in Last Fiscal Year**

Thefollowing table shows all grants of stock options to the named executiveofficers during fiscal year 2004 under the CDRV Investors, Inc. StockIncentive Plan.
| ** **        | ** ** | **Number of  Securities  Underlying  Options** | ** ** | **% of Total  Options  Granted to  Employees in** | ** ** | **Exercise  Price**  | ** ** | ** **                | ** ** | **Potential Realized Value at  Assumed Annual Rates of  Stock Appreciation for  Option Term** | ** ** |
|-------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------------------------|------------|----------------------|------------|---------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Name**          | ** ** | ** **                                          | ** ** | **Granted(1)**                                                        | ** ** | **Fiscal Year** | ** ** | ** ($/Sh)(2) ** | ** ** | **Expiration Date**                                                                                                                   | ** ** | **5%(3)** | ** ** | **10%(3)** | ** ** |
| Walter Zywottek   |       |                                                | 22,500     |                                                                  |       |                 | 4.63       | %                         |       |                                                                                                                                       | $          | 50.52 |   |   |   | 9/30/2014 |   |   | $ | 714,865 |   | $ | 1,811,607 |   |
| Edward Orzetti    |       |                                                | 45,000     |                                                                  |       |                 | 9.26       | %                         |       |                                                                                                                                       | 50.52      |   |   |   | 9/30/2014 |   |   | 1,429,729 |   | 3,623,214 |   |
| Jack Wyszomierski |       |                                                | 20,000     |                                                                  |       |                 | 4.12       | %                         |       |                                                                                                                                       | 50.52      |   |   |   | 9/30/2014 |   |   | 635,435 |   | 1,610,317 |   |
| Stephen Kunst     |       |                                                | 4,800      |                                                                  |       |                 | 0.99       | %                         |       |                                                                                                                                       | 50.52      |   |   |   | 9/30/2014 |   |   | 152,504 |   | 386,476 |   |
| George Gunther    |       |                                                | 3,000      |                                                                  |       |                 | 0.62       | %                         |       |                                                                                                                                       | 50.52      |   |   |   | 9/30/2014 |   |   | 95,315 |   | 241,548 |   |
|                   |            |                                                     |            |                                                                       |            |                      |            |                           |            |                                                                                                                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          All options were grantedunder the CDRV Investors, Inc. Stock Incentive Plan and generally becomevested and exercisable in five equal installments beginning on the firstanniversary of the grant date, subject to continued employment.

(2)          All options wereoriginally granted with an exercise price per share of $100.00, which was thefair market value of the underlying stock on the date of grant. In connectionwith the December 16, 2004 issuance by CDRV Investors, Inc. of $481.0million aggregate principal amount at maturity ($299.4 million grossproceeds) of 95¤8% senior discount notes due2015 and a related special distribution to CDRV Investors, Inc.shareholders, the exercise price of each option was adjusted to $50.52 pursuantto the antidilution provision of the CDRV Investors, Inc. Stock IncentivePlan.

(3)          Potentialrealizable value is based on the assumed annual growth for each of the grants,shown over their option term. Actual gains, if any, on stock option exercisesare dependent on the future value of the stock.

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**AggregatedOption Exercises In Last Fiscal Year And Fiscal Year-End Option Values**

Thefollowing table shows aggregate exercises of stock options in the 2004 fiscalyear by the named executive officers and the value of unexercised stock optionsheld by the named executive officers at December 31, 2004. All optionswere granted under the CDRVInvestors, Inc. Stock Incentive Plan.
| **Name**          | ** ** | ** ** | ** ** | **Shares  Acquired on  Exercise** | ** ** | **Value  Realized** | ** ** | **Number of  Securities  Underlying  Unexercised  Options at FY  End  Exercisable/  Unexercisable** | ** ** | **Value of  Unexercised In-  the-Money  Options at FY  End  Exercisable/  Unexercisable(1)** | ** ** |
|-------------------|------------|------------|------------|----------------------------------------|------------|---------------------|------------|--------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|
| Walter Zywottek   |       |       | —     |                                   |       |                | —     |                                                                                                               |       |                                                                                                             | 0/22,500   |   |   |   | $ | 0/123,300 |   |   |
| Edward Orzetti    |       |       | —     |                                   |       |                | —     |                                                                                                               |       |                                                                                                             | 0/45,000   |   |   |   | 0/246,000 |   |   |
| Jack Wyszomierski |       |       | —     |                                   |       |                | —     |                                                                                                               |       |                                                                                                             | 0/20,000   |   |   |   | 0/109,600 |   |   |
| Stephen Kunst     |       |       | —     |                                   |       |                | —     |                                                                                                               |       |                                                                                                             | 0/4,800    |   |   |   |   0/26,304 |   |   |
| George Gunther    |       |       | —     |                                   |       |                | —     |                                                                                                               |       |                                                                                                             | 0/3,000    |   |   |   |   0/16,440 |   |   |

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(1)          The“Value of Unexercised In-the-Money Options at FY End” is the aggregate numberof unexercised options on December 31, 2004 multiplied by the differencebetween the exercise price for each option and the fair market value of a shareof CDRV Investors, Inc. common stock on December 31, 2004 ($56.00).The actual value, if any, that will be realized upon the exercise of an optionwill depend upon the difference between the exercise price of the option andthe fair market value of the CDRV Investors, Inc. common stock on the datethat the option is exercised.

**EmploymentAgreements With Named Executive Officers**

*Mr. Zywottek*.   Weare party to an employment agreement with Mr. Zywottek pursuant to whichhe receives an annual base salary of $600,000 as of December 31, 2004. Mr. Zywottek’sbase salary will be reviewed at least annually, and may be increased (but notdecreased) based upon his performance and consistent with our compensationpractices. Mr. Zywottek is also eligible to receive an annual bonuspursuant to his employment agreement that becomes earned based on theachievement of objectives established under our applicable bonus plan. As of December 31,2004, Mr. Zywottek’s target annual bonus was equal to 100% of his basesalary.

Mr. Zywottek’s agreement does not have a fixedterm. However, if we terminate Mr. Zywottek’s employment without cause (asdefined in his employment agreement), he will be entitled to continued paymentof his then current base salary and continued health benefits for a period oftwo years following any such termination, or, if the termination of employmentoccurs more than 30 months after the completion of the Acquisition, for theearlier of one year or the date until he obtains new full-time employment.

*Mr. Orzetti*.   InMay 2004, Mr. Orzetti joined us as our new Executive Vice Presidentand President, General Lab Business, and entered into an employment agreementwith us upon his commencement of employment. Pursuant to his employmentagreement and as of December 31, 2004, Mr. Orzetti receives an annualbase salary of $550,020 and is also eligible to receive an annual bonus thatbecomes earned based on the achievement of objectives established under ourapplicable bonus plan. Mr. Orzetti’s target annual bonus is equal to 100%of his base salary.

Mr. Orzetti’s agreement does not have a fixedterm. However, if we terminate Mr. Orzetti’s employment without cause, hewill be entitled to continued payment of his then current base salary andcontinued health benefits for a period equal to the earlier of one yearfollowing any such termination or the date that he obtains new employment. Pursuantto Mr. Orzetti’s employment agreement, he also 

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received an award of 5,000CDRV Investors, Inc. restricted stock units that will generally vest onthe seventh anniversary of his commencement of employment with us. Mr. Orzetti’srestricted stock units will all vest earlier in certain circumstances if weundergo a public offering or if we are sold to a third party unrelated toCD&R.

Mr. Orzetti was offered the opportunity toparticipate in the initial offering under CDRV Investors, Inc. new stockincentive plan pursuant to his employment agreement.

*Mr. Wyszomierski*.   InJune 2004, Mr. Wyszomierski joined us as our new Executive VicePresident and Chief Financial Officer, and entered into an employment agreementwith us upon his commencement of employment. Mr. Wyszomierski’s agreementdoes not have a fixed term. Pursuant to his employment agreement and as of December 31,2004, Mr. Wyszomierski receives an annual base salary of $350,000 and isalso eligible to receive an annual bonus that becomes earned based on theachievement of objectives established under our applicable bonus plan. Mr. Wyszomierski’starget annual bonus is equal to 85% of his base salary.

Mr. Wyszomierski was offered the opportunity toparticipate in the initial offering under CDRV Investors, Inc.’s new stockincentive plan pursuant to his employment agreement.

*Mr. Kunst*.   Weare party to an employment agreement with Mr. Kunst pursuant to which hereceives an annual base salary of $253,380 as of December 31, 2004. Mr. Kunst’sbase salary will be reviewed at least annually, and may be increased (but notdecreased) based upon his performance and consistent with our compensationpractices. Mr. Kunst is also eligible to receive an annual bonus pursuantto his employment agreement that becomes earned based on the achievement ofobjectives established under our applicable bonus plan. As of December 31,2004, Mr. Kunst’s target annual bonus was equal to 75% of his base salary.

The employment agreement for Mr. Kunst has aninitial three-year term that is automatically extended for consecutive one-yearperiods unless either party chooses not to renew the agreement. Mr. Kunst’sagreement provides that if we terminate his employment without cause (asdefined in the employment agreement), fail to renew his agreement at the end ofany initial or any extended term, or materially demote (as so defined) him,then he will be entitled to continued payment of his then current base salaryand target annual bonus for a period of two years following any suchtermination or non-renewal.

*Mr. Gunther*.   Priorto his termination of employment with us in March 2005, we were parties toan employment agreement with Mr. Gunther. As of December 31, 2004, Mr. Guntherhad an annual base salary of $229,560, and a target annual bonus opportunityequal to 75% of his base salary.

Pursuant to his employmentagreement and separation agreement, Mr. Gunther will receive continuedpayment of his current base salary and target bonus for up to two yearsfollowing his termination of employment. The total amount of such continuedpayments is expected to be approximately $803,500. Mr. Gunther will alsoreceive approximately $5,850 for health benefits, and outplacement serviceswith a value not to exceed $21,000.

**Changein Control and Termination of Employment Arrangements under New Stock IncentivePlan**

The CDRV Investors, Inc.Stock Incentive Plan provides that the vesting of options to purchase shares ofCDRV Investors, Inc. common stock granted thereunder will be acceleratedif CDRV Investors, Inc. experiences a change in control (as defined in theplan) where substitute options with substantially equivalent terms and economicvalue are not substituted for existing options in place of accelerated vesting.The vesting of options will also be accelerated upon certain terminations ofemployment, such as death or disability (as defined in the plan). CDRVInvestors, Inc.’s board of directors has the discretion to accelerate thevesting of options at any time and from time to time.

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**Pension Plans**

We sponsor various retirement plans for most full-timeemployees, including defined benefit plans covering Messrs. Zywottek,Orzetti, Wyszomierski, Gunther and Kunst.

Messrs. Zywottek,Orzetti, Wyszomierski, Gunther and Kunst participate in the pension plan wesponsor covering substantially all of our full-time United States employees(except employees covered by collective bargaining agreements who participatein independently operated plans). As in effect as of December 31, 2004,annual retirement benefits under the pension plan are generally calculated asthe greater of:

·       aparticipant’s years of credited service multiplied by $240, and

·       1%of a participant’s average annual compensation earned in the consecutive fiveyear period during which the participant was most highly paid (referred to as “finalaverage earnings”), plus an additional 0.75% of final average earnings inexcess of one third of the Social Security taxable wage base in the year theparticipant terminates employment, in each case multiplied by the participant’syears of credited service (up to a maximum of 33 years).

Underthe pension plan, final average earnings includes the participant’s salary andbonus indicated earlier under the heading “—Summary Compensation Table,” aswell as any other bonus or severance payments that a participant may becomeentitled to. Because the pension plan complies with ERISA and Code maximumcompensation and defined benefit limitations, certain of the annual retirementbenefits indicated in the table below will be paid pursuant to an unfundedbenefit equalization plan, or supplemental plan, of the type permitted by ERISA.The following table shows the estimated annual benefits payable upon retirementto persons in specified remuneration and years of service classifications underthe pension plan and supplemental plan.
| ** **       | ** ** | **Estimated Annual Pension  (Years of Service)** | ** ** |
|------------------|------------|----------------------------------------------------------------------|------------|
| **Remuneration** | ** ** | ** **                                                           | ** ** | **15** | ** ** | **20** | ** ** | **25** | ** ** | **30** | ** ** | **35** | ** ** |
| $125,000         |       | $                                                                    | 29,516     |   | $ | 39,355 |   | $ | 49,194 |   | $ | 59,033 |   | $ | 64,936 |   |
| 150,000          |       | 36,079                                                               |       | 48,105 |   | 60,131 |   | 72,158 |   | 79,373 |   |
| 175,000          |       | 42,641                                                               |       | 56,855 |   | 71,069 |   | 85,283 |   | 93,811 |   |
| 200,000          |       | 49,204                                                               |       | 65,605 |   | 82,006 |   | 98,408 |   | 108,248 |   |
| 225,000          |       | 55,766                                                               |       | 74,355 |   | 92,944 |   | 111,533 |   | 122,686 |   |
| 250,000          |       | 62,329                                                               |       | 83,105 |   | 103,881 |   | 124,658 |   | 137,123 |   |
| 300,000          |       | 75,454                                                               |       | 100,605 |   | 125,756 |   | 150,908 |   | 165,998 |   |
| 400,000          |       | 101,704                                                              |       | 135,605 |   | 169,506 |   | 203,408 |   | 223,748 |   |
| 450,000          |       | 114,829                                                              |       | 153,105 |   | 191,381 |   | 229,658 |   | 252,623 |   |
| 500,000          |       | 127,954                                                              |       | 170,605 |   | 213,256 |   | 255,908 |   | 281,498 |   |
| 550,000          |       | 141,079                                                              |       | 188,105 |   | 235,131 |   | 282,158 |   | 310,373 |   |
| 600,000          |       | 154,204                                                              |       | 205,605 |   | 257,006 |   | 308,407 |   | 339,248 |   |
| 650,000          |       | 167,329                                                              |       | 223.105 |   | 278,881 |   | 334,658 |   | 368,123 |   |
| 700,000          |       | 180,454                                                              |       | 240,605 |   | 300,756 |   | 360,908 |   | 396,998 |   |
| 750,000          |       | 193,579                                                              |       | 258,105 |   | 322,631 |   | 387,158 |   | 425,873 |   |
| 800,000          |       | 206,704                                                              |       | 275,605 |   | 344,506 |   | 413,408 |   | 454,748 |   |
| 850,000          |       | 219,829                                                              |       | 293,105 |   | 366,381 |   | 439,658 |   | 483,623 |   |
|                  |            |                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

As of December 31, 2004, Messrs. Zywottek,Orzetti and Wyszomierski have less than 1 year of credited service and Messrs. Guntherand Kunst have, for purposes of both the pension plan and the supplementalplan, an estimated 5 and 4 years of respective credited service. Benefits shownin the table above are computed on the basis of straight life annuity benefits,and are not subject to deduction or offset.

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**ITEM 12.**         SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

CDRVInvestors, Inc. owns, through CDRV Holdings, Inc., all of theoutstanding capital stock of VWR International, Inc. The following tablelists all shares of common stock of CDRV Investors, Inc. beneficiallyowned by the following holders as of March 28, 2005:
| ** **                                                           | ** ** | **Shares Outstanding  After the Acquisition** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| **Name and Address of Beneficial Owner(1)** | ** ** | ** **                                                   | ** ** | **Number** | ** ** | **Percent** | ** ** |
| Clayton,  Dubilier & Rice Fund VI Limited Partnership(2)    |       | 4,200,000                                                    |       | 73.14 |   |
| Banc of America  Capital Investors, L.P.(3)                          |       | 350,000                                                      |       | 6.10 |   |
| Walter Zywottek                                                      |       | 7,500                                                        |       | * |   |
| Edward Orzetti                                                       |       | 15,000                                                       |       | * |   |
| Jack Wyszomierski                                                    |       | 10,000                                                       |       | * |   |
| Stephen Kunst                                                        |       | 2,400                                                        |       | * |   |
| George Gunther(4)                                                    |       | 1,500                                                        |       | * |   |
| B. Charles Ames(5)                                                   |       | 0                                                            |       | * |   |
| Joseph F.  Eckroth, Jr(6)                                            |       | 1,334                                                        |       | * |   |
| Dr. Lewis S.  Edelheit                                          |       | 2,331                                                        |       | * |   |
| Brian P. Kelley                                                      |       | 663                                                          |       | * |   |
| Joseph L.  Rice, III(5)                                         |       | 0                                                            |       | * |   |
| James W. Rogers(5)                                                   |       | 0                                                            |       | * |   |
| Axel Ruckert                                                         |       | 910                                                          |       | * |   |
| Richard J.  Schnall(5)                                               |       | 0                                                            |       | * |   |
| Carl T. Stocker                                                      |       | 2,831                                                        |       | * |   |
| Robert J. Zollars                                                    |       | 3,163                                                        |       | * |   |
| All directors and  executive officers as a group (18 persons)        |       | 47,632                                                       |       | 0.83 |   |
|                                                                      |            |                                                              |            |  |  |  |  |

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*                    Less than 1%

(1)          Inaccordance with Rule 13d-3 under the Exchange Act, as amended, a person isdeemed a “beneficial owner” of a security if he or she has or shares the powerto vote or direct the voting of such security or the power to dispose or directthe disposition of such security. A person is also deemed to be a beneficialowner of any securities which that person has the right to acquire beneficialownership of within 60 days. More than one person may be deemed to be abeneficial owner of the same securities. Each of such stockholders has solevoting and investment power as to the shares unless otherwise noted.

(2)          CD&RAssociates VI Limited Partnership, a Cayman Islands exempted limitedpartnership, is the general partner of CD&R Fund VI and has the power todirect CD&R Fund VI as to the voting and disposition of shares held byCD&R Fund VI. CD&R Investment Associates VI, Inc., a Cayman Islandexempted company, is the general partner of CD&R Associates VI LimitedPartnership and has the power to direct CD&R Associates VI LimitedPartnership as to its direction of CD&R Fund VI’s voting anddisposition of the shares held by CD&R Fund VI. No person controls thevoting and disposition of CD&R Investment Associates VI, Inc., withrespect to the shares owned by CD&R Fund VI. Each of CD&R Associates VILimited Partnership and CD&R Investment Associates VI, Inc.expressly disclaims beneficial ownership of the shares owned by CD&R FundVI. The business address for each of CD&R Fund VI, CD&R Associates VILimited Partnership and CD&R Investment Associates VI, Inc., is 1403Foulk Road, Suite 106, Wilmington, Delaware 19803.

(3)          Bancof America Capital Investors, L.P. is a Delaware limited partnership. Banc ofAmerica Capital Management, L.P., a Delaware limited partnership, is thegeneral partner of Banc of America Capital 

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Investors, L.P. andhas the power to direct Banc of America Capital Investors, L.P. as to thevoting and disposition of shares held by Banc of America Capital Investors,L.P. BACM I GP, LLC, a Delaware limited liability company, is the generalpartner of Banc of America Capital Management L.P. and has the power to directBanc of America Capital Management L.P. as to the voting and disposition ofshares held by Banc of America Capital Management L.P. The business address forBanc of America Capital Investors, L.P., Banc of America Capital Management,L.P. and BACM I GP, LLC, is Bank of America Corporate Center, 100 North TryonStreet, 25th Floor, Charlotte, NC 28255.

(4)          Mr. Guntherwas our Senior Vice President and Chief Information Officer until March 2005.

(5)          Doesnot include 4,200,000 shares owned by Clayton Dubilier & Rice Fund VILimited Partnership. Messrs. Ames, Rice III, Rogers and Schnall may bedeemed to share beneficial ownership of the shares owned of record by ClaytonDubilier & Rice Fund VI Limited Partnership by virtue of their statusas stockholders of CD&R Investment Associates VI, Inc., the generalpartner of CD&R Associates VI Limited Partnership. However, each of Messrs. Ames,Rice III, Rogers and Schnall expressly disclaims beneficial ownership of theshares owned by Clayton Dubilier & Rice Fund VI Limited Partnership.

(6)          Includes1,090 shares that were purchased by Mr. Eckroth under the CDRV Investors, Inc.Stock Incentive Plan that were immediately transferred to a trust created forthe benefit of Mr. Eckroth’s family.

**ITEM13.**         CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

**Investment Fund Managed by CD&R**

***Overview***.   Asof March 28, 2005, CD&R Fund VI owns approximately 73.14% of theoutstanding common stock of our ultimate parent company, CDRV Investors, Inc.CD&R Fund VI is a private investment fund managed by CD&R.

The general partner of CD&R Fund VI is CD&RAssociates VI Limited Partnership, a Cayman Islands exempted limitedpartnership. CD&R Associates VI Limited Partnership’s general partner isCD&R Investment Associates VI, Inc., a Cayman Islands exemptedcompany.

Four of our directors, B. Charles Ames, Joseph L. Rice, III,James W. Rogers and Richard J. Schnall, are principals of CD&R, limitedpartners (including a family trust of Mr. Ames) of CD&R Associates VILimited Partnership, and stockholders and directors of CD&R InvestmentAssociates VI, Inc.

CD&R is a private investment firm organized as aDelaware corporation. CD&R is the manager of a series of investment funds,including CD&R Fund VI. CD&R generally assists in structuring,arranging financing for and negotiating the acquisition of the companies inwhich the funds it manages invest. After the consummation of such transactions,CD&R generally provides management and financial consulting services to thecompanies. Such services include helping companies to establish effectivebanking, legal and other business relationships and assisting management indeveloping and implementing strategies for improving their operational,marketing and financial performance.

***Stock PurchaseAgreement***.   In connection with the Acquisition, CD&RFund VI and CDRV Acquisition Corporation entered into various agreements,including a stock purchase agreement, dated as of February 15, 2004, withMerck KGaA, pursuant to which CDRV Acquisition Corporation and certain of itsaffiliates agreed to purchase all of the outstanding capital stock of VWRInternational Corporation, the holding company of VWR International, Inc.,and 10% of the outstanding equity ownership interests of VWR InternationalImmobilien GmbH that we did not own. Pursuant to these agreements, Merck KGaAagreed to not solicit certain of our employees for a period of two yearsfollowing the completion of the Acquisition. Merck KGaA also agreed to not actas a distributor of certain competitive laboratory 

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products, excludingcertain products such as pharmaceutical products and ingredients, in thelaboratory field in North America and many Western European countries, or ownan interest in any such distributor, subject to certain ownership exceptions. Thisrestriction expires on the third anniversary of the completion of theAcquisition. CD&R Fund VI, on the other hand, agreed to not sell anycontrolling interest in us or our business to any entity that derives more than10% of its total revenues from the manufacture, distribution and sale of chemicalproducts for industrial or R&D uses. This restriction expires upon ourinitial public offering of voting securities. In addition, the parties agreedto certain indemnification obligations for breaches of their respectiverepresentations, warranties and covenants.

***ConsultingAgreement***.   CDRV Investors, Inc., CDRV Holdings, Inc.,CDRV Acquisition Corporation and CD&R entered into a Consulting Agreementimmediately prior to the Acquisition, pursuant to which CD&R provides uswith financial advisory and management consulting services following theconsummation of the Transactions. We pay CD&R a management fee of $1.5million annually, which will be reviewed on an annual basis. We paid CD&R afee of $18.0 million as compensation for performing financial, investmentbanking, management advisory and other services in connection with theAcquisition, and reimbursed certain CD&R expenses.

***IndemnificationAgreement***.   CDRV Investors, Inc., CDRV Holdings, Inc.,CDRV Acquisition Corporation and their respective subsidiaries entered into anIndemnification Agreement with CD&R and CD&R Fund VI immediately priorto the Acquisition, pursuant to which, following the consummation of theTransactions, we would indemnify CD&R, CD&R Fund VI, any otherinvestment vehicle managed by CD&R, their respective directors, officers,partners, employees, agents and controlling persons, against certainliabilities arising under federal securities laws, liabilities arising out ofthe performance of the consulting agreement and certain other claims andliabilities.

***Stock SubscriptionAgreement***.   As of March 28, 2005, CD&R Fund VIowns approximately 73.14% of the outstanding shares of common stock of CDRVInvestors, Inc. It subscribed for 4,800,000 shares of CDRV Investors, Inc.’scommon stock for an aggregate purchase price of $480.0 million pursuant to aStock Subscription Agreement, dated as of April 7, 2004. Pursuant to thatagreement, CD&R Fund VI may designate all of the members of the Board ofDirectors of CDRV Investors, Inc. and certain of its direct and indirectsubsidiaries. CD&R is also entitled to consult with CDRV Investors, Inc.with respect to our operations at any time, to have observers attend meetingsof its Board of Directors and those of its subsidiaries, including us, and toreceive all of its quarterly and annual financial reports and budgets, as wellas other documents.

On June 22, 2004,CD&R Fund VI transferred an aggregate of 500,000 shares of the common stockof CDRV Investors, Inc. to five of its limited partners, and on December 6,2004, CD&R Fund VI transferred another 100,000 shares of CDRV Investors, Inc.common stock to another of its limited partners, pursuant to transferagreements among the Company, CD&R Fund VI and each such transferee. Pursuantto the transfer agreements, transferees are entitled to the rights andobligations of a minority stockholder under the Registration and ParticipationAgreement, dated as of April 7, 2004, including the transfer restrictions, registrationrights, tag-along rights and drag-along rights that are described below underthe heading “—Agreement with Management and Other Investors—Registration andParticipation Agreement.”

**Agreementswith Management and Other Investors**

***Management EquityOfferings***.   Shortly after the completion of theAcquisition, CDRV Investors, Inc., our ultimate parent company, made aninitial offering of its shares of common stock and options to purchase sharesof its common stock to certain of our officers and employees. All of theexecutive officers listed under “Item 10—Directors and Executive Officers ofthe Registrant” except Ms. Keesee participated in this initial offeringand purchased shares and were granted options to purchase shares in a closingthat 

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occurred on September 30,2004. As part of this initial offering, CDRV Investors, Inc. also offeredour non-employee directors listed under “Item 10—Directors and ExecutiveOfficers of the Registrant” the opportunity to purchase up to 2,500 shares ofits common stock. Pursuant to this offer, Messrs. Stocker and Zollarspurchased 2,500 shares and Mr. Edelheit purchased 2,000 shares in theclosing that occurred on September 30, 2004. Mr. Eckroth purchased1,090 shares pursuant to this offer in a closing that occurred on December 7,2004.

All CDRV Investors, Inc.shares and options were offered under the CDRV Investors, Inc. StockIncentive Plan, which was adopted in connection with the Acquisition.

***Registration and Participation Agreement***

CDRV Investors, Inc., CD&R Fund VI and certainother stockholders of CDRV Investors, Inc. entered into a Registration andParticipation Agreement, dated as of April 7, 2004, pursuant to which,among other things:

***TransferRestrictions***.   Until the earlier of the initialpublic offering of the common stock of CDRV Investors, Inc. and the fifthanniversary of the agreement, holders of common stock of CDRV Investors, Inc.other than CD&R Fund VI are subject to certain restrictions on transfer.

***Registration Rights***.   Holders ofshares of common stock of CDRV Investors, Inc., including certainexecutive officers, are entitled to registration rights for such shares ofcommon stock held by them:

·       holdersconstituting, at any time prior to the initial public offering of the commonstock of CDRV Investors, Inc., at least 50% and thereafter, at least 25%,of the total registrable securities may request that CDRV Investors, Inc.use its best efforts to register such securities for public resale,

·       followingthe initial public offering of the common stock of CDRV Investors, Inc.,under specified circumstances (and if CDRV Investors, Inc. has qualifiedfor registration on Form S-3), certain holders other than CD&R Fund VImay request that CDRV Investors, Inc. use its best efforts to registertheir shares of common stock of CDRV Investors, Inc. for public resale on Form S-3,and

·       ifCDRV Investors, Inc. registers any common stock at any time, either forits account or for the account of any stockholder, the holders of registrablesecurities are entitled to request that it use its best efforts to include thenumber of their shares of common stock that, in the opinion of theunderwriters, can be sold.

CDRV Investors, Inc. will bear all registrationexpenses (other than underwriting discounts) for the first four registrations,including the fees and expenses of counsel to the selling stockholders. Becauseonly CD&R Fund VI holds more than 50% of its outstanding common stock, itis the only stockholder able to initiate the initial registration by itself. CDRVInvestors, Inc. also will bear the registration expenses (other thanunderwriting discounts) for two registrations on Form S-3 requested bycertain co-investors of CD&R Fund VI, including the fees and expenses ofcounsel to the selling stockholders.

If CDRV Investors, Inc. files a registrationstatement under the Securities Act with respect to a public offering of itscommon stock, no holders of its common stock will be permitted to effect anypublic sale or distribution of any shares of such stock during the 20 days beforeand the 180 days (or, in the case of a shelf registration, 90 days) after theeffective date of the registration statement (other than as part of the publicoffering).

***ParticipationRights***.   Prior to the initial public offering ofCDRV Investors, Inc., certain holders of the common stock of CDRVInvestors, Inc. have the right to purchase, on a pro rata basis,additional shares of its common stock if CD&R Fund VI or any otherinvestment vehicle managed by CD&R subscribes for additional shares ofcommon stock, excluding any issuances by way of dividends or distributions onin kind, or stock splits, reclassifications, recapitalizations orconsolidations.

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***Tag-Along Rights***.   Priorto such time as a public market has been established for 20% or more of thecommon stock of CDRV Investors, Inc., certain holders of common stock ofCDRV Investors, Inc. other than CD&R Fund VI have the right toparticipate, on a pro rata basis and subject to the same terms and conditions,in any sale by CD&R Fund VI of more than 10% of its shares of common stockto a third party purchaser or to CDRV Investors, Inc.

***Drag-Along Rights***.   Prior to suchtime as a public market has been established for 20% or more of the commonstock of CDRV Investors, Inc., if CD&R Fund VI intends to sell morethan 50% of its shares of common stock of CDRV Investors, Inc. to a thirdparty purchaser, CD&R Fund VI will have the right to require certain otherholders of common stock to participate in such sale, on a pro rata basis andsubject to the same terms and conditions.

**ITEM 14.**         PRINCIPAL ACCOUNTANTSFEES AND SERVICES FOR 2004 AND 2003

KPMGLLP served as the Company’s independent auditor for the fiscal years ended December 31,2004 and 2003. Fees and expenses for services rendered by KPMG in 2004 wereapproved by our Audit Committee. Fees and expenses related to 2003 wereapproved by our management as well as Merck KGaA, our former parent. KPMG’sfees and expenses for services rendered to the Company for the past two fiscalyears are set forth in the table below. We have determined that the provisionof these services is compatible with maintaining the independence of ourindependent auditors.
| **Type of Fees** | ** ** | ** **                           | ** ** | **     2004     ** | ** ** | **     2003     ** | ** ** |
|----------------------------|------------|--------------------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                 | ** ** | **(dollars in thousands)** | ** ** |
| Audit Fees(1)              |       |                                 | $          | 1,725                                                                |       |                                                                 |       | $ | 2,024 |   |   |
| Audit-Related  Fees(2)     |       |                                 | 701        |                                                                 |       |                                                                 | 115        |   |   |
| Tax Fees(3)                |       |                                 | 30         |                                                                 |       |                                                                 | 91         |   |   |
| TOTAL FEES                 |       |                                 | $          | 2,456                                                                |       |                                                                 |       | $ | 2,230 |   |   |

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(1)          2004audit fees relate to the audit of VWR International, Inc.’s globaloperations including regional statutory audits. Also included herein are feesrelated to various employee benefit plan audits. 2003 audit fees relate to theaudit of VWR International Corporation’s North American and European operationsfor 2003 under International Accounting Standards on behalf of Merck KGaA. Alsoincluded in 2003 are audit fees to audit the same financial statementspresented in accordance with U.S. GAAP.

(2)          2004audit-related services include procedures performed in connection with the April 2004Offering Memorandum and an S-4 Registration Statement. Audit relatedservices in 2003 include assistance with due diligence associated with theacquisition of VWR International Corporation by CD&R.

(3)          Fees for both yearsrelate to tax compliance services.

**Pre-ApprovalPolicy for Auditor Services**

The Audit Committee hasadopted a policy that requires it to pre-approve the audit and non-auditservices performed by VWR’s auditor in order to assure that providing suchservices will not impair the auditor’s independence.

The Audit Committee hasthe sole and direct responsibility and authority for the appointment,termination and compensation to be paid to the independent accountants. TheCommittee has the responsibility to approve, in advance of the provisionthereof, all audit services and permissible non-audit services to be performedby the independent accountants as well as compensation to be paid with respectto such services.

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Our Audit CommitteeCharter authorizes the Committee to delegate authority to pre-approve audit andpermissible non-audit services to a member of the Committee. Any decisions madeby such member under delegated authority, must be presented to the full Committeeat its next scheduled meeting.

**PART IV**

**ITEM 15.**         EXHIBITS AND FINANCIALSTATEMENT SCHEDULES

a.                 Financialstatements, financial statement schedule and exhibits filed as part of thisreport

1.                 Thefollowing financial statements, together with the Report of IndependentRegistered Public Accountants and Notes to Consolidated/Combined FinancialStatements, are filed as part of this report:
| ** ** | **VWR INTERNATIONAL, INC. (Predecessor and Successor)** |
|------------|---------------------------------------------------------|
|       |                                                    | Report of Independent Registered  Public Accounting Firm | 40 |
|       |                                                    | Consolidated Balance Sheets as of  December 31, 2004 and 2003 | 41 |
|       |                                                    | Consolidated/Combined Statements  of Operations for the periods included in the year ended December 31,  2004 and the years ended December 31, 2003 and 2002  | 42 |
|       |                                                    | Consolidated/Combined  Statements of Shareholders’ Equity and other Comprehensive Income (Loss) for  the periods included in the year ended December 31, 2004 and the years  ended December 31, 2003 and 2002 | 43 |
|       |                                                    | Consolidated/Combined  Statements of Cash Flows for the periods included in the year ended  December 31, 2004 and the years ended December 31, 2003 and 2002  | 45 |
|       |                                                    | Notes  to Consolidated/Combined Financial Statements | 46 |
|       |                                                    | Schedule II—Valuation and Qualifying Accounts for  the periods included in the year ended December 31, 2004 and the years  ended December 31, 2003 and 2002 | 103 |

 
| Exhibit    Number | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ** ** | **Description of Documents**                                                           | ** ** | **Method of Filing** |
|-------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|----------------------|
| 3.1               |       | Certificate  of Incorporation of VWR International, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       | Filed  herewith.                                                                       |
| 3.2               |       | Amended and Restated Bylaws of VWR  International, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       | Filed herewith.                                                                        |
| 4.1               |       | Credit Agreement, dated as of April 7, 2004,  among CDRV Acquisition Corporation (the rights and obligations of which  thereunder are to be assumed by VWR International, Inc.), the Foreign  Subsidiary Borrowers from time to time parties thereto, the several Lenders  from time to time parties thereto, Deutsche Bank AG, New York Branch, as  Administrative Agent, Citicorp North America, Inc., as Syndication  Agent, and Bank of America, N.A., BNP Paribas and Barclays Bank PLC, as  Documentation Agents. |       | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |

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| 4.2 |   | Assumption  Agreement, dated as of April 7, 2004, between CDRV Acquisition  Corporation and VWR International, Inc.                                                                                                                                                                                                             |   | Previously filed  as Exhibit 3.1 to Form S-4, filed on August 30, 2004. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|
| 4.3 |   | Guarantee and Collateral Agreement, dated as of  April 7, 2004, made by CDRV Holdings, Inc., CDRV Acquisition  Corporation (the rights and obligations of which are to be assumed by VWR  International, Inc.) and certain of its Subsidiaries in favor of  Deutsche Bank AG, New York Branch, as Administrative Agent.    |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 4.4 |   | Indenture, dated as of April 7, 2004, by and  among CDRV Acquisition Corporation, as Issuer, the Subsidiary Guarantors from  time to time parties thereto, as Subsidiary Guarantors and Wells Fargo Bank,  National Association, as Trustee, relating to the 67¤8%  Senior Notes due 2012 of CDRV Acquisition Corporation.      |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 4.5 |   | Indenture, dated as of April 7, 2004, by and  among CDRV Acquisition Corporation, as Issuer, the Subsidiary Guarantors from  time to time parties thereto, as Subsidiary Guarantors and Wells Fargo Bank,  National Association, as Trustee, relating to the 8% Senior Subordinated  Notes due 2014 of CDRV Acquisition Corporation. |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 4.6 |   | Supplemental Indenture, dated as of April 7,  2004, among VWR International, Inc. and Wells Fargo Bank, National  Association, as Trustee, relating to the 67¤8%  Senior Notes due 2012 of CDRV Acquisition Corporation.                                                                                                   |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 4.7 |   | Supplemental Indenture,  dated as of April 7, 2004, among VWR International, Inc., and Wells  Fargo Bank, National Association, as Trustee, relating to the 8% Senior  Subordinated Notes due 2014 of CDRV Acquisition Corporation.                                                                                             |   | Previously filed as  Exhibit 3.1 to Form S-4, filed on August 30, 2004. |
| 4.8 |   | Exchange and  Registration Rights Agreement, dated as of April 7, 2004, among CDRV  Acquisition Corporation, and Deutsche Bank Securities Inc., for itself and on  behalf of the Purchasers (as defined therein), relating to the 67¤8%  Senior Notes due 2012 of CDRV Acquisition Corporation.                                 |   | Previously filed as  Exhibit 3.1 to Form S-4, filed on August 30, 2004. |
| 4.9 |   | Exchange and Registration Rights Agreement, dated as  of April 7, 2004, among CDRV Acquisition Corporation, and Deutsche Bank  Securities Inc., for itself and on behalf of the Purchasers (as defined  therein), relating to the 8% Senior Subordinated Notes due 2014 of CDRV  Acquisition Corporation.                            |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |

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| 4.10  |   | Form of 67¤8%  Senior Notes due 2012 of CDRV Acquisition Corporation.                                                                                                                                                                                                                      |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|
| 4.11  |   | Form of 8% Senior Subordinated Notes due 2014  of CDRV Acquisition Corporation.                                                                                                                                                                                                                 |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 4.12  |   | Supplemental Indenture, dated as of April 7,  2004, among VWR International, Inc. and Wells Fargo Bank, National  Association, as Trustee, relating to the 67¤8%  Senior Notes due 2012 of CDRV Acquisition Corporation.                                                              |   | Previously filed as Exhibit 3.1 to Amendment  No. 2 to Form S-4, filed on November 19, 2004. |
| 4.13  |   | Supplemental Indenture, dated as of April 7,  2004, among VWR International, Inc. and Wells Fargo Bank, National  Association, as Trustee, relating to the 8% Senior Subordinated Notes due  2014 of CDRV Acquisition Corporation.                                                         |   | Previously filed as Exhibit 3.1 to Amendment  No. 2 to Form S-4, filed on November 19, 2004. |
| 10.1  |   | Consulting Agreement, dated as of April 7,  2004, by and among CDRV Investors, Inc., CDRV Holdings, Inc., CDRV  Acquisition Corporation, CDRV Delaware, Inc. and Clayton,  Dubilier & Rice, Inc.                                                                   |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 10.2  |   | Indemnification Agreement, dated as of April 7,  2004, among CDRV Investors, Inc., CDRV Holdings, Inc., CDRV  Acquisition Corporation, CDRV Delaware, Inc., Clayton,  Dubilier & Rice, Inc. and Clayton, Dubilier & Rice  Fund VI Limited Partnership.    |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 10.3  |   | Registration and  Participation Agreement, dated as of April 7, 2004, among CDRV  Investors, Inc., Clayton, Dubilier & Rice Fund VI Limited  Partnership, Banc of America Capital Investors, L.P., SSB Capital Partners  (Master Fund) I, L.P., and CGI Private Equity L.P., LLC. |   | Previously filed as  Exhibit 3.1 to Form S-4, filed on August 30, 2004.                           |
| 10.4  |   | Stock Subscription  Agreement, dated April 7, 2004, between CDRV Investors, Inc. and  Clayton, Dubilier & Rice Fund VI Limited Partnership.                                                                                                                                       |   | Previously filed as  Exhibit 3.1 to Form S-4, filed on August 30, 2004.                           |
| 10.5  |   | VWR International, Inc. Directors Compensation  Policy*                                                                                                                                                                                                                                         |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 10.6  |   | CDRV Investors, Inc. Stock Incentive Plan*                                                                                                                                                                                                                                                      |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 10.7  |   | Form of Employee Stock Subscription Agreement*                                                                                                                                                                                                                                                  |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 10.8  |   | Form of Stock Option Agreement*                                                                                                                                                                                                                                                                 |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 10.9  |   | Pension Contract for Walter Zywottek*                                                                                                                                                                                                                                                                |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |
| 10.10 |   | VWR International, Inc. Retirement Plan*                                                                                                                                                                                                                                                        |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004.                           |

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| 10.11 |   | VWR  Corporation Supplemental Benefits Plan*                                                                                 |   | Previously  filed as Exhibit 3.1 to Form S-4, filed on August 30, 2004. |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|
| 10.12 |   | Employment Agreement, among VWR International Inc.  and Walter Zywottek*                                                     |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.13 |   | Employment Agreement, among VWR International Inc.  and Jack Wyszomierski*                                                   |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.14 |   | Employment Agreement, among VWR International Inc.  and Edward H. Orzetti*                                                   |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.15 |   | Employment Agreement, among VWR International Inc.  and George Gunther*                                                      |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.16 |   | Letter of Employment for George A. Gunther*                                                                                  |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.17 |   | Severance Agreement and General Release among VWR  International Inc. and George Gunther*                                    |   | Filed herewith.                                                                        |
| 10.18 |   | Employment Agreement, among VWR International Inc.  and Charles F. Canfield*                                                 |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.19 |   | Employment Agreement, among VWR International Inc.  and Ted Pulkownik*                                                       |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.20 |   | Employment Agreement, among VWR International Inc.  and Stephen J. Kunst*                                                    |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.21 |   | Letter of Employment for Stephen J. Kunst*                                                                                   |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 10.22 |   | Employment Agreement,  among VWR International Inc. and Gerard Christian*                                                    |   | Previously filed as  Exhibit 3.1 to Form S-4, filed on August 30, 2004. |
| 10.23 |   | Letter of Employment for Gerard J. Christian*                                                                                |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 12.1  |   | Computation of Ratio of Earnings to Fixed Charges.                                                                           |   | Filed herewith.                                                                        |
| 21.1  |   | List of subsidiaries.                                                                                                        |   | Previously filed as Exhibit 3.1 to  Form S-4, filed on August 30, 2004. |
| 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  |   | Certificate of Principal Executive Officer pursuant  to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002). |   | Furnished herewith.                                                                    |
| 32.2  |   | Certificate of Principal Financial Officer pursuant  to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002). |   | Furnished herewith.                                                                    |

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*                    Denotesmanagement contract or compensatory plan, contract or arrangement.

**SUPPLEMENTALINFORMATION**

The Company is an indirect wholly-owned subsidiary ofCDRV Investors, Inc. No annual report to security holders covering theCompany’s last fiscal year or proxy statement, form of proxy or other proxysoliciting material has been sent to security holders.

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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.
|   | VWR  INTERNATIONAL, INC.                                       |
|--------|----------------------------------------------------------------|
|   | By:                                                            | /s/ STEPHEN KUNST |   |
|   | Name: Stephen Kunst                                            |
|   | Title: *Senior Vice President, General Counsel and  Secretary* |
|   | April 6, 2005                                             |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.
|                                  | **Signature** | ** **                   | ** ** | ** **          | **Title** | ** ** | ** ** | ** ** |
|----------------------------------|---------------|------------------------------|------------|---------------------|-----------|------------|------------|------------|
| /s/  WALTER W. ZYWOTTEK          |          | President, Chief Executive   |       | April 6,  2005 |
| Walter W.  Zywottek              |          | Officer and Director         |       |                |
| /s/  JACK L. WYSZOMIERSKI        |          | Executive Vice President and |       | April 6,  2005 |
| Jack L.  Wyszomierski            |          | Chief Financial Officer      |       |                |
| /s/  B. CHARLES AMES             |          | Director                     |       | April 6,  2005 |
| B. Charles Ames                  |          |                         |       |                |
| /s/  JOSEPH F. ECKROTH, JR. |          | Director                     |       | April 6,  2005 |
| Joseph F. Eckroth, Jr.      |          |                         |       |                |
| /s/ LEWIS S. EDELHEIT            |          | Director                     |       | April 6,  2005 |
| Lewis S. Edelheit                |          |                         |       |                |
| /s/  BRIAN P. KELLEY             |          | Director                     |       | April 6,  2005 |
| Brian P. Kelley                  |          |                         |       |                |
| /s/  JOSEPH L. RICE, III    |          | Director                     |       | April 6,  2005 |
| Joseph L.  Rice, III        |          |                         |       |                |
| /s/  JAMES W. ROGERS             |          | Director                     |       | April 6,  2005 |
| James W. Rogers                  |          |                         |       |                |
| /s/  AXEL RUCKERT                |          | Director                     |       | April 6,  2005 |
| Axel Ruckert                     |          |                         |       |                |
| /s/  RICHARD J. SCHNALL          |          | Director                     |       | April 6,  2005 |
| Richard J.  Schnall              |          |                         |       |                |
| /s/  CARL T. STOCKER             |          | Director                     |       | April 6,  2005 |
| Carl T. Stocker                  |          |                         |       |                |
| /s/  ROBERT J. ZOLLARS           |          | Director                     |       | April 6,  2005 |
| Robert J. Zollars                |          |                         |       |                |

 

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**Schedule II - Valuation of Qualifying Accounts**

**VWRINTERNATIONAL, INC.April 7 - December 31, 2004(Dollars in millions)**
| ** **                          | ** ** | **Balance at  Beginning  of Period** | ** ** | **Charged  to Income** | ** ** | **Foreign  Currency**

**Translation  Adjustments** | ** ** | **Deductions  From  Reserves(1)** | ** ** | **Balance at  End  of Period** | ** ** |
|-------------------------------------|------------|------------------------------------------------|------------|-----------------------------|------------|-----------------------------------------------------|------------|-----------------------------------|------------|------------------------------------------|------------|
| Allowance for  doubtful receivables |       |                                           | $          | 7.4                         |       |                                                |       | $                                 | 2.5        |                                     |       |   | $ | 0.4 |   |   |   | $ | (4.3 | ) |   |   | $ | 6.0 |   |   |
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**VWRINTERNATIONAL CORPORATIONJanuary 1 - April 6, 2004 and the years ended December 31, 2003and 2002(Dollars in millions)**
| ** **                                                               | ** ** | **Balance at  Beginning  of Period** | ** ** | **Charged  to Income** | ** ** | **Foreign  Currency  Translation  Adjustments** | ** ** | **Deductions  From  Reserves(1)** | ** ** | **Balance at  End  of Period** | ** ** |
|--------------------------------------------------------------------------|------------|------------------------------------------------|------------|-----------------------------|------------|-------------------------------------------------|------------|-----------------------------------|------------|------------------------------------------|------------|
| January 1 -  April 6, 2004  Allowance for doubtful receivables |       |                                           | $          | 7.8                         |       |                                            |       | $                                 | 0.6        |                                     |       |   | $ | (0.1 | ) |   |   | $ | (0.9 | ) |   |   | $ | 7.4 |   |   |
| Year ended  December 31, 2003  Allowance for doubtful receivables   |       |                                           | 4.2        |                        |       |                                            | 4.0        |                              |       |                                     | 0.6        |   |   |   | (1.0 | ) |   |   | 7.8 |   |   |
| Year ended  December 31, 2002  Allowance for doubtful receivables   |       |                                           | 4.0        |                        |       |                                            | 2.7        |                              |       |                                     | 0.7        |   |   |   | (3.2 | ) |   |   | 4.2 |   |   |

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(1)          Bad debts charged off,less recoveries.

103

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