**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**

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| (Mark One)                                                                                                                                           |                                                                                          |
|------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|
| **S**                                                                                                                                                | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**  |
| **For the quarterly period ended  September 30, 2006**                                                                                               |
| **or**                                                                                                                                               |
| **o**                                                                                                                                                | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| For the transition  period from                    to |

 

**Commission filenumber:  333 118658**

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**VWR INTERNATIONAL, INC.**

(Exact name of registrantas specified in its charter)

| **Delaware**                         |   | **91-1319190**       |
|--------------------------------------|--------|----------------------|
| (State or other  jurisdiction of     |   | (I.R.S. Employer     |
|  incorporation or organization) |   | Identification  No.) |

 

| **1310 Goshen Parkway**                   |   | ** ** |
|-------------------------------------------|--------|------------|
| **P.O. Box  2656**                   |   | ** ** |
| **West  Chester, PA**                     |   | **19380**  |
| (Address of  principal executive offices) |   | (Zip code) |

 

**(610) 431-1700**

(Registrant’s telephone number, including area code)

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes o No x

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct. (Check one):

Large accelerated filer o      Acceleratedfiler o      Non-acceleratedfiler x

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act).  Yes o No x

As of September 30,2006, there was no established public market for the registrant’s common stock,par value $0.01 per share. The number of shares of the registrant’s commonstock outstanding at November 14, 2006 was 100.

 

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**VWR INTERNATIONAL,INC.FORM 10-QFOR THE QUARTER ENDED SEPTEMBER 30, 2006**

**INDEX**

|                   | ** ** |                                                                                                                                                         | ** ** | **Page No.** | ** ** |
|-------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| **PART I.**       | ** ** | **FINANCIAL INFORMATION:**                                                                                                                              |       |              |       |   |   |
| Item 1.           |       | Financial Statements:                                                                                                                                   |       |              |       |   |   |
|              |       | Consolidated Balance Sheets—as of September 30,  2006 (Unaudited) and December 31, 2005                                                  |       |              | 1          |   |   |
|              |       | Consolidated Statements of Operations (Unaudited)—for  the three and nine months ended September 30, 2006 and 2005                            |       |              | 2          |   |   |
|              |       | Consolidated Statement of Stockholders’ Equity and  Other Comprehensive Income (Unaudited)—for the nine months ended  September 30, 2006 |       |              | 3          |   |   |
|              |       | Consolidated Statements of Cash Flows (Unaudited)—for  the nine months ended September 30, 2006 and 2005                                      |       |              | 4          |   |   |
|              |       | Notes to Consolidated Financial Statements (Unaudited)                                                                                                  |       |              | 5          |   |   |
| Item 2.           |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                             |       |              | 20         |   |   |
| Item 3.           |       | Quantitative  and Qualitative Disclosures about Market Risk                                                                                             |       |              | 31         |   |   |
| Item 4.           |       | Controls and  Procedures                                                                                                                                |       |              | 31         |   |   |
| **PART II.** | ** ** | **OTHER INFORMATION:**                                                                                                                                  |       |              |       |   |   |
| Item  1.          |       | Legal  Proceedings                                                                                                                                      |       |              | 31         |   |   |
| Item  1A.         |       | Risk  Factors                                                                                                                                           |       |              | 31         |   |   |
| Item  6.          |       | Exhibits                                                                                                                                                |       |              | 31         |   |   |
| Signature         |       |                                                                                                                                                    | 32         |              |       |

 

i

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**PART I—FINANCIALINFORMATION**

**Item 1—*Financial Statements***

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

| ** **                                                                        | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                        | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                        | ** ** | **(Unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                                                        | ** ** |                   | ** ** |                  |       |   |   |   |   |
| Current Assets:                                                                   |       |                   |       |                  |       |   |   |   |   |
| Cash and cash equivalents                                                         |       |                   | $          | 104.7                 |       |   |   | $ | 126.1 |   |   |
| Trade accounts receivable, less reserves of $9.0 and  $6.6, respectively          |       |                   | 458.8      |                  |       |   | 407.3 |   |   |
| Other receivables                                                                 |       |                   | 27.8       |                  |       |   | 30.8 |   |   |
| Inventories                                                                       |       |                   | 243.8      |                  |       |   | 270.4 |   |   |
| Other current assets                                                              |       |                   | 37.8       |                  |       |   | 30.6 |   |   |
| Total current assets                                                              |       |                   | 872.9      |                  |       |   | 865.2 |   |   |
| Property and  equipment, net                                                      |       |                   | 157.3      |                  |       |   | 156.8 |   |   |
| Investments                                                                       |       |                   | 8.0        |                  |       |   | 7.8 |   |   |
| Goodwill                                                                          |       |                   | 931.1      |                  |       |   | 910.0 |   |   |
| Other intangible  assets, net                                                     |       |                   | 553.0      |                  |       |   | 552.7 |   |   |
| Deferred income  taxes                                                            |       |                   | 6.3        |                  |       |   | 5.6 |   |   |
| Other assets                                                                      |       |                   | 39.4       |                  |       |   | 44.3 |   |   |
| Total assets                                                                      |       |                   | $          | 2,568.0               |       |   |   | $ | 2,542.4 |   |   |
| **Liabilities  and Stockholders’ Equity**                                    |       |                   |       |                  |       |   |   |   |   |
| Current Liabilities:                                                              |       |                   |       |                  |       |   |   |   |   |
| Short-term portion of bank debt and current portion  of capital lease obligations |       |                   | $          | 1.0                   |       |   |   | $ | 45.5 |   |   |
| Accounts payable                                                                  |       |                   | 349.1      |                  |       |   | 370.3 |   |   |
| Accrued expenses                                                                  |       |                   | 189.4      |                  |       |   | 143.4 |   |   |
| Total current liabilities                                                         |       |                   | 539.5      |                  |       |   | 559.2 |   |   |
| Long-term debt                                                                    |       |                   | 963.8      |                  |       |   | 1,013.3 |   |   |
| Capital lease  obligations                                                        |       |                   | 4.8        |                  |       |   | 5.0 |   |   |
| Other long-term  liabilities                                                      |       |                   | 89.0       |                  |       |   | 87.1 |   |   |
| Deferred income  taxes                                                            |       |                   | 237.9      |                  |       |   | 233.5 |   |   |
| Total liabilities                                                                 |       |                   | 1,835.0    |                  |       |   | 1,898.1 |   |   |
| Parent Company  common stock purchase subject to guarantee agreement              |       |                   | 2.6        |                  |       |   | 2.6 |   |   |
| Commitments and  contingencies                                                    |       |                   |       |                  |       |   |   |   |   |
| Stockholders’ equity:                                                        |       |                   |       |                  |       |   |   |   |   |
| Common stock, $0.01 par value; 100 shares  authorized, issued and outstanding     |       |                   | —     |                  |       |   | — |   |   |
| Additional paid-in capital                                                        |       |                   | 563.7      |                  |       |   | 557.4 |   |   |
| Retained earnings                                                                 |       |                   | 129.0      |                  |       |   | 73.2 |   |   |
| Unamortized value of restricted stock issued                                      |       |                   | —     |                  |       |   | (1.6 | ) |   |
| Accumulated other comprehensive income                                            |       |                   | 37.7       |                  |       |   | 12.7 |   |   |
| Total stockholders’ equity                                                   |       |                   | 730.4      |                  |       |   | 641.7 |   |   |
| Total liabilities and  stockholders’ equity                                  |       |                   | $          | 2,568.0               |       |   |   | $ | 2,542.4 |   |   |

 

See accompanying notes to consolidated financial statements.

1

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

| ** **                                    | ** ** | **Three Months Ended**                         | ** ** | **Nine Months Ended**                          | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                    | ** ** | **September 30,**                                   | ** ** | **September 30,**                                   | ** ** |
| ** **                                    | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net sales                                     |       |                                                     | $          | 817.6                                                    |       |   |   | $ | 812.0 |   |   | $ | 2,428.4 |   | $ | 2,360.9 |   |
| Cost of goods  sold                           |       |                                                     | 594.0      |                                                     |       |   | 602.4 |   |   | 1,771.3 |   | 1,757.8 |   |
| Gross profit                                  |       |                                                     | 223.6      |                                                     |       |   | 209.6 |   |   | 657.1 |   | 603.1 |   |
| Selling, general  and administrative expenses |       |                                                     | 168.9      |                                                     |       |   | 158.0 |   |   | 511.7 |   | 486.5 |   |
| Restructuring  charges (credits)              |       |                                                     | —     |                                                     |       |   | 4.3 |   |   | (1.0 | ) | 11.5 |   |
| Operating income                              |       |                                                     | 54.7       |                                                     |       |   | 47.3 |   |   | 146.4 |   | 105.1 |   |
| Interest income                               |       |                                                     | (2.1       | )                                                        |       |   | (0.8 | ) |   | (4.9 | ) | (1.8 | ) |
| Interest expense                              |       |                                                     | 21.6       |                                                     |       |   | 19.5 |   |   | 62.6 |   | 56.7 |   |
| Other (income)  expense, net                  |       |                                                     | (0.1       | )                                                        |       |   | (1.3 | ) |   | 0.3 |   | (3.2 | ) |
| Income before income taxes                    |       |                                                     | 35.3       |                                                     |       |   | 29.9 |   |   | 88.4 |   | 53.4 |   |
| Income tax  provision                         |       |                                                     | 13.9       |                                                     |       |   | 12.3 |   |   | 32.6 |   | 21.5 |   |
| Net income                                    |       |                                                     | $          | 21.4                                                     |       |   |   | $ | 17.6 |   |   | $ | 55.8 |   | $ | 31.9 |   |

 

See accompanying notes to consolidated financial statements.

2

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**VWR INTERNATIONAL,INC.Consolidated Statement of Stockholders’ Equity and Other Comprehensive IncomeNine Months Ended September 30, 2006(Dollars in millions)(Unaudited)**

| ** **                                                                                                           | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | **Unamortized**       | ** ** | **Accumulated**   | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|------------|------------|----------------|------------|--------------|------------|-----------------------|------------|-------------------|------------|------------|------------|
| ** **                                                                                                           | ** ** | ** ** | ** ** | **Additional** | ** ** | ** **   | ** ** | **value of**     | ** ** | **other**         | ** ** | ** ** | ** ** |
| ** **                                                                                                           | ** ** | **Common** | ** ** | **paid-in**    | ** ** | **Retained** | ** ** | **restricted**        | ** ** | **comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                                                           | ** ** | **stock**  | ** ** | **capital**    | ** ** | **earnings** | ** ** | **stock issued** | ** ** | **income**        | ** ** | **Total**  | ** ** |
| Balance at January 1, 2006                                                                                      |       |       | $          | —         |       |         |       | $                     | 557.4      |              |       |       | $          | 73.2 |   |   |   | $ | (1.6 | ) |   |   | $ | 12.7 |   |   | $ | 641.7 |   |
| Equity reclassification (Note 4(d))                                                                                  |       |       | —     |           |       |         | (1.6       | )                     |       |              | —     |       |       |   | 1.6 |   |   |   | — |   |   | — |   |
| Capital contributions                                                                                                |       |       | —     |           |       |         | 4.9        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 4.9 |   |
| Capital contribution for compensation expense  recognized for Parent Company options                                 |       |       | —     |           |       |         | 2.6        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 2.6 |   |
| Tax benefit related to Parent Company stock options                                                                  |       |       | —     |           |       |         | 0.1        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 0.1 |   |
| Capital contribution for compensation expense  recognized for amortization of Parent Company restricted common stock |       |       | —     |           |       |         | 0.3        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 0.3 |   |
| Comprehensive  income:                                                                                               |       |       |       |           |       |         |       |                  |       |              |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                           |       |       | —     |           |       |         | —     |                  |       |              | 55.8       |       |       |   | — |   |   |   | — |   |   | 55.8 |   |
| Foreign currency translation adjustment                                                                              |       |       | —     |           |       |         | —     |                  |       |              | —     |       |       |   | — |   |   |   | 25.2 |   |   | 25.2 |   |
| Unrealized loss on derivatives, net of tax                                                                           |       |       | —     |           |       |         | —     |                  |       |              | —     |       |       |   | — |   |   |   | (0.2 | ) |   | (0.2 | ) |
| Total comprehensive income                                                                                           |       |       |       |           |       |         |       |                  |       |              |       |       |       |   |   |   |   |   |   |   |   | 80.8 |   |
| Balance at  September 30, 2006                                                                                  |       |       | $          | —         |       |         |       | $                     | 563.7      |              |       |       | $          | 129.0 |   |   |   | $ | — |   |   |   | $ | 37.7 |   |   | $ | 730.4 |   |

 

See accompanying notes to consolidated financial statements.

3

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

| ** **                                                                         | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                         | ** ** | **September 30,**          | ** ** |
| ** **                                                                         | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| Cash flows from  operating activities:                                             |       |                            |       |   |   |
| Net income                                                                         |       | $                               | 55.8       |   | $ | 31.9 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                            |       |   |   |
| Depreciation and amortization                                                      |       | 25.5                            |       | 25.2 |   |
| Loss (gain) on sale of assets                                                      |       | 0.2                             |       | (0.1 | ) |
| Non-cash equity compensation expense                                               |       | 2.9                             |       | — |   |
| Amortization of debt issuance costs                                                |       | 4.4                             |       | 4.0 |   |
| Deferred income tax (benefit) expense                                              |       | 3.1                             |       | 10.1 |   |
| Provision for doubtful accounts                                                    |       | 4.6                             |       | 2.6 |   |
| Changes in  working capital:                                                       |       |                            |       |   |   |
| Trade accounts receivable                                                          |       | (40.5                           | )          | (61.9 | ) |
| Other receivables                                                                  |       | 3.7                             |       | 1.7 |   |
| Inventories                                                                        |       | 33.3                            |       | (24.2 | ) |
| Other assets                                                                       |       | (5.3                            | )          | (8.9 | ) |
| Accounts payable                                                                   |       | 12.6                            |       | 35.0 |   |
| Accrued expenses and other long-term liabilities                                   |       | 32.5                            |       | (1.8 | ) |
| Net cash provided by operating activities                                          |       | 132.8                           |       | 13.6 |   |
| Cash flows from  investing activities:                                             |       |                            |       |   |   |
| Capital expenditures                                                               |       | (15.1                           | )          | (12.1 | ) |
| Acquisitions of businesses and other intangible  assets                            |       | (0.6                            | )          | (44.5 | ) |
| Transaction costs                                                                  |       | (0.2                            | )          | (1.2 | ) |
| Proceeds from sales of property and equipment                                      |       | 5.2                             |       | 0.3 |   |
| Net cash used in investing activities                                              |       | (10.7                           | )          | (57.5 | ) |
| Cash flows from  financing activities:                                             |       |                            |       |   |   |
| Proceeds from debt                                                                 |       | 0.3                             |       | 2.9 |   |
| Repayment of debt                                                                  |       | (105.9                          | )          | (11.3 | ) |
| Net change in bank checks outstanding                                              |       | (44.7                           | )          | (3.1 | ) |
| Capital contributions                                                              |       | 4.9                             |       | — |   |
| Net cash used in financing activities                                              |       | (145.4                          | )          | (11.5 | ) |
| Effect of  exchange rate changes on cash                                           |       | 1.9                             |       | (2.4 | ) |
| Net decrease in cash and cash equivalents                                          |       | (21.4                           | )          | (57.8 | ) |
| Cash and cash  equivalents beginning of period                                     |       | 126.1                           |       | 116.1 |   |
| Cash and cash  equivalents end of period                                           |       | $                               | 104.7      |   | $ | 58.3 |   |
| Supplemental disclosures  of cash flow information:                                |       |                            |       |   |   |
| Cash paid during  the period for:                                                  |       |                            |       |   |   |
| Interest                                                                           |       | $                               | 48.7       |   | $ | 42.0 |   |
| Income taxes  paid, net                                                            |       | $                               | 9.9        |   | $ | 13.1 |   |

 

See accompanying notes to consolidated financial statements.

4

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

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

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

VWR International, Inc.(“VWR”, the “Company”, “we” or “our”) distributes scientific supplies,chemicals, and equipment, primarily in North America and Europe. The businessis diversified across products and services, customer groups, and geography. Wereport financial results on the basis of the following three business segments:North American laboratory distribution (“North American Lab”), Europeanlaboratory distribution (“European Lab”) and Science Education. Both the NorthAmerican Lab and European Lab segments distribute scientific supplies tocustomers in the pharmaceutical, biotechnology, chemical, technology, and foodprocessing industries; governmental agencies; colleges and universities; andenvironmental organizations. Science Education manufactures and distributesscientific supplies and specialized kits to primary and secondary schools aswell as distribution of scientific supplies to universities and researchinstitutes.

***(b) Background***

On April 7, 2004,Merck KGaA sold all of the outstanding shares of capital stock of ourpredecessor, VWR International Corporation, to CDRV Acquisition Corporation (“CDRVA”),a wholly-owned subsidiary of CDRV Holdings, Inc., a wholly-ownedsubsidiary of CDRV Investors, Inc. (“CDRV”) (the “Acquisition”). CDRV isour ultimate parent company. In connection with the Acquisition, CDRVA issued$200.0 of 67¤8%Unsecured Senior Notes due 2012 and $320.0 of 8% Unsecured Senior SubordinatedNotes due 2014 and obtained financing under a new senior secured creditfacility (the “Senior Secured Credit Facility”). Following the completion of the Acquisition,there were a series of internal reorganizations, pursuant to which, among otherthings, (i) VWR International Corporation merged with and into VWR, withVWR surviving, and (ii) thereafter, CDRVA merged with and into VWR, withVWR surviving and assuming the obligations of CDRVA.

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

The accompanying consolidated financial statementsinclude the accounts of VWR and its subsidiaries after elimination of allintercompany balances and transactions. The financial statements includedherein have been prepared by the Company without audit, pursuant to the rules andregulations of the Securities and Exchange Commission. Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America have been condensed or omitted pursuant to such rules andregulations. The December 31, 2005 balance sheet is the balance sheetincluded in the audited financial statements as shown in the Company’s 2005Annual Report on Form 10-K for the year ended December 31, 2005.The Company believes that the disclosures included herein are adequate to makethe information presented not misleading when read in conjunction with thefinancial statements, footnotes and related disclosures included in the Company’sAnnual Report on Form 10-K for the year ended December 31,2005.

The financial information presented herein reflectsall adjustments (consisting only of normal-recurring adjustments) that are, inthe opinion of management, necessary for a fair presentation of the****

5

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

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

results for the interimperiods presented. The results for interim periods are not necessarilyindicative of the results to be expected for the full year.

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

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

**(2) New AccountingStandards**

During July 2006, the Financial AccountingStandards Board (“FASB”) issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes*(“FIN 48”). This Interpretation clarifies the accounting for uncertainty inincome taxes recognized in accordance with FASB Statement of FinancialAccounting Standards (“SFAS”) No. 109, *Accountingfor Income Taxes.*FIN 48 provides guidance on the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return; derecognition; classification; interest and penalties;accounting in interim periods; disclosures; and transition. FIN 48 is effectivefor fiscal years beginning after December 15, 2006. We are currentlyevaluating the impact this Interpretation will have on our consolidatedfinancial statements.

During September 2006, the FASB issued SFAS No. 158,*Employers’ Accounting for Defined Benefit Pensionand Other Postretirement Plans*—*an amendment of SFAS No87, 88, 106, and 132(R)* (“SFAS 158”). This Statement requiresbalance sheet recognition of the funded status for all pension andpostretirement benefit plans. The impact of the initial adjustment will berecorded as an adjustment to other comprehensive income. Subsequent changes infunded status will also be recognized as a component of other comprehensiveincome to the extent they have not yet been recognized as a component of net periodicbenefit cost. We have pension and postretirement benefit plans that will besubject to the provisions of SFAS 158. SFAS 158 requires adoption by theCompany for our fiscal year ending December 31, 2007. At this time we havenot completed our assessment of the impact this Statement will have on ourconsolidated financial statements.

During September 2006,the FASB issued SFAS No. 157, *FairValue Measurements* (“SFAS 157”). This Statement defines fair value,establishes a framework for measuring fair value and expands disclosures aboutfair value measurements required under other accounting pronouncements, butdoes not change existing guidance as to whether or not an instrument is carriedat fair value. SFAS 157 is effective for fiscal years beginning after November 15,2007. We are currently evaluating the impact this Statement will have on ourconsolidated financial statements.

6

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

**(3) Acquisitions**

On April 1, 2005, we acquired AGB Scientific Ltd.(“AGB”) and Advanced Instruments Sales & Services, Inc. (“AI”)for cash consideration of approximately $40.6 and common stock of approximately$0.5. AGB distributes scientific supplies and is headquartered in Dublin,Ireland. AI performs services and distributes scientific supplies to the PuertoRican market and is headquartered in San Juan, Puerto Rico.

On July 1, 2005, we acquired Technical ServiceLab B.V. (“TSL”) for cash consideration of approximately $3.1. TSL performstechnical services on laboratory equipment in the Netherlands, Germany, Belgiumand France. The results of AGB and TSL have been included in the European Labsegment from the date of acquisition. The results of AI have been included inthe North American Lab segment from the date of acquisition.

Theexcess investment made by the Company over the estimates of the fair marketvalue of the identifiable assets and liabilities for the three acquisitionsdiscussed above and one other minor acquisition was $23.3 and is summarizedbelow.

| Purchase price,  including $0.5 of CDRV stock |   | $     | 45.0   |   |
|-----------------------------------------------|--------|-------|--------|--------|
| Transaction costs                             |   | 1.5   |   |
| Net tangible  assets acquired                 |   | (9.3  | )      |
| Intangible assets  acquired                   |   | (13.9 | )      |
| Goodwill                                      |   | $     | 23.3   |   |

 

Had these acquisitions occurred at the beginning of2005, the pro-forma consolidated statements of operations would not have beenmaterially different from the amounts reported.

Cash consideration forthese acquisitions was funded from cash and cash equivalents on hand.

**(4) Stock-BasedCompensation**

***(a) CDRV Investors, Inc. Stock Incentive Plan***

CDRV adopted the CDRVInvestors, Inc. Stock Incentive Plan (the “Stock Plan”). Under the StockPlan, CDRV’s board of directors may grant rights to purchase shares of CDRVcommon stock and options to purchase shares of CDRV common stock to any of ourexecutive officers or other employees, including our named executive officers.Under the Stock Plan, the board of directors may also grant shares of CDRVcommon stock, rights to purchase shares of CDRV common stock and othershare-based awards to our directors, who are not also our employees orassociated with Clayton, Dubilier & Rice (“CD&R”). Options grantedunder the plan vest in equal annual installments on each of the first fiveanniversaries of the grant date and expire ten years from the grant date. As ofSeptember 30, 2006, there were 1,026,591 shares of CDRV common stockavailable for all types of awards under the stock plan. Based on shares issued,options outstanding and restricted units granted under the Stock Plan as of September 30,2006, there are 120,988 shares available for future awards.

7

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

**(4) Stock-BasedCompensation (Continued)**

***(b) Stock and Option Activity***

During the first quarter of 2006, CDRV closed anoffering with our President and Chief Executive Officer for the purchase of19,643 shares at $56.00 per share. The offer to purchase the shares wasissued in the fourth quarter of 2005 and the fair value of the shares wassubsequently determined to be $75 per share. In accordance with the guidanceset forth in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees(“APB 25”), we recorded a compensation charge in the fourth quarter of 2005 of$0.7 applying the intrinsic value guidance set forth in APB 25. Coincident withthis purchase, this executive was granted options to purchase 58,929 shares at$75.00 per share. Also during the first quarter of 2006, CDRV issued 1,050shares to certain directors who are not also our employees or associated withCD&R for director compensation and issued 1,360 shares at $50.52 per share inconnection with the exercise of vested stock options.

During the second quarter of 2006, CDRV offered 85 ofour officers and employees the option to purchase 40,166 shares at $75.00per share. The fair value of this purchase option, calculated in accordance withthe provisions of SFAS No. 123 Revised, Share-Based Payment (“SFAS 123R”), of $1.3 was charged tooperations in the second quarter of 2006. Fifty-one of our officers andemployees ultimately purchased 25,070 shares in the second quarter of 2006. Inconnection with these purchases, these officers and employees were to begranted two options, for each share purchased, at grant date fair value duringthe third quarter of 2006. As a result of the delay in the issuance of theoptions, these officers and employees received a special bonus totaling $2.2that was recorded as a compensation charge, primarily in the third quarter of2006. Also during the second quarter of 2006, CDRV issued 900 shares to certaindirectors who are not also our employees or associated with CD&R fordirector compensation and issued 19,600 shares at $50.52 per share inconnection with the exercise of vested stock options.

During the third quarter of 2006, CDRV closed anoffering with our President and Chief Executive Officer for the purchase of4,201 shares at $119.00 per share. Coincident with this purchase, thisexecutive was granted options to purchase 12,603 shares at $119.00 per share.Also during the third quarter of 2006, CDRV granted options to purchase 49,140shares at $119.00 per share to 50 of our officers and employees in connectionwith the offering discussed above that occurred in the second quarter of 2006,issued 808 shares to certain directors who are not also our employees orassociated with CD&R for director compensation and issued 2,900 shares at$50.52 per share in connection with the exercise of vested stock options.

During the nine months ended September 30, 2005,CDRV closed offerings in respect of 17 of our officers and employees for thepurchase of 22,960 shares at $56.00 per share and granted options topurchase 45,920 shares at $56.00 per share; in connection with the acquisitionof AI discussed in Note 3, issued 8,929 shares, as consideration (for value of$0.5), and granted options to purchase 17,858 shares at $56.00 per share;closed an offering with 1 of our directors for 447 shares at $56.00 pershare; and issued 4,219 shares to certain directors who are not also ouremployees or associated with CD&R for director compensation.

These stock issuances arereflected as capital contributions from CDRV of $4.9 and $2.0 for the ninemonths ended September 30, 2006 and 2005, respectively.

8

----

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

**(4) Stock-BasedCompensation (Continued)**

***(c) Adoption of SFAS 123R***

Effective January 1, 2006, the Company adoptedSFAS 123R, which requires companies to recognize in the income statement, thegrant date value of stock options and other forms of equity-based compensationissued to employees. The Company previously accounted for stock options grantedto our employees using the intrinsic value method of APB 25. Under APB 25, theCompany did not recognize compensation expense for CDRV options granted to ouremployees because such options had an exercise price equal to their fair marketvalue on the date of grant. Compensation costs related to the grant ofstock-based compensation is recorded in our financial statements with acorresponding capital contribution from CDRV.

The Company adopted SFAS 123R using the modifiedprospective transition method. Under this transition method, compensation costincludes the cost for all options granted prior to, but not yet vested as of January 1,2006 and all prospective awards without restatement of prior periods. Theimpact of adopting SFAS 123R, including the second quarter charge for the stockpurchase option of $1.3 discussed above, for the three and nine months ended September 30,2006 was an increase to selling, general and administrative expenses of $0.4and $2.6, respectively, and a reduction to income tax provision of $0.1 and$1.0, respectively.

Hadcompensation expense for CDRV stock options granted been determined based onthe fair value at the grant date for awards under the plan, consistent with theprovisions of SFAS 123R, the Company’s net income for the three and nine monthsended September 30, 2005 would have approximated the pro-forma amountsindicated below:

| ** **                                                                                                     | ** ** | **Three Months**            | ** ** | **Nine Months**             | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                     | ** ** | **Ended**                        | ** ** | **Ended**                        | ** ** |
| ** **                                                                                                     | ** ** | **September 30, 2005** | ** ** | **September 30, 2005** | ** ** |
| Net income, as  reported                                                                                       |       |                             | $          | 17.6                             |       |   |   | $ | 31.9 |   |   |
| Deduct:  stock-based compensation expense determined using fair value based method for  all awards, net of tax |       |                             | (0.3       | )                                |       |   | (0.9 | ) |   |
| Pro-forma net income                                                                                           |       |                             | $          | 17.3                             |       |   |   | $ | 31.0 |   |   |

 

Thefair value of each option was estimated using the Black-Scholes option-pricingmodel. The weighted average fair value of options granted and the assumptionsused for each of the reporting periods are as follows:

| ** **                     | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                     | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                     | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Fair value of options  granted |       | $                                | 52.11      |                            | $          | 25.30 |   | $ | 43.07 |   | $ | 25.56 |   |
| Risk-free  interest rate       |       | 4.63                             | %          | 4.23                            | %          | 4.69 | % | 4.11 | % |
| Expected life of  options      |       | 6.5 years                        |       | 6.5 years                       |       | 6.5 years |   | 6.5 years |   |
| Volatility                     |       | 34                               | %          | 37                              | %          | 34 | % | 38 | % |
| Expected dividend yield        |       | 0.0                              | %          | 0.0                             | %          | 0.0 | % | 0.0 | % |
|                                |            |                                  |            |                                 |            |  |  |  |  |  |  |  |  |

** **

9

----

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

**(4) Stock-BasedCompensation (Continued)**

 

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

We recognize compensation expense for the CDRV stockoptions granted to our employees, which are considered fixed awards applyingpro-rata vesting, on a straight-line basis.

Informationregarding CDRV stock options granted to our employees under the Stock Plan for thenine months ended September 30, 2006 is as follows:

| ** **                              | ** ** | ** ** | ** ** | **Weighted** | ** ** |
|-----------------------------------------|------------|------------|------------|--------------|------------|
| ** **                              | ** ** | **Number** | ** ** | **Average**  | ** ** |
| ** **                              | ** ** | **of**     | ** ** | **Exercise** | ** ** |
| ** **                              | ** ** | **Shares** | ** ** | **Price**    | ** ** |
| Outstanding at  January 1, 2006    |       | 483,728    |       |         | $          | 51.24 |   |   |
| Granted                                 |       | 120,672    |       |         | 97.51      |   |   |
| Forfeited                               |       | (49,528    | )          |         | 50.52      |   |   |
| Canceled                                |       | (1,452     | )          |         | 50.52      |   |   |
| Exercised                               |       | (23,860    | )          |         | 50.52      |   |   |
| Outstanding at  September 30, 2006 |       | 529,560    |       |         | 61.89      |   |   |
| Exercisable at September 30,  2006 |       | 152,948    |       |         | 50.98      |   |   |

 

Cash received byCDRV as a result of CDRV stock options exercised was $1.2 for the nine monthsended September 30, 2006. In connection with these exercises, the taxbenefit realized by the Company was $0.1 for the nine months ended September 30,2006.

Total intrinsicvalue related to CDRV stock options exercised was $0.1 and $0.6 for the threeand nine months ended September 30, 2006, respectively. No options wereexercised during the three and nine months ended September 30, 2005.

Information regarding unvested CDRV stock options forthe nine months ended September 30, 2006 is as follows:

| ** **                                   | ** ** | ** ** | ** ** | **Weighted** | ** ** |
|----------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                                   | ** ** | **Number** | ** ** | **Average**  | ** ** |
| ** **                                   | ** ** | **of**     | ** ** | **Fair**     | ** ** |
| ** **                                   | ** ** | **Shares** | ** ** | **Value**    | ** ** |
| Unvested options  at January 1, 2006    |       | 398,330    |       |         | $          | 17.18 |   |   |
| Granted                                      |       | 120,672    |       |         | 43.07      |   |   |
| Forfeited                                    |       | (49,528    | )          |         | 15.58      |   |   |
| Vested                                       |       | (92,862    | )          |         | 16.95      |   |   |
| Unvested options at  September 30, 2006 |       | 376,612    |       |         | 25.74      |   |   |

 

 

10

----

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

**(4) Stock-BasedCompensation (Continued)**

Thefollowing is a summary of outstanding CDRV stock options as of September 30,2006.

| ** **   | ** ** | **Weighted**          | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** ** | ** ** | ** **    | ** ** |
|--------------|------------|-----------------------|------------|------------------------------|------------|------------------------------|------------|------------|------------|---------------|------------|
| ** **   | ** ** | **Average**           | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
| ** **   | ** ** | **Remaining**         | ** ** | **Number**                   | ** ** | **Aggregate**                | ** ** | **Number** | ** ** | **Aggregate** | ** ** |
| **Exercise** | ** ** | **Contractual**       | ** ** | **of**                       | ** ** | **Intrinsic**                | ** ** | **of**     | ** ** | **Intrinsic** | ** ** |
| **Price**    | ** ** | **Life (Years)** | ** ** | **Shares**                   | ** ** | **Value**                    | ** ** | **Shares** | ** ** | **Value**     | ** ** |
|         | $          | 50.52                 |       |                         |       | 8.0                          |       |       | 345,110    |          |       | $ | 23.6 |   |   | 140,192 |   |   | $ | 9.6 |   |   |
|         | 56.00      |                  |       |                         | 8.6        |                         |       | 63,778     |       |          | 4.0        |   |   | 12,756 |   |   | 0.8 |   |   |
|         | 75.00      |                  |       |                         | 9.4        |                         |       | 58,929     |       |          | 2.6        |   |   | — |   |   | — |   |   |
|         | 119.00     |                  |       |                         | 9.7        |                         |       | 61,743     |       |          | —     |   |   | — |   |   | — |   |   |
|         |       |                  |       |                         |       |                         |       | 529,560    |       |          | $          | 30.2 |   |   | 152,948 |   |   | $ | 10.4 |   |   |

 

***(d) Restricted Stock Units***

In 2005, CDRV granted 21,333 CDRV restricted stockunits with a total fair value of approximately $1.6 to certain of our officersand other key executives that will vest in equal annual installments over afive-year period. The restricted units will all vest earlier in certaincircumstances if CDRV has a change in control. The granting of these units wasreflected in the December 31, 2005 financial statements by increasingadditional paid-in capital by $1.6 and a contra-equity account of unamortizedvalue of restricted stock issued of $1.6. In accordance with the provisions ofSFAS 123R, the unamortized value of restricted stock issued of $1.6 as of the adoptiondate of January 1, 2006 was eliminated against additional paid-in capital.The unearned compensation is being recognized as compensation expense over thefive-year vesting period of the restricted units granted. Compensationexpense related to these restricted stock units was $0.1 and $0.3 for the threeand nine months ended September 30, 2006, respectively.

As of September 30, 2006, the aggregate estimatedfuture compensation expense related to nonvested options outstanding and theunamortized value of restricted stock issued is $10.2. This expense will berecognized over a weighted average period of 4.0 years.

It is CDRV’s policy toissue new shares upon share option exercise or restricted stock unitconversion.

**(5) Restructuring**

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

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

11

----

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

**(5) Restructuring(Continued)**

The following table setsforth the activity associated with the Company’s liabilities for restructuringas a result of the Acquisition.

| ** **                          | ** ** | **Severance**   | ** ** | ** **     | ** ** | ** ** | ** ** |
|-------------------------------------|------------|-----------------|------------|----------------|------------|------------|------------|
| ** **                          | ** ** | **and**         | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **benefits**    | ** ** | **related**    | ** ** | **Total**  | ** ** |
| Balance at January 1,  2006    |       |            | $          | 7.6            |       |       |       | $ | 5.6 |   |   | $ | 13.2 |   |
| Cash payments/other                 |       |            | (3.7       | )              |       |       | (1.2       | ) |   | (4.9 | ) |
| Currency translation changes        |       |            | 0.3        |           |       |       | 0.3        |   |   | 0.6 |   |
| Balance at  September 30, 2006 |       |            | $          | 4.2            |       |       |       | $ | 4.7 |   |   | $ | 8.9 |   |

 

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

In addition, we initiated several cost reductionprograms in response to relatively static market conditions and implementedreductions in force and other cost containment measures during 2005. Inconnection with these actions, we recorded accruals and charges to operationsrelated to severance and facility exit costs of approximately $4.3 and $11.5for the three and nine months ended September 30, 2005, respectively. Forthe nine months ended September 30, 2006, we reversed $1.0 of excessaccruals and credited operations as a result of the re-deployment of certainpersonnel originally included in the programs and net reductions to otherestimated severance and termination benefit accruals.

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

| ** **                                         | ** ** | **Three Months Ended September 30,** | ** ** |
|----------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                         | ** ** | **2006**                                                 | ** ** | **2005** | ** ** |
| ** **                                         | ** ** | **Severance**                                            | ** ** | ** ** | ** ** | ** ** | ** ** | **Severance** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                         | ** ** | **and**                                                  | ** ** | ** ** | ** ** | ** ** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                         | ** ** | **termination**                                          | ** ** | **Facilities** | ** ** | ** ** | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                                         | ** ** | **benefits**                                             | ** ** | **related** | ** ** | **Total** | ** ** | **benefits** | ** ** | **related** | ** ** | **Total** | ** ** |
| Balance at  beginning of period                    |       |                                                     | $          | 2.3 |   |   |   | $ | 0.1 |   |   | $ | 2.4 |   |   | $ | 3.6 |   |   |   | $ | 1.5 |   |   | $ | 5.1 |   |
| Accruals (credited) charged to earnings by segment |       |                                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab                                 |       |                                                     | —     |   |   |   | — |   |   | — |   |   | 0.4 |   |   |   | 0.1 |   |   | 0.5 |   |
| European Lab                                       |       |                                                     | —     |   |   |   | — |   |   | — |   |   | 4.2 |   |   |   | (0.4 | ) |   | 3.8 |   |
| Cash payments/other                                |       |                                                     | (0.4       | ) |   |   | — |   |   | (0.4 | ) |   | (3.3 | ) |   |   | — |   |   | (3.3 | ) |
| Currency translation changes                       |       |                                                     | (0.1       | ) |   |   | — |   |   | (0.1 | ) |   | — |   |   |   | — |   |   | — |   |
| Balance at end of period                           |       |                                                     | $          | 1.8 |   |   |   | $ | 0.1 |   |   | $ | 1.9 |   |   | $ | 4.9 |   |   |   | $ | 1.2 |   |   | $ | 6.1 |   |

 

12

----

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

**(5) Restructuring(Continued)**

| ** **                                          | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                          | ** ** | **2006**                                                | ** ** | **2005** | ** ** |
| ** **                                          | ** ** | **Severance**                                           | ** ** | ** ** | ** ** | ** ** | ** ** | **Severance** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **and**                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **termination**                                         | ** ** | **Facilities** | ** ** | ** ** | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **benefits**                                            | ** ** | **related** | ** ** | **Total** | ** ** | **benefits** | ** ** | **related** | ** ** | **Total** | ** ** |
| Balance at  beginning of period                     |       |                                                    | $          | 9.8 |   |   |   | $ | 0.3 |   |   | $ | 10.1 |   |   | $ | — |   |   |   | $ | — |   |   | $ | — |   |
| Accruals  (credited) charged to earnings by segment |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab                                  |       |                                                    | (1.0       | ) |   |   | — |   |   | (1.0 | ) |   | 4.3 |   |   |   | 0.1 |   |   | 4.4 |   |
| European Lab                                        |       |                                                    | —     |   |   |   | — |   |   | — |   |   | 6.0 |   |   |   | 1.1 |   |   | 7.1 |   |
| Cash payments/other                                 |       |                                                    | (7.1       | ) |   |   | (0.2 | ) |   | (7.3 | ) |   | (5.4 | ) |   |   | — |   |   | (5.4 | ) |
| Currency translation changes                        |       |                                                    | 0.1        |   |   |   | — |   |   | 0.1 |   |   | — |   |   |   | — |   |   | — |   |
| Balance at end of period                            |       |                                                    | $          | 1.8 |   |   |   | $ | 0.1 |   |   | $ | 1.9 |   |   | $ | 4.9 |   |   |   | $ | 1.2 |   |   | $ | 6.1 |   |

 

At September 30,2006, $4.5 of our aggregate restructuring liabilities are included in accruedexpenses and $6.3 are included in other long-term liabilities. At December 31,2005, $16.6 of our aggregate restructuring liabilities are included in accruedexpenses and $6.7 are included in other long-term liabilities.

**(6) Goodwill andOther Intangible Assets**

***(a)***   Goodwill

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

Changes in the carrying amount of goodwill by segmentfor the nine months ended September 30, 2006 are as follows:

| ** **                                              | ** ** | **North**             | ** ** | **European** | ** ** | **Science**   | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|--------------|------------|---------------|------------|------------|------------|
| ** **                                              | ** ** | **American Lab** | ** ** | **Lab**      | ** ** | **Education** | ** ** | **Total**  | ** ** |
| Balance at  January 1, 2006                        |       |                  | $          | 647.3        |       |          |       | $          | 195.0      |   |   |   | $ | 67.7 |   |   | $ | 910.0 |   |
| Purchase accounting adjustment for the TSL  acquisition |       |                  | —     |         |       |          | (1.0       | )          |       |   | — |   |   | (1.0 | ) |
| Currency translation changes                            |       |                  | 7.6        |         |       |          | 14.5       |       |       |   | — |   |   | 22.1 |   |
| Balance at  September 30, 2006                     |       |                  | $          | 654.9        |       |          |       | $          | 208.5      |   |   |   | $ | 67.7 |   |   | $ | 931.1 |   |

 

13

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

**(6) Goodwilland Other Intangible Assets (Continued)**

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

Other intangibleassets, net for each of the reporting periods is shown in the table below:

| ** **                                                                                                  | ** ** | **Weighted**     | ** ** | ** **             | ** ** | ** **            | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **Average**      | ** ** | ** **             | ** ** | ** **            | ** ** |
| ** **                                                                                                  | ** ** | **Amortization** | ** ** | ** **             | ** ** | ** **            | ** ** |
| ** **                                                                                                  | ** ** | **Period**       | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                  | ** ** | **(Years)**      | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| Amortizable  intangible assets:                                                                             |       |             |       |                   |       |                  |       |   |   |   |   |   |   |
| Customer relationships in North America (net of  accumulated amortization of $18.6 and $13.2, respectively) |       |             | 32.8       |                   |       |                  | $          | 228.3 |   |   |   | $ | 232.7 |   |   |
| Customer relationships in Europe (net of accumulated  amortization of $9.9 and $6.3, respectively)          |       |             | 20.3       |                   |       |                  | 72.7       |   |   |   | 69.5 |   |   |
| Chemical supply agreements (net of accumulated  amortization of $7.9 and $5.2, respectively)                |       |             | 10.0       |                   |       |                  | 23.5       |   |   |   | 24.2 |   |   |
| Other (net of accumulated amortization of $1.0 and  $0.4, respectively)                                     |       |             | 4.1        |                   |       |                  | 0.2        |   |   |   | 0.8 |   |   |
| Total amortizable intangible assets (net of  accumulated amortization of $37.4 and $25.1, respectively)     |       |             |       |                   |       |                  | 324.7      |   |   |   | 327.2 |   |   |
| Indefinite-lived  intangible assets:                                                                        |       |             |       |                   |       |                  |       |   |   |   |   |   |   |
| Trademarks and tradenames                                                                                   |       |             |       |                   |       |                  | 228.3      |   |   |   | 225.5 |   |   |
| Total intangible  assets, net                                                                               |       |             |       |                   |       |                  | $          | 553.0 |   |   |   | $ | 552.7 |   |   |

 

Amortizationexpense for each of the reporting periods is shown in the table below:

| ** **            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **            | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **            | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Amortization  expense |       |                             | $          | 3.8                             |       |   |   | $ | 3.5 |   |   |   | $ | 11.6 |   |   |   | $ | 10.7 |   |   |
|                       |            |                                  |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

14

----

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

**(7) Debt**

Thefollowing is a summary of ourdebt obligations:

| ** **                                       | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| Senior Secured  Credit Facility                  |       |                   | $          | 443.2                 |       |   |   | $ | 537.1 |   |   |
| 6 7¤8%  Unsecured Senior Notes due 2012     |       |                   | 200.0      |                  |       |   | 200.0 |   |   |
| 8% Unsecured  Senior Subordinated Notes due 2014 |       |                   | 320.0      |                  |       |   | 320.0 |   |   |
| Loan from CDRV  Holdings, Inc.              |       |                   | 0.6        |                  |       |   | 0.6 |   |   |
| Bank loans                                       |       |                   | —     |                  |       |   | 0.3 |   |   |
| Capital leases                                   |       |                   | 5.8        |                  |       |   | 5.8 |   |   |
| Total debt                                       |       |                   | 969.6      |                  |       |   | 1,063.8 |   |   |
| Less short-term  portion                         |       |                   | (1.0       | )                     |       |   | (45.5 | ) |   |
| Total long-term  portion                         |       |                   | $          | 968.6                 |       |   |   | $ | 1,018.3 |   |   |

 

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

The Senior Secured Credit Facility provides foraggregate maximum borrowings of approximately $593.2 under (1) a term loanfacility providing for a loan denominated in Euros in an aggregate principalamount currently outstanding of €107.3 million (orapproximately $136.1 on a U.S. dollar equivalent basis as of September 30, 2006), (2) aterm loan facility providing for a term loan denominated in U.S. dollars in anaggregate principal amount currently outstanding of $307.1, and (3) a multi-currencyrevolving credit facility, providing for up to $150.0 in multi-currencyrevolving loans (including standby and commercial letters of credit)outstanding at any time. Undrawn amounts under the multi-currency revolvingcredit facility will be available on a revolving credit basis for generalcorporate purposes. As of September 30, 2006, we had $9.5 of undrawnletters of credit and our remaining borrowing availability under the $150.0multi-currency revolving credit facility was $140.5. During the third quarterof 2006, the Senior Secured Credit Facility was amended to allow for anadditional $60.0 to be spent on acquisitions.

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

Subject to certainexceptions, the Senior Secured Credit Facility is subject to mandatoryprepayment 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 cash flow net of any voluntary principal prepayments (as defined) forany fiscal year unless certain leverage ratio targets are met. A $44.5principal prepayment was made in March 2006 based on excess cash flow (asdefined) generated in 2005. This amount was included in short-term bank debt inour consolidated balance sheet at December 31, 2005.

In September 2006, a$60.0 voluntary principal prepayment was made on the Senior Secured CreditFacility term loans.

15

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

**(7) Debt(Continued)**

***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 is definedin the credit agreement. As of September 30, 2006, none of the domesticsubsidiaries of VWR met the definition of significant subsidiary under thecredit agreement. In addition, the Senior Secured Credit Facility and theguarantees thereunder are secured by security interests in and pledges of orliens on substantially all of the tangible and intangible assets of VWR and itssubsidiaries.

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

***Interest***

At our election, theinterest rates applicable to the U.S. dollar-denominated term loan can be basedon a fluctuating 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 rateapplicable to the Euro-denominated term loan is based on a fluctuating rate ofinterest measured by reference to an adjusted EURIBOR plus a borrowing margin.As of September 30, 2006, the interest rates on the U.S.dollar-denominated and Euro-denominated term loans were 7.77% and 5.87%,respectively.

***Covenants***

The Senior Secured CreditFacility contains a number of covenants that, among other things, limit orrestrict our ability to dispose of assets, incur additional indebtedness, incurguarantee obligations, prepay other indebtedness, make acquisitions, modifyterms of the indentures, engage in mergers or consolidations, change thebusiness conducted by us taken as a whole, make capital expenditures, or engagein certain transactions with affiliates. In addition, the Senior Secured CreditFacility requires us to comply with specified financial ratios and tests,including a minimum interest expense coverage ratio, a maximum leverage ratioand a maximum capital expenditures test. As of September 30, 2006, theCompany 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 certain covenant limitations.

16

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

**(8) Defined Benefit Plans**

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

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

| ** **                      | ** ** | **Three Months Ended September 30,** | ** ** |
|---------------------------------|------------|----------------------------------------------------------|------------|
| ** **                      | ** ** | **U.S. Plan**                                       | ** ** | **German, French  and UK Plans** | ** ** |
| ** **                      | ** ** | **2006**                                                 | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                    |       | $                                                        | 0.2        |   | $ | 0.6 |   | $ | 0.7 |   | $ | 0.8 |   |
| Interest cost                   |       | 2.0                                                      |       | 1.9 |   | 1.1 |   | 1.0 |   |
| Expected return on  plan assets |       | (2.2                                                     | )          | (2.1 | ) | (1.0 | ) | (0.9 | ) |
| Recognized net  actuarial loss  |       | —                                                   |       | — |   | 0.1 |   | — |   |
| Net periodic  pension cost      |       | $                                                        | —     |   | $ | 0.4 |   | $ | 0.9 |   | $ | 0.9 |   |

 

| ** **                      | ** ** | **Nine Months Ended September 30,** | ** ** |
|---------------------------------|------------|---------------------------------------------------------|------------|
| ** **                      | ** ** | **U.S. Plan**                                      | ** ** | **German, French  and UK Plans** | ** ** |
| ** **                      | ** ** | **2006**                                                | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                    |       | $                                                       | 1.6        |   | $ | 3.9 |   | $ | 2.1 |   | $ | 2.6 |   |
| Interest cost                   |       | 6.2                                                     |       | 6.2 |   | 3.1 |   | 3.2 |   |
| Expected return  on plan assets |       | (6.7                                                    | )          | (6.3 | ) | (2.8 | ) | (2.9 | ) |
| Recognized net  actuarial loss  |       | 0.2                                                     |       | — |   | 0.3 |   | — |   |
| Net periodic  pension cost      |       | $                                                       | 1.3        |   | $ | 3.8 |   | $ | 2.7 |   | $ | 2.9 |   |

 

Net periodic pension cost for the U.S. plan is lowerin 2006 than 2005 primarily as a result of a curtailment of the plan effective June 1,2005. Future benefits were frozen effective May 31, 2005 for mostparticipants and most participants will earn no further benefits under the planafter that date. This curtailment was recorded as reductions to pensionliabilities, goodwill and deferred tax assets in 2005.

The Company madecontributions to the U.S. and Non-U.S. plans of approximately $12.4 and $1.3for the nine months ended September 30, 2006, respectively, and expects tomake additional contributions to the Non-U.S. plans of approximately $0.5during the remainder of 2006.

17

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

**(9) Comprehensive Income**

Comprehensiveincome is determined as follows:

| ** **                                        | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                        | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                        | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income                                        |       |                             | $          | 21.4                            |       |   |   | $ | 17.6 |   |   |   | $ | 55.8 |   |   | $ | 31.9 |   |
| Other  comprehensive income (loss):               |       |                             |       |                            |       |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment           |       |                             | (1.8       | )                               |       |   | 13.4 |   |   |   | 25.2 |   |   | (20.0 | ) |
| Unrealized gain (loss) on derivatives, net of tax |       |                             | 0.3        |                            |       |   | (1.0 | ) |   |   | (0.2 | ) |   | (0.3 | ) |
| Comprehensive income                              |       |                             | $          | 19.9                            |       |   |   | $ | 30.0 |   |   |   | $ | 80.8 |   |   | $ | 11.6 |   |

 

**(10) Commitments andContingencies**

The Company is involved in various environmental,employment, contractual and product liability cases and claims which areconsidered routine to our business and from time to time we are named as adefendant in cases as a result of our distribution of scientific supplies,including litigation resulting from the distribution of products containingasbestos by us and certain of our predecessors. While the impact of thislitigation has typically been immaterial, there can be no assurance that theimpact of pending cases, including those described below, and any future claimswill not be material to our business, financial condition or results ofoperations in the future.

During 2005, the German Federal Cartel Officeinitiated an investigation with regard to our European Distribution Agreementwith Merck KGaA. The purpose of the investigation is to determine whether thisagreement violates or otherwise infringes the general prohibition ofanti-competitive agreements under either German or EU rules. The Company hassubmitted information to the German Federal Cartel Office and is awaitingformal feedback in connection with this matter. At the current time we cannotcomplete our assessment as to the likely outcome of the investigation orpotential economic impact associated with an adverse ruling. In connection withthe Acquisition, we recorded intangible assets of approximately €24.8million (or $31.5 on a U.S. dollar equivalent basis as of September 30, 2006)related to our European Distribution Agreement with Merck KGaA. As of September 30,2006, the unamortized net book value of these intangible assets isapproximately  €18.5million (or $23.5 on a U.S. dollar equivalent basis).

On March 28, 2006,the Company was served with a complaint filed in the United States DistrictCourt, Western District of New York, by Corning Incorporated (“Corning”)alleging a breach of contract and unliquidated damages. On April 5, 2006,Corning amended its complaint to allege additional trademark and unfaircompetition claims. On May 2, 2006, the Company filed a motion to dismissCorning’s breach of contract claim and the court heard oral arguments on themotion on September 28, 2006. The Company believes Corning’s claims arewithout merit and will vigorously defend itself in this matter.

18

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

**(11) Segment FinancialInformation**

The Company reports financial results on the basis ofthe following three business segments: North American Lab; European Lab; andScience Education. The Company’s operating segments have been identified givingconsideration to both geographic areas and the nature of products among businesseswithin its geographic area.

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

| ** **                   | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                   | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                   | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Net Sales**                |       |                             |       |                            |       |   |   |   |   |   |   |   |   |
| North American Lab           |       |                             | $          | 492.5                           |       |   |   | $ | 490.0 |   |   | $ | 1,485.0 |   | $ | 1,430.4 |   |
| European Lab                 |       |                             | 270.6      |                            |       |   | 264.4 |   |   | 821.1 |   | 814.4 |   |
| Science Education            |       |                             | 54.5       |                            |       |   | 57.6 |   |   | 122.3 |   | 116.1 |   |
| Total                        |       |                             | $          | 817.6                           |       |   |   | $ | 812.0 |   |   | $ | 2,428.4 |   | $ | 2,360.9 |   |
| **Operating  Income**        |       |                             |       |                            |       |   |   |   |   |   |   |   |   |
| North American Lab           |       |                             | $          | 27.8                            |       |   |   | $ | 28.7 |   |   | $ | 84.5 |   | $ | 63.0 |   |
| European Lab                 |       |                             | 14.6       |                            |       |   | 7.1 |   |   | 43.3 |   | 28.6 |   |
| Science Education            |       |                             | 12.3       |                            |       |   | 11.5 |   |   | 18.6 |   | 13.5 |   |
| Total                        |       |                             | 54.7       |                            |       |   | 47.3 |   |   | 146.4 |   | 105.1 |   |
| Interest income              |       |                             | (2.1       | )                               |       |   | (0.8 | ) |   | (4.9 | ) | (1.8 | ) |
| Interest expense             |       |                             | 21.6       |                            |       |   | 19.5 |   |   | 62.6 |   | 56.7 |   |
| Other (income)  expense, net |       |                             | (0.1       | )                               |       |   | (1.3 | ) |   | 0.3 |   | (3.2 | ) |
| Income before  income taxes  |       |                             | $          | 35.3                            |       |   |   | $ | 29.9 |   |   | $ | 88.4 |   | $ | 53.4 |   |

 

**(12) Subsequent Event**

On October 2, 2006, the Company announced theacquisition of Sino Chemical Company (Pte.) Limited (“Sino”). Sino is locatedin Singapore and distributes laboratory chemicals, equipment and consumables.This acquisition is not expected to have a material impact on the financialposition or results of operations of the Company for 2006.

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

**Overview**

Our net sales are derived primarily from the sale ofscientific supplies, including laboratory supplies, research chemicals,equipment, and to a lesser extent laboratory furniture and services, which arerecorded on a gross basis. Freight costs that are billed to our customers arealso included in net sales.

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

Selling, general andadministrative expenses primarily reflect the costs of operations dedicated togenerating new sales, maintaining existing customer relationships, enhancingtechnology capabilities, receiving customer orders and operating ourdistribution center facilities. These expenses also include depreciation andamortization.

**Business Segments**

We report our financialresults on the basis of the following three business segments: North AmericanLab, European Lab, and Science Education. Both the North American Lab andEuropean Lab segments distribute scientific supplies to customers in thepharmaceutical, biotechnology, chemical, technology, and food processingindustries; governmental agencies; colleges and universities; and environmentalorganizations. Science Education manufactures and distributes scientificsupplies and specialized kits principally to primary and secondary schools inNorth America.

**Seasonality**

Our results of operationsare subject to seasonal trends primarily affecting our Science Education segment,which tend to result in increased net sales and operating income in the thirdquarter in comparison to other quarters of the year. This stronger quarterlyperformance is a result of schools purchasing supplies in preparation for thebeginning of the new school year. Quarterly net sales are also influenced bythe number of shipping days in a given fiscal period.

**Acquisitions**

We acquired AGB Scientific Ltd. (“AGB”) and AdvancedInstruments Sales & Service, Inc. (“AI”) on April 1, 2005and Technical Service Lab B.V. (“TSL”) on July 1, 2005. The results of AGBand TSL have been included in the European Lab segment and the results of AIhave been included in the North American Lab segment from the date of theacquisitions.

On October 2, 2006,the Company announced the acquisition of Sino Chemical Company (Pte.) Limited (“Sino”).Sino is located in Singapore and distributes laboratory chemicals, equipmentand consumables. This acquisition is not expected to have a material impact onthe financial position or results of operations of the Company for 2006.

**Restructuring**

Since the Acquisition on April 7, 2004, we haveinitiated various restructuring activities designed to reduce operating costsand improve our operating and administrative capabilities. We recordedrestructuring accruals of $29.7 million in 2004, primarily related toreductions in headcount in Europe primarily due to the reorganization of ourEuropean sales and marketing functions. In early 2005, we recorded additionalrestructuring accruals of $24.5 million, primarily for severance and other exitcosts 

20

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including estimates forenvironmental remediation associated with cessation of manufacturing operationsat a plant in France and severance costs associated with the consolidation ofcertain sales and marketing personnel in our German and UK operations. Thesecharges have been recorded as adjustments to acquisition costs (increases togoodwill) pursuant to the provisions of Emerging Issues Task Force Issue No. 95-3,*Recognition of Liabilities in Connectionwith a Purchase Business Combination*.

Throughout 2005, the Company recorded variousrestructuring charges in response to relatively static market conditions andimplemented reductions in force and other cost containment measures that didnot qualify as acquisition costs. In connection with these actions, we recordedrestructuring charges related to severance and facility exit costs totalingapproximately $20.6 million for the year ended December 31, 2005. For the three months ended September 30,2005 we recorded $0.5 million of suchcharges related to North American Lab programs and $3.8 million relatedto European Lab programs. For the nine months ended September 30, 2005 werecorded $4.4 million of such chargesrelated to North American Lab programs and $7.1 million related toEuropean Lab programs.

Theseprograms are complete and no such charges have been recorded in 2006. Duringthe nine months ended September 30, 2006 we reversed $1.0 million ofexcess accruals related to North American Lab programs.

**Constant CurrencyAnalysis**

We maintain operationsprimarily in North America and in Europe. Approximately 41% of our net salesoriginate in currencies other than the U.S. dollar, 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” disclosures in thefollowing discussion and analysis to quantify the impact of the fluctuation inforeign exchange rates and utilize constant currency results in our analysis ofsegment performance. We believe that this calculation is a useful measure,indicating true operating performance. Earnings from our subsidiaries are notgenerally repatriated to the United States, and we typically do not incursignificant gains or losses on foreign currency transactions with oursubsidiaries. Therefore, changes in foreign currency exchange rates primarilyimpact only reported earnings and not our financial position.

**Compliance with theSarbanes-Oxley Act**

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

A component of thisprogram is focused on the quality, security, and functionality of ourinformation systems. While we have developed sound plans to address all of ourcompliance requirements and believe our efforts to date have been effective,there can be no assurance that future efforts will not have an impact on, orpotentially distract our management team from, day-to-day activities.

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**Results ofOperations**

***Net Sales***

Thefollowing table presents net sales and changes in net sales by reportablesegment for the three and nine months ended September 30, 2006 and 2005(dollars in millions):

| ** **          | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|---------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **          | ** ** | **2006**                                                 | ** ** | **% Change**                                       | ** ** | **2005** | ** ** | **2006** | ** ** | **% Change** | ** ** | **2005** | ** ** |
| North American  Lab |       |                                                     | $          | 492.5                                                   |       |   |   | 0.5 | % |   |   | $ | 490.0 |   |   | $ | 1,485.0 |   |   | 3.8 | % |   | $ | 1,430.4 |   |
| European Lab        |       |                                                     | 270.6      |                                                    |       |   | 2.3 | % |   |   | 264.4 |   |   | 821.1 |   |   | 0.8 | % |   | 814.4 |   |
| Science Education   |       |                                                     | 54.5       |                                                    |       |   | (5.4 | )% |   |   | 57.6 |   |   | 122.3 |   |   | 5.3 | % |   | 116.1 |   |
| Total               |       |                                                     | $          | 817.6                                                   |       |   |   | 0.7 | % |   |   | $ | 812.0 |   |   | $ | 2,428.4 |   |   | 2.9 | % |   | $ | 2,360.9 |   |

 

Net sales for the three and nine months ended September 30,2006 increased $5.6 million and $67.5 million, respectively, over thecomparable periods of 2005. Foreign currency favorably impacted net sales by$14.8 million for the three months ended September 30, 2006. Foreigncurrency unfavorably impacted net sales by $2.2 million and the acquisitions ofAGB, AI and TSL favorably impacted net sales by $12.5 million for the ninemonths ended September 30, 2006. Excluding these effects, net salesdecreased 1.1% and increased 2.4%, respectively, from the comparable periods of2005.

Net sales in the North American Lab segment for thethree and nine months ended September 30, 2006 increased $2.5 million and$54.6 million, respectively, over the comparable periods of 2005. Foreigncurrency changes accounted for $3.2 million and $11.3 million of the increasefor the three and nine months ended September 30, 2006, respectively. Theacquisition of AI favorably impacted net sales by $3.4 million for the ninemonths ended September 30, 2006. Excluding these effects, net salesdecreased 0.1% and increased 2.8%, respectively, from the comparable periods of2005. The decrease for the three months ended September 30, 2006 is aresult of one less shipping day, partially offset by improved pricing. Theincrease for the nine months ended September 30, 2006 primarily reflectsimprovements in product pricing. For the nine months ended September 30,2006, our net sales to customers in the pharmaceutical industry experiencedlow-single digit growth and our net sales to customers in the biotechnology andindustrial industries achieved mid-single digit growth. These increases wereoffset by declines in net sales to our education customers.

Net sales in the European Lab segment for the threeand nine months ended September 30, 2006 increased $6.2 million and $6.7million, respectively, from the comparable periods of 2005. Foreign currencyfavorably impacted net sales by $11.6 million for the three months ended September 302006. Foreign currency unfavorably impacted net sales by $13.5 million and theacquisitions of AGB and TSL favorably impacted net sales by $9.1 million forthe nine months ended September 30, 2006. Excluding these effects, netsales decreased 2.0% and increased 1.4%, respectively, from the comparableperiods of 2005. The decrease for the three months ended September 30,2006 is primarily a result of one less shipping day. The increase for the ninemonths ended September 30, 2006 reflects improvements in product pricing.For the nine months ended September 30, 2006, our net sales to our bio-pharmaceuticaland industrial customers experienced low-single digit growth. These increaseswere partially offset by declines in net sales to our education, reseller andclinical customers.

Net sales in the ScienceEducation segment for the three and nine months ended September 30, 2006decreased $3.1 million or 5.4% and increased $6.2 million or 5.3%,respectively, over the comparable periods of 2005. The decrease for the threemonths ended September 30, 2006 is a result of a decrease in net sales toour direct education customers, partially offset by an increase in net sales toour publisher customers. The increase for the nine months ended September 30,2006 is primarily a result of growth in net sales to our publisher customersand partially due to growth in net sales to our direct education customers,including the fulfillment of a large international order.

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***Gross Profit***

Thefollowing table presents gross profit for the three and nine months ended September 30,2006 and 2005 (dollars in millions):

| ** **                              | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                              | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                              | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Gross profit                            |       |  $223.6                     |       |  $209.6                    |       | $ | 657.1 |   | $ | 603.1 |   |
| Percentage of net sales  (gross margin) |       | 27.3                             | %          | 25.8                            | %          | 27.1 | % | 25.5 | % |
|                                         |            |                                  |            |                                 |            |  |  |  |  |  |  |

 

Gross profit for the threeand nine months ended September 30, 2006 increased $14.0 million and $54.0million, respectively, over the comparable periods of 2005. Foreign currencyfavorably impacted gross profit by $4.3 million for the three months ended September 30,2006. Foreign currency unfavorably impacted gross profit by $1.5 million andthe acquisitions of AGB, AI and TSL favorably impacted gross profit by $4.7million for the nine months ended September 30, 2006. Excluding theseeffects, gross profit increased $9.7 million or 4.6% and $50.8 million or 8.4%from the comparable periods of 2005 as a result of the improved pricingdiscussed above. Our gross margin percentages improved in each of our segmentsover the comparable periods of 2005. The increases in North American Lab and EuropeanLab are primarily a result of favorable pricing, better mix and improvedrecovery of freight costs. The increases in Science Education are primarily aresult of improved pricing, partially offset by increased international netsales, which generate somewhat lower margins.

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

Thefollowing table presents selling, general, and administrative expenses (“SG&A”) for the three and ninemonths ended September 30, 2006 and 2005 (dollars in millions):

| ** **                                    | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                    | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Selling, general  and administrative expenses |       |  $168.9                     |       |  $158.0                    |       | $ | 511.7 |   | $ | 486.5 |   |
| Percentage of net sales                       |       | 20.7                             | %          | 19.5                            | %          | 21.1 | % | 20.6 | % |
|                                               |            |                                  |            |                                 |            |  |  |  |  |  |  |

 

SG&A for the three and nine months ended September 30,2006 increased $10.9 million and $25.2 million, respectively, over thecomparable periods of 2005. Foreign currency increased SG&A by $3.4 millionfor the three months ended September 30, 2006. Foreign currency favorablyimpacted SG&A by $2.0 million and the acquisitions of AGB, AI and TSLincreased SG&A by $4.4 million for the nine months ended September 30,2006. Excluding these effects, SG&A increased $7.5 million or 4.7% and$22.8 million or 4.7% from the comparable periods of 2005.

Charges related tostock-based compensation, including the adoption of SFAS 123R and the specialbonus of $2.2 million, in 2006 have increased SG&A by $2.6 million and $4.8million for the three and nine months ended September 30, 2006,respectively. Other factors contributing to the increases include inflation,increased information technology and Sarbanes-Oxley compliance costs ofapproximately $1.7 million and $5.9 million for the three and nine months endedSeptember 30, 2006, respectively, and investments in our sourcing functionand our BioSciences business.

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***Operating Income***

Thefollowing table presents operating income and operating income as a percentageof net sales by reportable segment for the three and nine months ended September 30,2006 and 2005 (dollars in millions):

| ** **          | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|---------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **          | ** ** | **2006**                                                 | ** ** | **2005**                                                | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **          | ** ** | **Amount**                                               | ** ** | **% of  Net Sales**                           | ** ** | **Amount** | ** ** | **% of  Net Sales** | ** ** | **Amount** | ** ** | **% of  Net Sales** | ** ** | **Amount** | ** ** | **% of  Net Sales** | ** ** |
| North American  Lab |       |                                                     | $          | 27.8                                                    |       |   |   | 5.6 | % |   |   | $ | 28.7 |   |   |   | 5.9 | % |   |   | $ | 84.5 |   |   |   | 5.7 | % |   |   | $ | 63.0 |   |   |   | 4.4 | % |   |
| European Lab        |       |                                                     | 14.6       |                                                    |       |   | 5.4 | % |   |   | 7.1 |   |   |   | 2.7 | % |   |   | 43.3 |   |   |   | 5.3 | % |   |   | 28.6 |   |   |   | 3.5 | % |   |
| Science Education   |       |                                                     | 12.3       |                                                    |       |   | 22.6 | % |   |   | 11.5 |   |   |   | 20.0 | % |   |   | 18.6 |   |   |   | 15.2 | % |   |   | 13.5 |   |   |   | 11.6 | % |   |
| Total               |       |                                                     | $          | 54.7                                                    |       |   |   | 6.7 | % |   |   | $ | 47.3 |   |   |   | 5.8 | % |   |   | $ | 146.4 |   |   |   | 6.0 | % |   |   | $ | 105.1 |   |   |   | 4.5 | % |   |

 

Operating income for the three and nine months ended September 30, 2006 increased$7.4 million and $41.3 million, respectively, over the comparable periods of2005. Several factors affect the comparability of the year-over-year increasein operating performance. Operating income was adversely impacted in 2005 byrestructuring charges of $4.3 million and $11.5 million for the three and ninemonths ended September 30,2005, respectively. In the nine months ended September 30, 2006 we recorded reductions to the previouslyestablished restructuring reserves of $1.0 million. The acquisitions favorablyimpacted operating income by $0.3 million for the nine months ended September 30, 2006. Foreigncurrency favorably impacted operating income by $0.9 million and $0.5 millionfor the three and nine months ended September 30,2006, respectively. Excluding these effects, operating income increased $2.2million or 4.3% and $28.0 million or 24.0% from the comparable periods of 2005.The increase for the threemonths ended September 30,2006 was the result of a grossprofit increase of $9.7 million, partially offset by an SG&A increase of$7.5 million. The increase forthe nine months ended September 30,2006 was the result of a grossprofit increase of $50.8 million, partially offset by an SG&A increase of$22.8 million.

Operating income in the North American Lab segmentdecreased $0.9 million and increased $21.5 million for the three and nine months ended September 30,2006, respectively, from the comparable periods of 2005. Operatingincome was adversely impacted in 2005 by restructuring charges of $0.5 millionand $4.4 million for the three and nine months ended September 30, 2005, respectively. In the nine months ended September 30, 2006 we recordedreductions to the previously established restructuring reserves of $1.0million. Foreign currency favorably impacted operating income by $0.3 millionand $1.0 million for the three and nine months ended September 30, 2006,respectively. The acquisition of AI unfavorably impacted operating income by$0.2 million for the nine months ended September 30, 2006. Excluding theseeffects, operating income decreased $1.7 million or 5.8% and increased $15.3million or 22.7% from the comparable periods of 2005. The decrease for the three months ended September 30, 2006 was the result of an SG&Aincrease of $9.5 million, which includes charges for stock-based compensationof $2.2 million and increased information technology and Sarbanes-Oxleycompliance costs of approximately $1.7 million. This decrease is partiallyoffset by a gross profit increase of $7.8 million. The increase for the nine months ended September 30, 2006 was the result of a gross profitincrease of $34.4 million, partially offset by an SG&A increase of $19.1million, which includes charges for stock-based compensation of $4.1 millionand increased information technology and Sarbanes-Oxley compliance costs ofapproximately $5.9 million.

Operating income in the European Lab segment for the three and nine months ended September 30, 2006 increased $7.5 million and$14.7 million, respectively, over the comparable periods of 2005. Operatingincome was adversely impacted in 2005 by restructuring charges of $3.8 millionand $7.1 million for the three and nine months ended September 30, 2005, respectively. The acquisitions of AGBand TSL favorably impacted operating income by $0.5 million for the nine monthsended September 30, 2006. 

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Foreign currency favorablyimpacted operating income by $0.6 million for the three months ended September 30,2006 and unfavorably impacted operating income by $0.5 million for the ninemonths ended September 30, 2006. Excluding these effects, operating incomeincreased $3.1 million or 28.4% and $7.6 million or 21.3% from the comparableperiods of 2005. Theincrease for the three months ended September 30, 2006 was the result of a gross profitincrease of $1.8 million and an SG&A decrease of $1.3 million. The increase for the nine months endedSeptember 30, 2006 was theresult of a gross profit increase of $11.6 million, partially offset by anSG&A increase of $4.0 million.

Operating income in theScience Education segment forthe three and nine months ended September 30, 2006 increased $0.8million and $5.1 million, respectively, over the comparable periods of 2005. The increase for the three monthsended September 30, 2006 wasthe result of a gross profit increase of $0.1 million and an SG&A decreaseof $0.7 million. The increase forthe nine months ended September 30, 2006 was the result of a gross profit increase of $4.8 million andan SG&A decrease of $0.3 million.

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

Interest expense, net ofinterest income, for the three and nine months ended September 30, 2006increased to $19.5 million and $57.7 million, respectively, from $18.7 millionand $54.9 million for the comparable periods of 2005. The increases in 2006 aredue to higher variable interest rates on the Senior Secured Credit Facilityterm loans, partially offset by decreased amounts outstanding under the SeniorSecured Credit Facility term loans as a result of a $44.5 million prepaymentmade in March 2006 and increased interest income earned on our cash andcash equivalents due to higher interest rates.

***Other (income) expense, net***

Other income, net was($0.1) million for the three months ended September 30, 2006, compared to($1.3) million for the comparable period of 2005. Other expense, net was $0.3million for the nine months ended September 30, 2006, compared to otherincome, net of ($3.2) million for the comparable period of 2005. Other expense,net for the nine months ended September 30, 2006 includes a net exchangeloss of $0.7 million. Other income, net includes net exchange gains of ($1.3)million and ($2.8) million for the three and nine months ended September 30,2005, respectively.

***Income Taxes***

The effective income taxrate for the three and nine months ended September 30, 2006 was 39.4% and36.9%, respectively, compared to 41.2% and 40.3% for the comparable periods of2005. The 2006 effective tax rates are lower as a result of reduction ofcertain deferred tax liabilities of $1.3 million as a consequence of reducedfuture foreign tax rates in Canada recorded in the second quarter of 2006, whichare partially offset by the unfavorable impact of provision-to-return and otheradjustments of $0.4 million related to final 2005 tax returns. The 2005effective tax rates were adversely impacted by losses and related valuationallowances associated with our operations in France and a valuation allowancefor U.S. foreign tax credits. In 2006, we do not anticipate such significantunfavorable impacts.

**Liquidity andCapital Resources**

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

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Our significant liquidity and capital funding needsare working capital, operating expenses, capital expenditures and amounts dueon our debt obligations. Liquidity and capital resource needs are met throughcash flows from operations and borrowings under the Senior Secured CreditFacility, as required.

Based on current operations and expectations as tofuture growth, we believe that cash generated from operations, together withamounts available under the $150.0 million five year multi-currency revolvingcredit facility, which is a component of the Senior Secured Credit Facility,will be adequate to permit us to meet our debt service obligations, capitalexpenditure program requirements, ongoing operating costs and working capitalneeds, although no assurance can be given in this regard.

Working capital, excluding cash and debt, was $229.7million and $225.4 million at September 30, 2006 and December 31,2005, respectively. Trade receivables, inventories and accounts payable, threeimportant elements of working capital, are discussed below.

***Trade AccountsReceivable.***   Days sales outstanding inaccounts receivable were 51.6**daysand 48.2 days for the quarterly periods ended September 30, 2006 and December 31,2005, respectively. Trade receivables are higher in Europe due to the extendedpayment practices in several of the countries in which we operate. In addition,our trade receivables tend to increase during the summer months in Europe andin the third quarter for our Science Education segment, which has higher netsales in that quarter.

***Inventories.***   Dayssupply of inventory were 37.8**daysand 43.1 days for the quarterly periods ended September 30, 2006 and December 31,2005, respectively. The improvement is due to focused efforts to reduce ourinventories on hand.

***Accounts Payable.***   Dayspayables outstanding were 54.1**daysand 59.1 days for the quarterly periods ended September 30, 2006 and December 31,2005, respectively. Trade accounts payable are primarily with suppliers whoseproducts we distribute. Payment terms are negotiated and in cases whereeconomic early payment discounts are offered, we typically time our payments toearn the discounts. Days payables outstanding are generally higher in Europedue to the extended payment practices in certain countries in which we operate.Depending on the timing of payments and inventory purchases, trade accountspayable can vary each quarter and from year to year.

**Historical CashFlows**

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

| ** **                                            | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                            | ** ** | **September 30,**          | ** ** |
| ** **                                            | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| Cash flow from  operations, excluding working capital |       | $                               | 96.5       |   | $ | 73.7 |   |
| Cash flow from  working capital changes, net          |       | 36.3                            |       | (60.1 | ) |
| Cash flow from  operations                            |       | $                               | 132.8      |   | $ | 13.6 |   |

 

We generated $132.8 million of cash flow fromoperations during the nine months ended September 30, 2006 compared to$13.6 million during the comparable period of 2005. The increase in cash flowfrom operations is primarily the result of increased net income, improvedmanagement of trade accounts receivable and inventories, reduced cash paymentsfor restructuring charges, increased taxes payable due to increased net income,and higher cash flows from certain other working capital changes. Theseincreases are partially offset by decreased cash flows due to lower accountspayable increases in the current period.

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Net cash used in investing activities was $10.7million for the nine months ended September 30, 2006 compared to $57.5million for the comparable period of 2005. This decrease is mainly due to the$44.5 million of investments to acquire businesses in 2005.

Net cash used in financing activities was $145.4million for the nine months ended September 30, 2006 compared to cash usedin financing activities of $11.5 million for the comparable period of 2005.This increase is primarily a result of increased net debt payments of $97.2million, which includes the $44.5 million and $60.0 million principal paymentson the Senior Secured Credit Facility, discussed below, and a larger decreasein bank checks outstanding of $41.6 million due primarily to the timing of vendorpayments.

Under the credit agreement for the Senior SecuredCredit Facility, beginning in 2006, Excess Cash Flow net of any voluntaryprincipal prepayments (as defined in the credit agreement) from the prior yearis required to be used to prepay credit agreement debt. On March 31, 2006,we prepaid $44.5 million on the Senior Secured Credit Facility term loans asrequired by the Excess Cash Flow provisions. In September 2006, a $60.0million voluntary principal prepayment was made on the Senior Secured CreditFacility term loans.

Our future financial and operating performance,ability to service or refinance our debt and ability to comply with covenantsand restrictions contained in our debt agreements will be subject to futureeconomic conditions and to financial, business and other factors, many of whichare beyond our control and will be substantially dependent on the globaleconomy, demand for our products, and our ability to successfully implement ouroverall business and profitability strategies. As of September 30, 2006,we had $104.7 million of cash and cash equivalents on hand.

As of September 30,2006, we had outstanding indebtedness of $969.6 million, which consistsprimarily of $520.0 million aggregate principal amount of notes, a $307.1million U.S. dollar-denominated term loan, and a $136.1 millionEuro-denominated term loan.

**Indebtedness**

***Senior SecuredCredit Facility.***   The Senior Secured CreditFacility consists of (1) a term loan facility providing for a loandenominated in Euros, in an aggregate principal amount outstanding at September 30,2006 of €107.3million (approximately $136.1 million on a U.S. dollar equivalent basis as of September 30,2006), (2) a term loan facility denominated in U.S. dollars in anaggregate principal amount outstanding at September 30, 2006 of $307.1million, 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. As of September 30,2006, there were no outstanding borrowings under the multi-currency revolvingcredit facility. Undrawn amounts under the multi-currency revolving creditfacility are available on a revolving credit basis for general corporatepurposes of the borrower and its subsidiaries. As of September 30, 2006,we had $9.5 million of undrawn letters of credit and our remaining borrowingavailability under the $150.0 million multi-currency revolving credit facilitywas $140.5 million.

***Senior and SeniorSubordinated Notes.******  ***The 67¤8% senior notesand 8% senior subordinated notes mature on April 15, 2012 and April 15,2014, respectively, in aggregate principal amounts of $200.0 million and $320.0million, respectively. The indentures governing the senior notes and the seniorsubordinated notes contain certain covenants that limit the Company’s abilityto incur additional indebtedness, pay cash dividends and make certain otherpayments. The indentures also require the Company to maintain certain financialcovenants, including a specified debt to Consolidated EBITDA leverage ratio anda specified Consolidated EBITDA to interest expense coverage ratio. At September 30,2006, the Company was in compliance with all such covenants.

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

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**Credit AgreementFinancial Covenants; Credit Agreement EBITDA**

Borrowings under the Senior Secured Credit Facilityare a key source of our liquidity. Our ability to borrow under the SeniorSecured Credit Facility is dependent upon, among other things, our compliancewith the financial covenants that limit the Company’s ability to incur additionalindebtedness, pay cash dividends and make certain other payments as set forthin the credit agreement for the Senior Secured Credit Facility. The financialcovenants include a specified debt to Credit Agreement EBITDA leverage ratioand a specified Credit Agreement EBITDA to interest expense coverage ratio forspecified periods. Failure to comply with these financial ratio covenants wouldresult in a default under the credit agreement for the Senior Secured CreditFacility and, absent a waiver or an amendment from our lenders, would permitthe acceleration of all outstanding borrowings under the Senior Secured CreditFacility. We were in compliance with these financial covenants as of September 30,2006.

Credit Agreement EBITDA as presented herein is afinancial performance measure that is used in the credit agreement for theSenior Secured Credit Facility. Credit Agreement EBITDA is not a defined termunder U.S. GAAP and should not be considered as an alternative to operatingincome or net income as a measure of operating results or cash flows as ameasure of liquidity. Credit Agreement EBITDA differs from the term “EBITDA” asit is commonly used. Credit Agreement EBITDA generally is defined asconsolidated income before consolidated net interest expense, consolidatedincome taxes, consolidated depreciation and amortization, other non-cashcharges deducted in determining consolidated net income (loss), non-cashprovisions for reserves for discontinued operations, extraordinary, unusual ornon-recurring items, gain or loss associated with the sale or write down ofassets not in the ordinary course of business and the cumulative effect ofaccounting changes and earnings of, but including cash dividends ordistributions from, non-controlled affiliates. Credit Agreement EBITDA isreduced by the amount of certain permitted dividends to CDRV Holdings, Inc.

Credit Agreement EBITDA is not used in the indenturesfor the senior and senior subordinated notes. The term “Consolidated EBITDA” isused in the indentures as part of the calculation of the term “ConsolidatedCoverage Ratio”, which is used for a number of purposes, including determiningour ability to incur additional indebtedness, and may include certain costsavings or synergies. “Consolidated EBITDA” is not the same as Credit AgreementEBITDA.

Thefollowing table presents a calculation of Credit Agreement EBITDA for thetwelve months ended September 30, 2006 (dollars in millions):

| ** **                                                              | ** ** | **(Unaudited)** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------|------------|
| Income before  cumulative effect of a change in accounting principle(1) |       |            | $          | 65.7 |   |   |
| Income tax  provision(1)                                                |       |            | 42.1       |   |   |
| Interest expense,  net(1)                                               |       |            | 77.1       |   |   |
| Depreciation and  amortization(1)                                       |       |            | 34.2       |   |   |
| Non-cash  charges(2)                                                    |       |            | 11.3       |   |   |
| Other  extraordinary, unusual or non-recurring items(3)                 |       |            | 10.3       |   |   |
| Credit Agreement EBITDA                                                 |       |            | $          | 240.7 |   |   |

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(1)          These amounts includethe four quarters during the twelve months ended September 30, 2006 asreported in the respective Form 10-Q or Form 10-K.

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

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(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.

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

| ** **                                       | ** ** | **Debt to Credit Agreement** | ** ** | **Credit Agreement EBITDA**  | ** ** |
|--------------------------------------------------|------------|---------------------------------------------|------------|----------------------------------------|------------|
| ** **                                       | ** ** | **EBITDA Leverage**                    | ** ** | **to Interest Expense**      | ** ** |
| **Test Period**                             | ** ** | ** **                                  | ** ** | **Ratio Not More Than** | ** ** | **Ratio Not Less Than** | ** ** |
| December 31,  2005 - December 30, 2006 |       |                                        | 7.0 to 1.0 |                                   |       |   | 1.9 to 1.0 |   |   |
| December 31,  2006 - December 30, 2007 |       |                                        | 6.5 to 1.0 |                                   |       |   | 2.0 to 1.0 |   |   |
| December 31,  2007 - December 30, 2008 |       |                                        | 6.0 to 1.0 |                                   |       |   | 2.1 to 1.0 |   |   |
| December 31,  2008 - December 30, 2009 |       |                                        | 5.5 to 1.0 |                                   |       |   | 2.2 to 1.0 |   |   |
| December 31,  2009 - December 30, 2010 |       |                                        | 5.0 to 1.0 |                                   |       |   | 2.3 to 1.0 |   |   |
| December 31, 2010  and thereafter           |       |                                        | 5.0 to 1.0 |                                   |       |   | 2.4 to 1.0 |   |   |
|                                                  |            |                                             |            |                                        |            |  |  |  |  |  |  |

 

Thetable below sets forth the specified debt to Credit Agreement EBITDA leverageratio and Credit Agreement EBITDA to interest expense ratio for the twelvemonths ended September 30, 2006:

| ** **                                                             | ** ** | **(Unaudited)** | ** ** |
|------------------------------------------------------------------------|------------|-----------------|------------|
| Consolidated Debt  to Credit Agreement EBITDA Leverage Ratio           |       |            | 4.0 to 1.0 |   |   |
| Credit Agreement  EBITDA to Credit Agreement Interest Expense Ratio(1) |       |            | 3.4 to 1.0 |   |   |

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

**Debt of CDRVInvestors, Inc.**

CDRV Investors, Inc., our indirect parent, issued$481.0 million aggregate principal amount at maturity ($297.9 million in netproceeds) of 95¤8%senior discount notes due 2015 (“CDRV Senior Discount Notes”) on December 16,2004. The net proceeds of the issuance were used to pay a dividend to theholders of the common stock of CDRV Investors, Inc. The CDRV SeniorDiscount Notes are senior unsecured obligations of CDRV Investors, Inc.and are structurally subordinated to all obligations and other liabilities ofCDRV Investors, Inc.’s existing and future subsidiaries, including us. Nocash interest will accrue on the CDRV Senior Discount Notes prior to January 1,2010. Thereafter, cash interest will accrue and be payable semiannually, onlyto the extent funds are available for distribution to CDRV Investors, Inc.under specified provisions of the indentures governing our senior notes andsenior subordinated notes and applicable law. As of September 30, 2006,the accreted value of the CDRV Senior Discount Notes was $354.4 million.

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 AccountingPolicies**

The discussion andanalysis of our financial condition and results of operations are based on ourfinancial statements, which have been prepared in accordance with accountingprinciples generally accepted in the United States of America. The preparationof these financial statements requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and the 

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disclosureof contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period. Onan ongoing basis, management evaluates its estimates and judgments, including,among others, those related to environmental liabilities, reserves for accountsreceivable and inventories, impairment of goodwill and intangible assets,pension plans, rebates from suppliers, agreements with customers, and product liability.Those estimates and assumptions are based on our historical experience, ourobservance of trends in the industry, and various other factors that arebelieved to be reasonable under the circumstances and form the basis for makingjudgments about the carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions. Refer to “Item 7—Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inour annual report on Form 10-K for the year ended December 31,2005 for the Company’s critical accounting policies.

**Forward-LookingStatements**

This Form 10-Q contains forward-lookingstatements within the meaning of Section 27A of the Securities Act of1933, as amended, (the “Securities Act”) and Section 21E of the SecuritiesExchange Act of 1934, as amended, (the “Exchange Act”). All statements otherthan statements of historical fact included in this Form 10-Q mayconstitute forward-looking statements. We have based these forward-lookingstatements on our current expectations and projections about future events. Althoughwe believe that our assumptions made in connection with the forward-lookingstatements are reasonable, there can be no assurances that the assumptions andexpectations will prove to be correct.

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

·       actions by manufacturers,customers, carriers and other third parties;

·       our ability to maintain ourrelationships with manufacturers;

·       loss of our key executiveofficers;

·       our ability to consummateand integrate potential acquisitions;

·       the effect of political andeconomic conditions, inflation and interest rates worldwide;

·       the effect of changes inlaws and regulations, including changes in accounting standards, trade, tax,price controls and other regulatory matters;

·       increased competition fromother companies in our industry and our ability to retain or increase ourmarket shares in the principal geographical areas in which we operate; and

·       our ability to generatesufficient funds to meet our debt service obligations, capital expenditureprogram requirements, ongoing operating costs and working capital needs.

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

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

Refer to “Item 7A—Quantitativeand Qualitative Disclosures about Market Risk” included in our annual report onForm 10-K for the year ended December 31, 2005, for the Company’squantitative and qualitative disclosure about market risk. There was nomaterial change in such information as of September 30, 2006.

**Item 4—*Controls and Procedures***

In connection with the preparation of this QuarterlyReport on Form 10-Q, management carried out an evaluation, with theparticipation of the Chief Executive Officer and the Chief Financial Officer,of the effectiveness of the disclosure controls and procedures pursuant to Rule 13a-15of the Exchange Act. Based on that evaluation, the Chief Executive Officer andthe Chief Financial Officer concluded that our disclosure controls andprocedures were effective at a reasonable assurance level as of September 30,2006.

There were no changes inour internal control over financial reporting that occurred during the quarterended September 30, 2006 that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

**Part II—OTHERINFORMATION**

**Item 1—*Legal Proceedings***

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

**Item 1A—*Risk Factors***

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

**Item6—*Exhibits***

| Exhibit  Number | ** ** | **Description of Documents**                                                                                                    | ** ** | **Method of Filing** |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|
| 10.1            |       | CDRV  Investors, Inc. Stock Incentive Plan, Amended and Restated as of  September 20, 2006.                           |       | Filed herewith.      |
| 31.1            |       | Certification of  Principal Executive Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                  |       | Filed herewith.      |
| 31.2            |       | Certification of  Principal Financial Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                  |       | Filed herewith.      |
| 32.1            |       | Certification of  Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of  the Sarbanes-Oxley Act of 2002). |       | Furnished herewith.  |
| 32.2            |       | Certification of  Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of  the Sarbanes-Oxley Act of 2002). |       | Furnished herewith.  |

 

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**SIGNATURE**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

|   | VWR INTERNATIONAL, INC. |
|--------|-------------------------|
|   | By:                     | /s/ GREGORY L. COWAN |
|   | Name:                   | Gregory L. Cowan |
|   | Title:                  | *Vice  President and Corporate Controller (Chief Accounting Officer and Duly  Authorized Officer)* |

 

November 14, 2006

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