**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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FORM 10-Q

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(Mark One)

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

**Forthe quarterly period ended June 30, 2005**

**or**

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

**For the transition period from               to               **

**Commissionfile number:  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  Identification No.) |
| incorporation or  organization)           |       |                                  |
| **1310 Goshen Parkway**                   | ** ** | ** **                            |
| **P.O. Box  2656**                   | ** ** | ** **                            |
| **West  Chester, PA**                     | ** ** | **19380**                             |
| (Address of  principal executive offices) |       | (Zip code)                            |

 

**(610)431-1700**(Registrant’s telephonenumber, including area code)

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

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

Asof June 30, 2005, there was no established public market for theregistrant’s common stock, par value $0.01 per share. As of August 12,2005, 100 shares of the registrant’s common stock were outstanding.

 

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**VWR INTERNATIONAL,INC.FORM 10-QFOR THE QUARTER ENDED JUNE 30, 2005**

**INDEX**

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

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

Theterm “Successor” refers to VWR International, Inc. following the Acquisition(as defined in Note 1(a)). The term “Predecessor” refers to VWRInternational Corporation prior to the Acquisition. See also “Background andBasis of Presentation” in Note 1 to the financial statements.
|                                                   | ** ** | ** **                                                                                                                                                                   | ** ** | **Page No.** |
|---------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
| Item 1.                                           |       | Financial Statements:                                                                                                                                                        |       |              |
|                                              |       | Consolidated  Balance Sheets—June 30, 2005 (Unaudited) and December 31, 2004                                                                                  |       | 3                 |
|                                              |       | Consolidated Statements of Operations (Unaudited)—for  the three months ended June 30, 2005 and the periods included in the  three months ended June 30, 2004 |       | 4                 |
|                                              |       | Consolidated Statements of Operations (Unaudited)—for  the six months ended June 30, 2005 and the periods included in the six  months ended June 30, 2004     |       | 5                 |
|                                              |       | Consolidated Statement of Stockholders’ Equity and  Other Comprehensive Income (Unaudited)—for the six months ended June 30,  2005                            |       | 6                 |
|                                              |       | Consolidated Statements of Cash Flows (Unaudited)—for the  six months ended June 30, 2005 and the periods included in the six  months ended June 30, 2004     |       | 7                 |
|                                              |       | Notes to Consolidated Financial Statements (Unaudited)                                                                                                                       |       | 8                 |
| Item 2.                                           |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                                             |       | 19                |
| Item 3.                                      |       | Quantitative and Qualitative Disclosures About Market  Risk                                                                                                                  |       | 30                |
| Item 4.                                           |       | Controls  and Procedures                                                                                                                                                     |       | 30                |
| **PART II.   OTHER  INFORMATION:** |       |                                                                                                                                                                         |
| Item 6.                                           |       | Exhibits                                                                                                                                                                     |       | 31                |
| Signature                                         |       | 32                                                                                                                                                                           |

 

2

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**PART I—FINANCIAL INFORMATION**

**Item 1—*Financial Statements***

**VWR INTERNATIONAL, INC.Consolidated Balance Sheets(Dollars in millions, except share data)**
| ** **                                                                    | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                    | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| **Assets**                                                                    |       |                    |       |                        |       |   |   |   |   |
| Current Assets:                                                               |       |                    |       |                        |       |   |   |   |   |
| Cash and cash equivalents                                                     |       |                    | $          | 73.3                        |       |   |   | $ | 116.1 |   |   |
| Trade accounts receivable, less reserves of $6.8 and  $6.0, respectively      |       |                    | 421.7      |                        |       |   | 413.4 |   |   |
| Other receivables                                                             |       |                    | 24.3       |                        |       |   | 19.7 |   |   |
| Inventories                                                                   |       |                    | 251.8      |                        |       |   | 248.9 |   |   |
| Other current assets                                                          |       |                    | 25.6       |                        |       |   | 28.9 |   |   |
| Total current assets                                                          |       |                    | 796.7      |                        |       |   | 827.0 |   |   |
| Property and  equipment, net                                                  |       |                    | 156.3      |                        |       |   | 154.4 |   |   |
| Investments                                                                   |       |                    | 8.0        |                        |       |   | 8.7 |   |   |
| Goodwill                                                                      |       |                    | 917.2      |                        |       |   | 907.0 |   |   |
| Other intangible  assets, net                                                 |       |                    | 553.3      |                        |       |   | 570.8 |   |   |
| Deferred income  taxes                                                        |       |                    | 32.2       |                        |       |   | 34.4 |   |   |
| Other assets                                                                  |       |                    | 46.1       |                        |       |   | 43.7 |   |   |
| Total assets                                                                  |       |                    | $          | 2,509.8                     |       |   |   | $ | 2,546.0 |   |   |
| **Liabilities  and Stockholders’ Equity**                                |       |                    |       |                        |       |   |   |   |   |
| Current Liabilities:                                                          |       |                    |       |                        |       |   |   |   |   |
| Short-term bank debt and current portion of capital  lease obligations        |       |                    | $          | 11.8                        |       |   |   | $ | 12.9 |   |   |
| Accounts payable                                                              |       |                    | 359.2      |                        |       |   | 333.8 |   |   |
| Accrued expenses                                                              |       |                    | 140.8      |                        |       |   | 150.4 |   |   |
| Total current liabilities                                                     |       |                    | 511.8      |                        |       |   | 497.1 |   |   |
| Long-term debt                                                                |       |                    | 1,055.6    |                        |       |   | 1,080.2 |   |   |
| Capital lease  obligations                                                    |       |                    | 5.3        |                        |       |   | 6.1 |   |   |
| Other long-term  liabilities                                                  |       |                    | 69.5       |                        |       |   | 81.3 |   |   |
| Deferred income  taxes                                                        |       |                    | 244.0      |                        |       |   | 241.1 |   |   |
| Total liabilities                                                             |       |                    | 1,886.2    |                        |       |   | 1,905.8 |   |   |
| Parent Company  common stock purchase subject to guarantee agreement          |       |                    | 2.9        |                        |       |   | 2.9 |   |   |
| Commitments and  contingences                                                 |       |                    |       |                        |       |   |   |   |   |
| Stockholders’ equity:                                                    |       |                    |       |                        |       |   |   |   |   |
| Common stock, $0.01 par value; 100 shares  authorized, issued and outstanding |       |                    | —     |                        |       |   | — |   |   |
| Additional paid-in capital                                                    |       |                    | 554.1      |                        |       |   | 552.3 |   |   |
| Retained earnings                                                             |       |                    | 46.2       |                        |       |   | 31.9 |   |   |
| Unamortized value of restricted stock issued                                  |       |                    | (0.3       | )                           |       |   | (0.3 | ) |   |
| Accumulated other comprehensive income                                        |       |                    | 20.7       |                        |       |   | 53.4 |   |   |
| Total stockholders’ equity                                               |       |                    | 620.7      |                        |       |   | 637.3 |   |   |
| Total liabilities and  stockholders’ equity                              |       |                    | $          | 2,509.8                     |       |   |   | $ | 2,546.0 |   |   |

 

See accompanying notes to consolidated financial statements.

3

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**VWR INTERNATIONAL, INC.Consolidated Statementsof Operations(Dollars in millions)(Unaudited)**
| ** **                                    | ** ** | ** **                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------|------------|-----------------------------|------------|----------------------------------|------------|
| ** **                                    | ** ** | **Successor**               | ** ** | **June 30, 2004**      | ** ** |
| ** **                                    | ** ** | **Three Months**       | ** ** | **Successor**                    | ** ** | ** ** | ** ** | **Predecessor** | ** ** |
| ** **                                    | ** ** | **Ended**                   | ** ** | **April 7 -**          | ** ** | ** ** | ** ** | **April 1 -** | ** ** |
| ** **                                    | ** ** | **June 30, 2005** | ** ** | **June 30, 2004**      | ** ** | ** ** | ** ** | **April 6, 2004** | ** ** |
| Net sales                                     |       |                        | $          | 794.8                            |       |   |   | $ | 676.0 |   |   |   |   |   | $ | 59.4 |   |   |
| Cost of goods  sold                           |       |                        | 594.0      |                             |       |   | 504.9 |   |   |   |   |   | 44.3 |   |   |
| Gross profit                                  |       |                        | 200.8      |                             |       |   | 171.1 |   |   |   |   |   | 15.1 |   |   |
| Selling, general  and administrative expenses |       |                        | 168.1      |                             |       |   | 139.4 |   |   |   |   |   | 11.7 |   |   |
| Operating income                              |       |                        | 32.7       |                             |       |   | 31.7 |   |   |   |   |   | 3.4 |   |   |
| Interest income                               |       |                        | (0.4       | )                                |       |   | (0.1 | ) |   |   |   |   | — |   |   |
| Interest expense:                             |       |                        |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Interest on third party debt                  |       |                        | 18.8       |                             |       |   | 16.0 |   |   |   |   |   | — |   |   |
| Interest on push down debt                    |       |                        | —     |                             |       |   | — |   |   |   |   |   | 0.3 |   |   |
| Other (income)  expense, net                  |       |                        | (0.9       | )                                |       |   | 0.5 |   |   |   |   |   | 0.4 |   |   |
| Income before income taxes                    |       |                        | 15.2       |                             |       |   | 15.3 |   |   |   |   |   | 2.7 |   |   |
| Income tax  provision                         |       |                        | 6.0        |                             |       |   | 6.8 |   |   |   |   |   | 1.1 |   |   |
| Net income                                    |       |                        | $          | 9.2                              |       |   |   | $ | 8.5 |   |   |   |   |   | $ | 1.6 |   |   |

 

See accompanying notes to consolidated financial statements.

4

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**VWR INTERNATIONAL, INC.Consolidated Statementsof Operations(Dollars in millions)(Unaudited)**
| ** **                                    | ** ** | ** **                  | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | **Successor**               | ** ** | **June 30, 2004**    | ** ** |
| ** **                                    | ** ** | **Six Months**         | ** ** | **Successor**                  | ** ** | ** ** | ** ** | **Predecessor** | ** ** |
| ** **                                    | ** ** | **Ended**                   | ** ** | **April 7 -**        | ** ** | ** ** | ** ** | **January 1 -** | ** ** |
| ** **                                    | ** ** | **June 30, 2005** | ** ** | **June 30, 2004**    | ** ** | ** ** | ** ** | **April 6, 2004** | ** ** |
| Net sales                                     |       |                        | $          | 1,548.9                        |       |   |   | $ | 676.0 |   |   |   |   |   | $ | 793.2 |   |   |
| Cost of goods  sold                           |       |                        | 1,155.4    |                           |       |   | 504.9 |   |   |   |   |   | 588.0 |   |   |
| Gross profit                                  |       |                        | 393.5      |                           |       |   | 171.1 |   |   |   |   |   | 205.2 |   |   |
| Selling, general  and administrative expenses |       |                        | 335.7      |                           |       |   | 139.4 |   |   |   |   |   | 163.7 |   |   |
| Operating income                              |       |                        | 57.8       |                           |       |   | 31.7 |   |   |   |   |   | 41.5 |   |   |
| Interest income                               |       |                        | (1.0       | )                              |       |   | (0.1 | ) |   |   |   |   | (0.2 | ) |   |
| Interest expense:                             |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Interest on third party debt                  |       |                        | 37.2       |                           |       |   | 16.0 |   |   |   |   |   | 1.7 |   |   |
| Interest on push down debt                    |       |                        | —     |                           |       |   | — |   |   |   |   |   | 4.1 |   |   |
| Other (income)  expense, net                  |       |                        | (1.9       | )                              |       |   | 0.5 |   |   |   |   |   | 0.1 |   |   |
| Income before income taxes                    |       |                        | 23.5       |                           |       |   | 15.3 |   |   |   |   |   | 35.8 |   |   |
| Income tax  provision                         |       |                        | 9.2        |                           |       |   | 6.8 |   |   |   |   |   | 15.1 |   |   |
| Net income                                    |       |                        | $          | 14.3                           |       |   |   | $ | 8.5 |   |   |   |   |   | $ | 20.7 |   |   |

 

See accompanying notes to consolidated financial statements.

5

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**VWR INTERNATIONAL, INC.Consolidated Statementof Stockholders’ Equity and Other Comprehensive IncomeSix Months Ended June 30, 2005(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, 2005                       |       |       | $          | —         |       |         |       | $                     | 552.3      |              |       |       | $          | 31.9 |   |   |   | $ | (0.3 | ) |   |   | $ | 53.4 |   |   | $ | 637.3 |   |
| Capital contribution                             |       |       | —     |           |       |         | 1.8        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 1.8 |   |
| Comprehensive  income (loss) (Note 9):           |       |       |       |           |       |         |       |                  |       |              |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                       |       |       | —     |           |       |         | —     |                  |       |              | 14.3       |       |       |   | — |   |   |   | — |   |   | 14.3 |   |
| Foreign currency translation adjustment          |       |       | —     |           |       |         | —     |                  |       |              | —     |       |       |   | — |   |   |   | (33.4 | ) |   | (33.4 | ) |
| Unrealized gain on derivatives, net of tax  |       |       | —     |           |       |         | —     |                  |       |              | —     |       |       |   | — |   |   |   | 0.7 |   |   | 0.7 |   |
| Total comprehensive (loss)                       |       |       |       |           |       |         |       |                  |       |              |       |       |       |   |   |   |   |   |   |   |   | (18.4 | ) |
| Balance at June  30, 2005                        |       |       | $          | —         |       |         |       | $                     | 554.1      |              |       |       | $          | 46.2 |   |   |   | $ | (0.3 | ) |   |   | $ | 20.7 |   |   | $ | 620.7 |   |

 

See accompanying notes to consolidated financial statements.

6

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**VWR INTERNATIONAL, INC.Consolidated Statementsof Cash Flows(Dollars in millions)(Unaudited)**
| ** **                                                                                | ** ** | ** **                  | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                                                                                | ** ** | **Successor**               | ** ** | **June 30, 2004**    | ** ** |
| ** **                                                                                | ** ** | **Six Months**         | ** ** | **Successor**                  | ** ** | ** ** | ** ** | **Predecessor** | ** ** |
| ** **                                                                                | ** ** | **Ended**                   | ** ** | **April 7 -**        | ** ** | ** ** | ** ** | **January 1 -** | ** ** |
| ** **                                                                                | ** ** | **June 30, 2005** | ** ** | **June 30, 2004**    | ** ** | ** ** | ** ** | **April 6, 2004** | ** ** |
| Cash flows from operating  activities:                                                    |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                |       |                        | $          | 14.3                           |       |   |   | $ | 8.5 |   |   |   |   |   | $ | 20.7 |   |   |
| Adjustments  to reconcile net income to net cash provided by operating activities:        |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                             |       |                        | 16.9       |                           |       |   | 8.1 |   |   |   |   |   | 8.9 |   |   |
| Gain on sale of assets                                                                    |       |                        | (0.1       | )                              |       |   | — |   |   |   |   |   | — |   |   |
| Interest on push down debt, net of tax                                                    |       |                        | —     |                           |       |   | — |   |   |   |   |   | 2.5 |   |   |
| Amortization of debt issuance costs                                                       |       |                        | 2.7        |                           |       |   | 0.9 |   |   |   |   |   | — |   |   |
| Deferred income tax expense                                                               |       |                        | 4.9        |                           |       |   | 0.9 |   |   |   |   |   | 0.9 |   |   |
| Provision for doubtful accounts                                                           |       |                        | 1.7        |                           |       |   | 1.2 |   |   |   |   |   | 0.6 |   |   |
| Changes  in working capital, net of effect of business acquisitions:                      |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Trade accounts receivable                                                                 |       |                        | (24.0      | )                              |       |   | 2.6 |   |   |   |   |   | (26.8 | ) |   |
| Other receivables                                                                         |       |                        | (2.2       | )                              |       |   | 0.3 |   |   |   |   |   | 8.7 |   |   |
| Inventories                                                                               |       |                        | (9.0       | )                              |       |   | (0.6 | ) |   |   |   |   | 17.5 |   |   |
| Other assets                                                                              |       |                        | (5.1       | )                              |       |   | (11.1 | ) |   |   |   |   | 1.9 |   |   |
| Accounts payable                                                                          |       |                        | 59.1       |                           |       |   | 21.9 |   |   |   |   |   | 61.7 |   |   |
| Other liabilities                                                                         |       |                        | (17.4      | )                              |       |   | 14.1 |   |   |   |   |   | 0.9 |   |   |
| Net cash provided by operating activities                                                 |       |                        | 41.8       |                           |       |   | 46.8 |   |   |   |   |   | 97.5 |   |   |
| Cash flows from investing  activities:                                                    |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Payment to Merck KGaA and affiliates to acquire business,  net of cash acquired of $130.8 |       |                        | —     |                           |       |   | (1,538.3 | ) |   |   |   |   | — |   |   |
| Transaction costs                                                                         |       |                        | (1.0       | )                              |       |   | (18.8 | ) |   |   |   |   | — |   |   |
| Acquisitions of businesses                                                                |       |                        | (41.4      | )                              |       |   | (2.7 | ) |   |   |   |   | — |   |   |
| Capital expenditures                                                                      |       |                        | (8.5       | )                              |       |   | (3.0 | ) |   |   |   |   | (3.3 | ) |   |
| Proceeds from sale of property and equipment                                              |       |                        | 0.3        |                           |       |   | — |   |   |   |   |   | 0.4 |   |   |
| Net cash used in investing activities                                                     |       |                        | (50.6      | )                              |       |   | (1,562.8 | ) |   |   |   |   | (2.9 | ) |   |
| Cash flows from financing  activities:                                                    |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Proceeds from debt                                                                        |       |                        | 2.4        |                           |       |   | 1,149.2 |   |   |   |   |   | 13.3 |   |   |
| Repayment of debt                                                                         |       |                        | (7.8       | )                              |       |   | (39.8 | ) |   |   |   |   | (6.8 | ) |   |
| Decrease in notes receivable from Merck KGaA and  affiliates                              |       |                        | —     |                           |       |   | — |   |   |   |   |   | 4.1 |   |   |
| Net change in bank checks outstanding                                                     |       |                        | (24.9      | )                              |       |   | 1.4 |   |   |   |   |   | (2.1 | ) |   |
| Issuance of 100 shares of common stock, net of  expenses                                  |       |                        | —     |                           |       |   | 530.5 |   |   |   |   |   | — |   |   |
| Cash paid for debt issuance costs                                                         |       |                        | —     |                           |       |   | (36.5 | ) |   |   |   |   | — |   |   |
| Net cash (used in) provided by financing activities                                       |       |                        | (30.3      | )                              |       |   | 1,604.8 |   |   |   |   |   | 8.5 |   |   |
| Effect of exchange rate changes on cash                                                   |       |                        | (3.7       | )                              |       |   | (0.1 | ) |   |   |   |   | (0.6 | ) |   |
| Net (decrease) increase in cash and cash equivalents                                      |       |                        | (42.8      | )                              |       |   | 88.7 |   |   |   |   |   | 102.5 |   |   |
| Cash and cash equivalents beginning of period                                             |       |                        | 116.1      |                           |       |   | — |   |   |   |   |   | 28.3 |   |   |
| Cash and cash equivalents end of period                                                   |       |                        | $          | 73.3                           |       |   |   | $ | 88.7 |   |   |   |   |   | $ | 130.8 |   |   |
| Supplemental  disclosures of cash flow information:                                       |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Cash  paid during the period for:                                                         |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                  |       |                        | $          | 33.9                           |       |   |   | $ | 3.9 |   |   |   |   |   | $ | 1.3 |   |   |
| Income taxes paid,  net                                                                   |       |                        | $          | 9.0                            |       |   |   | $ | 17.6 |   |   |   |   |   | $ | 4.2 |   |   |

 

See accompanying notes to consolidated financial statements.

7

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

**(1)   Backgroundand Basis of Presentation**

***(a)***   Background

VWR International, Inc. and its predecessor, VWRInternational Corporation, (“VWR”, the “Company”, “we” or “our”), distributescientific supplies, chemicals, and equipment, primarily in North America andEurope. Prior to April 7, 2004, Merck KGaA was VWR’s ultimate parentcompany. On April 7, 2004, Merck KGaA sold all of the outstanding sharesof capital stock of VWR International Corporation to CDRV AcquisitionCorporation (“CDRVA”), a wholly-owned subsidiary of CDRV Holdings, Inc., awholly-owned subsidiary of CDRV Investors, Inc. (“CDRV”), for a purchaseprice of approximately $1,683.4, consisting of approximately $1,669.1 in cashand approximately $14.3 of assumed debt (the “Acquisition”). In addition,direct acquisition costs of approximately $77.5 were incurred. CDRVA financedthe Acquisition through a $549.2 equity investment, approximately $1,110.5 invarious debt instruments, acquired cash of $70.1 and accrued expenses of $16.8.

In connection with the Acquisition, CDRVA issued$200.0 of 67¤8%unsecured senior notes due 2012 and $320.0 of 8% unsecured senior subordinatednotes due 2014 and obtained financing under a new senior secured credit facility (the “SeniorSecured Credit Facility”). Following the completion of the Acquisition, therewere a series of internal reorganizations, pursuant to which, among otherthings, (i) VWR International Corporation merged with and into VWRInternational, Inc., with VWR International, Inc. surviving, and (ii) thereafter,CDRVA merged with and into VWR International, Inc., with VWR International, Inc.surviving and assuming the obligations of CDRVA.

The term “successor” refers to VWR International, Inc.following the Acquisition. The term “predecessor” refers to VWR InternationalCorporation prior to the change in control on April 7, 2004. CDRVA had nooperations prior to the Acquisition.

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

The financial statements,for all periods presented prior to the Acquisition, reflect the push down ofthe purchase price previously paid by Merck KGaA for VWR to the VWR financialstatements that resulted in the recognition of push down debt due to Merck KGaAor a contribution to stockholders’ equity for cash consideration. Interestexpense was recorded on this push down debt based upon Merck KGaA’sintercompany interest rates, which are not necessarily indicative of rates VWRwould have obtained if it were not an ultimate subsidiary of Merck KGaA.Interest expense, including tax effects on push down debt, has been included inthe statements of operations, and presented as a non-cash item in theaccompanying statements of cash flows.

***(b)***   Basis ofPresentation

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 

8

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

and Exchange Commission (“SEC”).Certain information and footnote disclosures normally included in financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America, have been condensed or omitted pursuant tosuch rules and regulations. The December 31, 2004 balance sheet isthe balance sheet included in the audited financial statements as shown in theCompany’s 2004 Annual Report on Form 10-K for the year ended December 31,2004. The Company believes that the disclosures included herein are adequate tomake the 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 31,2004.

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

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

**(2)**   New AccountingStandards

During December 2004, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”)No. 123 Revised, *Share-Based Payment*.This Statement requires companies to recognize in the income statement, thegrant value of stock options and other forms of equity-based compensationissued to employees. The provisions of this Statement become effective at thebeginning of 2006. During August 2004, CDRV, our ultimate parent,introduced a share-based compensation arrangement as a component of itscompensation plans for our employees. Management is in the process ofevaluating but has not reached a conclusion on the impact this Statement willhave on the Company’s results of operations.

In March 2005, theFASB issued Interpretation No. 47, *AnInterpretation of FASB No. 143*. SFAS No. 143, *Accounting for Assets Retirement Obligations*(“SFAS No. 143”), addresses financial accounting and reporting forobligations associated with the retirement of tangible long-lived assets andthe associated asset retirement costs. SFAS No. 143 requires recognitionof a liability at fair value and an increase to the carrying value of therelated asset for any retirement obligation. This amount would then beamortized over the life of the asset. The liability would be adjusted at theend of each period to reflect the passage of time and changes in the estimatedfuture cash flows. This Interpretation addresses the legal obligation to retirean asset when the timing and (or) method of settlement are conditional on afuture event that may or may not be within the control of the Company. ThisInterpretation is effective December 31, 2005. We have not yet determinedwhether the adoption of this Interpretation will have a material impact on ourfinancial condition or results of operations.

9

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

**(3)**   Stock-BasedCompensation

TheCompany measures compensation expense for the stock-based employee compensationplan using the intrinsic value method of Accounting Principals Board Opinion No. 25,*Accounting for Stock Issued to Employees*.The Company has adopted the disclosure-only provisions of SFAS No. 148, *Accounting for Stock-Based Compensation—Transitionand Disclosure, an amendment of FASB Statement No. 123* (“SFAS No. 148”).Therefore, the Company has not recognized compensation expense for the CDRVoptions granted because such options had an exercise price equal to their fairmarket value on the date of grant. Had compensation expense for the CDRV stockoptions granted been determined based on the fair value at the grant date forawards under the plan, consistent with the methodology prescribed under SFAS No. 148,the Company’s net income would have approximated the pro-forma amounts indicatedbelow:
| ** **                                                                                                     | ** ** | **Three Months** | ** ** | **Six Months** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|---------------------|------------|
| ** **                                                                                                     | ** ** | **Ended**             | ** ** | **Ended**           | ** ** |
| ** **                                                                                                     | ** ** | **June 30,**     | ** ** | **June 30,**   | ** ** |
| ** **                                                                                                     | ** ** | **2005**              | ** ** | **2005**            | ** ** |
| Net income as  reported                                                                                        |       |                  | $          | 9.2                 |       |   |   | $ | 14.3 |   |   |
| Deduct:  stock-based compensation expense determined using fair value based method for  all awards, net of tax |       |                  | (0.3       | )                   |       |   | (0.6 | ) |   |
| Pro-forma net income                                                                                           |       |                  | $          | 8.9                 |       |   |   | $ | 13.7 |   |   |

 

Thefair value of the Company’s stock options was estimated using the Black-Scholesoption-pricing model with the following weighted average assumptions:
| Risk free  interest rate  |   | 3.67    | %      |
|---------------------------|--------|---------|--------|
| Expected life of  options |   | 4 years |   |
| Volatility                |   | 20      | %      |
| Expected dividend yield   |   | 0.0     | %      |

 

**(4)**   Restructuring

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

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

During the first half of 2005, we implemented variousrestructuring plans that were formulated in 2004 and were in the planning andevaluation stages. Accordingly, we recorded additional restructuring accrualsof approximately $24.1 in the first quarter of 2005 and approximately $0.4 inthe second quarter of 2005, which have been recorded as adjustments toacquisition costs (increases to goodwill) pursuant to the provisions ofEmerging Issues Task Force Issue No. 95-3, *Recognition of Liabilities in Connection with aPurchase Business Combination*(“EITF 95-3”). These chargesprimarily reflect severance and other exit 

10

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

costs including estimatesfor environmental remediation associated with cessation of manufacturingoperations at a plant in France and severance costs associated with theconsolidation of certain sales and marketing personnel in our German and UKoperations.

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

Thefollowing table sets forth the activity associated with the Company’sliabilities for restructuring as a result of the Acquisition during the six months ended June 30, 2005.
| ** **                          | ** ** | **Balance as of** | ** ** | **Accruals**        | ** ** | **Cash**      | ** ** | ** **      | ** ** | **Balance as of** | ** ** |
|-------------------------------------|------------|-----------------------------|------------|---------------------|------------|---------------|------------|-----------------|------------|-----------------------------|------------|
| ** **                          | ** ** | **January 1,**         | ** ** | **Charged to** | ** ** | **Payments/** | ** ** | **Translation** | ** ** | **June 30,**           | ** ** |
| ** **                          | ** ** | **2005**                    | ** ** | **Goodwill**        | ** ** | **Other**     | ** ** | **Adjustments** | ** ** | **2005**                    | ** ** |
| Severance and  termination benefits |       |                        | $          | 21.0                |       |          |       | $               | 13.4       |                        |       |   | $ | (17.7 | ) |   |   | $ | (2.9 | ) |   |   | $ | 13.8 |   |   |
| Facilities  related                 |       |                        | 0.5        |                |       |          | 10.9       |            |       |                        | (0.7       | ) |   |   | (0.8 | ) |   |   | 9.9 |   |   |
| Other                               |       |                        | 0.3        |                |       |          | 0.2        |            |       |                        | (0.1       | ) |   |   | —   |   |   |   | 0.4 |   |   |
| Totals                              |       |                        | $          | 21.8                |       |          |       | $               | 24.5       |                        |       |   | $ | (18.5 | ) |   |   | $ | (3.7 | ) |   |   | $ | 24.1 |   |   |

 

***(b)***   Other restructuringactivities

In addition, we initiated cost reduction programs inresponse to relatively static market conditions and implemented reductions inforce and other cost containment measures during the first and second quartersof 2005. In connection with these actions, we recorded accruals in the sixmonth period ended June 30, 2005 related to severance and other coststotaling approximately $7.2 ($2.1 and $5.1 for the three months ended March 31,and June 30, 2005, respectively), which are included in selling, generaland administrative expenses in the accompanying statements of operations.

The following table sets forth the activity associatedwith the Company’s liabilities for these cost reduction programs during the six months ended June 30, 2005.
| ** **                          | ** ** | **Balance as of** | ** ** | **Accruals**        | ** ** | **Cash**      | ** ** | ** **      | ** ** | **Balance as of** | ** ** |
|-------------------------------------|------------|-----------------------------|------------|---------------------|------------|---------------|------------|-----------------|------------|-----------------------------|------------|
| ** **                          | ** ** | **January 1,**         | ** ** | **Charged to** | ** ** | **Payments/** | ** ** | **Translation** | ** ** | **June 30,**           | ** ** |
| ** **                          | ** ** | **2005**                    | ** ** | **Earnings**        | ** ** | **Other**     | ** ** | **Adjustments** | ** ** | **2005**                    | ** ** |
| Severance and  termination benefits |       |                        | $          | —              |       |          |       | $               | 5.7        |                        |       |   | $ | (2.1 | ) |   |   | $ | — |   |   |   | $ | 3.6 |   |   |
| Facilities  related                 |       |                        | —     |                |       |          | 1.5        |            |       |                        | —     |   |   |   | — |   |   |   | 1.5 |   |   |
| Totals                              |       |                        | $          | —              |       |          |       | $               | 7.2        |                        |       |   | $ | (2.1 | ) |   |   | $ | — |   |   |   | $ | 5.1 |   |   |

 

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

***(a)***   Acquisition of VWRInternational Corporation by CDRV

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

11

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

Thefollowing unaudited pro-forma financial information presents a summary ofconsolidated results of operations of the Company for the six months ended June 30,2004 as if the Acquisition had occurred as of January 1, 2004.
| Net sales                   |   | $    | 1,469.2 |   |
|-----------------------------|--------|------|---------|--------|
| Income before  income taxes |   | 36.8 |    |
| Net income                  |   | 20.6 |    |

 

These unaudited pro-formaresults have been prepared for comparative purposes only and primarily includeadjustments for a consulting advisory fee, interest expense, depreciation,amortization and income taxes. These results do not purport to be indicative ofthe results of operations which actually would have resulted had theAcquisition occurred at the beginning of 2004, or of the future results ofoperations of the successor Company.

***(b)***   Acquisition of AGBScientific Ltd. and Advanced Instruments Sales & Service, Inc.

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

On April 1, 2005, the Company acquired AdvancedInstruments Sales & Service, Inc. (“AI”) for initial cashconsideration of approximately $16.8 and CDRV stock of approximately $0.5. AIperforms services and distributes scientific supplies to the Puerto Ricanmarket and is headquartered in San Juan, Puerto Rico. The results of AI havebeen included in the North American Lab segment from the date of acquisition.

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

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

12

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

***(c)***   Goodwill and OtherIntangibles

Changesin the carrying amount of goodwill by segment for the six months ended June 30,2005 are as follows:
| ** **                                                                   | ** ** | **North**             | ** ** | **European** | ** ** | **Science**   | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------|------------|--------------|------------|---------------|------------|------------|------------|
| ** **                                                                   | ** ** | **American Lab** | ** ** | **Lab**      | ** ** | **Education** | ** ** | **Total**  | ** ** |
| Balance as of  January 1, 2005                                               |       |                  | $          | 645.0        |       |          |       | $          | 192.8      |   |   |   | $ | 69.2 |   |   | $ | 907.0 |   |
| Changes as a  result of purchase accounting adjustments for the Acquisition: |       |                  |       |         |       |          |       |       |       |   |   |   |   |   |   |
| Restructuring charges, net of tax                                            |       |                  | 1.1        |         |       |          | 19.2       |       |       |   | 0.2 |   |   | 20.5 |   |
| Curtailment of benefit plans, net of tax(1)                                  |       |                  | (8.3       | )            |       |          | —     |       |       |   | — |   |   | (8.3 | ) |
| Final purchase price allocation                                              |       |                  | —     |         |       |          | —     |       |       |   | (1.6 | ) |   | (1.6 | ) |
| Other acquisitions(2)                                                        |       |                  | 3.7        |         |       |          | 22.3       |       |       |   | — |   |   | 26.0 |   |
| Currency translation changes                                                 |       |                  | (3.1       | )            |       |          | (23.3      | )          |       |   | — |   |   | (26.4 | ) |
| Balance as of June 30,  2005                                                 |       |                  | $          | 638.4        |       |          |       | $          | 211.0      |   |   |   | $ | 67.8 |   |   | $ | 917.2 |   |

----

(1)          During the first quarterof 2005, the Company finalized its plans with regard to the curtailment ofcertain U.S. benefit plans. In accordance with EITF 95-3, the curtailmentgains of $8.3, net of tax, were recorded as reductions to goodwill. See Note 8for further information.

(2)**         **Theallocation of purchase price for the AGB and AI acquisitions have been madebased upon management estimates and third-party valuations that have not beenfinalized. Accordingly, the purchase price allocations are preliminary andrevisions will be necessary.

Thefollowing schedule sets forth the major classes of intangible assets held at June 30,2005:
| ** **                              | ** ** | **Lives** | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-----------|------------|------------|------------|
| Amortized Intangibles:                  |       |      |       |       |       |
| Customer Relationships in North America |       | 20 -  33  |       | $          | 244.7      |   |
| Customer Relationships in Europe        |       | 20        |       | 70.0       |       |
| Chemical Supply Agreements              |       | 10        |       | 30.0       |       |
| Other                                   |       | various   |       | 4.4        |       |
| Less: Accumulated Amortization          |       |      |       | (17.6      | )          |
| Amortized Intangibles, net              |       |      |       | 331.5      |       |
| Unamortized Intangibles:                |       |      |       |       |       |
| Trademarks and Tradenames               |       |      |       | 221.8      |       |
| Total Intangible Assets                 |       |      |       | $          | 553.3      |   |

 

13

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

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

Followingis a summary of our debtobligations:
| ** **                                       | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2005**          | ** ** | **2004**              | ** ** |
| Senior Secured  Credit Facility                  |       | $                 | 540.4      |                  |       | $ | 559.5 |   |   |
| 67¤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               |       |                  | 0.7        |   |   |
| Bank loans                                       |       | 5.4               |       |                  | 11.9       |   |   |
| Capital leases                                   |       | 6.3               |       |                  | 7.1        |   |   |
| Total debt                                       |       | 1,072.7           |       |                  | 1,099.2    |   |   |
| Less short-term  portion                         |       | (11.8             | )          |                  | (12.9      | ) |   |
| Total long-term  portion                         |       | $                 | 1,060.9    |                  |       | $ | 1,086.3 |   |   |

 

***(a)***   Senior SecuredCredit Facility

The Senior Secured Credit Facility provides foraggregate maximum borrowings of approximately $690.4 under (1) a term loanfacility providing for a loan denominated in Euros in an aggregate principalamount currently outstanding of €132.7 million (orapproximately $160.5 on a U.S. dollar equivalent basis as of June 30, 2005), (2) aterm loan facility providing for a term loan denominated in U.S. dollars in anaggregate principal amount currently outstanding of $379.9, and (3) amulti-currency revolving credit facility, providing for up to $150.0 inmulti-currency revolving loans (including standby and commercial letters ofcredit) outstanding at any time. Undrawn amounts under the multi-currencyrevolving credit facility will be available on a revolving credit basis forgeneral corporate purposes. As of June 30, 2005, we had $11.3 of undrawnletters of credit and our remaining borrowing availability under the $150.0multi-currency revolving credit facility was $138.7.

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

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

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

·       50% of excess operatingcash flow (as defined) for any fiscal year unless certain leverage ratiotargets are met (payment beginning in 2006 for fiscal 2005).

***Security; Guarantees***

The obligations under the Senior Secured CreditFacility are guaranteed by our parent, CDRV Holdings, Inc., and eachsignificant direct and indirect domestic subsidiary of VWR, as that term isdefined in the credit agreement. As of June 30, 2005, none of the domesticsubsidiaries of VWR met the definition 

14

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

of significant subsidiaryunder the credit agreement. In addition, the Senior Secured Credit Facility andthe guarantees 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, the interest rates per annumapplicable to the U.S. dollar-denominated term loan can be based on afluctuating rate of interest measured by reference to either (1) anadjusted London inter-bank offered rate, or LIBOR, plus a borrowing margin or (2) analternate base rate, or ABR, plus a borrowing margin. The interest rate perannum applicable to the Euro-denominated term loan is based on a fluctuatingrate of interest measured by reference to an adjusted EURIBOR plus a borrowingmargin. As of June 30, 2005, the interest rates on the U.S.dollar-denominated and Euro-denominated term loans were 5.65% and 4.89%,respectively.

Effective July 21,2004, VWR entered into an interest rate cap to hedge a portion of thevariability of cash flows related to potential changes in interest rates on €35.0million of our Euro-denominated term loan. The instrument has a 5.0% 3-monthEURIBOR cap that terminates on July 21, 2006. The 3-month EURIBORrate was approximately 2.1% as of June 30, 2005.

***Covenants***

Our Senior Secured CreditFacility contains a number of covenants that, among other things, limit orrestrict our ability to dispose of assets, incur additional indebtedness, incurguarantee obligations, prepay other indebtedness, make acquisitions, modifyterms of the indentures, engage in mergers or consolidations, change thebusiness conducted by us taken as a whole, make capital expenditures, or 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 June 30, 2005, the Companywas in compliance with all of these covenants.

***(b)***   The Senior andSenior 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.

15

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

**(7)**   Income Taxes

On October 22, 2004,the American Jobs Creation Act (the “AJCA”) was signed into law. The AJCAcontains certain tax provisions that may impact us over the next several yearsas those provisions become effective. We reviewed these provisions and theirapplication to some of our businesses to evaluate the effect these changes mayhave on income taxes included in our consolidated financial statements.Specifically, the AJCA provides for exclusion for U.S. federal income taxpurposes of 85% of certain foreign earnings that are repatriated as dividends,as defined in the AJCA. As a result of our review, we will not elect to repatriateany unremitted foreign earnings.

**(8)**   Defined BenefitPlans

VWR 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 VWR’s policy to fund the minimum amount required by local regulationsof current and prior year service costs under its funded defined benefit plans.

Netperiodic pension cost of VWR’s U.S. defined benefit plan includes the followingcomponents:
| ** **                     | ** ** | ** **                  | ** ** | **Three Months Ended** | ** ** | ** **                  | ** ** | **Six Months Ended** | ** ** |
|--------------------------------|------------|-----------------------------|------------|----------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                     | ** ** | **Successor**               | ** ** | **June 30, 2004**      | ** ** | **Successor**               | ** ** | **June 30, 2004**    | ** ** |
| ** **                     | ** ** | **Three Months**       | ** ** | **Successor**                    | ** ** | **Predecessor**             | ** ** | **Six Months**            | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                     | ** ** | **Ended**                   | ** ** | **April 7 -**          | ** ** | **April 1 -**     | ** ** | **Ended**                      | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** |
| ** **                     | ** ** | **June 30, 2005** | ** ** | **June 30, 2004**      | ** ** | **April 6, 2004** | ** ** | **June 30, 2005**    | ** ** | **June 30, 2004** | ** ** | **April 6, 2004** | ** ** |
| Service cost                   |       |                        | $          | 1.4                              |       |                        |       | $                              | 1.6        |   |   |   | $ | 0.1 |   |   |   | $ | 3.3 |   |   |   | $ | 1.6 |   |   |   | $ | 1.8 |   |   |
| Interest cost                  |       |                        | 2.1        |                             |       |                        | 1.8        |                           |       |   | 0.2 |   |   |   | 4.3 |   |   |   | 1.8 |   |   |   | 2.2 |   |   |
| Expected return on plan assets |       |                        | (2.1       | )                                |       |                        | (1.7       | )                              |       |   | (0.2 | ) |   |   | (4.2 | ) |   |   | (1.7 | ) |   |   | (2.5 | ) |   |
| Recognized net actuarial loss  |       |                        | —     |                             |       |                        | —     |                           |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 0.8 |   |   |
| Net periodic  pension cost     |       |                        | $          | 1.4                              |       |                        |       | $                              | 1.7        |   |   |   | $ | 0.1 |   |   |   | $ | 3.4 |   |   |   | $ | 1.7 |   |   |   | $ | 2.3 |   |   |

 

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

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

As a result of the decision to curtail the pensionplan, future benefits were frozen effective May 31, 2005. Mostparticipants will earn no further benefits under the plan after that date. As aresult, there was a reduction in the plan’s projected benefit obligation of$13.1 that was recorded as a reduction to pension liabilities. Goodwill anddeferred tax assets were reduced by $8.0 and $5.1, respectively, as of March 31,2005.

16

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

Net periodic pension cost of VWR’s significantNon-U.S. defined benefit plans in Germany, France and the UK include thefollowing components:
| ** **                     | ** ** | ** **                  | ** ** | **Three Months Ended** | ** ** | ** **                  | ** ** | **Six Months Ended** | ** ** |
|--------------------------------|------------|-----------------------------|------------|----------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                     | ** ** | **Successor**               | ** ** | **June 30, 2004**      | ** ** | **Successor**               | ** ** | **June 30, 2004**    | ** ** |
| ** **                     | ** ** | **Three Months**       | ** ** | **Successor**                    | ** ** | **Predecessor**             | ** ** | **Six Months**            | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                     | ** ** | **Ended**                   | ** ** | **April 7 -**          | ** ** | **April 1 -**     | ** ** | **Ended**                      | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** |
| ** **                     | ** ** | **June 30, 2005** | ** ** | **June 30, 2004**      | ** ** | **April 6, 2004** | ** ** | **June 30, 2005**    | ** ** | **June 30, 2004** | ** ** | **April 6, 2004** | ** ** |
| Service cost                   |       |                        | $          | 0.9                              |       |                        |       | $                              | 0.6        |   |   |   | $ | — |   |   |   | $ | 1.8 |   |   |   | $ | 0.6 |   |   |   | $ | 0.1 |   |   |
| Interest cost                  |       |                        | 1.1        |                             |       |                        | 0.3        |                           |       |   | — |   |   |   | 2.2 |   |   |   | 0.3 |   |   |   | 0.3 |   |   |
| Expected return on plan assets |       |                        | (1.0       | )                                |       |                        | —     |                           |       |   | — |   |   |   | (2.0 | ) |   |   | — |   |   |   | — |   |   |
| Net periodic  pension cost     |       |                        | $          | 1.0                              |       |                        |       | $                              | 0.9        |   |   |   | $ | — |   |   |   | $ | 2.0 |   |   |   | $ | 0.9 |   |   |   | $ | 0.4 |   |   |

 

The Company made combinedcontributions to the Non-U.S. defined benefit plans of approximately $1.2 forthe six months ended June 30, 2005 and expects to make additionalcontributions to the Non-U.S. defined benefit plans of approximately $1.5during the remainder of 2005.

**(9)**   ComprehensiveIncome (Loss)

Comprehensiveincome (loss) is determined as follows:
| ** **                                 | ** ** | ** **                  | ** ** | **Three Months Ended** | ** ** | ** **                  | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|----------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                                 | ** ** | **Successor**               | ** ** | **June 30, 2004**      | ** ** | **Successor**               | ** ** | **June 30, 2004**    | ** ** |
| ** **                                 | ** ** | **Three Months**       | ** ** | **Successor**                    | ** ** | **Predecessor**             | ** ** | **Six Months**            | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                                 | ** ** | **Ended**                   | ** ** | **April 7 -**          | ** ** | **April 1 -**     | ** ** | **Ended**                      | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** |
| ** **                                 | ** ** | **June 30, 2005** | ** ** | **June 30, 2004**      | ** ** | **April 6, 2004** | ** ** | **June 30, 2005**    | ** ** | **June 30, 2004** | ** ** | **April 6, 2004** | ** ** |
| Net income                                 |       |                        | $          | 9.2                              |       |                        |       | $                              | 8.5        |   |   |   | $ | 1.6 |   |   |   | $ | 14.3 |   |   |   | $ | 8.5 |   |   |   | $ | 20.7 |   |   |
| Other comprehensive  income (loss):        |       |                        |       |                             |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment    |       |                        | (27.4      | )                                |       |                        | 2.4        |                           |       |   | — |   |   |   | (33.4 | ) |   |   | 2.4 |   |   |   | (3.7 | ) |   |
| Unrealized gain on derivatives, net of tax |       |                        | 0.4        |                             |       |                        | —     |                           |       |   | — |   |   |   | 0.7 |   |   |   | — |   |   |   | 0.2 |   |   |
| Comprehensive  income (loss)               |       |                        | $          | (17.8                            | )          |                        |       | $                              | 10.9       |   |   |   | $ | 1.6 |   |   |   | $ | (18.4 | ) |   |   | $ | 10.9 |   |   |   | $ | 17.2 |   |   |

 

**(10)**   SegmentFinancial Information

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

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

Selectedbusiness segment financial information and reconciliation of reported operatingincome by segment to income before income taxes are presented below. Inter-segmentactivity has been eliminated. Therefore, revenues reported for each operatingsegment are substantially all from external customers.
| ** **                   | ** ** | ** **                  | ** ** | **Three Months Ended** | ** ** | ** **                  | ** ** | **Six Months Ended** | ** ** |
|------------------------------|------------|-----------------------------|------------|----------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                   | ** ** | **Successor**               | ** ** | **June 30, 2004**      | ** ** | **Successor**               | ** ** | **June 30, 2004**    | ** ** |
| ** **                   | ** ** | **Three Months**       | ** ** | **Successor**                    | ** ** | **Predecessor**             | ** ** | **Six Months**            | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                   | ** ** | **Ended**                   | ** ** | **April 7 -**          | ** ** | **April 1 -**     | ** ** | **Ended**                      | ** ** | **April 7 -** | ** ** | **January 1 -** | ** ** |
| ** **                   | ** ** | **June 30, 2005** | ** ** | **June 30, 2004**      | ** ** | **April 6, 2004** | ** ** | **June 30, 2005**    | ** ** | **June 30, 2004** | ** ** | **April 6, 2004** | ** ** |
| **Net  Sales**               |       |                        |       |                             |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab           |       |                        | $          | 479.5                            |       |                        |       | $                              | 427.6      |   |   |   | $ | 36.0 |   |   |   | $ | 940.4 |   |   |   | $ | 427.6 |   |   |   | $ | 486.5 |   |   |   |
| European Lab                 |       |                        | 281.2      |                             |       |                        | 221.1      |                           |       |   | 21.6 |   |   |   | 550.0 |   |   |   | 221.1 |   |   |   | 283.0 |   |   |   |
| Science Education            |       |                        | 34.1       |                             |       |                        | 27.3       |                           |       |   | 1.8 |   |   |   | 58.5 |   |   |   | 27.3 |   |   |   | 23.7 |   |   |   |
| Total                        |       |                        | $          | 794.8                            |       |                        |       | $                              | 676.0      |   |   |   | $ | 59.4 |   |   |   | $ | 1,548.9 |   |   |   | $ | 676.0 |   |   |   | $ | 793.2 |   |   |   |
| **Operating Income**         |       |                        |       |                             |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab           |       |                        | $          | 19.7                             |       |                        |       | $                              | 25.6       |   |   |   | $ | 2.2 |   |   |   | $ | 34.3 |   |   |   | $ | 25.6 |   |   |   | $ | 28.5 |   |   |   |
| European Lab                 |       |                        | 10.4       |                             |       |                        | 3.6        |                           |       |   | 1.2 |   |   |   | 21.5 |   |   |   | 3.6 |   |   |   | 13.1 |   |   |   |
| Science Education            |       |                        | 2.6        |                             |       |                        | 2.5        |                           |       |   | — |   |   |   | 2.0 |   |   |   | 2.5 |   |   |   | (0.1 | ) |   |   |
| Total                        |       |                        | 32.7       |                             |       |                        | 31.7       |                           |       |   | 3.4 |   |   |   | 57.8 |   |   |   | 31.7 |   |   |   | 41.5 |   |   |   |
| Interest income              |       |                        | (0.4       | )                                |       |                        | (0.1       | )                              |       |   | — |   |   |   | (1.0 | ) |   |   | (0.1 | ) |   |   | (0.2 | ) |   |   |
| Interest expense:            |       |                        |       |                             |       |                        |       |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest on third party debt |       |                        | 18.8       |                             |       |                        | 16.0       |                           |       |   | — |   |   |   | 37.2 |   |   |   | 16.0 |   |   |   | 1.7 |   |   |   |
| Interest on push down debt   |       |                        | —     |                             |       |                        | —     |                           |       |   | 0.3 |   |   |   | — |   |   |   | — |   |   |   | 4.1 |   |   |   |
| Other (income) expense,  net |       |                        | (0.9       | )                                |       |                        | 0.5        |                           |       |   | 0.4 |   |   |   | (1.9 | ) |   |   | 0.5 |   |   |   | 0.1 |   |   |   |
| Income before  income taxes  |       |                        | $          | 15.2                             |       |                        |       | $                              | 15.3       |   |   |   | $ | 2.7 |   |   |   | $ | 23.5 |   |   |   | $ | 15.3 |   |   |   | $ | 35.8 |   |   |   |

 

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**Item2—*Management’s Discussion and Analysis of Financial Condition and Resultsof Operations***

This Form 10-Qcontains forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933 and Section 21E of the Securities Exchange Actof 1934. All statements other than statements of historical fact included inthis Form 10-Q may constitute forward-looking statements. We havebased these forward-looking statements on our current expectations and projectionsabout future events. Although we believe that our assumptions made inconnection with the forward-looking statements are reasonable, there can be noassurances that the assumptions and expectations will prove to be correct. Certainfactors that might cause such a difference include those discussed in thesection entitled “Management’s Discussion and Analysis of Financial Conditionand Results of Operations—Forward-Looking Statements” contained in our AnnualReport on Form 10-K for the year ended December 31, 2004. Weundertake no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.In light of these risks, uncertainties and assumptions, the forward-lookingevents discussed in the report might not occur.

**Overview**

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

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

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

The AGB and AI acquisitionswere completed on April 1, 2005. The results of AGB and AI have beenincluded in the European Lab segment and the North American Lab segment,respectively, from the date of the acquisitions. AGB had net sales of $8.7million, gross profit of $2.6 million and operating income of $0.5 million forthe three months ended June 30, 2005. AI had net sales of $4.6 million,gross profit of $2.2 million and operating income of $0.5 million for the threemonths ended June 30, 2005.

**Compliancewith the Sarbanes-Oxley Act**

We have launched a compliance program to address therequirements of Section 404 of the Sarbanes-Oxley Act in anticipation ofthe compliance date of December 31, 2006. Compliance with theserequirements requires significant incremental internal resources and financialinvestments including, but not limited to, use of outside experts, additionalaudit fees, and potential changes in systems design, security and structure.

During 2005, the SEC issued guidance fornon-accelerated filers that extended our anticipated compliance date by oneyear to December 31, 2006. Prior to the compliance date deferral, weexpected to spend in excess of $5 million during 2005 in conducting ourassessment of our internal control over financial reporting. Through June 30,2005 we have spent approximately $2.1 million on external assistance and weanticipate spending an additional $3 million over the next eighteen months onour compliance program, exclusive of remediation costs that cannot be estimatedat this time.

A component of thisprogram will also focus on the quality, security, and functionality of ourinformation systems. While we have developed sound plans to address all of ourcompliance requirements, 

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therecan be no assurance that such efforts will not have an impact on, or otherwisedistract our senior financial team from, our operations or require additionalspending above that exceeds our initial expectations.

**Basisof Financial Statement Presentation**

Prior to April 7, 2004, Merck KGaA was ourultimate parent company. On April 7, 2004, Merck KGaA sold its investmentin us to CDRVA. As a result of the Acquisition, the financial statements forthe periods included in our June 30, 2005 interim financial statementsreflect the results of operations, cash flows, and statements of stockholders’equity and other comprehensive income (loss) using predecessor and successortime periods. In order to provide a meaningful basis of comparing our resultsof operations for the three months and six months ended June 30, 2004, theresults of operations for the “predecessor” period (January 1, 2004through April 6, 2004) have been combined with the results of operationsfor the “successor” period (April 7, 2004 through June 30, 2004). Allintercompany accounts and transactions have been eliminated.

The purchase price paid by Merck KGaA for thebusinesses was pushed down to VWR International Corporation’s financialstatements from the date of acquisition and resulted in the allocation of thepurchase price to the assets and liabilities acquired and the recognition ofeither push down debt due Merck KGaA or a contribution to stockholders’ equityfor cash consideration. Interest expense was recorded on this push down debtbased upon Merck KGaA’s intercompany interest rates, which are not necessarilyindicative of rates we would have obtained if we were not an ultimatesubsidiary of Merck KGaA. Interest expense, including tax effects, on push downdebt has been included in the statements of operations, and presented as anon-cash item in the accompanying statements of cash flows, as this interestwas not required to be paid to Merck KGaA.

The financial statements,for all periods up to April 6, 2004, do not include allocations of MerckKGaA general corporate expenses or charges for financial reporting, tax, andtreasury services, as such costs were not charged to us. Management does notbelieve that charges for such services would have been material. The historicalfinancial information does not reflect the added costs that we will incur as aseparate company. These additional costs will include costs for new informationtechnology systems to operate as a separate company, costs of periodicreporting to the SEC, as well as the costs related to a global tax and treasurystaff and compliance with the Sarbanes-Oxley Act. This historical financialinformation also does not reflect the incremental costs associated with changesthat occured in our capital structure and operations.

**Effects of the Acquisition**

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

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

**Constant Currency Analysis**

We maintain operations in North America and in fifteenEuropean countries. Approximately 40% of our net sales originate in currenciesother than the U.S. dollar, principally the Euro, the British pound 

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sterling and the Canadiandollar. As a result, changes in our revenues and operating profits include theimpact of changes in foreign currency exchange rates. We provide “constantcurrency” disclosures in this Report on Form 10-Q to remove theimpact of the fluctuation in foreign exchange rates.

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

**Business Segments**

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

**Results of Operations**

***Net Sales***

Thefollowing table presents net sales and changes in net sales by reportablesegment for the three and six months ended June 30, 2005 and 2004 (dollarsin millions):
| ** **         | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **         | ** ** | **2005**                                            | ** ** | **% Change**                                 | ** ** | **2004** | ** ** | **2005** | ** ** | **% Change** | ** ** | **2004** | ** ** |
| Net Sales          |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab |       | $                                                   | 479.5      |                                              |       | 3.4 | % |   | $ | 463.6 |   | $ | 940.4 |   |   | 2.9 | % |   | $ | 914.1 |   |
| European Lab       |       | 281.2                                               |       |                                              | 15.9       | % |   | 242.7 |   | 550.0 |   |   | 9.1 | % |   | 504.1 |   |
| Science Education  |       | 34.1                                                |       |                                              | 17.2       | % |   | 29.1 |   | 58.5 |   |   | 14.7 | % |   | 51.0 |   |
| Total              |       | $                                                   | 794.8      |                                              |       | 8.1 | % |   | $ | 735.4 |   | $ | 1,548.9 |   |   | 5.4 | % |   | $ | 1,469.2 |   |

 

Net sales for the three and six months ended June 30,2005 increased $59.4 million and $79.7 million, respectively, over thecomparable periods of 2004. Foreign currency changes accounted for $12.7million and $29.4 million of the increase for the three and six months ended June 30,2005, respectively. The current year acquisitions favorably impacted net salesby $13.3 million for the three and six months ended June 30, 2005. Excludingthese effects, net sales increased by 4.5% and 2.5%, respectively, from thecomparable periods of 2004. The net sales growth for both periods wasexperienced by all of our segments.

Net sales in the North American Lab segment for thethree and six months ended June 30, 2005 increased $15.9 million and $26.3million, respectively, over the comparable periods of 2004. Foreign currencychanges accounted for $3.5 million and $6.8 million of the increase for thethree and six months ended June 30, 2005, respectively. The current yearacquisition favorably impacted net sales by $4.6 million for the three and sixmonths ended June 30, 2005. Excluding these effects, net sales increasedby 1.7% and 1.6%, respectively, from the comparable periods of 2004. Our netsales in the bio-pharmaceutical and education markets experienced lowsingle-digit growth for the first two quarters of 2005 while net sales in theindustrial market were down in the first quarter of 2005 and up slightly in thesecond quarter of 2005.

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Net sales in the European Lab segment for the threeand six months ended June 30, 2005 increased $38.5 million and $45.9million, respectively, over the comparable periods of 2004. Foreign currencychanges accounted for $9.2 million and $22.6 million of the increase for thethree and six months ended June 30, 2005, respectively. The current yearacquisition favorably impacted net sales by $8.7 million for the three and sixmonths ended June 30, 2005. Excluding these effects, net sales increasedby 8.5% and 2.9%, respectively, from the comparable periods of 2004. OurEuropean Lab segment operates in fifteen countries and results are heavilyinfluenced by the larger countries in which we operate such as Germany, UK, andFrance. These large markets experienced sluggish economic growth, whichsuppressed demand for our products during the first quarter of 2005. Theselarge markets and the majority of our smaller operations in other countriesexperienced growth during the second quarter of 2005. This growth was primarilydriven by the bio-pharmaceutical and industrial markets. Partially offsettingthis growth was a decline in the resellers market.

Net sales in the ScienceEducation segment for the three and six months ended June 30, 2005increased $5.0 million and $7.5 million, respectively, over the comparableperiods of 2004. These increases were primarily driven by increased salesactivity in both the publishers and education markets. This segment is highlyseasonal and has historically earned a disproportionately high share of its netsales and operating income in the third quarter of each year.

***Gross Profit***

Thefollowing table presents gross profit for the three and six months ended June 30,2005 and 2004 (dollars in millions):
| ** **                              | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|-----------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                              | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross profit                            |       | $                                               | 200.8      |                                          | $          | 186.2 |   | $ | 393.5 |   | $ | 376.3 |   |
| Percentage of net sales  (gross margin) |       | 25.3                                            | %          | 25.3                                          | %          | 25.4 | % | 25.6 | % |
|                                         |            |                                                 |            |                                               |            |  |  |  |  |  |  |  |  |

 

Gross profit for the three and six months ended June 30,2005 increased $14.6 million and $17.2 million, respectively, over thecomparable periods of 2004. Foreign currency changes accounted for $3.5 millionand $8.4 million of the increase for the three and six months ended June 30,2005, respectively. The current year acquisitions favorably impacted grossprofit by $4.8 million for the three and six months ended June 30, 2005. Excludingthese effects, gross profit increased by $6.3 million and $4.0 million,respectively, from the comparable periods of 2004. During the first and secondquarters of 2005, our North American Lab margins improved slightly while boththe European Lab and Science Education margins declined. The European Lab grossmargin percentages decreased as a result of product mix and price pressures andthe Science Education segment gross margin percentages decreased as result ofproduct mix and price pressures in both the publishers and education markets.

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

Thefollowing table presents selling, general, and administrative expenses (“SG&A”) for the three and sixmonths ended June 30, 2005 and 2004 (dollars in millions):
| ** **                                    | ** ** | **Three Months  Ended June 30,** | ** ** | **Six Months  Ended June 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                    | ** ** | **2005**                                        | ** ** | **2004**                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Selling, general  and administrative expenses |       | $                                               | 168.1      |                                          | $          | 151.1 |   | $ | 335.7 |   | $ | 303.1 |   |
| Percentage of net sales                       |       | 21.1                                            | %          | 20.5                                          | %          | 21.7 | % | 20.6 | % |
|                                               |            |                                                 |            |                                               |            |  |  |  |  |  |  |  |  |

 

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

For the three months ended June 30, 2005,SG&A increased $17.0 million over the comparable period of 2004. Foreigncurrency changes increased these expenses by $2.9 million and the current yearacquisitions added $3.8 million. Further increasing SG&A were $1.8 millionof charges, primarily severance, associated with a cost reduction program in theNorth American Lab segment and $3.3 million of charges in the European Labsegment related to the closing of a facility in the UK and severances andrelated costs for personnel in our German, French and Nordic operations. Excludingthese effects, SG&A costs increased by $5.2 million or 3.4% for the threemonths ended June 30, 2005 over the three months ended June 30, 2004.Additionally, SG&A for the second quarter of 2005, excluding theacquisitions and cost reduction programs discussed above and a decrease due toforeign currency changes of $3.1 million from the first quarter of 2005 was$162.3 million. SG&A, excluding the cost reduction program of $2.1 million,was $165.5 million for the first quarter of 2005. This decline of $3.2 millionor 1.9% reflects incremental savings from the Company’s 2004 restructuringprogram, the first quarter 2005 cost reduction program and ongoing spendingcontrols.

For the six months ended June 30, 2005, SG&Aincreased $32.6 million over the comparable period of 2004. Foreign currencychanges increased these expenses by $6.9 million and the current yearacquisitions added $3.8 million. Further increasing SG&A were $3.9 millionof charges, primarily severance, associated with cost reduction programs in theNorth American Lab segment and $3.3 million of charges in the European Labsegment related to the closing of a facility in the UK and severances andrelated costs for personnel in our German, French and Nordic operations.Excluding these effects, SG&A costs increased by $14.7 million or 4.8% forthe six months ended June 30, 2005 over the six months ended June 30,2004. This increase primarily reflects our aforementioned investments inpersonnel, inflation, partially offset by savings from the 2004 restructuringprogram and first quarter 2005 cost reduction program.

We expect to incuradditional severance charges in the second half of 2005 as we continue tooptimize our cost structure.

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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 six months ended June 30,2005 and 2004 (dollars in millions):
|                  | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **       | ** ** | **2005**                                            | ** ** | **2004**                                          | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **       | ** ** | ** **                                          | ** ** | **% of**                                     | ** ** | ** ** | ** ** | **% of** | ** ** | ** ** | ** ** | **% of** | ** ** | ** ** | ** ** | **% of** | ** ** |
| ** **       | ** ** | **Amount**                                          | ** ** | **Net Sales**                                | ** ** | **Amount** | ** ** | **Net Sales** | ** ** | **Amount** | ** ** | **Net Sales** | ** ** | **Amount** | ** ** | **Net Sales** | ** ** |
| Operating Income |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                  |            |                                                     |            |                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| North American Lab |   |   | $    | 19.7   |   |   |   | 4.1 | %      |   |   | $      | 27.8   |   |   |   | 6.0    | %      |   |   | $      | 34.3   |   |   |   | 3.6    | %    |   |   | $      | 54.1 |   |   |   | 5.9 | % |   |
|--------------------|--------|--------|------|--------|--------|--------|--------|-----|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|--------|------|--------|--------|--------|-----|---|--------|
| European Lab       |   |   | 10.4 |   |   |   | 3.7    | %   |   |   | 4.8    |   |   |   | 2.0    | %      |   |   | 21.5   |   |   |   | 3.9    | %      |   |   | 16.7 |   |   |   | 3.3  | %      |   |
| Science Education  |   |   | 2.6  |   |   |   | 7.6    | %   |   |   | 2.5    |   |   |   | 8.6    | %      |   |   | 2.0    |   |   |   | 3.4    | %      |   |   | 2.4  |   |   |   | 4.7  | %      |   |
| Total              |   |   | $    | 32.7   |   |   |   | 4.1 | %      |   |   | $      | 35.1   |   |   |   | 4.8    | %      |   |   | $      | 57.8   |   |   |   | 3.7    | %    |   |   | $      | 73.2 |   |   |   | 5.0 | % |   |

 

As a result of the factors described above, operatingincome for the three and six months ended June 30, 2005 decreased $2.4million and $15.4 million, respectively, from the comparable periods of 2004. Foreigncurrency changes increased operating income by $0.6 million and $1.5 millionfor the three and six months ended June 30, 2005, respectively. Thecurrent year acquisitions favorably impacted operating income by $1.0 millionfor the three and six months ended June 30, 2005. Excluding these effects,operating income decreased by $4.0 million and $17.9 million, respectively,from the comparable periods of 2004. The decrease for the three months ended June 30,2005 was the result of an SG&A increase of $10.3 million, which includes$5.1 million for the cost reduction programs, partially offset by a grossprofit increase of $6.3 million primarily attributable to increased salesvolume. The decrease for the six months ended June 30, 2005 was the resultof an SG&A increase of $21.9 million, which includes $7.2 million ofcharges for the cost reduction programs, partially offset by a gross profitincrease of $4.0 million primarily attributable to increased sales volume.

Operating income in the North American Lab segment forthe three and six months ended June 30, 2005 decreased $8.1 million and$19.8 million, respectively, from the comparable periods of 2004. Foreigncurrency changes increased operating income by $0.3 million and $0.7 millionfor the three and six months ended June 30, 2005, respectively. Thecurrent year acquisition favorably impacted operating income by $0.5 millionfor the three and six months ended June 30, 2005. Excluding these effects,operating income decreased by $8.9 million and $21.0 million, respectively,from the comparable periods of 2004. These decreases in operating income aredue to additional SG&A expenses from increased investment in the business,increases to corporate costs that are allocated to this segment and theexpenses related to 2005 cost reduction programs of $1.8 million and $3.9million for the three and six months ended June 30, 2005, respectively. Partiallyoffsetting these cost increases were improvements in gross profit of $1.1million and $4.3 million for the three and six months ended June 30, 2005,respectively, primarily related to period-over-period sales growth.

Operating income in the European Lab segment for thethree and six months ended June 30, 2005 increased $5.6 million and $4.8million, respectively, over the comparable periods of 2004. Foreign currencychanges increased operating income by $0.3 million and $0.8 million for thethree and six months ended June 30, 2005, respectively. The current yearacquisition favorably impacted operating income by $0.5 million for the threeand six months ended June 30, 2005. Excluding these effects, operatingincome increased by $4.8 million and $3.5 million, respectively, from thecomparable periods of 2004. The increase for the three months ended June 30,2005 is the result of increased gross profit of $3.6 million primarilyattributable to increased sales volume and savings from 2004 restructuringefforts that more than offset costs from the 2005 cost reduction programs. Theincrease in operating income for the six months ended June 30, 2005 isprimarily the result of savings from 2004 restructuring efforts that more thanoffset charges related to the 2005 cost reduction programs and decreased grossprofit of $2.0 million that resulted from a softer first quarter of 2005.

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Operating income in theScience Education segment increased $0.1 million for the three months ended June 30,2005 over the comparable period of 2004 and decreased $0.4 million for the sixmonths ended June 30, 2005 from the comparable period of 2004. Thissegment’s decline in gross margin, primarily attributable to product mix, aswell as additional investments in its sales force and warehouse support havenegatively impacted operating results during the first two quarters of 2005. Asnoted previously, this segment’s operating results are highly seasonal andbiased to the third quarter of every fiscal year.

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

Interest expense, net ofinterest income, for the three and six months ended June 30, 2005increased to $18.4 million and $36.2 million, respectively, from $16.2 millionand $21.5 million for the comparable periods of 2004. These increases are dueto the new capital structure established in connection with the Acquisitionthat resulted in a higher level of outstanding debt and higher interest rates. Theincrease in interest rates in the successor period reflects market rates forthird party debt as compared to the predecessor period where substantially alldebt was intercompany. In addition, the variable interest rates on our SeniorSecured Credit Facility were higher during the second quarter of 2005 than thesecond quarter of 2004.

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

Other income, net was $0.9million and $1.9 million for the three and six months ended June 30, 2005,respectively, compared to other expense, net of $0.9 million and $0.6 millionfor the comparable periods of 2004. The shift from expense in 2004 to income in2005 is due to exchange losses on foreign currency transactions in 2004 andexchange gains in 2005.

***Income Taxes***

The effective income taxrate for the three months and six months ended June 30, 2005 was 39.5% and39.3%, respectively, compared to 43.9% and 42.8% for the comparable periods of2004. The 2004 effective tax rates were adversely impacted by losses andrelated valuation allowances associated with our operations in France. In 2005,we do not anticipate such a significant unfavorable impact.

**Liquidity and Capital Resources**

We broadly define liquidity as our ability to generatesufficient funds from both internal and external sources to meet ourobligations and commitments. In addition, liquidity includes the ability toobtain appropriate debt and equity financing and to convert into cash thoseassets that are no longer required to meet existing strategic and financialobjectives. Therefore, liquidity cannot be considered separately from capitalresources that consist of current or potentially available funds for use inachieving long-range objectives and meeting debt service commitments.

Our significant liquidity and capital funding needsare working capital, operating expenses, capital expenditures, contractualobligations, and commercial commitments. Liquidity and capital resource needsare met through cash flows from operations, borrowings under our Senior SecuredCredit Facility, and credit terms from our suppliers, which approximatereceivable terms to our customers.

Working capital, excluding cash and debt, was $223.4million and $226.7 million at June 30, 2005 and December 31, 2004,respectively. Trade receivables, inventories and accounts payable, threeimportant elements of working capital, are discussed below.

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***Trade Accounts Receivable***.   Dayssales outstanding in accounts receivable were 48.3**days and 49.0 days for the quarterly periods ended June 30,2005 and December 31, 2004, respectively. Trade receivables are higher inEurope due to the extended payment practices in several of the countries inwhich we operate. Trade receivables tend to increase in the third quarter as aresult of higher sales of our Science Education segment to primary andsecondary schools.

***Inventories***.   Dayssupply of inventory were 38.6**daysand 39.1 days for the quarterly periods ended June 30, 2005 and December 31,2004, respectively, due primarily to continuous efforts to reduce inventorylevels while maintaining customer service levels. Inventories tend to increaseduring the second quarter to support higher sales in the third quarter due inpart to higher sales to primary and secondary schools in the third quarter inour Science Education segment.

***Accounts Payable***.   Dayspayables outstanding were 55.0**daysand 52.5 days for the quarterly periods ended June 30, 2005 and December 31,2004, respectively, mainly due to continued efforts to improve working capital.Trade accounts payable are primarily with suppliers whose products wedistribute. Payment terms are negotiated and in cases where economic earlypayment discounts are offered, we make payments to earn the discounts. Dayspayable outstanding are generally higher in Europe due to the extended paymentpractices in certain countries in which we operate. Depending on the timing ofpayments and inventory purchases, trade accounts payable can vary each quarterand from year to year.

**Historical Cash Flows**

Thefollowing table presents cash flow from operations before investing andfinancing activities related to operations and working capital (dollars inmillions):
| ** **                                            | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                            | ** ** | **2005**                                      | ** ** | **2004** | ** ** |
| Cash flow from  operations, excluding working capital |       | $                                             | 40.4       |   | $ | 53.2 |   |
| Cash flow from  working capital changes, net          |       | 1.4                                           |       | 91.1 |   |
| Cash flow from  operations                            |       | $                                             | 41.8       |   | $ | 144.3 |   |

 

We generated $41.8 million of cash flow fromoperations during the six months ended June 30, 2005 compared to $144.3million during the comparable period of 2004. The decrease in cash flow from operationswas the result of programs implemented during the first half of 2004 tosignificantly improve working capital management. Subsequent to this initialimprovement, working capital levels have remained relatively stable. To alesser extent, reductions in net income in 2005 compared to 2004 have alsoresulted in lower cash flow from operations.

Net cash used in investing activities was $50.6million for the six months ended June 30, 2005 compared to $1,565.7million for the comparable period of 2004. This decrease was mainly the resultof the Acquisition, partially offset by investments to acquire businessesduring 2005.

Net cash used in financing activities was $30.3million for the six months ended June 30, 2005 compared to cash providedby financing activities of $1,613.3 million for the comparable period of 2004. The2005 cash usage is comprised of net debt payments of $5.4 million and a netchange in our bank checks outstanding of $24.9 million. Net cash provided in2004 was primarily due to the Acquisition and the new capital structure weestablished.

Prior to the Acquisition on April 7, 2004, cashflow from operating activities and after investing activities was used to paydown debt or to pay dividends to Merck KGaA. Under the credit agreement for ourSenior Secured Credit Facility, beginning in the first quarter of fiscal 2006,Excess Cash Flow (as defined in the credit agreement) will be required to beused to prepay credit agreement debt, in addition to scheduled principalpayments. Based upon current levels of operations and expectations as to future

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growth, we believe thatcash generated from operations, together with amounts available under our$150.0 million five year multi-currency revolving credit facility, which is acomponent of our Senior Secured Credit Facility, will be adequate to permit usto meet our debt service obligations, capital expenditure requirements, ongoingoperating costs and working capital needs until the maturity of our SeniorSecured Credit Facility, although no assurance can be given in this regard. Ourfuture financial and operating performance, ability to service or refinance ourdebt and ability to comply with covenants and restrictions contained in ourdebt agreements will be subject to future economic conditions and to financial,business and other factors, many of which are beyond our control and will besubstantially dependent on the global economy, demand for our products, and ourability to successfully implement our overall business and profitability strategies.As of June 30, 2005, we had $73.3 million of cash and cash equivalents onhand.

As of June 30, 2005,we had outstanding indebtedness of $1,072.7 million, which consists primarilyof $520.0 million aggregate principal amount of notes, a $379.9 million U.S.dollar-denominated term loan, and a $160.5 million Euro-denominated term loan.

**IndebtednessPrior to the Acquisition**

Substantially allindebtedness prior to the Acquisition was intercompany debt with Merck KGaA.

**IndebtednessFollowing the Acquisition**

***Senior Secured Credit Facility***.   OnApril 7, 2004, we entered into the Senior Secured Credit Facility, whichconsists of (1) a term loan facility providing for a loan denominated inEuros, in an aggregate principal amount currently outstanding at €132.7million (approximately $160.5 million on a U.S. dollar equivalent basis as of June 30,2005), (2) a term loan facility providing for a term loan denominated inU.S. dollars in an aggregate principal amount currently outstanding at $379.9million, and (3) a multi-currency revolving credit facility, providing forup to $150.0 million in multi-currency revolving loans (including standby andcommercial letters of credit) outstanding at any time. As of June 30,2005, there was no outstanding balance on the multi-currency revolving creditfacility. Undrawn amounts under the multi-currency revolving credit facilityare available on a revolving credit basis for general corporate purposes of theborrower and its subsidiaries. As of June 30, 2005, we had $11.3 millionof undrawn letters of credit and our remaining borrowing availability under the$150.0 million multi-currency revolving credit facility was $138.7 million.

The credit agreementgoverning the Senior Secured Credit Facility contains certain covenants thatlimit the Company’s ability to incur additional indebtedness, pay cashdividends and make certain other payments. The senior secured credit agreementalso requires the Company to maintain certain financial covenants, including aspecified debt to Credit Agreement EBITDA leverage ratio and a specified CreditAgreement EBITDA to interest expense coverage ratio for specified periods. See “CreditAgreement Financial Covenants; Credit Agreement EBITDA” below. As of June 30,2005, the Company was in compliance with all covenants.

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

The indentures governingthe senior notes and the senior subordinated notes contain certain covenantsthat limit the Company’s ability to incur additional indebtedness, pay cashdividends and make certain other payments. The indentures also require theCompany to maintain certain financial covenants, including a specified debt toConsolidated EBITDA leverage ratio and a specified Consolidated EBITDA tointerest expense coverage ratio. At June 30, 2005, the Company was incompliance with all 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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**CreditAgreement Financial Covenants; Credit Agreement EBITDA**

Borrowings under our Senior Secured Credit Facilityare a key source of our liquidity. Our ability to borrow under our SeniorSecured Credit Facility is dependent upon, among other things, our compliancewith the financial covenants set forth in the credit agreement for our SeniorSecured Credit Facility. The financial covenants include a specified debt toCredit Agreement EBITDA leverage ratio and a specified Credit Agreement EBITDAto interest expense coverage ratio for specified periods. Failure to complywith these financial ratio covenants would result in a default under the creditagreement for our Senior Secured Credit Facility and, absent a waiver or anamendment from our lenders, would permit the acceleration of all outstandingborrowings under our Senior Secured Credit Facility. We are in compliance withthese financial covenants as of June 30, 2005.

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

Credit Agreement EBITDA is not used in the indenturesfor the 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.

Thecalculation of Credit Agreement EBITDA for the period indicated is set forthbelow.
| ** **                                                   | ** ** | **12 Months Ended**       | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                   | ** ** | **June 30, 2005**         | ** ** |
| ** **                                                   | ** ** | **(Unaudited)**                     | ** ** |
| ** **                                                   | ** ** | **(Dollars in millions)** | ** ** |
| Net income                                                   |       |                                | $          | 37.7 |   |   |
| Income tax  provision                                        |       |                                | 25.9       |   |   |
| Interest expense,  net                                       |       |                                | 71.0       |   |   |
| Depreciation and  amortization                               |       |                                | 34.6       |   |   |
| Non-cash  charges(1)                                         |       |                                | 7.3        |   |   |
| Other  extraordinary, unusual or non-recurring items(2)      |       |                                | 7.6        |   |   |
| Adjustment for  pro-forma effect of material acquisitions(3) |       |                                | 3.3        |   |   |
| Credit Agreement  EBITDA                                     |       |                                | $          | 187.4 |   |   |

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(1)          Non-cashcharges include pension, postretirement and post employment benefit expenses,net of cash contributed to the respective benefit plans in that year;amortization of direct response catalog costs for those catalogs with usefullives greater than one year; and LIFO adjustments.

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

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

Thetest periods for compliance with the financial covenants in the creditagreement for our Senior Secured Credit Facility began on July 1, 2004.The financial covenants specify, among other things, the following requirementsfor each four-quarter period ended during the following test periods:
| **Test Period**                                | ** ** | ** ** | ** **    | **Consolidated Debt to  Credit Agreement EBITDA  Leverage Ratio Not More Than** | ** ** | **Credit Agreement EBITDA  to Interest Expense Ratio  Not Less Than** | ** **    |   |
|-----------------------------------------------------|------------|------------|---------------|-------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|---------------|--------|
| July 1,  2004—December 30, 2005      |       |       | 7.25  to 1.00 |                                                                                                                    |       |                                                                                                     | 1.80  to 1.00 |   |   |
| December 31,  2005—December 30, 2006 |       |       | 7.00  to 1.00 |                                                                                                                    |       |                                                                                                     | 1.90  to 1.00 |   |   |
| December 31,  2006—December 30, 2007 |       |       | 6.50  to 1.00 |                                                                                                                    |       |                                                                                                     | 2.00  to 1.00 |   |   |
| December 31,  2007—December 30, 2008 |       |       | 6.00  to 1.00 |                                                                                                                    |       |                                                                                                     | 2.10  to 1.00 |   |   |
| December 31,  2008—December 30, 2009 |       |       | 5.50  to 1.00 |                                                                                                                    |       |                                                                                                     | 2.20  to 1.00 |   |   |
| December 31,  2009—December 30, 2010 |       |       | 5.00  to 1.00 |                                                                                                                    |       |                                                                                                     | 2.30  to 1.00 |   |   |
| December 31,  2010 and thereafter              |       |       | 5.00 to 1.00  |                                                                                                                    |       |                                                                                                     | 2.40 to 1.00  |   |   |
|                                                     |            |            |               |                                                                                                                         |            |                                                                                                          |               |        |  |  |  |  |  |

 

Thetable below sets forth the specified debt to Credit Agreement EBITDA leverageratio and Credit Agreement EBITDA to interest expense ratio for the periodindicated.
| ** **                                                             | ** ** | **12 Months Ended** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                             | ** ** | **June 30, 2005**   | ** ** |
| ** **                                                             | ** ** | **(Unaudited)**               | ** ** |
| Consolidated Debt  to Credit Agreement EBITDA Leverage Ratio           |       |                          | 5.7        |   |   |
| Credit Agreement EBITDA  to Credit Agreement Interest Expense Ratio(1) |       |                          | 2.9        |   |   |

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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 CDRV Investors, Inc.**

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

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

**Critical Accounting Policies**

The 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 

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makeestimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenues and expensesduring the reporting period. On an ongoing basis, management evaluates itsestimates and judgments, including, among others, those related to revenuerecognition, environmental liabilities, reserves for accounts receivable andinventories, impairment of goodwill and intangible assets, pension plans,rebates from suppliers, agreements with customers, and product liability. Thoseestimates 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” inthe Company’s Annual Report on Form 10-K for the year ended December 31,2004 for the Company’s critical accounting policies.

**Item3—*Quantitative and Qualitative Disclosure about Market Risk***

Refer to “Item 7A—Quantitativeand Qualitative Disclosures about Market Risk” included in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2004, forthe Company’s quantitative and qualitative disclosure about market risk. Therewas no material change in such information as of June 30, 2005.

**Item 4—*Controls and Procedures***

In connection with the preparation of this QuarterlyReport on Form 10-Q, management carried out an evaluation, with theparticipation of the Chief Executive Officer and the Executive Vice Presidentand Chief Financial Officer, of the effectiveness of the disclosure controlsand procedures pursuant to Rule 13a-15 of the Securities andExchange Act of 1934. Based on that evaluation, the Chief Executive Officer andthe Executive Vice President and Chief Financial Officer have concluded thatour disclosure controls and procedures were effective at a reasonable level asof June 30, 2005.

There were no changes in our internal control overfinancial reporting that occurred during the quarter ended June 30, 2005that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

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**Part II.   OTHER INFORMATION**

**Item 6—*Exhibits***
| **Exhibit  Number** | ** ** | **Description of Documents**                                                                                                 | ** ** | **Method of Filing** |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|
| 31.1                |       | Certification of Principal Executive Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                |       | Filed herewith.      |
| 31.2                |       | Certification of Principal Financial Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                |       | Filed herewith.      |
| 32.1                |       | Certificate of Principal Executive Officer pursuant  to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002). |       | Furnished herewith.  |
| 32.2                |       | Certificate of Principal Financial Officer pursuant  to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002). |       | Furnished herewith.  |

 

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**SIGNATURE**

Pursuantto the requirements of Sections 13 or 15(d) of the Securities Exchange Actof 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.
|                      |   | VWR INTERNATIONAL, INC. |
|----------------------|--------|-------------------------|
|                 |   | By:                     |   | /s/ JACK L. WYSZOMIERSKI |
|                 |   | Name:                   |   | Jack L. Wyszomierski |
|                 |   | Title:                  |   | *Executive Vice President and Chief Financial  Officer (Principal Financial and Accounting Officer)* |
| August 12, 2005 |   |                    |   |   |

 

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