**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

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**FORM 10-Q**

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| **(Mark One)** | ** **                                                                                              |
|----------------|---------------------------------------------------------------------------------------------------------|
| **S**          | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
| ** **     | **For the quarterly period ended March 31,  2007**                                                 |
| ** **     | **or**                                                                                                  |
| **o**          | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

**For the transition period from                  to                     **

**Commission file 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  incorporation or organization)                                      |   | (I.R.S. Employer  Identification No.) |
| **1310 Goshen Parkway  P.O. Box 2656  West Chester, PA**(Address of principal executive offices) |   | **19380**(Zip code)                   |

 

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

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes  o   No  x

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o           Acceleratedfiler o           Non-acceleratedfiler x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes  o    No  x

As of March 31, 2007,there was no established public market for the registrant’s common stock, parvalue $0.01 per share. The number of shares of the registrant’s common stockoutstanding at May 14, 2007 was 100.

 

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**VWR INTERNATIONAL,INC.FORM 10-QFOR THE QUARTER ENDED MARCH 31, 2007**

**INDEX**

**PART I. FINANCIAL INFORMATION:**

|                                       |                                                                                                                                                 | **Page No.** |
|---------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|
| Item 1.                               | Financial Statements:                                                                                                                                |              |   |   |
|                                  | Consolidated  Balance Sheets—as of March 31, 2007 (Unaudited) and December 31,  2006                                                  |              | 1 |   |
|                                  | Consolidated  Statements of Operations (Unaudited)—for the three months ended  March 31, 2007 and 2006                                     |              | 2 |   |
|                                  | Consolidated  Statement of Stockholders’ Equity and Other Comprehensive Income (Unaudited)—for  the three months ended March 31, 2007 |              | 3 |   |
|                                  | Consolidated  Statements of Cash Flows (Unaudited)—for the three months ended  March 31, 2007 and 2006                                     |              | 4 |   |
|                                  | Notes to Consolidated Financial Statements (Unaudited)                                                                                               |              | 5 |   |
| Item 2.                               | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                          |              | 16 |   |
| Item 3.                               | Quantitative and Qualitative Disclosures about Market  Risk                                                                                          |              | 25 |   |
| Item  4.                              | Controls  and Procedures                                                                                                                             |              | 25 |   |
| **PART II.  OTHER INFORMATION:** |                                                                                                                                                 |              |   |
| Item  1.                              | Legal  Proceedings                                                                                                                                   |              | 26 |   |
| Item  1A.                             | Risk  Factors                                                                                                                                        |              | 26 |   |
| Item 6.                               | Exhibits                                                                                                                                             |              | 26 |   |
| Signature                             |                                                                                                                                                 | 27                |   |

 

i

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**PART I—FINANCIALINFORMATION**

**Item 1—*Financial Statements***

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

| ** **                                                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                    | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| ** **                                                                    | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| **Assets**                                                                    |       |               |       |                  |       |   |   |   |   |
| Current Assets:                                                               |       |               |       |                  |       |   |   |   |   |
| Cash and cash equivalents                                                     |       |               | $          | 137.4                 |       |   |   | $ | 138.1 |   |   |
| Trade accounts receivable, less reserves of $9.7 and  $9.8, respectively      |       |               | 478.7      |                  |       |   | 452.7 |   |   |
| Other receivables                                                             |       |               | 26.5       |                  |       |   | 36.1 |   |   |
| Inventories                                                                   |       |               | 255.2      |                  |       |   | 260.6 |   |   |
| Other current assets                                                          |       |               | 24.4       |                  |       |   | 20.5 |   |   |
| Total current assets                                                          |       |               | 922.2      |                  |       |   | 908.0 |   |   |
| Property and  equipment, net                                                  |       |               | 157.2      |                  |       |   | 156.9 |   |   |
| Investments                                                                   |       |               | 8.7        |                  |       |   | 8.3 |   |   |
| Goodwill                                                                      |       |               | 936.4      |                  |       |   | 933.1 |   |   |
| Other intangible  assets, net                                                 |       |               | 550.5      |                  |       |   | 552.3 |   |   |
| Deferred income  taxes                                                        |       |               | 9.6        |                  |       |   | 7.2 |   |   |
| Other assets                                                                  |       |               | 35.2       |                  |       |   | 35.9 |   |   |
| Total assets                                                                  |       |               | $          | 2,619.8               |       |   |   | $ | 2,601.7 |   |   |
| **Liabilities  and Stockholders’ Equity**                                |       |               |       |                  |       |   |   |   |   |
| Current Liabilities:                                                          |       |               |       |                  |       |   |   |   |   |
| Short-term portion of debt and current portion of  capital lease obligations  |       |               | $          | 20.3                  |       |   |   | $ | 38.3 |   |   |
| Accounts payable                                                              |       |               | 378.2      |                  |       |   | 380.8 |   |   |
| Accrued expenses                                                              |       |               | 171.4      |                  |       |   | 169.1 |   |   |
| Total current liabilities                                                     |       |               | 569.9      |                  |       |   | 588.2 |   |   |
| Long-term debt                                                                |       |               | 950.7      |                  |       |   | 948.8 |   |   |
| Capital lease  obligations                                                    |       |               | 4.6        |                  |       |   | 4.8 |   |   |
| Other long-term  liabilities                                                  |       |               | 90.3       |                  |       |   | 80.5 |   |   |
| Deferred income  taxes                                                        |       |               | 227.9      |                  |       |   | 227.0 |   |   |
| Total liabilities                                                             |       |               | 1,843.4    |                  |       |   | 1,849.3 |   |   |
| Parent Company  common stock purchase subject to guarantee agreement          |       |               | 0.5        |                  |       |   | 0.5 |   |   |
| Commitments and  contingences                                                 |       |               |       |                  |       |   |   |   |   |
| Stockholders’ equity:                                                    |       |               |       |                  |       |   |   |   |   |
| Common stock, $0.01 par value; 100 shares authorized,  issued and outstanding |       |               | —     |                  |       |   | — |   |   |
| Additional paid-in capital                                                    |       |               | 560.2      |                  |       |   | 559.2 |   |   |
| Retained earnings                                                             |       |               | 158.9      |                  |       |   | 141.9 |   |   |
| Accumulated other comprehensive income                                        |       |               | 56.8       |                  |       |   | 50.8 |   |   |
| Total stockholders’ equity                                               |       |               | 775.9      |                  |       |   | 751.9 |   |   |
| Total liabilities and  stockholders’ equity                              |       |               | $          | 2,619.8               |       |   |   | $ | 2,601.7 |   |   |

 

See accompanying notes to consolidated financial statements.

1

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

| ** **                                    | ** ** | **Three Months  Ended  March 31,** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| Net sales                                     |       | $                                            | 843.1      |   | $ | 795.8 |   |
| Cost of goods  sold                           |       | 604.9                                        |       | 581.4 |   |
| Gross profit                                  |       | 238.2                                        |       | 214.4 |   |
| Selling, general  and administrative expenses |       | 181.3                                        |       | 168.5 |   |
| Restructuring  credits                        |       | —                                       |       | (0.2 | ) |
| Operating income                              |       | 56.9                                         |       | 46.1 |   |
| Interest income                               |       | (1.7                                         | )          | (1.3 | ) |
| Interest expense                              |       | 20.0                                         |       | 20.7 |   |
| Other (income)  expense, net                  |       | (0.1                                         | )          | 0.8 |   |
| Income before income taxes                    |       | 38.7                                         |       | 25.9 |   |
| Income tax  provision                         |       | 14.3                                         |       | 9.8 |   |
| Net income                                    |       | $                                            | 24.4       |   | $ | 16.1 |   |

 

See accompanying notes to consolidated financial statements.

2

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**VWRINTERNATIONAL, INC.Consolidated Statement of Stockholders’ Equity and Other Comprehensive IncomeThree Months Ended March 31, 2007(Dollars in millions)(Unaudited)**

| ** **                                                                           | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------|------------|------------|------------|----------------|------------|--------------|------------|-------------------|------------|------------|------------|
| ** **                                                                           | ** ** | ** ** | ** ** | **Additional** | ** ** | ** **   | ** ** | **other**         | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | **Common** | ** ** | **paid-in**    | ** ** | **Retained** | ** ** | **comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | **stock**  | ** ** | **capital**    | ** ** | **earnings** | ** ** | **income**        | ** ** | **Total**  | ** ** |
| Balance at  January 1, 2007                                                     |       |       | $          | —         |       |         |       | $                 | 559.2      |       |       |   | $ | 141.9 |   |   |   | $ | 50.8 |   |   | $ | 751.9 |   |
| Capital contributions                                                                |       |       | —     |           |       |         | 0.3        |              |       |       | —     |   |   |   | — |   |   | 0.3 |   |
| Capital contribution for compensation expense  recognized for Parent Company options |       |       | —     |           |       |         | 0.5        |              |       |       | —     |   |   |   | — |   |   | 0.5 |   |
| Tax benefit related to Parent Company stock options                                  |       |       | —     |           |       |         | 0.1        |              |       |       | —     |   |   |   | — |   |   | 0.1 |   |
| Capital  contribution for compensation expense recognized for amortization of        |       |       |       |           |       |         |       |              |       |       |       |   |   |   |   |   |   |   |   |
| Parent Company restricted common stock                                               |       |       | —     |           |       |         | 0.1        |              |       |       | —     |   |   |   | — |   |   | 0.1 |   |
| Dividend                                                                             |       |       | —     |           |       |         | —     |              |       |       | (7.4       | ) |   |   | — |   |   | (7.4 | ) |
| Comprehensive  income:                                                               |       |       |       |           |       |         |       |              |       |       |       |   |   |   |   |   |   |   |   |
| Net income                                                                           |       |       | —     |           |       |         | —     |              |       |       | 24.4       |   |   |   | — |   |   | 24.4 |   |
| Foreign currency translation adjustment                                              |       |       | —     |           |       |         | —     |              |       |       | —     |   |   |   | 6.0 |   |   | 6.0 |   |
| Total comprehensive income                                                           |       |       |       |           |       |         |       |              |       |       |       |   |   |   |   |   |   | 30.4 |   |
| Balance at  March 31, 2007                                                      |       |       | $          | —         |       |         |       | $                 | 560.2      |       |       |   | $ | 158.9 |   |   |   | $ | 56.8 |   |   | $ | 775.9 |   |

 

See accompanying notes to consolidated financial statements.

3

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

| ** **                                                                         | ** ** | **Three Months  Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                                     | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                             |       |                                         |       |   |   |
| Net income                                                                         |       | $                                            | 24.4       |   | $ | 16.1 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                         |       |   |   |
| Depreciation and amortization                                                      |       | 10.0                                         |       | 8.2 |   |
| Loss (gain) on sale of assets                                                      |       | 0.2                                          |       | (0.1 | ) |
| Non-cash credit for restructuring                                                  |       | —                                       |       | (0.2 | ) |
| Non-cash equity compensation expense                                               |       | 0.6                                          |       | 0.5 |   |
| Amortization of debt issuance costs                                                |       | 1.4                                          |       | 1.5 |   |
| Deferred income tax expense (benefit)                                              |       | 5.0                                          |       | (0.3 | ) |
| Provision for doubtful accounts                                                    |       | 0.8                                          |       | 0.7 |   |
| Changes in  working capital:                                                       |       |                                         |       |   |   |
| Trade accounts receivable                                                          |       | (24.0                                        | )          | (30.2 | ) |
| Other receivables                                                                  |       | 9.8                                          |       | 9.5 |   |
| Inventories                                                                        |       | 6.2                                          |       | 12.5 |   |
| Other assets                                                                       |       | (3.7                                         | )          | (2.8 | ) |
| Accounts payable                                                                   |       | 6.0                                          |       | 19.5 |   |
| Accrued expenses and other long-term liabilities                                   |       | 4.3                                          |       | 22.0 |   |
| Net cash provided by operating activities                                          |       | 41.0                                         |       | 56.9 |   |
| Cash flows from  investing activities:                                             |       |                                         |       |   |   |
| Capital expenditures                                                               |       | (5.9                                         | )          | (4.8 | ) |
| Acquisition of business and transaction costs                                      |       | (0.1                                         | )          | (0.2 | ) |
| Proceeds from sales of property and equipment                                      |       | 0.1                                          |       | 0.2 |   |
| Net cash used in investing activities                                              |       | (5.9                                         | )          | (4.8 | ) |
| Cash flows from  financing activities:                                             |       |                                         |       |   |   |
| Proceeds from debt                                                                 |       | 2.7                                          |       | 0.1 |   |
| Repayment of debt                                                                  |       | (21.0                                        | )          | (45.3 | ) |
| Net change in bank checks outstanding                                              |       | (10.4                                        | )          | (9.9 | ) |
| Capital contributions                                                              |       | 0.2                                          |       | — |   |
| Cash paid to amend Senior Secured Credit Facility                                  |       | (0.3                                         | )          | — |   |
| Dividend                                                                           |       | (7.4                                         | )          | — |   |
| Net cash used in financing activities                                              |       | (36.2                                        | )          | (55.1 | ) |
| Effect of  exchange rate changes on cash                                           |       | 0.4                                          |       | — |   |
| Net decrease in cash and cash equivalents                                          |       | (0.7                                         | )          | (3.0 | ) |
| Cash and cash  equivalents beginning of period                                     |       | 138.1                                        |       | 126.1 |   |
| Cash and cash  equivalents end of period                                           |       | $                                            | 137.4      |   | $ | 123.1 |   |
| Supplemental disclosures  of cash flow information:                                |       |                                         |       |   |   |
| Cash paid during  the period for:                                                  |       |                                         |       |   |   |
| Interest                                                                           |       | $                                            | 9.8        |   | $ | 9.8 |   |
| Income taxes  paid, net                                                            |       | $                                            | 8.1        |   | $ | 3.1 |   |

 

See accompanying notes to consolidated financial statements.

4

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

**(1)   Nature of Operations and Basis ofPresentation**

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

VWR International, Inc.and its subsidiaries (“VWR,” the “Company,” “we” or “our”) distributescientific supplies, chemicals, and equipment and provide services, primarilyin North America and Europe. The business is diversified across products,geographic regions and customer segments. We report financial results on thebasis of the following three business segments: North American laboratorydistribution (“North American Lab”), European laboratory distribution (“EuropeanLab”) and Science Education. In addition, we have Asia Pacific operations,which for purposes of external reporting, are embedded within the NorthAmerican Lab and European Lab segments. Both the North American Lab andEuropean Lab segments are comprised of the distribution of supplies tocustomers in major pharmaceutical, biotechnology, chemical, technology, foodprocessing and consumer products industries, as well as governmental agencies,universities and research institutes, and environmental organizations. ScienceEducation is comprised of the manufacture and distribution of scientificsupplies and specialized kits to primary and secondary schools.

Ourultimate parent company is CDRV Investors, Inc. (“CDRV”). See Note 12for discussion of CDRV’s agreement to be acquired by an affiliate of MadisonDearborn Partners, LLC.

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

The accompanyingconsolidated financial statements include the accounts of the Company afterelimination of all intercompany balances and transactions. The financialstatements included herein have been prepared by the Company without audit,pursuant to the rules and regulations of the Securities and ExchangeCommission. Certain information and footnote disclosures normally included infinancial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America have been condensed oromitted pursuant to such rules and regulations. The December 31, 2006balance sheet is the balance sheet included in the audited financial statementsas shown in the Company’s Annual Report on Form 10-K for the yearended December 31, 2006. The Company believes that the disclosuresincluded herein are adequate to make the information presented not misleadingin any material respect when read in conjunction with the financial statements,footnotes and related disclosures included in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2006.

The financial informationpresented herein reflects all adjustments (consisting only of normal-recurringadjustments) that are, in the opinion of management, necessary for a fairpresentation of the****results forthe interim periods presented. The results for interim periods are not necessarilyindicative of the results to 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)   NewAccounting Standards**

The following accountingstandards were adopted during the first quarter of 2007.

5

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

During July 2006, theFinancial Accounting Standards Board (“FASB”) issued Interpretation No. 48,*Accounting for Uncertainty in Income Taxes*(“FIN 48”). This Interpretation clarifies the accounting for uncertainty inincome taxes recognized in accordance with Statement of Financial AccountingStandards (“SFAS”) No. 109, *Accountingfor Income Taxes.*FIN 48 provides guidance on the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return, derecognition, classification, interest and penalties,accounting in interim periods, disclosures, and transition. FIN 48 is effectivefor fiscal years beginning after December 15, 2006. We adopted FIN 48effective January 1, 2007. See Note 3 for further information related toour adoption of FIN 48.

During July 2006, theFASB issued Emerging Issues Task Force (“EITF”) Issue No. 06-3, *How Taxes Collected from Customers and Remitted to GovernmentalAuthorities Should Be Presented in the Income Statement (That Is, Gross versusNet Presentation)* (“EITF 06-3”), which discusses the presentationof certain taxes in the income statement on either a gross or netbasis. Taxes within the scope of EITF 06-3 include any taxesassessed by a governmental authority that are directly imposed on arevenue-producing transaction between a seller and a customer and may include,but are not limited to, sales taxes, use taxes, value-added taxes, and certainexcise taxes. The presentation of these taxes on either a gross (included inrevenues and costs) or a net (excluded from revenues) basis is an accountingpolicy decision that is required to be disclosed, as well as, the amounts ofany taxes that are reported on a gross basis. EITF 06-3 is effective forinterim and annual periods beginning after December 15, 2006; accordingly,we adopted EITF 06-3 effective January 1, 2007. We record such taxeswithin the scope of EITF 06-3 on a net basis. The adoption of EITF 06-3did not result in a change in our accounting policy and, accordingly, did nothave a material effect on the Company’s financial position or results ofoperations.

The following accountingstandards will be adopted in the future.

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

During February 2007,the FASB issued SFAS No. 159, *The FairValue Option for Financial Assets and Financial Liabilities including anAmendment of SFAS No. 115* (“SFAS 159”). This Statement permitsentities to choose, at specified election dates, to measure eligible items atfair value and its objective is to improve financial reporting by providingentities with the opportunity to mitigate volatility in reported earningscaused by measuring related assets and liabilities differently without havingto apply complex hedge accounting provisions. SFAS 159 is effective for fiscalyears beginning after November 15, 2007. We are currently evaluating theimpact this Statement will have on our consolidated financial statements.

**(3)   Adoptionof FIN 48**

FIN 48 requires us torecognize in our consolidated financial statements, the impact of a taxposition if that tax position is more likely than not to be sustained uponexamination, based on technical merits. As of January 1, 2007, we haduncertain tax positions of approximately $7.0. Of the total, $2.1 would affectour effective tax rate and the remaining $4.9 would result in an adjustment togoodwill. In addition, as of 

6

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

January 1,2007, we had accrued interest related to our uncertain tax positions ofapproximately $1.3. Interest and penalties related to uncertain tax positionsare included in income tax expense.

We conduct businessglobally and, as a result, the Company or one or more of our subsidiaries,files income tax returns in the U.S. federal jurisdiction and various state andforeign jurisdictions. In the normal course of business, we are subject toexamination by taxing authorities mainly throughout North America and Europe,including such major jurisdictions as Germany, France, the UK, Belgium, Swedenand the U.S.

We have concluded all U.S. federal income tax mattersfor years through 2003. Our U.S. federal income tax returns for 2004 and 2005are currently under examination. Substantially all income tax matters in themajor foreign jurisdictions that we operate have been concluded for yearsthrough 2000. Examinations are currently in process in Belgium and Germany.Except for one uncertain tax position, that has been reserved, substantiallyall material state and local income tax matters have been finalized through2001. Based on the status of examinations, it is not likely that theseexaminations will be concluded in the next twelve months, and accordingly, itis not possible to estimate the impact in 2007, if any, to the reserve foruncertain tax positions. There have been no significant changes to the statusof the examinations during the quarter ended March 31, 2007.

At the date of adoption,we identified $2.2 relating to the recognition of the indirect tax effect ofthe federal benefit on tax uncertainties. This benefit was partially offset byother net tax uncertainties, primarily related to state taxes, of $0.6. Thesetax uncertainties relate to contingencies that existed prior to our acquisitionin April 2004; and, as such, the Company increased deferred tax assets by$1.3, decreased goodwill by $1.6 and decreased our reserves for uncertain taxpositions by $0.3.

**(4)   Stock-BasedCompensation**

TheCompany has certain share-based compensation programs under the CDRV Investors, Inc.Stock Incentive Plan (the “Stock Plan”), which include shares, options andrestricted stock units. Refer to Note 15 in our Annual Report on Form 10-Kfor the year ended December 31, 2006 for information on the valuation andaccounting for these programs. During the three months ended March 31,2007, CDRV granted 1,000 options to one of our employees and during the threemonths ended March 31, 2006, CDRV granted 58,929 options to our Presidentand Chief Executive Officer. In addition, CDRV granted 3,500 restricted stockunits to certain of our officers at a grant-date fair value of $98.64 duringthe three months ended March 31, 2007. These awards vest in equal annualinstallments over a five-year period and will vest earlier in certaincircumstances if CDRV has a change in control. The fair value of each optionwas estimated using the Black-Scholes option-pricing model. The weightedaverage fair value of options granted and the assumptions used for each of thereporting periods are as follows:

| ** **                     | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------|------------|--------------------------------------------------|------------|
| ** **                     | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Fair value of  options granted |       | $                                                | 42.96      |   | $ | 33.61 |   |
| Risk-free  interest rate       |       | 4.53                                             | %          | 4.76 | % |
| Expected life of  options      |       | 6.5 years                                        |       | 6.5 years |   |
| Volatility                     |       | 34                                               | %          | 35 | % |
| Expected dividend yield        |       | 0.0                                              | %          | 0.0 | % |
|                                |            |                                                  |            |  |  |  |  |

 

7

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

Share-basedcompensation charged to selling, general and administrative expenses was $0.6and $0.5 for the three months ended March 31, 2007 and 2006, respectively.The following is a summary of outstanding CDRV stock options as of March 31,2007.

| ** **   | ** ** | **Weighted**    | ** **             | ** **                   | ** ** | ** **                   | ** ** |
|--------------|------------|-----------------|------------------------|------------------------------|------------|------------------------------|------------|
| ** **   | ** ** | **Average**     | ** **             | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
| ** **   | ** ** | **Remaining**   | ** **             | **Number**                   | ** ** | **Aggregate**                | ** ** | **Number** | ** ** | **Aggregate** | ** ** |
| **Exercise** | ** ** | **Contractual** | ** **             | **of**                       | ** ** | **Intrinsic**                | ** ** | **of** | ** ** | **Intrinsic** | ** ** |
| ** **   | **Price**  | ** **      | ** **             | **Life (Years)**        | ** ** | **Shares**                   | ** ** | **Value** | ** ** | **Shares** | ** ** | **Value** | ** ** |
| $24.66       |       |            |     7.8 |                         |       | 445,591                      |       |   | $ | 33.0 |   |   | 156,664 |   |   | $ | 11.6 |   |   |
|   59.64 |       |            | 9.2                    |                         |       | 61,243                       |       |   | 2.4 |   |   | — |   |   | — |   |   |
|   98.64 |       |            | 10.0                   |                         |       | 1,000                        |       |   | — |   |   | — |   |   | — |   |   |
|         |       |            |                   |                         |       | 507,834                      |       |   | $ | 35.4 |   |   | 156,664 |   |   | $ | 11.6 |   |   |
|              |            |                 |                        |                              |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

As of March 31, 2007, there were 24,833outstanding restricted stock units.

As of March 31, 2007,the aggregate estimated future compensation expense related to unvested optionsoutstanding and the unamortized value of restricted stock units issued is $7.8.This expense will be recognized over a weighted average period of 3.7 years.

**(5)   Restructuring**

***(a)******         Restructuring as a result of our acquisitionin April 2004***

Thefollowing table sets forth the activity associated with the Company’sliabilities for restructuring as a result of our acquisition, for the threemonths ended March 31, 2007.

| ** **                       | ** ** | **Severance**   | ** ** | ** **     | ** ** | ** ** | ** ** |
|----------------------------------|------------|-----------------|------------|----------------|------------|------------|------------|
| ** **                       | ** ** | **and**         | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                       | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | **benefits**    | ** ** | **related**    | ** ** | **Total**  | ** ** |
| Balance at  January 1, 2007 |       |            | $          | 3.6            |       |       |       | $ | 4.7 |   |   | $ | 8.3 |   |
| Cash payments/other              |       |            | (0.3       | )              |       |       | (0.2       | ) |   | (0.5 | ) |
| Currency translation changes     |       |            | —     |           |       |       | 0.1        |   |   | 0.1 |   |
| Balance at  March 31, 2007  |       |            | $          | 3.3            |       |       |       | $ | 4.6 |   |   | $ | 7.9 |   |

 

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

In addition, we initiated cost reduction programs inresponse to relatively static market conditions and implemented reductions inforce and other cost containment measures during 2005. In connection with theseactions, we recorded accruals and charges to operations related to severanceand facility exit costs of $20.6 in the year ended December 31, 2005.

8

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

Thefollowing table sets forth the activity associated with the Company’sliabilities for these cost reduction programs, for the three months ended March 31,2007 and 2006.

| ** **                              | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------------------|------------|------------------------------------------------------|------------|
| ** **                              | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| ** **                              | ** ** | **Severance**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | **Severance** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **and**                                              | ** ** | ** ** | ** ** | ** ** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **termination**                                      | ** ** | **Facilities** | ** ** | ** ** | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **benefits**                                         | ** ** | **related** | ** ** | **Total** | ** ** | **benefits** | ** ** | **related** | ** ** | **Total** | ** ** |
| Balance at  beginning of period         |       |                                                 | $          | 1.6 |   |   |   | $ | — |   |   | $ | 1.6 |   |   | $ | 9.8 |   |   |   | $ | 0.3 |   |   | $ | 10.1 |   |
| Accruals credited to earningsby segment |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab                      |       |                                                 | —     |   |   |   | — |   |   | — |   |   | (0.2 | ) |   |   | — |   |   | (0.2 | ) |
| Cash payments/other                     |       |                                                 | (0.3       | ) |   |   | — |   |   | (0.3 | ) |   | (5.4 | ) |   |   | (0.2 | ) |   | (5.6 | ) |
| Currency translation changes            |       |                                                 | —     |   |   |   | — |   |   | — |   |   | — |   |   |   | — |   |   | — |   |
| Balance at end of period                |       |                                                 | $          | 1.3 |   |   |   | $ | — |   |   | $ | 1.3 |   |   | $ | 4.2 |   |   |   | $ | 0.1 |   |   | $ | 4.3 |   |

 

As of March 31, 2007, $3.4 of our aggregaterestructuring liabilities are included in accrued expenses and $5.8 areincluded in other long-term liabilities. As of December 31, 2006, $4.1 ofour aggregate restructuring liabilities are included in accrued expenses and$5.8 are included in other long-term liabilities.

**(6)**   Goodwill and OtherIntangible Assets

***(a)******         Goodwill***

Goodwillrepresents the excess of costs over fair value of assets of businessesacquired. Changes in the carrying amount of goodwill by segment for the threemonths ended March 31, 2007 are as follows:

| ** **                                                         | ** ** | **North**             | ** ** | **European** | ** ** | **Science**   | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------|------------|--------------|------------|---------------|------------|------------|------------|
| ** **                                                         | ** ** | **American Lab** | ** ** | **Lab**      | ** ** | **Education** | ** ** | **Total**  | ** ** |
| Balance at  January 1, 2007                                   |       |                  | $          | 648.6        |       |          |       | $          | 216.8      |   |   |   | $ | 67.7 |   |   | $ | 933.1 |   |
| Adjustment related to  adoption of FIN 48 (See Note 3)             |       |                  | (1.6       | )            |       |          | —     |       |       |   | — |   |   | (1.6 | ) |
| Additional consideration  for Sino Chemical Company (Pte.) Limited |       |                  | 0.1        |         |       |          | —     |       |       |   | — |   |   | 0.1 |   |
| Currency translation  changes                                      |       |                  | 1.8        |         |       |          | 3.0        |       |       |   | — |   |   | 4.8 |   |
| Balance at March 31, 2007                                     |       |                  | $          | 648.9        |       |          |       | $          | 219.8      |   |   |   | $ | 67.7 |   |   | $ | 936.4 |   |

 

 

9

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

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

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

| ** **                                                                                                   | ** ** | **Weighted**     | ** ** | ** **         | ** ** | ** **            | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                   | ** ** | **Average**      | ** ** | ** **         | ** ** | ** **            | ** ** |
| ** **                                                                                                   | ** ** | **Amortization** | ** ** | ** **         | ** ** | ** **            | ** ** |
| ** **                                                                                                   | ** ** | **Period**       | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                   | ** ** | **(Years)**      | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Amortizable intangible assets:                                                                               |       |             |       |               |       |                  |       |   |   |   |   |   |   |
| Customer relationships  in North America (net of accumulated amortization of $22.4 and $20.5,  respectively) |       |             | 32.8       |               |       |                  | $          | 223.8 |   |   |   | $ | 225.4 |   |   |
| Customer relationships  in Europe (net of accumulated amortization of $12.6 and $11.4, respectively)         |       |             | 20.3       |               |       |                  | 74.4       |   |   |   | 74.6 |   |   |
| Chemical supply  agreements (net of accumulated amortization of $10.0 and $9.1, respectively)                |       |             | 10.0       |               |       |                  | 23.1       |   |   |   | 23.6 |   |   |
| Other (net of  accumulated amortization of $1.1 and $1.0, respectively)                                      |       |             | 4.3        |               |       |                  | 0.2        |   |   |   | 0.2 |   |   |
| Total amortizable  intangible assets (net of accumulated amortization of $46.1 and $42.0,  respectively)     |       |             |       |               |       |                  | 321.5      |   |   |   | 323.8 |   |   |
| Indefinite-lived intangible assets:                                                                          |       |             |       |               |       |                  |       |   |   |   |   |   |   |
| Trademarks and  tradenames                                                                                   |       |             |       |               |       |                  | 229.0      |   |   |   | 228.5 |   |   |
| Total intangible assets, net                                                                                 |       |             |       |               |       |                  | $          | 550.5 |   |   |   | $ | 552.3 |   |   |

 

Amortization expense was$3.9 for both the three months ended March 31, 2007 and 2006.

**(7)**   Debt

Thefollowing is a summary of our debt obligations:

| ** **                                       | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Senior Secured Credit  Facility                  |       |               | $          | 430.0                 |       |   |   | $ | 448.7 |   |   |
| 6.875% Unsecured Senior  Notes due 2012          |       |               | 200.0      |                  |       |   | 200.0 |   |   |
| 8% Unsecured Senior  Subordinated Notes due 2014 |       |               | 320.0      |                  |       |   | 320.0 |   |   |
| Loan from CDRV                                   |       |               | 19.1       |                  |       |   | 16.5 |   |   |
| Loan from CDRV  Holdings, Inc.              |       |               | 0.7        |                  |       |   | 0.6 |   |   |
| Bank loans                                       |       |               | 0.2        |                  |       |   | 0.3 |   |   |
| Capital leases                                   |       |               | 5.6        |                  |       |   | 5.8 |   |   |
| Total debt                                       |       |               | 975.6      |                  |       |   | 991.9 |   |   |
| Less short-term portion                          |       |               | (20.3      | )                     |       |   | (38.3 | ) |   |
| Total long term-portion                          |       |               | $          | 955.3                 |       |   |   | $ | 953.6 |   |   |

 

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

The Senior Secured Credit Facility provides foraggregate maximum borrowings of approximately $580.0 under (1) a term loanfacility providing for a loan denominated in Euros in an aggregate principalamount currently outstanding of $136.9 as of March 31, 2007, (2) a term loan facilityproviding for a term loan denominated in U.S. dollars in an aggregate principalamount currently outstanding of $293.1, and (3) a multi-currency revolvingcredit facility, providing for up to $150.0 in multi-currency revolving loans 

10

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

(reduced by the amount ofany standby and commercial letters of credit drawn under that facility)outstanding at any time. Undrawn amounts under the multi-currency revolvingcredit facility are available on a revolving credit basis for general corporatepurposes. As of March 31, 2007, noamount was outstanding under the multi-currency revolving creditfacility, and we had $9.5 of undrawn letters of credit and up to $140.5 of additional debt that could be borrowed asrevolving loans or under standby and commercial letters of credit.

The term loan facilities will mature in 2011 and themulti-currency revolving credit facility will mature in 2009. The principalamounts of the term loans are amortized in annual installments for the firstsix years and quarterly installments during the seventh year, subject to adjustmentif the Company makes optional or mandatory prepayments on the term loans.

Subject to certainexceptions, the Senior Secured Credit Facility is subject to mandatoryprepayment and reduction in an amount equal to:

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

·       50%of excess cash flow net of any voluntary principal prepayments (as defined) forany fiscal year unless certain leverage ratio targets are met.

Mandatory principalprepayments of $20.5 and $44.5 were made in March 2007 and 2006,respectively, based on excess cash flow generated in 2006 and 2005,respectively. The $20.5 was included in short-term debt in our consolidatedbalance sheet at December 31, 2006. The required principal prepayment for2006 was reduced partially due to a $60.0 voluntary principal prepayment madein September 2006.

***Security; Guarantees***

The obligations under the Senior Secured CreditFacility are guaranteed by our parent, CDRV Holdings, Inc., and certain ofour domestic subsidiaries, as that term is defined in the credit agreement. TheSenior Secured Credit Facility and the guarantees thereunder are secured by securityinterests in and pledges of or liens on substantially all of the tangible andintangible domestic assets of VWR.

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

***Interest***

At our election, theinterest rates applicable to the U.S. dollar-denominated term loan can be basedon a fluctuating rate of interest measured by reference to either (1) anadjusted London inter-bank offered rate, or LIBOR, plus a borrowing margin or (2) analternate base rate, or ABR, plus a borrowing margin. The interest rateapplicable to the Euro-denominated term loan is based on a fluctuating rate ofinterest measured by reference to an adjusted EURIBOR plus a borrowing margin.As of March 31, 2007, the interest rates on the U.S. dollar-denominatedand Euro-denominated term loans were 7.61% and 6.06%, respectively.

11

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

***Covenants***

The Senior Secured CreditFacility contains a number of covenants that, among other things, limit orrestrict our ability to dispose of assets, incur additional indebtedness, incurguarantee obligations, prepay other indebtedness, make acquisitions, engage inmergers or consolidations, change the business conducted as a whole, makecapital expenditures, or engage in certain transactions with affiliates. Inaddition, the Senior Secured Credit Facility requires us to comply withspecified financial ratios and tests, including a minimum interest expensecoverage ratio, a maximum leverage ratio and a maximum capital expenditurestest. As of March 31, 2007, we were in compliance with all covenants.

***Amendment***

In January 2007,we amended certain provisions in the credit agreement to provide us with moreflexibility to make dividends or other payments to CDRV Holdings, Inc. anddecreased the interest margin we pay on the Euro-denominated term loan by 50basis points. On March 1, 2007, we paid a dividend of $7.4 to CDRVHoldings, Inc.

***(b)******          The Senior Notes and Senior SubordinatedNotes***

The 6.875% UnsecuredSenior Notes due 2012 (“Senior Notes”) and 8% Unsecured Senior SubordinatedNotes due 2014 (“Senior Subordinated Notes”) require semiannual cash interestpayments on April 15 and October 15 to holders of record at the closeof business as of the preceding April 1 and October 1. The SeniorSubordinated Notes are subordinated in right of payment to all secured debt ofthe Company and the Senior Notes.

The Senior Notes areguaranteed on a senior basis by each of our significant domestic subsidiaries.The Senior Subordinated Notes are guaranteed on a senior subordinated basis byeach of our significant domestic subsidiaries. As of March 31, 2007,neither notes were guaranteed by any of our subsidiaries because noneconstitute a significant domestic subsidiary as defined in the indentures forthese notes.

Thesenotes contain a number of covenants which, among other things, limit our abilityto incur additional indebtedness, make distributions of cash or property, makeacquisitions, engage in transactions with affiliates and incur liens on assets.As of March 31, 2007, we were in compliance with all covenants. Upon achange of control, holders of these notes have the right to require the Companyto repurchase these notes at a purchase price equal to 101% of principal plusaccrued and unpaid interest through the date of repurchase. Subject to specificterms and conditions contained in the indentures for these notes, the SeniorNotes and Senior Subordinated Notes are redeemable at the Company’s optionprior to maturity.

***(c)******           Loan from CDRV***

The loan from CDRV is anunrestricted loan from CDRV that is due on demand and bears interest at theovernight U.S. dollar LIBOR rate, which was 5.48% as of March 31, 2007.

**(8)   DefinedBenefit Plans**

VWR sponsors variousretirement plans for most full-time employees. Pension plan benefits for thedefined benefit plans are based primarily on participants’ compensation andyears of credited service. It has been VWR’s policy to fund the minimum amountrequired by local regulations.

12

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

Effective June 1,2005, the U.S. plan was curtailed and future benefits were frozen effective May 31,2005 for most participants. Accordingly, most participants will earn no furtherbenefits under the plan after that date.

Netperiodic pension cost for our U.S. plan and our significant Non-U.S. plans inGermany, France and the UK for each of the reporting periods include thefollowing components:

| ** **                      | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------------------|------------|------------------------------------------------------|------------|
| ** **                      | ** ** | ** **                                           | ** ** | ** ** | ** ** | **German, French** | ** ** |
| ** **                      | ** ** | **U.S. Plan**                                   | ** ** | **and UK Plans** | ** ** |
| ** **                      | ** ** | **2007**                                             | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Service cost                    |       | $                                                    | 0.5        |   | $ | 0.7 |   | $ | 0.7 |   | $ | 0.7 |   |
| Interest cost                   |       | 2.2                                                  |       | 2.1 |   | 1.2 |   | 0.9 |   |
| Expected return on plan  assets |       | (2.7                                                 | )          | (2.3 | ) | (1.2 | ) | (0.9 | ) |
| Recognized net actuarial  loss  |       | —                                               |       | 0.1 |   | 0.1 |   | 0.1 |   |
| Net periodic pension cost       |       | $                                                    | —     |   | $ | 0.6 |   | $ | 0.8 |   | $ | 0.8 |   |

 

The Company madecontributions to the Non-U.S. plans of approximately $0.5 for the three monthsended March 31, 2007, and expects to make additional contributions to theU.S. and Non-U.S. plans of approximately $9.4 during the remainder of 2007.

**(9)   ComprehensiveIncome**

Comprehensiveincome is determined as follows:

| ** **                                            | ** ** | **Three Months  Ended** | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|
| ** **                                            | ** ** | **March 31,**           | ** ** |
| ** **                                            | ** ** | **2007**                     | ** ** | **2006** | ** ** |
| Net income                                            |       | $                            | 24.4       |   | $ | 16.1 |   |
| Other comprehensive  income:                          |       |                         |       |   |   |
| Foreign currency  translation adjustments             |       | 6.0                          |       | 6.2 |   |
| Unrealized gain on  derivatives, net of taxes of $0.3 |       | —                       |       | 0.5 |   |
| Comprehensive income                                  |       | $                            | 30.4       |   | $ | 22.8 |   |

 

**(10)   Commitments andContingencies**

The Company is involved in various environmental,contractual and product liability cases and claims which are considered routineto our business and from time to time we are named as a defendant in cases as aresult of our distribution of scientific supplies, including litigationresulting from the alleged distribution of products containing asbestos by usand certain of our predecessors. While the impact of this litigation hastypically been immaterial, there can be no assurance that the impact of pendingcases, including those described below, and any future claims will not bematerial to our business, financial condition and results of operations in thefuture.

During 2005, the German Federal Cartel Officeinitiated an investigation with regard to our European Distribution Agreementwith Merck KGaA. The purpose of the investigation is to determine whether thisagreement violates or otherwise infringes the general prohibition ofanti-competitive agreements under either German or EU rules. The Companysubmitted information to the German Federal Cartel Office in response to itsinitial request. During 2007, the German Federal Cartel Office hasrequested additional information that we have provided or are in the process ofproviding. We cannot 

13

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

assess the likely outcomeof the investigation or potential economic impact associated with an adverseruling. In connection with our acquisition in April 2004, we recordedintangible assets related to our European Distribution Agreement with MerckKGaA. As of March 31, 2007, the unamortized net book value of theseintangible assets is approximately $23.1.

On March 28, 2006,the Company was served with a complaint filed in the United States DistrictCourt, Western District of New York, by Corning Incorporated (“Corning”)alleging a breach of contract and unliquidated damages. In April 2006,Corning amended its complaint to allege trademark and unfair competitionclaims. In November 2006, the Court dismissed Corning’s breach of contractclaim, but in March 2007, reconsidered its ruling and has now permittedCorning to proceed with the claim. In January 2007, the Company filedcounterclaims for breach of rebate obligation, unfair competition and tortiousinterference. The Company believes Corning’s claims are without merit and willvigorously defend itself against those claims and pursue its counterclaims.

**(11)   SegmentFinancial Information**

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

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

| ** **                   | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------|------------|--------------------------------------------------|------------|
| ** **                   | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| **Net Sales**                |       |                                             |       |   |   |
| North American Lab           |       | $                                                | 501.4      |   | $ | 492.2 |   |
| European Lab                 |       | 313.6                                            |       | 272.9 |   |
| Science Education            |       | 28.1                                             |       | 30.7 |   |
| Total                        |       | $                                                | 843.1      |   | $ | 795.8 |   |
| **Operating Income**         |       |                                             |       |   |   |
| North American Lab           |       | $                                                | 33.0       |   | $ | 29.4 |   |
| European Lab                 |       | 22.9                                             |       | 14.3 |   |
| Science Education            |       | 1.0                                              |       | 2.4 |   |
| Total                        |       | 56.9                                             |       | 46.1 |   |
| Interest income              |       | (1.7                                             | )          | (1.3 | ) |
| Interest expense             |       | 20.0                                             |       | 20.7 |   |
| Other (income)  expense, net |       | (0.1                                             | )          | 0.8 |   |
| Income before  income taxes  |       | $                                                | 38.7       |   | $ | 25.9 |   |

 

 

14

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

**(12)**                        SubsequentEvents

We have a 24% investment in KMF Laborchemie HandelsGmbH (“KMF”), which is accounted for using the equity method. On April 2,2007, we acquired the remaining 76% interest in KMF. KMF is a German-basedscientific laboratory supply distribution firm that offers highly diversifiedchemicals and consumable products to the laboratory industry in Germany. Thepurchase price was approximately $21.0.

In April 2007, we sold a facility in Germany forapproximately $2.3. This sale will not have a material impact on our operatingresults.

In April 2007, CDRV notified the trustee fortheir Senior Floating Rate Notes that it intends to pay cash interest for theirquarterly payment due June 1, 2007 in accordance with the terms andconditions of their Senior Floating Rate Notes. Therefore, we will pay adividend of approximately $8.6 to CDRV Holdings, Inc. in the secondquarter of 2007 to enable CDRV to make this cash interest payment.

On May 2, 2007, CDRV entered into an Agreementand Plan of Merger (the “Merger Agreement”) pursuant to which it will beacquired by an affiliate of Madison Dearborn Partners, LLC (“MDP”). Under theMerger Agreement, the issued and outstanding shares of CDRV’s common stock andequity equivalents issued under the Stock Plan will be converted, on the termsset forth in the Merger Agreement, into the right to receive aggregate cashmerger consideration of approximately $2,196.0, less certain transactionexpenses and subject to certain other adjustments. The merger is expected to beconsummated in the third quarter of 2007, subject to customary closingconditions, including expiration or termination of the waiting period under theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certainEuropean antitrust approvals. CDRV has made customary representations andwarranties in the Merger Agreement and has agreed to certain pre-closingcovenants in the Merger Agreement, including that it will conduct its businessin all material respects in the ordinary course, will not engage in certaintypes of transactions during such period, and will assist the MDP affiliate inobtaining its debt financing for the transaction. In addition, the MergerAgreement also provides that, at or immediately prior to the consummation of themerger, CDRV will and/or will cause its applicable subsidiaries to repay infull all indebtedness outstanding under, and take such other steps as may benecessary to cause the satisfaction and discharge of all obligations in respectof, the Senior Notes, Senior Subordinated Notes, CDRV’s Senior Discount Notes,CDRV’s Senior Floating Rate Notes, indebtedness under the Senior Secured CreditFacility and certain other indebtedness of CDRV and its subsidiaries.

15

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

**Forward-LookingStatements**

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

Forward-lookingstatements are inherently subject to risks, uncertainties and assumptions.Forward-looking statements are not guarantees of performance. You should notplace undue reliance on these statements. You should understand that the followingimportant factors, in addition to those discussed in “Item 1A—Risk Factors” inour annual report on Form 10-K for the year ended December 31,2006 and elsewhere in our Form 10-K and in this Form 10-Q,could affect our future results and could cause those results or other outcomesto differ materially from those expressed or implied in our forward-lookingstatements:

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

·       ourability to maintain our relationships with manufacturers;

·       lossof our key executive officers;

·       ourability to consummate and integrate potential acquisitions;

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

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

·       increasedcompetition from other companies in our industry and our ability to retain orincrease our market shares in the principal geographical areas in which we operate;and

·       ourability to generate sufficient funds to meet our debt service obligations,capital expenditure program requirements, ongoing operating costs and workingcapital needs.

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

**Overview**

Our net sales are derived primarily from the sale ofscientific supplies, including chemicals, glassware, instruments, protectiveclothing and other assorted laboratory products and the provision of services,including technical services, on-site storeroom services, warehousing andfurniture design, supply and installation. Freight costs that are billed to ourcustomers are also included in net sales.

Our cost of sales consists primarily of the cost ofinventory shipped and the cost of labor for services. Cost of sales alsoincludes freight expenses incurred to deliver products to customers as well ascredits for rebates earned from suppliers.

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Selling, general andadministrative (“SG&A”) expenses primarily reflect the costs of operationsdedicated to generating new sales, maintaining existing customer relationships,enhancing technology capabilities, receiving and processing customer orders andmaintaining our distribution center facilities. These expenses also includedepreciation and amortization.

**Business Segments**

We report our financialresults on the basis of the following three business segments: North AmericanLab, European Lab and Science Education. In addition, we have Asia Pacificoperations, which for purposes of external reporting, are embedded within theNorth American Lab and European Lab segments. Both the North American Lab andEuropean Lab segments are comprised of the distribution of supplies tocustomers in major pharmaceutical, biotechnology, chemical, technology, foodprocessing and consumer products industries, as well as governmental agencies,universities and research institutes, and environmental organizations. ScienceEducation is comprised of the manufacture and distribution of scientificsupplies and specialized kits to primary and secondary schools.

**Constant CurrencyAnalysis**

We maintain operations primarily in North America andin Europe. Approximately 45% of our net sales originated in currencies otherthan the U.S. dollar, principally the Euro, the British pound sterling and theCanadian dollar. As a result, changes in our revenues and operating profitsinclude the impact of changes in foreign currency exchange rates. We provide “constantcurrency” calculations in the following discussion and analysis to remove theimpact of the fluctuation in foreign exchange rates and utilize constantcurrency results in our analysis of segment performance.

We believe that thiscalculation is a useful measure, indicating the actual growth of ouroperations. Earnings from our subsidiaries are not generally repatriated to theUnited States, therefore we do not incur significant gains or losses on foreigncurrency transactions with our subsidiaries. Therefore, changes in foreigncurrency exchange rates primarily impact only reported earnings and not ouractual cash flow or economic condition.

**Compliance with theSarbanes-Oxley Act**

In 2006, we completed aprogram to address the requirements of Section 404 of the Sarbanes-OxleyAct prior to the mandatory compliance date of December 31, 2007.Compliance with these requirements required significant incremental internalresources and financial investments, including, but not limited to, use ofoutside advisors, additional audit fees, and changes in systems design,security and structure.

**Merger Agreement**

On May 2, 2007, CDRVentered into an agreement pursuant to which it will be acquired by an affiliateof MDP. See Note 12 under “Item 1—Financial Statements” for more information.

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**Results ofOperations**

***Net Sales***

Thefollowing table presents net sales and changes in net sales by reportablesegment for the three months ended March 31, 2007 and 2006 (dollars inmillions):

| ** **          | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------|------------|------------------------------------------------------|------------|
| ** **          | ** ** | **2007**                                             | ** ** | **% Change** | ** ** | **2006** | ** ** |
| North American  Lab |       | $                                                    | 501.4      |   |   | 1.9 | % |   | $ | 492.2 |   |
| European Lab        |       | 313.6                                                |       |   | 14.9 | % |   | 272.9 |   |
| Science Education   |       | 28.1                                                 |       |   | (8.5 | )% |   | 30.7 |   |
| Total               |       | $                                                    | 843.1      |   |   | 5.9 | % |   | $ | 795.8 |   |

 

Net sales for the three months ended March 31,2007 increased $47.3 million over the comparable period of 2006. Foreigncurrency increased net sales by $25.7 million. On a constant currency basis,net sales increased by $21.6 million or 2.7% over the comparable period of2006.

Net sales in our North American Lab segment for thethree months ended March 31, 2007 increased $9.2 million over thecomparable period of 2006. Foreign currency decreased net sales by $0.9million. On a constant currency basis, net sales increased $10.1 million or2.1% over the comparable period of 2006. For the three months ended March 31,2007, our net sales to customers in the pharmaceutical industry experiencedlow-single digit growth and our net sales to customers in industrial marketsachieved mid-single digit growth. Our net sales to our education andbiotechnology customers were relatively flat.

Net sales in our European Lab segment for the threemonths ended March 31, 2007 increased $40.7 million over the comparableperiod of 2006. Foreign currency increased net sales by $26.6 million. On aconstant currency basis, net sales increased $14.1 million or 5.2% over thecomparable period of 2006. For the three months ended March 31, 2007, ournet sales to bio-pharmaceutical customers achieved high-single digit growth,our net sales to industrial and education customers experienced low-singledigit growth, our net sales to clinical customers experienced mid-single digitgrowth and our net sales to resellers were relatively flat.

Net sales in our ScienceEducation segment for the three months ended March 31, 2007 decreased $2.6million or 8.5% from the comparable period of 2006. This decrease was primarilya result of a decline in net sales to our publisher customers and a decline inour international business due to the fulfillment of two large internationalorders in 2006. Net sales to our consumer customers were relatively flat.

***Gross Profit***

Thefollowing table presents gross profit and gross profit as a percentage of netsales for the three months ended March 31, 2007 and 2006 (dollars inmillions):

| ** **                              | ** ** | **Three Months Ended**                         | ** ** |
|-----------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                              | ** ** | **March 31,**                                       | ** ** |
| ** **                              | ** ** | **    2007    ** | ** ** | **    2006    ** | ** ** |
| Gross profit                            |       |                                                     | $          | 238.2 |   |   |   | $ | 214.4 |   |   |
| Percentage of net sales  (gross margin) |       |                                                     | 28.3       | % |   |   | 26.9 | % |   |

 

Gross profit for the threemonths ended March 31, 2007 increased $23.8 million over the comparableperiod of 2006. Foreign currency increased gross profit by $8.5 million. On aconstant currency basis, gross profit increased $15.3 million or 7.1% from thecomparable period of 2006. The increases in gross profit in both our NorthAmerican Lab and European Lab segments are primarily a result of favorablepricing, better mix and improved recovery of freight costs, especially in ourEuropean Lab segment. These 

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increasesare partially offset by a decrease in gross profit in our Science Educationsegment of $1.1 million primarily as a result of the decreased net salesdiscussed above.

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

Thefollowing table presents SG&A expenses and SG&A expenses as apercentage of net sales forthe three months ended March 31, 2007 and 2006 (dollars in millions):

| ** **                                    | ** ** | **Three Months Ended**                         | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                    | ** ** | **March 31,**                                       | ** ** |
| ** **                                    | ** ** | **    2007    ** | ** ** | **    2006    ** | ** ** |
| Selling, general  and administrative expenses |       |                                                     | $          | 181.3 |   |   |   | $ | 168.5 |   |   |
| Percentage of net sales                       |       |                                                     | 21.5       | % |   |   | 21.2 | % |   |

 

SG&A for the threemonths ended March 31, 2007 increased $12.8 million over the comparableperiod of 2006. Foreign currency increased SG&A by $4.4 million. On aconstant currency basis, SG&A increased $8.4 million or 5.0% from thecomparable period of 2006 primarily as a result of inflation and partially dueto increased costs related to our global sourcing/category managementinitiatives and on-going expansion in Asia Pacific. Partially offsetting theseincreases are cost savings derived from improved efficiencies in our serviceand distribution centers, particularly in our in our North American Labsegment.

***Operating Income***

Thefollowing table presents operating income and operating income as a percentageof net sales by reportable segment for the three months ended March 31,2007 and 2006 (dollars in millions):

| ** **          | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------|------------|------------------------------------------------------|------------|
| ** **          | ** ** | ** **                                           | ** ** | **% of** | ** ** | ** ** | ** ** | **% of** | ** ** |
| ** **          | ** ** | **2007**                                             | ** ** | **Net Sales** | ** ** | **2006** | ** ** | **Net Sales** | ** ** |
| North American  Lab |       | $                                                    | 33.0       |   |   | 6.6 | % |   | $ | 29.4 |   |   | 6.0 | % |   |
| European Lab        |       | 22.9                                                 |       |   | 7.3 | % |   | 14.3 |   |   | 5.2 | % |   |
| Science Education   |       | 1.0                                                  |       |   | 3.6 | % |   | 2.4 |   |   | 7.8 | % |   |
| Total               |       | $                                                    | 56.9       |   |   | 6.7 | % |   | $ | 46.1 |   |   | 5.8 | % |   |

 

Operating income for the three months ended March 31, 2007 increased $10.8 millionover the comparable period of 2006.Foreign currency increased operating income by $4.1 million. On a constantcurrency basis, operating income increased$6.7 million or 14.5% from the comparable period of 2006. This increase wasprimarily the result of a gross profit increase of $15.3 million, partiallyoffset by an SG&A increase of $8.4 million.

Operating income in our North American Lab segment for the three months ended March 31,2007 increased $3.6 million overthe comparable period of 2006. Foreign currency increased operatingincome by $2.2 million. On a constant currency basis, operating income increased $1.4 million or 4.8% from thecomparable period of 2006. This increase was primarily the result of agross profit increase of $7.0 million, partially offset by an SG&Aincrease of $5.4 million.

Operating income in our European Lab segment for the three months ended March 31, 2007 increased $8.6 million over thecomparable period of 2006. Foreign currency increased operating incomeby $1.9 million. On a constant currency basis, operating income increased $6.7 million or 46.9% from thecomparable period of 2006. This increase was the result of a grossprofit increase of $9.4 million, partially offset by an SG&A increaseof $2.7 million.

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Operating income in ourScience Education segment for the three months ended March 31, 2007decreased $1.4 million from the comparable period of 2006. The decreasewas the result of a gross profit decrease of $1.1 million and an SG&Aincrease of $0.3 million.

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

Interest expense, net ofinterest income, for the three months ended March 31, 2007 decreased to$18.3 million from $19.4 million for the comparable period of 2006.The decrease is due to decreased amounts outstanding under the Senior SecuredCredit Facility term loans due to prepayments made and increased interestincome, partially offset by higher variable interest rates on the SeniorSecured Credit Facility term loans.

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

Other (income) expense,net was ($0.1) million for the three months ended March 31, 2007compared to $0.8 million for the comparable period of 2006. Other income,net for the three months ended March 31, 2007 includes equity income of($0.4) million, partially offset by net exchange losses of $0.3 million.. Other expense, net for the three months ended March 31, 2006 includesnet exchange losses of $1.0 million, partially offset by equity income of($0.1) million.

***Income Taxes***

The effective income taxrate for the three months ended March 31, 2007 was 37.0% compared to 37.8%for the comparable period of 2006. The decrease in the 2007 rate is primarily aresult of changes in the geographical mix of earnings.

**Liquidity andCapital Resources**

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

Our significant liquidity and capital funding needsare working capital, operating expenses, capital expenditures and amounts dueon our debt obligations. Based on current operations and expectations as tofuture growth, we believe that cash generated from operations, together withamounts available under the $150.0 million five year multi-currencyrevolving credit facility, which is a component of the Senior Secured CreditFacility, will be adequate to permit us to meet our debt service obligations,capital expenditure program requirements, ongoing operating costs and workingcapital needs, although no assurance can be given in this regard.

Working capital, excluding cash and debt, was $235.2 millionand $220.0 million at March 31, 2007 and December 31, 2006,respectively. Trade receivables, inventories and accounts payable, threeimportant elements of working capital, are discussed below.

***Trade AccountsReceivable.***   Days sales outstanding inaccounts receivable were 51.1* *days and 50.2 days for thequarterly periods ended March 31, 2007 and December 31, 2006,respectively. days sales outstanding are higher in Europe due to theextended payment practices in certain countries in which we operate.

***Inventories.***   Dayssupply of inventory were 38.0* *days and 39.8 days for thequarterly periods ended March 31, 2007 and December 31, 2006,respectively. The improvement is due to focused efforts to reduce ourinventories on hand.

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***Accounts Payable.***   Dayspayables outstanding were 56.3* *days and 58.1 days for thequarterly periods ended March 31, 2007 and December 31, 2006,respectively. Trade accounts payable are primarily with suppliers whoseproducts we distribute. Payment terms are negotiated and in cases whereeconomic early payment discounts are offered, we typically time our payments toearn the discounts. days payables outstanding are generally higher inEurope due to the extended payment practices in certain countries in which weoperate. Depending on the timing of payments and inventory purchases, tradeaccounts payable can vary each quarter and from year to year.

**Historical CashFlows**

The following tablepresents cash flow from operations before investing and financing activitiesrelated to operations and working capital (dollars in millions):

| ** **                                            | ** ** | **Three Months Ended**                         | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                            | ** ** | **March 31,**                                       | ** ** |
| ** **                                            | ** ** | **    2007    ** | ** ** | **    2006    ** | ** ** |
| Cash flow from  operations, excluding working capital |       |                                                     | $          | 42.4 |   |   |   | $ | 26.4 |   |   |
| Cash flow from  working capital changes, net          |       |                                                     | (1.4       | ) |   |   | 30.5 |   |   |
| Cash flow from  operations                            |       |                                                     | $          | 41.0 |   |   |   | $ | 56.9 |   |   |

 

We generated $41.0 million of cash flow fromoperations during the three months ended March 31, 2007 compared to $56.9 millionduring the comparable period of 2006. The decrease in cash flow from operationsis primarily the result of lower cash flow from working capital changes dueprimarily to lower cash flows from accounts payable and higher bonus paymentsin the current period that is partially offset by an increase in net income.

Net cash used in investing activities was $5.9 millionfor the three months ended March 31, 2007 compared to $4.8 millionfor the comparable period of 2006. This increase is due to higher capitalexpenditures.

Net cash used in financing activities was $36.2 millionfor the three months ended March 31, 2007 compared to $55.1 millionfor the comparable period of 2006. This decrease is primarily due to decreasednet debt payments of $26.9 million, partially offset by the current perioddividend of $7.4 million.

As of March 31, 2007, we had outstandingindebtedness of $975.6 million, which consists primarily of $520.0 millionaggregate principal amount of notes, a $293.1 million U.S.dollar-denominated term loan, and a $136.9 million Euro-denominated termloan.

As of March 31, 2007, we had $9.5 million ofoutstanding but undrawn letters of credit and our remaining borrowingavailability under the $150.0 million multi-currency revolving creditfacility forming part of the Senior Secured Credit Facility was $140.5 million.Undrawn amounts under the multi-currency revolving credit facility will beavailable to meet future working capital and our business needs. Any potentialborrowings under the multi-currency revolving credit facility bear interest atvariable rates; interest expense for any such borrowings would fluctuate aswell.

Under the credit agreement for the Senior SecuredCredit Facility, excess cash flow (as defined in the credit agreement) from theprior year is required to be used to prepay credit agreement debt. Mandatoryprincipal prepayments of $20.5 million and $44.5 million were made inMarch 2007 and 2006, respectively, based on excess cash flow generated in2006 and 2005, respectively. The required principal prepayment for 2006 wasreduced partially due to a $60.0 million voluntary principal prepaymentmade in September 2006.

Based upon currentoperating levels and expectations as to future growth, we believe that cash onhand, cash generated from operations and amounts available under our $150.0 millionmulti-currency revolving credit facility will be adequate to permit us to meetour debt service obligations, capital expenditure requirements, ongoingoperating costs and working capital needs until the maturity of the 

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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 profitabilitystrategies. As of March 31, 2007, we had $137.4 million of cash andcash equivalents on hand.

**Indebtedness**

***The Merger Agreement provides that, at or immediately priorto the consummation of the merger, we will and/or will cause our applicablesubsidiaries to repay in full all indebtedness outstanding under, and take suchother steps as may be necessary to cause the satisfaction and discharge of allobligations in respect of, the Senior Notes, Senior Subordinated Notes, indebtednessunder the Senior Secured Credit Facility and certain other of our indebtedness.***

***See Note 12 under “Item 1—Financial Statements”for more information.***

***Senior Secured Credit Facility.***   TheSenior Secured Credit Facility consists of (1) a term loan facilityproviding for a loan denominated in Euros, in an aggregate principal amountcurrently outstanding of $136.9 million as of March 31, 2007, (2) aterm loan facility providing for a term loan denominated in U.S. dollars in anaggregate principal amount outstanding of $293.1 million, and (3) amulti-currency revolving credit facility, providing for up to $150.0 millionin multi-currency revolving loans (reduced by the amount of any standby andcommercial letters of credit drawn under that facility) outstanding at anytime.

Borrowings under theSenior Secured Credit Facility are a key source of our liquidity. Our abilityto borrow under the Senior Secured Credit Facility is dependent upon, amongother things, our compliance with the financial covenants that limit theCompany’s ability to incur additional indebtedness, pay cash dividends and makecertain other payments as set forth in the credit agreement for the 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 the Senior Secured Credit Facility and, absent a waiver or anamendment from our lenders, would permit the acceleration of all outstandingborrowings under the Senior Secured Credit Facility. VWR was in compliance withthese financial covenants as of March 31, 2007.

Credit Agreement EBITDA aspresented herein is a financial performance measure that is used in the creditagreement for the Senior Secured Credit Facility. Credit Agreement EBITDA isnot a defined term under U.S. GAAP and should not be considered as analternative to operating income or net income as a measure of operating resultsor cash flows as a measure of liquidity. Credit Agreement EBITDA differs fromthe term “EBITDA” as it is commonly used as a non-GAAP financial measure.Credit Agreement EBITDA generally is defined as consolidated income beforeconsolidated net interest expense, consolidated income taxes, consolidateddepreciation and amortization, other non-cash charges deducted in determiningconsolidated net income (loss), non-cash provisions for reserves fordiscontinued operations, extraordinary, unusual or non-recurring items, gain orloss associated with the sale or write down of assets not in the ordinarycourse of business and the cumulative effect of accounting changes and earningsof, 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 isnot a financial measure used in the covenants under the indentures for thenotes. The term “Consolidated EBITDA” is used in the indentures as part of thecalculation of the term “Consolidated Coverage Ratio,” which is used for anumber of purposes, including determining our ability to incur additionalindebtedness and pay cash dividends and make certain other restricted payments,and may include certain cost savings or synergies. “Consolidated EBITDA” is notthe same as Credit Agreement EBITDA.

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The following tablepresents a calculation of Credit Agreement EBITDA for the twelve months ended March 31,2007 (dollars in millions):

| Net income(1)                                           |   | $    | 77.0   |   |
|---------------------------------------------------------|--------|------|--------|--------|
| Income tax  provision(1)                                |   | 48.8 |   |
| Interest expense,  net(1)                               |   | 75.5 |   |
| Depreciation and  amortization(1)                       |   | 43.2 |   |
| Non-cash  charges(2)                                    |   | 11.4 |   |
| Other  extraordinary, unusual or non-recurring items(3) |   | 1.9  |   |
| Credit Agreement EBITDA                                 |   | $    | 257.8  |   |

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(1)          These amounts includethe four quarters during the twelve months ended March 31, 2007 asreported in the respective Form 10-Q or Form 10-K.

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

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

The financialcovenants specify, among other things, the following requirements for eachfour-quarter period ended during the following test periods:

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

 

The table belowsets forth the specified debt to Credit Agreement EBITDA leverage ratio andCredit Agreement EBITDA to interest expense ratio for the twelve months ended March 31,2007:

| Consolidated Debt  to Credit Agreement EBITDA Leverage Ratio           |   | 3.8 to 1.0 |   |
|------------------------------------------------------------------------|--------|------------|--------|
| Credit Agreement EBITDA  to Credit Agreement Interest Expense Ratio(1) |   | 3.7 to 1.0 |   |

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

As noted above, the creditagreement for the Senior Secured Credit Facility restricts our ability totransfer assets, pay cash dividends and make certain other payments to ourdirect or indirect parent companies. In January 2007, we amendedprovisions in the credit agreement to conform them in certain respects to theprovisions in the indentures governing the Senior Notes and Senior SubordinatedNotes (described below), including the indebtedness, restricted payments andinvestments covenants. The modifications permit us to pay or make specifiedcash dividends, payments or distributions to allow CDRV to make cash interestpayments on the Senior Floating Rate Notes described below under  “Debt ofCDRV” and to make other payments, subject to the indenture governingsuch notes. In addition, as part of 

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theamendment to the credit agreement, the interest margin on the Euro-denominatedterm loan was decreased by 50 basis points.

***ForeignSubsidiaries.***   Our foreignsubsidiaries operate from time to time with and without formal lines of creditwith local banks. The borrowings available to and drawn from time to time byour foreign subsidiaries are limited in aggregate by certain covenantscontained within the Senior Secured Credit Facility.

***Senior and Senior Subordinated Notes.******  ***The SeniorNotes and Senior Subordinated Notes mature on April 15, 2012 and April 15,2014, respectively, in aggregate principal amounts of $200.0 million and$320.0 million, respectively. The indentures governing the Senior Notesand the Senior Subordinated Notes contain certain covenants that, among otherrequirements, limit the Company’s ability to incur additional indebtedness andliens against the Company’s property and assets, limit the Company’s ability totransfer assets, pay cash dividends and make certain other restricted payments(unless certain conditions are met), and limit the Company’s ability to sellassets or restrict the use of the proceeds therefrom. At March 31, 2007,VWR was in compliance with all covenants under these indentures.

**Debtof CDRV**

In December 2004, CDRV issued $481.0 millionaggregate principal amount at maturity ($297.9 million in net proceeds) of95¤8%senior discount notes due 2015 (“CDRV Senior Discount Notes”). In connectionwith various transactions involving the issuance of the Senior Floating RateNotes described below, in December 2006, CDRV Investment HoldingsCorporation, a wholly owned subsidiary of CDRV and our indirect parent, assumedthe obligations under the CDRV Senior Discount Notes. The CDRV Senior DiscountNotes are senior unsecured obligations of CDRV Investment Holdings Corporationand are structurally subordinated to all obligations and other liabilities ofCDRV Investment Holdings Corporation’s existing and future subsidiaries,including us. No cash interest will accrue on the CDRV Senior Discount Notesprior to January 1, 2010. Thereafter, cash interest will accrue and bepayable semiannually, only to the extent of funds actually available fordistribution to CDRV Investment Holdings Corporation under specified provisionsof the indentures governing our Senior Notes and Senior Subordinated Notes andthe Senior Secured Credit Facility covenants. As of March 31, 2007, theaccreted value of the CDRV Senior Discount Notes was $371.5 million.

In December 2006,CDRV issued $350.0 million aggregate principal amount of senior floatingrate notes due 2011 (“CDRV Senior Floating Rate Notes”). The CDRV SeniorFloating Rate Notes are senior unsecured obligations of CDRV and arestructurally subordinated to all obligations and other liabilities of CDRV’sexisting and future subsidiaries, including us. Interest is payable quarterly.Interest on the CDRV Senior Floating Rate Notes may be paid (1) entirelyin cash (“Cash Interest”), (2) entirely by increasing the principal amountof the outstanding CDRV Senior Floating Rate Notes (“PIK Interest”) or (3) 50%as Cash Interest and 50% as PIK Interest. Cash Interest will accrue on the CDRVSenior Floating Rate Notes at a rate per annum equal to an applicable LIBORplus an applicable spread (as defined in the agreement) (“Cash Interest Rate”).PIK Interest will accrue on the CDRV Senior Floating Rate Notes at a rate perannum equal to the Cash Interest Rate plus 75 basis points.

We do not guarantee theobligations under the CDRV Senior Discount Notes or CDRV Senior Floating RateNotes. The terms of the Senior Secured Credit Facility and the indenturesgoverning the Senior Notes and Senior Subordinated Notes significantly restrictus from making distributions and otherwise transferring assets to our direct orindirect parent companies. However, in January 2007, we amended theprovisions of the credit agreement for the Senior Secured Credit Facility toprovide us with more flexibility to makedividends or other payments to enable CDRV to pay Cash Interest with respect tothe CDRV Senior Floating Rate Notes.On March 1, 2007, we paid a dividend of $7.4 million that enabledCDRV to make a Cash Interest payment of $7.4 million with respect to theCDRV Senior Floating Rate Notes.

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**Critical AccountingPolicies**

The discussion andanalysis of our financial condition and results of operations are based on ourfinancial statements, which have been prepared in accordance with accountingprinciples generally accepted in the United States of America. The preparationof these financial statements requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and the disclosureof contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period. Onan ongoing basis, management evaluates its estimates and judgments, including,among others, those related to environmental liabilities, reserves for accountsreceivable and inventories, impairment of goodwill and intangible assets,pension plans, rebates from suppliers, agreements with customers, and productliability. Those estimates and assumptions are based on our historicalexperience, our observance of trends in the industry, and various other factorsthat are believed to be reasonable under the circumstances and form the basisfor making judgments about the carrying values of assets and liabilities thatare not readily apparent from other sources. Actual results may differ fromthese estimates under different assumptions or conditions. Refer to “Item 7—Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inour Annual Report on Form 10-K for the year ended December 31,2006 for the Company’s critical accounting policies.

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

Refer to “Item 7A—Quantitativeand Qualitative Disclosures about Market Risk” included in our Annual Report onForm 10-K for the year ended December 31, 2006 for theCompany’s quantitative and qualitative disclosure about market risk. There wasno material change in such information as of March 31, 2007.

**Item 4—*Controls and Procedures***

The Company’s management, with the participation ofthe Company’s Chief Executive Officer and Chief Financial Officer, evaluatedthe effectiveness of the Company’s disclosure controls and procedures as ofMarch 31, 2007. The term “disclosure controls and procedures,” as definedin Rules 13a-15(e) and 15d-15(e) under the ExchangeAct, means controls and other procedures of a company that are designed toensure that information required to be disclosed by a company in the reportsthat it files or submits under the Exchange Act is recorded, processed,summarized and reported, within the time periods specified in the SEC’srules and forms.

Disclosure controls and procedures include, withoutlimitation, controls and procedures designed to ensure that informationrequired to be disclosed by a company in the reports that it files or submitsunder the Exchange Act is accumulated and communicated to the company’smanagement, including its principal executive and principal financial officers,as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving their objectives and management necessarilyapplies its judgment in evaluating the cost-benefit relationship of possiblecontrols and procedures. Based on the evaluation of the Company’sdisclosure controls and procedures as of March 31, 2007, the Company’sChief Executive Officer and Chief Financial Officer concluded that, as of suchdate, the Company’s disclosure controls and procedures were effective at thereasonable assurance level.

There have been no changes in the Company’s internalcontrol over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) during the fiscal quarter ended March 31, 2007, that havematerially affected or are reasonably likely to materially affect the Company’sinternal control over financial reporting.

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**Part II —OTHER INFORMATION**

**Item 1—*Legal Proceedings***

For information regardinglegal proceedings, see Note 10 in “Item 1—Financial Statements” of thisquarterly report on Form 10-Q, which information is incorporatedherein by reference into this item.

**Item 1A—*Risk Factors***

There have been nomaterial changes to the risk factors that are included in our Annual Report on Form 10-Kfor the year ended December 31, 2006 that could affect our business,results of operations and financial condition.

**Item6—*Exhibits***

| Exhibit  Number | ** ** | **Description of Documents**                                                                                                                                                      | ** ** | **Method of Filing** |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|
| 10.1            |       | VWR International, Inc. Nonqualified Deferred  Compensation Plan, effective May 1, 2007                                                                                 |       | Filed herewith.      |
| 10.2            |       | VWR  International, Inc. Nonqualified Deferred Compensation Plan Trust  Agreement, dated as of May 1, 2007, between VWR International, Inc.  and Wells Fargo, N.A. |       | Filed herewith.      |
| 31.1            |       | Certification of  Principal Executive Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                                                                    |       | Filed herewith.      |
| 31.2            |       | Certification of  Principal Financial Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                                                                    |       | Filed herewith.      |
| 32.1            |       | Certification of  Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of  the Sarbanes-Oxley Act of 2002).                                                   |       | Furnished herewith.  |
| 32.2            |       | Certification of  Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of  the Sarbanes-Oxley Act of 2002).                                                   |       | Furnished herewith.  |

 

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**SIGNATURE**

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

|                   | VWR INTERNATIONAL, INC. |
|-------------------|-------------------------|
|              | By:                     | /s/ GREGORY L. COWAN |
|              | Name:                   | Gregory L. Cowan |
|              | Title:                  | Vice President and Corporate Controller |
|              |                    | (Chief Accounting Officer and Duly Authorized |
|              |                    | Officer) |
| May 14, 2007 |                    |   |

 

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