**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  June 30, 2006**                                |
| **or**                                                                                |
| **o**                                                                                 | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| For the transition  period from            to |

 

**Commissionfile number: 333-118658**

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**VWR INTERNATIONAL, INC.**

**(Exact name of registrant asspecified 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**                     | **19380**  |
| (Address of principal executive offices) | (Zip code) |

 

**(610) 431-1700**

(Registrant’s telephone number, including area code)

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes o   No x

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

Large accelerated filer o      Acceleratedfiler o      Non-acceleratedfiler x

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

Asof June 30, 2006, there was no established public market for theregistrant’s common stock, par value $0.01 per share. The number of shares ofthe registrant’s common stock outstanding at August 11, 2006 was 100.

 

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

**INDEX**

|                                                      | ** ** | ** **                                                                                                                                        | ** ** | **Page No.** |
|------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
| **PART I.   FINANCIAL  INFORMATION:** |       |                                                                                                                                              |
| Item  1.                                             |       | Financial  Statements:                                                                                                                            |       |              |
|                                                 |       | Consolidated  Balance Sheets—as of June 30, 2006 (Unaudited) and December 31, 2005                                            |       | 3                 |
|                                                 |       | Consolidated Statements of Operations (Unaudited)—for  the three and six months ended June 30, 2006 and 2005                  |       | 4                 |
|                                                 |       | Consolidated Statement of Stockholders’ Equity and  Other Comprehensive Income (Unaudited)—for the six months ended June 30,  2006 |       | 5                 |
|                                                 |       | Consolidated Statements of Cash Flows (Unaudited)—for  the six months ended June 30, 2006 and 2005                                      |       | 6                 |
|                                                 |       | Notes to Consolidated Financial Statements (Unaudited)                                                                                            |       | 7                 |
| Item 2.                                              |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                       |       | 21                |
| Item 3.                                              |       | Quantitative and Qualitative Disclosures about Market  Risk                                                                                       |       | 31                |
| Item  4.                                             |       | Controls  and Procedures                                                                                                                          |       | 31                |
| **PART II.   OTHER  INFORMATION:**    |       |                                                                                                                                              |
| Item 1.                                              |       | Legal Proceedings                                                                                                                                 |       | 31                |
| Item  1A.                                            |       | Risk Factors                                                                                                                                      |       | 32                |
| Item 6.                                              |       | Exhibits                                                                                                                                          |       | 32                |
| Signature                                            |       | 33                                                                                                                                                |

 

2

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**PART I—FINANCIALINFORMATION**

**Item 1—*Financial Statements***

**VWR INTERNATIONAL, INC.****Consolidated BalanceSheets****(Dollars in millions, except share data)**

| ** **                                                                        | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                        | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| **Assets**                                                                        | ** ** |                    | ** ** |                        |       |   |   |   |   |
| Current Assets:                                                                   |       |                    |       |                        |       |   |   |   |   |
| Cash and cash equivalents                                                         |       |                    | $          | 143.2                       |       |   |   | $ | 126.1 |   |   |
| Trade accounts receivable, less reserves of $8.7 and  $6.6, respectively          |       |                    | 448.2      |                        |       |   | 407.3 |   |   |
| Other receivables                                                                 |       |                    | 26.1       |                        |       |   | 30.8 |   |   |
| Inventories                                                                       |       |                    | 258.5      |                        |       |   | 270.4 |   |   |
| Other current assets                                                              |       |                    | 32.6       |                        |       |   | 30.6 |   |   |
| Total current assets                                                              |       |                    | 908.6      |                        |       |   | 865.2 |   |   |
| Property and  equipment, net                                                      |       |                    | 159.0      |                        |       |   | 156.8 |   |   |
| Investments                                                                       |       |                    | 8.1        |                        |       |   | 7.8 |   |   |
| Goodwill                                                                          |       |                    | 932.6      |                        |       |   | 910.0 |   |   |
| Other intangible  assets, net                                                     |       |                    | 557.8      |                        |       |   | 552.7 |   |   |
| Deferred income  taxes                                                            |       |                    | 5.6        |                        |       |   | 5.6 |   |   |
| Other assets                                                                      |       |                    | 43.7       |                        |       |   | 44.3 |   |   |
| Total assets                                                                      |       |                    | $          | 2,615.4                     |       |   |   | $ | 2,542.4 |   |   |
| **Liabilities  and Stockholders’ Equity**                                    |       |                    |       |                        |       |   |   |   |   |
| Current Liabilities:                                                              |       |                    |       |                        |       |   |   |   |   |
| Short-term portion of bank debt and current portion  of capital lease obligations |       |                    | $          | 6.4                         |       |   |   | $ | 45.5 |   |   |
| Accounts payable                                                                  |       |                    | 375.6      |                        |       |   | 370.3 |   |   |
| Accrued expenses                                                                  |       |                    | 173.8      |                        |       |   | 143.4 |   |   |
| Total current liabilities                                                         |       |                    | 555.8      |                        |       |   | 559.2 |   |   |
| Long-term debt                                                                    |       |                    | 1,019.7    |                        |       |   | 1,013.3 |   |   |
| Capital lease  obligations                                                        |       |                    | 4.9        |                        |       |   | 5.0 |   |   |
| Other long-term  liabilities                                                      |       |                    | 90.6       |                        |       |   | 87.1 |   |   |
| Deferred income  taxes                                                            |       |                    | 232.6      |                        |       |   | 233.5 |   |   |
| Total liabilities                                                                 |       |                    | 1,903.6    |                        |       |   | 1,898.1 |   |   |
| Parent Company  common stock purchase subject to guarantee agreement              |       |                    | 2.6        |                        |       |   | 2.6 |   |   |
| Commitments and  contingencies                                                    |       |                    |       |                        |       |   |   |   |   |
| Stockholders’ equity:                                                        |       |                    |       |                        |       |   |   |   |   |
| Common stock, $0.01 par value; 100 shares authorized,  issued and outstanding     |       |                    | —     |                        |       |   | — |   |   |
| Additional paid-in capital                                                        |       |                    | 562.4      |                        |       |   | 557.4 |   |   |
| Retained earnings                                                                 |       |                    | 107.6      |                        |       |   | 73.2 |   |   |
| Unamortized value of restricted stock issued                                      |       |                    | —     |                        |       |   | (1.6 | ) |   |
| Accumulated other comprehensive income                                            |       |                    | 39.2       |                        |       |   | 12.7 |   |   |
| Total stockholders’ equity                                                   |       |                    | 709.2      |                        |       |   | 641.7 |   |   |
| Total liabilities and  stockholders’ equity                                  |       |                    | $          | 2,615.4                     |       |   |   | $ | 2,542.4 |   |   |

 

See accompanying notes to consolidated financial statements.

3

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

| ** **                                    | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net sales                                     |       | $                                               | 815.0      |                                          | $          | 794.8 |   | $ | 1,610.8 |   | $ | 1,548.9 |   |
| Cost of goods  sold                           |       | 595.9                                           |       | 594.0                                         |       | 1,177.3 |   | 1,155.4 |   |
| Gross profit                                  |       | 219.1                                           |       | 200.8                                         |       | 433.5 |   | 393.5 |   |
| Selling, general  and administrative expenses |       | 174.3                                           |       | 163.0                                         |       | 342.8 |   | 328.5 |   |
| Restructuring  (credits) charges              |       | (0.8                                            | )          | 5.1                                           |       | (1.0 | ) | 7.2 |   |
| Operating income                              |       | 45.6                                            |       | 32.7                                          |       | 91.7 |   | 57.8 |   |
| Interest income                               |       | (1.5                                            | )          | (0.4                                          | )          | (2.8 | ) | (1.0 | ) |
| Interest expense                              |       | 20.3                                            |       | 18.8                                          |       | 41.0 |   | 37.2 |   |
| Other (income)  expense, net                  |       | (0.4                                            | )          | (0.9                                          | )          | 0.4 |   | (1.9 | ) |
| Income before income taxes                    |       | 27.2                                            |       | 15.2                                          |       | 53.1 |   | 23.5 |   |
| Income tax  provision                         |       | 8.9                                             |       | 6.0                                           |       | 18.7 |   | 9.2 |   |
| Net income                                    |       | $                                               | 18.3       |                                          | $          | 9.2 |   | $ | 34.4 |   | $ | 14.3 |   |

 

See accompanying notes to consolidated financial statements.

4

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

| ** **                                                                                                           | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | **Unamortized**       | ** ** | **Accumulated**   | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|------------|------------|----------------|------------|--------------|------------|-----------------------|------------|-------------------|------------|------------|------------|
| ** **                                                                                                           | ** ** | ** ** | ** ** | **Additional** | ** ** | ** **   | ** ** | **value of**     | ** ** | **other**         | ** ** | ** ** | ** ** |
| ** **                                                                                                           | ** ** | **Common** | ** ** | **paid-in**    | ** ** | **Retained** | ** ** | **restricted**        | ** ** | **comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                                                           | ** ** | **stock**  | ** ** | **capital**    | ** ** | **earnings** | ** ** | **stock issued** | ** ** | **income**        | ** ** | **Total**  | ** ** |
| Balance at January 1, 2006                                                                                      |       |       | $          | —         |       |         |       | $                     | 557.4      |              |       |       | $          | 73.2 |   |   |   | $ | (1.6 | ) |   |   | $ | 12.7 |   |   | $ | 641.7 |   |
| Equity reclassification (Note 4(b))                                                                                  |       |       | —     |           |       |         | (1.6       | )                     |       |              | —     |       |       |   | 1.6 |   |   |   | — |   |   | — |   |
| Capital contributions                                                                                                |       |       | —     |           |       |         | 4.1        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 4.1 |   |
| Capital contribution for compensation expense  recognized for Parent Company options                                 |       |       | —     |           |       |         | 2.2        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 2.2 |   |
| 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 |       |       | —     |           |       |         | 0.2        |                  |       |              | —     |       |       |   | — |   |   |   | — |   |   | 0.2 |   |
| Comprehensive  income:                                                                                               |       |       |       |           |       |         |       |                  |       |              |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                           |       |       | —     |           |       |         | —     |                  |       |              | 34.4       |       |       |   | — |   |   |   | — |   |   | 34.4 |   |
| Foreign currency translation adjustment                                                                              |       |       | —     |           |       |         | —     |                  |       |              | —     |       |       |   | — |   |   |   | 27.0 |   |   | 27.0 |   |
| Unrealized loss on derivatives, net of tax                                                                           |       |       | —     |           |       |         | —     |                  |       |              | —     |       |       |   | — |   |   |   | (0.5 | ) |   | (0.5 | ) |
| Total comprehensive income                                                                                           |       |       |       |           |       |         |       |                  |       |              |       |       |       |   |   |   |   |   |   |   |   | 60.9 |   |
| Balance at  June 30, 2006                                                                                       |       |       | $          | —         |       |         |       | $                     | 562.4      |              |       |       | $          | 107.6 |   |   |   | $ | — |   |   |   | $ | 39.2 |   |   | $ | 709.2 |   |

** **

See accompanying notes to consolidated financial statements.

5

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

| ** **                                                                         | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **June 30,**              | ** ** |
| ** **                                                                         | ** ** | **2006**                       | ** ** | **2005** | ** ** |
| Cash flows from  operating activities:                                             |       |                           |       |   |   |
| Net income                                                                         |       | $                              | 34.4       |   | $ | 14.3 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                           |       |   |   |
| Depreciation and amortization                                                      |       | 16.2                           |       | 16.9 |   |
| Gain on sale of assets                                                             |       | (0.7                           | )          | (0.1 | ) |
| Non-cash equity compensation expense                                               |       | 2.4                            |       | — |   |
| Amortization of debt issuance costs                                                |       | 2.7                            |       | 2.7 |   |
| Deferred income tax (benefit) expense                                              |       | (1.3                           | )          | 4.9 |   |
| Provision for doubtful accounts                                                    |       | 3.1                            |       | 1.7 |   |
| Changes in  working capital:                                                       |       |                           |       |   |   |
| Trade accounts receivable                                                          |       | (27.4                          | )          | (24.0 | ) |
| Other receivables                                                                  |       | 5.5                            |       | 3.4 |   |
| Inventories                                                                        |       | 18.9                           |       | (9.0 | ) |
| Other assets                                                                       |       | (3.8                           | )          | (10.7 | ) |
| Accounts payable                                                                   |       | 11.8                           |       | 59.1 |   |
| Other liabilities                                                                  |       | 18.0                           |       | (17.4 | ) |
| Net cash provided by operating activities                                          |       | 79.8                           |       | 41.8 |   |
| Cash flows from  investing activities:                                             |       |                           |       |   |   |
| Capital expenditures                                                               |       | (10.0                          | )          | (8.5 | ) |
| Acquisitions of businesses and other intangible  assets                            |       | (0.6                           | )          | (41.4 | ) |
| Transaction costs                                                                  |       | (0.2                           | )          | (1.0 | ) |
| Proceeds from sales of property and equipment                                      |       | 5.1                            |       | 0.3 |   |
| Net cash used in investing activities                                              |       | (5.7                           | )          | (50.6 | ) |
| Cash flows from  financing activities:                                             |       |                           |       |   |   |
| Proceeds from debt                                                                 |       | 0.2                            |       | 2.4 |   |
| Repayment of debt                                                                  |       | (45.5                          | )          | (7.8 | ) |
| Net change in bank checks outstanding                                              |       | (18.0                          | )          | (24.9 | ) |
| Capital contributions                                                              |       | 4.1                            |       | — |   |
| Net cash used in financing activities                                              |       | (59.2                          | )          | (30.3 | ) |
| Effect of  exchange rate changes on cash                                           |       | 2.2                            |       | (3.7 | ) |
| Net increase (decrease) in cash and cash equivalents                               |       | 17.1                           |       | (42.8 | ) |
| Cash and cash  equivalents beginning of period                                     |       | 126.1                          |       | 116.1 |   |
| Cash and cash  equivalents end of period                                           |       | $                              | 143.2      |   | $ | 73.3 |   |
| Supplemental disclosures  of cash flow information:                                |       |                           |       |   |   |
| Cash paid during  the period for:                                                  |       |                           |       |   |   |
| Interest                                                                           |       | $                              | 38.4       |   | $ | 33.9 |   |
| Income taxes  paid, net                                                            |       | $                              | 6.7        |   | $ | 9.0 |   |

 

See accompanying notes to consolidated financial statements.

6

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

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

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

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

***(b)***     Background

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

***(c)***      Basisof Presentation

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

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

7

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

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

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

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

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

**(2) New AccountingStandard**

During July 2006, theFinancial Accounting Standards Board (“FASB”) issued Interpretation No. 48,*Accounting for Uncertainty in Income Taxes*(“FIN 48”). This Statement clarifies the accounting for uncertainty in incometaxes recognized in accordance with FASB 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 are currentlyevaluating the impact this Interpretation will have on our consolidatedfinancial statements.

**(3) Acquisitions**

On April 1, 2005, we acquired AGB Scientific Ltd.(“AGB”) and Advanced Instruments Sales & Services, Inc. (“AI”)for cash consideration of approximately $40.6 and common stock of approximately$0.5. AGB distributes scientific supplies and is headquartered in Dublin,Ireland. AI performs services and distributes scientific supplies to the PuertoRican market and is headquartered in San Juan, Puerto Rico. On July 1,2005, we acquired Technical Service Lab B.V. (“TSL”) for cash consideration ofapproximately $3.1. TSL performs technical services on laboratory equipment inthe Netherlands, Germany, Belgium and France. The results of AGB and TSL havebeen included in the European Lab segment from the date of acquisition. Theresults of AI have been included in the North American Lab segment from thedate of acquisition.

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

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

 

8

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

**(3) Acquisitions(Continued)**

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

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

**(4) Stock-Based Compensation**

***(a)***    StockOptions

CDRV adopted the CDRV Investors, Inc. StockIncentive Plan (the “Stock Plan”). Under the Stock Plan, CDRV’s board ofdirectors may grant rights to purchase shares of CDRV common stock and optionsto purchase shares of CDRV common stock to any of our executive officers orother employees, including our named executive officers. Under the Stock Plan,the board of directors may also grant shares of CDRV common stock, rights topurchase shares of CDRV common stock and other share-based awards to ourdirectors, who are not also our employees or associated with Clayton, Dubilier &Rice (“CD&R”). Options granted under the plan vest in equal annualinstallments on each of the first five anniversaries of the grant date andexpire ten years from the grant date. As of June 30, 2006, there were1,026,591 shares of CDRV common stock available for all types of awards. Basedon shares issued, options outstanding and restricted units granted under theStock Plan as of June 30, 2006, there are 134,145 shares available forfuture awards.

During the first quarter of 2006, CDRV had thefollowing stock transactions with our employees, directors and former employees.Closed an offering with our new President and Chief Executive Officer for thepurchase of 19,643 shares at $56.00 per share. The offer to purchase theshares was issued in the fourth quarter of 2005 and the fair value of theshares was subsequently determined to be $75 per share. In accordance with theguidance set forth in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees(“APB 25”), we recorded a compensation charge in the fourth quarter of 2005 of$0.7 applying the intrinsic value guidance set forth in APB 25. Coincident withthis purchase, this executive was granted options to purchase 58,929 shares at$75.00 per share. Issued 1,049 shares to certain directors who are not also ouremployees or associated with CD&R for director compensation and issued1,360 shares at $50.52 per share in connection with the exercise of vestedstock options.

During the second quarter of 2006, CDRV had thefollowing stock transactions with our employees, directors and former employees.Offered 85 of our officers and employees the option to purchase 40,166 sharesat $75.00 per share. The fair value of this purchase option, calculated inaccordance with the provisions of SFAS No. 123 Revised, Share-Based Payment (“SFAS 123R”), of$1.3 was charged to operations in the second quarter of 2006. CDRV closed theoffering with 51 of our officers and employees for the purchase of 25,070shares in the second quarter of 2006 and will grant these officers andemployees 50,140 options at grant date fair value during the third quarter of2006. As a result of the delay in the issuance of the options, these officersand employees will receive a special bonus totaling $2.2 in the third quarterof 2006, which will be recorded as a compensation charge, primarily in thethird quarter of 2006. Issued 736 shares to certain directors who are not alsoour employees or associated with CD&R for director compensation and issued19,600 shares at $50.52 per share in connection with the exercise of vestedstock options.

9

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

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

During the six months ended June 30, 2005, CDRVhad the following stock transactions with our employees and directors. Closedofferings in respect of 15 of our officers and employees for the purchase of21,210 shares at $56.00 per share and granted options to purchase 42,420shares at $56.00 per share. In connection with the acquisition of AI discussedin Note 3, issued 8,929 shares, as consideration (for value of $0.5), andgranted options to purchase 17,858 shares at $56.00 per share. Closed anoffering with 1 of our directors for 447 shares at $56.00 per share and issued2,812 shares to certain directors who are not also our employees or associatedwith CD&R for director compensation.

These stock issuances are reflected as capitalcontributions from CDRV of $4.1 and $1.8 for the six months ended June 30,2006 and 2005, respectively.

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

The Company adopted SFAS 123R using the modifiedprospective transition method. Under this transition method, compensation costincludes the cost for all options granted prior to, but not yet vested as of January 1,2006 and all prospective awards without restatement of prior periods. Theimpact of adopting SFAS 123R, including the charge for the purchase option of$1.3 discussed above, for the three and six months ended June 30, 2006 wasan increase to selling, general and administrative expenses of $1.8 and $2.2,respectively, and a reduction to income tax provision of $0.7 and $0.9,respectively.

Had compensation expense for CDRV stock optionsgranted been determined based on the fair value at the grant date for awardsunder the plan, consistent with the provisions of SFAS 123R, the Company’s netincome for the three and six months ended June 30, 2005 would haveapproximated the pro-forma amounts indicated below:

| ** **                                                                                                     | ** ** | **Three Months  Ended  June 30, 2005** | ** ** | **Six Months  Ended  June 30, 2005** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------------------|------------|
| Net income, as  reported                                                                                       |       |                                                  | $          | 9.2                                                 |       |   |   | $ | 14.3 |   |   |
| Deduct:  stock-based compensation expense determined using fair value based method for  all awards, net of tax |       |                                                  | (0.3       | )                                                   |       |   | (0.6 | ) |   |
| Pro-forma net income                                                                                           |       |                                                  | $          | 8.9                                                 |       |   |   | $ | 13.7 |   |   |

 

10

----

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

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

The fair value of eachoption was estimated using the Black-Scholes option-pricing model. No optionswere granted during the three months ended June 30, 2006. The weightedaverage fair value of options granted and the assumptions used for each of thereporting periods when options were granted are as follows:

| ** **                     | ** ** | **Three Months  Ended** | ** ** | **Six Months  Ended  June 30,** | ** ** |
|--------------------------------|------------|------------------------------|------------|-------------------------------------------|------------|
| ** **                     | ** ** | **June 30, 2005**  | ** ** | **2006**                                  | ** ** | **2005** | ** ** |
| Fair value of  options granted |       |                         | $          | 25.57                                     |       |   | $ | 33.61 |   | $ | 25.57 |   |
| Risk-free  interest rate       |       |                         | 4.10       | %                                         |       | 4.76 | % | 4.10 | % |
| Expected life of  options      |       |                         | 6.5 years  |                                      |       | 6.5 years |   | 6.5 years |   |
| Volatility                     |       |                         | 38         | %                                         |       | 35 | % | 38 | % |
| Expected dividend yield        |       |                         | 0.0        | %                                         |       | 0.0 | % | 0.0 | % |
|                                |            |                              |            |                                           |            |  |  |  |  |  |  |  |

 

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

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

Informationregarding CDRV stock options granted to our employees under the Stock Plan forthe six months ended June 30, 2006 is as follows:

| ** **                           | ** ** | **Number  of  Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|--------------------------------------|------------|------------------------|------------|----------------------------------------|------------|
| Outstanding at  January 1, 2006 |       | 483,728                |       |                                   | $          | 51.24 |   |   |
| Granted                              |       | 58,929                 |       |                                   | 75.00      |   |   |
| Forfeited                            |       | (46,608                | )          |                                   | 50.52      |   |   |
| Canceled                             |       | (752                   | )          |                                   | 50.52      |   |   |
| Exercised                            |       | (20,960                | )          |                                   | 50.52      |   |   |
| Outstanding at  June 30, 2006   |       | 474,337                |       |                                   | 54.30      |   |   |
| Exercisable at  June 30, 2006   |       | 86,142                 |       |                                   | 51.29      |   |   |

 

Cash received by CDRV as a result of CDRV stockoptions exercised was $1.1 for the six months ended June 30, 2006. In connectionwith these exercises, the tax benefit realized by the Company was $0.1 for thesix months ended June 30, 2006.

Total intrinsicvalue related to CDRV stock options exercised was $0.5 for the three and sixmonths ended June 30, 2006. No options were exercised during the three andsix months ended June 30, 2005.

11

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

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

Informationregarding unvested CDRV stock options for the six months ended June 30,2006 is as follows:

| ** **                                | ** ** | ** ** | ** ** | **Weighted** | ** ** |
|-------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                                | ** ** | **Number** | ** ** | **Average**  | ** ** |
| ** **                                | ** ** | **of**     | ** ** | **Fair**     | ** ** |
| ** **                                | ** ** | **Shares** | ** ** | **Value**    | ** ** |
| Unvested options  at January 1, 2006 |       | 398,330    |       |         | $          | 17.18 |   |   |
| Granted                                   |       | 58,929     |       |         | 33.61      |   |   |
| Forfeited                                 |       | (46,608    | )          |         | 15.58      |   |   |
| Vested                                    |       | (22,456    | )          |         | 20.94      |   |   |
| Unvested options at  June 30, 2006   |       | 388,195    |       |         | 19.65      |   |   |

 

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

| ** **   | ** ** | **Weighted**          | ** ** | ** **                   | ** ** | ** **                   | ** ** |
|--------------|------------|-----------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **   | ** ** | **Average**           | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
| ** **   | ** ** | **Remaining**         | ** ** | **Number**                   | ** ** | **Aggregate**                | ** ** | **Number** | ** ** | **Aggregate** | ** ** |
| **Exercise** | ** ** | **Contractual**       | ** ** | **of**                       | ** ** | **Intrinsic**                | ** ** | **of** | ** ** | **Intrinsic** | ** ** |
| **Price**    | ** ** | **Life (Years)** | ** ** | **Shares**                   | ** ** | **Value**                    | ** ** | **Shares** | ** ** | **Value** | ** ** |
|         | $          | 50.52                 |       |                         |       | 8.3                          |       |   | 351,630 |   |   | $ | 24.1 |   |   |   | 74,086 |   |   |   | $ | 5.1 |   |   |
|         | 56.00      |                  |       |                         | 8.8        |                         |       | 63,778 |   |   | 4.0 |   |   |   | 12,056 |   |   |   | 0.8 |   |   |
|         | 75.00      |                  |       |                         | 9.7        |                         |       | 58,929 |   |   | 2.6 |   |   |   | — |   |   |   | — |   |   |
|         |       |                  |       |                         |       |                         |       | 474,337 |   |   | $ | 30.7 |   |   |   | 86,142 |   |   |   | $ | 5.9 |   |   |

 

***(b) Restricted Stock Units***

In 2005, CDRV granted 21,333 CDRV restricted stockunits with a total fair value of approximately $1.6 to certain of our officersand other key executives that will vest in equal annual installments over afive-year period. The restricted units will all vest earlier in certaincircumstances if CDRV has a change in control. The granting of these units wasreflected in the December 31, 2005 financial statements by increasingadditional paid-in capital by $1.6 and a contra-equity account of unamortizedvalue of restricted stock issued of $1.6. In accordance with the provisions ofSFAS 123R, the unamortized value of restricted stock issued of $1.6 as of theadoption date of January 1, 2006 was eliminated against additional paid-incapital. The unearned compensation is being amortized as compensation expenseover the five-year vesting period of the restricted units granted.Compensation expense related to these restricted stock units was $0.1 and $0.2for the three and six months ended June 30, 2006, respectively.

As of June 30, 2006, the aggregate estimatedfuture compensation expense related to nonvested options outstanding and theunamortized value of restricted stock issued is $7.8. This expense will berecognized over a weighted average period of 3.9 years.

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

12

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

**(5) Restructuring**

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

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

Thefollowing table sets forth the activity associated with the Company’sliabilities for restructuring as a result of the Acquisition.

| ** **                       | ** ** | **Severance**   | ** ** | ** **     | ** ** | ** ** | ** ** |
|----------------------------------|------------|-----------------|------------|----------------|------------|------------|------------|
| ** **                       | ** ** | **and**         | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                       | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | **benefits**    | ** ** | **related**    | ** ** | **Total**  | ** ** |
| Balance at  January 1, 2006 |       |            | $          | 7.6            |       |       |       | $ | 5.6 |   |   | $ | 13.2 |   |
| Cash payments/other              |       |            | (2.7       | )              |       |       | (1.4       | ) |   | (4.1 | ) |
| Currency translation changes     |       |            | 0.4        |           |       |       | 0.4        |   |   | 0.8 |   |
| Balance at June 30,  2006   |       |            | $          | 5.3            |       |       |       | $ | 4.6 |   |   | $ | 9.9 |   |

 

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

In addition, we initiated several cost reductionprograms in response to relatively static market conditions and implementedreductions in force and other cost containment measures during 2005. Inconnection with these actions, we recorded accruals and charges to operationsrelated to severance and facility exit costs of approximately $5.1 and $7.2 forthe three and six months ended June 30, 2005, respectively. For the threeand six months ended June 30, 2006 we reversed $0.8 and $1.0,respectively, of excess accruals and credited operations as a result of there-deployment of certain personnel originally included in the programs and netreductions to other estimated severance and termination benefit accruals.

13

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

**(5) Restructuring(Continued)**

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

| ** **                                          | ** ** | **Three Months Ended June 30,** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                          | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| ** **                                          | ** ** | **Severance**                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **Severance** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **and**                                             | ** ** | ** ** | ** ** | ** ** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **termination**                                     | ** ** | **Facilities** | ** ** | ** ** | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **benefits**                                        | ** ** | **related** | ** ** | **Total** | ** ** | **benefits** | ** ** | **related** | ** ** | **Total** | ** ** |
| Balance at  beginning of period                     |       |                                                | $          | 4.2 |   |   |   | $ | 0.1 |   |   | $ | 4.3 |   |   | $ | 2.1 |   |   |   | $ | — |   |   | $ | 2.1 |   |
| Accruals  (credited) charged to earnings by segment |       |                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab                                  |       |                                                | (0.8       | ) |   |   | — |   |   | (0.8 | ) |   | 1.8 |   |   |   | — |   |   | 1.8 |   |
| European Lab                                        |       |                                                | —     |   |   |   | — |   |   | — |   |   | 1.8 |   |   |   | 1.5 |   |   | 3.3 |   |
| Cash payments/other                                 |       |                                                | (1.2       | ) |   |   | — |   |   | (1.2 | ) |   | (2.1 | ) |   |   | — |   |   | (2.1 | ) |
| Currency translation changes                        |       |                                                | 0.1        |   |   |   | — |   |   | 0.1 |   |   | — |   |   |   | — |   |   | — |   |
| Balance at end of period                            |       |                                                | $          | 2.3 |   |   |   | $ | 0.1 |   |   | $ | 2.4 |   |   | $ | 3.6 |   |   |   | $ | 1.5 |   |   | $ | 5.1 |   |

 

| ** **                                          | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                          | ** ** | **2006**                                          | ** ** | **2005** | ** ** |
| ** **                                          | ** ** | **Severance**                                     | ** ** | ** ** | ** ** | ** ** | ** ** | **Severance** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **and**                                           | ** ** | ** ** | ** ** | ** ** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **termination**                                   | ** ** | **Facilities** | ** ** | ** ** | ** ** | **termination** | ** ** | **Facilities** | ** ** | ** ** | ** ** |
| ** **                                          | ** ** | **benefits**                                      | ** ** | **related** | ** ** | **Total** | ** ** | **benefits** | ** ** | **related** | ** ** | **Total** | ** ** |
| Balance at  beginning of period                     |       |                                              | $          | 9.8 |   |   |   | $ | 0.3 |   |   | $ | 10.1 |   |   | $ | — |   |   |   | $ | — |   |   | $ | — |   |
| Accruals  (credited) charged to earnings by segment |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North American Lab                                  |       |                                              | (1.0       | ) |   |   | — |   |   | (1.0 | ) |   | 3.9 |   |   |   | — |   |   | 3.9 |   |
| European Lab                                        |       |                                              | —     |   |   |   | — |   |   | — |   |   | 1.8 |   |   |   | 1.5 |   |   | 3.3 |   |
| Cash payments/other                                 |       |                                              | (6.6       | ) |   |   | (0.2 | ) |   | (6.8 | ) |   | (2.1 | ) |   |   | — |   |   | (2.1 | ) |
| Currency translation changes                        |       |                                              | 0.1        |   |   |   | — |   |   | 0.1 |   |   | — |   |   |   | — |   |   | — |   |
| Balance at end of period                            |       |                                              | $          | 2.3 |   |   |   | $ | 0.1 |   |   | $ | 2.4 |   |   | $ | 3.6 |   |   |   | $ | 1.5 |   |   | $ | 5.1 |   |

 

At June 30, 2006,$6.0 of our aggregate restructuring liabilities are included in accruedexpenses and $6.3 are included in other long-term liabilities. At December 31,2005, $16.6 of our aggregate restructuring liabilities are included in accruedexpenses and $6.7 are included in other long-term liabilities.

**(6) Goodwill and OtherIntangible Assets**

***(a)***   Goodwill

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

14

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

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

Changes in the carryingamount of goodwill by segment for the six months ended June 30, 2006 areas follows:

| ** **                                              | ** ** | **North**             | ** ** | **European** | ** ** | **Science**   | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|--------------|------------|---------------|------------|------------|------------|
| ** **                                              | ** ** | **American Lab** | ** ** | **Lab**      | ** ** | **Education** | ** ** | **Total**  | ** ** |
| Balance at  January 1, 2006                        |       |                  | $          | 647.3        |       |          |       | $          | 195.0      |   |   |   | $ | 67.7 |   |   | $ | 910.0 |   |
| Purchase accounting adjustment for the TSL  acquisition |       |                  | —     |         |       |          | (1.0       | )          |       |   | — |   |   | (1.0 | ) |
| Currency translation changes                            |       |                  | 7.5        |         |       |          | 16.1       |       |       |   | — |   |   | 23.6 |   |
| Balance at June 30,  2006                          |       |                  | $          | 654.8        |       |          |       | $          | 210.1      |   |   |   | $ | 67.7 |   |   | $ | 932.6 |   |

 

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

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

| ** **                                                                                                  | ** ** | **Weighted**     | ** ** | ** **        | ** ** | ** **            | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                  | ** ** | **Average**      | ** ** | ** **        | ** ** | ** **            | ** ** |
| ** **                                                                                                  | ** ** | **Amortization** | ** ** | ** **        | ** ** | ** **            | ** ** |
| ** **                                                                                                  | ** ** | **Period**       | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                  | ** ** | **(Years)**      | ** ** | **2006**          | ** ** | **2005**              | ** ** |
| Amortizable intangible  assets:                                                                             |       |             |       |              |       |                  |       |   |   |   |   |   |   |
| Customer relationships in North America (net of  accumulated amortization of $16.7 and $13.2, respectively) |       |             | 32.8       |              |       |                  | $          | 230.1 |   |   |   | $ | 232.7 |   |   |
| Customer relationships in Europe (net of accumulated  amortization of $8.9 and $6.3, respectively)          |       |             | 20.3       |              |       |                  | 74.3       |   |   |   | 69.5 |   |   |
| Chemical supply agreements (net of accumulated  amortization of $7.2 and $5.2, respectively)                |       |             | 10.0       |              |       |                  | 24.5       |   |   |   | 24.2 |   |   |
| Other (net of accumulated amortization of $0.8 and  $0.4, respectively)                                     |       |             | 3.0        |              |       |                  | 0.4        |   |   |   | 0.8 |   |   |
| Total amortizable intangible assets (net of  accumulated amortization of $33.6 and $25.1, respectively)     |       |             |       |              |       |                  | 329.3      |   |   |   | 327.2  |   |   |
| Indefinite-lived intangible  assets:                                                                        |       |             |       |              |       |                  |       |   |   |   |   |   |   |
| Trademarks and tradenames                                                                                   |       |             |       |              |       |                  | 228.5      |   |   |   | 225.5 |   |   |
| Total intangible  assets, net                                                                               |       |             |       |              |       |                  | $          | 557.8 |   |   |   | $ | 552.7 |   |   |

 

Amortization expense for each of the reporting periodsis shown in the table below:

| ** **            | ** ** | **Three Months Ended**                         | ** ** | **Six Months Ended**                           | ** ** |
|-----------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **            | ** ** | **June 30,**                                        | ** ** | **June 30,**                                        | ** ** |
| ** **            | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** |
| Amortization  expense |       |                                                     | $          | 3.9                                                      |       |   |   | $ | 3.6 |   |   |   | $ | 7.8 |   |   |   | $ | 7.2 |   |   |
|                       |            |                                                          |            |                                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

15

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

**(7) Debt**

Thefollowing is a summary of ourdebt obligations:

| ** **                                       | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2006**          | ** ** | **2005**              | ** ** |
| Senior Secured  Credit Facility                  |       | $                 | 504.2      |                  |       | $ | 537.1 |   |   |
| 6 7¤8%  Unsecured Senior Notes due 2012     |       | 200.0             |       |                  | 200.0      |   |   |
| 8% Unsecured  Senior Subordinated Notes due 2014 |       | 320.0             |       |                  | 320.0      |   |   |
| Loan from CDRV  Holdings, Inc.              |       | 0.6               |       |                  | 0.6        |   |   |
| Bank loans                                       |       | 0.3               |       |                  | 0.3        |   |   |
| Capital leases                                   |       | 5.9               |       |                  | 5.8        |   |   |
| Total debt                                       |       | 1,031.0           |       |                  | 1,063.8    |   |   |
| Less short-term  portion                         |       | (6.4              | )          |                  | (45.5      | ) |   |
| Total long-term  portion                         |       | $                 | 1,024.6    |                  |       | $ | 1,018.3 |   |   |

 

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

The Senior Secured Credit Facility provides foraggregate maximum borrowings of approximately $654.2 under (1) a term loanfacility providing for a loan denominated in Euros in an aggregate principalamount currently outstanding of €121.8 million (orapproximately $155.6 on a U.S. dollar equivalent basis as of June 30, 2006), (2) aterm loan facility providing for a term loan denominated in U.S. dollars in anaggregate principal amount currently outstanding of $348.6, and (3) amulti-currency revolving credit facility, providing for up to $150.0 inmulti-currency revolving loans (including standby and commercial letters ofcredit) outstanding at any time. Undrawn amounts under the multi-currencyrevolving credit facility will be available on a revolving credit basis forgeneral corporate purposes. As of June 30, 2006, we had $9.6 of undrawnletters of credit and our remaining borrowing availability under the $150.0multi-currency revolving credit facility was $140.4.

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

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

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

·       50% of excess cash flow (asdefined) for any fiscal year unless certain leverage ratio targets are met. Aprepayment of $44.5 was made in March 2006 based on excess cash flow (asdefined) generated in 2005. This amount was included in short-term bank debt inour consolidated balance sheet at December 31, 2005.

16

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

**(7) Debt(Continued)**

***Security; Guarantees***

The obligations under the Senior Secured CreditFacility are guaranteed by our parent, CDRV Holdings, Inc., and eachsignificant direct and indirect domestic subsidiary of VWR, as that term isdefined in the credit agreement. As of June 30, 2006, none of the domesticsubsidiaries of VWR met the definition of significant subsidiary under thecredit agreement. In addition, the Senior Secured Credit Facility and theguarantees thereunder are secured by security interests in and pledges of orliens on substantially all of the tangible and intangible assets of VWR and itssubsidiaries.

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

***Interest***

At our election, the interest rates applicable to theU.S. dollar-denominated term loan can be based on a fluctuating rate ofinterest measured by reference to either (1) an adjusted London inter-bankoffered rate, or LIBOR, plus a borrowing margin or (2) an alternate baserate, or ABR, plus a borrowing margin. The interest rate applicable to theEuro-denominated term loan is based on a fluctuating rate of interest measuredby reference to an adjusted EURIBOR plus a borrowing margin. As of June 30,2006, the interest rates on the U.S. dollar-denominated and Euro-denominatedterm loans were 7.34% and 5.53%, respectively.

Effective July 21,2004, VWR entered into an interest rate cap to hedge a portion of thevariability of cash flows related to potential changes in interest rates on €35.0million of our Euro-denominated term loan. The instrument has a 5.0% 3-monthEURIBOR cap that terminated on July 21, 2006. The 3-month EURIBORrate was approximately 3.1% as of June 30, 2006.

***Covenants***

The Senior Secured Credit Facility contains a numberof covenants that, among other things, limit or restrict our ability to disposeof assets, incur additional indebtedness, incur guarantee obligations, prepayother indebtedness, make acquisitions, modify terms of the indentures, engagein mergers or consolidations, change the business conducted by us taken as awhole, make capital expenditures, or engage in certain transactions withaffiliates. In addition, the Senior Secured Credit Facility requires us tocomply with specified financial ratios and tests, including a minimum interestexpense coverage ratio, a maximum leverage ratio and a maximum capitalexpenditures test. As of June 30, 2006, the Company was in compliance withall covenants.

17

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

**(7) Debt**(Continued)

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

The 67¤8% UnsecuredSenior Notes mature on April 15, 2012. The 8% Unsecured SeniorSubordinated Notes mature on April 15, 2014. Both the senior and seniorsubordinated notes require semiannual cash interest payments on April 15and October 15 to holders of record at the close of business as of thepreceding April 1 and October 1. The senior subordinated notes aresubordinated in right of payment to all secured debt of the Company and thesenior notes.

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

**(8) Defined BenefitPlans**

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

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

| ** **                      | ** ** | **Three Months Ended June 30,** | ** ** |
|---------------------------------|------------|-----------------------------------------------------|------------|
| ** **                      | ** ** | ** **                                          | ** ** | **German, French** | ** ** |
| ** **                      | ** ** | **U.S. Plan**                                  | ** ** | **and UK Plans** | ** ** |
| ** **                      | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                    |       | $                                                   | 0.7        |   | $ | 1.4 |   | $ | 0.7 |   | $ | 0.9 |   |
| Interest cost                   |       | 2.1                                                 |       | 2.1 |   | 1.1 |   | 1.1 |   |
| Expected return  on plan assets |       | (2.2                                                | )          | (2.1 | ) | (0.9 | ) | (1.0 | ) |
| Recognized net  actuarial loss  |       | 0.1                                                 |       | — |   | 0.1 |   | — |   |
| Net periodic  pension cost      |       | $                                                   | 0.7        |   | $ | 1.4 |   | $ | 1.0 |   | $ | 1.0 |   |

 

| ** **                      | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------|------------|---------------------------------------------------|------------|
| ** **                      | ** ** | ** **                                        | ** ** | **German, French** | ** ** |
| ** **                      | ** ** | **U.S. Plan**                                | ** ** | **and UK Plans** | ** ** |
| ** **                      | ** ** | **2006**                                          | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Service cost                    |       | $                                                 | 1.4        |   | $ | 3.3 |   | $ | 1.4 |   | $ | 1.8 |   |
| Interest cost                   |       | 4.2                                               |       | 4.3 |   | 2.0 |   | 2.2 |   |
| Expected return  on plan assets |       | (4.5                                              | )          | (4.2 | ) | (1.8 | ) | (2.0 | ) |
| Recognized net  actuarial loss  |       | 0.2                                               |       | — |   | 0.2 |   | — |   |
| Net periodic pension  cost      |       | $                                                 | 1.3        |   | $ | 3.4 |   | $ | 1.8 |   | $ | 2.0 |   |

 

18

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

**(8)** Defined Benefit Plans(Continued)

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

The Company madecontributions to the U.S. and Non-U.S. plans of approximately $4.0 and $0.8 forthe six months ended June 30, 2006, respectively, and expects to makeadditional contributions to the U.S. and Non-U.S. plans of approximately $4.4and $0.9, respectively, during the remainder of 2006.

**(9)   ComprehensiveIncome (Loss)**

Comprehensiveincome (loss) is determined as follows:

| ** **                                        | ** ** | **Three Months Ended** | ** ** | **Six Months Ended**               | ** ** |
|---------------------------------------------------|------------|----------------------------------|------------|----------------------------------------------|------------|
| ** **                                        | ** ** | **June 30,**                | ** ** | **June 30,**                            | ** ** |
| ** **                                        | ** ** | **  2006  ** | ** ** | **   2005   ** | ** ** | **  2006  ** | ** ** | **   2005   ** | ** ** |
| Net income                                        |       |                             | $          | 18.3                                         |       |   |   | $ | 9.2 |   |   |   | $ | 34.4 |   |   |   | $ | 14.3 |   |   |
| Other  comprehensive income (loss):               |       |                             |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment           |       |                             | 20.8       |                                         |       |   | (27.4 | ) |   |   | 27.0 |   |   |   | (33.4 | ) |   |
| Unrealized (loss) gain on derivatives, net of tax |       |                             | (1.0       | )                                            |       |   | 0.4 |   |   |   | (0.5 | ) |   |   | 0.7 |   |   |
| Comprehensive income  (loss)                      |       |                             | $          | 38.1                                         |       |   |   | $ | (17.8 | ) |   |   | $ | 60.9 |   |   |   | $ | (18.4 | ) |   |

 

**(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 distribution of products containing asbestos by us andcertain of our predecessors. While the impact of this litigation has typicallybeen immaterial, there can be no assurance that the impact of the pending andany future claims will not be material to our business, financial condition orresults of operations in the future.

During 2005, the German Federal Cartel Officeinitiated an investigation with regard to our European Distribution Agreementwith Merck KGaA. The purpose of the investigation is to determine whether thisagreement violates or otherwise infringes the general prohibition ofanti-competitive agreements under either German or EU rules. The Company hassubmitted information to the German Federal Cartel Office and is awaitingformal feedback in connection with this matter. At the current time we cannotcomplete our assessment as to the likely outcome of the investigation orpotential economic impact associated with an adverse ruling. In connection withthe Acquisition, we recorded intangible assets of approximately €24.8million (or $31.7 on a U.S. dollar equivalent basis as of June 30, 2006)related to our European Distribution Agreement with Merck KGaA. As of June 30,2006, the unamortized net book value of these intangible assets isapproximately  €19.2million (or $24.5 on a U.S. dollar equivalent basis).

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

**(10)**   Commitments and Contingencies(Continued)

On March 28, 2006, the Company was served with acomplaint filed in the United States District Court, Western District of NewYork, by Corning Incorporated (“Corning”) alleging a breach of contract andunliquidated damages. On April 5, 2006, Corning amended its complaint to allegeadditional trademark and unfair competition claims. On May 2, 2006, theCompany filed a motion to dismiss Corning’s breach of contract claim. TheCompany will vigorously defend itself in this matter. Until further informationis obtained we cannot assess the likely outcome of this litigation.

**(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**                         | ** ** | **Six Months Ended**                           | ** ** |
|------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                   | ** ** | **June 30,**                                        | ** ** | **June 30,**                                        | ** ** |
| ** **                   | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Net  Sales**               |       |                                                     |       |                                                     |       |   |   |   |   |   |   |   |   |
| North American Lab           |       |                                                     | $          | 500.3                                                    |       |   |   | $ | 479.5 |   |   | $ | 992.5 |   | $ | 940.4 |   |
| European Lab                 |       |                                                     | 277.6      |                                                     |       |   | 281.2 |   |   | 550.5 |   | 550.0 |   |
| Science Education            |       |                                                     | 37.1       |                                                     |       |   | 34.1 |   |   | 67.8 |   | 58.5 |   |
| Total                        |       |                                                     | $          | 815.0                                                    |       |   |   | $ | 794.8 |   |   | $ | 1,610.8 |   | $ | 1,548.9 |   |
| **Operating Income**         |       |                                                     |       |                                                     |       |   |   |   |   |   |   |   |   |
| North American Lab           |       |                                                     | $          | 27.3                                                     |       |   |   | $ | 19.7 |   |   | $ | 56.7 |   | $ | 34.3 |   |
| European Lab                 |       |                                                     | 14.4       |                                                     |       |   | 10.4 |   |   | 28.7 |   | 21.5 |   |
| Science Education            |       |                                                     | 3.9        |                                                     |       |   | 2.6 |   |   | 6.3 |   | 2.0 |   |
| Total                        |       |                                                     | 45.6       |                                                     |       |   | 32.7 |   |   | 91.7 |   | 57.8 |   |
| Interest income              |       |                                                     | (1.5       | )                                                        |       |   | (0.4 | ) |   | (2.8 | ) | (1.0 | ) |
| Interest expense             |       |                                                     | 20.3       |                                                     |       |   | 18.8 |   |   | 41.0 |   | 37.2 |   |
| Other (income)  expense, net |       |                                                     | (0.4       | )                                                        |       |   | (0.9 | ) |   | 0.4 |   | (1.9 | ) |
| Income before  income taxes  |       |                                                     | $          | 27.2                                                     |       |   |   | $ | 15.2 |   |   | $ | 53.1 |   | $ | 23.5 |   |

 

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

**Overview**

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

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

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

**Business Segments**

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

**Acquisitions**

We acquired AGB ScientificLtd. (“AGB”) and Advanced Instruments Sales & Service, Inc. (“AI”)on April 1, 2005 and Technical Service Lab B.V. (“TSL”) on July 1,2005. The results of AGB and TSL have been included in the European Lab segmentand the results of AI have been included in the North American Lab segment fromthe date of the acquisitions.

**Restructuring**

Since the Acquisition on April 7, 2004, we haveinitiated various restructuring activities designed to rationalize operatingcosts and improve our operating and administrative capabilities. We recordedrestructuring accruals of $29.7 million in 2004, primarily related toreductions in headcount in Europe primarily due to the reorganization of ourEuropean sales and marketing functions. In early 2005, we recorded additionalrestructuring accruals of $24.5 million, primarily for severance and other exitcosts including estimates for environmental remediation associated withcessation of manufacturing operations at a plant in France and severance costsassociated with the consolidation of certain sales and marketing personnel inour German and UK operations. These charges have been recorded as adjustmentsto acquisition costs (increases to goodwill) pursuant to the provisions ofEmerging Issues Task Force Issue No. 95-3, *Recognition of Liabilities in Connection with aPurchase Business Combination*.

Throughout 2005, the Company recorded various restructuringcharges in response to relatively static market conditions and implementedreductions in force and other cost containment measures that did not qualify asacquisition costs. In connection with these actions, we recorded restructuringcharges related to severance and facility exit costs totaling approximately$20.6 million for the year ended December 31, 2005. For the three months ended June 30,2005 we recorded $1.8 million of suchcharges related to North American Lab programs and $3.3 million relatedto European Lab programs. For the six months ended 

21

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June 30, 2005 werecorded $3.9 million ofsuch charges related to North American Lab programs and $3.3 millionrelated to European Lab programs.

These programs are complete and no such charges havebeen recorded in 2006. During the three and six months ended June 30, 2006we reversed $0.8 million and $1.0 million, respectively, of excess accrualsrelated to North American Lab programs.

**Constant CurrencyAnalysis**

We maintain operations inNorth America and in Europe. Approximately 41% of our net sales originate incurrencies other than the U.S. dollar, principally the Euro, the British poundsterling and the Canadian dollar. As a result, changes in our revenues andoperating profits include the impact of changes in foreign currency exchangerates. We provide “constant currency” disclosures in the following discussionand analysis to quantify the impact of the fluctuation in foreign exchangerates and utilize constant currency results in our analysis of segmentperformance. We believe that this calculation is a useful measure, indicatingtrue operating performance. Earnings from our subsidiaries are not generallyrepatriated to the United States, and we typically do not incur significantgains or losses on foreign currency transactions with our subsidiaries.Therefore, changes in foreign currency exchange rates primarily impact onlyreported earnings and not our financial position.

**Compliance with theSarbanes-Oxley Act**

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

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

**Results ofOperations**

***Net Sales***

The following table presents net sales and changes innet sales by reportable segment for the three and six months ended June 30,2006 and 2005 (dollars in millions):

| ** **          | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **          | ** ** | **2006**                                            | ** ** | **% Change**                                 | ** ** | **2005** | ** ** | **2006** | ** ** | **% Change** | ** ** | **2005** | ** ** |
| North American  Lab |       | $                                                   | 500.3      |                                              |       | 4.3 | % |   | $ | 479.5 |   | $ | 992.5 |   |   | 5.5 | % |   | $ | 940.4 |   |
| European Lab        |       | 277.6                                               |       |                                              | (1.3       | )% |   | 281.2 |   | 550.5 |   |   | 0.1 | % |   | 550.0 |   |
| Science Education   |       | 37.1                                                |       |                                              | 8.8        | % |   | 34.1 |   | 67.8 |   |   | 15.9 | % |   | 58.5 |   |
| Total               |       | $                                                   | 815.0      |                                              |       | 2.5 | % |   | $ | 794.8 |   | $ | 1,610.8 |   |   | 4.0 | % |   | $ | 1,548.9 |   |

 

Net sales for the three and six months ended June 30,2006 increased $20.2 million and $61.9 million, respectively, over thecomparable periods of 2005. Foreign currency and the acquisition of TSLfavorably impacted net sales by $4.2 million and $0.7 million, respectively,for the three months ended June 30, 2006. Foreign currency unfavorablyimpacted net sales by $16.9 million and the acquisitions of AGB, AI and TSLfavorably impacted net sales by $12.5 million for the six months ended June 30,2006. Excluding these effects, net sales increased by 1.9% and 4.3%,respectively, from the comparable periods of 2005. These increases primarilyreflect improvements in product pricing.

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Net sales in theNorth American Lab segment for the three and six months ended June 30,2006 increased $20.8 million and $52.1 million, respectively, over thecomparable periods of 2005. Foreign currency changes accounted for $4.8 millionand $8.2 million of the increase for the three and six months ended June 30,2006, respectively. The acquisition of AI favorably impacted net sales by $3.4million for the six months ended June 30, 2006. Excluding these effects,net sales increased 3.3% and 4.3%, respectively, from the comparable periods of2005. These increases reflect improvements in product pricing, partially offsetby one less billing day for the three months ended June 30, 2006. For thethree months ended June 30, 2006 our net sales in the bio-pharmaceuticaland clinical markets experienced low-single digit growth, our net sales in theindustrial market achieved mid-single digit growth and our net sales in theproduction safety market achieved growth of approximately 13%. These increaseswere partially offset by a decline in our government market. For the six monthsended June 30, 2006 our net sales in the bio-pharmaceutical marketexperienced low-single digit growth, our net sales in the industrial andclinical markets achieved mid-single digit growth and our net sales in theproduction safety market achieved growth of approximately 13%. These increaseswere partially offset by a decline in our government market.

Net sales in the European Lab segment for the threeand six months ended June 30, 2006 decreased $3.6 million and increased$0.5 million, respectively, from the comparable periods of 2005. Foreigncurrency changes unfavorably impacted net sales by $0.6 million and $25.1million for the three and six months ended June 30, 2006, respectively.The acquisitions of AGB and TSL favorably impacted net sales by $0.7 millionand $9.1 million for the three and six months ended June 30, 2006.Excluding these effects, net sales decreased 1.3% and increased 3.0%,respectively, from the comparable periods of 2005. The decrease for the threemonths ended June 30, 2006 reflects approximately three fewer billingdays. For the three months ended June 30, 2006 our net sales in thebio-pharmaceutical market were consistent with the comparable period of 2005and our net sales in our other markets each declined primarily as a result ofthe three fewer billing days. For the six months ended June 30, 2006 ournet sales in the bio-pharmaceutical market experienced low-single digit growthand our net sales in the industrial market achieved mid-single digit growth.These increases were partially offset by declines in our education, resellersand clinical market.

Net sales in the Science Education segment for thethree and six months ended June 30, 2006 increased $3.0 million or 8.8%and $9.3 million or 15.9%, respectively, over the comparable periods of 2005.The increase for the three months ended June 30, 2006 was a result ofgrowth in both our direct education and publishers markets. The increase forthe six months ended June 30, 2006 was a result of growth in our directeducation market, including the fulfillment of a large international order, andgrowth in our publishers market.

***GrossProfit***

The following table presents gross profit for thethree and six months ended June 30, 2006 and 2005 (dollars in millions):

| ** **                              | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                              | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Gross profit                            |       | $                                               | 219.1      |                                          | $          | 200.8 |   | $ | 433.5 |   | $ | 393.5 |   |
| Percentage of net sales  (gross margin) |       | 26.9                                            | %          | 25.3                                          | %          | 26.9 | % | 25.4 | % |
|                                         |            |                                                 |            |                                               |            |  |  |  |  |  |  |  |  |

 

Gross profit for the three and six months ended June 30,2006 increased $18.3 million and $40.0 million, respectively, over thecomparable periods of 2005. Foreign currency and the acquisition of TSLfavorably impacted gross profit by $1.0 million and $0.5 million, respectively,for the three months ended June 30, 2006. Foreign currency unfavorablyimpacted gross profit by $5.8 million and the acquisitions of AGB, AI and TSLfavorably impacted gross profit by $4.7 million for the six months ended June 30,2006. Excluding these effects, gross profit increased $16.8 million or 8.4% and$41.1 million or 10.4% from the 

23

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comparable periods of 2005as a result of the net sales increases and improved pricing discussed above.Our gross margin percentages improved in each of our segments over thecomparable periods of 2005. The increases in North American Lab and EuropeanLab are primarily a result of favorable pricing, better mix and improvedrecovery of freight costs. The increases in Science Education are primarily aresult of improved pricing, partially offset by increased international netsales, which generate somewhat lower margins.

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

The following table presents selling, general, andadministrative expenses (“SG&A”)for the three and six months ended June 30, 2006 and 2005 (dollarsin millions):

| ** **                                    | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Selling, general  and administrative expenses |       | $                                               | 174.3      |                                          | $          | 163.0 |   | $ | 342.8 |   | $ | 328.5 |   |
| Percentage of net sales                       |       | 21.4                                            | %          | 20.5                                          | %          | 21.3 | % | 21.2 | % |
|                                               |            |                                                 |            |                                               |            |  |  |  |  |  |  |  |  |

 

SG&A for the three and six months ended June 30,2006 increased $11.3 million and $14.3 million, respectively, over thecomparable periods of 2005. Foreign currency and the acquisition of TSL eachincreased SG&A by $0.4 million for the three months ended June 30,2006. Foreign currency favorably impacted SG&A by $5.3 million and theacquisitions of AGB, AI and TSL increased SG&A by $4.4 million for the sixmonths ended June 30, 2006. Excluding these effects, SG&A increased $10.5million or 6.4% and $15.2 million or 4.6% from the comparable periods of 2005.

Included in these increases are stock-basedcompensation charges of $1.8 million and $2.2 million for the three and sixmonths ended June 30, 2006, respectively, as a result of our adoption ofSFAS 123R in 2006. The balance of these increases are primarily a result ofinflation; increased information technology and Sarbanes-Oxley costs ofapproximately $2.9 million and $4.2 million for the three and six months ended June 30,2006, respectively; and investments in our sourcing function and ourBioSciences business; partially offset by savings from our prior restructuringprograms.

***Operating Income***

The following table presents operating income andoperating income as a percentage of net sales by reportable segment for thethree and six months ended June 30, 2006 and 2005 (dollars in millions):

| ** **          | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------|------------|---------------------------------|------------|-------------------------------|------------|
| ** **          | ** ** | **2006**                        | ** ** | **2005**                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **          | ** ** | **Amount**                      | ** ** | **%  of  Net Sales**     | ** ** | **Amount** | ** ** | **%  of  Net Sales** | ** ** | **Amount** | ** ** | **%  of  Net Sales** | ** ** | **Amount** | ** ** | **%  of  Net Sales** | ** ** |
| North American  Lab |       |                            | $          | 27.3                          |       |   |   | 5.5 | % |   |   | $ | 19.7 |   |   |   | 4.1 | % |   |   | $ | 56.7 |   |   |   | 5.7 | % |   |   | $ | 34.3 |   |   |   | 3.6 | % |   |
| European Lab        |       |                            | 14.4       |                          |       |   | 5.2 | % |   |   | 10.4 |   |   |   | 3.7 | % |   |   | 28.7 |   |   |   | 5.2 | % |   |   | 21.5 |   |   |   | 3.9 | % |   |
| Science Education   |       |                            | 3.9        |                          |       |   | 10.5 | % |   |   | 2.6 |   |   |   | 7.6 | % |   |   | 6.3 |   |   |   | 9.3 | % |   |   | 2.0 |   |   |   | 3.4 | % |   |
| Total               |       |                            | $          | 45.6                          |       |   |   | 5.6 | % |   |   | $ | 32.7 |   |   |   | 4.1 | % |   |   | $ | 91.7 |   |   |   | 5.7 | % |   |   | $ | 57.8 |   |   |   | 3.7 | % |   |

 

Operating income for the three and six months ended June 30, 2006 increased$12.9 million and $33.9 million, respectively, over the comparable periods of2005. Several factors affect the comparability of the year-over-year increasein operating performance. Operating income was adversely impacted in 2005 byrestructuring charges of $5.1 million and $7.2 million for the three and sixmonths ended June 30, 2005, respectively. For the comparable periods of2006 we recorded reductions to the previously established restructuringreserves of $0.8 million and $1.0 million, respectively. The acquisitionsfavorably impacted operating income by $0.1 million and $0.3 million for thethree and six months ended June 30, 2006, respectively. Foreign currencyfavorably impacted operating income by $0.6 million for the three months ended June 30,2006 and unfavorably impacted operating income by $0.5 million for the sixmonths ended 

24

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June 30, 2006.Excluding these effects, operating income increased $6.3 million or 16.7% and$25.9 million or 39.8% from the comparable periods of 2005. The increase for the three monthsended June 30, 2006 was theresult of a gross profit increase of $16.8 million, partially offset by anSG&A increase of $10.5 million. Theincrease for the six months ended June 30, 2006 was the result of a gross profitincrease of $41.1 million, partially offset by an SG&A increase of $15.2million.

Operating income in the North American Lab segment for the three and six months ended June 30,2006 increased $7.6 million and $22.4 million, respectively, over thecomparable periods of 2005. Operating income was adversely impacted in 2005 byrestructuring charges of $1.8 million and $3.9 million for the three and sixmonths ended June 30, 2005, respectively. For the comparable periods of2006 we recorded reductions to the previously established restructuringreserves of $0.8 million and $1.0 million, respectively. Foreign currencyfavorably impacted operating income by $0.4 million and $0.6 million for thethree and six months ended June 30, 2006, respectively. The acquisition ofAI unfavorably impacted operating income by $0.2 million for the six monthsended June 30, 2006. Excluding these effects, operating income increased$4.6 million or 21.4% and $17.1 million or 44.8% from the comparable periods of2005. The increase for the threemonths ended June 30, 2006 wasthe result of a gross profit increase of $12.4 million, partially offset by anSG&A increase of $7.8 million. Theincrease for the six months ended June 30, 2006 was the result of a gross profitincrease of $26.6 million, partially offset by an SG&A increase of $9.5million.

Operating income in the European Lab segment for the three and six months ended June 30, 2006 increased$4.0 million and $7.2 million, respectively, over the comparable periods of2005. Operating income was adversely impacted in 2005 by restructuring chargesof $3.3 million for the three and six months ended June 30, 2005. Theacquisitions favorably impacted operating income by $0.1 million and $0.5million for the three and six months ended June 30, 2006, respectively.Foreign currency favorably impacted operating income by $0.2 million for thethree months ended June 30, 2006 and unfavorably impacted operating incomeby $1.1 million for the six months ended June 30, 2006. Excluding theseeffects, operating income increased $0.4 million or 2.9% and $4.5 million or18.1% from the comparable periods of 2005. The increase for the three months ended June 30, 2006 was the result of a gross profitincrease of $2.8 million, partially offset by an SG&A increase of $2.4million. The increase for thesix months ended June 30, 2006 wasthe result of a gross profit increase of $9.8 million, partially offset by anSG&A increase of $5.3 million.

Operating income in the Science Education segment for the three and six months ended June 30,2006 increased $1.3 million and $4.3 million, respectively, over thecomparable periods of 2005. Theincrease for the three months ended June 30, 2006 was the result of a gross profitincrease of $1.6 million, partially offset by an SG&A increase of $0.3million. The increase for thesix months ended June 30, 2006 wasthe result of a gross profit increase of $4.7 million, partially offset by anSG&A increase of $0.4 million.

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

Interest expense, net of interest income, for thethree and six months ended June 30, 2006 increased to $18.8 million and$38.2 million, respectively, from $18.4 million and $36.2 million for thecomparable periods of 2005. The increases in 2006 are due to higher variableinterest rates on the Senior Secured Credit Facility term loans, partiallyoffset by decreased amounts outstanding under the Senior Secured CreditFacility term loans as a result of a $44.5 million prepayment made in March 2006and increased interest income earned on our cash and cash equivalents due tohigher interest rates.

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

Other income, net was ($0.4) million for the threemonths ended June 30, 2006, compared to ($0.9) million for the comparableperiod of 2005. Other expense, net was $0.4 million for the six months ended June 30,2006, compared to ($1.9) million for the comparable period of 2005. Thedecrease for the six 

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months ended June 30,2006 is primarily due to a net exchange loss of $0.7 million in 2006 and a netexchange gain of ($1.5) million in 2005.

***Income Taxes***

The effective income tax rate for the three and sixmonths ended June 30, 2006 was 32.6% and 35.2%, respectively, compared to39.5% and 39.3% for the comparable periods of 2005. The 2006 effective taxrates are lower as a result of reduction of certain deferred tax liabilities of$1.3 million as a consequence of reduced future foreign tax rates in Canada andthe favorable impact of provision-to-return adjustments of $0.3 million relatedto final 2005 tax returns. The 2005 effective tax rates were adversely impactedby losses and related valuation allowances associated with our operations inFrance and a valuation allowance for U.S. foreign tax credits. In 2006, we donot anticipate such significant unfavorable impacts.

**Liquidity andCapital Resources**

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

Our significant liquidity and capital funding needsare working capital, operating expenses, capital expenditures, contractualobligations, commercial commitments and amounts due on our debt obligations.Liquidity and capital resource needs are met through cash flows from operationsand borrowings under the Senior Secured Credit Facility, as required.

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

Working capital, excluding cash and debt, was $216.0million and $225.4 million at June 30, 2006 and December 31, 2005,respectively. Trade receivables, inventories and accounts payable, threeimportant elements of working capital, are discussed below.

***Trade***Accounts Receivable.******   Dayssales outstanding in accounts receivable were 50.0* *days and 48.2 days for the quarterly periodsended June 30, 2006 and December 31, 2005, respectively. Tradereceivables are higher in Europe due to the extended payment practices inseveral of the countries in which we operate.

***Inventories***.   Dayssupply of inventory were *39.5 *daysand 43.1 days for the quarterly periods ended June 30, 2006 and December 31,2005, respectively. The improvement is due to focused efforts to reduce ourinventories on hand.

***Accounts***Payable.******   Dayspayables outstanding were 57.4 daysand 59.1 days for the quarterly periods ended June 30, 2006 and December 31,2005, respectively. Trade accounts payable are primarily with suppliers whoseproducts we distribute. Payment terms are negotiated and in cases whereeconomic early payment discounts are offered, we typically time our payments toearn the discounts. Days payables outstanding are generally higher in Europedue to the extended payment practices in certain countries in which we operate.Depending on the timing of payments and inventory purchases, trade accountspayable can vary each quarter and from year to year.

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**Historical Cash Flows**

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

| ** **                                            | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                            | ** ** | **2006**                            | ** ** | **2005** | ** ** |
| Cash flow from  operations, excluding working capital |       | $56.8                               |       | $40.4 |   |
| Cash flow from  working capital changes, net          |       | 23.0                                |       | 1.4 |   |
| Cash flow from  operations                            |       | $79.8                               |       | $41.8 |   |

 

We generated $79.8 million of cash flow fromoperations during the six months ended June 30, 2006 compared to $41.8million during the comparable period of 2005. The increase in cash flow fromoperations is primarily the result of increased net income, improved managementof inventories, reduced cash payments for restructuring charges, and highercash flows from certain other working capital changes. These increases arepartially offset by lower cash flows being provided by increases to accountspayable.

Net cash used in investing activities was $5.7 millionfor the six months ended June 30, 2006 compared to $50.6 million for thecomparable period of 2005. This decrease is mainly due to the $41.4 million ofinvestments to acquire business in 2005.

Net cash used in financing activities was $59.2million for the six months ended June 30, 2006 compared to cash used infinancing activities of $30.3 million for the comparable period of 2005. Thisincrease is comprised of increased net debt payments of $39.9 million, whichincludes the $44.5 million principal payment on the Senior Secured CreditFacility, as discussed below, partially offset by a decrease in net change inbank checks outstanding of $6.9 million and capital contributions of $4.1million.

Under the credit agreement for the Senior SecuredCredit Facility, beginning in 2006, Excess Cash Flow (as defined in the creditagreement) from the prior year is required to be used to prepay creditagreement debt. On March 31, 2006, we prepaid $44.5 million on the SeniorSecured Credit Facility term loans as required by the Excess Cash Flowprovisions.

Our future financial and operating performance,ability to service or refinance our debt and ability to comply with covenantsand restrictions contained in our debt agreements will be subject to futureeconomic conditions and to financial, business and other factors, many of whichare beyond our control and will be substantially dependent on the globaleconomy, demand for our products, and our ability to successfully implement ouroverall business and profitability strategies. As of June 30, 2006, we had$143.2 million of cash and cash equivalents on hand.

As of June 30, 2006, we had outstandingindebtedness of $1,031.0 million, which consists primarily of $520.0 millionaggregate principal amount of notes, a $348.6 million U.S. dollar-denominatedterm loan, and a $155.6 million Euro-denominated term loan.

**Indebtedness**

***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 at €121.8 million (approximately $155.6 millionon a U.S. dollar equivalent basis as of June 30, 2006), (2) a termloan facility denominated in U.S. dollars in an aggregate principal amountcurrently outstanding at $348.6 million, and (3) a multi-currencyrevolving credit facility, providing for up to $150.0 million in multi-currencyrevolving loans (including standby and commercial letters of credit)outstanding at any time. As of June 30, 2006, there was no outstandingbalance on the multi-currency revolving credit facility. Undrawn amounts underthe multi-currency revolving credit facility are available on a revolvingcredit basis for 

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general corporate purposesof the borrower and its subsidiaries. As of June 30, 2006, we had $9.6million of undrawn letters of credit and our remaining borrowing availabilityunder the $150.0 million multi-currency revolving credit facility was $140.4million.

***Senior******and Senior Subordinated Notes.******  ***The 67¤8%senior notes and 8% senior subordinated notes mature on April 15, 2012 andApril 15, 2014, respectively, in aggregate principal amounts of $200.0million and $320.0 million, respectively.

The indentures governing the senior notes and thesenior subordinated notes contain certain covenants that limit the Company’sability to incur additional indebtedness, pay cash dividends and make certainother payments. The indentures also require the Company to maintain certainfinancial covenants, including a specified debt to Consolidated EBITDA leverageratio and a specified Consolidated EBITDA to interest expense coverage ratio.At June 30, 2006, the Company was in compliance with all such covenants.

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

**Credit AgreementFinancial Covenants; Credit Agreement EBITDA**

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

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

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

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The following tablepresents a calculation of Credit Agreement EBITDA for the twelve months ended June 30,2006 (dollars in millions):

| ** **                                                              | ** ** | **(Unaudited)** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------|------------|
| Income before  cumulative effect of a change in accounting principle(1) |       |            | $          | 61.9 |   |   |
| Income tax  provision(1)                                                |       |            | 40.5       |   |   |
| Interest expense,  net(1)                                               |       |            | 76.3       |   |   |
| Depreciation and  amortization(1)                                       |       |            | 33.2       |   |   |
| Non-cash  charges(2)                                                    |       |            | 11.7       |   |   |
| Other  extraordinary, unusual or non-recurring items(3)                 |       |            | 11.6       |   |   |
| Credit Agreement EBITDA                                                 |       |            | $          | 235.2 |   |   |

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(1)        These amounts include the four quarters during the twelve monthsended June 30, 2006 as reported in the respective Form 10-Q or Form 10-K.

(2)        Non-cash charges include pension, postretirement and post employmentbenefit expenses, net of cash contributed to the respective benefit plans inthat year; amortization of direct response catalog costs for those catalogswith useful lives greater than one year; charges for equity compensation; andLIFO adjustments.

(3)        Other extraordinary, unusual or non-recurring items include one-timeseverance costs; non-routine inventory reserve adjustments; gains or losses onthe sale of businesses or facilities; and other extraordinary, unusual ornon-recurring gains, losses, charges or credits.

The financial covenantsspecify, among other things, the following requirements for each four-quarterperiod ended during the following test periods:

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

 

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

| ** **                                                             | ** ** | **(Unaudited)** | ** ** |
|------------------------------------------------------------------------|------------|-----------------|------------|
| Consolidated Debt  to Credit Agreement EBITDA Leverage Ratio           |       | 4.4 to 1.0      |       |
| Credit Agreement EBITDA  to Credit Agreement Interest Expense Ratio(1) |       | 3.3 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.

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**Debt of CDRVInvestors, Inc.**

CDRV Investors, Inc., our indirect parent, issued$481.0 million aggregate principal amount at maturity ($297.9 million in net proceeds)of 95¤8%senior discount notes due 2015 (“CDRV Senior Discount Notes”) onDecember 16, 2004. The net proceeds of the issuance were used to pay adividend to the holders of the common stock of CDRV Investors, Inc. TheCDRV Senior Discount Notes are senior unsecured obligations of CDRVInvestors, Inc. and are structurally subordinated to all obligations andother liabilities of CDRV Investors, Inc.’s existing and futuresubsidiaries, including us. No cash interest will accrue on the CDRV SeniorDiscount Notes prior to January 1, 2010. Thereafter, cash interest willaccrue and be payable semiannually, only to the extent funds are available fordistribution to CDRV Investors, Inc. under specified provisions of theindentures governing our senior notes and senior subordinated notes andapplicable law. As of June 30, 2006, the accreted value of the CDRV SeniorDiscount Notes was $346.1 million.

We do not guarantee the obligations under the CDRVSenior Discount Notes. The terms of the Senior Secured Credit Facility and theindentures governing our senior notes and senior subordinated notessignificantly restrict us from making distributions and otherwise transferringassets to CDRV Investors, Inc.

**Critical AccountingPolicies**

The discussion andanalysis of our financial condition and results of operations are based on ourfinancial statements, which have been prepared in accordance with accountingprinciples generally accepted in the United States of America. The preparationof these financial statements requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and the 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 31,2005 for the Company’s critical accounting policies.

**Forward-LookingStatements**

This Form 10-Q contains forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. All statementsother than statements of historical fact included in this Form 10-Qmay constitute forward-looking statements. We have based these forward-lookingstatements on our current expectations and projections about future events. Althoughwe believe that our assumptions made in connection with the forward-lookingstatements are reasonable, there can be no assurances that the assumptions andexpectations will prove to be correct.

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

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resultsor other outcomes to differ materially from those expressed or implied in ourforward-looking statements:

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

·       ourability to maintain our relationships with manufacturers;

·       lossof our key executive officers;

·       ourability to consummate and integrate potential acquisitions;

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

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

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

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

Refer to “Item 7A -Quantitative and Qualitative Disclosures about Market Risk” included in ourannual report on Form 10-K for the year ended December 31,2005, for the Company’s quantitative and qualitative disclosure about marketrisk. There was no material change in such information as of June 30,2006.

**Item 4—*Controls and Procedures***

In connection with the preparation of this QuarterlyReport on Form 10-Q, management carried out an evaluation, with theparticipation of the Chief Executive Officer and the Chief Financial Officer,of the effectiveness of the disclosure controls and procedures pursuant to Rule 13a-15of the Securities and Exchange Act of 1934. Based on that evaluation, the ChiefExecutive Officer and the Chief Financial Officer concluded that our disclosurecontrols and procedures were effective at a reasonable assurance level as of June 30,2006.

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

**Part II—OTHERINFORMATION**

**Item 1—*LegalProceeding**s***

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

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**Item 1A—*Risk Factor**s***

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

**Item6—*Exhibits***

| Exhibit  Number | ** ** | **Description of Documents**                                                                                                    | ** ** | **Method of Filing** |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|
| 10.1            |       | CDRV Investors, Inc.  Stock Incentive Plan, as amended.                                                                         |       | 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/ JACK L. WYSZOMIERSKI |
|                 | Name:                   | Jack L. Wyszomierski |
|                 | Title:                  | *Executive Vice President and Chief Financial  Officer* |
|                 |                    | *(Principal  Financial Officer and Duly Authorized Officer)* |
|                 |                    |   |
| August 11, 2006 |                    |   |

 

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