Annual Report (Form 10-K), fiscal year 1993




ITEM 2 - PROPERTIES - ------------------- VWR Corporation owns and leases office and warehouse space throughout the United States and Canada for wholesale distribution of scientific equipment and supplies as follows:
Batavia, Illinois Owned Bridgeport, New Jersey Owned Buffalo Grove, Illinois Owned Cerritos, California Leased San Francisco, California Leased Houston, Texas Leased Marietta, Georgia Leased London, Ontario, Canada Leased Catano, Puerto Rico Leased Toronto, Ontario, Canada Leased
The Company leases office space in West Chester, Pennsylvania, for executive, financial, information systems, marketing, and other administrative activities.
The Company also leases twenty-five smaller facilities throughout the United States and five smaller facilities in Canada which support the sales and warehouse functions. All facilities have been designed to serve the Company's purpose (generic office and warehouse functions) and are sufficient for its current operations.
ITEM 3.

ITEM 3. - LEGAL PROCEEDINGS - ------ ----------------- The Corporation is involved in various contractual, warranty, public liability cases and environmental claims which are considered normal to the Corporation's business.
ITEM 4.

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------ --------------------------------------------------- No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 1993.
PART II. - --------
ITEM 5

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------
VWR Corporation Common Stock, $1.00 par value, is traded on the NASDAQ/National Market System under the VWRX symbol. On February 28, 1994, there were approximately 6,000 shareholders represented by 1,837 holders of record.
The market prices of the Corporation's common shares during the years ended December 31, 1993, and 1992, are set forth below. The prices reflect bid prices as reported by NASDAQ for the Company.
* All share and per share data reflect a two-for-one stock split effective May 9,1992.
The Corporation declared quarterly dividends of $0.10 per share for each quarter during the fiscal years ended December 31, 1993, and December 31, 1992. The Corporation's long-term debt agreements provide, among other terms, limitations on working capital, tangible net worth, the current ratio, and the debt-to-equity ratio which may restrict the Corporation's ability to declare or pay dividends. Approximately $2 million of retained earnings was available to pay dividends at December 31, 1993.
ITEM 6.

ITEM 6. - SELECTED FINANCIAL DATA - ------ ----------------------- The following table of selected financial data should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein.
ITEM 7

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - -----------------------------------------------------------------------
Results of Operations - --------------------- Sales
1993 Increase 1992 Increase 1991 - ---------------------------------------------------------------------- $509.2 3.9% $490.2 11.2% $441.0
Sales increased by almost 4% in 1993 due primarily to strong growth rates in our international export, high school science education (Sargent-Welch
division) businesses and the effects of the acquisition of Johns Scientific and the distribution agreement with BDH Ltd. in Canada. Growth in Canada was less than expected. Combining the operations and systems of the three companies proved to be a more complex task than anticipated and we experienced higher costs. In addition, sales of our principal U.S. operating unit (VWR Scientific) lagged behind the market and we missed our internal target.
In 1992 each of our areas of business activity gained market share and contributed to our growth from 1991. Sargent-Welch and our international export business sales were very strong. The acquisition of Johns Scientific in the fourth quarter of 1992 for approximately $7.4 million and a large international order in the second half of 1992 accounted for about 1% of the sales growth. Approximately 2% of the sales growth was due to price increases.
Gross Margin - ------------- 1993 Increase 1992 Increase 1991 - -------------------------------------------------------------------- Margin $116.3 1.7% $114.4 9.1% $104.9 Percent of Sales 22.8% 23.3% 23.8%
Over the three-year period, gross margin as a percent of sales declined primarily as a result of customer mix and competitive price pressures.
Operating Expenses Before Restructuring and Other Charges - --------------------------------------------------------- 1993 Increase 1992 Increase 1991 - ---------------------------------------------------------------------- Expenses $101.9 6.7% $95.5 8.2% $88.3 Percent of Sales 20.0% 19.5% 20.0%
In 1993 the increase in operating expenses before restructuring and other charges is primarily due to higher personnel costs and transition costs associated with the acquisition of Johns Scientific and the distribution agreement with BDH, Ltd., and our investment in a new direct marketing effort. Excluding the impact from Canadian acquisitions and direct marketing, operating expenses grew approximately 1.4%.
Operating expenses grew at a rate slower than sales in 1992. The reasons for the slower growth rate were our continuous emphasis on cost containment and the fact that fixed costs were stable while sales increased.
Restructuring and Other Charges - -------------------------------
In the fourth quarter of 1993, the Company made the decision to refocus certain information systems efforts into customer service systems and to take actions that would reduce operating expenses. As a result of this effort, the Company recorded a $3.3 million charge which included non-cash charges of $1.3 million (primarily for software development costs that do not have continuing value) and $2 million related to the consolidation of functions and facilities which consists primarily of severance and personnel-related costs. Approximately $2 million is accrued at December 31, 1993, and is reflected in current liabilities. It is anticipated that the impact of the consolidation of certain functions will result in annualized cost savings of approximately $2 million, beginning in the first half of 1994.
Interest Expense - ---------------- 1993 Increase 1992 Decrease 1991 - -------------------------------------------------------------------- Interest $4.5 15.4% $3.9 (7.1)% $4.2 Percent of Sales .9% .8% 1.0%
In 1993 interest expense increased due to increased borrowing levels which occurred primarily for the purchase of a new warehouse facility for the Sargent-Welch division, system enhancements, and the 1992 acquisition of Johns Scientific.
Interest expense decreased in 1992 primarily as a result of reduced debt levels. Lower debt levels were achieved primarily by improvements in working capital management.
Income Taxes - ------------ 1993 Decrease 1992 Increase 1991 - -------------------------------------------------------------------- Taxes $2.7 (52.6)% $5.7 23.9% $4.6 Percent of Sales .5% 1.2% 1.0% Effective tax rate 40.6% 37.5% 37.5%
The income taxes footnote to the financial statements describes the difference between the statutory and effective income tax rates. The higher effective tax rate in 1993 reflects the impact of new U.S. federal tax legislation and the carryforward to future years of Canadian tax benefits not recognized currently.
In 1993 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes," which did not have a material effect on the consolidated financial position or results of operations.
Income Before Cumulative Effect of Accounting Change and Per Share Data - ----------------------------------------------------------------------- 1993 Decrease 1992 Increase 1991 - -------------------------------------------------------------------- Income $3.9 (58.5)% $9.4 22.1% $7.7 Percent of Sales .8% 1.9% 1.8% Per Share $ .35 $ .85 $ .71
In addition to the impact of the restructuring and other charges, which were $3.3 million pre-tax ($1.9 million net of tax or $.18 per share), income before cumulative effect of accounting change decreased primarily due to decreased operating income from lower than expected sales and margins, and higher operating expenses along with higher interest costs.
In 1992 the improvement was the result of sales growth, improved profitability in our newer areas of business activity, expense controls, lower debt levels, and strong asset management.
Financial Condition and Liquidity - --------------------------------- The ratio of debt to equity over the past four years is as follows:
1993 1992 1991 1990 - -------------------------------------------------------------- 1.5 1.1 1.3 1.8
The ratio of income before cumulative effect of accounting change, plus depreciation and amortization, to interest expense over the past four years is as follows:
1993 1992 1991 1990 - -------------------------------------------------------------- 2.9 4.6 3.7 2.6
VWR continues to maintain a liquid financial position. VWR's current ratio was 2.7 at December 31, 1993 and accounts receivable and inventory accounted for 63% of total assets. For the year ended December 31, 1993 cash flow from operations of $6.4 million and debt borrowings of $14 million were used to finance investments in property and equipment of $13.4 million and to pay dividends of $4.4 million. The significant investment in property and equipment was due to the purchase of a new warehouse facility for the Sargent- Welch division and system enhancements. Sufficient credit availability existed at December 31, 1993 to provide for the amounts of bank checks outstanding less cash in bank of $1.1 million. Cash requirements reach a low toward the end of each calendar year due to the natural business cycle.
The Company has unsecured revolving credit loan agreements, expiring in 1996 which provide for committed facilities of $75 million. The Company is obligated to make available an unsecured subordinated revolving line of credit for approximately $5 million to Momentum Corporation (formerly Momentum
Distribution, Inc., the company spun off in 1990) through February 1995. There have been no loans to Momentum Corporation through December 31, 1993.
VWR borrows at short-term interest rates. Our credit agreements give us the option to convert up to $37.5 million to a five-year term loan. Interest rate collars effectively establish a minimum and maximum rate on up to $55 million of revolving credit debt. Collars of $25 million will expire in 1994 and are expected to be replaced with interest rate swaps of $10 million at a fixed rate. The remaining collar of $30 million will expire in 1996 and is expected to be replaced at a fixed rate into 1999.
On January 1, 1994, the company formed a joint venture with E. Merck of Germany to acquire an interest in Bender & Hobein GmbH, a distributor of laboratory supplies and equipment in Germany. The investment will be accounted for using the cost method of accounting and was funded through the Company's revolving credit line.
VWR has been designated by the EPA as a potentially responsible party for various sites. Management believes that any required expenditures would be immaterial to the Company's consolidated financial statements.
The Company adopted SFAS No. 106 "Accounting For Postretirement Benefits Other Than Pensions," in 1993, which resulted in a one-time non-cash charge of $1.4 million (net of deferred tax benefit of $.9 million). See notes to the consolidated financial statements for further discussion.
Due to declining interest and inflation rates, the Company changed certain pension and retiree medical actuarial assumptions, which included lowering the discount rate to 7.75% and rate of compensation increase to 4%. These changes will not have a material effect on the consolidated financial statements in 1994.
As of December 31, 1993 the estimated cost for capital improvement projects is expected to range between $4-$5 million in 1994 related primarily to continued investments in new computer and warehouse systems.
Operating Income Return on Average Invested Capital - -----------------------------------------------------
1993 1992 1991 1990 - ---------------------------------------------------------------------
11.5% 21.8% 19.0% 19.1%
1993 before restructuring charges 14.9%
Operating Income to Sales - ------------------------- 1993 1992 1991 1990 - ---------------------------------------------------------------------
2.2% 3.9% 3.8% 3.9%
1993 before restructuring charges 2.8%
Average Invested Capital to Sales - --------------------------------- 1993 1992 1991 1990 - ---------------------------------------------------------------------
18.9% 17.7% 19.8% 20.7%
Days Sales in Accounts Receivable - --------------------------------- 1993 1992 1991 1990 - ---------------------------------------------------------------------
42.6 41.5 42.1 43.5
Inventory Turnover (Before LIFO) - -------------------------------- 1993 1992 1991 1990 - ---------------------------------------------------------------------
6.9 6.4 6.0 5.6
VWR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------ Principles of Consolidation - -------------------- The accompanying consolidated financial statements include the accounts of VWR Corporation (the Company) and all of its subsidiaries (including its wholly owned Canadian subsidiary). All significant intercompany accounts and transactions have been eliminated.
Capitalization, Depreciation and Amortization - --------------------------------------- Land, buildings, and equipment are recorded at cost. Depreciation is computed using the straight-line method for financial reporting purposes and, generally, accelerated methods for income tax purposes. Acquisition and development costs for significant business systems and related software for internal use are capitalized on significant projects and amortized over their estimated useful lives of seven years. Interest is capitalized on major construction and development projects while in progress. The Company capitalizes the costs of developing and producing catalogs, which are used by customers for ordering products. Such costs are amortized over the period of use, generally two years.
Income Taxes - ------------ In 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes," which supersedes SFAS No. 96 previously followed by the Company. The adoption of SFAS 109 did not have a material effect on the Company's financial position or results of operations. SFAS 109 uses the asset and liability method under which deferred taxes are determined based on the difference between the financial statement amounts and tax bases of assets and liabilities using enacted tax rates. Deferred tax expense is the result of changes in the asset or liability for deferred taxes.
Postretirement Benefits - ----------------------- In 1993, the Company adopted SFAS No. 106 "Accounting for Postretirement Benefits Other Than Pensions." This Statement requires the Company to accrue the cost of retiree medical expenses over the period earned by the participants, which is a change from the Company's prior practice of recording these costs when incurred.
Earnings Per Share and 1992 Stock Split - ---------------------------------- Earnings per share are based on the weighted average number of shares and dilutive common share equivalents outstanding during the period.
On April 20, 1992, the Company's Board of Directors declared a two-for-one stock split in the form of a stock dividend payable to shareholders of record as of May 9, 1992. The aggregate par value, which did not change on a per- share basis, of $5.6 million for the additional shares was transferred from additional paid-in capital to common stock. All share and per-share data in these financial statements have been restated to give effect to the stock split.
Segment and Customer Information - -------------------------------- The Company is engaged in one line of business, industrial distribution. No single customer accounts for more than 10% of sales. The majority of the Company's business activity pertains to, and accounts receivable result from, sales of laboratory equipment and supplies to businesses across a wide geographical area in various industries, mainly industrial, governmental, biomedical, and educational. At December 31, 1993, the Company had no significant concentrations of credit risk.
Reclassifications - -----------------
Certain prior years' amounts have been reclassified to conform to the current year's presentation.
INVENTORIES - ----------- Inventories consist primarily of purchased goods for sale and are valued at the lower of cost (substantially last-in, first-out method) or market.
LIFO cost at December 31, 1993, and 1992, was approximately $26.8 million and $25.5 million, respectively, less than current cost. The effect of LIFO layer liquidations decreased the cost of sales by $.6 million in 1993, and $.4 million in 1992 and 1991.
Depreciation expense for the years ended December 31, 1993, 1992, and 1991, was $5.4 million, $4.3 million, and $4.0 million, respectively.
ACCRUED LIABILITIES - ------------------- Included in accrued liabilities at December 31, 1993, and 1992, is accrued compensation of approximately $4.2 million and $5.2 million respectively.
FOREIGN CURRENCY TRANSACTIONS - ------------------------------ The Company has entered into forward exchange contracts to hedge foreign currency transactions with its Canadian subsidiary. As of December 31, 1993, the Company had approximately $3.4 million of forward exchange contracts outstanding. Net transaction gains and losses are not material.
At December 31, 1993, the Company had unsecured revolving lines of credit of $75 million. Under the terms of these agreements, which expire in 1996, the Company may borrow U.S. dollars at various rates. In addition, the Company can elect to convert up to $37.5 million of the line into term notes which can extend into the year 2001. Principal amounts due on long-term debt, including assumed conversion in 1995 of the revolving credit agreements to term notes, in each of the five years beginning January 1, 1994, are $.1 million, $3.9 million, $32.1 million, $7.7 million and $7.6 million, respectively.
A principal payment of $1.1 million due in 1994 on other debt is expected to be funded from the revolving credit facility and, accordingly, is classified as long-term.
For the year ended December 31, 1993, the approximate weighted average interest rate on borrowings made under the unsecured revolving lines was 7.88%, which approximates the year-end rate.
The Company has purchased interest rate collars on $55 million, of which $20 million expires on March 27, 1994, $5 million expires on May 3, 1994, and $30 million expires on March 1, 1996. The collars are based on the three-month London Interbank Offered Rate ("LIBOR") and have a floor of 6.75% and a ceiling of 9.5%. The cost of the collars is treated as a reduction of the revolving credit debt and is being amortized as revolving credit interest expense over the terms of the collars.
The Company's long-term debt agreement provides for, among other terms, restrictive covenants with respect to working capital, tangible net worth, the current ratio, and the debt-to-equity ratio, which may restrict the Company's ability to declare or pay dividends. Under the most restrictive of these terms, approximately $2 million of retained earnings at December 31, 1993, is available to pay dividends.
INCOME TAXES - ------------ During 1993, the Company adopted SFAS No. 109 "Accounting for Income Taxes." The cumulative effect of the accounting change was not material.
The income (loss) before income taxes and cumulative effect of accounting change is as follows:
The reconciliation of tax computed at the federal statutory tax rates of 35% (1993) and 34% (1992 and 1991) of income before income taxes and cumulative effect of accounting change to the actual income tax provision is as follows:
Deferred tax liabilities (assets) as of December 31, 1993 and 1992 are comprised of the following: - ----------------------------------------------------------------------------- (Thousands of dollars) 1993 1992 - ----------------------------------------------------------------------------- Depreciation $6,400 $6,539 Pension 1,918 884 ----- ----- Deferred tax liabilities 8,318 7,423 ----- ----- Postretirement benefits (809) Other benefits (584) (485) Restructuring charges (720) Other-net (363) (578) ----- ----- Deferred tax assets (2,476) (1,063) ------ ------ Net deferred tax liability $5,842 $6,360 ====== ====== Included in other current assets at December 31, 1993 are refundable income taxes of approximately $2.1 Million and $.6 million of net current deferred tax assets. The Company has Canadian tax loss carryforwards of approximately $.9 million which expire at various dates through 2000.
SHAREHOLDER RIGHTS AGREEMENT - ---------------------------- On May 20, 1988, the Company established a Shareholder Rights Agreement. The Agreement is designed to deter coercive or unfair takeover tactics that could deprive shareholders of an opportunity to realize the full value of their shares.
Under the Agreement, the Company has distributed a dividend of one Right for each outstanding share of the Company's stock. When exercisable, each Right will entitle its holder to buy two shares of the Company's common stock at $45.00 per share. The Rights will become exercisable if a purchaser acquires or makes an offer to acquire 20 percent of the Company's common stock. In the event that a purchaser acquires 20 percent of the common stock, each Right shall entitle the holder, other than the acquirer, to purchase, at the Right's then-current full exercise price, shares of the Company's common stock having a market value of twice the then-current full exercise price of the Right. In the event that, under certain circumstances, the Company is acquired in a merger or transfers 50 percent or more of its assets or earnings to any one entity, each Right entitles the holder to purchase common stock of the surviving or purchasing company having a market value of twice the full exercise price of the Right. The Rights, which expire on May 31, 1998, may be redeemed by the Company at a price of $.005 per Right.
STOCK AND INCENTIVE PROGRAMS - ---------------------------- Under the stock option and restricted stock plans, in addition to outstanding options, 235,411 shares were reserved for issuance at December 31, 1993.
Restricted Stock Awards - ----------------------- The Company's restricted stock award plan, provides for grants of common stock to certain directors, officers, and managers. The vesting periods range from one to eight years. The fair market value of the stock at the date of grant establishes the compensation amount, which is amortized to operations over the vesting period. During the years ended December 31, 1993, 1992 and 1991, the Company granted 45,219, 7,580 and 15,116 shares, respectively, at fair market values of approximately $.7 million, $.1 million and $.1 million, respectively.
Stock Options - ------------- Under the stock option plan, options, which vest over 3 to 10 years, have been granted to certain officers and managers to purchase common stock of the Company at its fair market value at date of grant. Changes in options outstanding were:
At December 31, 1993, there were 98,871 options exercisable at an average price of $7.50.
Savings Investment Plan - ----------------------- The Company has a savings investment plan whereby it matches 50% of the employee's contribution up to 3% of the employee's pay. For employee contributions between 3% and 7.5% of their pay, the Company will match 50% of the contribution within prescribed limits based on the Company's profitability for the year. All Company contributions are used to buy shares of the Company's stock. Expenses under this plan for the years ended December 31, 1993, 1992, and 1991, were $.5 million, $.6 million and $.4 million, respectively. At December 31, 1993, there were approximately 538,000 shares available for issuance under this Plan.
Employee Stock Ownership Plan - ----------------------------- In September, 1990, the Company established an employee stock ownership plan (ESOP) by, in effect, contributing 400,000 shares of treasury stock ($2.9 million fair value) to the ESOP. All full-time and part-time employees, except certain union employees, are eligible to participate in the plan.
The ESOP shares will be allocated equally to individual participants' accounts over a period up to ten years. Vesting occurs equally over an employment period of five years at which time the employee is 100% vested in the plan. Expenses are recognized based on shares to be allocated in the subsequent year and are reduced for dividends paid, which approximated $.1 million in 1993, and $.2 million in 1992 and 1991. The net expense for 1993, 1992, and 1991 was approximately $.1 million, $.3 million and $.2 million, respectively.
POSTRETIREMENT BENEFITS - ------------------------ Pension Plans:
The Company has two defined benefit pension plans covering substantially all of its domestic employees, except for employees covered by independently operated collective bargaining plans. Pension benefits are based on years of credited service and the highest five consecutive years' average compensation. Contributions to the Company plans are based on funding standards established by the Employee Retirement Income Security Act of 1974 (ERISA).
The total VWR Corporation plans' funding status and the amounts recognized in the Company's Consolidated Balance Sheets at December 31, 1993, and 1992, are:
The assets of the Company plans consist predominantly of undivided interests in several funds structured to duplicate the performance of various stock and bond indexes.
Net pension expense under the Company plans includes the following components:
The Company maintains a supplemental pension plan for certain senior officers. Expenses incurred under this plan in 1993 were approximately $.3 million. There were no expenses incurred under this plan for 1992 and 1991.
Certain employees are covered under union-sponsored, collectively bargained plans. Expenses under these plans for the years ended December 31, 1993, 1992 and 1991, were $.2 million, $.2 million and $.1 million, respectively, as determined in accordance with negotiated labor contracts.
Retiree Medical Benefits Program - -------------------------------- The Company provides certain medical benefits for retired employees. In 1993, the Company adopted SFAS No. 106 "Accounting for Postretirement Benefits Other Than Pensions." The Company elected to immediately recognize the calculated liability resulting in a one-time non-cash charge to income of approximately $1.4 million, net of a deferred tax benefit of approximately $.9 million.
Employees retired as of December 31, 1992 and active employees who reached age 55 by December 31, 1992 are eligible to participate in the company's retiree
health plan (the "plan"). There are also certain provisions for participation by spouses. The plan is contributory, with retiree contributions based on years of service and includes other co-payment and co-insurance provisions.
The Company does not fund the plan. The liability of the plan at December 31, 1993 is as follows:
(Thousands of dollars)
Accumulated postretirement benefit obligation: Retirees $1,604 Eligible active participants 183 Other active participants 21 Unrecognized net gain 266 ----- Accrued postretirement benefit obligation $2,074 =====
The net periodic postretirement benefit cost for 1993 includes the following components: Service cost $ 7 Interest cost 174 ----- $181 ===== The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation is 10% through 1996 and declines 1% per year to a level of 5.4% in 2001 and thereafter. The effect of a 1% annual increase in the assumed cost trend rate would increase the accumulated postretirement benefit obligation by approximately 8%; the annual service and interest cost components in the aggregate would not be materially affected. A 7.75% discount rate was used in determining the accumulated postretirement benefit obligation.
Before the adoption of SFAS No. 106, the retiree health care expense was recorded as claims were incurred. The expense for 1992 and 1991 was approximately $.2 million.
LEASES - ------ The Company leases office and warehouse space, computer equipment, and automobiles under operating leases with terms ranging up to 15 years, subject to renewal options.
Rental expense for continuing operations for the years ended December 31, 1993, 1992, and 1991, was approximately $5.2 million, $4.8 million, and $4.4 million, respectively.
Future minimum lease payments as of December 31, 1993, under noncancelable operating leases, having initial lease terms of more than one year are:
CONTINGENCIES AND COMMITMENTS - ------------------------------ The Company is involved in various environmental, contractual, warranty, and public liability cases and claims, which are considered routine to the Company's business. In the opinion of management, the potential financial impact of these matters is not material to the consolidated financial statements.
As a result of the March, 1990 spin-off of Momentum Corporation, VWR is obligated to make available to the spun-off company, through February 1995, an unsecured subordinated revolving line of credit of $5 million. There have been no loans to Momentum Corporation under this facility.
ACQUISITION - ----------
Effective October 5, 1992, the Company, through its wholly owned Canadian subsidiary, acquired certain assets related to the laboratory supply business of Johns Scientific, Inc. of Toronto, Canada for approximately $7.4 million. This acquisition was accounted for under the purchase method of accounting and was funded through the Company's revolving credit line, and a $1.6 million, 8% note payable expected to be refinanced through the revolving line of credit. The acquisition is not material in relation to the Company's consolidated financial statements. The $2.6 million excess purchase price over net assets acquired is being amortized over a 15 year period.
RESTRUCTURING AND OTHER CHARGES - ------------------------------- In the fourth quarter of 1993, the Company made the decision to refocus certain information systems efforts into customer service systems and to take actions that would reduce operating expenses. As a result of this effort, the Company recorded a $3.3 million charge which included non-cash charges of $1.3 million (primarily for software development costs that do not have continuing value) and $2 million related to the consolidation of functions and facilities which consists primarily of severance and personnel-related costs. As of December 31, 1993, approximately $2 million of these costs are accrued on the Company's consolidated balance sheet as a current liability.
REPORT OF INDEPENDENT AUDITORS - ------------------------------ To The Shareholders of VWR Corporation:
We have audited the consolidated balance sheets of VWR Corporation as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also include the financial statement schedules listed in the index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of VWR Corporation at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in the notes to the consolidated financial statements (postretirement benefits), in 1993, the Company changed its method of accounting for postretirement benefits other than pensions.
BY (SIGNATURE)
ERNST & YOUNG
Philadelphia, Pennsylvania February 11, 1994
ITEM 9.



ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ------ -------------------------------------------------------------- None
PART III. - --------
ITEM 10.



ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- --------------------------------------------------- The information required by this item is incorporated by reference from the section captioned "Election of Directors" and the last paragraph of the section captioned "Ownership of VWR Corporation Stock" contained in the Company's definitive Proxy Statement, which the Company will have filed with the Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year.
Information regarding executive officers of the Company is included in Part I of this Form 10-K.
ITEM 11.

ITEM 11. - EXECUTIVE COMPENSATION - ------- ---------------------- The information required by this item is incorporated by reference from the Sections "Fees to Directors and Committees of the Board" and "Executive Compensation" contained in the Company's definitive Proxy Statement which the Company will have filed with the Commission pursuant to regulation 14A within 120 days after the close of the fiscal year.
ITEM 12.

ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ---------- ----------------------------------------------------------
The information required by this item is incorporated by reference from the section captioned "Ownership of VWR Corporation Stock" contained in the Company's definitive Proxy Statement, which the Company will have filed with the Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year.
ITEM 13.

ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - ------- ---------------------------------------------- None PART IV. - -------
ITEM 14.

ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - -------- ------------------------------------------------------------ (a)(1) Financial Statements
The following financial statements have been included as part of this report: Form 10-K Page --------- Consolidated Statements of Operations 17 Consolidated Balance Sheets 18 Consolidated Statements of Cash Flows 20 Consolidated Statements of Shareholders' Equity 22 Notes to Consolidated Financial Statements 25 Report of Independent Auditors 39
(2) Financial Statement Schedules
(a) The following financial statement schedules are submitted herewith: -Schedule V - Property, Plant, and Equipment -Schedule VI - Accumulated Depreciation, Depletion, and Amortization of Property, Plant, and Equipment -Schedule VIII - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and have therefore been omitted.
(b) Reports on Form 8-K
None
(3) Exhibits Exhibit Number and Description ------------------------------
2 Agreement and Plan of Distribution between VWR Corporation and Momentum Distribution, Inc.(1)
3 Restated Certificate of Incorporation dated July 9, 1987, as amended by Certificate of Ownership and Merger dated March 1, 1990(1)
Bylaws as amended and restated as of February 27, 1992(1)
4 Credit Agreement by and among VWR Corporation and its Subsidiaries and CoreStates Bank, N.A. for itself and as agent, Seattle-First National Bank and PNC Bank, National Association dated December 20, 1993.
10 Change of Control Agreements between VWR Corporation and Jerrold B. Harris, Gerard W. Cooney, Walter S. Sobon, and Richard H. Serafin(1)(3)
Change of Control Agreements between VWR Corporation and Joseph A. Panozzo, Paul J. Nowak and Richard W. Amstutz(2)(3)
VWR Corporation Executive Bonus Plan dated January 1, 1990(1)
VWR Corporation Supplemental Benefits Plan dated November 1, 1990(1)
11 Computation of Per Share Earnings
21 Parent and Subsidiaries of the Company
23 Consent of Independent Auditors
24 Power of Attorney
(1) Filed as an Exhibit to the Company's Form 10-K Report for the year ended December 31, 1991 and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Form 10-K Report for the year ended December 31, 1992 and incorporated herein by reference.
(3) May be deemed a management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VWR CORPORATION
Date March 29, 1994 BY (SIGNATURE)
Jerrold B. Harris, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the behalf of the registrant in the capacities and on the dates indicated.
Date March 29, 1994 BY (SIGNATURE)
Walter S. Sobon, Vice President Finance (Principal Financial Officer)
DIRECTORS James W. Bernard ) Richard E. Engebrecht ) Jerrold B. Harris ) Curtis P. Lindley ) BY (SIGNATURE) Edward A. McGrath, Jr.) Donald P. Nielsen ) N. Stewart Rogers ) Jerrold B. Harris Robert S. Rogers ) Attorney-in-fact James H. Wiborg ) Power of Attorney dated February 28, 1994
Date: March 29, 1994
VWR CORPORATION --------------------------------
SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT ------------------------------------------- (thousands of dollars)
(1) Construction in progress which was completed and transferred to Equipment & Computer Software.
(2) Principally, new Distribution Systems and Software.
(3) Principally furniture, equipment and leasehold improvements for headquarter's facility and financial software.
(4) Reallocation of purchase price of Canadian subsidiary acquired in 1990.
(5) Principally furniture, equipment and leasehold improvements for new warehouse facility in Buffalo Grove, Illinois and distribution systems and software.
(6) The annual provisions for depreciation have been computed principally in accordance with the following lives: - Buildings 40 years - Equipment 3 - 10 years - Computer Software 7 years
(1) Uncollectible accounts written off, net of recoveries.
Exhibit Index - ------------- Exhibit Number and Description Page - ------------------------------ ---- 2 Agreement and Plan of Distribution between VWR Corporation and Momentum Distribution, Inc. *
3 Restated Certificate of Incorporation dated July 9, 1987, as amended by Certificate of Ownership and Merger dated March 1, 1990 *
Bylaws as amended and restated as of February 27, 1992 *
4 Credit Agreement by and among VWR Corporation and its 49 Subsidiaries and CoreStates Bank, N.A. for itself and as agent, Seattle-First National Bank and PNC Bank, National Association dated December 20, 1993.
10 Change of Control agreements between VWR Corporation and Jerrold B. Harris, Gerard W. Cooney, Walter S. Sobon, and Richard H. Serafin *
Change of Control agreements between VWR Corporation and Joseph A. Panozzo, Paul J. Nowak, and Richard W. Amstutz **
VWR Corporation Executive Bonus Plan dated January 1, 1990 *
VWR Corporation Supplemental Benefits Plan dated November 1, 1990 *
11 Computation of Per Share Earnings 98
21 Parent and Subsidiaries of the Company 100
23 Consent of Independent Auditors 101
24 Power of Attorney 102
* Filed as an Exhibit to the Company's Form 10-K Report for the year ended December 31, 1991, and incorporated herein by reference
** Filed as an Exhibit to the Company's Form 10-K Report for the year ended December 31, 1992.