Annual Report (Form 10-K), fiscal year 1994




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 Morrisville, North Carolina Leased Catano, Puerto Rico Leased Mississauga, Ontario, Canada Leased Edmonton, Alberta, 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-two smaller facilities throughout the United States and one smaller facility 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 environmental, contractual, warranty, and public liability cases and 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, 1994.
PART II. --------
ITEM 5

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ------------------------------------------------------------------------
VWR Corporation Common Shares, $1.00 par value, are traded on the NASDAQ National Market System under the VWRX symbol. On February 28, 1995, there were approximately 6,000 shareholders represented by 1,754 holders of record.
The market prices of the Corporation's common shares during the years ended December 31, 1994, and 1993 are set forth below. The prices reflect bid prices as reported by NASDAQ for the Company.
Year Ended Year Ended VWR Corporation Common Stock December 31, 1994 December 31, 1993 ---------------------------- ----------------- -----------------
Quarter High Low High Low ------- ---- --- ---- --- First $12.13 $ 9.75 $17.00 $13.25 Second 12.25 9.63 16.00 11.75 Third 11.75 6.50 12.75 11.25 Fourth 12.00 7.00 13.75 12.00
The Corporation declared quarterly dividends of $0.10 per share in April, August, and October and $.04 per share in December for the year ended December 31, 1994. A quarterly dividend of $.10 per share was declared for each quarter during the fiscal year ended December 31, 1993. The Corporation's long-term debt agreements provide, among other terms, minimum 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 $1.8 million of retained earnings was available to pay dividends at December 31, 1994.
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.
For the Years Ended December 31 ----------------------------------------------- 1994 1993* 1992 1991 1990 ---- ---- ---- ---- ---- Operations (Thousand of dollars) Sales $535,179 $509,235 $490,168 $440,983 $428,568 Gross margin 113,198 116,274 114,431 104,924 102,823 Income from continuing operations before cumulative effect of accounting change 2,053 3,890 9,430 7,743 6,970 Loss from companies distributed (269) Cumulative effect of accounting change (1,400) Net income $ 2,053 $ 2,490 $ 9,430 $ 7,743 $ 6,701 -----------------------------------------------------------------------------
Per share Data** Dividends $0.34 $0.40 $0.40 $0.40 $0.40 Book value for continuing operations 3.62 3.68 3.80 3.34 3.02 Income from continuing operations before cumulative effect of accounting change .18 .35 0.85 0.71 0.66 Loss from companies distributed (0.03) Cumulative effect of accounting change (.13) ----------------------------------------------------- Net income per share $0.18 $0.22 $0.85 $0.71 $0.63
For the Years Ended December 31 ----------------------------------------------- 1994 1993* 1992 1991 1990 ---- ---- ---- ---- ---- Financial Position (Continuing operations only, thousands of dollars) Working capital $ 75,120 $ 65,197 $ 57,881 $ 52,928 $ 58,991 Property and Equipment-net 38,259 41,562 33,608 32,662 33,320 Total assets 173,375 148,777 136,093 126,896 132,876 Short-term debt 2,250 150 218 272 944 Long-term debt 79,170 61,757 47,553 46,747 57,333 Shareholders' equity 40,168 41,057 42,257 36,832 32,847 Total invested capital 121,588 102,964 90,028 83,851 91,124 ------------------------------------------------------------------------------ Operating & Financial Statistics (Continuing Operations Only)
Gross margin to sales 21.2% 22.8% 23.35% 23.79% 23.99% Income from Continuing Operations to sales .38% .76% 1.92% 1.76% 1.63% Current ratio 2.67 2.80 2.46 2.42 2.60 Return on Average Shareholders' Equity 5.06% 5.98% 23.85% 22.22% 22.21% ------------------------------------------------------------------------------ * Results include restructuring and other charges of $3.3 million pre-tax ($1.9 million net of tax).
** All share and per share data reflect a two-for-one stock split effective May 9, 1992.
ITEM 7

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -----------------------------------------------------------------------
Results of Operations --------------------- Sales ----- 1994 Increase 1993 Increase 1992 ---------------------------------------------------------------------- $535.2 5.1% $509.2 3.9% $490.2
The sales increase in 1994 was due to growth in all areas of our business. The acquisition of Canlab, the Toronto-based distribution division of Baxter International, in the fourth quarter of 1994 accounted for approximately 20% of the sales growth for the year. During the second half of 1994 our Canadian operations showed strong sales growth, improving margins and operating results.
In 1993 sales increased primarily due to strong growth rates in our inter- national 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.
Gross Margin ------------ 1994 Decrease 1993 Increase 1992 -------------------------------------------------------------------- Margin $113.2 (2.7%) $116.3 1.7% $114.4 Percent of Sales 21.2% 22.8% 23.3%
Over the three-year period, gross margin as a percent of sales declined primarily as a result of continued competitive price pressures and customer mix.
Operating Expenses before Restructuring and Other Charges in 1993 ---------------------------------------------------------------------- 1994 Increase 1993 Increase 1992 ---------------------------------------------------------------------- Expenses $105.0 3.2% $101.7 6.7% $95.3 Percent of Sales 19.6% 20.0% 19.4%
In 1994 operating expenses grew at a rate lower than sales growth. Approximately 28% of the increase in operating expenses is the result of the acquisition of Canlab in the fourth quarter of 1994.
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%.
Restructuring and Other Charges -------------------------------
In December 1994, the Company made the decision to consolidate certain sales offices and functions. As a result, the Company will incur approximately $2 million in charges which are primarily for severance and other personnel- related costs. It is expected that the consolidation will be completed by the end of 1995 and will result in annualized cost savings of approximately $3 million. The cost of the consolidation effort will be accounted for in accordance with the new guidance set forth in FASB EITF Issue 94-3 "Accounting for Restructuring Charges." Under EITF 94-3, the costs will be recognized primarily when they are incurred throughout 1995.
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 did not have continuing value) and $2 million related to the consolidation of functions and facilities which consisted primarily of severance and other personnel-related costs. In 1994 the Company completed the consolidation of certain administrative functions which was provided for in the fourth quarter of 1993 and has expended the $2 million of cost accrued at December 31, 1993, which was reflected in current liabilities.
At December 31, 1993 it was anticipated that the impact of the consolidation of certain functions and the reduction of expenses would result in annualized cost savings of approximately $2 million, beginning in the first-half of 1994. Actual cost savings for fiscal 1994 were approximately $1.2 million. Planned investments in sales and marketing have offset those savings in 1994.
Interest Expense and Other --------------------------
1994 Increase 1993 Increase 1992 --------------------------------------------------------------------- Interest and Other $5.1 8.5% $4.7 17.5% $4.0 Percent of Sales 1.0% .9% .8%
In 1994 interest expense and other increased primarily due to increased borrowings for the acquisition of Canlab, partially offset by replacing expired interest rate collars with fixed rate interest swaps. Foreign currency transaction losses accounted for approximately $.2 million of the increase.
In 1993 interest expense and other 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.
Income Taxes ------------ 1994 Decrease 1993 Decrease 1992 -------------------------------------------------------------------- Taxes $1.0 (63.0%) $2.7 (52.6)% $5.7 Percent of Sales .2 .5% 1.2% Effective tax rate 32.0% 40.6% 37.5%
The income taxes footnote to the financial statements describes the difference between the statutory and effective income tax rates. The lower effective tax rate in 1994 reflects the recognition of the benefits of a portion of the Canadian net operating loss carrforwards and lower state taxes. Management expects that the realization of the deferred tax assets related to the Canadian net operating losses will result from improved margins and elimination of duplicate personnel and facility cost, coupled with the acquisition of Canlab in late 1994. The higher effective tax rate in 1993 reflects the carryforward to future years of Canadian tax benefits not recognized in 1993.
Income Before Cumulative Effect of Accounting Change and Per Share Data ----------------------------------------------------------------------- 1994 Decrease 1993 Decrease 1992 -------------------------------------------------------------------- Income $2.1 (46.2)% $3.9 (58.5)% $9.4 Percent of Sales .4% .8% 1.9% Per Share $ .18 $ .35 $ .85
In 1994, the decrease in income before cumulative effect of accounting change is primarily due to lower margins.
In 1993, 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 sales and margins, and higher operating expenses along with higher interest costs.
Financial Condition and Liquidity --------------------------------- The ratio of debt to equity over the past four years is as follows:
1994 1993 1992 1991 -------------------------------------------------------------- 2.0 1.5 1.1 1.3
The ratio of operating income, plus depreciation and amortization, to interest expense over the past four years is as follows:
1994 1993 1992 1991 -------------------------------------------------------------- 3.8 4.5 7.1 5.8
VWR continues to maintain a liquid financial position. VWR's current ratio was 2.7 at December 31, 1994 and accounts receivable and inventory accounted for 66% of total assets. The increase in accounts receivable is due to transition issues related to the consolidation of the Company's credit department and higher sales growth in the fourth quarter of 1994 compared to the fourth quarter of 1993. The increase in inventory and accounts payable is primarily due to various marketing programs, and to supporting new supplier partnerships with several customers. For the year ended December 31, 1994 cash flow from operations of $5.1 million and debt borrowings of $19.5 million were used to finance investments in property and equipment of $2.9 million, the Canlab acquisition of $13.9 million, the joint venture investment of $2.9 million and to pay dividends of $4.4 million. Sufficient credit availability existed at December 31, 1994 to provide for the amounts of bank checks outstanding less cash in bank of $1.4 million. Cash requirements reach a low toward the end of each calendar year due to the natural business cycle.
On October 27, 1994 the Company replaced its previously unsecured revolving credit facility with a dual-currency secured revolving credit and term loan agreement, expiring in 1997, with four banks which provides for committed facilities of $80 million subject to the maintenance of certain levels of accounts receivable and inventory, and a $20 million five-year loan due in varying installments beginning December 31, 1994. The facility provides for the ability to borrow Canadian dollars in an amount up to $16 million in U.S. dollars. Canadian borrowings were used to finance the acquisition of Canlab. Interest on borrowings is at variable short-term interest rates.
To reduce the impact of changes in interest rates on floating rate long-term debt, the Company uses a combination of interest rate swaps, and collars. The notional amounts of the interest rate collars and swaps are based upon expected actual debt levels during a five-year period. The Company provides protection to meet actual exposures and does not speculate in derivatives.
The Company's interest rate collar effectively establishes a minimum and maximum rate on up to $30 million of credit, and expires in 1996. The Company also has interest rate swap agreements which change interest rate exposure on $10 million of floating rate debt to a fixed rate of 4.86% through February 1996, and on $30 million at a fixed rate of 6.38% from February 1996 to February 1999. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties.
Due to the increase in debt levels from the Canadian acquisition, the board of directors made a decision to reduce the company's quarterly dividend, declared on December 16, 1994 to $.04 per share from the previous $ .10 per share.
On February 27, 1995, the Company and EM Industries, Incorporated ("EM") (an affiliate of E. Merck, Darmstadt, Germany) entered into an agreement that calls for EM to invest $20 million in the Company for common shares (calculated at a price per share of $11) and a three-year warrant to purchase an additional $10 million of common shares at $11 per share, subject to regulatory approvals and other customary conditions. Assuming exercise of the warrant, EM would own approximately 20% of the common stock of the Company.
EM has also agreed to a four-year "standstill" agreement, which limits its ability to increase its equity interest in the Company during the four years. After the four-year period, without prior approval of the Board of Directors of the Company, EM would be permitted to acquire additional equity in the Company only by offering to acquire all of the outstanding shares of the Company. The standstill agreement also grants EM certain registration rights. The Company has also agreed to elect two representatives of EM to its Board of Directors. In addition, the Companies have agreed to enter into new distribution agreements encompassing the U.S. and Canadian markets.
The agreements have been unanimously approved by the Company's Board of Directors and do not require shareholder approval. The expected proceeds of approximately $20 million from the issuance of the shares under the share purchase agreement are expected to be used to repay debt.
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.
As of December 31, 1994 the estimated cost for capital improvement projects is expected to range between $4 and $5 million in 1995 related primarily to continued investments in new computer systems and equipment and warehouse equipment.
Operating Income Return on Average Invested Capital -----------------------------------------------------
1994 1993 1992 1991 ---------------------------------------------------------------------
7.3% 11.7% 22.0% 19.0%
1993 before restructuring charges 15.1%
Operating Income to Sales ------------------------- 1994 1993 1992 1991 ---------------------------------------------------------------------
1.5% 2.2% 3.9% 3.8%
1993 before restructuring charges 2.9%
Average Invested Capital to Sales --------------------------------- 1994 1993 1992 1991 ---------------------------------------------------------------------
21.0% 18.9% 17.7% 19.8%
Days Sales in Accounts Receivable --------------------------------- 1994* 1993 1992 1991 ---------------------------------------------------------------------
45.7 42.6 41.5 42.1
Inventory Turnover (Before LIFO) -------------------------------- 1994* 1993 1992 1991 ---------------------------------------------------------------------
6.7 6.9 6.4 6.0
*Excludes the effect of the Canlab acquisition
ITEM 8.


ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------ -------------------------------------------
VWR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 1994 1993 1992 ------------------------------------------------------------------------------- (Thousands of dollars, except per share data)
Sales $535,179 $509,235 $490,168 Cost of sales 421,981 392,961 375,737 ------- ------- ------- Gross margin 113,198 116,274 114,431 Operating expenses 104,124 101,713 95,322 Canlab transition expenses 916 Restructuring and other charges 3,300 ------- ------- ------- Operating income 8,158 11,261 19,109 Interest expense and other 5,137 4,708 4,021 ------- ------- ------- Income before income taxes and cumulative effect of accounting change 3,021 6,553 15,088 Income taxes 968 2,663 5,658 ------- ------- ------- Income before cumulative effect of accounting change 2,053 3,890 9,430 Cumulative effect of change in accounting for postretirement benefits, net of income tax benefit of $860 (1,400) ------- ------- ------- Net Income $ 2,053 $ 2,490 $ 9,430 ======= ======= ======= Earnings (Loss) Per Share: Income before cumulative effect of accounting change $ 0.18 $ 0.35 $ 0.85 Cumulative effect of accounting change (0.13) ------- ------- ------- Net Income $ 0.18 $ 0.22 $ 0.85 ======= ======= ======= Weighted average number of common shares outstanding (thousands) 11,128 11,153 11,128
See Notes to Consolidated Financial Statements.
VWR CORPORATION CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share data) December 31, ASSETS 1994 1993 ------------------------------------------------------------------------------- Current Assets: Receivables-- Trade receivables, less reserves of $619 and $259 $70,777 $60,272 Other receivables 2,753 2,489 Inventories 40,091 30,243 Other 6,378 8,484 ------- -------- Total Current Assets 119,999 101,488
Property and Equipment--net 38,259 41,562
Other Assets 15,117 5,727 ------- -------- $173,375 $148,777 ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------------------------------------------------- Current Liabilities:
Bank checks outstanding, less cash in bank $ 1,398 $ 1,062 Accounts payable 35,783 26,743 Accrued liabilities 5,448 8,336 Current portion of long-term debt 2,250 150 ------- ------- Total Current Liabilities 44,879 36,291
Long-Term Debt 79,170 61,757
Deferred Income Taxes and Other 9,158 9,672
Shareholders' Equity: Preferred stock, $1 par value, 1,000,000 shares authorized, none issued Common stock, $1 par value, 30,000,000 shares authorized, 11,316,592 issued 11,316 11,316
(Thousands of dollars, December 31, except share data) 1994 1993 ---- ---- Additional paid-in capital $ 29,269 $ 29,137 Retained earnings 4,941 6,651 Treasury shares at cost, 250,225 and 293,613 shares (2,463) (2,882) Unamortized ESOP contribution (1,786) (2,057) Unamortized restricted stock awards (485) (541) Cumulative translation adjustment (624) (567) -------- -------- Total Shareholders' Equity 40,168 41,057 -------- -------- $173,375 $148,777 ======== ========
See Notes to Consolidated Financial Statements.
VWR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1994 1993 1992 ------------------------------------------------------------------------------- (Thousands of dollars) OPERATING ACTIVITIES Net Income $ 2,053 $ 2,490 $ 9,430 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,791 9,203 8,432 Cumulative effect of accounting change 1,400 Change in assets and liabilities, net of effect of businesses acquired: Receivables, net (7,359) (4,123) (3,217) Inventories (4,459) 2,782 926 Other current assets (1,625) (5,914) (1,462) Accounts payable 9,040 (750) 4,834 Accrued liabilities (2,013) 835 197 Deferred income taxes and other (330) 495 (36) ------- ------- ------- Cash Provided by Operating Activities 5,098 6,418 19,104 ------- ------- ------- INVESTING ACTIVITIES
Additions to property and equipment, net (2,922) (13,402) (5,184) Acquisition of businesses net of $1,600 note payable in 1992 (13,939) (5,837) Investment in joint venture (2,881) Net additions to other assets (909) (1,854) (931) -------- -------- -------- Cash Used by Investing Activities $(20,651) $(15,256) $(11,952) -------- -------- --------
Year Ended December 31, 1994 1993 1992 ------------------------------------------------------------------------------- (Thousands of dollars)
FINANCING ACTIVITIES Proceeds from long-term debt $169,243 $228,983 $136,493 Repayment of long-term debt (149,730) (214,847) (137,341) Net change in bank checks outstanding 336 (741) (1,618) Cash dividends (4,419) (4,395) (4,383) Purchase of treasury shares (286) Proceeds from exercise of stock options 135 88 249 Other (12) (250) (266) ------- ------- ------- Cash Provided (Used) by Financing Activities 15,553 8,838 (7,152) ------- ------- ------- Net Change in Cash 0 0 0
Cash at beginning of year 0 0 0 ------- ------- ------- Cash at end of year $ 0 $ 0 $ 0 ======= ======= ======= Supplemental disclosures of cash flow information:
Cash paid (received) during the year for: Interest (net of capitalized interest) $ 4,568 $ 4,128 $ 3,493 Income taxes (254) 4,568 4,350
See Notes to Consolidated Financial Statements.
VWR CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Thousands of dollars, Unamortized except per share data) Restricted Stock, Common Unamortized Stock Additional ESOP $1 Par Paid-in Retained Treasury Contribution, Value Capital Earnings Shares and Other ----------------------------------------------------------------------------
Balance December 31, 1991 $5,658 $34,451 $3,697 $(3,882) $(3,092)
Net income 9,430 Two-for-one stock split 5,658 (5,658) Cash dividends ($.40 per share) (4,383) Allocation of shares to ESOP participants 235 Restricted stock awards - 7,580 shares 23 74 (97) Forfeiture of restricted stock - 2,173 shares (26) 26 Amortization of restricted stock 279 Grant of treasury shares - 14,482 shares 44 141 Acquisition of treasury stock - 21,756 shares (305) Exercise of stock options (66) (183) 507 Foreign currency translation adjustment (274)
Balance ------ ------ ----- ----- ------ December 31, 1992 $11,316 $28,794 $8,561 $(3,491) $(2,923) ------ ------ ----- ----- ------
(Thousands of dollars, Unamortized except per share data) Restricted Stock, Common Unamortized Stock Additional ESOP $1 Par Paid-in Retained Treasury Contribution, Value Capital Earnings Shares and Other -------------------------------------------------------------------------------
Net income $2,490 Cash dividends ($.40 per share) (4,400) Allocation of shares to ESOP participants $ 417 Restricted stock awards 45,219 shares $ 222 $ 439 (661) Amortization of restricted stock 290 Grant of treasury shares- 4,478 shares 28 43 Acquisition of treasury stock - 1,783 shares (22) Exercise of stock options (61) 149 Tax benefit on ESOP divi- dends and restricted stock 154 Foreign currency transla- tion adjustment (288) Balance ------- ------- ------ ------- ------- December 31, 1993 $11,316 $29,137 $6,651 $(2,882) $(3,165) ------- ------- ------ ------- -------
(Thousands of dollars, Unamortized except per share data) Restricted Stock, Common Unamortized Stock Additional ESOP $1 Par Paid-in Retained Treasury Contribution, Value Capital Earnings Shares and Other -------------------------------------------------------------------------------
Net income $2,053 Cash dividends ($.34 per share) (3,763) Allocation of shares to ESOP participants $271 Restricted stock awards 21,816 shares $28 $211 (239) Amortization of restricted stock 295 Exercise of stock options (79) 208 Tax benefit on ESOP divi- dends and restricted stock 183 Foreign currency transla- tion adjustment (57) Balance ------- ------- ------ -------- -------- December 31, 1994 $11,316 $29,269 $4,941 $(2,463) $(2,895) ======= ======= ====== ======== ========
See Notes to Consolidated Financial Statements.
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 and all of its subsidiaries (the Company). All significant intercompany accounts and transactions have been eliminated.
Capitalization, Depreciation and Amortization --------------------------------------- Land, buildings, and equipment are recorded at cost. Depreciation is com- puted 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 and amortized over their estimated useful lives of seven years. 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. Goodwill is amortized over periods of 15 and 40 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.
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, 1994, 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 or market. Inventory valued using the last-in, first-out (LIFO) method comprised 88% and 95% of inventory at December 31, 1994 and 1993, respectively. Cost of the remaining inventories is determined using the first-in, first-out (FIFO) method.
LIFO cost at December 31, 1994, and 1993, was approximately $27.7 million and $26.8 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.
FIXED ASSETS ------------ Net property and equipment at December 31, 1994, and 1993, is: ----------------------------------------------------------------------------- (Thousands of dollars) 1994 1993 ----------------------------------------------------------------------------- Land $ 2,130 $ 2,130 Buildings 10,249 10,249 Equipment and computer software 53,029 50,339 Construction in progress 408 280 ------- ------- 65,816 62,998 Less accumulated depreciation (27,557) (21,436) ------- ------- Net property and equipment $38,259 $41,562 ======= =======
Depreciation expense for the years ended December 31, 1994, 1993 and 1992, was $6.3 million, $5.4 million and $4.3 million, respectively.
ACCRUED LIABILITIES ------------------- Included in accrued liabilities at December 31, 1994, and 1993, is accrued compensation of approximately $3.3 million and $4.2 million, respectively.
FOREIGN CURRENCY TRANSACTIONS ------------------------------ The Company supplies product to its Canadian subsidiary for sale to the subsidiary's Canadian customers. The Company has entered into forward exchange contracts to fix the rate of exchange on the Canadian dollar payments made to the Company upon settlement of the intercompany accounts related to those shipments to its subsidiary. As of December 31, 1994, the Company had approximately $1.1 million of forward exchange contracts outstanding. Net transaction gains and losses are not material and are included in interest expense.
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENTS ---------------------------------------------- The long-term debt of the Company at December 31, 1994, and 1993, is: ----------------------------------------------------------------------------- (Thousands of dollars) 1994 1993 ----------------------------------------------------------------------------- Revolving Credit Agreements $61,920 $60,107 Term Note 19,500 1,800 Less current portion (2,250) (150) ------- ------- Net long-term debt $79,170 $61,757 ======= =======
On October 27, 1994, the Company replaced its previously unsecured revolving credit facility with a dual-currency secured revolving credit and term loan agreement, expiring in 1997, with four banks which provides for committed facilities of $80 million subject to the maintenance of certain levels of accounts receivable and inventory, and a $20 million five-year term note due quarterly in varying installments beginning December 31, 1994. The facility provides for the ability to borrow Canadian dollars up to $16 million in U.S. dollars. Canadian borrowings were used to finance the acquisition of Canlab as noted under "Acquisitions." Interest on borrowings is at short-term interest rates. The agreement is secured by the Company's accounts receivable and inventory. The Company expects to have sufficient accounts receivable and inventory to provide adequate availability under these facilities. Principal amounts due on long-term debt, before the impact of the equity transaction (see "Subsequent Event" note), in each of the five years beginning January 1, 1995, are $2.3 million, $3.3 million, $66.6 million, $5.3 million and $4.5 million, respectively.
For the year ended December 31, 1994, the approximate weighted average interest rate on borrowings made under the outstanding loan facilities was 7.0%, which approximates the year-end rate. Interest expense for the years ended December 31, 1994, 1993, and 1992, was $4.8 million, $4.5 million, and $3.9 million, respectively.
The Company has an interest rate collar on $30 million which expires on March 1, 1996. The collar is based on the three-month London Interbank Offered Rate ("LIBOR") and has a floor of 6.75% and a ceiling of 9.5%. The cost of the collar is treated as a reduction of the revolving credit debt and is being amortized as revolving credit interest expense over the term of the collar.
The Company has entered into interest rate swap agreements with a financial institution which effectively change the Company's interest rate exposure on $10 million of floating rate debt to a fixed rate of 4.86% from March 28, 1994 through February 29, 1996, and on $30 million to a fixed rate of 6.38% from February 29, 1996 through February 28, 1999. Net receipts or payments under the agreements are recognized as an adjustment to interest expense. The fair market value of the swap agreements is based on the present value of the future cash flows determined by the interest rate difference between the contracts' fixed rate and the then current replacement rate. At December 31, 1994 the fair market value of the swap agreements, which is not recorded in the consolidated financial statements, is approximately $1.4 million. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties.
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 $1.8 million of retained earnings at December 31, 1994 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:
------------------------------------------------------------------------------- (Thousands of dollars) 1994 1993 1992 ------------------------------------------------------------------------------- Domestic $3,470 $7,447 $15,280 Foreign (449) (894) (192) ------ ------ ------- $3,021 $6,553 $15,088 ====== ====== =======
The provision for income taxes on income before cumulative effect of accounting change consists of: --------------------------------------------------------------------------- (Thousands of dollars) 1994 1993 1992 --------------------------------------------------------------------------- Current: Federal $1,652 $2,320 $4,410 State 170 200 772 ------ ------ ------ 1,822 2,520 5,182 ------ ------ ------ Deferred: Federal (276) 286 351 State (213) 7 125 Foreign (365) (150) ------ ----- ------ (854) 143 476 ------ ------ ------ Total tax provision $ 968 $2,663 $5,658 ====== ====== ======
The reconciliation of tax computed at the federal statutory tax rates of 35% (1994 and 1993) and 34% (1992) of income before income taxes and cumulative effect of accounting change to the actual income tax provision is as follows:
------------------------------------------------------------------------------- (Thousands of dollars) 1994 1993 1992 -------------------------------------------------------------------------------
Statutory tax $1,058 $2,293 $5,130 State income taxes net of federal tax benefit (29) 137 592 Increase in statutory rate on deferred tax items 164 Increase (Decrease) in valuation allowance for foreign net operating loss (165) 250 Other-net 104 (181) (64) ------ ------ ------ Total tax provision $ 968 $2,663 $5,658 ====== ====== ======
Deferred tax liabilities (assets) as of December 31, 1994 and 1993 are comprised of the following: ----------------------------------------------------------------------------- (Thousands of dollars) 1994 1993 ----------------------------------------------------------------------------- Depreciation $5,942 $6,400 Pension 1,730 1,918 ----- ----- Deferred tax liabilities 7,672 8,318 ----- ----- Postretirement benefits (800) (809) Other benefits (525) (584) Restructuring charges (720) Net operating loss carryforwards from foreign operations net of valuation allowances of $160 in 1994 and $350 in 1993 (586) (150) Other-net (714) (213) ----- ----- Deferred tax assets (2,625) (2,476) ----- ----- Net deferred tax liability $5,047 $5,842 ====== ======
Included in other current assets at December 31, 1994 and 1993 are refundable income taxes of approximately $.4 million and $2.1 million, respectively, and net current deferred tax assets of $.8 million and $.6 million, respectively. The Company has Canadian tax loss carryforwards of approximately $1.0 million which expire at various dates through 2001. Management expects that the realization of the deferred tax assets related to the Canadian net operating losses will result from improved margins, elimination of duplicate personnel and facility cost, coupled with the acquisition of Canlab in late 1994.
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. On February 23, 1995, the Company amended the Agreement to change the definition of "Acquiring Person," and to provide that the Agreement be governed by the laws of the Commonwealth of Pennsylvania instead of the laws of the State of Delaware.
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 an Acquiring Person 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, 241,440 shares were reserved for issuance at December 31, 1994.
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, 1994, 1993 and 1992, the Company granted 21,816, 45,219 and 7,580 shares, respectively, at fair market values of approximately $.2 million, $.7 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:
------------------------------------------------------------------------------- Shares Average Price ------------------------------------------------------------------------------ Outstanding at December 31, 1991 429,310 $7.41 Exercised (44,301) 5.62 Canceled (12,196) 7.82 ------ Outstanding at December 31, 1992 372,813 7.61 Exercised (14,469) 6.07 Granted 59,921 13.88 Canceled (12,446) 6.90 -------- Outstanding at December 31, 1993 405,819 8.61 Exercised (22,007) 6.14 Granted 5,000 10.00 Canceled (32,845) 7.75 ------- Outstanding at December 31, 1994 355,967 $8.86 =======
At December 31, 1994, there were 135,870 options exercisable at an average price of $7.79.
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, 1994, 1993, and 1992, were $.6 million, $.5 million and $.6 million, respectively. At December 31, 1994, there were 407,513 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 of which 153,568 shares are allocated to participants at December 31, 1994. 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. The total number of shares to be allocated in a year is the higher of an amount based on the Company's profitability or the minimum allocation required per the ESOP agreement. Expenses are recognized based on shares to be allocated in the subsequent year and are reduced for dividends paid on unallocated shares.
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, 1994, and 1993, are:
------------------------------------------------------------------------------ (Thousands of dollars) 1994 1993 ------------------------------------------------------------------------------ Actuarial present value of plan benefit obligations
Vested benefit obligation $30,166 $31,240 Nonvested benefit obligation 1,254 1,116 ------- ------- Accumulated benefit obligation $31,420 $32,356 ======= ======= Projected benefit obligation $35,972 $37,848 Plan assets at fair value (33,313) (33,610) ------- ------- Projected benefit obligation in excess of plan assets 2,659 4,238 Prior service costs not yet recognized in net periodic pension cost 699 336 Unrecognized net transition obligation (333) (391) Unrecognized actuarial loss (6,901) (8,222) ------- ------ Prepaid pension expense included in consolidated balance sheets $(3,876) $(4,039) ======= =======
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:
------------------------------------------------------------------------------ (Thousands of dollars) 1994 1993 1992 ------------------------------------------------------------------------------
Service Cost (benefits earned during the year) $1,516 $1,252 $1,184 Interest cost on projected benefit obligation 2,922 2,758 2,503 Actual return on plan assets (116) (3,412) (1,366) Net amortization and deferral (2,714) 682 (1,370) ------ ------ ------ Net pension expense $1,608 $1,280 $ 951 ====== ====== ====== The assumptions used were: Discount rate 8.75% 7.75% 9% Rate of increase in compensation levels 4% 4% 5% Expected long-term rate of return on plan assets 10% 10% 10%
The Company maintains a supplemental pension plan for certain senior officers. Expenses incurred under this plan in 1994 and 1993 were approximately $.2 million and $.3 million, respectively. There were no expenses incurred under this plan in 1992.
Certain employees are covered under union-sponsored, collectively bargained plans. Expenses under these plans for each of the years ended December 31, 1994, 1993 and 1992, were $.2 million, 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, 1994 and 1993 is as follows:
(Thousands of dollars) 1994 1993 Accumulated postretirement benefit obligation: ---- ---- Retirees $1,486 $1,604 Eligible active participants 184 183 Other active participants 22 21 Unrecognized net gain 307 266 ------ ------ Accrued postretirement benefit obligation $1,999 $2,074 ====== ======
The net periodic postretirement benefit cost includes the following components: 1994 1993 ---- ---- Service cost $ 6 $ 7 Interest cost 139 174 Net amortization and deferral (3) ----- ----- $ 142 $ 181 ===== =====
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation is 10% through 1996 declining 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 9%; the annual service and interest cost components in the aggregate would not be materially affected. An 8.75% discount rate was used in determining the accumulated postretirement benefit obligation at December 31, 1994 and 7.75% was used at December 31, 1993.
Before the adoption of SFAS No. 106, the retiree health care expense was recorded as claims were incurred. The expense for 1992 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 was approximately $5.2 million for the years ended December 31, 1994, and 1993, and $4.8 million in 1992
Future minimum lease payments as of December 31, 1994, under noncancelable operating leases, having initial lease terms of more than one year are:
------------------------------------------------------------------------------ Years Ending December 31 (Thousands of dollars) ------------------------------------------------------------------------------ 1995 $ 4,436 1996 3,514 1997 3,008 1998 2,000 1999 1,710 Thereafter 3,681 ------ Total minimum payments $18,349 ====== 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.
ACQUISITIONS ------------ Effective October 31, 1994, the Company, through its wholly-owned Canadian subsidiary, acquired certain assets related to the laboratory supply business of Canlab, a division of Baxter International for approximately $13.9 million. The acquisition was accounted for under the purchase method of accounting and was funded through the Company's secured term loan. The unamortized balance of the excess purchase price over net assets acquired is $5.1 million at December 31, 1994 which is included in other long-term assets. In the fourth quarter of 1994, as a result of the acquisition, VWR terminated certain of its employees and closed certain facilities. The total cost of these actions, which was expensed in 1994, was $.9 million.
Canlab's results of operations have been included in the consolidated results of operations since the date of acquisition. The following unaudited pro forma combined results of operations for the years ended December 31, 1994 and 1993 have been prepared assuming that the acquisition had occurred as of the beginning of each period. It is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined enterprise:
(Thousands of dollars) 1994 1993 ---- ---- Sales $570,170 $553,467
1994 1993 ---- ----
Income before cumulative effect of accounting change 3,254 5,766 Net income 3,254 4,366
Earnings per share: Before cumulative effect of accounting change $ .29 $.52 Net income .29 .39
The pro forma results of operations include, among other items, certain adjustments for increased interest on acquisition debt, amortization of goodwill, plus expense savings from discontinued fucntions, and related income tax effects. 	
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 which was refinanced through the revolving line of credit. The acquisition is not material in relation to the Company's consolidated financial statements. The unamortized balance of the excess purchase price over net assets acquired is $2.1 million at December 31, 1994 and $2.5 million at December 31, 1993 which is included in other long-term assets.
JOINT VENTURE ------------- 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 $2.9 million investment, included in other long-term assets, is accounted for using the cost method of accounting and was funded through the Company's revolving credit line.
The initial term of this agreement is for a period of three years. During the initial term, VWR has the right to "put" its investment to E. Merck and receive the original DM cost of the investment. Subsequent to the initial term, if either party terminates the agreement, E. Merck will have to re- acquire the shares from VWR at fair value.
RESTRUCTURING AND OTHER CHARGES ------------------------------- In December 1994, the Company made the decision to consolidate certain sales offices and functions. As a result, the Company will incur approximately $2 million in charges which are primarily for severance and other personnel- related costs. The cost of the consolidation effort will be accounted for in accordance the new guidance set forth in FASB EITF Issue 94-3 "Accounting for Restructuring Charges." Under EITF 94-3 costs will be recognized primarily when they are incurred throughout 1995.
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 did not have continuing value) and $2 million related to the consolidation of functions and facilities which consisted primarily of severance and other personnel-related costs. All of the Company's contemplated actions were completed during 1994, and all of the cash expenditures related to the $2 million accrued at December 31, 1993 have been made.
SUBSEQUENT EVENT ----------------
On February 27, 1995, the Company and EM Industries, Incorporated ("EM") (an affiliate of E. Merck, Darmstadt, Germany) entered into an agreement that calls for EM to invest $20 million in the Company for common shares (calculated at a price per share of $11) and a three-year warrant to purchase an additional $10 million of common shares at $11 per share, subject to regulatory approvals and other customary conditions. Assuming exercise of the warrant, EM would own approximately 20% of the common stock of the Company.
EM has also agreed to a four-year "standstill" agreement, which limits its ability to increase its equity interest in the Company during the four years. After the four-year period, without prior approval of the Board of Directors of the Company, EM would be permitted to acquire additional equity in the Company only by offering to acquire all of the outstanding shares of the Company. The standstill agreement also grants EM certain registration rights. The Company has also agreed to elect two representatives of EM to its Board of Directors. In addition, the Companies have agreed to enter into new distribution agreements encompassing the U.S. and Canadian markets.
The agreements have been unanimously approved by the Company's Board of Directors and do not require shareholder approval. The expected proceeds of approximately $20 million from the issuance of the shares under the share purchase agreement are expected to be used to repay debt.
FOREIGN AND DOMESTIC OPERATIONS -------------------------------
At December 31, 1994, identifiable assets of the Company's Canadian operations were $28 million. Approximately half of the assets are attributable to the Canlab acquisition on October 31, 1994. Because Canlab's operations are reflected in the consolidated totals for only two months in 1994, net sales and operating income (loss) of the Canadian operations are proportionately smaller - - in each case less than 10 percent of the consolidated total for such amounts. For the years ended December 31, 1993 and 1992 sales and identifiable assets attributable to these Canadian operations were less than 10% of the Company's totals in each category.
QUARTERLY FINANCIAL DATA (Unaudited) -------------------------------------------------------------------------------
(Thousands of dollars, Gross Operating Net Earnings except per share data) Sales Margin Income* Income (Loss) Per (Loss)** Share** ------------------------------------------------------------------------------- Year Ended - December 31, 1994
First Quarter $122,044 $ 26,506 $ 1,418 $ 183 $ .02 Second Quarter 130,896 26,916 1,937 516 .05 Third Quarter 145,562 30,861 4,218 2,128 .19 Fourth Quarter 136,677 28,915 1,501 (774) (.07) -------- -------- ------- ------ ------ Total $535,179 $113,198 $ 9,074 $2,053 $ .18 ======== ======== ======= ====== ======
Year Ended - December 31, 1993 First Quarter $125,485 $ 28,554 $ 3,146 $ (95) $ (.01) Second Quarter 127,101 28,624 3,496 1,420 .13 Third Quarter 135,746 31,862 6,236 2,920 .26 Fourth Quarter 120,903 27,234 1,683 (1,755) (.16) -------- -------- ------- ------ ------ Total $509,235 $116,274 $14,561 $2,490 $ .22 ======== ======== ======= ====== ======
*Fourth quarter 1994 amounts are before Canlab transition expenses. Fourth quarter 1993 amounts are before Restructuring and other charges.
**1993 amounts are after the cumulative effect of a first quarter accounting change for postretirement benefits. Fourth quarter 1993 amounts have been reduced by the effects of restructuring and other charges. Fourth quarter 1994 amounts have been reduced by the effects of Canlab transition expenses.
REPORT OF INDEPENDENT AUDITORS ------------------------------ To The Shareholders of VWR Corporation:
We have audited the consolidated balance sheets of VWR Corporation as of December 31, 1994 and 1993, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. Our audits also include the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VWR Corporation at December 31, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents 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 LLP
Philadelphia, Pennsylvania February 7, 1995, except for the subsequent event note as to which the date is February 27, 1995.
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 18 Consolidated Balance Sheets 19 Consolidated Statements of Cash Flows 21 Consolidated Statements of Shareholders' Equity 23 Notes to Consolidated Financial Statements 26 Report of Independent Auditors 42
(2) Financial Statement Schedules
(a) The following financial statement schedule is submitted herewith:
-Schedule II - 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.
(3) Exhibits Exhibit Number and Description ------------------------------
2 Agreement and Plan of Merger between VWR Corporation and VWR New Corporation
Agreement and Plan of Distribution between VWR Corporation and Momentum Distribution, Inc. (1)
3 Amended and Restated Articles of Incorporation
3.1 Amended and Restated Bylaws
4 Amended and Restated Credit Agreement by and among VWR Corporation and its Subsidiaries and CoreStates Bank, N.A. for itself and as agent, Seattle-First National Bank, Bank of America Canada, and PNC Bank, National Association dated October 27, 1994.
Rights Agreement dated as of May 20, 1988 between VWR Corporation and The First Jersey National Bank (filed as an exhibit to the Company's registration statement in Form 8-A dated May 23, 1988, and incorporated herein by reference).
10 Change of Control agreements between VWR Corporation and Philip Hunsucker (3)
Change of Control agreements between VWR Corporation and Jerrold B. Harris, 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.(3)
VWR Corporation Supplemental Benefits Plan dated November 1, 1990. (3)
11 Computation of Per Share Earnings
21 Parent and Subsidiaries of the Company
23 Consent of Independent Auditors
24 Power of Attorney
27 Article 5 FDS for year ended December 31, 1994 (4)
(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.
(4) Submitted for the benefit of the SEC.
(b) Reports on Form 8-K
None
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 27, 1995 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 27, 1995 BY (SIGNATURE)
Walter S. Sobon, Vice President Finance (Principal Financial and 							 Accounting 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, 1995
Date: March 27, 1995
VWR CORPORATION --------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS ----------------------------------------------- (Thousands of dollars)
Balance at Charged to Balance Beginning Costs and at End Description of Year Expenses Deductions (1) Other of Year ----------- --------- ---------- -------------- ----- --------- Allowances for losses (deducted from trade receivables) for:
Year Ended December 31, 1994 $259 $656 $554 $258(2) $619 === === === === ===
Year Ended December 31, 1993 $222 $377 $340 $259 === === === ===
Year Ended December 31, 1992 $182 $482 $442 $222 === === === ===
(1) Uncollectible accounts written off, net of recoveries. (2) Reserves established in connection with the Canlab acquisition.
Exhibit Index -------------
Exhibit Number and Description ------------------------------
2 Agreement and Plan of Merger between VWR Corporation and VWR New Corporation
Agreement and Plan of Distribution between VWR Corporation and Momentum Distribution, Inc.*
3 Amended and Restated Articles of Incorporation
3.1 Amended and Restated Bylaws
4 Amended and Restated Credit Agreement by and among VWR Corporation and its Subsidiaries and CoreStates Bank, N.A. for itself and as agent, Seattle-First National Bank, Bank of America Canada, and PNC Bank, National Association dated October 27, 1994.
Rights Agreement dated as of May 20, 1988 between VWR Corporation and The First Jersey National Bank (filed as an exhibit to the Company's registration statement in Form 8-A dated May 23, 1988, and incorporated herein by reference).
10 Change of Control agreements between VWR Corporation and Philip Hunsucker
Change of Control agreements between VWR Corporation and Jerrold B. Harris, 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
21 Parent and Subsidiaries of the Company
23 Consent of Independent Auditors
24 Power of Attorney
27 Article 5 FDS for year ended December 31, 1994
* 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.