UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 333-124100
VWR FUNDING, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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56-2445503 |
(State of Incorporation)
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(I.R.S. Employer Identification No.) |
1310 Goshen Parkway
P.O. Box 2656
West Chester, PA 19380
(Address of Principal Executive Offices)
Registrants telephone number, including area code: (610) 431-1700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Act.
Yes þ No o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes o No þ
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.
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Large accelerated file o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
As of December 31, 2009, there was no established public market for the registrants common stock,
par value $0.01 per share. The number of shares of the registrants common stock outstanding at
February 28, 2010 was 1,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
VWR FUNDING, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
TABLE OF CONTENTS
As used in this Annual Report on Form 10-K, the Company, we, us, and our refer to VWR
Funding, Inc. and its consolidated subsidiaries before and/or after the Merger (as defined in Item
1 Business), as the context requires.
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PART I
ITEM 1.
BUSINESS
Overview
We are a leader in the global laboratory supply industry. We provide distribution services to
a highly fragmented supply chain by offering products from a wide range of manufacturers to a large
number of customers. Our business is highly diversified across products and services, geographic
regions and customer segments.
Products we distribute include chemicals, glassware, equipment, instruments, protective
clothing, production supplies and other assorted laboratory products. We also provide certain
services to some of our customers, including technical services, on-site storeroom services and
laboratory and furniture design, supply and installation. We maintain operations in more than 20
countries and process approximately 50,000 order lines daily from more than 20 strategically
located distribution centers. Our principal customers are major pharmaceutical, biotechnology,
industrial and government organizations, as well as academic institutions, including schools,
colleges and universities.
The roots of our business date back to 1852. Following a series of business combinations, the
Company became part of Univar Corporation. In 1986, the Company became a publicly-traded company
following a spin-off from Univar and embarked on a substantial expansion program. In 1995, the
Company acquired Baxter Internationals industrial distribution business, more than doubling its
revenue base. In connection with this acquisition, Merck KGaA acquired 49.9% of the Companys then
outstanding shares and, in 1999, Merck KGaA took the Company private by acquiring the remainder.
During the period from 1995 through 1999, Merck KGaA actively built its scientific supplies
distribution business in Europe through a series of acquisitions. In 2001, Merck KGaA combined the
operations of the U.S. and European distribution businesses, and in 2002, consolidated them under a
common U.S. parent company, creating a leader in the global laboratory supply industry. On April 7,
2004, the Company was acquired from Merck KGaA by CDRV Investors, Inc. (CDRV) (the CD&R
Acquisition). CDRV was controlled by a private equity fund managed by Clayton, Dubilier & Rice,
Inc. (CD&R).
On June 29, 2007, CDRV completed a merger (the Merger) by and among CDRV, Varietal
Distribution Holdings, LLC, a Delaware limited liability company (Holdings), and Varietal
Distribution Merger Sub, Inc., a Delaware corporation and subsidiary of Holdings (Merger Sub).
Pursuant to the Merger, Merger Sub merged with and into CDRV, with CDRV continuing as the surviving
corporation and assuming all of the debt obligations of Merger Sub. In addition, in connection with
the Merger, CDRV changed its name to VWR Funding, Inc. After giving effect to the Merger and
related transactions, the Company became a direct, wholly owned subsidiary of VWR Investors, Inc.,
a Delaware corporation (VWR Investors), which is a direct, wholly owned subsidiary of Holdings.
Holdings is a holding company owned by private equity funds managed by Madison Dearborn Partners,
LLC (Madison Dearborn), other co-investors and certain members of our management who have been
given the opportunity to purchase equity in Holdings pursuant to an equity incentive plan
established at the time of the Merger, who we collectively refer to as the equity investors. See
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters in this Annual Report on Form 10-K for additional information regarding the equity
investors.
The Merger, including the
redemption of previous debt and the payment of related fees and
expenses, was financed by equity contributions of $1,425.0 million, the issuance of $675.0 million
aggregate principal amount of 10.25%/11.25% unsecured senior notes due 2015 (Senior Notes), the
issuance of $353.3 million and 125.0 million aggregate principal amount of 10.75% unsecured
senior subordinated notes due 2017 (Senior Subordinated Notes) and senior secured term loan
borrowings under a senior secured credit facility of
$615.0 million and 600.0 million (the
Senior Secured Credit Facility).
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We report our financial results on the basis of the following three business segments: North
American laboratory distribution (North American Lab), European laboratory distribution
(European Lab) and Science Education. Both the North American Lab and European Lab segments are
engaged in the distribution of laboratory and production supplies to customers in the
pharmaceutical, biotechnology, medical device, chemical, technology, food processing and consumer
products industries, as well as governmental agencies, universities and research institutes, and
environmental organizations. Science Education is engaged in the assembly, manufacture and
distribution of scientific supplies and specialized kits principally to academic institutions,
including primary and secondary schools, colleges and universities. Our operations in the Asia
Pacific region (Asia Pacific) are engaged in regional commercial operations and also support our
North American Lab and European Lab businesses. The results of our operations in Asia Pacific are
not material and are included in our North American Lab segment. During 2007, we opened a shared
services center in Coimbatore, India to which we have transferred certain functions from our North
American and European operations. The costs of operating our shared services
center have been allocated to our business segments based on relative utilization. See Note 17 in
Item 8 Financial Statements and Supplementary Data in this Annual Report on Form 10-K for
additional information about business segments and geographical areas.
Customers and Markets
Management estimates that industry-wide revenues in the global laboratory supply industry in
which our North American Lab and European Lab segments operate were approximately $28 billion in
2009 based on trade association data. Our net sales in these segments are influenced by, but not
directly correlated with, the growth of research and development spending from a diversified group
of end-users, and we expect that demand may vary by type of end-user.
In relation to our Science Education segment, we estimate that industry-wide annual sales of
scientific supplies to primary and secondary schools in North America in 2009 were approximately
$550 million. Industry sales levels are subject to fluctuations driven by state budgetary status,
changes in state and local government funding and spending patterns, the timing of state by state
new textbook adoption cycles and population changes. Our Science Education segment is seasonal,
with increased net sales and operating income in the third quarter, in connection with school
purchases of supplies in preparation for the beginning of the new school year.
We maintain a diverse and stable customer base across a diversified array of end users and
geographies. Our customers include pharmaceutical, biotechnology, medical device, chemical,
technology, food processing and consumer products companies. They also include universities and
research institutes, governmental agencies, environmental organizations and primary and secondary
schools. We serve our customers globally through our operations in more than 20 countries. We
established a presence in Asia Pacific in 2006 and plan to further expand in this region to respond
to the needs of our global customers who are also expanding operations there.
We seek to be the principal provider of laboratory supplies to our customer base. We are a
significant provider of laboratory supplies to a majority of the worlds 20 largest pharmaceutical
companies. Pharmaceutical and biotechnology companies represented approximately 34% of our 2009 net
sales, and together with universities and colleges, accounted for approximately 50% of our 2009 net
sales. In 2009, our top 20 customers accounted for approximately 22% of our net sales, with no
single customer representing more than 3% of our net sales.
Products
We offer a wide range of products, including chemicals, glassware, plasticware, instruments
and other laboratory equipment, protective clothing, laboratory furniture and scientific
educational materials for primary and secondary schools. Our average order size is less than $500.
Many of our products, including chemicals, laboratory and production supplies and science education
products, are consumable in nature. These products are basic and essential supplies required by
research and quality control laboratories and represented approximately 75% of our net sales in
each of 2009, 2008 and 2007. We also offer durable products, including, but not limited to,
centrifuges, fume hoods, workstations, ovens, microscopes and cold storage equipment.
We distribute products sourced from a wide array of manufacturers and are a primary
distributor for a variety of major manufacturers. We offer customers a large selection of products
designed to meet their individual needs from a combination of premium, value-for-money and
lower-cost products.
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Services
We provide services to customers ranging from single-site laboratories and/or production
facilities to large multinational corporations with multiple locations. These services cover a
broad range of customer needs and include technical services, on-site storeroom services and
laboratory and furniture design, supply and installation. While we believe the provision of
services is an important element of our value proposition to our customers, net sales and operating
income derived from such services are not material.
Distribution Network
Our distribution network consists of strategically located distribution centers and various
smaller regional service centers and just-in-time facilities for customer-specific requirements.
Customer contact centers have the responsibility for order entry and customer service. Our
distribution centers receive products from manufacturers, manage inventory and fill and ship
customer orders. We also contract with third parties to ship products directly to our customers
based on our instructions.
Our regional service centers are located near selected customer locations and are designed to
supply a limited number of products to those customers that require a high level of service. We
also operate just-in-time facilities at or near customer sites to meet customer needs promptly.
Sales and Marketing
We market to customers through our global sales force, our websites, and our catalogs. We have
a global sales, sales support, customer service, pricing, marketing and category management
workforce. Supporting the field sales organization are specialist teams who provide advanced sales
and technical support for e-business integration, customized services, laboratory furniture,
safety, environment, microbiology, chromatography and life science product areas.
The Internet has become an increasingly important tool for us. Net sales are derived, in part,
from e-business sales and marketing channels. Our website features a fully indexed and searchable
catalog covering our entire product line, is available in several languages and has been
custom-designed for many of the countries in which we do business. This electronic catalog includes
product descriptions, technical specifications and cross-referenced data in different languages
through individual country sites. This website allows customers to enter orders directly and enables us to communicate new product releases, promotions and other news to our
customers.
We also provide printed catalogs and other printed materials. Our general catalogs are printed
in several languages. The general catalogs are supplemented by specialty catalogs for specific
product lines.
Suppliers
We distribute products from a wide range of manufacturers. This includes a majority of the
major manufacturers of laboratory chemicals, glassware, plasticware, instruments and other
laboratory equipment, protective clothing and laboratory furniture who sell through distributors.
In many cases, we believe we are a principal distributor for these major manufacturers.
Merck KGaA is one of our major suppliers of chemical and other products. The Company has a
European Distribution Agreement with Merck KGaA to distribute certain chemical products in Europe.
The European Distribution Agreement was originally entered into in April 2004 with a five year term
and has been extended for a second five year term through April 2014. Merck KGaA has the right to
terminate this agreement if certain events occur. During 2005, the German Federal Cartel Office
initiated an investigation with regard to our European Distribution Agreement in Germany. See Note
15(b) under Item 8 Financial Statements and Supplementary Data in this Annual Report on Form
10-K for more information regarding the investigation and related court proceedings.
The Company also has a distribution agreement with affiliates of Merck KGaA to distribute
certain chemical products in North America. The North American chemical distribution agreement was
originally entered into in April 2004 with a five year term and automatically extended for a second
five-year term, ending April 2014. Affiliates of Merck KGaA may terminate the North America
chemical distribution agreement if certain events occur.
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Merck KGaA and its affiliates supplied products accounting for approximately 13% of our
consolidated net sales in each of 2009, 2008, and 2007.
Trademarks and Trade Names
We have more than 50 different registered and unregistered trademarks and service marks for
our products and services, substantially all of which are owned by us. In some cases, however, we
do not own the existing applications and registrations for our material trademarks or service marks
in each country in which we do business. Generally, registered trademarks have perpetual lives,
provided that they are renewed on a timely basis and continue to be used properly as trademarks,
subject only to the rights of third parties to seek cancellation of the marks.
Our business is not dependent to a material degree on patents, copyrights or trade secrets
although we consider our catalogs, websites and proprietary software integral to our operations.
Although we believe we have adequate policies and procedures in place to protect our intellectual
property, we have not sought patent protection for our processes nor have we registered the
copyrights in any of our catalogs, websites or proprietary software. Other than licenses to
commercially available third party software, we have no licenses to intellectual property that are
significant to our business.
Competition
We operate in a highly competitive environment. We compete in the global laboratory supply
industry primarily with two other major distributors, Thermo Fisher Scientific Inc. and Sigma
Aldrich Corporation. We also compete with many smaller regional, local and specialty distributors,
as well as with manufacturers selling directly to their customers. Competitive factors include
price, service and delivery, breadth of product line, customer support, e-business capabilities and
the ability to meet the special requirements of customers.
Some of our competitors are increasing their manufacturing operations both internally and
through acquisitions of manufacturers, including manufacturers that supply products to us. To date,
we have not experienced an adverse impact on our ability to continue to source products from
manufacturers that have been vertically integrated, although there is no assurance that we will not
experience such an impact in the future.
Government Regulation
Some of the products we offer and our operations are subject to a number of complex and
stringent laws and regulations governing the production, handling, transportation, import, export
and distribution of chemicals, drugs and other similar products, including the operating and
security standards of the United States Drug Enforcement Administration, the Bureau of Alcohol,
Tobacco, Firearms and Explosives, the Food and Drug Administration, the Bureau of Industry and
Security and various state boards of pharmacy as well as comparable state and foreign agencies. In
addition, our logistics activities must comply with the rules and regulations of the Department of
Transportation, the Federal Aviation Administration and similar foreign agencies. While we believe
we are in compliance in all material respects with such laws and regulations, any non-compliance
could result in substantial fines or otherwise restrict our ability to provide competitive
distribution services and thereby have an adverse impact on our financial condition. For
information on environmental, health and safety matters, see below under Environmental, Health
and Safety Matters.
Employees
As of December 31, 2009, we had approximately 6,700 employees, including approximately 3,400
employees in North America, approximately 2,800 employees in Europe and approximately 500 employees
in Asia Pacific. As of December 31, 2009, approximately 7% of our employees in North America were
represented by unions, and virtually all of our employees in Europe are represented by workers
councils and/or unions. While we believe our relations with our employees are good, there can be no
assurance that further union expansion will not occur and cause increased future costs.
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Environmental, Health and Safety Matters
We are subject to a broad range of foreign, federal, state and local environmental, health and
safety laws and regulations, including those pertaining to air emissions, water discharges, the
handling, disposal and transport of solid and hazardous materials and wastes, the investigation and
remediation of contamination and otherwise relating to health and safety and the protection of the
environment and natural resources. As our global operations involve, and have involved, the
handling, transport and distribution of materials that are, or could be classified as toxic or
hazardous, there is some risk of contamination and environmental damage inherent in our operations
and the products we handle, transport and distribute. Our environmental, health and safety
liabilities and obligations may result in significant capital expenditures and other costs, which
could negatively impact our business, financial condition and results of operations. We may be
fined or penalized by regulators for failing to comply with environmental, health and safety laws
and regulations. In addition, contamination resulting from our current or past operations may
trigger investigation or remediation obligations, which may have a material impact on our business,
financial condition and results of operations.
Based on current information, we believe that any costs we may incur relating to environmental
matters will not be material. We cannot be certain, however, that identification of presently
unidentified environmental conditions, more vigorous enforcement by regulatory authorities or other
unanticipated events will not arise in the future and give rise to additional environmental
liabilities, compliance costs or penalties which could have a material impact on our business,
financial condition and results of operations. In addition, environmental laws and regulations are
constantly evolving and it is not possible to predict accurately the effect they, or any new
regulations or legislation, may have in future periods. We currently do not maintain third-party
insurance for most of any current or future environmental liabilities.
Available Information
We file or furnish annual and quarterly reports and other information with or to the U.S.
Securities and Exchange Commission (SEC). You may read and copy any documents we file at the
SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also
available to the public free of charge at the SECs website at www.sec.gov.
You may also access our press releases, financial information and reports filed with or
furnished to the SEC (for example, our Annual Report on Form 10-K, our Quarterly Reports on Form
10-Q and our Current Reports on Form 8-K and any amendments to those forms) online at www.vwr.com.
Copies of any documents on our website are available without charge, and reports filed with or
furnished to the SEC will be available as soon as reasonably practicable after they are filed with
or furnished to the SEC. The information found on our website is not part of this or any other
report filed with or furnished to the SEC.
Corporate Information
Our principal executive offices are located at 1310 Goshen Parkway, P.O. Box 2656, West
Chester, PA 19380 and our telephone number is (610) 431-1700. Our Internet website is located at
www.vwr.com.
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ITEM 1A.
RISK FACTORS
Our business is subject to a number of important risks and uncertainties that are described below.
You should carefully consider these risks and all other information included in this Annual Report
on Form 10-K.
Risks Related to Our Capital Structure
Our substantial indebtedness could have a material adverse effect on our financial condition and
prevent us from fulfilling our debt or contractual obligations.
We have a substantial amount of debt, which requires significant interest and principal
payments. As of December 31, 2009, we had an aggregate principal amount of debt outstanding of
$2,871.7 million. Our high level of debt could have important consequences to us including the
following:
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making it more difficult for us to satisfy our debt or contractual obligations; |
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requiring us to dedicate a substantial portion of our cash flow from operations to debt
service payments, which would reduce the funds available for working capital, capital
expenditures, investments or acquisitions and other general corporate purposes; |
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limiting our flexibility in planning for, or reacting to, changes in our business, future
business opportunities and the industry in which we operate; |
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placing us at a competitive disadvantage compared to any of our less leveraged competitors; |
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increasing our vulnerability to a downturn in our business and both general and
industry-specific adverse economic conditions; and |
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limiting our ability to obtain additional financing at a favorable cost of borrowing, or
if at all, to fund future working capital, capital expenditures, investments, acquisitions
or other general corporate requirements. |
Despite current indebtedness levels and restrictive covenants, we may incur additional indebtedness
in the future, which would intensify our leverage risks.
Although the terms of the indentures governing the Senior Notes and Senior Subordinated Notes
and the credit agreement governing the Senior Secured Credit Facility restrict us and our
restricted subsidiaries from incurring additional indebtedness, these restrictions are subject to
exceptions and qualifications, including with respect to our ability to incur additional senior
secured debt. In addition, during 2009, we elected to satisfy $43.0 million of interest payments due on the
Senior Notes and the Senior Subordinated Notes by increasing the outstanding principal amount of
both series of Notes, and we are permitted to continue to do so under the Senior Notes and the
Senior Subordinated Notes for any interest period through July 15, 2011 and March 31, 2010,
respectively. The risks that we and our subsidiaries face as a result of our leverage could
intensify to the extent that we incur additional indebtedness.
Our debt agreements contain restrictions on our ability to operate our business and to pursue our
business strategies, and our failure to comply with, cure breaches of, or obtain waivers for
covenants could result in an acceleration of the due date of our indebtedness.
The credit agreement governing our Senior Secured Credit Facility and the indentures governing
the Senior Notes and Senior Subordinated Notes contain, and agreements governing future debt
issuances may contain, covenants that restrict our ability to finance future operations or capital
needs, to respond to changing business and economic conditions or to engage in other transactions
or business activities that may be important to our growth strategy or otherwise important to us.
The credit agreement and the indentures restrict, among other things, our ability and the ability
of our subsidiaries to:
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incur additional indebtedness; |
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pay dividends or make distributions in respect of our capital stock or
to make certain other restricted payments or investments; |
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purchase or redeem stock; |
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make investments or other specified restricted payments; |
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create liens; |
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sell assets and subsidiary stock; |
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enter into transactions with affiliates; and |
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enter into mergers, consolidations and sales of substantially all assets. |
We cannot assure you that we will be able to maintain compliance with such covenants in the
future and, if we fail to do so, that we will be able to obtain waivers from the lenders or note
holders and/or amend the covenants. In particular, if our financial condition or operating results
deteriorate, our relations with our lenders and noteholders may be materially and adversely
affected, which could impact our ability to obtain waivers if necessary.
Any breach of the covenants in the credit agreement or the indentures could result in a
default of the obligations under such debt and cause a default under other debt. If there were an
event of default under the credit agreement related to our Senior Secured Credit Facility that was
not cured or waived, the lenders under our Senior Secured Credit Facility could cause all amounts
outstanding with respect to the borrowings under the Senior Secured Credit Facility to be due and
payable immediately. Our assets and cash flow may not be sufficient to fully repay borrowings under
our Senior Secured Credit Facility and our obligations under the Senior Notes and Senior
Subordinated Notes if accelerated upon an event of default. If, as or when required, we are unable
to repay, refinance or restructure our indebtedness under, or amend the covenants contained in, our
Senior Secured Credit Facility, the lenders under our Senior Secured Credit Facility could
institute foreclosure proceedings against the assets securing borrowings under the Senior Secured
Credit Facility.
We may not be able to generate sufficient cash flows or access sufficient additional capital to
meet our debt obligations or to fund our other liquidity needs.
Our business may not generate sufficient cash flow from operations, or future borrowings under
our Senior Secured Credit Facility or from other sources may not be available to us in an amount
sufficient, to enable us to make required interest payments on our indebtedness or to fund our
other liquidity needs, including capital expenditure requirements, investments, acquisitions and
other transactions that are important to the execution of our business strategy. Additionally, the
revolving loan portion of our Senior Secured Credit Facility is scheduled to mature in 2013, and
significant portions of our other long-term debt are scheduled to mature beginning in 2014, and we
will need to refinance or satisfy this debt as it matures. We may not be able to refinance our
maturing debt on favorable terms, or at all, based on general economic or market conditions, our
historical or projected growth or other factors, including those beyond our control. If our cash
flow from operations or other liquidity sources are not sufficient to make required interest
payments or we are not able to refinance maturing debt on favorable terms, we may have to take
actions such as selling assets, seeking additional equity or debt capital on commercially
unreasonable terms or reducing or delaying important business transactions. Our Senior Secured
Credit Facility and the indentures governing the Senior Notes and Senior Subordinated Notes
restrict our ability to sell assets and use the proceeds from such sales for purposes other than
debt payment obligations.
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Our ability to make payments on our debt obligations depends on our ability to receive dividends,
payments or other distributions from our subsidiaries.
We are a holding company operating principally through VWR International, LLC (VWR) and
certain of its subsidiaries. As a result, we are substantially dependent on dividends, payments or
other distributions from VWR (and such subsidiaries) to make payments on the Senior Notes, Senior
Subordinated Notes and borrowings under the Senior Secured Credit Facility. VWRs ability to make
such dividends, payments or other distributions will depend on its and its subsidiaries financial
and operating performance, which, in turn, is subject to prevailing economic and competitive
conditions and financial and business factors, such as the following, which may be beyond our
control:
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operating difficulties; |
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increased operating costs; |
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decreased demand for the products and services we offer; |
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market cyclicality; |
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product prices; |
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the response of competitors or suppliers; |
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regulatory developments; |
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failure to successfully complete or integrate acquisitions; and |
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delays in implementing or our inability to fund strategic projects. |
In addition, the ability of VWR and its subsidiaries to pay such dividends and other
distributions also may be restricted by law.
A change in the control of the Company could require us to repay certain of our outstanding
indebtedness, and we may be unable to do so.
Upon a change of control, as defined in the indentures governing the Senior Notes and the
Senior Subordinated Notes, subject to certain conditions, we will be required to offer to
repurchase the notes at 101% of the principal amount thereof, plus accrued and unpaid interest to
the date of repurchase. The source of funds for that purchase will be our available cash or cash
generated from operations or other potential sources, including borrowings, sales of assets or
sales of equity. We may not have sufficient funds from such sources at the time of any change of
control to make required repurchases of notes tendered. In addition, the terms of our Senior
Secured Credit Facility limit our ability to repurchase the notes and certain change of control
events will constitute an event of default under the indentures. If the holders of the notes
exercise their right to require us to repurchase all of the notes upon a change of control, the
financial effect of this repurchase could cause a default under our other debt, even if the change
of control itself would not cause a default. Accordingly, it is possible that we will not have
sufficient funds at the time of the change of control to make the required repurchase of our other
debt and the notes or that restrictions in our Senior Secured Credit Facility and the indentures
will not allow such repurchases.
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The interests of our controlling stockholders may conflict with your interests.
Private equity funds managed by Madison Dearborn indirectly own a substantial majority of our
common stock through their ownership interests in Holdings. The interests of these funds as equity
holders may conflict with your interests. The controlling stockholders may have an incentive to
increase the value of their investment or cause us to distribute funds at the expense of our
financial condition and liquidity position, subject to the restrictions in our Senior Secured
Credit Facility and the indentures. In addition, these funds have the indirect power to elect a
majority of our Board of Directors and appoint new officers and management and, therefore,
effectively could control many other major decisions regarding our operations. Furthermore, our
controlling stockholders are in the business of making investments in companies and may, from time
to time, acquire and hold interests in businesses that compete directly or indirectly with us. Our
controlling stockholders may also pursue acquisition opportunities that may be complementary to our
business and, as a result, those acquisition opportunities may not be available to us.
Risks Related to Our Business
Our business is affected by general economic conditions in the United States, Europe and the other
regions in which we operate, and the continued volatility of global economic conditions or
instability in the capital and credit markets could adversely impact our business for the
foreseeable future.
Conditions in the global economy deteriorated dramatically in 2008 and most of 2009, and
during that time, continuing through the present, the global capital and credit markets have
experienced unprecedented volatility and disruption. Although economic conditions in the U.S.,
Europe and Asia-Pacific appear to have shown signs of improvement in the second half of 2009, it
remains difficult to determine the duration or strength of an economic recovery and whether we have
entered into a period of stability in global capital and credit markets. Continued volatility in
the capital and credit markets, including the general credit availability and liquidity issues we
and our counterparties (most importantly, our customers, suppliers and lenders) continue to face,
could materially and adversely affect our business, financial condition and results of operations.
In particular, if the economic recovery is disrupted or develops slowly, or if market instability
continues or worsens, we could encounter or continue to encounter:
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a reduction in revenues and/or less favorable pricing or terms from new and existing customers; |
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the inability to expand our customer base in existing or new markets; |
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difficulties in collecting accounts receivable; |
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an increase in product prices from our suppliers that we are not able to pass through to our customers; |
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an acceleration of payment terms to our suppliers and/or the imposition of more restrictive credit
terms and other contractual requirements; |
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a reduction in research and development spending by our customers, especially those in the
pharmaceutical and biotechnology industries; |
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a decrease in the discretionary spending by schools and other customers to which we sell products and
services through our Science Education business; |
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the inability to access additional capital or refinance existing indebtedness; |
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a limited availability to enter into new derivative financial instruments; and |
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the need to record additional impairment charges against our goodwill and/or intangible and other
long-lived assets. |
9
The demand for our products depends on the level of our customers research and development and
other scientific endeavors. Our business, financial condition and results of operations may be
harmed if our customers discontinue, outsource and/or spend less on these activities.
Our customers are engaged in research, development and production in the pharmaceutical,
biotechnology, medical device, education, chemical, technology, food processing, consumer products
and other industries. The amount of customer spending on research, development and production has a
large impact on our sales and profitability. Our customers determine the amounts that they will
spend on the basis of, among other things, general economic conditions, their financial condition
and liquidity, spending priorities and their need to develop new products, which, in turn, is
dependent upon a number of factors, including their competitors research, development and
production initiatives. In addition, consolidation in the industries in which our customers operate
may have an impact on such spending as customers integrate acquired operations, including research
and development departments and their budgets. Our customers finance their research and development
spending from private and public sources. Government funding of scientific research and education
has varied for several reasons, including general economic conditions, growth in population,
political priorities, changes in the number of students and other demographic changes.
A continuation of global capital and credit market instability, a sluggish economic recovery
or a return to a period of economic contraction could result in reductions, or further reductions
as the case may be, in spending by our customers across all industry segments that we serve. In
particular, we may experience a further reduction in revenues from certain of our customers in the
pharmaceutical industry, which have restructured research functions resulting in workforce
reductions, facility closures and budget reductions; from certain of our customers in the
biotechnology industry, which are experiencing increased economic and liquidity pressures; and from
schools in the United States served by our Science Education segment, which have been reducing and
adjusting budgeted expenditures in light of reductions in state and local funding. A further
reduction in spending by our customers could have a material adverse effect on our business,
financial condition and results of operations.
The healthcare industry has and will continue to experience significant changes that could
adversely affect our business.
Many of our customers in the healthcare industry have experienced significant changes in the
last several years and are expected to continue to experience significant changes, including
reductions in governmental support of healthcare services, lower reimbursements for research and
development and adverse changes in legislation or regulations regarding the delivery or pricing of
healthcare services or mandated benefits. In response to these and other changes, some of our
customers have implemented or may in the future implement actions in an effort to control and
reduce costs, including:
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development of large and sophisticated group purchasing organizations; |
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consolidation, especially in the case of pharmaceutical companies; |
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purchasing the products that we supply directly from manufacturers; |
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the closing of domestic facilities and establishment of facilities at low-cost offshore locations; and |
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significant reductions in and/or outsourcing of research, development and production activities,
including outsourcing to low-cost offshore locations. |
The impact of past and potential future changes in the healthcare industry and our customers
reactions to them may result in our healthcare industry customers significantly reducing their
purchases of products and services from us or the prices they are willing to pay for those products
or services. In addition, we will need to adapt our business to maintain existing customer
relationships and develop new customer relationships as our customers consolidate or move
facilities to low-cost offshore locations or outsource certain activities domestically or to
low-cost offshore locations. For instance, we intend to continue our expansion into the Asia
Pacific region, but there is no assurance
10
that we will be successful in maintaining relationships with our existing customers who have
established operations in that region or in developing new customer relationships with the
outsourcing organizations in that region.
We compete in a highly competitive market. Failure to compete successfully could have a material
adverse effect on our business, financial condition and results of operations.
We compete globally with two other major distributors, Thermo Fisher Scientific Inc. and Sigma
Aldrich Corporation, as well as many smaller regional, local and specialty distributors, and with
manufacturers selling directly to their customers. The bases upon which we compete include price,
service and delivery, breadth of customer support, e-business capabilities and the ability to meet
the special requirements of customers.
Some of our competitors have greater financial and other resources than we do. Most of our
products are available from several sources, and some of our customers have relationships with
several distributors. Our agreements with customers generally provide that the customer can
terminate the agreement or reduce the scope of products or services provided pursuant to the
agreement with short or no notice. Lack of product availability, stemming from either our inability
to acquire products or interruptions in the supply of products from manufacturers, could have a
material adverse effect on our ability to compete. Our competitors could also obtain exclusive
rights to distribute some products, thereby foreclosing our ability to distribute these products.
Vertically integrated distributors may also have an advantage with respect to the total delivered
product cost of certain of their captive products. Additionally, manufacturers could increase their
efforts to sell directly to consumers and effectively bypass distributors like us. Consolidation in
the global laboratory supply industry could result in existing competitors increasing their market
share through business combinations, which could have a material adverse effect on our business,
financial condition and results of operations. The entry of new distributors in the industry could
also have a material adverse effect on our ability to compete.
Our business, financial condition and results of operations depend upon maintaining our
relationships with manufacturers.
We offer products from a wide range of manufacturers. We are dependent on these manufacturers
for our supply of products. Our most significant dependence is on Merck KGaA and its affiliates,
which supplied products that accounted for approximately 13% of our net sales in 2009.
Our ability to sustain our gross margins has been, and will continue to be, dependent in part
upon our ability to obtain favorable terms from our suppliers. These terms may change from time to
time, and such changes could adversely affect our gross margins over time. In addition, our results
of operations and cash flows could be adversely impacted by the acceleration of payment terms to
our suppliers and/or the imposition of more restrictive credit terms and other contractual
requirements.
Some of our competitors are increasing their manufacturing operations both internally and
through acquisitions of manufacturers, including manufacturers that supply products to us. To date,
we have not experienced an adverse impact on our ability to continue to source products from
manufacturers that have been vertically integrated, although there is no assurance that we will not
experience such an impact in the future.
The loss of one or more of our large suppliers, a material reduction in their supply of
products or provision of services to us, extended disruptions or interruptions in their operations
or material changes in the terms we obtain from them, could have a material adverse effect on our
business, financial condition and results of operations.
A significant part of our growth strategy is to engage in acquisitions or business combinations,
which will subject us to a variety of risks that could harm our business.
We intend to continue to review and complete selective acquisition opportunities throughout
the world as a part of our growth strategy. There can be no assurance that we will be able to
complete suitable acquisitions for a variety of reasons, including competition for acquisition
targets, the need for regulatory approvals, the inability of the parties to agree to the structure
or purchase price of the transaction and our inability to fund the transaction. In addition, any
completed acquisition will subject us to a variety of other risks:
11
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we may need to allocate substantial operational, financial and management resources in
integrating new businesses, technologies and products, and management may encounter difficulties
in integrating the operations, personnel or systems of the acquired businesses; |
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future acquisitions or business combinations might have a material adverse effect on our
business relationships with customers or manufacturers, or both, and could lead to a termination
of, or otherwise affect our relationships with, such customers or manufacturers; |
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we may assume substantial actual or contingent liabilities; |
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we may incur substantial unanticipated costs or encounter other problems associated with
acquired businesses; and |
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we may not be able to retain the key personnel, customers and suppliers of the acquired business. |
The international scope of our operations may adversely affect our business.
We derived approximately 47% of our 2009 net sales from operations outside the United States,
and we are continuing to expand our sourcing, commercial operations and administrative activities
in Asia Pacific. Accordingly, we face certain risks, including:
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restrictions on foreign ownership of subsidiaries; |
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tariffs and other trade barriers and restrictions; |
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political risks; |
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differing laws or administrative practices; |
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local business practices that are inconsistent with local or U.S. law, such
as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the FCPA),
or other applicable anti-bribery regulations; |
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disruptions in the efficiency and effectiveness of, and difficulty in
overseeing and managing, operations, supply chain and certain important
administrative functions, including those that have been or in the future
may be transferred to our shared services center in Coimbatore, India; |
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fluctuations in foreign currency exchange rates; and |
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potentially adverse tax consequences of operating in multiple jurisdictions. |
In addition, an adverse change in laws or administrative practices in countries within which
we operate could have a material adverse effect on us. Our operations outside the United States
also may present additional risk with respect to compliance with government regulations and
licensing requirements.
In 2008, we incurred, and we may in the future incur, impairment charges related to our goodwill
and intangible assets, which could negatively impact our results of operations.
We have recorded significant amounts of goodwill and intangible assets, including
indefinite-lived intangible assets, on our balance sheet as a result of the Merger and acquisitions
completed subsequent to the Merger. Our intangible assets with finite useful lives primarily
relate to customer and supplier relationships and are amortized over their respective estimated
useful lives on a straight-line basis. Our indefinite-lived intangible assets relate to our
trademarks and trade names.
12
Goodwill
and other intangible assets with indefinite useful lives are not amortized and
are tested annually for impairment, and they must also be tested for
impairment between the annual tests if an event or change in circumstance occurs that would
more likely than not reduce the fair value of the asset below its carrying amount. Other
amortizable intangible assets are reviewed for impairment whenever an indication of potential
impairment exists. The results of our 2008 impairment testing identified impairments of our
goodwill and indefinite-lived intangible assets aggregating $392.1 million. We did not record any
impairment charges during 2009, but we continue to be subject to the risks which led to the
impairment charges recognized during 2008. See Item 7 Managements Discussion & Analysis of
Financial Condition Critical Accounting Policies Goodwill & Intangible Assets in this Annual
Report on Form 10-K for more information.
As of December 31, 2009, goodwill and intangible assets represented approximately $3.8 billion
or 75% of our total assets. We may recognize additional impairment charges in the future should our
operating results or market conditions decline significantly due to, among other things, ongoing or
worsening economic instability and volatility or other macro economic pressures, including but not
limited to rising interest rates.
If we do not comply with existing government regulations or if we or our suppliers become subject
to more onerous government regulations, we could be adversely affected.
Some of the products we offer and our operations are subject to a number of complex and
stringent laws and regulations governing the production, handling, transportation, import, export
and distribution of chemicals, drugs and other similar products, including the operating and
security standards of the United States Drug Enforcement Administration, the Bureau of Alcohol,
Tobacco, Firearms and Explosives, the Food and Drug Administration, the Bureau of Industry and
Security and various state boards of pharmacy as well as comparable state and foreign agencies. In
addition, our logistics activities must comply with the rules and regulations of the Department of
Transportation, the Federal Aviation Administration and similar foreign agencies. While we believe
we are in compliance in all material respects with such laws and regulations, any non-compliance
could result in substantial fines, penalties or assessments or otherwise restrict our ability to
provide competitive distribution services and thereby have an adverse impact on our financial
condition. We cannot assure you that existing laws and regulations will not be revised or that new,
more restrictive laws will not be adopted or become applicable to us or the products that we
distribute.
If our suppliers become subject to more stringent laws, they may seek to recover any or all
increased costs of compliance from us by increasing the prices at which we purchase products from
them, and we may not be able to recover all such increased prices from our customers. Accordingly,
we cannot assure you that our business and financial condition will not be materially and adversely
affected by future changes in applicable laws and regulations applicable to our suppliers.
If any of our operations are found not to comply with applicable antitrust or competition laws, our
business may suffer.
Our operations are subject to applicable antitrust and competition laws in the countries in
which we conduct our business, in particular in the United States and in the European Union. These
laws prohibit, among other things, anticompetitive agreements and practices. If any of our
commercial agreements are found to violate or infringe upon such laws, we may be subject to civil
and other penalties and/or third party claims for damages. Further, agreements that infringe upon
these laws may be void and unenforceable, in whole or in part, or require modification in order to
be lawful and enforceable. If we are unable to enforce any of our commercial agreements, whether at
all or in material part, our business could be adversely affected. See Note 15(b) of Item 8
Financial Statements and Supplementary Data in this Annual Report on Form 10-K for information
regarding our appeal of the German Federal Cartel Offices decision to invalidate in Germany the
exclusivity and non-competition provisions of our European Distribution Agreement with Merck KGaA.
13
We are subject to environmental, health and safety laws and regulations, and costs to comply with
such laws and regulations, or any liability or obligation imposed under such laws or regulations,
could negatively impact our business, financial condition and results of operations.
We are subject to a broad range of foreign, federal, state and local environmental, health and
safety laws and regulations, including those pertaining to air emissions, water discharges, the
handling, disposal and transport of solid and hazardous materials and wastes, the investigation and
remediation of contamination and otherwise relating to health and safety and the protection of the
environment and natural resources. As our global operations involve and have involved the handling,
transport and distribution of materials that are or could be classified as toxic or hazardous,
there is some risk of contamination and environmental damage inherent in our operations and the
products we handle, transport and distribute. Our environmental, health and safety liabilities and
obligations may result in significant capital expenditures and other costs, which could negatively
impact our business, financial condition and results of operations. We may be fined or penalized by
regulators for failing to comply with environmental, health and safety laws and regulations. In
addition, contamination resulting from our current or past operations may trigger investigation or
remediation obligations, which may have a material adverse effect on our business, financial
condition and results of operations.
Based on current information, we believe that any costs we may incur relating to
environmental, health and safety matters will not be material. We cannot be certain, however, that
identification of presently unidentified environmental, health and safety conditions, new
regulations, more vigorous enforcement by regulatory authorities or other unanticipated events will
not arise in the future and give rise to additional liabilities, compliance costs or penalties
which could have a material adverse effect on our business, financial condition and results of
operations. In addition, environmental, health and safety laws and regulations are constantly
evolving and it is not possible to predict accurately the effect they may have in future periods.
We currently do not maintain third-party insurance for most of any current or future environmental
liabilities.
We are subject to product liability and other claims in the ordinary course of business.
Our business involves risks of product liability, patent infringement and other claims in the
ordinary course of business arising from the products that we source from various manufacturers.
Our exposure to such claims may increase as we seek to increase the geographic scope of our
sourcing activities and sales of private label products. We maintain insurance policies, including
certain product liability insurance, and in many cases we have indemnification rights against such
claims from the manufacturers of the products we distribute. We cannot assure you that our
insurance coverage or indemnification agreements with manufacturers will be available in all
pending or any future cases brought against us. Furthermore, our ability to recover under any
insurance or indemnification arrangements is subject to the financial viability of our insurers,
our manufacturers and our manufactures insurers, as well as legal enforcement under the local laws
governing the arrangements. In particular, as we seek to expand our sourcing from manufacturers in
Asia Pacific and other developing locations, we expect that we will increase our exposure to
potential defaults under the related indemnification arrangements. Insurance coverage in general or
coverage for certain types of liabilities, such as product liability or patent infringement in
these developing markets may not be readily available for purchase or cost-effective for us to
purchase. Furthermore, for many years, new insurance for liability
relating to asbestos, lead and silica exposure has not been available
on commercially reasonable terms or at all, and we do not maintain insurance for product recalls. Accordingly, we could be
subject to uninsured and unindemnified future liabilities, and an unfavorable result in a case for
which adequate insurance or indemnification is not available could result in a material adverse
effect on our business, financial condition and results of operations.
From time to time, we are named as a defendant in cases that arise as a result of our
distribution of laboratory supplies, including litigation resulting from the alleged prior
distribution of products containing asbestos by certain of our predecessors or acquired companies.
While the impact of this litigation on us has typically been immaterial, there can be no assurance
that the impact of the pending and any future claims will not be material to our business,
financial condition and results of operations in the future.
14
If we are unable to hire, train and retain key personnel, our business, financial condition and
results of operations could be adversely affected.
Our success depends in large part upon our continuing ability to identify, hire, retain and
motivate skilled professionals. We face intense competition for these professionals from our
competitors, customers, suppliers and other companies within the industries in which we compete and
the geographical regions in which we operate. Any failure on our part to hire, train, and retain a
sufficient number of qualified professionals could have a significant adverse impact on our
business.
We depend heavily on the services of our senior management. We believe that our future success
will depend upon the continued services of our senior management. Our business may be harmed by the
loss of one or more members of our senior management. We currently do not maintain key-man life
insurance with respect to our executive officers.
We rely upon third parties to ship products to our customers and interruptions in their operations
could harm our business, financial condition and results of operations.
We ship a significant amount of our orders through various independent package delivery
providers, and prompt shipment of our products is essential to our business. Strikes or other
service interruptions involving our carriers could cause our operating expenses to rise or
seriously harm our ability to fulfill our customers orders or deliver products on a timely basis,
or both. In addition, an increase in prices by these providers, due to increases in fuel prices or
otherwise, could adversely impact our business, financial condition and results of operations if we
are unable to find alternative providers or make adjustments to our selling prices.
Problems with or failure of our information technology, its connectivity to our customers,
suppliers and certain service providers and the normal functioning of our telephone systems could
significantly disrupt our operations, which could reduce our customer or supplier base and could
harm our business, financial condition and results of operations.
Our success depends, in part, on the secure and uninterrupted performance of our information
technology systems and our telephone systems at our customer call centers and distribution centers.
Our systems, the systems of our customers, suppliers and service providers, and the connectivity
among such systems are vulnerable to disruption and damage from a variety of sources, including
system or network failures, malicious human acts and natural disasters. While we have taken
appropriate steps to improve system redundancy and disaster recovery procedures, reduce our
reliance on legacy systems and reinforce the security of our information services, there can be no
guarantee that failures, disruptions, data breaches or unauthorized intrusions will not occur. We
currently do not maintain third-party insurance for most of these types of events. Sustained or
repeated system failures, service disruptions or unauthorized intrusions that interrupt our ability
to receive and process orders, receive and process customer payments and deliver products in a
timely manner could have a material adverse effect on our business, financial condition and results
of operations.
In addition, we accept payment by credit card and similar payment instruments for a material
portion of our sales, and our ability to accept, process and settle credit card transactions is
subject to rules and regulations issued and/or amended from time to time by the payment card
industry and by individual payment card companies such as American Express, VISA, MasterCard and
Discover. These rules and regulations, which vary based on annual transaction volume and
transaction experience, require us to safeguard customer information, including applying the
minimum security standards for the manner in which we capture, store, process and transmit such
information. Our failure to comply with such changing rules and standards can subject us to fines,
restrictions or expulsion from these card acceptance programs, which could have a material adverse
affect on our business, financial condition and results of operations.
We plan to continue to make significant technology and infrastructure investments, with
particular emphasis in North America. Our technology initiatives are designed to enhance the
security, reliability and effectiveness of our operations to continue to provide high quality
service to our customers. The cost and potential problems and interruptions associated with the
implementation of our technology initiatives could disrupt or reduce the efficiency of our
operations in the near term.
15
We have not registered and in some cases do not own the existing applications and registrations for
our material trademarks or service marks in every country in which we do business.
We serve our customers globally through our operations in more than 20 countries, and we have
more than 50 different registered and unregistered trademarks and service marks for our products
and services. Although we have registered our material trademarks in the United States and the
primary European countries in which we conduct business, we have not registered and in some cases
do not own the existing applications and registrations for our material trademarks or service marks
in all countries in which we conduct business. Our efforts to protect our intellectual property
rights in certain countries, especially those in the Asia Pacific region, may only provide us with
limited protection. In addition, in some countries, we may be blocked from registering or otherwise
protecting certain of our marks by others who have already registered identical or similar marks
for similar goods or services, and in those cases, we run the risk of being sued for infringement
or being unable to effectively establish brand identity.
The failure to own and have enforceable rights in the trademarks and service marks used in our
business could have a material adverse effect on our business, financial condition and results of
operations.
We are subject to currency risks with respect to our international operations and certain
outstanding foreign-denominated debt.
While we report our consolidated financial results in U.S. dollars, we derive a significant
portion of our sales and incur costs in foreign currencies (principally the Euro, the British pound
sterling and the Canadian dollar) from our operations outside the United States. For example, in
each of 2009 and 2008, approximately 47% of our net sales came from our operations outside the
United States, primarily from our operations in Europe and Canada. Fluctuations in the relative
values of currencies occur from time to time and could adversely affect our operating results.
Specifically, during times of a strengthening U.S. dollar, our reported international sales and
earnings will be reduced because the local currency will translate into fewer U.S. dollars. This
could also make it more difficult to pay amounts due on our debt, the majority of which is
denominated in U.S. dollars.
Although the majority of our outstanding debt is denominated in U.S. dollars, as of December
31, 2009, we had 723.9 million ($1,042.9 million on a U.S. dollar equivalent basis as of December
31, 2009) of foreign currency-denominated debt recorded on our U.S. dollar-denominated balance
sheet, which constitutes approximately 36% of our total outstanding debt. As a result, our
operating results are exposed to foreign currency risk with respect to this indebtedness.
Specifically, during times of a weakening U.S. dollar, the relative value of this debt would
increase, which could require us to record exchange losses.
Unanticipated increases to our income tax liabilities could adversely impact our results of
operations.
As a global corporation, we are subject to income taxes and tax audits in the U.S. and
numerous foreign jurisdictions. Judgment is required in determining our global provision for income
taxes and other tax liabilities. Although we believe that our tax estimates are reasonable, we
cannot assure you that the final determination of tax audits or tax disputes will not be different
from what is reflected in our historical income tax provisions and accruals. Tax authorities in the
various jurisdictions in which we have a presence and conduct business may disagree with our tax
positions and assess additional taxes.
In addition, our effective tax rate in the future could be adversely affected by changes to
our operating structure, changes in the mix of earnings in countries with differing statutory tax
rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the
discovery of new information in the course of our tax return preparation process. The carrying
value of deferred tax assets, which are predominantly in the U.S., is dependent on our ability to
generate future taxable income in the U.S. In addition, President Obamas administration has
recently announced proposals for new U.S. tax legislation that, if adopted, could adversely affect
our tax rate. Increases in our income tax liabilities as a result of any of the foregoing could
adversely affect our financial position, results of operations and cash flows.
16
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
We own and lease office and warehouse space in North America, Europe and Asia Pacific. We
maintain our corporate headquarters in West Chester, Pennsylvania for executive, financial, legal,
information systems, marketing and other administrative activities. Our European executive,
financial, legal, information systems, marketing and other administrative activities are in
Darmstadt, Germany and Haasrode, Belgium. As of December 31, 2009, the following table sets forth
information with respect to our significant distribution and other office facilities:
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Location |
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Owned/Leased |
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Size |
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Type of Facility |
Batavia, Illinois(1) * |
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Owned |
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300,000 sq. ft. |
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Distribution |
Briare, France(2) |
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Owned/Leased |
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358,675 sq. ft. |
|
Distribution/Repackaging and Mixing |
Bridgeport, New Jersey(1) * |
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Owned/Leased |
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416,776 sq. ft. |
|
Distribution |
Brisbane, California(1) |
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Leased |
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248,280 sq. ft. |
|
Distribution |
Bruchsal, Germany(2) |
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Owned/Leased |
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218,906 sq. ft. |
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Distribution |
Buffalo, New York(3) * |
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Owned |
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121,600 sq. ft. |
|
Distribution/Assembly |
Coimbatore, India(1)(2)(3) |
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Leased |
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33,022 sq. ft. |
|
Shared Services |
Darmstadt, Germany(2) |
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Leased |
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45,348 sq. ft. |
|
Offices |
Debrecen, Hungary(2) |
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Leased |
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67,188 sq. ft. |
|
Distribution/Repackaging and Mixing |
Denver, Colorado(1) |
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Leased |
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130,091 sq. ft. |
|
Distribution |
Dublin, Ireland(2) |
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Leased |
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77,067 sq. ft. |
|
Distribution |
Edmonton, Alberta, Canada(1) |
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Leased |
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44,449 sq. ft. |
|
Distribution |
Franklin, Massachusetts(1) |
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Leased |
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55,486 sq. ft. |
|
Distribution |
Haasrode, Belgium(2) |
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Owned |
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201,447 sq. ft. |
|
Offices/Distribution/Repackaging and Mixing |
Karlskoga, Sweden(2) |
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Leased |
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129,167 sq. ft. |
|
Distribution |
Lutterworth, United Kingdom(2) |
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Leased |
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183,205 sq. ft. |
|
Distribution |
Manati, Puerto Rico(1) |
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Owned |
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130,450 sq. ft. |
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Distribution |
Mexico City, Mexico(1) |
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Leased |
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63,948 sq. ft. |
|
Distribution |
Milan, Italy(2) |
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Leased |
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13,563 sq. ft. |
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Distribution |
Mississauga, Ontario, Canada(1) |
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Leased |
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114,000 sq. ft. |
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Distribution |
Mollet del Valles, Spain(2) |
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Leased |
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33,480 sq. ft. |
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Distribution |
Radnor, Pennsylvania(4) |
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Leased |
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150,000 sq. ft. |
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Offices |
Rochester, New York(3) * |
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Owned |
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339,600 sq. ft. |
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Distribution/Manufacturing/Assembly |
San Dimas, California(1) |
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Leased |
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52,800 sq. ft. |
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Distribution |
Singapore(1)(2) |
|
Leased |
|
74,034 sq. ft. |
|
Distribution |
St. Catharines, Ontario, Canada(3) |
|
Leased |
|
24,318 sq. ft. |
|
Distribution |
Sugar Land, Texas(1) |
|
Leased |
|
62,280 sq. ft. |
|
Distribution |
Suwanee, Georgia(1) |
|
Leased |
|
168,925 sq. ft. |
|
Distribution |
Tempe, Arizona(1) |
|
Leased |
|
34,908 sq. ft. |
|
Distribution |
Tualatin, Oregon(1) |
|
Leased |
|
56,400 sq. ft. |
|
Distribution |
West Chester, Pennsylvania(1)(3)(4) |
|
Leased |
|
97,516 sq. ft. |
|
Offices |
|
|
|
* |
|
Subject to a mortgage lien under the Senior Secured Credit Facility. |
|
(1) |
|
North American Lab |
|
(2) |
|
European Lab |
|
(3) |
|
Science Education |
|
(4) |
|
During 2010, our corporate headquarters offices will be relocated to
Radnor, Pennsylvania. As of December 31, 2009, our leased facility in
Radnor, Pennsylvania has not yet been occupied. |
17
We also lease various regional distribution centers and service facilities in North America,
Europe and Asia Pacific that support our sales and warehouse functions. For information regarding
our lease commitments, see Note 15(a) under Item 8 Financial Statements and Supplementary Data
in this Annual Report on Form 10-K.
ITEM 3.
LEGAL PROCEEDINGS
For information regarding legal and regulatory proceedings and matters, see Note 15(b) under
Item 8 Financial Statements and Supplementary Data in this Annual Report on Form 10-K, from
which information is incorporated by reference into this item.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Re-election of Directors
Pursuant to a written consent in lieu of a meeting dated February 22, 2010, the Companys parent
company, VWR Investors, Inc., re-elected all members of the Companys Board of Directors,
consisting of Nicholas W. Alexos, John M. Ballbach, Robert L. Barchi, Edward A. Blechschmidt, Thompson Dean,
Robert P. DeCresce, Pamela Forbes Lieberman, Harry M. Jansen Kraemer, Jr., Carlos del Salto, Timothy P.
Sullivan and Robert J. Zollars.
PART II
ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market Information
There is no established public trading market for our common stock. The number of shares of
our common stock, $0.01 par value, outstanding at February 28, 2010 was 1,000, all of which was
held by VWR Investors.
Holdings was initially capitalized through the issuance of preferred units and common units in
connection with the Merger, and it has issued additional units and repurchased units since the
consummation of the Merger. See Recent Sales and Purchases of Unregistered Equity Securities
below for more information. There is no established public trading market for the preferred units
or common units. As of February 28, 2010, Holdings had 1,409,929 preferred units outstanding and
14,002,666 common units outstanding, and 263 holders of record of its common units. See Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters in
this Annual Report on Form 10-K for information regarding the beneficial ownership of the common
units and preferred units of Holdings.
Dividends
Our debt instruments and related agreements include significant restrictions on our and
Holdings ability to pay dividends on our respective common equity. See Item 7 Managements
Discussion and Analysis of Financial Condition and Results of Operations Indebtedness and Note
10 in Item 8 Financial Statements and Supplementary Data in this Annual Report on Form 10-K. We
did not pay any dividends on our common stock in 2008 or 2009. We currently do not expect to pay
dividends on our common stock other than in connection with the repayment of intercompany debt, the
funding of equity unit purchases by Holdings from terminated management investors and/or the
funding of company fees and expenses.
Holdings has not in the past paid any dividends on its common equity and it currently does not
expect to pay any dividends on its common equity in the foreseeable future, except for tax
distributions to the extent required by Holdings limited liability company operating agreement.
18
Recent Sales and Purchases of Unregistered Equity Securities
VWR Funding, Inc. did not sell or purchase any equity securities in 2009.
In 2009, Holdings sold 1,359.63 preferred units and 63,370.91 common units pursuant to
Holdings 2007 Securities Purchase Plan (the Successor Equity Plan), which was established upon
the consummation of the Merger to permit members of management, board members and consultants the
opportunity to purchase equity units of Holdings. The cash purchase price for all issuances to
management investors was $1,000 per preferred unit and $.01 per common unit. A board member
purchased common units in March 2009 at a cash purchase price of $1.00 per common unit. The
proceeds of these issuances have ultimately been contributed to the Company as additional capital
contributions. Holdings purchased 204,437.55 common units in 2009 from employees whose employment
with VWR was terminated in 2007, 2008 or 2009, in each case in accordance with Holdings purchase
rights under the transaction documents governing the employees purchases of the units. These
purchases were funded by Holdings subsidiaries.
All of the equity issued by Holdings under the Successor Equity Plan in 2008 were deemed
exempt from registration under the Securities Act of 1933 in reliance upon Regulation D, Section
4(2) or Rule 701 of the Securities Act of 1933, as amended, as transactions by an issuer not
involving a public offering, or transactions pursuant to compensatory benefit plans and contracts
relating to compensation. The recipients of securities in each of such transactions represented
their intentions to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution of the securities. All recipients were either furnished with or
had adequate access to, through their relationship with us, information about Holdings.
See Item 12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters for additional information regarding the equity investors in Holdings, and see
Item 13 Certain Relationships and Related Transactions, and Director Independence Certain
Relationships and Related Transactions Management Equity Arrangements for additional information
regarding the Successor Equity Plan. See Note 13(a) under Item 8 Financial Statements and
Supplementary Data in this Annual Report on Form 10-K for more information regarding the Companys
accounting pursuant to the Successor Equity Plan.
ITEM 6.
SELECTED FINANCIAL DATA
The selected historical financial data presented below under the captions Income Statement
Data, Other Financial Data and Balance Sheet Data as of December 31, 2009, 2008 and 2007 and
for the years ended December 31, 2009 and 2008 and for the period June 30 through December 31, 2007
are derived from the consolidated financial statements of VWR Funding, Inc. subsequent to the
Merger. The selected historical financial data presented below under the captions Income Statement
Data, Other Financial Data and Balance Sheet Data as of December 31, 2006 and 2005 and for the
period January 1 through June 29, 2007 and for each of the periods in the two-year period ended
December 31, 2006 are derived from the consolidated financial statements of the Company prior to
the Merger. The term Predecessor refers to the Company prior to the Merger. The term Successor
refers to the Company following the Merger. As a result of the Merger, the Successor and
Predecessor periods are each presented on a different cost basis and, therefore, are not
comparable.
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
|
|
|
Year Ended December 31, |
|
|
December 31, |
|
|
|
June 29, |
|
|
Year Ended December 31, |
|
(In millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
3,561.2 |
|
|
$ |
3,759.2 |
|
|
$ |
1,822.7 |
|
|
|
$ |
1,699.3 |
|
|
$ |
3,257.6 |
|
|
$ |
3,138.2 |
|
Cost of goods sold |
|
|
2,545.6 |
|
|
|
2,693.8 |
|
|
|
1,311.3 |
|
|
|
|
1,230.1 |
|
|
|
2,374.3 |
|
|
|
2,334.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,015.6 |
|
|
|
1,065.4 |
|
|
|
511.4 |
|
|
|
|
469.2 |
|
|
|
883.3 |
|
|
|
803.7 |
|
SG&A expenses(1)(2)(3)(4) |
|
|
806.8 |
|
|
|
1,253.7 |
|
|
|
408.5 |
|
|
|
|
408.1 |
|
|
|
692.3 |
|
|
|
660.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
208.8 |
|
|
|
(188.3 |
) |
|
|
102.9 |
|
|
|
|
61.1 |
|
|
|
191.0 |
|
|
|
143.1 |
|
Interest expense, net(5) |
|
|
(224.5 |
) |
|
|
(283.9 |
) |
|
|
(127.4 |
) |
|
|
|
(98.5 |
) |
|
|
(110.4 |
) |
|
|
(104.0 |
) |
Other income (expense), net(6) |
|
|
(23.9 |
) |
|
|
22.1 |
|
|
|
(67.2 |
) |
|
|
|
3.5 |
|
|
|
(1.5 |
) |
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes and cummulative
effect of a change in accounting principal |
|
|
(39.6 |
) |
|
|
(450.1 |
) |
|
|
(91.7 |
) |
|
|
|
(33.9 |
) |
|
|
79.1 |
|
|
|
42.9 |
|
Income tax benefit (provision) |
|
|
25.5 |
|
|
|
115.5 |
|
|
|
42.7 |
|
|
|
|
8.3 |
|
|
|
(32.7 |
) |
|
|
(20.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before cumulative effect of a
change in accounting principal |
|
|
(14.1 |
) |
|
|
(334.6 |
) |
|
|
(49.0 |
) |
|
|
|
(25.6 |
) |
|
|
46.4 |
|
|
|
22.0 |
|
Cumulative effect of a change in accounting
principle |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(14.1 |
) |
|
$ |
(334.6 |
) |
|
$ |
(49.0 |
) |
|
|
$ |
(25.6 |
) |
|
$ |
46.4 |
|
|
$ |
21.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
116.6 |
|
|
$ |
116.1 |
|
|
$ |
53.2 |
|
|
|
$ |
19.4 |
|
|
$ |
41.4 |
|
|
$ |
33.9 |
|
Capital expenditures |
|
|
23.9 |
|
|
|
29.7 |
|
|
|
16.3 |
|
|
|
|
15.7 |
|
|
|
23.6 |
|
|
|
18.4 |
|
Gross profit as a percentage of net sales |
|
|
28.5 |
% |
|
|
28.3 |
% |
|
|
28.1 |
% |
|
|
|
27.6 |
% |
|
|
27.1 |
% |
|
|
25.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
124.4 |
|
|
$ |
42.0 |
|
|
$ |
45.0 |
|
|
|
|
|
|
|
$ |
139.4 |
|
|
$ |
126.1 |
|
Total assets |
|
|
5,127.3 |
|
|
|
5,084.9 |
|
|
|
5,615.3 |
|
|
|
|
|
|
|
|
2,646.2 |
|
|
|
2,591.8 |
|
Total debt |
|
|
2,871.7 |
|
|
|
2,815.6 |
|
|
|
2,797.4 |
|
|
|
|
|
|
|
|
1,723.7 |
|
|
|
1,451.8 |
|
Total stockholders equity |
|
|
1,042.6 |
|
|
|
1,008.4 |
|
|
|
1,407.3 |
|
|
|
|
|
|
|
|
62.9 |
|
|
|
321.3 |
|
|
|
|
(1) |
|
Share-based compensation expense of $3.4 million, $3.8 million, $2.7
million, $9.0 million and $4.6 million is included in selling, general
and administrative (SG&A) expenses for the years ended December 31,
2009 and 2008, for the periods from June 30 through December 31, 2007
and January 1 through June 29, 2007, and for the year ended December
31, 2006, respectively. |
|
(2) |
|
During the fourth quarter of 2008, we recognized aggregate impairment
charges of $392.1 million, relating to the impairment of goodwill and
intangible assets. See Note 3 included in Item 8 Financial
Statements and Supplementary Data in this Annual Report on Form 10-K
for more information on these impairment charges. |
|
(3) |
|
Predecessor expenses associated with the Merger amounted to $36.8
million for the period January 1 June 29, 2007. These expenses
consisted of investment banking, legal, accounting and advisory fees
related to the Merger. |
|
(4) |
|
Included in SG&A expenses, we recognized charges (credits) relating to
cost reduction initiatives of $11.4 million, $4.2 million, $0.3
million, $0.7 million, $(1.0) million and $20.6 million, during the
years ended December 31, 2009 and 2008, for the periods from June 30
through December 31, 2007 and January 1 through June 29, 2007, and for
the years ended December 31, 2006 and 2005, respectively. |
|
(5) |
|
Interest rate swap arrangements have contributed to volatility in
interest expense, net. See Note 14 included in Item 8 Financial
Statements and Supplementary Data in this Annual Report on
Form 10-K for more information on our interest rate swap arrangements. |
|
(6) |
|
As a result of the change in our capital structure related to the
Merger, we have a significant amount of foreign-denominated debt on
our U.S. dollar-denominated balance sheet. See Note 2(c) included in
Item 8 Financial Statements and Supplementary Data in this Annual
Report on
Form 10-K for more information on our exchange gains and losses
included in other income (expense), net. |
20
ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Factors Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements other than statements of historical fact included in this
Form 10-K may constitute forward-looking statements. These statements may be preceded by, followed
by or include the words believes, expects, anticipates, intends, plans, estimates or
similar expressions. We have based these forward-looking statements on our current expectations and
projections about future events. Although we believe that our assumptions made in connection with
the forward-looking statements are reasonable, we cannot assure you that the assumptions and
expectations will prove to be correct.
Forward-looking statements are inherently subject to risks, uncertainties and assumptions.
Forward-looking statements are not guarantees of performance. You should not place undue reliance
on these statements. Forward-looking statements include information in this Annual Report on Form
10-K regarding, among other things:
|
|
|
managements forecasts, plans and strategies; |
|
|
|
|
managements general expectations concerning the global laboratory supply industry; |
|
|
|
|
efficiencies and cost savings; |
|
|
|
|
the economy; |
|
|
|
|
sales, income and margins; |
|
|
|
|
growth; |
|
|
|
|
economies of scale; |
|
|
|
|
future acquisitions and dispositions; |
|
|
|
|
litigation; |
|
|
|
|
potential and contingent liabilities; |
|
|
|
|
taxes; and |
|
|
|
|
capital markets and liquidity. |
You should understand that the following important factors, in addition to those discussed in
Item 1A Risk Factors and elsewhere in this Annual Report on Form 10-K, could affect our future
results and could cause those results or other outcomes to differ materially from those expressed
or implied in our forward-looking statements:
|
|
|
actions by, and our ability to maintain existing business relationships and practices
with, suppliers, customers, carriers and other third parties; |
|
|
|
|
loss of any of our key executive officers; |
|
|
|
|
our ability to consummate and integrate potential acquisitions; |
|
|
|
|
the effect of political, economic and credit and financial market conditions, inflation
and interest rates worldwide; |
21
|
|
|
the effect of changes in laws and regulations, including changes in accounting
standards, trade, tax, price controls and other regulatory matters; |
|
|
|
|
increased competition from other companies in our industry and our ability to retain or
increase our market shares in the principal geographical areas in which we operate; |
|
|
|
|
foreign currency exchange rate fluctuations; and |
|
|
|
|
our ability to generate sufficient funds to meet our debt obligations, capital
expenditure program requirements, ongoing operating costs, acquisition financing and
working capital needs. |
All forward-looking statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the foregoing cautionary statements. In addition, all
forward-looking statements speak only as of the date of this Annual Report on Form 10-K. We
undertake no obligations to update or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
The following discussion should be read in conjunction with our consolidated financial
statements and related notes included in Item 8 Financial Statements and Supplementary Data in
this Annual Report on Form 10-K.
Overview
We generate our net sales primarily through the sale of products, and also, to a lesser
extent, through the provision of services, in the global laboratory supply industry. We offer
exclusive, branded and private label products that we source from a wide range of manufacturers.
Our customer base is highly diversified. Many of our products, including chemicals, laboratory and
production supplies and science education products, are consumable in nature. Our principal
customers are major pharmaceutical, biotechnology, industrial and government organizations, as well
as academic institutions, including schools, colleges and universities. We report our financial
results on the basis of the following three business segments: North American Lab, European Lab and
Science Education.
On June 29, 2007, the Company was acquired by affiliates of Madison Dearborn Partners, LLC
pursuant to the Merger. As described below under the heading Factors Affecting Our Operating
Results Effects of the Merger, the Merger and the financing transactions completed in connection
with the Merger have had a significant impact on our financial condition and results of operations
and will continue to have a significant impact in the future.
Our
results of operations on a reported basis (see Basis of Financial
Statement Presentation below), including our consolidated operating income
(loss) and net income (loss), have been volatile. For example, our consolidated net loss for the
years ended December 31, 2009 and 2008 and for the periods included in the year ended December 31,
2007, was $14.1 million, $334.6 million and $74.6 million, respectively. Our results of operations
during the three year period ending December 31, 2009 were impacted, in particular, by the
following factors:
|
|
|
a reduction in customer spending during the latter part of 2008 and throughout 2009 due,
in part, to a general deterioration of global economic conditions, especially with respect
to (i) certain of our customers in the pharmaceutical industry, which have initiated
restructuring of research functions resulting in workforce reductions, facility closures and
budget reductions; (ii) certain of our customers in the biotechnology industry, which are
experiencing increased economic and liquidity pressures; and (iii) certain of our customers
in the primary and secondary educational market, which are facing budget reductions and/or
funding deficits; |
|
|
|
|
the effects of the Merger, including increased depreciation, amortization and interest
expense in 2009, 2008 and the second half of 2007 and the recognition of certain Merger
expenses in the first half of 2007; |
|
|
|
|
our recognition of non-cash impairment charges during 2008 associated with goodwill and
intangible assets, primarily as a result of macroeconomic factors; |
|
|
|
|
changes in foreign currency exchange rates; |
|
|
|
|
acquisitions of certain businesses; and |
|
|
|
|
foreign currency translation, including our recognition of net unrealized translation
gains (losses) on certain portions of our debt. |
22
Strategy
Our primary goal is to enhance our position as a leader in the global laboratory supply
industry. Toward this end, we have instituted a number of strategies to drive sustainable,
profitable growth through organic sales growth and selective acquisitions. The principal elements
of our strategy are outlined below:
Increase Productivity and Profitability. Achieving operational excellence in our customer
service and support and distribution operations remains a cornerstone of our strategy. We will
continue to leverage our shared services center in India to not only provide cost-effective
business support but enhanced service capabilities as well. Ongoing standardization of processes
and systems within our customer service network will bring enhanced service to our customer and
supplier base.
Expand Global Presence. We will continue to seek opportunities to expand our presence in
emerging markets as well as our global footprint through select acquisitions and expansion of
existing operations.
Targeted Acquisitions and Efficient Integration. An important part of our strategy is to
accelerate the Companys growth through selective acquisitions in various locations throughout the
world. Selective acquisitions present an opportunity to leverage our existing infrastructure and to
establish in-country operations in new geographic areas.
Improve Sourcing Strategy. By utilizing our global scale and strong relationships with our
multinational customers and suppliers and maintaining our primary focus on distribution, we intend
to continue developing mutually beneficial relationships with leading manufacturers. An important
part of our strategy involves providing our customers with a choice of products at varying price
points. Global sourcing and supplier integration are key elements of this strategy to implement.
Increase Sales of Private Label Products. Due to increasing demand by our customers for the
broadest possible product choice, we will direct our sales and marketing efforts to strike a
balance between exclusive, branded and private label product offerings. We believe this strategy is
timely as customers seek to realize productivity gains and reduce operating costs.
Factors Affecting Our Operating Results
Effects of Merger
The Merger has been accounted for using the purchase method of accounting. As such, our assets
and liabilities were adjusted to their respective fair values as of June 29, 2007. This resulted in
an increased value assigned to identifiable intangible assets relating to customer relationships,
trademarks and trade names, certain adjustments to pension and post-retirement liabilities for
existing plans, the recognition of other fair value adjustments, an increase in deferred income tax
liabilities and the impact of the new debt and equity structure. A significant portion of the
purchase price was allocated to goodwill and amortizable and indefinite-lived intangible assets.
Accordingly, non-cash charges for depreciation and amortization have increased subsequent to the
Merger.
In addition, immediately after the Merger, we had approximately $2.7 billion of outstanding
indebtedness, compared to approximately $1.7 billion prior to the Merger. Accordingly, we are a
highly leveraged company and related interest expense has increased subsequent to the Merger. This
increase in our debt obligations, together with the restrictions placed on us in the documents
governing our debt instruments, may limit our flexibility in planning for, or reacting to, changes
in our business and future business opportunities and may make us more vulnerable to a downturn in
our business, industry or the economy in general.
Predecessor expenses associated with the Merger amounted to $36.8 million for the period
January 1 June 29, 2007. These expenses consisted of investment banking, legal, accounting and
advisory fees related to the Merger. There were no Merger expenses recognized after June 29, 2007.
23
Impairments of Goodwill and Intangible Assets
As a result of the Merger, and to a lesser extent due to acquisitions completed subsequent to
the Merger, we carry significant amounts of goodwill and intangible assets, including
indefinite-lived intangible assets, on our balance sheet. During the fourth quarter of 2008, we
recognized aggregate impairment charges of $392.1 million, relating to the impairment of goodwill
and intangible assets. The impairment charges were recognized for each of the Companys segments
($202.1 million in North American Lab, $88.0 million in European Lab and $102.0 million in Science
Education). We believe that the impairment charges recognized in our North American Lab and
European Lab segments were primarily a result of macroeconomic factors (global recession and
volatility in the financial markets), while the charges recognized in our Science Education segment
were due to a mix of macroeconomic and industry-specific factors (reduction in discretionary
spending by schools). We did not recognize any impairment charges during 2009 or 2007. See Notes 3
and 14(e) included in Item 8 Financial Statements and Supplementary Data in this Annual Report
on Form 10-K for more information on our recent impairment assessments and associated fair value
measurements.
We may recognize additional impairment charges in the future should our operating results or
market conditions decline significantly due to, among other things, ongoing or worsening
recessionary or other macro economic pressures. See Critical Accounting Policies below for a
discussion of risks and uncertainties associated with accounting for our goodwill and intangible
assets.
Foreign Currency
We maintain operations primarily in North America and in Europe. In 2009, approximately 47% of
our net sales originated in currencies other than the U.S. dollar, principally the Euro, the
British pound sterling and the Canadian dollar. As a result, changes in our reported revenues and
operating profits include the impact of changes in foreign currency exchange rates. We provide
constant currency assessments in the following discussion and analysis to remove the impact of
fluctuation in foreign exchange rates and utilize constant currency results in our analysis of
segment performance. We calculate the approximate impact of changes in foreign exchange rates by
comparing our current period results derived using current period average exchange rates to our
current period results recalculated using average foreign exchange rates in effect during the prior
period(s). We believe that our constant currency assessments are a useful measure, indicating the
actual results of our operations.
Earnings from our subsidiaries are not generally repatriated to the United States; therefore
we do not incur significant gains or losses on foreign currency transactions with our subsidiaries.
As a result of the change in our capital structure related to the Merger, we have a
significant amount of foreign-denominated debt on our U.S. dollar-denominated balance sheet. The
translation of foreign-denominated debt obligations that are recorded on our U.S.
dollar-denominated balance sheet is recorded in other income (expense), net as a foreign currency
exchange gain or loss each period. As a result, our operating results are exposed to risk based on
fluctuations in foreign currency exchange rates, principally with respect to the Euro. Our net
exchange loss of $23.9 million and $64.0 million for the year ended December 31, 2009 and for the
periods included in the year ended December 31, 2007, respectively, are substantially related to
unrealized losses due to the strengthening of the Euro against the U.S. dollar. Our net exchange
gain of $22.1 million for the year ended December 31, 2008 is substantially related to unrealized
gains due to the weakening of the Euro against the U.S. dollar.
24
Recent Acquisitions
The below table depicts the acquisitions made by the Company during 2009, 2008 and 2007. The
operating results of acquired businesses are included in our operating results from the date of
acquisition and therefore will affect the comparability of our operating results from period to
period.
|
|
|
|
|
|
|
|
|
Acquisition Date |
|
Entity Name |
|
Product / Service Offering |
|
Location |
|
Business Segment |
|
|
|
|
|
|
|
|
|
December 1, 2009
|
|
OneMed Lab (OneMed)
|
|
Laboratory supply
|
|
Finland, Norway & Sweden
|
|
European Lab |
|
|
|
|
|
|
|
|
|
October 1, 2009
|
|
X-treme Geek (XGeek)
|
|
Internet and catalog retailer marketing to science enthusiasts
|
|
United States
|
|
Science Education |
|
|
|
|
|
|
|
|
|
October 1, 2008
|
|
Omnilab AG (Omnilab AG)
|
|
Laboratory supply
|
|
Switzerland
|
|
European Lab |
|
|
|
|
|
|
|
|
|
August 1, 2008
|
|
Spektrum-3D Kft (Spektrum)
|
|
Laboratory supply
|
|
Hungary
|
|
European Lab |
|
|
|
|
|
|
|
|
|
April 1, 2008
|
|
Jencons (Scientific) Limited (Jencons)
|
|
Laboratory supply
|
|
United Kingdom
|
|
European Lab |
|
|
|
|
|
|
|
|
|
November 1, 2007
|
|
Omnilabo International B.V. (Omnilabo BV)
|
|
Laboratory supply
|
|
Netherlands
|
|
European Lab |
|
|
|
|
|
|
|
|
|
July 2, 2007
|
|
Bie & Berntsen A-S (B&B)
|
|
Laboratory supply
|
|
Denmark
|
|
European Lab |
|
|
|
|
|
|
|
|
|
April 2, 2007
|
|
KMF Laborchemie Handels GmbH (KMF)
|
|
Laboratory supply, including chemical and consumable products
|
|
Germany
|
|
European Lab |
The acquisitions noted above were funded through a combination of cash and cash equivalents on
hand and, to a limited extent, incremental borrowings made under the Companys Senior Secured
Credit Facility.
Seasonality and Inflation
Our results of operations are subject to seasonal trends primarily affecting our Science
Education segment, which tend to result in increased net sales and operating income in the third
calendar quarter in comparison to other quarters of the year. For example, in 2009, 2008 and 2007,
approximately 36%, 40% and 40%, respectively, of our Science Education segments total net sales
were generated in the quarter ending September 30. This quarterly performance is typically due to
increased sales volume as schools purchase supplies in preparation for the beginning of the new
school year. Our results of operations are also subject to cyclical trends. For example, the
Science Education segments publisher kitting business tends to follow a five to six-year business
cycle based on certain large states adoption rates for new textbooks. We believe that 2007
represented the height of the most recent business cycle.
During 2009, 2008, and 2007, inflation has not had a significant impact on our results of
operations, as we believe we have been able to pass through the majority of these increases to our
customers. However, our earnings and cash flows could be adversely affected if we are unable to
pass through future cost increases arising from inflation.
25
Basis of Financial Statement Presentation
Until June 29, 2007, we were controlled by CD&R. As a result of the Merger, affiliates of
Madison Dearborn acquired control of the Company on June 29, 2007. Accordingly, the consolidated
financial statements found in Item 8 Financial Statements and Supplementary Data in this Annual
Report on Form 10-K reflect the results of operations, cash flows, and statements of stockholders
equity and other comprehensive income (loss) using Predecessor and Successor periods. In order to
provide investors a meaningful basis of comparing our results of operations in our discussion and
analysis for the year ended December 31, 2008 to the year ended December 31, 2007, the results of
operations for the Predecessor period (January 1, 2007 through June 29, 2007) have been combined
with the results of operations for the Successor period (June 30, 2007 through December 31, 2007)
as shown in the following table. This combined presentation is not consistent with U.S. GAAP, and
may yield results that are not strictly comparable on a period-to-period basis primarily due to the
impact of purchase accounting adjustments and the impact of changes in our capital structure
associated with the Merger.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007 |
|
|
|
Successor |
|
|
Predecessor |
|
|
Combined |
|
|
Net sales |
|
$ |
1,822.7 |
|
|
$ |
1,699.3 |
|
|
$ |
3,522.0 |
|
Cost of goods sold |
|
|
1,311.3 |
|
|
|
1,230.1 |
|
|
|
2,541.4 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
511.4 |
|
|
|
469.2 |
|
|
|
980.6 |
|
Selling, general and administrative expenses |
|
|
408.5 |
|
|
|
371.3 |
|
|
|
779.8 |
|
Merger expenses |
|
|
|
|
|
|
36.8 |
|
|
|
36.8 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
102.9 |
|
|
|
61.1 |
|
|
|
164.0 |
|
Interest income |
|
|
3.0 |
|
|
|
3.3 |
|
|
|
6.3 |
|
Interest expense |
|
|
(130.4 |
) |
|
|
(101.8 |
) |
|
|
(232.2 |
) |
Other income (expense), net |
|
|
(67.2 |
) |
|
|
3.5 |
|
|
|
(63.7 |
) |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(91.7 |
) |
|
|
(33.9 |
) |
|
|
(125.6 |
) |
Income tax benefit |
|
|
42.7 |
|
|
|
8.3 |
|
|
|
51.0 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(49.0 |
) |
|
$ |
(25.6 |
) |
|
$ |
(74.6 |
) |
|
|
|
|
|
|
|
|
|
|
We believe that a combined 2007 results of operations presentation (as reported) is
comparable to our 2008 presentation relative to net sales and gross profit due to the fact that the
Merger had substantially no impact on these components. Consequently, we have not applied any
pro-forma adjustments to these income statement captions in the following discussion and analysis.
Other income (expense) and income taxes for the 2007 period were not adjusted as a pro-forma
presentation would not provide a meaningful understanding of these components of our operating
results. However, as a result of the Merger and our new capital structure, we have incurred higher
expenses, including depreciation and amortization and interest expense. Accordingly, for
comparative purposes in our discussion and analysis below of 2007 results of operations, with
respect to SG&A expenses, operating income and interest expense, have been adjusted to reflect
pro-forma adjustments assuming the Merger occurred as of January 1, 2007. The pro-forma results do
not purport to be indicative of the results of operations which actually would have resulted had
the Merger occurred at the beginning of 2007, or of the future results of operations of the
Company. We refer to these components in the following discussion and analysis, after the effect of
pro-forma adjustments, on an as adjusted basis.
Components of Revenues and Expenses
Our net sales are derived primarily from the sale of laboratory supplies and scientific
educational materials. Net sales are also derived, to a lesser extent, from the provision of
services. Freight costs that are billed to our customers are included in net sales. Provisions for
discounts, rebates to customers, sales returns and other adjustments are provided for as a
reduction of net sales in the period the related sales are recorded.
Our cost of goods sold consists primarily of the cost of inventory shipped and our cost of
labor for services. Cost of goods sold also includes freight expenses incurred to deliver products
to customers as well as credits for rebates earned from suppliers.
26
SG&A expenses primarily reflect the costs of operations dedicated to generating sales,
maintaining existing customer relationships, enhancing technology capabilities, receiving and
processing customer orders and maintaining our distribution center facilities. SG&A expenses also
include our corporate, administrative and shared-service costs and depreciation and amortization
expense.
Results of Operations
2009 Compared With 2008
Net Sales
The following table presents net sales by reportable segment for the years ended December 31,
2009 and 2008 and net sales growth by reportable segment from 2008 to 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
% Change |
|
|
2008 |
|
|
North American Lab |
|
$ |
2,017.0 |
|
|
|
(3.6 |
)% |
|
$ |
2,092.2 |
|
European Lab |
|
|
1,407.2 |
|
|
|
(6.4 |
)% |
|
|
1,503.4 |
|
Science Education |
|
|
137.0 |
|
|
|
(16.3 |
)% |
|
|
163.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,561.2 |
|
|
|
(5.3 |
)% |
|
$ |
3,759.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales for 2009 decreased $198.0 million or 5.3% from 2008. Changes in foreign currency
exchange rates caused net sales to decrease by approximately $108.8 million while the acquisitions
of Jencons, Spektrum, Omnilab AG, XGeek and OneMed (collectively the Acquisitions) increased net
sales by approximately $25.5 million. Accordingly, net sales from comparable operations decreased
approximately $114.7 million or 3.1% in 2009 from 2008.
Within our laboratory distribution businesses, net sales of consumable products, including
chemicals, were flat in 2009 compared to 2008 while net sales of capital goods, including
equipment, instruments and furniture experienced a mid to high-single digit decrease over the same
period. Further, net sales to pharmaceutical and biotechnology customers experienced
low single digit decreases during 2009 compared to 2008, while sales to colleges and universities
increased at about the same rate. Net sales to governmental entities
were essentially unchanged while sales to industrial customers
experienced a mid single digit decrease.
Net sales in our North American Lab segment for 2009 decreased $75.2 million or 3.6% from
2008. Changes in foreign currency exchange rates caused net sales to decrease by approximately
$21.7 million. Accordingly, net sales from comparable operations decreased approximately $53.5
million or 2.6% in 2009 from 2008. Net sales in our European Lab segment for 2009 decreased $96.2
million or 6.4% from 2008. Changes in foreign currency exchange rates caused net sales to decrease
by approximately $87.1 million while the Acquisitions increased net sales by approximately $22.8
million. Accordingly, net sales from comparable operations decreased approximately $31.9 million or
2.1% in 2009 from 2008. We believe the comparable decreases in net sales across our laboratory
distribution businesses are primarily a function of the global economic recession and the resulting
decline in spending by the customers we serve.
Net sales in our Science Education segment for 2009 decreased $26.6 million or 16.3% from
2008. The acquisition of XGeek increased net sales by approximately $2.7 million. Accordingly, net
sales from comparable operations decreased approximately $29.3 million or 17.9% in 2009 from 2008.
This decrease was primarily due to lower volume in our science supplies business and our publisher
kitting business. We believe the decreases in volume relate to the unfavorable economic conditions
as well as the cyclical nature of the publisher
kitting business.
27
Gross Profit
The following table presents gross profit and gross profit as a percentage of net sales for
the years ended December 31, 2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Gross profit |
|
$ |
1,015.6 |
|
|
$ |
1,065.4 |
|
Percentage of net sales (gross margin) |
|
|
28.5 |
% |
|
|
28.3 |
% |
Gross profit for 2009 decreased $49.8 million or 4.7% from 2008. Changes in foreign currency
exchange rates caused gross profit to decrease by approximately $35.1 million while the
Acquisitions increased gross profit by approximately $7.5 million. Accordingly, gross profit from
comparable operations decreased approximately $22.2 million or 2.1% in 2009 from 2008. Reductions
in comparable gross profit are largely due to decreases in sales volume across each of our
operating segments. Our Science Education segment accounted for approximately 56% of the
consolidated reduction in comparable gross profit.
Consolidated gross margin for 2009 increased approximately 20 basis points to 28.5% from 28.3%
in 2008. Our laboratory businesses benefitted from efficient pricing actions and, to a lesser
extent, from a shift in product mix including an increase in sales of
private-label products. In addition, we experienced tight supply
conditions in a portion of our chemical product offerings, which did
contribute to gross margin improvement in 2009. These
benefits were mostly offset by product price increases from our suppliers and by increases in the
cost of foreign-sourced goods, especially in our European Lab segment and at our Canadian
operations within our North American Lab segment. Gross margin attributable to Science Education
declined during 2009 from 2008 primarily as a result of a less favorable sales mix.
SG&A Expenses
The following table presents SG&A expenses and SG&A expenses as a percentage of net sales for
the years ended December 31, 2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
SG&A expenses |
|
$ |
806.8 |
|
|
$ |
861.6 |
|
Percentage of net sales |
|
|
22.7 |
% |
|
|
22.9 |
% |
SG&A
expenses for 2009 decreased $54.8 million or 6.4% from 2008. Changes in foreign currency
exchange rates caused SG&A expenses to decrease by approximately $32.3 million while the
Acquisitions increased SG&A expenses by approximately $6.4 million. Accordingly, SG&A expenses from
comparable operations decreased approximately $28.9 million or
3.4% in 2009 from 2008. The
comparable decrease in SG&A expenses reflects our implementation of cost reduction initiatives
across all segments and is further influenced by decreases in net periodic pension costs, partially
offset by increases in charges associated with implementing cost reduction initiatives.
Cost reductions were achieved primarily through personnel reductions, operating efficiencies and
discretionary spending discipline. Pension costs associated with our primary defined benefit
obligations decreased during 2009 primarily in North American Lab where we recognized $3.7 million
of pension income in 2009, due to an increase in the expected return
on pension plan assets, compared to $1.7 million of pension expense in 2008. Partially offsetting
the decreases in SG&A expenses noted above, we recognized $11.4 million in charges associated with
implementing cost reduction initiatives during 2009, such charges representing an increase of $7.2
million ($2.9 million in North American Lab, $4.1 million in European Lab and $0.2 million in
Science Education) over the comparable 2008 period. See Note 12 included in Item 8 Financial
Statements and Supplementary Data in this Annual Report on Form 10-K for more information on our
defined benefit obligations.
28
Impairment of Goodwill and Intangible Assets
We did not recognize any impairment charges during 2009. During the fourth quarter of 2008, we
recognized aggregate impairment charges of $392.1 million, relating to the impairment of goodwill
and intangible assets. The impairment charges were recognized at each of the Companys segments
($202.1 million in North American Lab, $88.0 million in European Lab and $102.0 million in Science
Education). We believe that the impairment charges recognized in our North American Lab and
European Lab segments were primarily a result of macroeconomic factors, while the charges
recognized in our Science Education segment were due to a mix of macroeconomic and
industry-specific factors.
Operating Income (Loss)
The following table presents operating income (loss) and operating income (loss) as a
percentage of net sales by segment for the years ended December 31, 2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
2009 |
|
|
Net Sales |
|
|
2008 |
|
|
Net Sales |
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
113.7 |
|
|
|
5.6 |
% |
|
$ |
(95.3 |
) |
|
|
(4.6 |
)% |
European Lab |
|
|
93.1 |
|
|
|
6.6 |
% |
|
|
2.8 |
|
|
|
0.2 |
% |
Science Education |
|
|
2.0 |
|
|
|
1.5 |
% |
|
|
(95.8 |
) |
|
|
(58.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
208.8 |
|
|
|
5.9 |
% |
|
$ |
(188.3 |
) |
|
|
(5.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss) increased $397.1 million from a
$188.3 million loss in 2008 to $208.8 million of income in 2009. Changes in foreign currency exchange rates caused operating income
(loss) to decrease by approximately $2.8 million while the Acquisitions increased operating income
(loss) by approximately $1.1 million. As discussed above, impairment charges negatively impacted
operating income (loss) by $392.1 million in 2008. The following table highlights the changes in
operating income (loss) from 2008 to 2009 by segment (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Impairment |
|
|
Foreign |
|
|
|
|
|
|
2009 |
|
|
|
operating |
|
|
of goodwill |
|
|
currency and |
|
|
Other |
|
|
operating |
|
|
|
income |
|
|
& intangible |
|
|
the |
|
|
(explained |
|
|
income |
|
|
|
(loss) |
|
|
assets |
|
|
Acquisitions |
|
|
below) |
|
|
(loss) |
|
|
North American Lab |
|
$ |
(95.3 |
) |
|
$ |
202.1 |
|
|
$ |
(1.2 |
) |
|
$ |
8.1 |
|
|
$ |
113.7 |
|
European Lab |
|
|
2.8 |
|
|
|
88.0 |
|
|
|
(0.5 |
) |
|
|
2.8 |
|
|
|
93.1 |
|
Science Education |
|
|
(95.8 |
) |
|
|
102.0 |
|
|
|
|
|
|
|
(4.2 |
) |
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(188.3 |
) |
|
$ |
392.1 |
|
|
$ |
(1.7 |
) |
|
$ |
6.7 |
|
|
$ |
208.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income in our North American Lab segment for 2009 increased $209.0 million from
2008. Impairment charges of $202.1 million negatively impacted our operating income during 2008.
Foreign currency decreased operating income in 2009 by approximately $1.2 million. Accordingly,
operating income increased approximately $8.1 million over 2008, from comparable operations. The
increase for 2009 was primarily the result of a $20.0 million decrease in SG&A expenses due to
implemented cost saving initiatives and pension income during the 2009 period,
partially offset by an $11.9 million decrease in gross profit as a result of reduced sales volume.
Operating income in our European Lab segment for 2009 increased $90.3 million from 2008.
Impairment charges of $88.0 million negatively impacted our operating income during 2008. Foreign
currency and the Acquisitions decreased operating income in 2009 by approximately $0.5 million.
Accordingly, operating income increased approximately $2.8 million over 2008, from comparable
operations. The increase for 2009 was primarily due to a $2.2 million increase in gross profit as a
result of gross margin expansion and a $0.6 million decrease in SG&A expenses attributable to
implemented cost saving initiatives, mostly offset by the increase in charges associated with cost
saving initiatives.
29
Operating income in our Science Education segment for 2009 increased $97.8 million from 2008.
Impairment charges of $102.0 million negatively impacted our operating income during 2008.
Accordingly, operating income decreased approximately $4.2 million over 2008, from comparable
operations, as a result of a decrease in gross profit of $12.5 million from reduced customer demand
and a less favorable sales mix, offset by a decrease in SG&A expenses of $8.3 million related to a
decrease in variable costs associated with reduced business activity and implemented cost reduction
initiatives.
Interest Expense, Net of Interest Income
Interest expense, net of interest income, was $224.5 million and $283.9 million for 2009 and
2008, respectively. The decrease in net interest expense during 2009 is primarily attributable to a
decrease in our net unrealized gain or loss on interest rate swaps, lower interest rates associated
with our variable rate debt, the benefit of changes in foreign currency exchange rates and a
decrease in average amounts outstanding under our multi-currency revolving facility during 2009, as
compared to 2008. We recognized a net unrealized loss on interest rate swaps of $35.4 million
during 2008 compared to a $0.1 million unrealized gain during 2009. As a result of our
discontinuance of hedge accounting under our interest rate swap arrangements during 2008, interest
expense may continue to fluctuate significantly from period to period, however, such fluctuations
will not impact the Companys operating cash flows until realized. See Note 14 included in Item 8
Financial Statements and Supplementary Data in this Annual Report on Form 10-K for more
information on our interest rate swap arrangements.
Other Income (Expense), Net
Other income (expense), net is primarily comprised of exchange gains (losses). Our net
exchange loss was $23.9 million for 2009 compared to a net exchange gain of $22.1 million for 2008.
Our net exchange loss for 2009 is substantially related to unrealized losses due to the
strengthening of the Euro against the U.S. dollar. Our net exchange gain for 2008 is substantially
related to unrealized gains due to the weakening of the Euro against the U.S. dollar. Due to the
significant amount of foreign-denominated debt recorded on our U.S. dollar-denominated balance
sheet, other income (expense), net may continue to experience significant fluctuations.
Income Taxes
During the years ended December 31, 2009 and 2008, we recognized an income tax benefit of
$25.5 million and $115.5 million, on pre-tax losses of $39.6 million and $450.1 million,
respectively, resulting in an effective income tax benefit rate of
64.4% and 25.7%, respectively.
The
higher tax benefit rate in 2009 reflects our recognition of a deferred tax
benefit on domestic net operating losses, a favorable tax rate reduction in
Canada, a favorable foreign rate differential on operating profits in our
foreign operations and a favorable settlement of a prior year uncertain tax
position.
The
tax benefit in 2008 primarily reflects tax benefits for the impairment charges associated with our
indefinite-lived intangible assets. Impairment charges associated with goodwill are generally not
deductible for tax purposes. Accordingly, our 2008 tax benefit rate
was negatively impacted.
Changes
to our uncertain tax positions during 2009 and 2008 are described in Note 11 in
Item 8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
30
2008 Compared With 2007
Net Sales
The following table presents net sales by reportable segment for the years ended December 31,
2008 and 2007 and net sales growth by reportable segment from 2007 to 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2008 |
|
|
% Change |
|
|
2007(1) |
|
|
North American Lab |
|
$ |
2,092.2 |
|
|
|
3.7 |
% |
|
$ |
2,018.4 |
|
European Lab |
|
|
1,503.4 |
|
|
|
12.9 |
% |
|
|
1,331.2 |
|
Science Education |
|
|
163.6 |
|
|
|
(5.1 |
)% |
|
|
172.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,759.2 |
|
|
|
6.7 |
% |
|
$ |
3,522.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the mathematical sum of the 2007 Predecessor period
(January 1 through June 29, 2007) and Successor period (June 30
through December 31, 2007), without pro-forma adjustment. |
Net sales for 2008 increased $237.2 million or 6.7% over 2007. Changes in foreign currency
exchange rates and the acquisitions of KMF, B&B, Omnilabo BV, Jencons, Spektrum and Omnilab AG (the
2008/2007 Acquisitions) increased net sales in 2008 by approximately $148.0 million. Accordingly,
net sales from comparable operations increased approximately $89.2 million or 2.5% in 2008 over
2007.
Net sales in our North American Lab segment for 2008 increased $73.8 million or 3.7% over
2007. Changes in foreign currency exchange rates increased net sales by approximately $2.8 million.
Accordingly, net sales from comparable operations increased approximately $71.0 million or 3.5% in
2008 over 2007. During 2008, net sales to pharmaceutical customers experienced only nominal growth
while net sales to educational, industrial and clinical customers and governmental agencies
experienced a higher rate of growth.
Net sales in our European Lab segment for 2008 increased $172.2 million or 12.9% over 2007.
Changes in foreign currency exchange rates and the 2008/2007 Acquisitions increased net sales by
approximately $145.2 million. Accordingly, net sales from comparable operations increased
approximately $27.0 million or 2.0% in 2008 over 2007. During 2008, net sales to pharmaceutical
customers were essentially flat while we experienced double-digit growth with our education
customers and mid single-digit growth with our industrial customers and governmental agencies.
Net
sales in our North American Lab and European Lab segments were negatively impacted during
2008 due to a general slowdown in sales at certain of our large customers. During the fourth
quarter of 2008, sales growth in our lab businesses was negatively impacted by a reduction in
customer spending due, in part, to a general deterioration of economic conditions. Additionally,
certain of our customers in the pharmaceutical industry initiated restructuring of research
functions resulting in workforce reductions, facility closures and budget reductions and certain of
our customers in the biotechnology industry experienced increased economic and liquidity pressures.
Net sales in our Science Education segment for 2008 decreased $8.8 million or 5.1% from 2007.
Declines were observed across all product lines and were primarily due to unfavorable economic
conditions and the resulting reduction in discretionary spending by schools. In addition, the
Science Education segments publisher kitting business tends to follow a five to six-year business
cycle based on certain large states adoption rates for new textbooks.
31
Gross Profit
The following table presents gross profit and gross profit as a percentage of net sales for the
years ended December 31, 2008 and 2007 (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2008 |
|
|
2007(2) |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
1,065.4 |
|
|
$ |
980.6 |
|
Percentage of net sales (gross margin) |
|
|
28.3 |
% |
|
|
27.8 |
% |
|
|
|
(2) |
|
Represents the mathematical sum of the 2007 Predecessor period (January 1 through June 29,
2007) and Successor period (June 30 through December 31, 2007), without pro-forma adjustment. |
Gross profit for 2008 increased $84.8 million or 8.6% over 2007. Changes in foreign currency
exchange rates and the 2008/2007 Acquisitions increased gross profit in 2008 by $46.4 million.
Accordingly, gross profit increased $38.4 million or 3.9% over 2007, from comparable operations. We
experienced gross margin improvement in our North American Lab and European Lab segments in 2008.
Gross margin improvement in North American Lab was primarily due to efficient pricing as well as
the impact of changes in our customer mix. North American gross margin improvement was further
impacted by a $2.8 million supplier-related liability reversal recorded in the fourth quarter of
2008. Gross margin improvement in European Lab is primarily due to efficient pricing and changes in
customer and product mix, offset by increases in the cost of foreign-sourced goods primarily in the
United Kingdom due to a sharp decline in the value of the British pound sterling against the Euro
during the second half of 2008. Our gross profit from Science Education declined during 2008
primarily as a result of unfavorable economic conditions and the resulting reduction in
discretionary spending by schools. Our Science Education gross margin declined during 2008
primarily as a result of a less favorable sales mix and higher product costs.
SG&A Expenses
The following table presents SG&A expenses, as reported and as adjusted, and, in each case,
SG&A expenses as a percentage of net sales for the years ended December 31, 2008 and 2007 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
SG&A expenses, as reported(3) |
|
$ |
861.6 |
|
|
$ |
779.8 |
|
Percentage of net sales, as reported |
|
|
22.9 |
% |
|
|
22.1 |
% |
Depreciation and amortization(4) |
|
|
|
|
|
|
35.2 |
|
Other adjustments(5) |
|
|
|
|
|
|
(6.3 |
) |
|
|
|
|
|
|
|
SG&A expenses, as adjusted |
|
$ |
861.6 |
|
|
$ |
808.7 |
|
|
|
|
|
|
|
|
Percentage of net sales, as adjusted |
|
|
22.9 |
% |
|
|
23.0 |
% |
|
|
|
(3) |
|
For 2007, represents the mathematical sum of the 2007 Predecessor
period (January 1 through June 29, 2007) and Successor period (June 30
through December 31, 2007), without pro-forma adjustment. |
|
(4) |
|
Reflects pro-forma adjustments had the Merger occurred on January 1,
2007. The increases in depreciation and amortization are the result of
increases in the fair value of amortizable intangible assets acquired
and property and equipment, including the revisions of estimated
useful lives. |
|
(5) |
|
Represents pro-forma adjustments associated with management and board
service fees and executive officer salaries. Also reflects a pro-forma
adjustment to exclude $7.9 million of share-based compensation
associated with the acceleration of unvested stock options and
restricted stock units as a result of the change in control caused by
the Merger. |
32
Adjusted SG&A expenses for 2008 increased $52.9 million or 6.5% over 2007. Changes in foreign
currency exchange rates and the 2008/2007 Acquisitions increased adjusted SG&A expenses by
approximately $38.6 million. Accordingly, adjusted SG&A expenses from comparable operations
increased approximately $14.3 million or 1.8% over 2007. This increase in adjusted SG&A expenses
reflects our continued spending discipline across all segments. The increase in adjusted SG&A
expenses was primarily the result of wage and benefit increases, increased spending on information
technology in our North American Lab segment of approximately $7.4 million, increased charges
associated with certain cost reduction programs in our European Lab segment of $3.0 million and a
charge of $1.3 million relating to the write down of certain long-lived assets within our Science
Education segment.
Impairment of Goodwill and Intangible Assets
During the fourth quarter of 2008, we recognized aggregate impairment charges of $392.1
million, relating to the impairment of goodwill and intangible assets. The impairment charges were
recognized at each of the Companys segments ($202.1 million in North American Lab, $88.0 million
in European Lab and $102.0 million in Science Education). We believe that the impairment charges
recognized in our North American Lab and European Lab segments were primarily a result of
macroeconomic factors, while the charges recognized in our Science Education segment were due to a
mix of macroeconomic and industry-specific factors. We did not recognize any impairment charges
during 2007.
Merger Expenses
Predecessor expenses associated with the Merger amounted to $36.8 million for the period
January 1 June 29, 2007. These expenses consisted of investment banking, legal, accounting and
advisory fees related to the Merger. There were no Merger expenses incurred after June 29, 2007.
Operating (Loss) Income
The following table presents operating (loss) income, as reported and as adjusted, and, in
each case, operating (loss) income as a percentage of net sales by segment for the years ended
December 31, 2008 and 2007 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
2008 |
|
|
Net Sales |
|
|
2007 |
|
|
Net Sales |
|
Operating (loss) income, as reported:(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
(95.3 |
) |
|
|
(4.6 |
)% |
|
$ |
105.9 |
|
|
|
5.2 |
% |
European Lab |
|
|
2.8 |
|
|
|
0.2 |
% |
|
|
80.9 |
|
|
|
6.1 |
% |
Science Education |
|
|
(95.8 |
) |
|
|
(58.6 |
)% |
|
|
14.0 |
|
|
|
8.1 |
% |
Merger expenses |
|
|
|
|
|
|
|
|
|
|
(36.8 |
) |
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(188.3 |
) |
|
|
(5.0 |
)% |
|
|
164.0 |
|
|
|
4.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A adjustments:(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
|
|
|
|
|
|
|
|
|
(10.2 |
) |
|
|
|
|
European Lab |
|
|
|
|
|
|
|
|
|
|
(15.9 |
) |
|
|
|
|
Science Education |
|
|
|
|
|
|
|
|
|
|
(2.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income, as adjusted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
|
(95.3 |
) |
|
|
(4.6 |
)% |
|
|
95.7 |
|
|
|
4.7 |
% |
European Lab |
|
|
2.8 |
|
|
|
0.2 |
% |
|
|
65.0 |
|
|
|
4.9 |
% |
Science Education |
|
|
(95.8 |
) |
|
|
(58.6 |
)% |
|
|
11.2 |
|
|
|
6.5 |
% |
Merger expenses |
|
|
|
|
|
|
|
|
|
|
(36.8 |
) |
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(188.3 |
) |
|
|
(5.0 |
)% |
|
$ |
135.1 |
|
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|
For 2007, represents the mathematical sum of the 2007 Predecessor period
(January 1 through June 29, 2007) and Successor period (June 30 through
December 31, 2007) by segment, without pro-forma adjustment. |
|
(7) |
|
See notes (4) and (5) above for explanation of these pro-forma adjustments. |
33
Adjusted operating (loss) income decreased $323.4 million from $135.1 million of income in
2007 to a $188.3 million loss in 2008. Changes in foreign currency exchange rates and the 2008/2007
Acquisitions increased adjusted operating (loss) income by approximately $7.8 million over 2007. As
discussed above, impairment charges negatively impacted adjusted operating (loss) income by $392.1
million in 2008 and Merger expenses negatively impacted adjusted operating (loss) income by $36.8
million in 2007. The following table highlights the changes in adjusted operating (loss) income
from 2007 to 2008 by segment (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment |
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
2007 operating |
|
|
of goodwill |
|
|
currency |
|
|
|
|
|
|
|
|
|
|
|
|
(loss) income, |
|
|
& intangible |
|
|
and the 2008/2007 |
|
|
Merger |
|
|
Other |
|
|
2008 operating |
|
|
|
as adjusted |
|
|
assets |
|
|
Acquisitions |
|
|
expenses |
|
|
(explained below) |
|
|
(loss) income |
|
|
North American Lab |
|
$ |
95.7 |
|
|
$ |
(202.1 |
) |
|
$ |
(0.3 |
) |
|
$ |
|
|
|
$ |
11.4 |
|
|
$ |
(95.3 |
) |
European Lab |
|
|
65.0 |
|
|
|
(88.0 |
) |
|
|
8.1 |
|
|
|
|
|
|
|
17.7 |
|
|
|
2.8 |
|
Science Education |
|
|
11.2 |
|
|
|
(102.0 |
) |
|
|
|
|
|
|
|
|
|
|
(5.0 |
) |
|
|
(95.8 |
) |
Merger expenses |
|
|
(36.8 |
) |
|
|
|
|
|
|
|
|
|
|
36.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
135.1 |
|
|
$ |
(392.1 |
) |
|
$ |
7.8 |
|
|
$ |
36.8 |
|
|
$ |
24.1 |
|
|
$ |
(188.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income in our North American Lab segment for 2008 decreased $191.0 million from
2007. Impairment charges of $202.1 million negatively impacted our operating income during 2008.
Changes in foreign currency exchange rates decreased operating income in 2008 by approximately $0.3
million. Accordingly, operating income increased approximately $11.4 million or 11.9% over 2007,
from comparable operations. The increase for 2008 was primarily the result of gross margin
improvement, driven by efficient pricing actions and customer mix. Improvements in gross margin
were partially offset by wage and benefit cost increases which were somewhat mitigated by
reductions in discretionary spending.
Operating income in our European Lab segment for 2008 decreased $62.2 million from 2007.
Impairment charges of $88.0 million negatively impacted our operating income during 2008. Changes
in foreign currency exchange rates and the 2008/2007 Acquisitions increased operating income in
2008 by approximately $8.1 million. Accordingly, operating income increased approximately $17.7
million or 27.2% over 2007, from comparable operations. The increase for 2008 was primarily the
result of gross margin improvement, driven by efficient pricing actions as well as favorable
customer and product mix. The increase in operating income for 2008 was further influenced by
disciplined spending practices and savings generated from cost reduction efforts.
Operating income in our Science Education segment for 2008 decreased $107.0 million from 2007.
Impairment charges of $102.0 million negatively impacted our operating income during 2008.
Operating income from comparable operations declined primarily as the result of a decrease in gross
profit of $6.2 million from reduced customer demand and adverse product mix, partially offset by
decreases in adjusted SG&A expenses of $1.2 million. The decrease in operating income for 2008 was
primarily the result of unfavorable economic conditions and the resulting reduction in
discretionary spending by schools and further due to a charge of $1.3 million related to the write
down of certain long-lived assets.
34
Interest Expense, Net of Interest Income
The following table presents the components of interest expense, net on an as reported and as
adjusted basis for the years ended December 31, 2008 and 2007 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Interest income(8) |
|
$ |
5.7 |
|
|
$ |
6.3 |
|
Interest expense(8) |
|
|
(289.6 |
) |
|
|
(232.2 |
) |
|
|
|
|
|
|
|
Interest expense, net, as reported |
|
|
(283.9 |
) |
|
|
(225.9 |
) |
Interest expense adjustments(9) |
|
|
|
|
|
|
(44.2 |
) |
|
|
|
|
|
|
|
Interest expense, net, as adjusted |
|
$ |
(283.9 |
) |
|
$ |
(270.1 |
) |
|
|
|
|
|
|
|
|
|
|
(8) |
|
For 2007, represents the mathematical sum of the 2007 Predecessor
period (January 1 through June 29, 2007) and Successor period (June 30
through December 31, 2007), without pro-forma adjustment. |
|
(9) |
|
Reflects increased interest expense as a result of the new capital
structure. In determining these amounts, we used interest rates in
effect as of December 31, 2007, and included adjustments to reflect
the estimated effect of our interest rate swaps entered into at the
time of the Merger. For pro-forma purposes, interest expense was
reflected as if cash interest was paid on the Senior Notes consistent
with our actual elections to pay cash interest in the year ended
December 31, 2008 and the period from June 30 December 31, 2007, but
this is not necessarily indicative of the actual method of payment
that may be selected in future periods. |
Interest expense, net of interest income on an adjusted basis, was $283.9 million and $270.1
million for 2008 and 2007, respectively. The increase in adjusted net interest expense during 2008
is primarily attributable to increased borrowings under our Senior Secured Credit Facility as well
as increased interest expense on Euro-denominated debt due to changes in foreign currency exchange
rates. In addition, interest expense was further influenced in 2008 by our recognition of a net
unrealized loss on interest rate swaps of $35.4 million. These increases were partially offset by
the write-off of unamortized deferred financing costs of $27.8 million in 2007 related to the debt
obligations that were refinanced in connection with the Merger and a commitment fee for a bridge
loan of $3.4 million incurred in 2007. Our recognition of net unrealized losses on our interest
rate swap arrangements is due to our discontinuance of hedge accounting with a corresponding
decrease in variable rates of interest during the fourth quarter of 2008.
Other Income (Expense), Net
Other income (expense), net was $22.1 million of income for 2008 compared to $63.7 million of
expense for the comparable period of 2007. Other income (expense) is primarily comprised of
exchange gains (losses). Our net exchange gain for 2008 is substantially related to our recognition
of net unrealized gains associated with the weakening of the Euro against the U.S. dollar. Our net
exchange loss for 2007 is substantially related to our recognition of net unrealized losses
associated with the strengthening of the Euro against the U.S. dollar.
Income Taxes
During the year ended December 31, 2008 and for the periods included in the year ended
December 31, 2007, we recognized an income tax benefit of $115.5 million and $51.0 million, on
pre-tax losses of $450.1 million and $125.6 million, respectively, resulting in an effective income
tax benefit rate of 25.7% and 40.6%, respectively. The benefit recognized in 2008 reflects tax benefits for the
impairment charges associated with our indefinite-lived intangible assets. Impairment charges
associated with goodwill are generally not deductible for tax purposes.
The benefit recognized in the 2007 periods reflects our recognition of net operating losses
and an income tax benefit of $34.6 million related to a change in tax rates on deferred taxes on
European intangible assets, as a result of a reduction in the German income tax rate. The Company
recognized the impact of these rate changes, consistent with the date of enactment of the
legislation, offset by the recognition of tax expense of $25.5 million on dividends received from
foreign operations.
35
Changes to our uncertain tax positions during 2008 and 2007 primarily relate to pre-Merger
contingencies, and accordingly, have increased or decreased goodwill by a corresponding amount. See
Note 11 in Item 8 Financial Statements and Supplementary Data of this Annual Report on Form
10-K, for more information.
Liquidity and Capital Resources
Our future financial and operating performance, ability to service or refinance our debt and
ability to comply with covenants and restrictions contained in our debt agreements will be subject
to future economic conditions and to financial, business and other factors, many of which are
beyond our control and will be substantially dependent on the global economy, demand for our
products, and our ability to successfully implement our overall business strategies. As of December
31, 2009, we had $124.4 million of cash and cash equivalents on hand and our compensating cash
balance totaled $105.0 million.
As of December 31, 2009, we had $2,871.7 million of outstanding indebtedness, including
$1,495.3 million of indebtedness under our Senior Secured Credit Facility, $710.0 million of Senior
Notes, $541.4 million of Senior Subordinated Notes and $105.0 million of compensating cash
indebtedness. We also had unused availability of $213.1 million under our multi-currency revolving
loan facility (which is a component of our Senior Secured Credit Facility) as of December 31, 2009.
Borrowings under the multi-currency revolving loan facility are a key source of our liquidity. From
time-to-time, our liquidity needs cause the aggregate amount of outstanding borrowings under our
multi-currency revolving loan facility to fluctuate. Accordingly, the amount of credit available to
us can increase or decrease based on changes in our operating cash flows, debt service
requirements, working capital needs and acquisition and investment activities. All borrowings under
the multi-currency revolving loan facility bear interest at variable rates.
The Senior Secured Credit Facility does not contain any financial maintenance covenants that
require the Company to comply with specified financial ratios or tests, such as a minimum interest
expense coverage ratio or a maximum leverage ratio, unless the Company wishes to incur additional
indebtedness associated with acquisitions or make certain restricted payments. The indentures
governing the Senior Notes and Senior Subordinated Notes contain covenants that, among other
things, limit the Companys ability and that of its restricted subsidiaries to make restricted
payments, pay dividends, incur or create additional indebtedness, issue certain types of common and
preferred stock, make certain dispositions outside the ordinary course of business, execute certain
affiliate transactions, create liens on assets of the Company and restricted subsidiaries, and
materially change our lines of business. As of December 31, 2009, the Company was in compliance
with the covenants under the Senior Secured Credit Facility and with the indentures and related
requirements governing the Senior Notes and Senior Subordinated Notes.
We have the ability to elect to make non-cash payment-in-kind (PIK) interest elections under
certain of our debt instruments. On June 25, 2009, we made an election to pay PIK interest on our
Senior Notes for the semi-annual interest period commencing July 15, 2009 and ending on January 15,
2010. Accordingly, we have classified $35.0 million of accrued but unpaid interest on our Senior
Notes as of December 31, 2009 within the long-term portion of debt. The Company did not make an
election to pay PIK Interest on its Senior Notes for the interest period ending on July 15, 2010
and so it must satisfy the related interest payment with cash in July 2010. On June 25 and
September 21, 2009, we made elections to capitalize an aggregate amount of $5.3 million and 1.9
million ($2.7 million on a U.S. dollar equivalent basis as of December 31, 2009) of cash interest
payable on our Senior Subordinated Notes for the June 30 and September 30, 2009 interest payment
dates. The Company paid cash interest on the Senior Subordinated Notes for the December 31, 2009
payment date. We made these PIK interest elections in order to enhance our liquidity to fund
acquisition and investment opportunities. We continue to evaluate the possibility of future PIK
interest elections. See Indebtedness Senior Notes and Senior Subordinated Notes section below
for more information on our non-cash PIK interest election options.
Subject to the Companys continued compliance with its covenants, the Company may at any time
or from time to time request additional tranches of term loans or increases in the amount of
commitments under the Senior Secured Credit Facility. The actual extension of any such incremental
term loans or increases in commitments would be subject to the Company and existing and any new
lenders reaching agreement on applicable terms and conditions, which may depend on market
conditions at the time of any request.
36
Based on the terms and conditions of these debt obligations and our current operations and
expectations for future growth, we believe that cash generated from operations, together with
available borrowings under our multi-currency revolving loan facility and our ability to make PIK
interest elections under each of our Senior Notes and Senior Subordinated Notes will be adequate to
permit us to meet our current and expected operating, capital investment, acquisition financing and
debt service obligations prior to maturity, although no assurance can be given in this regard.
The majority of our long-term debt obligations will mature between 2014 and 2017, although the
revolving loan portion of our Senior Secured Credit Facility is scheduled to mature in 2013. We
currently intend to reduce our debt to earnings ratio in advance of these maturities, which we
believe will be important as we seek to refinance or otherwise satisfy these debt obligations.
Financial markets continue to exhibit volatility and many market participants are experiencing
difficulty obtaining liquidity to fund their business needs. We continue to assess the potential
impact of current market conditions on various aspects of our liquidity, financial condition and
results of operations, including, but not limited to, the continued availability and general
creditworthiness of our debt and financial instrument counterparties, the impact of market
conditions on our customers, suppliers and insurers and the general recoverability and
realizability of our long-lived assets and certain financial instruments, including investments
held under our defined benefit pension plans. To date, aside from our recognition of non-cash
impairment charges related to the recoverability of long-lived intangible assets and goodwill
during the fourth quarter of 2008, a limited availability to enter into new derivative instruments,
a tightening of credit with certain suppliers and the factors impacting our operating results
discussed above, we have not had a significant financial statement impact based on the
aforementioned assessments. However, there can be no assurance that our business, liquidity,
financial condition or results of operations will not be materially and adversely impacted in the
future as a result of existing or future market conditions.
Historical Cash Flows
In order to provide a meaningful basis of comparing our cash flows in the following discussion
and analysis of cash flow activity, we have combined our cash flow activity for the Predecessor
period (January 1, 2007 through June 29, 2007) with our cash flow activity for the successor period
(June 30, 2007 through December 31, 2007). This combined presentation is not consistent with U.S.
GAAP, and may yield results that are not strictly comparable on a period-to-period basis primarily
due to the impact of required purchase accounting adjustments and the impact of changes in our
capital structure associated with the Merger. Our operating cash flows were generally unaffected by
the Merger with the exception of increased cash paid for Merger related expenses and interest.
Operating Activities
The following table presents cash flow from operations before investing and financing
activities related to operations and working capital (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007(1) |
|
|
Cash flow from operations, excluding
working capital |
|
$ |
133.9 |
|
|
$ |
45.5 |
|
|
$ |
58.2 |
|
Cash flow from working capital changes, net |
|
|
35.1 |
|
|
|
(36.8 |
) |
|
|
18.2 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operations |
|
$ |
169.0 |
|
|
$ |
8.7 |
|
|
$ |
76.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the mathematical sum of the 2007 Predecessor period
(January 1 through June 29, 2007) and Successor period (June 30
through December 31, 2007), without adjustment. |
We generated $169.0 million of cash from operating activities during 2009 compared to $8.7
million and $76.4 million during 2008 and 2007, respectively. The increase in operating cash flows
from 2008 to 2009 is primarily due to improvements in our working capital components (after consideration of our PIK interest
deferrals) and also to lower cash paid for interest. The decrease in operating cash flows from 2007 to 2008 was primarily
due to higher cash interest paid subsequent to the Merger.
37
We paid cash interest of $200.7 million, $242.8 million and $140.8 million during 2009, 2008
and 2007, respectively. Cash interest decreased in 2009 from 2008 primarily as a result of lower
interest rates associated with our variable rate debt and, to a lesser extent, as a result of our
elections to capitalize approximately $8.0 million of interest under our Senior Subordinated Notes,
as discussed above.
We experienced generally favorable cash flows from working capital components in 2009 compared
to 2008. For example, trade accounts receivable provided cash of $12.2 million during 2009 compared
to an $11.7 million use of cash during 2008. In addition, the reduction in inventories in 2009
effectively provided $30.2 million of cash compared to only $2.4 million during 2008. These
improvements in our cash flows from trade accounts receivable and inventories are primarily
attributable to a decline in commercial activity and, to a lesser extent, our continued focus on
cash collections and inventory management. Lastly, our trade accounts payable in 2009 represented
an $18.1 million source of cash as compared to a $22.3 million use of cash in 2008. The increase in
cash provided by trade accounts payable was primarily due to timing. Our cash disbursement routines
follow a standardized process for payment, and so we may experience fluctuations in cash flows
associated with trade accounts payable from period to period based on the calendar.
We
experienced fluctuations in various components of our working capital
in 2008 compared to 2007. For
example, trade accounts receivable used cash of $11.7 million during 2008 compared to $7.6 million
of cash provided during 2007. This decrease in cash flows was primarily the result of increased
sales as receivable collection patterns were essentially unchanged during 2008. In addition,
inventories in 2008 provided $2.4 million of cash compared to a use of $13.3 million of cash during
2007. This increase in cash flows was due, in part, to improved inventory management practices.
Lastly, our trade accounts payable in 2008 represented a $22.3 million use of cash as compared to
$7.8 million of cash used in 2007. The increase in cash used by trade accounts payable was
primarily due to a general tightening of credit terms with certain suppliers, especially in the
second half of 2008 as conditions in the economy deteriorated.
Investing Activities
Net cash used in investing activities was $38.1 million, $74.9 million and $3,887.0 million
during 2009, 2008 and 2007, respectively. Net cash used in the 2009 period was primarily associated
with the acquisitions of OneMed and XGeek and ongoing capital expenditures, partially offset by the
proceeds from sales of property and equipment. Net cash used in the 2008 period was primarily
associated with the acquisitions of Jencons, Spektrum and Omnilab AG and ongoing capital
expenditures, partially offset by proceeds from sales of property and equipment. The change in
investing cash flows from 2009 to 2008 is primarily due to the aggregate size and number of
acquisitions completed. The 2007 usage primarily relates to the Merger consideration paid and the
acquisitions of KMF, B&B and Omnilabo BV.
Capital expenditures decreased in 2009 from 2008 by $5.8 million, partly due to timing of cash
outflows and partly reflecting our desire to manage our resources prudently during the current
economic downturn. Capital expenditures increased in 2008 from 2007 reflecting increased
investments in information technology and internet-based infrastructure. Capital expenditures have
been approximately $30.0 million per year over the past several years. We anticipate a similar
level of capital expenditures going forward. In addition, we expect incremental investments in
information technology and infrastructure may average approximately $10.0 million per year over the
next several years.
Financing Activities
Net cash used in financing activities was $51.1 million during 2009 and net cash provided by
financing activities was $65.0 million and $3,848.2 million during 2008 and 2007, respectively.
Cash used in 2009 was primarily related to $41.5 million of net repayments of debt and $6.6 million
paid to repurchase redeemable equity units. Cash provided during 2008 was primarily due to $62.5
million in net cash proceeds, drawn primarily from our Senior Secured Credit Facility and used to
meet our debt service, acquisition financing and general working capital needs. Cash provided
during 2007 was primarily due to debt and equity issuances associated with the Merger.
38
Schedule of Contractual Obligations
The following table details the Companys contractual obligations as of December 31, 2009 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
<1 year |
|
|
1-3 years |
|
|
3-5 years |
|
|
>5 years |
|
|
Senior Secured Credit Facility term loans |
|
$ |
1,471.9 |
|
|
$ |
20.9 |
|
|
$ |
23.5 |
|
|
$ |
1,427.5 |
|
|
$ |
|
|
Senior Secured Credit Facility revolving
facility |
|
|
23.4 |
|
|
|
23.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes due 2015 |
|
|
710.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
710.0 |
|
Senior Subordinated Notes due 2017 |
|
|
541.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
541.4 |
|
Predecessor Senior Subordinated Notes due 2014 |
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
1.0 |
|
|
|
|
|
Interest(1) |
|
|
1,107.6 |
|
|
|
170.5 |
|
|
|
393.7 |
|
|
|
324.8 |
|
|
|
218.6 |
|
Capital leases(2) |
|
|
17.9 |
|
|
|
2.0 |
|
|
|
4.5 |
|
|
|
4.0 |
|
|
|
7.4 |
|
Operating leases(2) |
|
|
150.3 |
|
|
|
30.7 |
|
|
|
45.0 |
|
|
|
23.6 |
|
|
|
51.0 |
|
Compensating cash balance and other debt(3) |
|
|
106.1 |
|
|
|
106.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded pension obligation(4) |
|
|
42.3 |
|
|
|
3.1 |
|
|
|
2.9 |
|
|
|
3.3 |
|
|
|
33.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,171.9 |
|
|
$ |
356.7 |
|
|
$ |
469.6 |
|
|
$ |
1,784.2 |
|
|
$ |
1,561.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For purposes of calculating interest above, interest rates and effects
of foreign currency on the Senior Secured Credit Facility, the Senior
Subordinated Notes and our interest rate swap arrangements were
assumed to be unchanged from December 31, 2009 and we assumed cash
interest will be paid on the Senior Notes and Senior Subordinated
Notes until maturity, except for our January 15, 2010 Senior Note
interest payment which was satisfied as payment in kind interest. In
addition, outstanding amounts under our multi-currency revolving loan
facility, a component of our Senior Secured Credit Facility, were
assumed to remain outstanding through the remaining term of the
multi-currency revolving loan facility (2013). Lastly, we incorporated the impact of the Companys
March 2010 excess cash flow payment on future cash interest
requirements (see Indebtedness below for more information). |
|
(2) |
|
See Notes 10 and 15 in Item 8 Financial Statements and
Supplementary Data of this Annual Report on Form 10-K, for further
discussion on our lease commitments. |
|
(3) |
|
Our compensating cash balance represents bank overdraft positions of
subsidiaries participating in our global cash pooling arrangement with
a third-party bank. Due to the nature of these overdrafts, all amounts
have been classified within the short-term portion of debt at each
period end. As of December 31, 2009, our compensating cash balance was
$105.0 million. |
|
(4) |
|
The amounts in the table reflect estimated cash payments to be made by
the Company over the next five years and thereafter with respect to
certain pension obligations. Our pension obligations are included in
other long-term liabilities on our balance sheet as of December 31,
2009. |
Noncurrent
deferred income tax liabilities as of December 31, 2009 were $495.5 million.
Deferred tax liabilities are calculated based on cumulative temporary differences between the
financial reporting and tax bases of assets and liabilities using enacted tax rates. This amount is
not included in the table above because this presentation would not be meaningful. These
liabilities do not have a direct connection with the amount of cash taxes to be paid in any future
periods and do not relate to liquidity needs. In addition, the Company has excluded from the above
table uncertain tax liabilities due to the uncertainty of the period of payment. The Company had
uncertain tax liabilities of $5.0 million, exclusive of interest and penalties, as of December 31,
2009. In addition, we do not provide for deferred income tax liabilities nor foreign withholding
taxes on approximately $294.4 million of cumulative undistributed earnings of our foreign
subsidiaries as of December 31, 2009, as we consider these earnings to be permanently reinvested.
We believe that cash flows generated by our domestic operations and available credit under our
Senior Secured Credit Facility will be sufficient to allow us to satisfy our domestic liquidity
requirements, including mandatory principal and interest payments.
The employment agreements with our executive officers include non-compete, non-solicit and
non-hire covenants as well as severance provisions. In general, if the executive officer is
terminated without Cause or resigns for Good Reason (as such terms are defined in the
respective employment agreements) the executive officer is entitled to one and a half times (two
times in the case of our Chairman, President and Chief Executive Officer) the sum of base salary
plus the target bonus for the year in which such termination or resignation occurs and continued
health benefits for the 12-month period (18-month period in the case of our Chairman, President and
Chief Executive Officer) following termination or resignation. Salary and bonus payments are
payable in equal installments over the 12-month period following such termination or resignation.
The aggregate potential payments
under these employment agreements for terminations without Cause and resignations for Good
Reason, including estimated costs associated with continued health benefits, is approximately $11.9
million at December 31, 2009.
39
Indebtedness
See Note 10 in Item 8 Financial Statements and Supplementary Data of this Annual Report on
Form 10-K, for additional discussion of our debt obligations.
Senior Secured Credit Facility. Our Senior Secured Credit Facility is with a syndicate of
lenders and provides for aggregate maximum borrowings consisting of (1) term loans denominated in
Euros in an aggregate principal amount currently outstanding of 597.0 million ($860.0 million
on a U.S. dollar equivalent basis as of December 31, 2009), (2) term loans denominated in U.S.
dollars in an aggregate principal amount currently outstanding of $611.9 million and (3) a
multi-currency revolving loan facility, providing for an equivalent in U.S. dollars of up to $250.0
million in multi-currency revolving loans (inclusive of swingline loans of up to $25.0 million and
letters of credit of up to $70.0 million). The multi-currency revolving loan facility permits one
or more of our foreign subsidiaries to become foreign borrowers under such facility upon the
satisfaction of certain conditions.
Subject to the Companys continued compliance with its covenants, the Company may at any time
or from time to time request additional tranches of term loans or increases in the amount of
commitments under the Senior Secured Credit Facility. The actual extension of any such incremental
term loans or increases in commitments would be subject to the Company and existing and any new
lenders reaching agreement on applicable terms and conditions, which may depend on market
conditions at the time of any request. Additionally, the total amount outstanding under any
incremental new tranches of term loans or incremental new revolving credit commitments may not
exceed in aggregate the lesser of $300.0 million or an amount which would cause the Company to
exceed certain ratios. To present, the Company has not requested any such incremental term loans or
credit commitments.
As of December 31, 2009, an aggregate U.S. dollar equivalent of $23.4 million was outstanding
under the multi-currency revolving loan facility as a result of £14.4 million outstanding in
revolving loans. In addition, we had $13.5 million of undrawn letters of credit outstanding. As of
December 31, 2009, we had $213.1 million of available borrowing capacity under the multi-currency
revolving loan facility.
The term loans will mature on June 30, 2014 and the multi-currency revolving loan facility
will mature on June 30, 2013. Subject to any mandatory or optional prepayments, the principal
amounts of the term loans require quarterly amortization payments commencing on September 30, 2009
equal to 0.25% of their respective original principal amounts drawn, with the final amortization
payments due at maturity.
Based on an excess cash flow calculation required by the Senior Secured Credit Facility
for the year ended December 31, 2009, the Company is required to make
a principal repayment of $20.9
million on the outstanding term loans in March 2010. The excess cash flow payment will be applied against the
Companys scheduled installments of principal due in respect of
the term loans in 2010 and part of 2011. We have
classified the excess cash flow payment within the short term portion of debt in the
accompanying balance sheet as of December 31, 2009.
As of December 31, 2009, the interest rates on the U.S. dollar-denominated and
Euro-denominated term loans were 2.73% and 2.97%, respectively, which include a variable margin of
2.5%, and amounts drawn under the multi-currency revolving loan facility bear interest at a rate of
3.02%. As of December 31, 2009, there were no loans under our Senior Secured Credit Facility
denominated in currencies other than the U.S. dollar, Euro and British pound sterling.
Senior Notes and Senior Subordinated Notes. The Senior Notes and Senior Subordinated Notes,
and related guarantees, are unsecured obligations of the Company and are subordinate to all of the
Companys and the Subsidiary Guarantors obligations under all secured indebtedness, including any
borrowings under the Senior Secured Credit Facility to the extent of the value of the assets
securing such obligations, and are effectively subordinate to all obligations of each of the
Companys subsidiaries that is not a guarantor of the Senior Notes or the Senior Subordinated Notes
(as the case may be). The Senior Notes, and related guarantees, rank senior in right of payment to
all of the Companys and the Subsidiary Guarantors existing and future subordinated indebtedness,
including the Senior Subordinated Notes.
40
The Senior Notes, which amount to $710.0 million as of December 31, 2009, will mature on July
15, 2015. Interest on the Senior Notes is payable twice a year, on each January 15 and July 15. For
any interest period through July 15, 2011, the Company may elect to pay interest on the Senior
Notes (1) entirely in cash (Cash Interest), (2) entirely by increasing the principal amount of
the Senior Notes (PIK Interest) or (3) 50% as Cash Interest and 50% as PIK Interest. PIK Interest
accrues on the Senior Notes at a rate per annum equal to the Cash Interest rate of 10.25% plus 100
basis points. Prior to July 15, 2009, the Company paid its Senior Note interest obligations as Cash
Interest. On June 25, 2009, we made an election to pay PIK Interest for the semi-annual interest
period commencing July 15, 2009 and ending on January 15, 2010. Accordingly, we have classified
$35.0 million of accrued but unpaid interest on our Senior Notes as of December 31, 2009 within the
long-term portion of debt. The Company did not make an election to pay PIK Interest for the
interest period ending on July 15, 2010 and so it must satisfy the related interest payment with
Cash Interest. Under the terms of the Senior Notes, if the Company were to make a 100% PIK Interest
election for the two remaining semi-annual interest periods for which is entitled to do so, it
would be required to make a mandatory principal redemption payment on July 15, 2012 of
approximately $47.2 million.
The Senior Subordinated Notes are denominated in Euros in an aggregate principal amount
currently outstanding of 126.9 million ($182.7 million on a U.S. dollar equivalent basis as of
December 31, 2009) and in U.S. dollars in an aggregate principal amount currently outstanding of
$358.7 million. The Senior Subordinated Notes will mature on June 30, 2017. Interest on the Senior
Subordinated Notes is payable quarterly on March 31, June 30, September 30 and December 31 of each
year. On any interest payment date through and including March 31, 2010, the Company will have the
option to capitalize up to approximately 28% per annum of the interest payable on such date by
capitalizing such interest and adding it to the then outstanding principal amount of the Senior
Subordinated Notes. In the absence of such an election for any interest payment date, all of the
interest on the Senior Subordinated Notes is payable entirely in cash. The interest rate on the
Senior Subordinated Notes does not change if the Company makes an election to capitalize interest.
On June 25 and September 21, 2009, we made elections to capitalize an aggregate amount of
approximately $5.3 million and 1.9 million ($2.7 million on a U.S. dollar equivalent basis as
of December 31, 2009) of cash interest payable on our Senior Subordinated Notes for the June 30 and
September 30, 2009 interest payment dates. The Company paid Cash Interest for the December 31, 2009
payment date. The Company will not be required to make a mandatory redemption payment in connection
with any past or future elections to capitalize interest on the Senior Subordinated Notes.
Interest Rate Swap Arrangements. Borrowings under our Senior Secured Credit Facility bear
interest at variable rates while our Senior Notes and Senior Subordinated Notes bear interest at
fixed rates. The Company manages its exposure to changes in market interest rates by entering into
interest rate swaps. The Company is party to two interest rate swaps that became effective on June
29, 2007 and mature on December 31, 2012 for the purpose of fixing the variable rate of interest on
a portion of our outstanding term loan borrowings under the Senior Secured Credit Facility. The
interest rate swaps carry initial notional principal amounts of $425.0 million (the USD Swap) and
300.0 million (the Euro Swap). The notional value of the USD Swap declines over its term in
annual decrements of $25.0 million through December 29, 2011 and carries a final notional principal
amount of $160.0 million for the period from December 30, 2011 through December 30, 2012. Beginning
on December 31, 2007, the notional value of the Euro Swap declines over its term in annual
decrements of 20.0 million through December 29, 2011 and carries a final notional principal
amount of 110.0 million for the period from December 30, 2011 through December 30, 2012. Under
the USD Swap and Euro Swap, the Company receives monthly interest at a variable rate equal to
one-month U.S. Libor and one-month Euribor, respectively, and pay monthly interest at a fixed rate
of 5.40% and 4.55%, respectively.
As of December 31, 2009, the Amended Swaps effectively convert $350.0 million of variable rate
U.S. dollar-denominated debt and 240.0 million ($345.7 million on a U.S. dollar equivalent
basis) of variable rate Euro-denominated debt to fixed rates of interest. The counterparty to our
interest rate swap agreements is a major financial institution. The Company actively monitors its
asset or liability position under the interest rate swap agreements and the credit ratings of the
counterparty, in an effort to understand and evaluate the risk of non-performance by the
counterparty.
41
The aggregate fair value of the interest rate swaps as of December 31, 2009 was a liability of
$49.8 million and is reflected in other long-term liabilities. During the year ended December 31,
2009 and 2008, we recognized non-cash net unrealized gains (losses) on our Amended Swaps of $0.1
million and $(35.4) million, respectively, as a component of interest expense. See Note 14 in Item
8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K, for a further
discussion of our interest rate swap arrangements.
Compensating Cash Balance. Our foreign subsidiaries obtain their liquidity from our global
cash pooling arrangement or from formal or informal lines of credit offered by local banks. The
borrowings drawn by our foreign subsidiaries from local banks are limited in aggregate by certain
covenants contained within the Senior Secured Credit Facility, Senior Notes and Senior Subordinated
Notes. The borrowings available to our foreign subsidiaries under our global cash pooling
arrangement are limited in aggregate by the amount of compensating cash balances supporting the
global cash pooling arrangement. Our compensating cash balance represents bank overdraft positions
of subsidiaries participating in our global cash pooling arrangement with a third-party bank. Due
to the nature of these overdrafts, all amounts have been classified within the short-term portion
of debt at each period end. As of December 31, 2009, our compensating cash balance was $105.0
million.
Off-Balance Sheet Arrangements
We are not involved in any off-balance sheet arrangements that have or are reasonably likely
to have a material current or future effect on our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies
See Note 2 included in Item 8 Financial Statements and Supplementary Data in this Annual
Report on Form 10-K for a description of our significant accounting policies. The policies
discussed below are considered by management to be critical to an understanding of our consolidated
financial statements because their application places the most significant demands on managements
judgment, with financial reporting results relying on estimation about the effect of matters that
are inherently uncertain. Specific risks for these critical accounting policies are described in
the following paragraphs. For all of these policies, management cautions that future events rarely
develop exactly as forecast, and such estimates routinely require adjustment. The Companys
management has reviewed these critical accounting policies and estimates and related disclosures
with its audit committee.
Goodwill and Intangible Assets. We have significant amounts of goodwill and intangible assets on
our consolidated balance sheet as of December 31, 2009. Goodwill primarily represents the excess of
acquisition costs over the fair value of net assets acquired in connection with the Merger and
completed acquisitions subsequent to the Merger. Our intangible assets with finite useful lives
primarily relate to customer and supplier relationships and are amortized over their respective
estimated useful lives on a straight-line basis. Our indefinite-lived intangible assets relate to
our trademarks and trade names and are not amortized.
We believe that accounting for goodwill and intangible assets represents a critical accounting
policy because of the significant judgments and estimates that must be made by management in order
to determine each assets useful life, to apply the impairment testing model required by U.S. GAAP
and, when necessary, to determine various related fair value measurements.
We reevaluate the estimated useful lives of our intangible assets annually. We determined that our
trademarks and trade names have indefinite lives because they do not have legal, regulatory,
contractual, competitive or economic limitations and are expected to contribute to the generation
of cash flows indefinitely.
Goodwill and other intangible assets with indefinite useful lives are not amortized and are tested annually for impairment or between the annual tests if an event or change in circumstance
occurs that would more likely than not reduce the fair value of the asset below its carrying
amount. Other amortizable intangible assets are reviewed for impairment whenever indication of
potential impairment exists.
Indefinite-lived intangible assets other than goodwill are tested for impairment prior to goodwill
or amortizable intangible assets. An impairment charge is measured if the carrying value of an
indefinite-lived intangible asset exceeds its fair value. We evaluate the recoverability of our
amortizable intangible assets by comparing the carrying value to estimated undiscounted future cash
flows expected to be generated. If an amortizable intangible asset is considered impaired, the
impairment loss to be recognized is measured as the amount by which the assets carrying value
exceeds its fair value.
42
Goodwill impairment testing is performed at the reporting unit level. We have determined that our
reporting units are the same as our business segments and we have elected to perform our annual
impairment testing on October 1st of each year. The goodwill impairment analysis is a
two-step test. The first step (Step 1), used to identify potential impairment, involves comparing
the reporting units estimated fair value to its carrying value, including goodwill. If the
estimated fair value exceeds its carrying value, goodwill is considered not to be impaired. If the
carrying value exceeds its estimated fair value, there is an indication of potential impairment and
the second step is performed to measure the amount of impairment, if any. The second step (Step
2) involves calculating an implied fair value of goodwill. The implied fair value of goodwill is
determined in a manner similar to the amount of goodwill calculated in a business combination. If
the implied fair value of goodwill exceeds the carrying value of goodwill, there is no impairment.
If the carrying value of goodwill exceeds the implied fair value of goodwill, an
impairment charge is recorded for the excess. Goodwill impairments cannot be reversed in subsequent
periods.
The fair value of our intangible assets is determined using a discounted cash flow approach. The
Company estimates the fair value of each reporting unit using both the income approach (which is a
discounted cash flow technique) and market approach (which is a market multiple technique). These
valuation methods required management to make various assumptions, including, but not limited to,
assumptions related to future profitability, cash flows, discount rates and control premiums, as
well as valuation multiples derived from comparable publicly traded companies that are applied to
operating performance of the reporting unit. Our estimates are based upon historical trends,
managements knowledge and experience and overall economic factors, including projections of future
earnings potential.
Developing discounted future cash flows in applying the income approach requires us to evaluate our
intermediate to longer-term strategies for each reporting unit, including, but not limited to,
estimates about revenue growth, our acquisition strategies, operating margins, capital
requirements, inflation and working capital management. The development of appropriate rates to
discount the estimated future cash flows of each reporting unit requires the selection of risk
premiums, which can materially impact the present value of future cash flows. Selection of an
appropriate peer group under the market approach involves judgment and an alternative selection of
guideline companies could yield materially different market multiples. We seek to minimize judgment
in the selection of an acquisition control premium by referring to historical control premiums
observed in the marketplace. We believe the estimates and assumptions used in the valuation methods
are reasonable.
2008 Assessments
During the fourth quarter of 2008, we recognized aggregate impairment charges of $392.1 million,
relating to the impairment of goodwill and intangible assets. The impairment charges were
recognized for each of the Companys reporting units ($202.1 million in North American Lab, $88.0
million in European Lab and $102.0 million in Science Education). We believe that the impairment
charges recognized in our North American Lab and European Lab reporting units were primarily a
result of macroeconomic factors, while the charges recognized in our Science Education reporting
unit were due to a mix of macroeconomic and industry-specific factors.
2009 Assessments
We observed a decline in the operating results of Science Education during the
seasonally-significant third calendar quarter of 2009. We were also aware of the reduction in
spending by schools due to the general economic conditions in the United States and the impact that
unresolved state budgets have had on results and, accordingly, as of September 30, 2009, we reduced
forecasted sales in the near term. As a result, we performed an interim impairment test of Science
Educations goodwill and intangible assets as of September 30, 2009. We determined that there was
no measured impairment of the intangible assets. Our evaluation of reporting unit goodwill revealed
a failure of Step 1. However, our Step 2 measurement of the implied fair value of goodwill exceeded
the carrying value of goodwill primarily as a result of a decrease in
the fair value of amortizable intangible assets. Accordingly, we did not recognize any
impairment charges. As of September 30, 2009, any decrease in
the fair value of our Science Education
reporting unit would likely result in impairment charges.
43
As of our latest annual assessment of our indefinite-lived intangible assets and goodwill on
October 1, 2009, we determined that there was no measured impairment of our indefinite-lived
intangible assets and that the estimated fair values of our North American Lab and European Lab
reporting units each exceeded its respective carrying value. Accordingly, no impairment was
recognized. The amount by which the estimated fair value exceeded its carrying value was
approximately $90.0 million in our North American Lab reporting unit and was approximately
$300.0 million in our European Lab reporting unit.
The carrying value of goodwill and intangible assets as of December 31, 2009 was $929.9 million and
$1,081.6 million, respectively, for North American Lab,
$866.6 million and $759.8 million,
respectively, for European Lab and $36.5 million and $145.3 million, respectively, for Science
Education. As of December 31, 2009, we determined that there were no impairments of our goodwill or
intangible assets in any of our reporting units.
Should
our planned organic revenue or cash flow growth, our acquisition
strategy growth or market conditions be
adversely affected due to, among other things, ongoing or worsening recessionary or other
macro-economic pressures; or should we experience adverse changes in market factors such as
discount rates, valuation multiples derived from comparable publicly traded companies, or control
premiums derived from market transactions; additional impairment charges against goodwill and
intangible assets may be required. Since we recognized impairments on our indefinite-lived
intangible assets at each of our reporting units in 2008, we will likely incur additional
impairment charges if we experience any decrease in the fair value of these assets going forward.
Interest Rate Swap Valuations. We apply the fair value provisions of U.S. GAAP to our interest
rate swap arrangements. We determine the fair value of all of our interest rate swaps using a
discounted cash flow model based on the contractual terms of the instrument and using observable
inputs such as interest rates, counterparty credit spread and our own credit spread. The discounted
cash flow model does not involve significant management judgment and does not incorporate
significant unobservable inputs. Accordingly, we classify our interest rate swap valuation
measurements within Level 2 of the valuation hierarchy. We consider our interest rate swap
valuations to be a critical accounting policy as we do not apply hedge accounting and therefore
changes in fair value are recognized as a component of income or loss each period. We had no other
material financial assets or liabilities carried at fair value and measured on a recurring basis as
of December 31, 2009.
As of December 31, 2009, the incorporation of credit spreads into our discounted cash flow
model had the effect of lowering the fair value (liability) of our interest rate swap arrangements
by $3.1 million. As of December 31, 2009, a 100 basis point (or 1.00%) improvement (deterioration)
in our own credit spread would have had the impact of increasing (decreasing) our liability for
interest rate swaps by approximately $0.5 million. As of December 31, 2009, counterparty credit
spread did not have a material impact on the fair value of our interest rate swaps. See Note 14
included in Item 8 Financial Statements and Supplementary Data in this Annual Report on Form
10-K for more information on our interest rate swaps.
Accounts Receivable and Reserves. The carrying amount of trade accounts receivable reflects a
reserve representing our estimate of the amounts that will not be collected for losses due to
uncollectibility and for estimated sales returns and allowances. In addition to reviewing
delinquent accounts receivable, we consider many factors in estimating our reserve, including
historical data, experience, customer types, creditworthiness and economic trends. From time to
time, we may adjust our assumptions for anticipated changes in any of these or other factors
expected to affect collectibility. During 2009, bad debt expense was $3.8 million.
Inventories. Inventories are valued at the lower of cost or market, cost being determined
principally by the last-in, first-out method for the U.S. subsidiaries and the first-in, first-out
method for all other subsidiaries. We review our inventory realization based upon several factors,
including customer demand, supply of inventory, inventory levels, competitive activity and
technology changes and record reserves for obsolescence based upon those and other factors. From
time to time, we may adjust our assumptions for anticipated changes in any of these or other
factors.
Rebates from Suppliers. We earn rebates from certain of our suppliers from the achievement of
certain sales growth and/or purchase volume thresholds. To the extent that rebates relate to
inventory on hand, the inventory cost is reduced to reflect the lower cost. During the course of
the year, estimates made concerning the achievement of these goals or milestones can vary from
quarter to quarter. Generally, a proportionally larger amount of rebates are earned in the fourth
quarter of each year.
Agreements with Customers. We have agreements with several of our customers, which contain
provisions related to pricing, volume purchase incentives and other contractual provisions. During
the course of the year, estimates are made concerning customer contracts and changes in estimates
related to these contracts may vary from quarter to quarter and are recorded against net sales.
44
Product Liability. We are subject to product liability and other claims in the ordinary course
of business and, from time to time, we are named as a defendant in cases as a result of our
distribution of laboratory and production supplies. While the impact on us of this litigation has
typically been immaterial, there can be no assurance that the impact of the pending and any future
claims will not be material to our business, financial condition and results of operations in the
future. Our estimates of potential liability are based on several factors, including our historical
experience in similar cases, legal venue and the merits of each individual case.
Pension Plans. We have defined benefit pension plans covering a significant number of domestic
and international employees. Accounting for these plans requires the use of assumptions, including
estimates on the expected long-term rate of return on assets, discount rates and the average rate
of increase in employee compensation. In order to make informed assumptions, management consults
with actuaries and reviews public market data and general economic information. We periodically
assess these assumptions based on market conditions, and if those conditions change, our pension
cost and pension obligation may be adjusted accordingly. See Note 12 included in Item 8
Financial Statements and Supplementary Data in this Annual
Report on Form 10-K for more
information on our defined benefit pension plans.
Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the expected net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting and income tax
purposes and net operating loss and credit carryforwards. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes
the enactment date. We record a valuation allowance to reduce deferred tax assets to the amount
that is more likely than not to be realized.
The Company recognizes the effect of income tax positions only if those positions are more
likely than not to be sustained. Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in recognition or measurement are
reflected in the period in which a change in judgment occurs, as a result of information that
arises or when a tax position is effectively settled.
We must make assumptions, judgments and estimates to determine our current provision for
income taxes and also our deferred tax assets and liabilities and any valuation allowance to be
recorded against a deferred tax asset. Our assumptions, judgments and estimates take into account
current tax laws, our interpretation of current tax laws and possible outcomes of current and
future audits conducted by foreign and domestic tax authorities and estimates of the amount of
future taxable income, if any. Any of the assumptions, judgments and estimates could cause our
actual income tax obligations to differ from our estimates. See Note 11 included in Item 8
Financial Statements and Supplementary Data in this Annual
Report on Form 10-K for more
information on income taxes.
Estimates and Other Accounting Policies. The preparation of consolidated financial statements
in conformity with generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Those
estimates and assumptions are based on managements best estimates and judgment. Management
evaluates its estimates and assumptions on an ongoing basis using historical experience and other
factors, including the current economic environment, which management believes to be reasonable
under the circumstances. We adjust such estimates and assumptions when we believe relevant facts
and circumstances warrant an adjustment. Current adverse economic conditions, illiquid credit
markets, volatile equity and foreign currency markets, and declines in customer spending have
combined to increase the uncertainty inherent in such estimates and assumptions. As future events
and their effects cannot be determined with precision, actual results could differ significantly
from those estimates. Changes in those estimates resulting from continued changes in the economic
environment will be reflected in our consolidated financial statements in future periods.
45
New Accounting Standards
See Note 2 in Item 8 Financial Statements and Supplementary Data of this Annual Report on
Form 10-K, for a complete description of new accounting standards, including those standards
adopted as of December 31, 2009 and to be adopted in future periods.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our Senior Secured Credit Facility contains variable interest rates, which exposes the Company
to fluctuating rates of interest. In order to partially mitigate such potential variations in
interest rates, the Company has entered into certain interest rate swaps. As of December 31, 2009,
our two interest rate swaps effectively convert $350.0 million of variable rate U.S.
dollar-denominated debt and 240.0 million ($345.7 million on a U.S. dollar equivalent basis) of
variable rate Euro-denominated debt to fixed rates of interest. As of December 31, 2009, an
instantaneous 100 basis point (or 1.00%) change in the variable rates for the Senior Secured Credit
Facility would, on an annualized basis, impact interest expense by approximately $8.0 million on a
pre-tax basis and inclusive of our interest rate swaps. See Item 7 Managements Discussion
and Analysis of Financial Condition and Results of Operations Indebtedness in this Annual
Report on Form 10-K for more
information on our variable rate debt and our interest rate swap arrangements.
Foreign Currency Exchange Rate Risk
While we report our consolidated financial results in U.S. dollars, we derive a significant
portion of our sales and incur costs in foreign currencies (principally the Euro, the British pound
sterling and the Canadian dollar) from our operations outside the United States. Fluctuations in
the relative values of currencies occur from time to time and could favorably or unfavorably affect
our operating results. Specifically, during times of a strengthening U.S. dollar, our reported
international sales and earnings will be reduced because the local currency will translate into
fewer U.S. dollars. A 10.00% change in foreign currency exchange rates relative to the U.S. dollar
would have impacted our operating income by approximately $9.5 million. Net sales and costs tend to
be incurred in the same currency, and therefore, reduce local currency risks.
Where we deem it prudent, we have engaged in hedging programs, using primarily foreign
currency forward contracts, aimed at limiting the impact of foreign currency exchange rate
fluctuations on cash flows and earnings. We have regularly entered into foreign currency forward
contracts to mitigate the risk of changes in foreign currency exchange rates primarily associated
with the purchase of inventory from foreign vendors or for payments between our subsidiaries
generally within the next twelve months or less. Gains and losses on such foreign currency forward
contracts generally offset certain portions of gains and losses on expected commitments. These
activities have not been material to our consolidated financial statements. Due to recent
volatility in global capital and credit markets, our availability to enter into new derivative
financial instruments has been limited and may continue to be limited; consequently, our future
results of operations may be subject to increased variability. See Note 14 in Item 8 Financial
Statements and Supplementary Data of this Annual Report on Form 10-K, for additional discussion of
our hedging programs.
As a result of a change in our capital structure related to the Merger, we have a significant
amount of foreign-denominated debt on our U.S. dollar-denominated balance sheet. An instantaneous
10.00% change in foreign currency exchange rates associated with foreign denominated debt
outstanding as of December 31, 2009 would have impacted our exchange gain or loss by approximately
$93.8 million on a pre-tax basis.
46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and schedule of the Company for the periods
indicated are included in this Annual Report on Form 10-K. The term Successor refers to the
Company after giving effect to the consummation of the Merger (as defined in Note 1) on June 29,
2007. The term Predecessor refers to the Company prior to giving effect to the consummation of
the Merger. As a result of the Merger, including changes in our capital structure and the effects
of purchase accounting, the Predecessor and Successor financial statements are not comparable. See
Note 1.
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48 |
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49 |
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50 |
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51 |
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53 |
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54 |
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148 |
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47
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
VWR Funding, Inc.:
We have audited the accompanying consolidated balance sheets of VWR Funding, Inc. and subsidiaries
(Successor) as of December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders equity and other comprehensive income (loss), and cash flows for the
years ended December 31, 2009 and 2008 and for the period from June 30, 2007 to December 31, 2007
(Successor periods) and for the period from January 1, 2007 to June 29, 2007 (Predecessor period).
In connection with our audits of the consolidated financial statements, we also have audited the
financial statement schedule for the Successor and Predecessor periods as listed on the index on
page 47. These consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). 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 Successor consolidated financial statements referred to above present fairly,
in all material respects, the financial position of VWR Funding, Inc. and subsidiaries as of
December 31, 2009 and 2008, and the results of their operations and their cash flows for the
Successor periods, in conformity with U.S. generally accepted accounting principles. Further, in
our opinion, the aforementioned Predecessor consolidated financial statements present fairly, in
all material respects, the results of operations and the cash flows of CDRV Investors, Inc. and its
subsidiaries for the Predecessor period, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of VWR Funding, Inc.s internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March 15, 2010 expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
As discussed in Note 1 to the consolidated financial statements, effective June 29, 2007, VWR
Funding, Inc. acquired all of the outstanding stock of CDRV Investors, Inc. in a business
combination accounted for as a purchase (the Merger). As a result of the Merger, the consolidated
financial information for the periods after the Merger are presented on a different cost basis than
that for the periods before the Merger and, therefore, are not comparable.
As discussed in Notes 2 and 14 to the consolidated financial statements, the Company has changed
its method of accounting for fair value measurements for recurring financial assets and liabilities
on January 1, 2008 and for non-financial assets and liabilities that are not required or permitted
to be measured at fair value on a recurring basis on January 1, 2009 due to the adoption of
Accounting Standard Codification Topic 820, Fair Value Measurements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
March 15, 2010
48
VWR FUNDING, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In millions, except share data)
|
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|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
124.4 |
|
|
$ |
42.0 |
|
Compensating cash balance |
|
|
105.0 |
|
|
|
100.7 |
|
Trade accounts receivable, less reserves of $10.8 and $10.1,
respectively |
|
|
471.3 |
|
|
|
472.2 |
|
Other receivables |
|
|
28.9 |
|
|
|
34.4 |
|
Inventories |
|
|
263.6 |
|
|
|
284.8 |
|
Other current assets |
|
|
24.0 |
|
|
|
29.8 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,017.2 |
|
|
|
963.9 |
|
Property and equipment, net |
|
|
191.4 |
|
|
|
190.1 |
|
Goodwill |
|
|
1,833.0 |
|
|
|
1,784.7 |
|
Other intangible assets, net |
|
|
1,986.7 |
|
|
|
2,012.9 |
|
Deferred income taxes |
|
|
12.6 |
|
|
|
14.2 |
|
Other assets |
|
|
86.4 |
|
|
|
119.1 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,127.3 |
|
|
$ |
5,084.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Redeemable Equity Units and Stockholders Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of debt and capital lease obligations |
|
$ |
152.4 |
|
|
$ |
165.0 |
|
Accounts payable |
|
|
378.2 |
|
|
|
356.5 |
|
Accrued expenses |
|
|
158.2 |
|
|
|
189.8 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
688.8 |
|
|
|
711.3 |
|
Long-term debt and capital lease obligations |
|
|
2,719.3 |
|
|
|
2,650.6 |
|
Other long-term liabilities |
|
|
135.3 |
|
|
|
121.5 |
|
Deferred income taxes |
|
|
495.5 |
|
|
|
546.7 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
4,038.9 |
|
|
|
4,030.1 |
|
Redeemable equity units |
|
|
45.8 |
|
|
|
46.4 |
|
Commitments and contingences (Note 15) |
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; 1,000 shares authorized,
issued and outstanding |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
1,361.7 |
|
|
|
1,360.4 |
|
Accumulated deficit |
|
|
(397.7 |
) |
|
|
(383.6 |
) |
Accumulated other comprehensive income |
|
|
78.6 |
|
|
|
31.6 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
1,042.6 |
|
|
|
1,008.4 |
|
|
|
|
|
|
|
|
Total liabilities, redeemable equity units and stockholders equity |
|
$ |
5,127.3 |
|
|
$ |
5,084.9 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
49
VWR FUNDING, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
3,561.2 |
|
|
$ |
3,759.2 |
|
|
$ |
1,822.7 |
|
|
|
$ |
1,699.3 |
|
Cost of goods sold |
|
|
2,545.6 |
|
|
|
2,693.8 |
|
|
|
1,311.3 |
|
|
|
|
1,230.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,015.6 |
|
|
|
1,065.4 |
|
|
|
511.4 |
|
|
|
|
469.2 |
|
Selling, general and administrative expenses |
|
|
806.8 |
|
|
|
861.6 |
|
|
|
408.5 |
|
|
|
|
371.3 |
|
Impairment of goodwill and intangible assets |
|
|
|
|
|
|
392.1 |
|
|
|
|
|
|
|
|
|
|
Merger expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
208.8 |
|
|
|
(188.3 |
) |
|
|
102.9 |
|
|
|
|
61.1 |
|
Interest income |
|
|
2.3 |
|
|
|
5.7 |
|
|
|
3.0 |
|
|
|
|
3.3 |
|
Interest expense |
|
|
(226.8 |
) |
|
|
(289.6 |
) |
|
|
(130.4 |
) |
|
|
|
(101.8 |
) |
Other income (expense), net |
|
|
(23.9 |
) |
|
|
22.1 |
|
|
|
(67.2 |
) |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(39.6 |
) |
|
|
(450.1 |
) |
|
|
(91.7 |
) |
|
|
|
(33.9 |
) |
Income tax benefit |
|
|
25.5 |
|
|
|
115.5 |
|
|
|
42.7 |
|
|
|
|
8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(14.1 |
) |
|
$ |
(334.6 |
) |
|
$ |
(49.0 |
) |
|
|
$ |
(25.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
50
VWR FUNDING, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity and Other Comprehensive Income (Loss)
(In millions, except share data)
For the Period January 1, 2007 June 29, 2007 (Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
Treasury stock, |
|
|
|
|
|
|
Common stock |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
at cost |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
earnings |
|
|
income (loss) |
|
|
Shares |
|
|
Amount |
|
|
Total |
|
|
|
Balance at January 1, 2007 |
|
|
5,862,892 |
|
|
$ |
0.1 |
|
|
$ |
14.5 |
|
|
$ |
1.7 |
|
|
$ |
50.8 |
|
|
|
59,480 |
|
|
$ |
(4.2 |
) |
|
$ |
62.9 |
|
Issuance of common stock in connection with our Predecessor
stock plan |
|
|
1,757 |
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
Exercise of stock options |
|
|
5,900 |
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0 |
|
Tax benefit related to stock options |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
Acquisition of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,200 |
|
|
|
(0.7 |
) |
|
|
(0.7 |
) |
Comprehensive (loss) income (Note 2(r)): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25.6 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.7 |
|
|
|
|
|
|
|
|
|
|
|
24.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 29, 2007 |
|
|
5,870,549 |
|
|
$ |
0.1 |
|
|
$ |
24.0 |
|
|
$ |
(23.9 |
) |
|
$ |
75.5 |
|
|
|
66,680 |
|
|
$ |
(4.9 |
) |
|
$ |
70.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period June 30, 2007 December 31, 2007 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
|
Common stock |
|
|
paid-in |
|
|
Accumulated |
|
|
comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
income (loss) |
|
|
Total |
|
|
|
Opening balance at June 30, 2007 |
|
|
1,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Issuance of common stock to parent, net of expenses
and redeemable equity units |
|
|
|
|
|
|
|
|
|
|
1,354.9 |
|
|
|
|
|
|
|
|
|
|
|
1,354.9 |
|
Tax benefit related to transaction fee |
|
|
|
|
|
|
|
|
|
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
10.2 |
|
Capital contributions from parent |
|
|
|
|
|
|
|
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
1.1 |
|
Share-based compensation expense associated with
our parent company equity plan |
|
|
|
|
|
|
|
|
|
|
2.7 |
|
|
|
|
|
|
|
|
|
|
|
2.7 |
|
Reclassification of redeemable equity units |
|
|
|
|
|
|
|
|
|
|
(8.7 |
) |
|
|
|
|
|
|
|
|
|
|
(8.7 |
) |
Comprehensive (loss) income (Note 2(r)): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49.0 |
) |
|
|
|
|
|
|
(49.0 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96.1 |
|
|
|
96.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007 |
|
|
1,000 |
|
|
$ |
|
|
|
$ |
1,360.2 |
|
|
$ |
(49.0 |
) |
|
$ |
96.1 |
|
|
$ |
1,407.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
51
VWR FUNDING, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity and Other Comprehensive Income (Loss) (Continued)
(In millions, except share data)
For the Years Ended December 31, 2008 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
|
Common stock |
|
|
paid-in |
|
|
Accumulated |
|
|
comprehensive |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
income (loss) |
|
|
Total |
|
|
|
Balance at January 1, 2008 |
|
|
1,000 |
|
|
$ |
|
|
|
$ |
1,360.2 |
|
|
$ |
(49.0 |
) |
|
$ |
96.1 |
|
|
$ |
1,407.3 |
|
Capital contributions from parent |
|
|
|
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
2.3 |
|
Share-based compensation expense associated with
our parent company equity plan |
|
|
|
|
|
|
|
|
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
3.8 |
|
Reclassification of redeemable equity units |
|
|
|
|
|
|
|
|
|
|
(5.9 |
) |
|
|
|
|
|
|
|
|
|
|
(5.9 |
) |
Comprehensive (loss) income (Note 2(r)): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(334.6 |
) |
|
|
|
|
|
|
(334.6 |
) |
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64.5 |
) |
|
|
(64.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(399.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
|
1,000 |
|
|
|
|
|
|
|
1,360.4 |
|
|
|
(383.6 |
) |
|
|
31.6 |
|
|
|
1,008.4 |
|
Capital contributions from parent |
|
|
|
|
|
|
|
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
1.4 |
|
Share-based compensation expense associated with
our parent company equity plan |
|
|
|
|
|
|
|
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
Reclassifications of redeemable equity units |
|
|
|
|
|
|
|
|
|
|
(3.5 |
) |
|
|
|
|
|
|
|
|
|
|
(3.5 |
) |
Comprehensive (loss) income (Note 2(r)): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14.1 |
) |
|
|
|
|
|
|
(14.1 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47.0 |
|
|
|
47.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
1,000 |
|
|
$ |
|
|
|
$ |
1,361.7 |
|
|
$ |
(397.7 |
) |
|
$ |
78.6 |
|
|
$ |
1,042.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
52
VWR FUNDING, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(14.1 |
) |
|
$ |
(334.6 |
) |
|
$ |
(49.0 |
) |
|
|
$ |
(25.6 |
) |
Adjustments to reconcile net loss to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
116.6 |
|
|
|
116.1 |
|
|
|
53.2 |
|
|
|
|
19.4 |
|
Net unrealized translation loss (gain) |
|
|
26.5 |
|
|
|
(30.1 |
) |
|
|
67.1 |
|
|
|
|
|
|
Net unrealized (gain) loss on interest rate swaps |
|
|
(0.1 |
) |
|
|
35.4 |
|
|
|
|
|
|
|
|
|
|
Impairment of goodwill and intangible assets |
|
|
|
|
|
|
392.1 |
|
|
|
|
|
|
|
|
|
|
Non-cash interest accretion |
|
|
43.0 |
|
|
|
|
|
|
|
|
|
|
|
|
17.5 |
|
Non-cash equity compensation expense |
|
|
3.4 |
|
|
|
3.8 |
|
|
|
2.7 |
|
|
|
|
9.0 |
|
Amortization and write-off of debt issuance costs |
|
|
9.6 |
|
|
|
9.6 |
|
|
|
4.8 |
|
|
|
|
31.0 |
|
Deferred income tax benefit |
|
|
(58.4 |
) |
|
|
(150.9 |
) |
|
|
(60.3 |
) |
|
|
|
(15.7 |
) |
Other, net |
|
|
7.4 |
|
|
|
4.1 |
|
|
|
2.6 |
|
|
|
|
1.5 |
|
Changes in working capital, net of business acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
|
12.2 |
|
|
|
(11.7 |
) |
|
|
21.7 |
|
|
|
|
(14.1 |
) |
Inventories |
|
|
30.2 |
|
|
|
2.4 |
|
|
|
(3.6 |
) |
|
|
|
(9.7 |
) |
Other current and non-current assets |
|
|
(4.3 |
) |
|
|
(0.1 |
) |
|
|
(12.6 |
) |
|
|
|
6.9 |
|
Accounts payable |
|
|
18.1 |
|
|
|
(22.3 |
) |
|
|
(23.0 |
) |
|
|
|
15.2 |
|
Accrued expenses and other liabilities |
|
|
(21.1 |
) |
|
|
(5.1 |
) |
|
|
15.8 |
|
|
|
|
21.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
169.0 |
|
|
|
8.7 |
|
|
|
19.4 |
|
|
|
|
57.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger consideration, net of cash acquired of $135.8 |
|
|
|
|
|
|
|
|
|
|
(3,802.9 |
) |
|
|
|
|
|
Acquisitions of businesses and other intangible assets |
|
|
(17.9 |
) |
|
|
(54.2 |
) |
|
|
(36.1 |
) |
|
|
|
(19.4 |
) |
Capital expenditures |
|
|
(23.9 |
) |
|
|
(29.7 |
) |
|
|
(16.3 |
) |
|
|
|
(15.7 |
) |
Proceeds from sales of property and equipment |
|
|
3.7 |
|
|
|
9.0 |
|
|
|
1.2 |
|
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(38.1 |
) |
|
|
(74.9 |
) |
|
|
(3,854.1 |
) |
|
|
|
(32.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from debt |
|
|
268.3 |
|
|
|
381.7 |
|
|
|
2,622.9 |
|
|
|
|
0.1 |
|
Repayment of debt |
|
|
(309.8 |
) |
|
|
(319.2 |
) |
|
|
(33.7 |
) |
|
|
|
(21.4 |
) |
Issuance of common stock to parent, net of expenses |
|
|
|
|
|
|
|
|
|
|
1,353.8 |
|
|
|
|
|
|
Net change in bank overdrafts |
|
|
(0.1 |
) |
|
|
14.7 |
|
|
|
39.9 |
|
|
|
|
0.5 |
|
Net change in compensating cash balance |
|
|
(4.3 |
) |
|
|
(13.3 |
) |
|
|
(43.5 |
) |
|
|
|
(7.8 |
) |
Proceeds from equity and stock incentive plans |
|
|
1.4 |
|
|
|
2.3 |
|
|
|
1.1 |
|
|
|
|
0.2 |
|
Debt issuance costs |
|
|
|
|
|
|
(1.2 |
) |
|
|
(62.6 |
) |
|
|
|
(0.6 |
) |
Repurchase of redeemable equity units |
|
|
(6.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(51.1 |
) |
|
|
65.0 |
|
|
|
3,877.9 |
|
|
|
|
(29.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
2.6 |
|
|
|
(1.8 |
) |
|
|
1.8 |
|
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
|
82.4 |
|
|
|
(3.0 |
) |
|
|
45.0 |
|
|
|
|
(3.6 |
) |
Cash and cash equivalents beginning of period |
|
|
42.0 |
|
|
|
45.0 |
|
|
|
|
|
|
|
|
139.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period |
|
$ |
124.4 |
|
|
$ |
42.0 |
|
|
$ |
45.0 |
|
|
|
$ |
135.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
53
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In millions, except share data)
(1) Background, Nature of Operations and Basis of Presentation
VWR Funding, Inc. (formerly CDRV Investors, Inc. (CDRV) offers products and services through
its wholly-owned subsidiary, VWR International, LLC (VWR), and VWRs subsidiaries. We distribute
laboratory supplies, including chemicals, glassware, equipment, instruments, protective clothing,
production supplies and other assorted laboratory products, primarily in North America and Europe.
We also provide services, including technical services, on-site storeroom services and laboratory
and furniture design, supply and installation, which comprise only a small portion of our net
sales. Our business is diversified across products, geographic regions and customer segments.
We report financial results on the basis of the following three business segments: North
American laboratory distribution (North American Lab), European laboratory distribution
(European Lab) and Science Education. Both the North American Lab and European Lab segments are
engaged in the distribution of laboratory and production supplies to customers in the
pharmaceutical, biotechnology, medical device, chemical, technology, food processing and consumer
products industries, as well as governmental agencies, universities and research institutes, and
environmental organizations. Science Education is engaged in the assembly, manufacture and
distribution of scientific supplies and specialized kits principally to academic institutions,
including primary and secondary schools, colleges and universities. Our operations in the Asia
Pacific region (Asia Pacific) are engaged in regional commercial operations and support our North
American Lab and European Lab businesses. The results of our operations in Asia Pacific are not
material and are included in our North American Lab segment.
Until April 2004, the Company was owned by Merck KGaA. On April 7, 2004, the Company was
acquired from Merck KGaA by affiliates of Clayton, Dubilier & Rice, Inc. (CD&R) (the CD&R
Acquisition). On June 29, 2007, the Company was acquired from CD&R by affiliates of Madison
Dearborn Partners, LLC (Madison Dearborn) pursuant to a merger (the Merger). The Company
changed its name to VWR Funding, Inc. in connection with the Merger. As used herein, the Company,
we, us, and our refer to VWR Funding, Inc. and its consolidated subsidiaries before and/or
after the Merger and the name change, as the context requires.
After giving effect to the Merger and related transactions, the Company became a direct,
wholly owned subsidiary of VWR Investors, Inc., a Delaware corporation (VWR Investors), which is
a direct, wholly owned subsidiary of Varietal Distribution Holdings, LLC, a Delaware limited
liability company (Holdings). VWR Investors and Holdings have no operations other than the
ownership of the Company. Private equity funds managed by Madison Dearborn beneficially own
approximately 75% of our outstanding common stock through their ownership interests in Holdings.
As a result of the Merger, our assets and liabilities were adjusted to their estimated fair
values as of June 30, 2007. This resulted in a significant increase in the carrying value of our
identified intangible assets and goodwill. In addition, we revalued our pension obligations,
recorded significant deferred tax liabilities and certain deferred tax assets and we incurred
substantial additional indebtedness. The Merger, including the redemption of previous debt and the
payment of related fees and expenses, was financed by equity contributions of $1,425.0, the
issuance of $675.0 aggregate principal amount of 10.25%/11.25% unsecured senior notes due 2015
(Senior Notes), the issuance of $353.3 and 125.0 aggregate principal amount of 10.75% unsecured
senior subordinated notes due 2017 (Senior Subordinated Notes) and senior secured term loan
borrowings under a senior secured credit facility of $615.0 and 600.0 (the Senior Secured Credit
Facility).
54
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The Merger has been reflected as of June 30, 2007 and the consolidated financial statements
reflecting the financial position of the Company as of December 31, 2009 and 2008 and the results
of operations and cash flows for the years ended December 31, 2009 and 2008 and for the period from
June 30 through December 31, 2007 (after giving effect to the consummation of the Merger) are
designated as Successor financial statements. The consolidated financial statements reflecting
the results of operations and cash flows of the Company through the close of business on June 29,
2007 (prior to giving effect to the consummation of the Merger) are designated as Predecessor
financial statements.
(2) Summary of Significant Accounting Policies
The Companys accounting policies are applicable to the Predecessor and Successor financial
statements unless otherwise noted.
(a) Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. For example, significant estimates and assumptions were
made in determining triggering events and in quantifying impairments of our assets (Note 3), the
fair value of our financial instruments (Note 14), the need for valuation allowances on deferred
taxes (Note 11) and the discount rates and expected return on plan assets (Note 12), among others.
Those estimates and assumptions are based on managements best estimates and judgment. Management
evaluates its estimates and assumptions on an ongoing basis using historical experience and other
factors, including the current economic environment, which management believes to be reasonable
under the circumstances. We adjust such estimates and assumptions when we believe relevant facts
and circumstances warrant an adjustment. Current adverse economic conditions, illiquid credit
markets, volatile equity and foreign currency markets, and declines in customer spending have
combined to increase the uncertainty inherent in such estimates and assumptions. As future events
and their effects cannot be determined with precision, actual results could differ significantly
from those estimates. Changes in those estimates resulting from continued changes in the economic
environment will be reflected in our consolidated financial statements in future periods. In
preparation of this Annual Report on Form 10-K, we evaluated events subsequent to December 31, 2009
through the date of issuance.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of VWR Funding, Inc.
and its subsidiaries after elimination of all intercompany balances and transactions. The
consolidated financial statements exclude the accounts of Holdings and VWR Investors, but include
Holdings investment cost basis allocated to assets and liabilities acquired in the Merger.
(c) Foreign Currency Translation
Assets and liabilities of our foreign subsidiaries, where the functional currency is the local
currency, are translated into U.S. dollars using period-end exchange rates, and income and expenses
are translated using average exchange rates. Resulting translation adjustments are reported in
accumulated other comprehensive income as a separate component of stockholders equity. Foreign
currency transaction gains and losses are reported in other income (expense), net within our
statements of operations, except for gains and losses associated with the purchase of inventories
and related derivative financial instruments, which are reported in costs of goods sold within our
statements of operations (see Note 14(c)).
We have a significant amount of foreign-denominated debt on our U.S. dollar-denominated
balance sheet. The translation of foreign-denominated debt obligations on our U.S.
dollar-denominated balance sheet is reported in other income (expense), net as a foreign currency
exchange gain or loss each period. As a result, our operating results are exposed to foreign
currency risk, principally with respect to the Euro. An instantaneous 10.00% change in foreign
currency exchange rates associated with foreign denominated debt outstanding as of December 31,
2009 would have impacted our exchange gains or losses by approximately $93.8 on a pre-tax basis.
55
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Foreign currency exchange gains and losses included in other income (expense), net were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange (losses)
gains, net |
|
$ |
(23.9 |
) |
|
$ |
22.1 |
|
|
$ |
(67.1 |
) |
|
|
$ |
3.1 |
|
During the years ended December 31, 2009, 2008, and 2007, we recorded foreign currency
exchange gains (losses) based primarily on changes in the value of the Euro, the British pound
sterling and the Canadian dollar against the U.S. dollar, as well as the Euro against the British
pound sterling during such time periods. Our net exchange losses for the year ended December 31,
2009 and for the period from June 30 through December 31, 2007 are substantially related to
unrealized losses due to the strengthening of the Euro against the U.S. dollar. Our net exchange
gains for the year ended December 31, 2008 are substantially related to unrealized gains due to the
weakening of the Euro against the U.S. dollar.
(d) Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid investments with original maturities
of three months or less. Our cash equivalents consisted of overnight deposits with major banks and
overnight investments in money market funds. The amount of restricted cash was $0.2 and $0.4 as of
December 31, 2009 and 2008, respectively.
While our global cash pooling arrangement is with a single financial institution with specific
provisions for the right to offset positive and negative cash balances, we believe it is unlikely
that we would offset an underlying cash deficit with a cash surplus from another country.
Accordingly, we classify a positive amount of cash, equal to our aggregate bank overdraft positions
of subsidiaries participating in our global cash pooling arrangement, as a compensating cash
balance separate from cash and cash equivalents. Due to the nature of these bank overdraft
positions, amounts have been classified within the short-term portion of debt as of each period
end.
(e) Trade Accounts Receivable
The carrying amount of trade accounts receivable reflects a reserve representing our estimate
of the amounts that will not be collected and for estimated sales returns and allowances. In
addition to reviewing delinquent accounts receivable, we consider many factors in estimating our
reserve, including historical data, experience, customer types, creditworthiness and economic
trends. From time to time, we may adjust our assumptions for anticipated changes in any of these or
other factors expected to affect collectability.
Trade accounts receivable reflects a diverse customer base and our wide geographic dispersion
of businesses. As a result, no significant concentrations of credit risk existed as of December 31,
2009 and 2008.
(f) Inventories
Inventories, consisting primarily of products held for sale, are valued at the lower of cost
or market, cost being determined by the last-in, first-out (LIFO) method for our U.S.
subsidiaries and the first-in, first-out method for all other subsidiaries. We periodically review
quantities of inventories on hand and compare these amounts to the expected use of each product or
product line. We record a charge to cost of goods sold for the amount required to reduce the
carrying value of inventory to net realizable value. The table below shows the percentage of
inventories determined using the LIFO method and the amount by which the LIFO cost is less than the
current cost for each period.
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Percent using LIFO method |
|
|
55 |
% |
|
|
56 |
% |
Amount less than current cost |
|
$ |
9.9 |
|
|
$ |
6.2 |
|
56
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(g) Property and Equipment
Property and equipment are recorded at cost. Property and equipment held under capital leases
are stated at the present value of minimum lease payments. Depreciation is computed using the
straight-line method as follows: buildings and improvements ranges from 10 to 40 years; equipment
and software ranges from 3 to 15 years. Property and equipment held under capital leases and
leasehold improvements are amortized on a straight-line basis over the shorter of the estimated
useful lives of the assets or the estimated remaining life of the lease. Costs for repairs and
maintenance that do not significantly increase the value or estimated lives of property and
equipment are treated as expense as such costs are incurred.
(h) Impairment of Long-Lived Assets
We evaluate the recoverability of long-lived assets used in operations when events or changes
in circumstances indicate a possible inability to recover carrying amounts. The Company assesses
recoverability by comparing the carrying value of the asset to estimated undiscounted future cash
flows expected to be generated by the asset. If an asset is considered impaired, the impairment
loss to be recognized is measured as the amount by which the assets carrying value exceeds its
fair value.
(i) Goodwill and Intangible Assets
Goodwill primarily represents the excess of acquisition costs over the fair value of net assets
acquired in connection with the Merger and completed acquisitions subsequent to the Merger. Our
intangible assets with finite useful lives primarily relate to customer and supplier relationships
and are amortized over their respective estimated useful lives on a straight-line basis. Our
indefinite-lived intangible assets relate to our trademarks and trade names and are not amortized.
We reevaluate the estimated useful lives of our intangible assets annually. We determined that our
trademarks and trade names have indefinite lives because they do not have legal, regulatory,
contractual, competitive or economic limitations and are expected to contribute to the generation
of cash flows indefinitely.
Goodwill and other intangible assets with indefinite useful lives are not amortized and are tested annually for impairment or between the annual tests if an event or change in circumstance
occurs that would more likely than not reduce the fair value of the asset below its carrying
amount. Other amortizable intangible assets are reviewed for impairment whenever indication of
potential impairment exists.
Indefinite-lived intangible assets are tested for impairment prior to goodwill or amortizable
intangible assets. An impairment charge is measured if the carrying value of an indefinite-lived
intangible asset exceeds its fair value. We evaluate the recoverability of our amortizable
intangible assets by comparing the carrying value to estimated undiscounted future cash flows
expected to be generated. If an amortizable intangible asset is considered impaired, the impairment
loss to be recognized is measured as the amount by which the assets carrying value exceeds its
fair value.
Goodwill impairment testing is performed at the reporting unit level. We have determined that our
reporting units are the same as our business segments and we have elected to perform our annual
impairment testing on October 1st of each year. The goodwill impairment analysis is a
two-step test. The first step (Step 1), used to identify potential impairment, involves comparing
the reporting units estimated fair value to its carrying value, including goodwill. If the
estimated fair value exceeds its carrying value, goodwill is considered not to be impaired. If the
carrying value exceeds its estimated fair value, there is an indication of potential impairment and
the second step is performed to measure the amount of impairment, if any. The second step (Step
2) involves calculating an implied fair value of goodwill. The implied fair value of goodwill is
determined in a manner similar to the amount of goodwill calculated in a business combination. If
the implied fair value of goodwill exceeds the carrying value of goodwill, there is no impairment.
If the carrying value of goodwill exceeds the implied fair value of goodwill, an impairment charge
is recorded for the excess. Goodwill impairments cannot be reversed in subsequent periods.
No impairment losses associated with goodwill and intangible assets were recorded in 2009 or 2007.
During 2008, the Company recognized certain impairment charges. See Note 3.
57
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(j) Advertising
We expense advertising costs as incurred, except for certain direct-response advertising,
which is capitalized and amortized over its expected period of future benefit, generally between 12
to 48 months. Capitalized direct-response advertising, which is included in other current assets
and other assets, consists of catalog production and mailing costs that are expensed over the
estimated useful life from the date catalogs are mailed. Capitalized direct-response advertising as
of December 31, 2009 and 2008 were $5.7 and $7.4, respectively. The table below shows total
advertising expense, including amortization of capitalized direct-response advertising costs, for
each of the reporting periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising expense |
|
$ |
21.8 |
|
|
$ |
24.9 |
|
|
$ |
14.5 |
|
|
|
$ |
11.2 |
|
(k) Revenue Recognition
We record product revenue on a gross basis when persuasive evidence of an arrangement exists,
the price is fixed or determinable, title and risk of loss have been transferred to the customer
and collectibility of the resulting receivable is reasonably assured. Title and risk of loss is
transferred at the time of shipment or upon delivery to customers, depending upon the terms of the
arrangement with the customer. Products are delivered without post-sale obligations to the
customer. Provisions for discounts, rebates to customers, sales returns and other adjustments are
provided for as a reduction of sales in the period the related sales are recorded.
Our service revenues, which are substantially less than our product distribution revenues, are
primarily comprised of technical services, on-site storeroom services, laboratory and furniture
design, supply and installation. Revenues related to technical services and on-site storeroom
services are recognized as the services are performed. Certain of our arrangements to provide
on-site storeroom services contain multiple elements. We recognize revenue separately for each
element based on the fair value of the element provided. The majority of contracts associated with
our laboratory and furniture design, supply and installation are recorded under the
percentage-of-completion method of accounting. Profits recognized on contracts in process are based
upon estimated contract revenue and cost to completion. Cost to completion is measured based on
actual costs incurred to date compared to total estimated costs. Typically, the duration of such
projects does not extend beyond two months.
We record shipping and handling charges billed to customers in net sales and record shipping
and handling costs in cost of goods sold for all periods presented. Sales taxes, value-added taxes
and certain excise taxes collected from customers and remitted to governmental authorities are
accounted for on a net basis and therefore are excluded from net sales.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the expected net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting and income tax purposes and net
operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. We record a valuation allowance to reduce deferred tax assets to the amount that is
more likely than not to be realized.
58
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The Company recognizes the effect of income tax positions only if those positions are more
likely than not to be sustained. Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in recognition or measurement are
reflected in the period in which a change in judgment occurs, as a result of information that
arises or when a tax position is effectively settled. Prior to January 1, 2007, the Company
recognized the effect of income tax positions only if such positions were probable of being
sustained. We recognize accrued interest and penalties related to unrecognized tax benefits as a
component of income tax expense in our consolidated financial statements.
(m) Insurance
We maintain corporate insurance programs with third parties in the areas of executive risk,
commercial property, business interruption and casualty (including product liability). We also
self-insure certain risks inherent in our business which, taken together with the deductible levels
and exclusions contained within our third party programs, results in our recording of accruals for
incurred claims. Our ultimate exposure may be mitigated by amounts we expect to recover from third
parties associated with such claims.
(n) Pensions and Other Postretirement Plans
We have defined benefit plans covering certain of our employees. The benefits include pension,
salary continuance, life insurance and health care. Benefits are accrued over the employees
service period. The Company is required to use actuarial methods and assumptions in the valuation
of defined benefit obligations and the determination of expense. Differences between actual and
expected results or changes in the value of defined benefit obligations and plan assets are not
recognized in earnings as they occur but, rather, systematically over subsequent periods. See Note
12.
(o) Share-Based Compensation
The Company expenses the grant-date fair value of share-based awards over the vesting period
during which services are performed. Share-based compensation expense that has been included in
selling, general and administrative (SG&A) expenses amounted to $3.4, $3.8, $2.7, and $9.0 for
the years ended December 31, 2009 and 2008, for the periods from June 30 through December 31, 2007
and January 1 through June 29, 2007, respectively.
(p) Financial Instruments and Derivatives
All derivatives, whether designated for hedging relationships or not, are recorded on the
balance sheet at fair value. For all hedging relationships the Company formally documents the
hedging relationship and its risk-management objective and strategy, the hedged instrument, the
hedged item, the nature of the risk being hedged, how the hedging instruments effectiveness will
be assessed prospectively and retrospectively, and a description of the method of measuring
ineffectiveness. If the derivative is designated as a fair value hedge, the changes in the fair
value of the derivative and of the hedged item attributable to the hedged risk are recognized in
the results of operations. If the derivative is designated as a cash flow hedge, the effective
portions of changes in the fair value of the derivative are recorded in accumulated other
comprehensive income (loss) and are recognized in the results of operations when the hedged item
affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are
recognized in the results of operations. Cash flows from derivatives which are accounted for as
hedges are classified in the statement of cash flows in the same category as the item being hedged
or on a basis consistent with the nature of the instrument. Cash flows from our interest rate swap
arrangements are classified in the statement of cash flows within operating activities consistent
with the classification of interest. For derivative instruments not designated as hedging
instruments, changes in fair value are recognized in the results of operations in the current
period.
59
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(q) Asset Retirement Obligations
A liability for an asset retirement obligation is recognized at fair value in the period when
the asset is placed in service. The fair value of the liability is estimated using discounted cash
flows. In subsequent periods, the retirement obligation is accreted to its future value or the
estimate of the obligation at the asset retirement date. The accretion charge is reflected as a
component of SG&A expenses. A corresponding retirement asset equal to the fair value of the
retirement obligation when the asset is placed in service is also recorded as part of the carrying
amount of the related long-lived asset and depreciated over the assets useful life. Our
conditional asset retirement obligations primarily relate to restoration costs for leased
facilities, including the removal of certain leasehold improvements. Costs related to our asset
retirement obligations are not material.
(r) Comprehensive Income (Loss)
Other comprehensive income (loss) components include foreign currency translation adjustments,
pension and other postretirement benefit plan adjustments and realized and unrealized gains
(losses) on derivatives. Accumulated other comprehensive income (loss), net of tax, consists of:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Foreign currency translation adjustments |
|
$ |
78.5 |
|
|
$ |
10.1 |
|
Realized loss on derivatives, net of taxes of $5.9 and $8.1 |
|
|
(10.5 |
) |
|
|
(13.7 |
) |
Unrealized (loss) gain on derivatives, net of taxes of
$1.6 in 2008 |
|
|
(0.2 |
) |
|
|
3.5 |
|
Retirement benefit plans, net of taxes of $9.1 and $21.5 |
|
|
10.8 |
|
|
|
31.7 |
|
|
|
|
|
|
|
|
|
|
$ |
78.6 |
|
|
$ |
31.6 |
|
|
|
|
|
|
|
|
Comprehensive income (loss) is determined as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
December 31, |
|
|
December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(14.1 |
) |
|
$ |
(334.6 |
) |
|
$ |
(49.0 |
) |
|
|
$ |
(25.6 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
68.4 |
|
|
|
(107.2 |
) |
|
|
117.3 |
|
|
|
|
25.8 |
|
Benefit plan adjustments, net of taxes(1) |
|
|
(19.6 |
) |
|
|
32.1 |
|
|
|
(0.4 |
) |
|
|
|
|
|
Realized (loss) on derivatives, net of $4.6 taxes |
|
|
|
|
|
|
|
|
|
|
(7.3 |
) |
|
|
|
|
|
Unrealized (loss) gain on derivatives, net of taxes(2) |
|
|
(3.7 |
) |
|
|
8.7 |
|
|
|
(14.0 |
) |
|
|
|
(1.1 |
) |
Amortization of realized losses on derivatives, net of
taxes(3) |
|
|
3.2 |
|
|
|
1.9 |
|
|
|
0.5 |
|
|
|
|
|
|
Amortization of net actuarial gain, net of $0.9 taxes |
|
|
(1.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
32.9 |
|
|
$ |
(399.1 |
) |
|
$ |
47.1 |
|
|
|
$ |
(0.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Benefit plan adjustments are net of taxes of $12.4, $22.0 and $0.5 for the years ended
December 31, 2009 and 2008 and for the period from June 30 through December 31, 2007,
respectively. |
|
(2) |
|
Unrealized (loss) gain on derivatives is net of taxes of $1.5, $5.5, $9.4 and $0.5 for
the years ended December 31, 2009 and 2008 and for the periods from June 30 through
December 31, 2007 and January 1 through June 29, 2007, respectively. |
|
(3) |
|
Amortization of realized losses on derivatives is net of taxes of $2.2, $1.5 and $0.3
for the years ended December 31, 2009 and 2008 and for the period from June 30 through
December 31, 2007, respectively. |
60
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(s) Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
200.7 |
|
|
$ |
242.8 |
|
|
$ |
89.0 |
|
|
|
$ |
51.8 |
|
Cash paid for income
taxes, net |
|
|
32.7 |
|
|
|
28.1 |
|
|
|
25.7 |
|
|
|
|
14.1 |
|
See Note 10(e) for information on non-cash capital lease additions during the year ended
December 31, 2009.
(t) New Accounting Standards
The following accounting standards were adopted during 2009:
Accounting Standards Codification
In June 2009, the Financial Accounting Standards Board (FASB) established the FASB
Accounting Standards Codification (ASC) as the single official source of authoritative,
nongovernmental U.S. generally accepted accounting principles (GAAP). The ASC did not change GAAP
but reorganizes the literature. The ASC became effective for the Company as of September 30, 2009.
The ASC had no impact on our consolidated financial statements.
Fair Value Measurements and Disclosures
ASC Topic 820, Fair Value Measurements and Disclosures, establishes a framework for measuring
fair value and provides for disclosure of fair value measurements. We adopted the provisions of ASC
Topic 820 with respect to our financial assets and liabilities measured at fair value on a
recurring basis on January 1, 2008. We adopted the provisions of ASC Topic 820 with respect to our
non-financial assets and liabilities that are not required or permitted to be measured at fair
value on a recurring basis on January 1, 2009. Non-recurring non-financial assets and liabilities
include those measured at fair value for indefinite-lived intangible asset and goodwill impairment
testing, asset retirement obligations initially measured at fair value and those initially measured
at fair value in a business combination. See Note 14.
In September 2009, the FASB amended ASU Topic 820 by providing additional guidance about
measuring the fair value of liabilities. The new guidance addresses the impact of transfer
restrictions on the fair value of a liability and the ability to use the fair value of a liability
that is traded as an asset as an input to the valuation of the underlying liability. We adopted the
new guidance as of September 30, 2009 with respect to our determination and disclosure of the fair
value of our Senior Notes, which are traded as an asset. See Note 14.
61
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Derivatives & Hedging
In March 2008, the FASB issued a pronouncement pertaining to disclosures about derivative
instruments and hedging activities. This guidance requires entities to provide disclosures about
how and why derivative instruments are used, how derivative instruments and related hedged items
are accounted for, and how derivative instruments and related hedged items affect financial
position, financial performance and cash flows. Certain disclosures required by this guidance
became effective for the Company on January 1, 2009. See Note 14 for related disclosures.
Business Combinations
ASC Topic 805, Business Combinations, revised accounting practices related to business
combinations. We applied the principles of ASC Topic 805 to our business combinations for which the
acquisition date was after January 1, 2009 and when accounting for valuation allowances on deferred
taxes and acquired tax contingencies for prior business combinations. There was no financial
statement impact upon our adoption of the provisions of ASC Topic 805.
Defined Benefit Plans Pensions
In December 2008, the FASB issued guidance which requires increased disclosure concerning
benefit plan assets. This guidance became effective for the Companys disclosures as of December
31, 2009. See Notes 12 and 14 for related disclosures.
In September 2009, the FASB provided additional guidance on using the net asset value per
share, provided by an investee, when estimating the fair value of an alternate investment that does
not have a readily determinable fair value and enhanced required disclosures concerning these
investments. Examples of alternate investments, within the scope of this standard, include
investments in hedge funds and private equity, real estate, and venture capital partnerships. Our
adoption of this guidance as of December 31, 2009 did not have any impact on our financial position
or results of operations. See Notes 12 and 14 for related disclosures.
The following accounting standards will be adopted in the future:
Revenue
Recognition
In October 2009, the FASB issued updated revenue recognition guidance which eliminates the
requirement that all undelivered elements have vendor specific objective evidence of selling price
or third party evidence of selling price before an entity can recognize the portion of an overall
arrangement fee that is attributable to items that already have been delivered. Additionally, the
new guidance will require entities to disclose more information about their multiple-element
revenue arrangements. This update is expected to become effective for the Company on January 1,
2011 and will be applied prospectively for revenue arrangements entered into or materially modified
after such date. Early adoption is permitted. The Company expects that the adoption of this
guidance will not have a material impact on its consolidated financial statements.
Fair
Value Measurements and Disclosures
In January 2010, the FASB issued updated guidance to amend the disclosure requirements related
to recurring and nonrecurring fair value measurements. This updated guidance requires new
disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the
fair value hierarchy and requires a reconciliation of recurring Level 3 measurements including
purchases, sales, issuances and settlements on a gross basis. This update will become effective for
the Company with the interim and annual reporting period beginning January 1, 2010, except for the
requirement to provide the additional Level 3 activity on a gross basis, which will become
effective for the Company with the interim and annual reporting period beginning January 1, 2011.
The Company will not be required to provide the amended disclosures for any previous periods
presented for comparative purposes. Other than requiring additional disclosures, our adoption of
this updated guidance will not have a material impact on the Companys consolidated financial
statements.
62
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(3) Impairment
We carry significant amounts of goodwill and intangible assets, including indefinite-lived
intangible assets, on our balance sheet, as a result of the Merger and completed acquisitions
subsequent to the Merger.
2009 Assessments
We observed a decline in the operating results of Science Education during the
seasonally-significant third calendar quarter of 2009. We were also aware of the reduction in
spending by schools due to the general economic conditions in the United States and the impact that
unresolved state budgets have had on results and, accordingly, as of September 30, 2009, we reduced
forecasted sales in the near term. As a result, we performed an interim impairment test of Science
Educations goodwill and intangible assets as of September 30, 2009. We determined that there was
no measured impairment of the intangible assets. Our evaluation of reporting unit goodwill revealed
a failure of Step 1. However, our Step 2 measurement of the implied fair value of goodwill exceeded
the carrying value of goodwill primarily as a result of a decrease in
the fair value of amortizable intangible assets. Accordingly, we did not recognize any impairment charges. As of
September 30, 2009, any decrease in the fair value of our Science Education reporting unit would likely result in impairment charges.
As of our latest annual assessment of our indefinite-lived intangible assets and goodwill on
October 1, 2009, we determined that there was no measured impairment of our indefinite-lived
intangible assets and that the estimated fair values of our North American Lab and European Lab
reporting units each exceeded its respective carrying value. Accordingly, no impairment was
recognized. The amount by which the estimated fair value exceeded its carrying value was
approximately $90.0 in our North American Lab reporting unit and was approximately $300.0 in our European Lab reporting unit.
The December 2009 German appellate court ruling on our and Merck KGaAs appeal of the German
Federal Cartel Offices order relating to our exclusive European Distribution Agreement had the
potential to negatively affect our operations in Germany (see Note 15(b)). Consequently, we tested
the recoverability of our chemical supply agreement intangible asset, relating to the entire
geographic scope of the European Distribution Agreement, as of December 31, 2009 (see Note 5).
There was no impairment recognized, as the fair value exceeded the respective carrying value.
See Note 14(e) for a discussion of our non-recurring fair value measurements made in connection
with our impairment testing of goodwill and intangible assets as of September 30, October 1 and
December 31, 2009.
2008 Assessments
During the fourth quarter of 2008, the Company conducted the required annual test of goodwill
for impairment as of October 1, 2008. There was no indicated impairment for our North American Lab
and European Lab reporting units, as the estimated fair value exceeded its corresponding carrying
value. However, as a result of a decline in operating results in our Science Education reporting
unit and due to a decline in forecasted cash flows, we recognized an impairment of goodwill and
intangible assets of $99.0.
As of December 31, 2008, based on an adverse change in the general business climate as a
result of the global economic slowdown, the Company determined an impairment test was required for
all reporting units, including tests of long-lived assets, indefinite-lived intangible assets and
goodwill. As a result of our impairment tests, we recognized aggregate impairment charges of
$293.1, relating to the impairment of goodwill and intangible assets. We believe that the
impairment charges recognized in our North American Lab and European Lab reporting units were
primarily a result of macroeconomic factors (global recession and volatility in the financial
markets), while the charges recognized in our Science Education reporting unit were due to a mix of
macroeconomic and industry-specific factors (reduction in discretionary spending by schools).
63
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
These impairment charges reduced the carrying value of our reporting units during the fourth
quarter of 2008 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
European |
|
|
Science |
|
|
|
|
|
|
American Lab |
|
|
Lab |
|
|
Education |
|
|
Total |
|
Asset category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets |
|
$ |
106.6 |
|
|
$ |
88.0 |
|
|
$ |
39.0 |
|
|
$ |
233.6 |
|
Goodwill |
|
|
95.5 |
|
|
|
|
|
|
|
63.0 |
|
|
|
158.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment charges |
|
$ |
202.1 |
|
|
$ |
88.0 |
|
|
$ |
102.0 |
|
|
$ |
392.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) Business Combinations and Acquisitions
(a) The Merger
The Merger was accounted for under the purchase method of accounting. The following table
summarizes the allocation of the purchase price as of December 31, 2007:
|
|
|
|
|
Merger consideration, including transaction costs of $108.8 |
|
$ |
4,002.0 |
|
Net current assets |
|
|
(986.0 |
) |
Property and equipment |
|
|
(188.3 |
) |
Intangible assets acquired |
|
|
(2,331.9 |
) |
Other assets |
|
|
(26.3 |
) |
Current liabilities |
|
|
595.1 |
|
Non-current liabilities |
|
|
83.9 |
|
Deferred taxes |
|
|
783.6 |
|
|
|
|
|
Goodwill |
|
$ |
1,932.1 |
|
|
|
|
|
Merger consideration in the consolidated statement of cash flows for the period June 30
through December 31, 2007 of $3,802.9, excludes cash and cash equivalents acquired of $135.8,
management equity in the Predecessor of $35.6 exchanged for equity in Holdings and payments made in
July 2007 related to the repayment of debt and interest of $25.7 and other liabilities of $2.0.
Included in Merger consideration are pre-payment penalties and tender offer premiums of $93.0
related to debt obligations of the Company that were redeemed in connection with the Merger. See
Note 5 for adjustments to Merger allocation during 2008.
64
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(b) Successor Acquisitions
Our results of operations for the years ended December 31, 2009 and 2008 and during the period
from June 30 through December 31, 2007 includes the effects of certain business combinations and
acquisitions noted below:
|
|
|
On July 2, 2007, we acquired Bie & Berntsen A-S (B&B), a Danish scientific laboratory
supply distributor. |
|
|
|
On November 1, 2007, we acquired Omnilabo International B.V. (Omnilabo BV), a
Netherlands-based scientific laboratory supply distributor. |
|
|
|
On April 1, 2008, we acquired Jencons (Scientific) Limited (Jencons), a scientific
laboratory supply distributor. Based in the UK, Jencons also has operations in Ireland,
Kenya and the United States. |
|
|
|
On August 1, 2008, we acquired Spektrum-3d Kft (Spektrum), a Hungarian-based
scientific laboratory supply distributor. |
|
|
|
On October 1, 2008, we acquired Omnilab AG (Omnilab), a Swiss scientific laboratory
supply distributor. |
|
|
|
On October 1, 2009, we acquired X-treme Geek (XGeek), a domestic internet-based
retailer offering high-tech gadgets and accessories to the technically inclined. |
|
|
|
On December 1, 2009, we acquired OneMed Lab (OneMed), a scientific laboratory supply
distributor operating in Finland, Norway and Sweden. |
The results of B&B, Omnilabo BV, Jencons, Spektrum, Omnilab and OneMed (collectively, the EU
Successor Acquisitions) have been included in the European Lab segment from the dates of
acquisition. The results of XGeek have been included in our Science Education segment from October
1, 2009. We refer to the EU Successor Acquisitions together with the acquisition of XGeek as the
Successor Acquisitions. The Successor Acquisitions were funded through a combination of cash and
cash equivalents on hand and, to a limited extent, incremental borrowings made under the Companys Senior Secured Credit
Facility. The accumulated excess of the purchase price over the fair value of the acquired net
assets of the Successor Acquisitions is summarized below:
|
|
|
|
|
Purchase price |
|
$ |
106.8 |
|
Net tangible assets acquired |
|
|
2.2 |
|
Intangible assets acquired |
|
|
38.5 |
|
|
|
|
|
Goodwill |
|
$ |
66.1 |
|
|
|
|
|
(c) Predecessor Acquisition
Prior to April 2007, we had a 24% investment in KMF Laborchemie Handels GmbH (KMF), which
was accounted for using the equity method. On April 2, 2007, we acquired the remaining 76% interest
in KMF and discontinued equity method treatment, as KMF became a consolidated subsidiary. Equity
income, included in other income (expense), net for the period from January 1 through June 29, 2007
was $0.4.
The purchase price was funded from cash and cash equivalents on hand. KMF is a German-based
scientific laboratory supply distribution firm that offers highly diversified chemicals and
consumable products to the laboratory industry in Germany. The results of KMF have been included in
the European Lab segment from the date of acquisition on a consolidated basis.
65
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(d) Pro-Forma Financial Information
The following unaudited pro-forma financial information presents a summary of consolidated
results of operations of the Company as if the Merger, the acquisition of KMF and the Successor
Acquisitions had occurred on January 1, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007(1) |
|
|
Net sales |
|
$ |
3,587.7 |
|
|
$ |
3,828.1 |
|
|
$ |
3,669.8 |
|
Loss before income taxes |
|
|
(38.3 |
) |
|
|
(445.7 |
) |
|
|
(187.9 |
) |
Net loss |
|
|
(13.6 |
) |
|
|
(331.3 |
) |
|
|
(115.9 |
) |
|
|
|
(1) |
|
Represents the mathematical sum of the 2007 Predecessor (January 1
through June 29, 2007) and Successor (June 30 through December 31,
2007) periods, including pro-forma adjustments. |
These pro-forma results have been prepared for comparative purposes only and primarily include
pro-forma adjustments for interest expense including non-cash amortization of deferred financing
costs, depreciation, amortization and income taxes. The pro-forma results also include an
adjustment to remove the effect of the Companys accounting for KMF as an equity method investment
prior to April 1, 2007. The pro-forma results assume interest rates in effect as of December 31,
2009 and further that certain effective interest rate swaps were established as of January 1, 2007,
in the same notional amounts and with identical terms as the actual interest rate swaps entered
into upon the Merger. These results do not purport to be indicative of the results of operations
which actually would have resulted had the Merger, the acquisition of KMF and the Successor
Acquisitions occurred at the beginning of 2007, or of the future results of operations of the
Company.
(5) Goodwill and Other Intangible Assets
The following tables reflect changes in the carrying value of goodwill by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
European |
|
|
Science |
|
|
|
|
|
|
American Lab |
|
|
Lab |
|
|
Education |
|
|
Total |
|
|
Balance at January 1, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
1,022.2 |
|
|
$ |
843.0 |
|
|
$ |
99.6 |
|
|
$ |
1,964.8 |
|
Accumulated impairment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,022.2 |
|
|
|
843.0 |
|
|
|
99.6 |
|
|
|
1,964.8 |
|
Adjustments to Merger allocation |
|
|
3.3 |
|
|
|
3.7 |
|
|
|
(0.1 |
) |
|
|
6.9 |
|
Successor Acquisitions |
|
|
|
|
|
|
32.6 |
|
|
|
|
|
|
|
32.6 |
|
Goodwill impairment charges
(Note 3) |
|
|
(95.5 |
) |
|
|
|
|
|
|
(63.0 |
) |
|
|
(158.5 |
) |
Currency translation changes |
|
|
(14.3 |
) |
|
|
(46.8 |
) |
|
|
|
|
|
|
(61.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
1,011.2 |
|
|
|
832.5 |
|
|
|
99.5 |
|
|
|
1,943.2 |
|
Accumulated impairment losses |
|
|
(95.5 |
) |
|
|
|
|
|
|
(63.0 |
) |
|
|
(158.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
915.7 |
|
|
|
832.5 |
|
|
|
36.5 |
|
|
|
1,784.7 |
|
Successor Acquisitions |
|
|
|
|
|
|
4.6 |
|
|
|
|
|
|
|
4.6 |
|
Currency translation changes |
|
|
9.4 |
|
|
|
29.9 |
|
|
|
|
|
|
|
39.3 |
|
Other |
|
|
4.8 |
|
|
|
(0.4 |
) |
|
|
|
|
|
|
4.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
1,025.4 |
|
|
|
866.6 |
|
|
|
99.5 |
|
|
|
1,991.5 |
|
Accumulated impairment losses |
|
|
(95.5 |
) |
|
|
|
|
|
|
(63.0 |
) |
|
|
(158.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
929.9 |
|
|
$ |
866.6 |
|
|
$ |
36.5 |
|
|
$ |
1,833.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
During
the year ended December 31, 2009 and 2008, we reclassified $6.6
and $5.8, respectively,
from goodwill to identifiable intangible assets relating to customer relationships and other
amortizable intangible assets in our European Lab segment as a result of our finalization of
purchase accounting for acquisitions completed in 2008 and 2007, respectively. The North American Lab other adjustments for 2009
represents an inconsequential correction of an error related to various consolidation adjustments for periods prior to the Merger.
Management believes that the correction is inconsequential to any previously reported
annual or interim consolidated financial statements.
Other intangible assets, net for each of the reporting periods is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Amortization |
|
|
December 31, |
|
|
|
Period (Years) |
|
|
2009 |
|
|
2008 |
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships in North America (net of accumulated amortization of $93.8 and $55.5) |
|
|
20.0 |
|
|
$ |
657.1 |
|
|
$ |
685.4 |
|
Customer relationships in Europe (net of accumulated amortization of $64.1 and $36.3) |
|
|
19.5 |
|
|
|
449.1 |
|
|
|
446.4 |
|
Customer relationships in Science Education (net of accumulated amortization of $16.4 and
$9.8) |
|
|
20.0 |
|
|
|
114.8 |
|
|
|
121.2 |
|
Chemical supply agreement (net of accumulated amortization of $20.6 and $11.9) |
|
|
7.0 |
|
|
|
36.9 |
|
|
|
43.7 |
|
Other (net of accumulated amortization of $7.9 and $5.0) |
|
|
6.4 |
|
|
|
11.1 |
|
|
|
13.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Total amortizable intangible assets (net of accumulated amortization of $202.8 and $118.5) |
|
|
19.3 |
|
|
|
1,269.0 |
|
|
|
1,309.9 |
|
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and tradenames |
|
|
|
|
|
|
717.7 |
|
|
|
703.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net |
|
|
|
|
|
$ |
1,986.7 |
|
|
$ |
2,012.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for each of the reporting periods is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense |
|
$ |
81.6 |
|
|
$ |
82.4 |
|
|
$ |
39.6 |
|
|
|
$ |
7.8 |
|
The estimated amortization expense for each of the five succeeding years and thereafter is as
follows:
|
|
|
|
|
Year ended December 31: |
|
|
|
|
2010 |
|
$ |
83.0 |
|
2011 |
|
|
81.7 |
|
2012 |
|
|
80.8 |
|
2013 |
|
|
80.6 |
|
2014 |
|
|
76.2 |
|
Thereafter |
|
|
866.7 |
|
|
|
|
|
|
|
$ |
1,269.0 |
|
|
|
|
|
67
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(6) Cost Reduction Initiatives
The Company has undertaken cost reduction initiatives at acquired businesses, and from time to
time, outside the context of an acquisition. Cost reduction initiatives typically include severance
and facility closure costs. Expenses associated with such actions recognized in our statements of
operations during the year ended December 31, 2009 and 2008 and for the periods included in the
year ended December 31, 2007 were $11.4, $4.2 and $1.0, respectively. As of December 31, 2009 and
2008, $4.9 and $6.7, respectively, of our aggregate liabilities are included in accrued expenses
and $4.0 and $1.1, respectively, are included in other long-term liabilities.
(7) Property and Equipment
Property and equipment, net, for each of the reporting periods is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Land |
|
|
16.6 |
|
|
$ |
16.8 |
|
Buildings and improvements |
|
|
112.2 |
|
|
|
102.1 |
|
Equipment and computer software |
|
|
128.7 |
|
|
|
106.9 |
|
Capital additions in process |
|
|
13.4 |
|
|
|
8.1 |
|
|
|
|
|
|
|
|
|
|
|
270.9 |
|
|
|
233.9 |
|
Less accumulated depreciation |
|
|
(79.5 |
) |
|
|
(43.8 |
) |
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
191.4 |
|
|
$ |
190.1 |
|
|
|
|
|
|
|
|
Depreciation expense, including amortization of assets recorded under capital leases, for each
of the reporting periods is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
$ |
35.0 |
|
|
$ |
33.7 |
|
|
$ |
13.6 |
|
|
|
$ |
11.6 |
|
(8) Accounts Payable
The Company maintains a centralized cash management system for certain domestic accounts
payable functions. Included in accounts payable as of December 31, 2009 and 2008 are $1.7 and $6.1,
respectively, of uncleared payments.
68
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(9) Accrued Expenses
The components of accrued expenses for each of the reporting periods is shown in the table
below:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Other accrued expenses |
|
$ |
69.1 |
|
|
$ |
66.4 |
|
Employee-related accruals |
|
|
63.8 |
|
|
|
61.1 |
|
Accrued interest |
|
|
0.2 |
|
|
|
32.2 |
|
Deferred income taxes |
|
|
12.0 |
|
|
|
15.7 |
|
Income taxes payable |
|
|
8.2 |
|
|
|
7.7 |
|
Cost reduction-related accruals |
|
|
4.9 |
|
|
|
6.7 |
|
|
|
|
|
|
|
|
|
|
$ |
158.2 |
|
|
$ |
189.8 |
|
|
|
|
|
|
|
|
As discussed in Note 10(b), we have classified $35.0 of accrued but unpaid interest on our
Senior Notes as of December 31, 2009 within the long-term portion of debt in the accompanying
balance sheet.
(10) Debt
The following is a summary of our debt obligations:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Senior Secured Credit Facility |
|
$ |
1,495.3 |
|
|
$ |
1,504.8 |
|
Senior Notes |
|
|
710.0 |
|
|
|
675.0 |
|
Senior Subordinated Notes |
|
|
541.4 |
|
|
|
527.3 |
|
Compensating cash balance |
|
|
105.0 |
|
|
|
100.7 |
|
Capital leases |
|
|
17.9 |
|
|
|
5.6 |
|
Predecessor Senior Subordinated Notes |
|
|
1.0 |
|
|
|
1.0 |
|
Other debt |
|
|
1.1 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
Total debt |
|
|
2,871.7 |
|
|
|
2,815.6 |
|
Less short-term portion |
|
|
(152.4 |
) |
|
|
(165.0 |
) |
|
|
|
|
|
|
|
Total long term-portion |
|
$ |
2,719.3 |
|
|
$ |
2,650.6 |
|
|
|
|
|
|
|
|
The following table summarizes the principal maturities of our debt as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
Thereafter |
|
|
Total |
|
|
Senior Secured Credit Facility term loans |
|
$ |
20.9 |
|
|
$ |
8.7 |
|
|
$ |
14.8 |
|
|
$ |
14.8 |
|
|
$ |
1,412.7 |
|
|
$ |
|
|
|
$ |
1,471.9 |
|
Senior Secured Credit Facility revolving
facility |
|
|
23.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.4 |
|
Senior Notes due 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
710.0 |
|
|
|
710.0 |
|
Senior Subordinated Notes due 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
541.4 |
|
|
|
541.4 |
|
Compensating cash balance |
|
|
105.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105.0 |
|
Capital leases |
|
|
2.0 |
|
|
|
2.3 |
|
|
|
2.2 |
|
|
|
2.2 |
|
|
|
1.8 |
|
|
|
7.4 |
|
|
|
17.9 |
|
Predecessor Senior Subordinated Notes due 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0 |
|
|
|
|
|
|
|
1.0 |
|
Other debt |
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
152.4 |
|
|
$ |
11.0 |
|
|
$ |
17.0 |
|
|
$ |
17.0 |
|
|
$ |
1,415.5 |
|
|
$ |
1,258.8 |
|
|
$ |
2,871.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(a) Senior Secured Credit Facility
Our Senior Secured Credit Facility is with a syndicate of lenders and provides for aggregate
maximum borrowings consisting of (1) term loans denominated in Euros in an aggregate principal
amount currently outstanding of 597.0 ($860.0 on a U.S. dollar equivalent basis as of December 31,
2009), (2) term loans denominated in U.S. dollars in an aggregate principal amount currently
outstanding of $611.9 and (3) a multi-currency revolving loan facility, providing for an equivalent
in U.S. dollars of up to $250.0 in multi-currency revolving loans (inclusive of swingline loans of
up to $25.0 and letters of credit of up to $70.0). The multi-currency revolving loan facility
permits one or more of our foreign subsidiaries to become foreign borrowers under such facility
upon the satisfaction of certain conditions.
Subject to the Companys continued compliance with its covenants, the Company may at any time
or from time to time request additional tranches of term loans or increases in the amount of
commitments under the Senior Secured Credit Facility. The actual extension of any such incremental
term loans or increases in commitments would be subject to the Company and existing and any new
lenders reaching agreement on applicable terms and conditions, which may depend on market
conditions at the time of any request. Additionally, the total amount outstanding under any
incremental new tranches of term loans or incremental new revolving credit commitments may not
exceed in aggregate the lesser of $300.0 or an amount which would cause the Company to exceed
certain ratios. To present, the Company has not requested any such incremental term loans or credit
commitments.
As of December 31, 2009, an aggregate U.S. dollar equivalent of $23.4 was outstanding under
the multi-currency revolving loan facility as a result of £14.4 outstanding in revolving loans. In
addition, we had $13.5 of undrawn letters of credit outstanding. As of December 31, 2009, we had
$213.1 of available borrowing capacity under the multi-currency revolving loan facility.
Maturity; Prepayments
The term loans will mature on June 30, 2014 and the multi-currency revolving loan facility
will mature on June 30, 2013. Subject to any mandatory or optional prepayments, the principal
amounts of the term loans require quarterly amortization payments commencing on September 30, 2009
equal to 0.25% of their respective original principal amounts drawn, with the final amortization
payments due at maturity.
Based on an excess cash flow calculation required by the Senior Secured Credit Facility for the
year ended December 31, 2009, the Company is required to make a principal repayment of $20.9
on the outstanding term loans in March 2010. The excess cash flow payment will be applied
against the Companys scheduled installments of principal due in respect of the term
loans in 2010 and part of 2011. We have classified the excess cash flow payment within the short term
portion of debt in the accompanying balance sheet as of December 31, 2009.
Security; Guarantees
The obligations under the Senior Secured Credit Facility are guaranteed by VWR Investors, the
Company and each of the Companys wholly owned U.S. subsidiaries other than its U.S. foreign
subsidiary holding companies (collectively, the Subsidiary Guarantors). In addition, the Senior
Secured Credit Facility and the guarantees thereunder are secured by (1) security interests in and
pledges of or liens on substantially all of the tangible and intangible assets of VWR Investors,
the Company and the Subsidiary Guarantors and (2) pledges of 100% of the capital stock of each of
the Subsidiary Guarantors and 65% of the capital stock of each of its U.S. foreign subsidiary
holding companies.
70
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Interest
At our election, the interest rates on all U.S. dollar loans, other than swingline loans, may
generally be based on either (1) the then applicable British Bankers Association London Interbank
Offered Rate (commonly known as U.S. Libor) plus a variable margin, or (2) the then applicable
alternate base rate (defined as the greater of the U.S. Prime lending rate or the Federal Funds
effective rate plus 0.5%) plus a variable margin. Swingline loans shall be denominated only in U.S.
dollars and based on the alternate base rate plus a variable margin. All loans denominated in
Canadian dollars may generally be based on either (1) the then applicable Canadian prime interest
rate plus a variable margin, or (2) the then applicable average offered interest rate for Canadian
bankers acceptances plus a variable margin. All loans denominated in Euros shall generally be
based on the then applicable interest rate determined by the Banking Federation of the European
Union (commonly known as the Euribor rate) plus a variable margin. All loans denominated in
currencies other than U.S. dollars, Canadian dollars and Euros shall generally be based on the then
applicable London Interbank Offered Rate for each respective loan and currency of denomination plus
a variable margin.
As of December 31, 2009, the interest rates on the U.S. dollar-denominated and
Euro-denominated term loans were 2.73% and 2.97%, respectively, which include a variable margin of
2.5%, and amounts drawn under the multi-currency revolving loan facility bear interest at a rate of
3.02%. As of December 31, 2009, there were no loans under our Senior Secured Credit Facility
denominated in currencies other than the U.S. dollar, Euro and British pound sterling. See Note
14(c) for related interest rate swap arrangements.
Fees
The Company pays quarterly fees with respect to the Senior Secured Credit Facility, including
(1) a commitment fee equal to 0.50% per year on the unused portion of the multi-currency revolving
loan facility (subject to two step downs if certain net leverage ratios are met), and (2) letter of
credit fees consisting of a participation fee (equal to the then applicable Eurodollar variable
margin on the multi-currency revolving loan facility times any outstanding letters of credit), a
fronting fee (equal to 0.125% on the outstanding undrawn letters of credit paid to the issuing
bank) and administrative fees.
(b) Senior Notes and Senior Subordinated Notes
Ranking
The Senior Notes and Senior Subordinated Notes, and related guarantees, are unsecured
obligations of the Company and are subordinate to all of the Companys and the Subsidiary
Guarantors obligations under all secured indebtedness, including any borrowings under the Senior
Secured Credit Facility to the extent of the value of the assets securing such obligations, and are
effectively subordinate to all obligations of each of the Companys subsidiaries that is not a
guarantor of the Senior Notes or the Senior Subordinated Notes (as the case may be). The Senior
Notes, and related guarantees, rank senior in right of payment to all of the Companys and the
Subsidiary Guarantors existing and future subordinated indebtedness, including the Senior
Subordinated Notes.
71
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Maturity; Interest Payments
The Senior Notes, which amount to $710.0 as of December 31, 2009, will mature on July 15,
2015. Interest on the Senior Notes is payable twice a year, on each January 15 and July 15. For any
interest period through July 15, 2011, the Company may elect to pay interest on the Senior Notes
(1) entirely in cash (Cash Interest), (2) entirely by increasing the principal amount of the
Senior Notes (PIK Interest) or (3) 50% as Cash Interest and 50% as PIK Interest. PIK Interest
accrues on the Senior Notes at a rate per annum equal to the Cash Interest rate of 10.25% plus 100
basis points. Prior to July 15, 2009, the Company paid its Senior Note interest obligations as Cash
Interest. On June 25, 2009, we made an election to pay PIK Interest for the semi-annual interest
period commencing July 15, 2009 and ending on January 15, 2010. Accordingly, we have classified
$35.0 of accrued but unpaid interest on our Senior Notes as of December 31, 2009 within the
long-term portion of debt in the accompanying balance sheet. The Company did not make an election
to pay PIK Interest for the interest period ending on July 15, 2010 and so it must satisfy the
related interest payment with Cash Interest. Under the terms of the Senior Notes, if the Company
were to make a 100% PIK Interest election for the two remaining semi-annual interest periods for
which is entitled to do so, it would be required to make a mandatory principal redemption payment
on July 15, 2012 of approximately $47.2.
The Senior Subordinated Notes are denominated in Euros in an aggregate principal amount
currently outstanding of 126.9 ($182.7 on a U.S. dollar equivalent basis as of December 31, 2009)
and in U.S. dollars in an aggregate principal amount currently outstanding of $358.7. The Senior
Subordinated Notes will mature on June 30, 2017. Interest on the Senior Subordinated Notes is
payable quarterly on March 31, June 30, September 30 and December 31 of each year, beginning on
September 30, 2007. On any interest payment date through and including March 31, 2010, the Company
will have the option to capitalize up to approximately 28% per annum of the interest payable on
such date by capitalizing such interest and adding it to the then outstanding principal amount of
the Senior Subordinated Notes. In the absence of such an election for any interest payment date,
all of the interest on the Senior Subordinated Notes is payable entirely in cash. The interest rate
on the Senior Subordinated Notes does not change if the Company makes an election to capitalize
interest. On June 25 and September 21, 2009, we made elections to capitalize an aggregate amount of
approximately $5.3 and 1.9 ($2.7 on a U.S. dollar equivalent basis as of December 31, 2009) of
cash interest payable on our Senior Subordinated Notes for the June 30 and September 30, 2009
interest payment dates. The Company paid Cash Interest for the December 31, 2009 payment date. The
Company will not be required to make a mandatory redemption payment in connection with any past or
future elections to capitalize interest on the Senior Subordinated Notes.
Guarantees
The obligations under the Senior Notes and Senior Subordinated Notes are guaranteed, jointly
and severally and fully and unconditionally, on an unsubordinated basis by each of the Subsidiary
Guarantors. The Subsidiary Guarantors obligations under the guarantees of the Senior Notes and
Senior Subordinated Notes are not secured by any of the Companys assets or the Subsidiary
Guarantors assets.
Redemption
The Company may redeem some or all of the Senior Notes at any time prior to July 15, 2011 at a
price equal to 100% of the principal amount, plus any accrued and unpaid interest to the date of
redemption, plus a declining make whole premium. Before July 15, 2011, the Company may redeem up
to 35% of the original aggregate principal amount of the Senior Notes at a redemption price equal
to 110.250% of their aggregate principal amount, plus accrued interest, with the net cash proceeds
of certain equity offerings. In addition, on or after July 15, 2011, the Company may redeem some or
all of the Senior Notes at any time at declining redemption prices that start at 105.125% of their
aggregate principal amount and are reduced to 100% of their aggregate principal amount on or after
July 15, 2013. The Company is required to offer to purchase the Senior Notes at 101% of their
aggregate principal amount, plus accrued interest to the repurchase date, if it experiences
specific kinds of changes in control.
72
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The Company may redeem some or all of the Senior Subordinated Notes at any time prior to June
30, 2012 at a price equal to 100% of the principal amount, plus any accrued and unpaid interest to
the date of redemption, plus a declining make whole premium. Before June 30, 2012, the Company
may redeem up to 40% of the original aggregate principal amount of the Senior Subordinated Notes at
a redemption price equal to 110.750% of their aggregate principal amount, plus accrued interest,
with the net cash proceeds of certain equity offerings. In addition, on or after June 30, 2012, the
Company may redeem some or all of the Senior Subordinated Notes at any time at declining redemption
prices that start at 105.375% of their aggregate principal amount and are reduced to 100% of their
aggregate principal amount on or after June 30, 2014. The Company is required to offer to purchase
the Senior Subordinated Notes at 101% of their aggregate principal amount, plus accrued interest to
the repurchase date, if it experiences specific kinds of changes in control.
Registration Rights
The Company entered into a Registration Rights Agreement with respect to the Senior Notes (the
Senior Notes Registration Rights Agreement). The Company satisfied its obligations under the
Senior Notes Registration Rights Agreement, and in February 2008, it completed the exchange offer
pursuant to which 100% of the outstanding Senior Notes were exchanged for new Senior Notes
registered with the Securities and Exchange Commission (SEC) and with the same terms.
The Company entered into a Registration Rights Agreement with respect to the Senior
Subordinated Notes (the Subordinated Notes Registration Rights Agreement). Under the Subordinated
Notes Registration Rights Agreement, the Company is obligated, upon the request of holders of a
majority in principal amount of the Senior Subordinated Notes, to (1) file and cause to become
effective a registration statement with respect to an offer to exchange the Senior Subordinated
Notes for other freely tradable notes that have substantially identical terms, or (2) file with the
SEC and cause to become effective a shelf registration statement relating to the resales of the
Senior Subordinated Notes if the Company is not able to effect the exchange offer. The Company is
obligated to pay additional interest on the Senior Subordinated Notes in certain instances,
including if we do not file the registration statement within 90 days following a request or
completed the related exchange offer within 30 days of the effective date of the registration
statement. If the Company fails to satisfy certain of the registration obligations under the
Subordinated Notes Registration Rights Agreement, it will be subject to a registration default and
the annual interest on the Senior Subordinated Notes will increase by 0.25% and by an additional
0.25% for each subsequent 90-day period during which the registration default continued, up to a
maximum additional interest rate of 1.0% per annum. If we determine a registration payment
arrangement is probable and can be reasonably estimated, a liability will be recorded. As of
December 31, 2009, we concluded the likelihood of having to make any payments under the
arrangements was remote, and therefore did not record a contingent liability.
73
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(c) Covenant Compliance
The Senior Secured Credit Facility does not contain any financial maintenance covenants that
require the Company to comply with specified financial ratios or tests, such as a minimum interest
expense coverage ratio or a maximum leverage ratio, unless the Company wishes to incur additional
indebtedness associated with acquisitions or make certain restricted payments.
The indentures governing the Senior Notes and Senior Subordinated Notes contain covenants
that, among other things, limit the Companys ability and that of its restricted subsidiaries to
make restricted payments, pay dividends, incur or create additional indebtedness, issue certain
types of common and preferred stock, make certain dispositions outside the ordinary course of
business, execute certain affiliate transactions, create liens on assets of the Company and
restricted subsidiaries, and materially change our lines of business.
As of December 31, 2009, the Company was in compliance with the covenants under the Senior
Secured Credit Facility and with the indentures and related requirements governing the Senior Notes
and Senior Subordinated Notes.
(d) Compensating Cash Balance
Our compensating cash balance represents bank overdraft positions of subsidiaries
participating in our global cash pooling arrangement with a third-party bank. Due to the nature of
these overdrafts, all amounts have been classified within the short-term portion of debt as of each
period end.
(e) Other
During the year ended December 31, 2009, we recognized capital lease obligations related to
facilities in Singapore and Spain of approximately $12.3, with a corresponding non-cash increase to
property and equipment, net. As of December 31, 2009, the facility in Singapore was complete while
the Spanish facility remained under construction with an expected date of completion during the
first quarter of 2010. We will lease the facilities from non-affiliated companies upon completion.
We have recognized the cost of these assets as construction in progress during the construction
phases.
The Company entered into a bridge loan commitment arrangement to secure funding for the
Merger. This bridge loan facility was not utilized because the Company issued the Senior Notes. The
bridge loan fee of $3.4 was paid at closing and recorded to interest expense in the Successor
financial statements as of June 30, 2007.
Substantially all of the debt obligations of the Company outstanding prior to the consummation
of the Merger were repaid or redeemed through the tender offers and redemptions as of the Merger.
As of December 31, 2009, $1.0 of 8% unsecured senior subordinated notes due 2014 (Predecessor
Senior Subordinated Notes) remain outstanding. Effective on the closing date of the Merger, the
indenture relating to the Predecessor Senior Subordinated Notes was amended pursuant to a
supplemental indenture, which eliminated substantially all of the restrictive covenants and certain
events of default and related provisions in the indenture.
74
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(11) Income Taxes
(a) Income Tax Benefit (Provision)
The components of (loss) income before benefit (provision) for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
(119.9 |
) |
|
$ |
(406.1 |
) |
|
$ |
(124.6 |
) |
|
|
$ |
(54.1 |
) |
Foreign |
|
|
80.3 |
|
|
|
(44.0 |
) |
|
|
32.9 |
|
|
|
|
20.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(39.6 |
) |
|
$ |
(450.1 |
) |
|
$ |
(91.7 |
) |
|
|
$ |
(33.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of benefit (provision) for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
|
|
|
$ |
0.5 |
|
|
$ |
|
|
|
|
$ |
|
|
State |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
(32.6 |
) |
|
|
(35.9 |
) |
|
|
(17.6 |
) |
|
|
|
(7.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32.9 |
) |
|
|
(35.4 |
) |
|
|
(17.6 |
) |
|
|
|
(7.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
38.2 |
|
|
|
88.3 |
|
|
|
14.2 |
|
|
|
|
15.6 |
|
State |
|
|
6.2 |
|
|
|
19.5 |
|
|
|
8.4 |
|
|
|
|
0.2 |
|
Foreign |
|
|
14.0 |
|
|
|
43.1 |
|
|
|
37.7 |
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58.4 |
|
|
|
150.9 |
|
|
|
60.3 |
|
|
|
|
15.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax benefit |
|
$ |
25.5 |
|
|
$ |
115.5 |
|
|
$ |
42.7 |
|
|
|
$ |
8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2009 and 2008, in addition to providing an income tax
benefit of $25.5 and $115.5, respectively, in our statement of operations, the Company also
recorded deferred taxes through goodwill of $2.3 and $3.2, respectively, and through stockholders
equity of $13.1 and $27.4, respectively. During the period June 30 through
December 31, 2007, in addition to providing an income tax benefit of $42.7 in our statement of
operations, the Company also recorded deferred taxes through goodwill and stockholders equity of
$103.0 and $25.0, respectively.
75
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The benefit for income taxes in the accompanying statements of operations differs from the
benefit calculated by applying the statutory federal income tax rate of 35% due to the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory tax benefit |
|
$ |
13.9 |
|
|
$ |
157.6 |
|
|
$ |
32.1 |
|
|
|
$ |
11.8 |
|
State income taxes, net of federal benefit |
|
|
3.7 |
|
|
|
12.9 |
|
|
|
5.5 |
|
|
|
|
0.1 |
|
Change in foreign tax rates |
|
|
3.5 |
|
|
|
|
|
|
|
34.6 |
|
|
|
|
|
|
Foreign rate differential |
|
|
4.2 |
|
|
|
(5.7 |
) |
|
|
(1.0 |
) |
|
|
|
(0.1 |
) |
Dividend received from foreign operations |
|
|
|
|
|
|
|
|
|
|
(25.5 |
) |
|
|
|
|
|
Asset impairments |
|
|
|
|
|
|
(44.9 |
) |
|
|
|
|
|
|
|
|
|
Foreign tax settlement |
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nondeductible expenses |
|
|
(1.4 |
) |
|
|
(1.7 |
) |
|
|
(1.2 |
) |
|
|
|
(3.3 |
) |
Change in valuation allowance |
|
|
(1.8 |
) |
|
|
(2.8 |
) |
|
|
(3.1 |
) |
|
|
|
(0.1 |
) |
Other, net |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
1.3 |
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax benefit |
|
$ |
25.5 |
|
|
$ |
115.5 |
|
|
$ |
42.7 |
|
|
|
$ |
8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
tax benefit in 2009 reflects our recognition of a deferred tax
benefit on domestic net operating losses, a favorable tax rate reduction in
Canada, a favorable foreign rate differential on operating profits in our
foreign operations and a favorable settlement of a prior year uncertain tax
position.
The tax benefit in 2008 primarily reflects our recognition of tax
benefits for net operating losses and
impairment charges associated with indefinite-lived intangible assets. Impairment charges
associated with goodwill are generally not deductible for tax purposes. The foreign rate
differential for 2008 of $5.7 primarily relates to rate differences applied to impairment charges
associated with indefinite-lived intangible assets.
During the period June 30 through December 31, 2007, the Company recorded an income tax
benefit of $34.6 primarily as a result of a reduction in the German income tax rate. This tax
benefit was partially offset by the recognition of tax expense of $25.5 related to dividends
received from foreign operations, which were offset by operating losses and by operating loss
carryforwards. The Company recorded valuation allowances of $3.1 during the period June 30 through
December 31, 2007, primarily related to our operations in Ireland and for U.S. withholding tax.
76
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(b) Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
251.0 |
|
|
$ |
224.8 |
|
Pension and other compensation benefits |
|
|
0.2 |
|
|
|
|
|
Foreign currency translation loss |
|
|
17.9 |
|
|
|
6.4 |
|
Derivative financial instruments |
|
|
19.5 |
|
|
|
17.6 |
|
Foreign tax credit and alternative minimum tax carryforwards |
|
|
7.6 |
|
|
|
7.9 |
|
Inventory overhead capitalization |
|
|
2.4 |
|
|
|
2.6 |
|
Accrued expenses |
|
|
4.5 |
|
|
|
4.6 |
|
Receivables |
|
|
3.6 |
|
|
|
3.3 |
|
Transaction fees |
|
|
9.6 |
|
|
|
10.4 |
|
|
|
|
|
|
|
|
|
|
|
316.3 |
|
|
|
277.6 |
|
Valuation allowances |
|
|
(56.6 |
) |
|
|
(47.2 |
) |
|
|
|
|
|
|
|
Total deferred tax assets, net of valuation allowances |
|
|
259.7 |
|
|
|
230.4 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
693.5 |
|
|
|
710.5 |
|
Property and equipment |
|
|
14.7 |
|
|
|
19.5 |
|
Inventory valuation |
|
|
16.5 |
|
|
|
20.0 |
|
Goodwill amortization |
|
|
17.1 |
|
|
|
5.4 |
|
Pension and other compensation benefits |
|
|
|
|
|
|
11.9 |
|
Other |
|
|
3.3 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
745.1 |
|
|
|
771.0 |
|
|
|
|
|
|
|
|
Net deferred tax liabilities |
|
$ |
485.4 |
|
|
$ |
540.6 |
|
|
|
|
|
|
|
|
Deferred income taxes have been classified in the accompanying consolidated balance sheets as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Deferred tax asset current (incuded in other
current assets) |
|
$ |
9.5 |
|
|
$ |
7.6 |
|
Deferred tax asset noncurrent |
|
|
12.6 |
|
|
|
14.2 |
|
Deferred tax liability current (included in
accrued expenses) |
|
|
(12.0 |
) |
|
|
(15.7 |
) |
Deferred tax liability noncurrent |
|
|
(495.5 |
) |
|
|
(546.7 |
) |
|
|
|
|
|
|
|
Net deferred tax liability |
|
$ |
(485.4 |
) |
|
$ |
(540.6 |
) |
|
|
|
|
|
|
|
The Company evaluates the realization of deferred tax assets taking into consideration such
factors as the reversal of existing taxable temporary differences, expected profitability by tax
jurisdiction and available carryforward periods. As of December 31, 2009, the Company had valuation
allowances of $56.6 associated with certain foreign net operating loss carryforwards, foreign tax
credit carryforwards, short-lived state net operating losses and other deferred tax assets that are
not expected to be realized. The increase in the deferred tax valuation allowance of $9.4 during
2009 is the result of foreign net operating losses, foreign tax credit carryforwards and
short-lived state net operating losses not expected to be realized, partially offset by rate
reductions in jurisdictions where valuation allowances were previously recognized.
77
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Although a significant component of the Companys valuation allowance reflects assessments
prior to the Merger, should applicable losses, credits and deductions ultimately be realized, the
resulting reduction in the valuation allowance will generally be recognized as a component of our
tax benefit (provision).
(c) Uncertain Tax Positions
The Company adopted the uncertain tax position provisions of ASC Topic 740, Income Taxes (the
provisions formerly known as FIN No. 48) on January 1, 2007. As a result of the adoption, we
identified a net unrecorded tax benefit of $1.3 related to uncertainties that existed prior to the
CD&R Acquisition. Accordingly, the Company increased deferred tax assets by $1.3, decreased the
reserve for uncertain tax positions by $0.3, and credited goodwill for $1.6. The liability for
uncertain tax positions was $8.3 as of January 1, 2007, which included $1.3 of accrued interest and
estimated tax penalties.
We conduct business globally and, as a result, the Company or one or more of its subsidiaries,
files income tax returns in the U.S. federal jurisdiction and various state and foreign
jurisdictions. In the normal course of business, we are subject to examination by taxing
authorities mainly throughout North America and Europe, including jurisdictions in which we have
significant operations such as Germany, France, the UK, Belgium, Sweden and the U.S. We have
concluded all U.S. federal income tax matters for years through 2005. Substantially all income tax
matters in the major foreign jurisdictions that we operate have been concluded for years through
2004. Substantially all state and local income tax matters have been finalized through 2004. While
it is reasonably possible that the amount of unrecognized tax benefits will change in the next
twelve months, management does not expect the change to have a significant impact on the results of
operations or the financial position of the Company.
As of December 31, 2009 and 2008, the Company had $5.2 and $8.8, respectively, of unrecognized
tax benefits, including $0.2 at each period end for the payment of interest and penalties. Accruals
for interest and penalties were immaterial during the years ended December 31, 2009, 2008 and 2007.
Although substantially all tax uncertainties pertain either directly to the Merger or relate to
uncertain positions from the Predecessor period, should such tax uncertainties ultimately be
different, the resultant reduction in tax uncertainties will generally be recognized as a component
of our tax benefit (provision).
A reconciliation of the reserve associated with uncertain tax positions, exclusive of interest
and penalties, as of the adoption date through December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
Balance at January 1 |
|
$ |
8.6 |
|
|
$ |
13.9 |
|
|
$ |
7.0 |
|
Tax positions related to the current year
additions |
|
|
|
|
|
|
4.9 |
|
|
|
7.0 |
|
Tax positions related to prior years additions |
|
|
0.3 |
|
|
|
|
|
|
|
0.2 |
|
Tax positions related to prior years reductions |
|
|
(3.3 |
) |
|
|
(8.7 |
) |
|
|
(0.3 |
) |
Reductions for settlements or payments |
|
|
(0.6 |
) |
|
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31 |
|
$ |
5.0 |
|
|
$ |
8.6 |
|
|
$ |
13.9 |
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2009, a French income tax examination was formally
concluded. During the year ended December 31, 2008, the U.S. federal income tax and German income
tax audits for the 2004 and 2005 tax years were concluded, we benefitted from a Belgian court
decision and we favorably resolved certain other foreign and state tax matters, offset by charges
related to a pre-Merger uncertain tax position that became known to us.
78
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(d) Other Matters
Neither income taxes nor foreign withholding taxes have been provided on $294.4 of cumulative
undistributed earnings of foreign subsidiaries as of December 31, 2009. These earnings are
considered permanently invested in the business. We make an evaluation at the end of each reporting
period as to whether or not some or all of the undistributed earnings are permanently reinvested.
Future changes in facts and circumstances could require us to recognize income tax liabilities on
the assumption that our foreign undistributed earnings will be distributed to the United States.
As of December 31, 2009, the Company has federal net operating loss carryforwards of $492.3
that begin to expire in 2025 and state net operating loss carryforwards of $490.1, with a
corresponding state tax benefit of $19.6, that expire at various times through 2029. In addition,
the Company has foreign net operating loss carryforwards of $222.1, which predominantly have
indefinite expirations. Further, as of December 31, 2009, there are U.S. foreign tax credit
carryforwards of $7.1 that will expire at various times through 2019.
The Company files a consolidated federal and certain state combined income tax returns with
its domestic subsidiaries and its parent, VWR Investors.
(12) Benefit Programs
The Company sponsors various retirement plans, as summarized below.
(a) U.S. Defined Benefit Plan
The U.S. defined benefit plan (U.S. Retirement Plan) is a funded and tax-qualified defined
benefit retirement plan that covers substantially all VWRs full-time U.S. employees who completed
one full year of service as of May 31, 2005. Benefits under the U.S. Retirement Plan were frozen on
May 31, 2005. The Company generally funds the minimum amount required by applicable laws and
regulations. As of December 31, 2009, the U.S. Retirement Plan covered approximately 3,700
participants. The Company uses a December 31 measurement date for the U.S. Retirement Plan.
The change in benefit obligation, change in plan assets, and reconciliation of funded status
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
Change in benefit obligation: |
|
|
|
|
|
|
|
|
Benefit obligation beginning of period |
|
$ |
159.1 |
|
|
$ |
150.6 |
|
Service cost |
|
|
0.4 |
|
|
|
1.1 |
|
Interest cost |
|
|
9.2 |
|
|
|
8.9 |
|
Actuarial loss |
|
|
0.2 |
|
|
|
3.9 |
|
Benefits paid |
|
|
(5.6 |
) |
|
|
(5.4 |
) |
Early retirement benefits |
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation end of period |
|
|
163.9 |
|
|
|
159.1 |
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
Fair value of plan assets beginning of period |
|
|
216.6 |
|
|
|
147.9 |
|
Actual (loss) gain on plan assets |
|
|
(9.1 |
) |
|
|
74.1 |
|
Benefits paid |
|
|
(5.6 |
) |
|
|
(5.4 |
) |
|
|
|
|
|
|
|
Fair value of plan assets end of period |
|
|
201.9 |
|
|
|
216.6 |
|
|
|
|
|
|
|
|
Funded status |
|
$ |
38.0 |
|
|
$ |
57.5 |
|
|
|
|
|
|
|
|
79
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Amounts recognized in the consolidated balance sheet for the U.S. Retirement Plan were as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Other assets |
|
$ |
38.0 |
|
|
$ |
57.5 |
|
Accumulated other comprehensive income or loss
pretax |
|
|
(37.9 |
) |
|
|
(61.1 |
) |
The amount in accumulated other comprehensive income (loss) that has not been recognized as
net periodic pension (income) cost as of December 31, 2009 relates to an actuarial gain. The
accumulated benefit obligation was $163.9 and $159.1 as of December 31, 2009 and 2008,
respectively.
Net periodic pension (income) cost includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
0.4 |
|
|
$ |
1.1 |
|
|
$ |
0.9 |
|
|
|
$ |
1.0 |
|
Interest cost |
|
|
9.2 |
|
|
|
8.9 |
|
|
|
4.4 |
|
|
|
|
4.3 |
|
Expected return on plan assets |
|
|
(11.7 |
) |
|
|
(8.3 |
) |
|
|
(5.0 |
) |
|
|
|
(5.4 |
) |
Recognized net actuarial gain |
|
|
(2.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Early retirement benefits |
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic
pension (income)
cost |
|
$ |
(3.7 |
) |
|
$ |
1.7 |
|
|
$ |
0.3 |
|
|
|
$ |
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following net actuarial gains
(losses) were included in other comprehensive income or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
Net actuarial gain (loss)
included in other
comprehensive income or loss |
|
$ |
(20.9 |
) |
|
$ |
61.9 |
|
|
$ |
(0.8 |
) |
|
|
$ |
|
|
The net periodic pension (income) cost and the projected benefit obligation were based on the
following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
January 1 - |
|
|
|
2009 |
|
2008 |
|
|
December 31, 2007 |
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate for benefit obligation at period end |
|
5.75% |
|
|
5.80 |
% |
|
6.05% |
|
|
|
6.35 |
% |
Discount rate for net periodic pension (income) cost |
|
6.05% / 5.80% |
|
|
6.05 |
% |
|
6.35% |
|
|
|
5.95 |
% |
Expected rate of return on plan assets for net
periodic pension (income) cost |
|
6.82% / 5.20% |
|
|
5.70 |
% |
|
6.50% / 8.25% |
|
|
|
8.25 |
% |
Assumed annual rate of compensation increase for
benefit obligation and net
periodic pension (income) cost |
|
4.00% |
|
|
4.00 |
% |
|
4.00% |
|
|
|
4.00 |
% |
80
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
We select our discount rate by comparing certain bond yield curves available as of year end
with Moodys ratings of Aa or AA, respectively. Based on our review as of December 31, 2009, we
selected 5.75% to adjust for any differences between the maturity of the reference bonds and the
weighted average maturity date of our future expected benefit payments.
During the third quarter of 2007, we implemented a liability driven investment strategy which
seeks to more closely correlate U.S. Retirement Plan asset returns with expected plan liabilities
thereby reducing the Companys exposure to future expenses and funding obligations. Accordingly,
the U.S. Retirement Plan substantially reallocated its asset holdings from equities into certain
fixed income funds (which primarily invested in interest rate swaps) during the third and fourth
quarters of 2007. As a result, the expected rate of return on plan assets was revised downward to
5.70% as of December 31, 2007. The expected rate of return on plan assets for net periodic pension
(income) cost was 8.25% from January 1 through September 30, 2007 and 6.50% from October 1 through
December 31, 2007.
During the year ended December 31, 2008, U.S. Retirement Plan assets experienced a substantial
increase in value as the lower interest rate environment applicable to our fixed income fund
returns more than offset both declines in equity market returns and also the interest rate yield
curve applicable to our discount rate (due to widening credit spreads). During the second quarter
of 2009, the U.S. Retirement Plan liquidated its holdings in these fixed income funds and invested
the proceeds in a diversified fixed income fund (which invests in long duration investment grade
corporate bonds primarily across industrial, financial and utilities sectors). As a result of these
changes, the discount rate and expected rate of return on plan assets, each for net periodic
pension (income) cost from January 1 through June 30, 2009 was 5.80% and 5.20%, respectively, and
from July 1 through December 31, 2009 was 6.05% and 6.82%, respectively.
As of December 31, 2009, the overall investment strategy of the U.S. Retirement Plan continues
to be to correlate asset returns with expected plan liabilities while maintaining a sufficient
amount of cash on hand to satisfy near-term benefit payments. The current target allocations for
plan assets are 90% fixed income funds and 10% cash and money market funds. The fixed income fund
investment is managed by a single institution. The fair values of the U.S. Retirement Plans assets
as of December 31, 2009, by asset class were as follows (see Note 14 for more discussion on fair
value measurements):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2009 |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets |
|
|
Observable Inputs |
|
|
Unobservable Inputs |
|
Asset Class |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
Money market funds |
|
$ |
18.7 |
|
|
$ |
|
|
|
$ |
18.7 |
|
|
$ |
|
|
Fixed income fund |
|
|
183.2 |
|
|
|
|
|
|
|
183.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
201.9 |
|
|
$ |
|
|
|
$ |
201.9 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company does not expect to make contributions to the U.S. Retirement Plan in 2010. The
following benefit payments are expected to be paid:
|
|
|
|
|
2010 |
|
$ |
6.1 |
|
2011 |
|
|
6.4 |
|
2012 |
|
|
7.0 |
|
2013 |
|
|
7.6 |
|
2014 |
|
|
8.2 |
|
2015 2019 |
|
|
49.5 |
|
81
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(b) Other U.S. Benefit Plans
The Company also sponsors defined contribution plans as well as a supplemental pension plan
and a nonqualified deferred compensation plan for certain senior officers. The supplemental pension
plan was also frozen on May 31, 2005; it covered three active participants as of December 31, 2009.
In addition, certain employees are covered under union-sponsored, collectively bargained plans.
Expenses under these union-sponsored plans are determined in accordance with negotiated labor
contracts. Expenses incurred under these plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined contribution plans |
|
$ |
8.8 |
|
|
$ |
8.0 |
|
|
$ |
3.7 |
|
|
|
$ |
4.5 |
|
Union-sponsored plans |
|
|
0.6 |
|
|
|
0.8 |
|
|
|
0.7 |
|
|
|
|
0.4 |
|
Supplemental pension plan |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
|
0.3 |
|
Nonqualified deferred
compensation plan |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
In addition, the Company provides health benefits to certain retirees and their spouses. These
benefit plans are unfunded. Shown below are the accumulated postretirement benefit obligation and
the weighted average discount rate used in determining the accumulated postretirement benefit
obligation. The annual cost of these plans is not material.
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Postretirement benefit obligations |
|
$ |
1.5 |
|
|
$ |
2.7 |
|
Weighted average discount rate |
|
|
5.75 |
% |
|
|
5.80 |
% |
Health care cost trend rate assumed for next year |
|
|
8.80 |
% |
|
|
9.10 |
% |
Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate) |
|
|
4.50 |
% |
|
|
4.50 |
% |
Year that the rate reaches the ultimate trend rate |
|
|
2028 |
|
|
|
2028 |
|
Assumed health care cost trend rates have a significant effect on the amounts reported for
health care plans. A one-percentage-point change in assumed health care cost trend rates would
change our postretirement benefit obligation as of December 31, 2009 by approximately $0.4.
(c) Non-U.S. Benefit Plans
The Company has defined benefit pension plans at various foreign subsidiaries. Our significant
Non-U.S. defined benefit plans are in Germany, the UK and France. Our German subsidiary has an
unfunded defined benefit pension plan for current employees and retirees. Our UK subsidiary has
established two defined benefit plans. Our French subsidiary has a defined benefit pension plan for
a certain group of employees that is closed to new participants. In addition, the Company has
several small defined benefit pension plans at other locations. The Company uses a December 31
measurement date for these non-U.S. defined benefit plans. Combined information for the German,
French and the UK plans change in benefit obligation, change in plan assets, and reconciliation of
funded status were as follows:
82
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
Change in benefit obligation: |
|
|
|
|
|
|
|
|
Benefit obligation beginning of period |
|
$ |
82.6 |
|
|
$ |
103.8 |
|
Service cost |
|
|
1.8 |
|
|
|
3.1 |
|
Interest cost |
|
|
5.2 |
|
|
|
5.4 |
|
Plan participants contributions |
|
|
0.3 |
|
|
|
0.3 |
|
Actuarial (gain) loss |
|
|
16.8 |
|
|
|
(6.2 |
) |
Benefits paid |
|
|
(3.6 |
) |
|
|
(4.7 |
) |
Currency translation changes |
|
|
7.3 |
|
|
|
(19.1 |
) |
|
|
|
|
|
|
|
Benefit obligation end of period |
|
|
110.4 |
|
|
|
82.6 |
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
Fair value of plan assets beginning of period |
|
|
45.3 |
|
|
|
73.2 |
|
Actual (loss) gain on plan
assets |
|
|
8.7 |
|
|
|
(9.6 |
) |
Company contributions |
|
|
1.3 |
|
|
|
1.9 |
|
Plan participants contributions |
|
|
0.3 |
|
|
|
0.3 |
|
Benefits paid |
|
|
(2.5 |
) |
|
|
(3.7 |
) |
Currency translation changes |
|
|
5.3 |
|
|
|
(16.8 |
) |
|
|
|
|
|
|
|
Fair value of plan assets end of period |
|
|
58.4 |
|
|
|
45.3 |
|
|
|
|
|
|
|
|
Funded status |
|
$ |
(52.0 |
) |
|
$ |
(37.3 |
) |
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheet were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Other assets |
|
$ |
0.2 |
|
|
$ |
0.3 |
|
Other long-term liabilities |
|
|
(52.2 |
) |
|
|
(37.6 |
) |
Accumulated other comprehensive income or loss pretax |
|
|
16.4 |
|
|
|
5.0 |
|
The amount in accumulated other comprehensive income or loss that has not been recognized as
net periodic pension cost as of December 31, 2009 relates to net actuarial losses. The combined
accumulated benefit obligation was $102.3 and $77.1 as of December 31, 2009 and 2008, respectively.
Combined net periodic pension cost includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
1.8 |
|
|
$ |
3.1 |
|
|
$ |
1.3 |
|
|
|
$ |
1.3 |
|
Interest cost |
|
|
5.2 |
|
|
|
5.4 |
|
|
|
2.8 |
|
|
|
|
2.5 |
|
Expected return on plan assets |
|
|
(2.9 |
) |
|
|
(4.4 |
) |
|
|
(2.6 |
) |
|
|
|
(2.3 |
) |
Recognized net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
4.1 |
|
|
$ |
4.1 |
|
|
$ |
1.5 |
|
|
|
$ |
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The following net actuarial
(losses) gains were included in other comprehensive income or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
Net actuarial (loss) gain included in other
comprehensive income or loss |
|
$ |
(11.4 |
) |
|
$ |
(6.0 |
) |
|
$ |
1.0 |
|
|
|
$ |
|
|
The combined net periodic pension cost and the combined projected benefit obligation were
based on the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate for benefit obligation |
|
|
5.54 |
% |
|
|
6.13 |
% |
|
|
5.55 |
% |
|
|
|
5.43 |
% |
Discount rate for net periodic pension cost |
|
|
5.85 |
% |
|
|
5.78 |
% |
|
|
5.43 |
% |
|
|
|
5.15 |
% |
Expected rate of return on plan assets for net
periodic pension cost (French and UK plans only) |
|
|
6.13 |
% |
|
|
6.50 |
% |
|
|
6.90 |
% |
|
|
|
6.60 |
% |
Assumed annual rate of compensation
increase for benefit obligation |
|
|
3.57 |
% |
|
|
3.19 |
% |
|
|
3.93 |
% |
|
|
|
3.61 |
% |
Assumed annual rate of compensation
increase for net periodic pension cost |
|
|
3.26 |
% |
|
|
3.42 |
% |
|
|
3.87 |
% |
|
|
|
3.70 |
% |
The Company expects to make contributions to the French and UK plans of approximately $1.9 in
2010. The French and UK plans primarily invest in insurance contracts. The combined weighted target
allocations for the underlying investments of such insurance contracts are approximately 70% equity
index funds and 30% debt securities, equally divided between corporate bonds and government
securities. The combined fair values of the French and UK plans assets as of December 31, 2009, by
asset class are as follows (see Note 14 for more discussion on fair value measurements):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2009 |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
|
|
|
|
|
|
Active Markets |
|
|
Observable Inputs |
|
|
Unobservable Inputs |
|
Asset Class |
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
Insurance contracts |
|
$ |
58.4 |
|
|
$ |
|
|
|
$ |
58.4 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
58.4 |
|
|
$ |
|
|
|
$ |
58.4 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The following combined benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
|
|
|
|
|
2010 |
|
$ |
4.0 |
|
2011 |
|
|
3.1 |
|
2012 |
|
|
3.4 |
|
2013 |
|
|
3.6 |
|
2014 |
|
|
3.9 |
|
2015 2019 |
|
|
21.9 |
|
(d) Other Non-U.S. Postemployment Benefits
Certain of the Companys European subsidiaries provide post employment benefits in the form of
lump-sum cash payments to employees when they leave the Company, regardless of their reason for
leaving. The Company estimates and accrues a liability for these benefits. The largest such plans
are in France, Italy and Belgium. The combined liability recorded for these plans was $3.3 and $2.2
as of December 31, 2009 and 2008, respectively.
(13) Share-Based Compensation
(a) Successor Equity Plan
Holdings has established the 2007 Securities Purchase Plan (Successor Equity Plan) pursuant
to which members of management, members of the Board of Directors (Board Members) and consultants
(Consultants) may be provided the opportunity to purchase equity units of Holdings. To date, the
equity units issued by Holdings have consisted of vested Class A Preferred Units (Preferred
Units), vested Class A Common Units (Common Units), and unvested Class A Common Units (Founders
Units). The proceeds of these issuances have ultimately been contributed to the Company as
additional capital contributions.
The Preferred Units, which are fully vested upon issuance, are non-voting units that accrue a
yield at a rate of 8.0% per annum on a daily basis, compounded quarterly, on the amount of
unreturned capital with respect to such Preferred Units. As of December 31, 2009, the aggregate
accrued yield on the outstanding Preferred Units was $310.1, which is recorded at Holdings.
The Common Units, which are fully vested upon issuance, each are entitled to one vote for all
matters to be voted on by holders of equity units. The Common Units are subordinate to the
Preferred Units, including with respect to the unreturned capital and unpaid yield on the Preferred
Units. Holders of Common Units will be entitled to participate in distributions, if and when
approved by Holdings Board of Managers, ratably on a per-unit basis.
The terms of the Founders Units are the same as the Common Units except that they are subject
to vesting pro rata on a daily basis during the four-year service period following issuance,
subject to accelerated vesting upon the occurrence of certain events. Founders Units are owned upon
issuance. The vesting feature of the Founders Units impacts only the purchase price applicable to
the repurchase and put options described below.
As a holding company that operates through its subsidiaries, Holdings would be dependent on
dividends, payments or other distributions from its subsidiaries to make any dividend payments to
holders of the Preferred Units, Common Units or Founders Units. Holdings has not in the past paid
any dividends on any of the Units and it currently does not expect to pay any dividends on the
Units in the foreseeable future, except for tax distributions to the extent required by Holdings
limited liability company operating agreement.
85
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Successor Equity Plan Activity and Accounting Model Management Investors
On June 29, 2007 and during the period June 30 through December 31, 2007, certain members of
management (Management Investors) acquired an aggregate of $36.4 and $5.2, respectively, in the
equity units of Holdings. During the year ended December 31, 2009 and 2008, Management Investors
acquired additional equity units of Holdings in the aggregate of $1.4 and $2.3, respectively. These
investments were allocated to Preferred Units, Common Units and Founders Units in accordance with
the related Management Unit Purchase Agreements (Management Agreements). The ratio of Preferred
Units to Common Units acquired by the Management Investors was the same as the ratio of Preferred
Units to Common Units acquired by Madison Dearborn and other institutional co-investors in
connection with the Merger and related transactions (the Preferred/Common Ratio). The Founders
Units are only available to Management Investors.
The equity units purchased by the Management Investors had a fair value, for accounting
purposes, in excess of the original cost paid to purchase such units. The excess was attributed to
the Founders Units. As Founders Units contain a vesting requirement predicated upon an employees
future service with the Company, the excess is recognized as compensation expense over the
applicable four-year vesting period. The fair value of the equity units issued in connection with
the Merger and during the period June 30 through December 31, 2007 exceeded their original cost by
$14.1. The fair value of equity units issued during the year ended December 31, 2009 and 2008
exceeded their original cost by $0.1 and $1.9, respectively. During the year ended December 31,
2009 and 2008 and during the period June 30 through December 31, 2007, we recognized non-cash
compensation expense relating to the Founders Units of $3.4, $3.8 and $1.7, respectively, which was
classified within SG&A expenses. As of December 31, 2009, there was $5.5 of unamortized
compensation related to unvested Founders Units, which is being amortized to compensation expense
over their four-year vesting period (a weighted average period of 1.3 years as of December 31,
2009).
The Management Agreements include certain repurchase and put options that are triggered if a
Management Investors employment is terminated. Upon the termination of a Management Investors
employment, Holdings and its affiliates would first have an option to repurchase the Management
Investors equity units. If Holdings or its affiliates do not exercise the option, then the
Management Investor has the right to put the equity units to Holdings. Under the put option, the
payment to the Management Investor would be effected with cash for the Preferred Units and via the
issuance of a subordinated promissory note for the Common Units and Founders Units.
Under the repurchase option or put option, the Preferred Units, the Common Units and the
vested Founders Units can be repurchased by or sold to Holdings at fair market value and unvested
Founders Units can be repurchased by or sold to Holdings at the lower of original cost or fair
market value. Upon a termination for cause (as defined in the Management Agreements), Common
Units and vested and unvested Founders Units can be repurchased by or sold to Holdings at the lower
of original cost or fair market value. The fair market value of the equity units is calculated in
accordance with the relevant transaction documents. The fair market value of the Preferred Units
has been based on unreturned capital plus accrued and unpaid yield thereon (the Preferred Unit
Liquidation Preference). The calculation of the fair market value of the Common Units (the Common
Unit Calculated Value) takes into account the enterprise value of Holdings, the Preferred Unit
Liquidation Preference, and the number of outstanding Common Units and Founders Units. The funding
to effect repurchases of units from terminated employees with cash is dependent on dividends,
payments or other distributions from the Company, through its subsidiaries. During the years ended
December 31, 2009 and 2008, the Company, through its subsidiaries, provided the funding to effect
various repurchases of units from terminated employees in accordance with the applicable Management
Agreements, and the Company expects to continue to provide the funding to effect future repurchases
of units.
86
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
As a result of the put option, the equity units issued to the Management Investors are subject
to a repurchase obligation due to events outside of our control. We therefore classify all equity
units held by Management Investors outside of permanent equity on our consolidated balance sheet
with a carrying value that reflects the aggregate amount that would be paid to Management Investors
for the equity units pursuant to the put option as of the balance sheet date. On a quarterly basis,
we adjust the reported carrying value of redeemable equity units based on the Preferred Unit
Liquidation Preference and Common Unit Calculated Value as of that date, which will typically
result in a corresponding adjustment to additional paid-in capital. The following table reflects
changes in the carrying value of redeemable equity units:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
Balance at January 1 |
|
$ |
46.4 |
|
|
$ |
43.2 |
|
Reclassifications from permanent equity, net |
|
|
3.5 |
|
|
|
5.9 |
|
Reclassifications to accrued expenses upon
notification of redemption |
|
|
(4.1 |
) |
|
|
(2.7 |
) |
|
|
|
|
|
|
|
Balance at December 31 |
|
$ |
45.8 |
|
|
$ |
46.4 |
|
|
|
|
|
|
|
|
As of December 31, 2009 and 2008, $0.2 and $2.7, respectively, was included within accrued
expenses in the accompanying balance sheets relating to the committed repurchase of units by
Holdings.
Successor Equity Plan Activity Board Members and Consultants
During the period June 30 through December 31, 2007, certain Board Members and Consultants
acquired an aggregate of $4.9 in the equity units of Holdings. These investments were
allocated to the Preferred Units and Common Units consistent with the Preferred/Common Ratio, but
certain of the Board Members and Consultants also were permitted to acquire additional Common
Units, in accordance with their respective Unit Purchase Agreements.
During the period June 30 through December 31, 2007, we recognized non-cash compensation
expense of $1.0 relating to the equity units acquired by the Board Members and Consultants, which
was classified within SG&A expenses. The non-cash compensation expense, which is equal to the fair
value of the equity units issued to Board Members and Consultants in excess of their original cost,
was immediately recognized due to the lack of a service or vesting condition.
(b) Predecessor Stock Plan
Shortly after the CD&R Acquisition, we adopted the CDRV Investors, Inc. Stock Incentive Plan
(the Predecessor Stock Plan). Our prior Board of Directors granted rights to purchase shares of
our common stock, options to purchase shares of our common stock, restricted stock units and other
share-based awards to certain of our executive officers, other employees and our directors who were
not also our employees or associated with CD&R. Options granted provided for vesting in equal
annual installments on the first five anniversaries of the grant date and expired ten years from
the grant date. Restricted stock units granted represented a future right to receive shares of our
common stock. Awards vested earlier upon a change of control or certain other circumstances.
During the first quarter of 2007, we sold 500 shares to one of our employees at $98.64 per
share. Coincident with this purchase, the employee was granted options to purchase 1,000 shares at
$98.64 per share. During the period January 1 through June 29, 2007, we issued 1,257 director stock
units to our directors who were not also our employees or associated with CD&R for director
compensation.
87
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
In accordance with the terms of the Predecessor Stock Plan, all unvested options and
restricted stock units vested as a result of the change in control caused by the Merger. We
expensed the unamortized grant date fair value of $6.5 relating to all unvested options and $1.4
relating to all unvested restricted stock units in the period January 1 through June 29, 2007.
Total intrinsic value related to stock options and restricted stock units settled as of the Merger
was $168.3. Share-based compensation of $9.0, including the acceleration of unamortized grant date
fair value as of the Merger, was recorded within SG&A expenses in the period January 1 through June
29, 2007.
(14) Financial Instruments and Fair Value Measurements
Our financial instruments consist primarily of cash and cash equivalents, our compensating
cash balance, trade accounts receivable, accounts payable, short and long-term debt, foreign
currency forward contracts, interest rate swaps and investments held by certain pension plans we
sponsor.
Our financial instruments, other than our trade accounts receivable and payable, are spread
across a number of large financial institutions whose credit ratings we monitor and believe do not
currently carry a material risk of non-performance. Certain of our financial instruments, including
our interest rate swap arrangements, foreign currency forward contracts, contain an
off-balance-sheet risk.
(a) Recurring Fair Value Measures
Fair value is defined as an exit price (i.e., the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date). The fair value hierarchy prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels as shown below. An instruments classification within
the fair value hierarchy is determined based on the lowest level input that is significant to the
fair value measurement.
|
Level 1 |
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|
Level 2 |
|
Inputs that are observable for the asset or liability, either directly or
indirectly through market corroboration, for substantially the full term of the asset or
liability. |
|
Level 3 |
|
Inputs that are unobservable for the asset or liability based on the Companys own
assumptions (about the assumptions market participants would use in pricing the asset or
liability). |
The carrying amounts reported in the accompanying balance sheets for cash and cash
equivalents, our compensating cash balance, trade accounts receivable, accounts payable and
short-term debt approximate fair value due to the short-term nature of these instruments.
Accordingly, these items have been excluded from the table below.
88
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The following table presents information about the Companys other financial assets and
liabilities measured at fair value on a recurring basis as of December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
Description |
|
2009 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap arrangements |
|
$ |
(49.8 |
) |
|
$ |
|
|
|
$ |
(49.8 |
) |
|
$ |
|
|
Foreign currency forward
contracts |
|
$ |
(0.5 |
) |
|
$ |
|
|
|
$ |
(0.5 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
Description |
|
2008 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward
contracts |
|
$ |
5.1 |
|
|
$ |
|
|
|
$ |
5.1 |
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap arrangements |
|
$ |
(49.9 |
) |
|
$ |
|
|
|
$ |
(49.9 |
) |
|
$ |
|
|
We determine the fair value of our interest rate swap arrangements using a discounted cash
flow model based on the contractual terms of the instrument and using observable inputs such as
interest rates, counterparty credit spread and our own credit spread. The discounted cash flow
model does not involve significant management judgment and does not incorporate significant
unobservable inputs. Accordingly, we classify our interest rate swap valuations within Level 2 of
the valuation hierarchy. The fair value of our foreign currency forward contracts was estimated
based on period-end spot rates and we believe such valuations qualify as a Level 2 measurement.
(b) Debt Instruments
The table below shows the carrying amounts and estimated fair values of our primary long-term
debt instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
|
|
Senior Secured Credit
Facility |
|
$ |
1,495.3 |
|
|
$ |
1,415.0 |
|
|
$ |
1,504.8 |
|
|
$ |
1,186.3 |
|
Senior Notes |
|
|
710.0 |
|
|
|
738.4 |
|
|
|
675.0 |
|
|
|
515.0 |
|
Senior Subordinated Notes |
|
|
541.4 |
|
|
|
516.0 |
|
|
|
527.3 |
|
|
|
377.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,746.7 |
|
|
$ |
2,669.4 |
|
|
$ |
2,707.1 |
|
|
$ |
2,078.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of our debt instruments as of December 31, 2009 and 2008 are based on
estimates using quoted market prices and standard pricing models that take into account the present
value of future cash flows as of the respective balance sheet date. We believe that the inputs to
our pricing models qualify as Level 2 measurements, except for our publicly-traded Senior Notes as
of December 31, 2009, which we believe qualify as a Level 1 measurement.
89
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(c) Derivative Instruments and Hedging Activities
Interest Rate Swap Arrangements
Borrowings under our Senior Secured Credit Facility bear interest at variable rates while our
Senior Notes and Senior Subordinated Notes bear interest at fixed rates. The Company manages its
exposure to changes in market interest rates by entering into interest rate swaps. The Company is
party to two interest rate swaps that became effective on June 29, 2007 and mature on December 31,
2012 for the purpose of fixing the variable rate of interest on a portion of our outstanding term
loan borrowings under the Senior Secured Credit Facility. The interest rate swaps carry initial
notional principal amounts of $425.0 (the USD Swap) and 300.0 (the Euro Swap). The notional
value of the USD Swap declines over its term in annual decrements of $25.0 through December 29,
2011 and carries a final notional principal amount of $160.0 for the period from December 30, 2011
through December 31, 2012. Under the USD Swap, the Company received quarterly interest at a
variable rate equal to three-month U.S. Libor and paid quarterly interest at a fixed rate of 5.45%
through June 30, 2008. The notional value of the Euro Swap declines over its term in annual
decrements of 20.0 through December 29, 2011 and carries a final notional principal amount of
110.0 for the period from December 30, 2011 through December 31, 2012. Under the Euro Swap, the
Company received quarterly interest at a variable rate equal to three-month Euribor and paid
quarterly interest at a fixed rate of 4.68% through June 30, 2008.
The fair value of the interest rate swaps as of June 29, 2007 was a liability of $2.1,
representing an unrealized loss on derivative transactions, with a corresponding adjustment to
accumulated other comprehensive income (loss), which is being amortized to interest expense over
the remaining term of the hedged instruments.
The interest rate swaps were accounted for as cash flow hedges with the effective portions of
changes in the fair value reflected in other comprehensive income (loss). Effective June 30, 2008,
the Company amended the USD Swap and Euro Swap to secure lower fixed rates of interest of 5.40% and
4.55%, respectively, and further amended the floating leg of the instrument to one-month U.S. Libor
and one-month Euribor, respectively. There were no other changes in the terms and conditions of the
original swaps. We refer to the amended USD Swap and the amended Euro Swap collectively as the
Amended Swaps. Upon entering into the Amended Swaps, the Company discontinued hedge accounting
for the original swaps and measured the fair value of the USD Swap and the Euro Swap. As of June
30, 2008, $10.5, representing a net unrealized loss, was included in other comprehensive income
(loss). This net unrealized loss is being reclassified from other comprehensive income (loss) to
interest expense over the remaining term of the swap arrangements.
The Amended Swaps were designated as cash flow hedges, but during the third quarter of 2008
the amended USD Swap no longer qualified for hedge accounting and there was measured
ineffectiveness associated with our amended Euro Swap. Accordingly, we discontinued hedge
accounting under the Amended USD Swap, effective July 1, 2008, and under the Amended Euro Swap,
effective October 1, 2008. The cumulative effective portion of changes in fair value of the Amended
Swaps was $3.5, in the aggregate, representing a net unrealized loss and included in other
comprehensive income (loss) as of September 30, 2008. This unrealized loss is being reclassified
from other comprehensive income (loss) to interest expense over the remaining term of the swap
arrangements. Subsequent to September 30, 2008, changes in the fair value of the Amended Swaps are
recognized as a non-cash component of interest expense, but will impact the Companys operating
cash flows when realized.
As of December 31, 2009, the Amended Swaps effectively convert $350.0 of variable rate U.S.
dollar-denominated debt and 240.0 ($345.7 on a U.S. dollar equivalent basis) of variable rate
Euro-denominated debt to fixed rates of interest. The counterparty to our interest rate swap
agreements is a major financial institution. The Company actively monitors its asset or liability
position under the interest rate swap agreements and the credit ratings of the counterparty, in an
effort to understand and evaluate the risk of non-performance by the counterparty.
90
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Foreign Currency Forward Contracts
We regularly enter into foreign currency forward contracts to mitigate the risk of changes in
foreign currency exchange rates primarily associated with the purchase of inventory from foreign
vendors or for payments between our subsidiaries generally within the next twelve months or less.
Gains and losses on the foreign currency forward contracts generally offset certain portions of
gains and losses on expected commitments. To the extent these foreign currency forward contracts
are considered effective hedges, gains and losses on these positions are deferred and recorded in
accumulated other comprehensive income (loss) and are recognized in the results of operations when
the hedged item affects earnings. The notional value of our outstanding foreign currency forward
contracts was $25.7 and $50.1 as of December 31, 2009 and 2008, respectively.
In June 2007, in connection with the anticipated issuance of Euro-denominated debt under the
Senior Secured Credit Facility, the Company entered into a series of foreign currency forward
agreements with notional amounts totaling 621.4. These foreign currency forward agreements,
designated as cash-flow hedges, were used to hedge short-term exposure to possible changes in
foreign exchange rates between the Euro and U.S. dollar. These agreements were settled on June 29,
2007 upon the issuance of the Euro-denominated debt with a corresponding realized loss on
derivative transaction of $6.0, net of $3.8 in taxes, to accumulated other comprehensive income
(loss), which is being amortized to interest expense over the life of the underlying
Euro-denominated debt.
Tabular Disclosures
The following tables reflect the balance sheet classification and fair value of our derivative
instruments on a gross basis as of December 31, 2009 and 2008:
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Asset Derivatives |
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Liability Derivatives |
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Year Ended December 31, |
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|
Year Ended December 31, |
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2009 |
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|
2008 |
|
|
2009 |
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|
2008 |
|
|
|
Balance Sheet |
|
Fair |
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|
Balance Sheet |
|
Fair |
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|
Balance Sheet |
|
Fair |
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|
Balance Sheet |
|
Fair |
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Location |
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Value |
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|
Location |
|
Value |
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|
Location |
|
Value |
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|
Location |
|
Value |
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|
Derivatives designated as hedging instruments |
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|
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|
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Foreign currency
forward contracts |
|
Accrued expenses |
|
$ |
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|
Other current assets |
|
$ |
5.3 |
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|
Accrued expenses |
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$ |
(0.5 |
) |
|
Other current assets |
|
$ |
(0.2 |
) |
Derivatives not designated as hedging instruments |
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Interest rate swap
derivatives |
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Other long-term
liabilities |
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(49.8 |
) |
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Other long-term
liabilities |
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(49.9 |
) |
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Total derivatives |
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$ |
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$ |
5.3 |
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$ |
(50.3 |
) |
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|
$ |
(50.1 |
) |
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91
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The following table reflects the amount of gains (losses) recognized for our derivative
instruments and the classification of gains (losses) within our statements of operations, or equity
in the case of any effective portion of cash flow hedges, for the year ended December 31, 2009:
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Year Ended December 31, 2009 |
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|
Amount of Gain |
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|
|
(Loss) Recognized |
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|
Location of Gain (Loss) |
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Amount of Gain (Loss) |
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in Other |
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Reclassified from Other |
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Reclassified from |
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Comprehensive |
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Comprehensive Income |
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Other Comprehensive |
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Income (Effective |
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|
into Earnings (Effective |
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Income into Earnings |
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Derivatives in cash flow hedging relationships |
|
Portion) |
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|
Portion) |
|
(Effective Portion) |
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|
Interest rate swap derivatives |
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$ |
|
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|
Interest expense |
|
$ |
(4.2 |
) |
Foreign currency forward
contracts |
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|
Interest expense |
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|
(1.2 |
) |
Foreign currency forward
contracts |
|
|
(2.6 |
) |
|
Cost of goods sold |
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|
2.0 |
|
Foreign currency forward contracts |
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|
|
|
|
Other income
(expense) |
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|
0.7 |
|
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|
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Total |
|
$ |
(2.6 |
) |
|
|
|
$ |
(2.7 |
) |
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Location of Gain (Loss) |
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Amount of Gain (Loss) |
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Derivatives not designated as hedging instruments |
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Recognized in Earnings |
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Recognized in Earnings |
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Interest rate swap derivatives realized |
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Interest expense |
|
$ |
(32.2 |
) |
Interest rate swap derivatives unrealized |
|
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|
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Interest expense |
|
$ |
0.1 |
|
Foreign currency forward contracts |
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Other income (expense) |
|
$ |
(0.3 |
) |
During the year ended December 31, 2008, we recognized a non-cash net unrealized loss of $35.4
on our Amended Swaps. During the year ended December 31, 2008 and during the period from June 30
through December 31, 2007, we recognized a gain (loss) from settled foreign currency forward
contracts included in cost of goods sold of $1.3 and $(0.9), respectively.
As
of December 31, 2009, approximately $5.2 of pre-tax net losses currently deferred in other
comprehensive income (loss) are expected to be recognized in earnings as interest expense within
the next 12 months.
(d) Pension Investments
See Note 12 for a description of the material pension plans that we sponsor, including
investment strategies, major classes of plan assets and their respective fair values and
classification within the fair value hierarchy (for funded plans) and discussion of concentrations
of risk, if any. In determining the funded status of these pension plans, we evaluate the fair
value of investments held by each plan. The fair value of pension plan holdings is determined
through observing values for underlying investment holdings, either directly or indirectly, through
market corroboration.
92
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(e) Non-Recurring Fair Value Measures
As discussed in Notes 3 and 5, the Company recently applied the fair value measurement
principles of GAAP to certain of its non-recurring nonfinancial assets as follows:
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|
On September 30, 2009, the Company determined the fair value of the goodwill and
intangible assets of its Science Education segment in connection with an interim impairment
test triggered as a result of a change in circumstances; |
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|
On October 1, 2009, the Company determined the fair value of the goodwill of its North
American Lab and European Lab segments in connection with an annual impairment test
required under GAAP; |
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|
On October 1, 2009, the Company determined the fair value of intangible assets relating
to its acquisition of XGeek; |
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|
On December 1, 2009, the Company determined the fair value of intangible assets relating
to its acquisition of OneMed; and |
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|
On December 31, 2009, the Company determined the fair value of a chemical supply
agreement in its European Lab segment in connection with an interim impairment test
triggered as a result of a change in circumstances. |
The following table presents the Companys hierarchy for nonfinancial assets measured at fair
value on a non-recurring basis:
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Impairment |
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Charges - |
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Carrying Value - |
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Significant |
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Year Ended |
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December 31, |
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Unobservable |
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December 31, |
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Description |
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2009 |
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Inputs (Level 3) |
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2009 |
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Goodwill Science Education |
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$ |
36.5 |
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$ |
36.5 |
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$ |
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Intangible assets Science Education |
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|
145.3 |
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145.3 |
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Goodwill North American Lab |
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|
929.9 |
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929.9 |
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Goodwill European Lab |
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|
866.6 |
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866.6 |
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Chemical supply agreement European
Lab |
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36.9 |
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36.9 |
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Acquired intangible assets |
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6.9 |
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|
6.9 |
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Not applicable |
The fair value of our intangible assets is determined using a
discounted cash flow approach. The Company estimates the fair value of each reporting unit using both the income approach (which
is a discounted cash flow technique) and market approach (which is a market multiple technique).
These valuation methods required management to make various assumptions, including, but not limited
to, assumptions related to future profitability, cash flows, discount rates and control premiums,
as well as valuation multiples derived from comparable publicly traded companies that are applied
to operating performance of the reporting unit. Our estimates are based upon historical trends,
managements knowledge and experience and overall economic factors, including projections of future
earnings potential.
93
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Developing discounted future cash flows in applying the income approach requires us to evaluate our
intermediate to longer-term strategies for each reporting unit, including, but not limited to,
estimates about revenue growth, our acquisition strategies, operating margins, capital
requirements, inflation and working capital management. The development of appropriate rates to
discount the estimated future cash flows of each reporting unit requires the selection of risk
premiums, which can materially impact the present value of future cash flows. Selection of an
appropriate peer group under the market approach involves judgment and an alternative selection of
guideline companies could yield materially different market multiples. We seek to minimize judgment
in the selection of an acquisition control premium by referring to historical control premiums
observed in the marketplace.
The Company estimated the fair value of the chemical supply agreement based on expected future cash
flows discounted at a rate of return that reflects the relative risk of the cash flows.
The Company estimated the fair value of acquired intangible assets using discounted cash flow
techniques which included an estimate of future cash flows, consistent with overall cash flow
projections used to determine the purchase price paid to acquire the business, discounted at a rate
of return that reflect the relative risk of the cash flows.
We believe the estimates and assumptions used in the valuation methods are reasonable.
(15) Commitments and Contingencies
(a) Lease Commitments
The Company leases office and warehouse space and computer equipment under operating leases,
certain of which extend up to 15 years, subject to renewal options. Rental expense is shown in the
table below:
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Successor |
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Predecessor |
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|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
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June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental expense |
|
$ |
34.2 |
|
|
$ |
34.6 |
|
|
$ |
18.9 |
|
|
|
$ |
17.6 |
|
Future minimum lease payments as of December 31, 2009, under capital leases and under
non-cancelable operating leases having initial lease terms of more than one year are as follows:
|
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|
|
|
|
|
|
Capital |
|
|
Operating |
|
|
|
Leases |
|
|
Leases |
|
Year ended December 31: |
|
|
|
|
|
|
|
|
2010 |
|
$ |
3.1 |
|
|
$ |
30.7 |
|
2011 |
|
|
3.2 |
|
|
|
25.3 |
|
2012 |
|
|
3.0 |
|
|
|
19.7 |
|
2013 |
|
|
2.9 |
|
|
|
13.4 |
|
2014 |
|
|
2.4 |
|
|
|
10.2 |
|
Thereafter |
|
|
9.5 |
|
|
|
51.0 |
|
|
|
|
|
|
|
|
Total minimum payments |
|
|
24.1 |
|
|
$ |
150.3 |
|
|
|
|
|
|
|
|
|
Less amounts representing
imputed interest |
|
|
(6.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Present value of minimum lease payments |
|
$ |
17.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
94
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(b) Contingencies
Our business involves a risk of product liability, patent infringement and other claims in the
ordinary course of business arising from the products that we source from various manufacturers.
Our exposure to such claims may increase as we seek to increase the geographic scope of our
sourcing activities and sales of private label products. We maintain insurance policies, including
product liability insurance, and in many cases we have indemnification rights against such claims
from the manufacturers of the products we distribute. We cannot assure you that our insurance
coverage or indemnification agreements with manufacturers will be available in all pending or any
future cases brought against us. Furthermore, our ability to recover under any insurance or
indemnification arrangements is subject to the financial viability of our insurers, our
manufacturers and our manufactures insurers, as well as legal enforcement under the local laws
governing the arrangements. In particular, as we seek to expand our sourcing from manufacturers in
Asia Pacific and other developing locations, we expect that we will increase our exposure to
potential defaults under the related indemnification arrangements. Insurance coverage in general or
coverage for certain types of liabilities, such as product liability or patent infringement in
these developing markets may not be readily available for purchase or cost-effective for us to
purchase. Furthermore, insurance for liability relating to asbestos, lead and silica exposure is
not available, and we do not maintain insurance for product recalls. Accordingly, we could be
subject to uninsured and unindemnified future liabilities, and an unfavorable result in a case for
which adequate insurance or indemnification is not available could result in a material adverse
effect on our business, financial condition and results of operations.
During 2005, the German Federal Cartel Office (GFCO) initiated an investigation with regard
to our European Distribution Agreement with Merck KGaA. The purpose of the investigation is to
determine whether this agreement violates or otherwise infringes the general prohibition of
anti-competitive agreements under either German or EU rules. We submitted information to the GFCO
in response to its initial request. During 2007, the GFCO requested additional information, which
we provided. In December 2007, Merck KGaA received a letter from the GFCO, which asserted that the
aforementioned agreement is contrary to applicable competition regulations in Germany. In February
2008, we submitted a response to the GFCO. In June 2008, the GFCO requested additional information,
which we provided. In May 2009, we and Merck KGaA received a letter from the GFCO, which again
asserted that the aforementioned agreement is contrary to applicable competitive regulations in
Germany. Following our response to these assertions, in July 2009, the GFCO issued its formal
decision that the exclusivity and non-competition provisions of the agreement violate certain
provisions of German and EU law and ordered Merck KGaA to either supply chemical products to other
distributors in Germany, in addition to us, on non-discriminatory terms or to supply chemical
products directly to end customers in Germany without involving any distributors. Merck KGaA and we
filed formal appeals of this decision and the competent German appellate court temporarily
suspended enforcement of the GFCOs order. In December 2009, the German appellate court granted
partial injunctive relief, but lifted the suspension with respect to a majority of the products
covered by the European Distribution Agreement. In February 2010, the GFCO indicated that it had opened a new investigation with regard to
the European Distribution Agreement. As a result of the Merger on June 29, 2007 and related purchase
accounting, we recorded certain amortizable intangible assets related to the entire geographic
scope of our European Distribution Agreement with Merck KGaA. As of December 31, 2009, the
unamortized net book value of these intangible assets was $36.9. We cannot assess the likely outcome of our and Merck KGaAs
appeal of the GFCOs initial decision or any subsequent investigation, but we do not believe an
adverse ruling in either case would result in a material adverse effect on our business, financial
condition or results of operations.
We also are involved in various legal and regulatory cases, claims, assessments and inquiries,
which are considered routine to our business and which include being named from time to time as a
defendant in cases as a result of our distribution of laboratory supplies, including litigation
resulting from the alleged prior distribution of products containing asbestos by certain of our
predecessors or acquired companies. While the impact of this litigation has typically been
immaterial, there can be no assurance that the impact of the pending and any future claims will not
be material to our business, financial condition or results of operations in the future.
95
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(c) Employment Agreements
The employment agreements with our executive officers include non-compete, non-solicit and
non-hire covenants as well as severance provisions. In general, if the executive officer is
terminated without Cause or resigns for Good Reason (as such terms are defined in the
respective employment agreements) the executive officer is entitled to one and a half times (two
times in the case of our Chairman, President and Chief Executive Officer) the sum of base salary
plus the target bonus for the year in which such termination or resignation occurs and continued
health benefits for the 12-month period (18-month period in the case of our Chairman, President and
Chief Executive Officer) following termination or resignation. Salary and bonus payments are
payable in equal installments over the 12-month period following such termination or resignation.
The aggregate potential payments under these employment agreements for terminations without Cause
and resignations for Good Reason, including estimated costs associated with continued health
benefits, is approximately $11.9 as of December 31, 2009.
(d) Significant Relationship
Merck KGaA and its affiliates are one of our major suppliers of chemical and other products.
The Company has a European Distribution Agreement with Merck KGaA to distribute certain chemical
products in Europe. The European Distribution Agreement was originally entered into in April 2004
with a five year term and has been extended for a second five year term through April 2014. Merck
KGaA has the right to terminate this agreement if certain events occur. See Note 15(b) for a
discussion of legal matters relating to the European Distribution Agreement with Merck KGaA.
The Company also has distribution agreements with affiliates of Merck KGaA to distribute
certain chemical products in North America. The North American chemical distribution agreement was
originally entered into in April 2004 with a five year term and automatically extended for a second
five-year term, ending April 2014. Affiliates of Merck KGaA may terminate the North America
chemical distribution agreement if certain events occur.
Merck KGaA and its affiliates supplied products accounting for approximately 13% of our
consolidated net sales, representing less than 10% of our North American Lab net sales and
approximately 25% of our European Lab net sales, in each of 2009, 2008 and 2007.
(16) Transactions with Related Parties
(a) Transactions with Madison Dearborn and Avista Capital Partners
As of December 31, 2009, Madison Dearborn and Avista Capital Partners, L.P. (Avista),
through certain of their investment funds, beneficially own approximately 75.4% and 7.7% of our
total outstanding common stock, respectively, through their ownership interests in Holdings. On the
closing date of the Merger, an affiliate of Madison Dearborn received a fee of $35.6 for
transaction services rendered in connection with the Merger pursuant to an agreement entered into
on the closing date of the Merger between the Company and this affiliate (the Management Services
Agreement). This fee was recorded as a reduction to additional paid-in capital, net of a $10.2 tax
benefit.
The Management Services Agreement was amended in August 2007 to add an affiliate of Avista as
a party. Pursuant to the Management Services Agreement, Madison Dearborn and Avista or their
affiliate parties thereto will provide the Company with management and consulting services and
financial and other advisory services and will be paid an aggregate annual management fee of $2.0
(paid quarterly) in connection with the provision of such services as well as board-level services.
In addition, Madison Dearborn and Avista will receive a placement fee of 2.5% of any equity
financing that they provide to us prior to a public equity offering. The Management Services
Agreement shall remain in effect until the date on which none of Madison Dearborn or its affiliates
hold directly or indirectly any equity securities of the ultimate parent of the Company or its
successors. As of December 31, 2009, the Company has an accrued but unpaid balance of $1.1,
included in accrued expenses on the accompanying balance sheet, due to affiliates of Madison
Dearborn and Avista related to the Management Services Agreement.
96
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(b) Transactions with Goldman, Sachs & Co.
As of December 31, 2009, affiliates of Goldman, Sachs & Co. (Goldman) beneficially own
approximately 4.3% of our total outstanding common stock through their ownership interests in
Holdings. Goldman and its affiliates have provided from time to time in the past and may provide in
the future investment banking, commercial lending and financial advisory services to the Company
and its affiliates. In connection with the Merger, Goldman provided financial advisory services to
the Company as well as a bridge loan commitment to the Company to secure financing. Goldman was
also a joint lead arranger, joint bookrunner, and syndication agent for the Companys Senior
Secured Credit Facility, and was an initial purchaser of the Senior Notes and sole purchaser of the
Senior Subordinated Notes. For their services, financing commitments and participation in the
Senior Secured Credit Facility, Senior Notes and Senior Subordinated Notes, Goldman was paid $59.2.
In addition, Goldman was and currently is a lender under the Companys Senior Secured Credit
Facility for which it receives fees and earns interest according to the terms and conditions of the
Senior Secured Credit Facility. Affiliates of Goldman are counterparty to our interest rate swap
arrangements (see Note 14(c)).
(c) Transactions with CD&R
Under the terms of a consulting agreement between the Company and CD&R, the Company was
required to pay an annual consulting fee of $1.5 for financial advisory and management consulting
services. The consulting agreement with CD&R was terminated in connection with the Merger.
(d) Services performed by Debevoise & Plimpton LLP
The Company was provided legal services by Debevoise & Plimpton LLP. A senior member of that
law firm was related to a principal of CD&R who resigned from our Board of Directors in 2006. In
2007 prior to the Merger, the Company was provided legal services totaling $2.5, which were
included in Merger expenses.
(e) Services performed by SIRVA, Inc.
The Company was provided with product transportation and relocation services by SIRVA, Inc.
(SIRVA). Three former members of our Board of Directors were also members of SIRVAs Board of
Directors, and one former member of our Board of Directors served as the President and Chief
Executive Officer of SIRVA. SIRVA was a portfolio company of certain funds managed by CD&R. Total
expenses incurred with SIRVA during the period January 1 through June 29, 2007 were $1.4.
In December 2006, the Company and John Ballbach, our Chairman, President and Chief Executive
Officer, entered into an agreement, under which SIRVA would purchase Mr. Ballbachs former house at
its then-current fair market value of $1.0. During the period January 1 through June 29, 2007, the
Company sold the home with an immaterial loss recognized upon sale.
(17) Segment and Geographical Financial Information
We report financial results on the basis of the following three business segments: North
American laboratory distribution (North American Lab), European laboratory distribution
(European Lab) and Science Education. Our operations in Asia Pacific are engaged in regional
commercial operations and also support our North American Lab and European Lab businesses. The
results of our operations in Asia Pacific are not material and are included in our North American
Lab segment.
97
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
The Companys operating segments have been identified giving consideration to both geographic
areas and the nature of products among businesses within its geographic area. North American Lab
and European Lab are organized as distinct operating segments primarily because of geographic
dispersion and the inherent differences in business models. The North American Lab segment is
highly standardized and operated as an integrated business, whereas the European Lab business is
more fragmented and its customer markets are more localized. The Science Education operating
segment has been differentiated from the North American Lab segment because of its unique and
specialized product lines, concentration of customers in the educational sector and because it has
higher gross margins. Operations within North America (excluding Science Education) have been
aggregated due to the similarity of economic characteristics, product lines, customers and
distribution methods. Similarly, operations within the European Lab segment have been aggregated
because of common economic characteristics as well as the similarity among products, customers and
distribution networks.
The Company allocates its centralized management of corporate costs to its operating segments
as follows:
|
|
|
Corporate costs are allocated to its North American Lab and Science Education operating
segments using allocation factors that management considers reasonable to distribute costs
on the basis of usage. |
|
|
|
Centralized costs related to the management of the European Lab operating segment are
incurred within the segment structure and no inter-segment allocation is required. |
Selected business segment financial information is presented below. Inter-segment activity has
been eliminated. Therefore, revenues reported for each operating segment are substantially all from
external customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
2,017.0 |
|
|
$ |
2,092.2 |
|
|
$ |
1,014.7 |
|
|
|
$ |
1,003.7 |
|
European Lab |
|
|
1,407.2 |
|
|
|
1,503.4 |
|
|
|
700.8 |
|
|
|
|
630.4 |
|
Science Education |
|
|
137.0 |
|
|
|
163.6 |
|
|
|
107.2 |
|
|
|
|
65.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,561.2 |
|
|
$ |
3,759.2 |
|
|
$ |
1,822.7 |
|
|
|
$ |
1,699.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
113.7 |
|
|
$ |
(95.3 |
) |
|
$ |
54.1 |
|
|
|
$ |
51.8 |
|
European Lab |
|
|
93.1 |
|
|
|
2.8 |
|
|
|
39.1 |
|
|
|
|
41.8 |
|
Science Education |
|
|
2.0 |
|
|
|
(95.8 |
) |
|
|
9.7 |
|
|
|
|
4.3 |
|
Merger expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
208.8 |
|
|
$ |
(188.3 |
) |
|
$ |
102.9 |
|
|
|
$ |
61.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
12.8 |
|
|
$ |
18.1 |
|
|
$ |
10.2 |
|
|
|
$ |
9.4 |
|
European Lab |
|
|
9.9 |
|
|
|
9.7 |
|
|
|
4.8 |
|
|
|
|
5.0 |
|
Science Education |
|
|
1.2 |
|
|
|
1.9 |
|
|
|
1.3 |
|
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
23.9 |
|
|
$ |
29.7 |
|
|
$ |
16.3 |
|
|
|
$ |
15.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
62.7 |
|
|
$ |
61.5 |
|
|
$ |
28.5 |
|
|
|
$ |
11.1 |
|
European Lab |
|
|
46.4 |
|
|
|
47.1 |
|
|
|
21.0 |
|
|
|
|
7.6 |
|
Science Education |
|
|
7.5 |
|
|
|
7.5 |
|
|
|
3.7 |
|
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
116.6 |
|
|
$ |
116.1 |
|
|
$ |
53.2 |
|
|
|
$ |
19.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Our total operating loss during the year ended December 31, 2008 is primarily due to $392.1 in
pre-tax charges relating to the impairment of goodwill and intangible assets, including $202.1,
$88.0, and $102.0 of charges recorded in our North American Lab, European Lab and Science Education
segments, respectively. See Note 3.
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Total Assets |
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
2,576.5 |
|
|
$ |
2,626.1 |
|
European Lab |
|
|
2,313.1 |
|
|
|
2,198.2 |
|
Science Education |
|
|
237.7 |
|
|
|
260.6 |
|
|
|
|
|
|
|
|
Total |
|
$ |
5,127.3 |
|
|
$ |
5,084.9 |
|
|
|
|
|
|
|
|
The following is a reconciliation of reported operating income (loss) by segment to loss
before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
Operating income (loss), as reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Lab |
|
$ |
113.7 |
|
|
$ |
(95.3 |
) |
|
$ |
54.1 |
|
|
|
$ |
51.8 |
|
European Lab |
|
|
93.1 |
|
|
|
2.8 |
|
|
|
39.1 |
|
|
|
|
41.8 |
|
Science Education |
|
|
2.0 |
|
|
|
(95.8 |
) |
|
|
9.7 |
|
|
|
|
4.3 |
|
Merger expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
208.8 |
|
|
|
(188.3 |
) |
|
|
102.9 |
|
|
|
|
61.1 |
|
Interest income |
|
|
2.3 |
|
|
|
5.7 |
|
|
|
3.0 |
|
|
|
|
3.3 |
|
Interest expense |
|
|
(226.8 |
) |
|
|
(289.6 |
) |
|
|
(130.4 |
) |
|
|
|
(101.8 |
) |
Other income (expense), net |
|
|
(23.9 |
) |
|
|
22.1 |
|
|
|
(67.2 |
) |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
$ |
(39.6 |
) |
|
$ |
(450.1 |
) |
|
$ |
(91.7 |
) |
|
|
$ |
(33.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales, long-lived assets and total assets by geographic area are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Year Ended December 31, |
|
|
Year Ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
June 30 - |
|
|
|
January 1 - |
|
|
|
2009 |
|
|
2008 |
|
|
December 31, 2007 |
|
|
|
June 29, 2007 |
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
1,890.5 |
|
|
$ |
1,979.3 |
|
|
$ |
1,003.1 |
|
|
|
$ |
956.5 |
|
International |
|
|
1,670.7 |
|
|
|
1,779.9 |
|
|
|
819.6 |
|
|
|
|
742.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,561.2 |
|
|
$ |
3,759.2 |
|
|
$ |
1,822.7 |
|
|
|
$ |
1,699.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Long-lived Assets |
|
|
|
|
|
|
|
|
United States |
|
$ |
93.3 |
|
|
$ |
105.2 |
|
International |
|
|
98.1 |
|
|
|
84.9 |
|
|
|
|
|
|
|
|
Total |
|
$ |
191.4 |
|
|
$ |
190.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
|
|
|
|
|
United States |
|
$ |
2,555.4 |
|
|
$ |
2,675.9 |
|
International |
|
|
2,571.9 |
|
|
|
2,409.0 |
|
|
|
|
|
|
|
|
Total |
|
$ |
5,127.3 |
|
|
$ |
5,084.9 |
|
|
|
|
|
|
|
|
(18) Unaudited Quarterly Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Quarterly Periods |
|
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
841.2 |
|
|
$ |
876.0 |
|
|
$ |
902.1 |
|
|
$ |
941.9 |
|
Gross profit |
|
|
244.4 |
|
|
|
244.8 |
|
|
|
260.1 |
|
|
|
266.3 |
|
Operating income |
|
|
42.4 |
|
|
|
44.0 |
|
|
|
63.0 |
|
|
|
59.4 |
|
Interest expense, net |
|
|
(62.3 |
) |
|
|
(50.4 |
) |
|
|
(59.1 |
) |
|
|
(52.7 |
) |
Other income (expense), net |
|
|
36.6 |
|
|
|
(46.0 |
) |
|
|
(30.0 |
) |
|
|
15.5 |
|
Income (loss) before income
taxes |
|
|
16.7 |
|
|
|
(52.4 |
) |
|
|
(26.1 |
) |
|
|
22.2 |
|
Net income (loss) |
|
|
11.2 |
|
|
|
(26.8 |
) |
|
|
(15.7 |
) |
|
|
17.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Quarterly Periods |
|
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
922.6 |
|
|
$ |
965.5 |
|
|
$ |
979.9 |
|
|
$ |
891.2 |
|
Gross profit |
|
|
261.1 |
|
|
|
271.7 |
|
|
|
278.8 |
|
|
|
253.8 |
|
Operating income (loss) |
|
|
40.5 |
|
|
|
47.4 |
|
|
|
65.4 |
|
|
|
(341.6 |
) |
Interest expense, net |
|
|
(63.2 |
) |
|
|
(63.1 |
) |
|
|
(64.8 |
) |
|
|
(92.8 |
) |
Other (expense) income, net |
|
|
(75.0 |
) |
|
|
1.8 |
|
|
|
96.5 |
|
|
|
(1.2 |
) |
(Loss) income before income
taxes |
|
|
(97.7 |
) |
|
|
(13.9 |
) |
|
|
97.1 |
|
|
|
(435.6 |
) |
Net (loss) income |
|
|
(56.8 |
) |
|
|
(9.7 |
) |
|
|
56.4 |
|
|
|
(324.5 |
) |
Operating loss in the fourth quarter of 2008 includes $392.1 of charges relating to the
impairment of goodwill and intangible assets. See Note 3.
100
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
(19) Condensed Consolidating Financial Information Post Merger
The following tables set forth the condensed consolidating financial statements of the
Company. These financial statements are included as a result of the guarantee arrangements relating
to the issuance of the Senior Notes in connection with the Merger. The Senior Notes are jointly and
severally guaranteed on an unsecured basis by the Subsidiary Guarantors. The guarantees are full
and unconditional and each of the Subsidiary Guarantors is wholly owned, directly or indirectly, by
the Company. These condensed consolidating financial statements have been prepared from the
Companys financial information on the same basis of accounting as the Companys consolidated
financial statements.
The following condensed consolidating financial statements present the balance sheets as of
December 31, 2009 and 2008 and statements of operations and cash flows for the years ended December
31, 2009 and 2008 and for the periods included in the year ended December 31, 2007 of (1) the
Company (Parent), (2) the Subsidiary Guarantors, (3) subsidiaries of the Company that are not
guarantors (the Non-Guarantor Subsidiaries), (4) elimination entries necessary to consolidate the
Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries, and (5) the Company on a
consolidated basis. The eliminating adjustments primarily reflect inter-company transactions, such
as accounts receivable and payable, advances, royalties and profit in inventory eliminations. We
have not presented separate notes and other disclosures concerning the Subsidiary Guarantors as we
have determined that such material information is available in the notes to the Companys
consolidated financial statements.
101
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Condensed Consolidating Balance Sheet
December 31, 2009 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1.3 |
|
|
$ |
10.1 |
|
|
$ |
113.0 |
|
|
$ |
|
|
|
$ |
124.4 |
|
Compensating cash balance |
|
|
|
|
|
|
|
|
|
|
105.0 |
|
|
|
|
|
|
|
105.0 |
|
Trade accounts receivable, net |
|
|
|
|
|
|
190.1 |
|
|
|
281.2 |
|
|
|
|
|
|
|
471.3 |
|
Inventories |
|
|
|
|
|
|
134.9 |
|
|
|
128.7 |
|
|
|
|
|
|
|
263.6 |
|
Other current assets |
|
|
|
|
|
|
14.4 |
|
|
|
38.5 |
|
|
|
|
|
|
|
52.9 |
|
Intercompany receivables |
|
|
14.8 |
|
|
|
2.1 |
|
|
|
|
|
|
|
(16.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
16.1 |
|
|
|
351.6 |
|
|
|
666.4 |
|
|
|
(16.9 |
) |
|
|
1,017.2 |
|
Property and equipment, net |
|
|
|
|
|
|
71.6 |
|
|
|
119.8 |
|
|
|
|
|
|
|
191.4 |
|
Goodwill |
|
|
|
|
|
|
905.1 |
|
|
|
927.9 |
|
|
|
|
|
|
|
1,833.0 |
|
Other intangible assets, net |
|
|
|
|
|
|
1,125.8 |
|
|
|
860.9 |
|
|
|
|
|
|
|
1,986.7 |
|
Deferred income taxes |
|
|
221.9 |
|
|
|
|
|
|
|
12.6 |
|
|
|
(221.9 |
) |
|
|
12.6 |
|
Investment in subsidiaries |
|
|
2,649.7 |
|
|
|
1,759.3 |
|
|
|
|
|
|
|
(4,409.0 |
) |
|
|
|
|
Other assets |
|
|
41.9 |
|
|
|
42.2 |
|
|
|
2.3 |
|
|
|
|
|
|
|
86.4 |
|
Intercompany loans |
|
|
1,045.3 |
|
|
|
136.6 |
|
|
|
19.2 |
|
|
|
(1,201.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,974.9 |
|
|
$ |
4,392.2 |
|
|
$ |
2,609.1 |
|
|
$ |
(5,848.9 |
) |
|
$ |
5,127.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE EQUITY
UNITS AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt and
capital lease obligations |
|
$ |
44.3 |
|
|
$ |
0.4 |
|
|
$ |
107.7 |
|
|
$ |
|
|
|
$ |
152.4 |
|
Accounts payable |
|
|
|
|
|
|
177.9 |
|
|
|
200.3 |
|
|
|
|
|
|
|
378.2 |
|
Accrued expenses |
|
|
2.7 |
|
|
|
60.7 |
|
|
|
94.8 |
|
|
|
|
|
|
|
158.2 |
|
Intercompany payables |
|
|
|
|
|
|
0.8 |
|
|
|
16.1 |
|
|
|
(16.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
47.0 |
|
|
|
239.8 |
|
|
|
418.9 |
|
|
|
(16.9 |
) |
|
|
688.8 |
|
Long-term debt and capital lease
obligations |
|
|
2,702.5 |
|
|
|
1.5 |
|
|
|
15.3 |
|
|
|
|
|
|
|
2,719.3 |
|
Other long-term liabilities |
|
|
50.4 |
|
|
|
16.2 |
|
|
|
68.7 |
|
|
|
|
|
|
|
135.3 |
|
Deferred income taxes |
|
|
|
|
|
|
448.4 |
|
|
|
269.0 |
|
|
|
(221.9 |
) |
|
|
495.5 |
|
Intercompany loans |
|
|
86.6 |
|
|
|
1,037.4 |
|
|
|
77.1 |
|
|
|
(1,201.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,886.5 |
|
|
|
1,743.3 |
|
|
|
849.0 |
|
|
|
(1,439.9 |
) |
|
|
4,038.9 |
|
Redeemable equity units |
|
|
45.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45.8 |
|
Total stockholders equity |
|
|
1,042.6 |
|
|
|
2,648.9 |
|
|
|
1,760.1 |
|
|
|
(4,409.0 |
) |
|
|
1,042.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable equity units
and stockholders equity |
|
$ |
3,974.9 |
|
|
$ |
4,392.2 |
|
|
$ |
2,609.1 |
|
|
$ |
(5,848.9 |
) |
|
$ |
5,127.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Condensed Consolidating Balance Sheet
December 31, 2008 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3.1 |
|
|
$ |
8.6 |
|
|
$ |
30.3 |
|
|
$ |
|
|
|
$ |
42.0 |
|
Compensating cash balance |
|
|
|
|
|
|
|
|
|
|
100.7 |
|
|
|
|
|
|
|
100.7 |
|
Trade accounts receivable, net |
|
|
|
|
|
|
196.5 |
|
|
|
275.7 |
|
|
|
|
|
|
|
472.2 |
|
Inventories |
|
|
|
|
|
|
153.3 |
|
|
|
131.5 |
|
|
|
|
|
|
|
284.8 |
|
Other current assets |
|
|
|
|
|
|
15.0 |
|
|
|
49.2 |
|
|
|
|
|
|
|
64.2 |
|
Intercompany receivables |
|
|
11.2 |
|
|
|
5.5 |
|
|
|
|
|
|
|
(16.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
14.3 |
|
|
|
378.9 |
|
|
|
587.4 |
|
|
|
(16.7 |
) |
|
|
963.9 |
|
Property and equipment, net |
|
|
|
|
|
|
83.1 |
|
|
|
107.0 |
|
|
|
|
|
|
|
190.1 |
|
Goodwill |
|
|
|
|
|
|
900.2 |
|
|
|
884.5 |
|
|
|
|
|
|
|
1,784.7 |
|
Other intangible assets, net |
|
|
|
|
|
|
1,167.9 |
|
|
|
845.0 |
|
|
|
|
|
|
|
2,012.9 |
|
Deferred income taxes |
|
|
150.4 |
|
|
|
|
|
|
|
14.2 |
|
|
|
(150.4 |
) |
|
|
14.2 |
|
Investment in subsidiaries |
|
|
2,630.4 |
|
|
|
1,690.4 |
|
|
|
|
|
|
|
(4,320.8 |
) |
|
|
|
|
Other assets |
|
|
49.7 |
|
|
|
64.2 |
|
|
|
5.2 |
|
|
|
|
|
|
|
119.1 |
|
Intercompany loans |
|
|
1,004.9 |
|
|
|
108.0 |
|
|
|
51.0 |
|
|
|
(1,163.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,849.7 |
|
|
$ |
4,392.7 |
|
|
$ |
2,494.3 |
|
|
$ |
(5,651.8 |
) |
|
$ |
5,084.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE EQUITY
UNITS AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt and
capital lease obligations |
|
$ |
61.9 |
|
|
$ |
0.4 |
|
|
$ |
102.7 |
|
|
$ |
|
|
|
$ |
165.0 |
|
Accounts payable |
|
|
|
|
|
|
166.8 |
|
|
|
189.7 |
|
|
|
|
|
|
|
356.5 |
|
Accrued expenses |
|
|
36.6 |
|
|
|
62.5 |
|
|
|
90.7 |
|
|
|
|
|
|
|
189.8 |
|
Intercompany payables |
|
|
1.0 |
|
|
|
|
|
|
|
15.7 |
|
|
|
(16.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
99.5 |
|
|
|
229.7 |
|
|
|
398.8 |
|
|
|
(16.7 |
) |
|
|
711.3 |
|
Long-term debt and capital lease
obligations |
|
|
2,645.2 |
|
|
|
1.9 |
|
|
|
3.5 |
|
|
|
|
|
|
|
2,650.6 |
|
Other long-term liabilities |
|
|
50.2 |
|
|
|
15.7 |
|
|
|
55.6 |
|
|
|
|
|
|
|
121.5 |
|
Deferred income taxes |
|
|
|
|
|
|
426.9 |
|
|
|
270.2 |
|
|
|
(150.4 |
) |
|
|
546.7 |
|
Intercompany loans |
|
|
|
|
|
|
1,088.9 |
|
|
|
75.0 |
|
|
|
(1,163.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,794.9 |
|
|
|
1,763.1 |
|
|
|
803.1 |
|
|
|
(1,331.0 |
) |
|
|
4,030.1 |
|
Redeemable equity units |
|
|
46.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46.4 |
|
Total stockholders equity |
|
|
1,008.4 |
|
|
|
2,629.6 |
|
|
|
1,691.2 |
|
|
|
(4,320.8 |
) |
|
|
1,008.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable equity units
and stockholders equity |
|
$ |
3,849.7 |
|
|
$ |
4,392.7 |
|
|
$ |
2,494.3 |
|
|
$ |
(5,651.8 |
) |
|
$ |
5,084.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Condensed Consolidating
Statement of Operations
December 31, 2009 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
|
|
|
$ |
1,885.0 |
|
|
$ |
1,690.7 |
|
|
$ |
(14.5 |
) |
|
$ |
3,561.2 |
|
Cost of goods sold |
|
|
|
|
|
|
1,405.0 |
|
|
|
1,155.1 |
|
|
|
(14.5 |
) |
|
|
2,545.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
480.0 |
|
|
|
535.6 |
|
|
|
|
|
|
|
1,015.6 |
|
Selling, general and administrative expenses |
|
|
3.2 |
|
|
|
380.8 |
|
|
|
445.6 |
|
|
|
(22.8 |
) |
|
|
806.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(3.2 |
) |
|
|
99.2 |
|
|
|
90.0 |
|
|
|
22.8 |
|
|
|
208.8 |
|
Interest expense, net of
interest income (1) |
|
|
(179.8 |
) |
|
|
(40.7 |
) |
|
|
(4.0 |
) |
|
|
|
|
|
|
(224.5 |
) |
Other income (expense), net |
|
|
(29.7 |
) |
|
|
20.2 |
|
|
|
8.4 |
|
|
|
(22.8 |
) |
|
|
(23.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes and
equity in earnings of subsidiaires |
|
|
(212.7 |
) |
|
|
78.7 |
|
|
|
94.4 |
|
|
|
|
|
|
|
(39.6 |
) |
Income tax benefit (provision) |
|
|
84.3 |
|
|
|
(34.9 |
) |
|
|
(23.9 |
) |
|
|
|
|
|
|
25.5 |
|
Equity in
earnings of subsidiaries, net of tax |
|
|
114.3 |
|
|
|
70.5 |
|
|
|
|
|
|
|
(184.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(14.1 |
) |
|
$ |
114.3 |
|
|
$ |
70.5 |
|
|
$ |
(184.8 |
) |
|
$ |
(14.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Parents net interest expense for the year ended December 31, 2009
of $179.8 relates to long-term debt of approximately $2.6 billion, net
of interest income associated with inter-company loans of $1.0
billion. The Parent is substantially dependent on dividends, interest
income, or other distributions from its subsidiary companies to fund
the cash interest expense on its long-term debt obligations. The
Parent may draw on its existing revolving credit facility (a component
of the Senior Secured Credit Facility) to fund certain portions of the
cash interest expense on its long-term debt obligations, and it may
also elect to satisfy its interest expense on the Senior Notes and
Senior Subordinated Notes for certain time periods by increasing the
principal amount thereon. |
Condensed Consolidating Statement of Operations
December 31, 2008 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
|
|
|
$ |
1,983.1 |
|
|
$ |
1,797.9 |
|
|
$ |
(21.8 |
) |
|
$ |
3,759.2 |
|
Cost of goods sold |
|
|
|
|
|
|
1,476.2 |
|
|
|
1,239.4 |
|
|
|
(21.8 |
) |
|
|
2,693.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
506.9 |
|
|
|
558.5 |
|
|
|
|
|
|
|
1,065.4 |
|
Selling, general and administrative expenses |
|
|
3.1 |
|
|
|
411.5 |
|
|
|
468.4 |
|
|
|
(21.4 |
) |
|
|
861.6 |
|
Impairment of goodwill and intangible assets |
|
|
|
|
|
|
290.7 |
|
|
|
101.4 |
|
|
|
|
|
|
|
392.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(3.1 |
) |
|
|
(195.3 |
) |
|
|
(11.3 |
) |
|
|
21.4 |
|
|
|
(188.3 |
) |
Interest expense, net of interest income |
|
|
(210.3 |
) |
|
|
(67.8 |
) |
|
|
(5.8 |
) |
|
|
|
|
|
|
(283.9 |
) |
Other income (expense), net |
|
|
41.7 |
|
|
|
24.5 |
|
|
|
(22.7 |
) |
|
|
(21.4 |
) |
|
|
22.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes and
equity in earnings of subsidiaires |
|
|
(171.7 |
) |
|
|
(238.6 |
) |
|
|
(39.8 |
) |
|
|
|
|
|
|
(450.1 |
) |
Income tax benefit |
|
|
63.9 |
|
|
|
46.5 |
|
|
|
5.1 |
|
|
|
|
|
|
|
115.5 |
|
Equity in loss of subsidiaries, net of tax |
|
|
(226.8 |
) |
|
|
(34.7 |
) |
|
|
|
|
|
|
261.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(334.6 |
) |
|
$ |
(226.8 |
) |
|
$ |
(34.7 |
) |
|
$ |
261.5 |
|
|
$ |
(334.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Condensed Consolidating Statement of Operations
June 30 December 31, 2007 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
|
|
|
$ |
995.3 |
|
|
$ |
847.2 |
|
|
$ |
(19.8 |
) |
|
$ |
1,822.7 |
|
Cost of goods sold |
|
|
|
|
|
|
743.5 |
|
|
|
587.6 |
|
|
|
(19.8 |
) |
|
|
1,311.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
251.8 |
|
|
|
259.6 |
|
|
|
|
|
|
|
511.4 |
|
Selling, general and administrative expenses |
|
|
0.9 |
|
|
|
198.8 |
|
|
|
217.8 |
|
|
|
(9.0 |
) |
|
|
408.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(0.9 |
) |
|
|
53.0 |
|
|
|
41.8 |
|
|
|
9.0 |
|
|
|
102.9 |
|
Interest expense, net of interest income |
|
|
(83.6 |
) |
|
|
(42.4 |
) |
|
|
(1.4 |
) |
|
|
|
|
|
|
(127.4 |
) |
Other income (expense), net |
|
|
(68.0 |
) |
|
|
(0.8 |
) |
|
|
10.6 |
|
|
|
(9.0 |
) |
|
|
(67.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
and
equity in earnings of subsidiaries |
|
|
(152.5 |
) |
|
|
9.8 |
|
|
|
51.0 |
|
|
|
|
|
|
|
(91.7 |
) |
Income tax benefit (provision) |
|
|
86.3 |
|
|
|
(30.8 |
) |
|
|
(12.8 |
) |
|
|
|
|
|
|
42.7 |
|
Equity in earnings of subsidiaries, net of tax |
|
|
17.2 |
|
|
|
38.2 |
|
|
|
|
|
|
|
(55.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(49.0 |
) |
|
$ |
17.2 |
|
|
$ |
38.2 |
|
|
$ |
(55.4 |
) |
|
$ |
(49.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
January 1 June 29, 2007 (Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
|
|
|
$ |
941.4 |
|
|
$ |
775.1 |
|
|
$ |
(17.2 |
) |
|
$ |
1,699.3 |
|
Cost of goods sold |
|
|
|
|
|
|
709.9 |
|
|
|
537.4 |
|
|
|
(17.2 |
) |
|
|
1,230.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
231.5 |
|
|
|
237.7 |
|
|
|
|
|
|
|
469.2 |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
185.7 |
|
|
|
195.6 |
|
|
|
(10.0 |
) |
|
|
371.3 |
|
Merger expenses |
|
|
36.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(36.8 |
) |
|
|
45.8 |
|
|
|
42.1 |
|
|
|
10.0 |
|
|
|
61.1 |
|
Interest expense, net of interest income |
|
|
(22.4 |
) |
|
|
(75.9 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
(98.5 |
) |
Other income (expense), net |
|
|
0.2 |
|
|
|
8.4 |
|
|
|
4.9 |
|
|
|
(10.0 |
) |
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
and
equity in earnings of subsidiaries |
|
|
(59.0 |
) |
|
|
(21.7 |
) |
|
|
46.8 |
|
|
|
|
|
|
|
(33.9 |
) |
Income tax benefit (provision) |
|
|
17.0 |
|
|
|
8.9 |
|
|
|
(17.6 |
) |
|
|
|
|
|
|
8.3 |
|
Equity in earnings of subsidiaries, net of tax |
|
|
16.4 |
|
|
|
29.2 |
|
|
|
|
|
|
|
(45.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(25.6 |
) |
|
$ |
16.4 |
|
|
$ |
29.2 |
|
|
$ |
(45.6 |
) |
|
$ |
(25.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2009 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
$ |
(150.7 |
) |
|
$ |
187.8 |
|
|
$ |
131.9 |
|
|
$ |
|
|
|
$ |
169.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany investing transactions |
|
|
194.9 |
|
|
|
25.6 |
|
|
|
|
|
|
|
(220.5 |
) |
|
|
|
|
Acquisitions of other businesses and transaction costs |
|
|
|
|
|
|
(1.0 |
) |
|
|
(16.9 |
) |
|
|
|
|
|
|
(17.9 |
) |
Capital expenditures |
|
|
|
|
|
|
(11.0 |
) |
|
|
(12.9 |
) |
|
|
|
|
|
|
(23.9 |
) |
Proceeds from the sales of property and equipment |
|
|
|
|
|
|
|
|
|
|
3.7 |
|
|
|
|
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
194.9 |
|
|
|
13.6 |
|
|
|
(26.1 |
) |
|
|
(220.5 |
) |
|
|
(38.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany financing transactions |
|
|
|
|
|
|
(194.9 |
) |
|
|
(25.6 |
) |
|
|
220.5 |
|
|
|
|
|
Proceeds from debt |
|
|
267.0 |
|
|
|
|
|
|
|
1.3 |
|
|
|
|
|
|
|
268.3 |
|
Repayment of debt |
|
|
(307.8 |
) |
|
|
(0.4 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
(309.8 |
) |
Other financing activities, net |
|
|
(5.2 |
) |
|
|
(4.6 |
) |
|
|
0.2 |
|
|
|
|
|
|
|
(9.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(46.0 |
) |
|
|
(199.9 |
) |
|
|
(25.7 |
) |
|
|
220.5 |
|
|
|
(51.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
2.6 |
|
|
|
|
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
|
(1.8 |
) |
|
|
1.5 |
|
|
|
82.7 |
|
|
|
|
|
|
|
82.4 |
|
Cash and cash equivalents beginning of period |
|
|
3.1 |
|
|
|
8.6 |
|
|
|
30.3 |
|
|
|
|
|
|
|
42.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period |
|
$ |
1.3 |
|
|
$ |
10.1 |
|
|
$ |
113.0 |
|
|
$ |
|
|
|
$ |
124.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2008 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
$ |
(157.1 |
) |
|
$ |
86.7 |
|
|
$ |
79.1 |
|
|
$ |
|
|
|
$ |
8.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany investing transactions |
|
|
94.4 |
|
|
|
(5.6 |
) |
|
|
|
|
|
|
(88.8 |
) |
|
|
|
|
Acquisitions of other businesses and transaction costs |
|
|
|
|
|
|
|
|
|
|
(54.2 |
) |
|
|
|
|
|
|
(54.2 |
) |
Capital expenditures |
|
|
|
|
|
|
(18.5 |
) |
|
|
(11.2 |
) |
|
|
|
|
|
|
(29.7 |
) |
Proceeds from the sales of property and equipment |
|
|
|
|
|
|
0.3 |
|
|
|
8.7 |
|
|
|
|
|
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
94.4 |
|
|
|
(23.8 |
) |
|
|
(56.7 |
) |
|
|
(88.8 |
) |
|
|
(74.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany financing transactions |
|
|
|
|
|
|
(94.4 |
) |
|
|
5.6 |
|
|
|
88.8 |
|
|
|
|
|
Proceeds from debt |
|
|
381.0 |
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
|
|
381.7 |
|
Repayment of debt |
|
|
(317.4 |
) |
|
|
(0.2 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
(319.2 |
) |
Other financing activities, net |
|
|
1.1 |
|
|
|
24.2 |
|
|
|
(22.8 |
) |
|
|
|
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
64.7 |
|
|
|
(70.4 |
) |
|
|
(18.1 |
) |
|
|
88.8 |
|
|
|
65.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
(1.8 |
) |
|
|
|
|
|
|
(1.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
|
2.0 |
|
|
|
(7.5 |
) |
|
|
2.5 |
|
|
|
|
|
|
|
(3.0 |
) |
Cash and cash equivalents beginning of period |
|
|
1.1 |
|
|
|
16.1 |
|
|
|
27.8 |
|
|
|
|
|
|
|
45.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period |
|
$ |
3.1 |
|
|
$ |
8.6 |
|
|
$ |
30.3 |
|
|
$ |
|
|
|
$ |
42.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
VWR FUNDING, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(In millions, except share data)
Condensed Consolidating Statement of Cash Flows
June 30 December 31, 2007 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
$ |
(65.2 |
) |
|
$ |
56.0 |
|
|
$ |
28.6 |
|
|
$ |
|
|
|
$ |
19.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany investing transactions |
|
|
65.7 |
|
|
|
39.1 |
|
|
|
|
|
|
|
(104.8 |
) |
|
|
|
|
Merger consideration |
|
|
(3,802.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,802.9 |
) |
Allocation of acquired cash balances |
|
|
(77.1 |
) |
|
|
22.1 |
|
|
|
55.0 |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
(9.8 |
) |
|
|
(6.5 |
) |
|
|
|
|
|
|
(16.3 |
) |
Acquisition of other businesses and transaction costs |
|
|
|
|
|
|
|
|
|
|
(36.1 |
) |
|
|
|
|
|
|
(36.1 |
) |
Proceeds from the sales of property and equipment |
|
|
|
|
|
|
|
|
|
|
1.2 |
|
|
|
|
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(3,814.3 |
) |
|
|
51.4 |
|
|
|
13.6 |
|
|
|
(104.8 |
) |
|
|
(3,854.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany financing transactions |
|
|
|
|
|
|
(65.7 |
) |
|
|
(39.1 |
) |
|
|
104.8 |
|
|
|
|
|
Proceeds from debt |
|
|
2,620.8 |
|
|
|
|
|
|
|
2.1 |
|
|
|
|
|
|
|
2,622.9 |
|
Repayment of debt |
|
|
(32.5 |
) |
|
|
|
|
|
|
(1.2 |
) |
|
|
|
|
|
|
(33.7 |
) |
Issuance of common stock to parent, net of expenses |
|
|
1,353.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,353.8 |
|
Debt issuance costs |
|
|
(62.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62.6 |
) |
Other financing activities, net |
|
|
1.1 |
|
|
|
(25.6 |
) |
|
|
22.0 |
|
|
|
|
|
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
3,880.6 |
|
|
|
(91.3 |
) |
|
|
(16.2 |
) |
|
|
104.8 |
|
|
|
3,877.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
1.8 |
|
|
|
|
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
|
1.1 |
|
|
|
16.1 |
|
|
|
27.8 |
|
|
|
|
|
|
|
45.0 |
|
Cash and cash equivalents beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period |
|
$ |
1.1 |
|
|
$ |
16.1 |
|
|
$ |
27.8 |
|
|
$ |
|
|
|
$ |
45.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
January 1 June 29, 2007 (Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Non-Guarantor |
|
|
|
|
|
|
Total |
|
|
|
Parent |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
$ |
(16.0 |
) |
|
$ |
47.7 |
|
|
$ |
25.3 |
|
|
$ |
|
|
|
$ |
57.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany investing transactions |
|
|
15.8 |
|
|
|
(42.5 |
) |
|
|
|
|
|
|
26.7 |
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
(9.3 |
) |
|
|
(6.4 |
) |
|
|
|
|
|
|
(15.7 |
) |
Acquisition of other businesses and transaction costs |
|
|
|
|
|
|
|
|
|
|
(19.4 |
) |
|
|
|
|
|
|
(19.4 |
) |
Proceeds from the sales of property and equipment |
|
|
|
|
|
|
|
|
|
|
2.2 |
|
|
|
|
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
15.8 |
|
|
|
(51.8 |
) |
|
|
(23.6 |
) |
|
|
26.7 |
|
|
|
(32.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany financing transactions |
|
|
|
|
|
|
(15.8 |
) |
|
|
42.5 |
|
|
|
(26.7 |
) |
|
|
|
|
Proceeds from debt |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
0.1 |
|
Repayment of debt |
|
|
|
|
|
|
(20.5 |
) |
|
|
(0.9 |
) |
|
|
|
|
|
|
(21.4 |
) |
Other financing activities, net |
|
|
(1.1 |
) |
|
|
(4.1 |
) |
|
|
(3.2 |
) |
|
|
|
|
|
|
(8.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(1.1 |
) |
|
|
(40.4 |
) |
|
|
38.5 |
|
|
|
(26.7 |
) |
|
|
(29.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
2.0 |
|
|
|
|
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash
equivalents |
|
|
(1.3 |
) |
|
|
(44.5 |
) |
|
|
42.2 |
|
|
|
|
|
|
|
(3.6 |
) |
Cash and cash equivalents beginning of period |
|
|
1.3 |
|
|
|
66.8 |
|
|
|
71.3 |
|
|
|
|
|
|
|
139.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period |
|
$ |
|
|
|
$ |
22.3 |
|
|
$ |
113.5 |
|
|
$ |
|
|
|
$ |
135.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Managements Evaluation of Disclosure Controls and Procedures
The Companys management, with the participation of the Companys Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2009.
Based on this evaluation, the Companys Chief Executive Officer and Chief Financial Officer
concluded that, as of December 31, 2009, the Companys disclosure controls and procedures were
effective in providing reasonable assurance that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized, reported and accumulated and communicated to the Companys management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
Managements Annual Report on Internal Control Over Financial Reporting
The Companys management, including the Companys Chief Executive Officer and Chief Financial
Officer, is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The Companys management
conducted an assessment of the effectiveness of the Companys internal control over financial
reporting as of December 31, 2009 based on criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
this assessment, the Companys management concluded that, as of December 31, 2009, the Companys
internal control over financial reporting was effective.
The Companys independent registered public accounting firm, KPMG LLP, has audited the
effectiveness of the Companys internal control over financial reporting, as stated in their report
located elsewhere in this Form 10-K.
Changes in Internal Control over Financial Reporting
There have been no changes in the Companys internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the fiscal quarter ended December 31,
2009, that have materially affected or are reasonably likely to materially affect the Companys
internal control over financial reporting.
108
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
VWR Funding, Inc.:
We have audited VWR Funding, Inc. and subsidiaries internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). VWR Funding, Inc.s
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in
Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the effectiveness of the Companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also includes performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, VWR Funding, Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of VWR Funding, Inc. and subsidiaries
(Successor) as of December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders equity and other comprehensive income (loss), and cash flows for the years
ended December 31, 2009 and 2008, and for the period from June 30, 2007 to December 31, 2007
(Successor periods) and the related consolidated statements of operations, stockholders equity and
other comprehensive income (loss) and cash flows of CDRV Investors, Inc. and subsidiaries
(Predecessor) for the period January 1, 2007 to June 29, 2007 (Predecessor period), and our report
dated March 15, 2010 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
March 15, 2010
109
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following chart sets forth certain information regarding our directors and executive
officers as of December 31, 2009:
|
|
|
|
|
Name |
|
Age |
|
Position |
John M. Ballbach |
|
49 |
|
Chairman, President and Chief Executive Officer |
Gregory L. Cowan |
|
56 |
|
Senior Vice President and Chief Financial Officer |
Matthew C. Malenfant |
|
48 |
|
Senior Vice President and President of North America, Lab Distribution and Services |
Manuel Brocke-Benz |
|
51 |
|
Senior Vice President and Managing Director of Europe, Lab Distribution and Services |
Wu Ming Kei (a/k/a Eddy Wu) |
|
43 |
|
Senior Vice President and President of Asia Pacific |
George Van Kula |
|
46 |
|
Senior Vice President, General Counsel and Secretary |
Theodore C. Pulkownik |
|
52 |
|
Senior Vice President, Strategy and Corporate Development |
Paul A. Dumas |
|
43 |
|
Senior Vice President, Human Resources |
Jon Michael Colyer |
|
36 |
|
Vice President and General Manager of Science Education |
Charles R. Patel |
|
40 |
|
Senior Vice President and Chief Information Officer |
Theresa A. Balog |
|
48 |
|
Vice President and Corporate Controller |
Nicholas W. Alexos |
|
46 |
|
Director |
Robert L. Barchi |
|
63 |
|
Director |
Edward A. Blechschmidt |
|
57 |
|
Director |
Thompson Dean |
|
51 |
|
Director |
Robert P. DeCresce |
|
60 |
|
Director |
Pamela Forbes Lieberman |
|
55 |
|
Director |
Harry M. Jansen Kraemer Jr. |
|
54 |
|
Director |
Carlos del Salto |
|
66 |
|
Director |
Timothy P. Sullivan |
|
51 |
|
Director |
Robert J. Zollars |
|
52 |
|
Director |
Each of our directors will hold office until our next annual meeting or until a successor is
elected or appointed. None of our executive officers or directors has any familial relationship
with any other director or executive officer. Familial relationship for the purposes of this
section means any relationship by blood, marriage or adoption, not more remote than first cousin.
John M. Ballbach has served as our President and Chief Executive Officer since 2005. He was
appointed Chairman of the Board in June 2007 and currently is the Chair of the Finance Committee
and a member of the Nominating and Governance Committee. Before joining VWR, Mr. Ballbach was a
private investor and President of Ballbach Consulting LLC. Prior to that, he was an officer of The
Valspar Corporation, an international manufacturer of paint and coatings, serving as its President
and Chief Operating Officer from 2002 until 2004 and as the Senior Vice President of EPS, Color
Corporation and Operations, from 2000 to 2002. He joined the Valspar Corporation in 1990 and was
appointed Group Vice President, Packaging in 1998. Mr. Ballbach is currently a member of the Board
of Directors of The Timken Company and is on the Advisory Board of Guardian Capital Partners. In
the past five years, Mr. Ballbach also served as a Director of the Celanese Corporation. He is a
Trustee Fellow of Georgetown College, from which he holds a bachelor of arts degree. Mr. Ballbach
also holds a master of business administration degree from the Harvard Business School. Mr.
Ballbachs leadership role and extensive knowledge of our business, strategy and industry on an
international basis, in his capacity as the President and Chief Executive Officer of the
Company, along with his prior senior management and consulting experience at other
organizations, make him a valuable member of our Board of Directors.
110
Gregory L. Cowan is our Senior Vice President and Chief Financial Officer, a position he held
since June 2009. In his current role, Mr. Cowan is responsible for the Companys financial
operations on a global basis and for overseeing VWRs Investor Relations Group. Prior to his
promotion to his current position, Mr. Cowan served as Vice President and Corporate Controller
since December 2004. Since joining VWR, Mr. Cowan has overseen compliance efforts, the development
of global policies and procedures as well as internal and external reporting processes. Prior to
joining VWR, Mr. Cowan spent approximately five years at CDI Corporation, a professional services
company, in various senior financial positions and most recently as Senior Vice President and Chief
Accounting Officer. Prior to CDI Corporation, he was Vice President of Internal Audit at Crown Cork
and Seal Company Inc. for approximately six years and a senior manager at PricewaterhouseCoopers
LLC, where he served in various audit capacities for eleven years. Mr. Cowan serves on the Board of
Directors of Emtec, Inc. He graduated from Rutgers University with a degree in accounting. In
addition, he is also a Certified Public Accountant.
Matthew Malenfant is our Senior Vice President and President of North America, Lab
Distribution and Services, a position he has held since January 2006. In his current role, Mr.
Malenfant is responsible for all sales, marketing, services and operations for the Companys North
American Lab business. Mr. Malenfant joined the Company in 1995 when it acquired Baxter
International Inc.s industrial distribution business, which was the successor to American Hospital
Supply Corporation. Prior to assuming his present position with VWR, Mr. Malenfant served as Senior
Vice President of Sales for the Eastern Zone from 1997 to 1999, as Senior Vice President Marketing
and Global Sourcing from 1999 to 2004, as Senior Vice President Global Marketing from 2004 to 2005,
and as Senior Vice President, Supplier Management and Services during 2005. Mr. Malenfant is a
Director of Cellumen, Inc. and serves on the Board of Advisors for the Center for Services
Leadership at Arizona State University and on the Life Science Advisory Board at Safeguard
Scientifics, Inc. Mr. Malenfant graduated from Arizona State University with a bachelor of arts
degree in marketing and a bachelor of science degree in communication.
Manuel Brocke-Benz is our Senior Vice President and Managing Director of Europe, Lab
Distribution and Services, a position he has held since January 2006. In his current role, Mr.
Brocke-Benz is responsible for all sales, marketing, services and operations for the Companys
European Lab business. Mr. Brocke-Benz joined the Company in 1987. Prior to assuming his current
position, he served as Senior Vice President and General Manager Continental Europe from 2003 to
2005 and as Corporate Senior Vice President Process Excellence from 2001 to 2003. During the years
1996 to 2001 he served as General Manager Benelux countries, Vice President European Key Accounts,
Vice President European Marketing and Corporate Senior Vice President Global E-business. Mr.
Brocke-Benz holds a law degree from Albert-Ludwigs University in Freiburg, Germany.
Wu Ming Kei (a/k/a Eddy Wu) is our Senior Vice President and President of Asia Pacific, a
position he has held since August 2008. In his current role, Mr. Wu is responsible for leadership
of VWRs overall activities in Asia Pacific including existing business in India, China and
Singapore, as well as its Global Sourcing and Services organizations operating in the region. Prior
to joining VWR, Mr. Wu most recently was the President & CEO of Momentive Performance Materials,
Asia-Pacific, headquartered in Tokyo, from December 2006 to August 2008. Momentive is a leading
producer worldwide of silicones and silicone derivatives that, prior to its acquisition by a
private equity firm, was a part of General Electric Company. Mr. Wu had been with General Electric
since 1992 and held numerous positions, including President & CEO of GE Toshiba Silicones from
January 2006 to December 2006, President of the Greater China operation of GE Toshiba Silicones
from December 2003 to January 2006 and various general management, sales and marketing roles in
North America and Asia. Mr. Wu holds a bachelor of science degree in chemistry from the University
of Hong Kong and a master of business administration degree from the Hong Kong University of
Science and Technology.
George Van Kula is our Senior Vice President, General Counsel and Secretary, a position he has
held since May 2006. Mr. Van Kula joined VWR from Honeywell International Inc., a diversified
technology and manufacturing company, where he served as Vice President and General Counsel,
Europe, Middle East and Africa (EMEA), based out of Brussels, Belgium. Mr. Van Kula joined
Honeywell in December 1996, and held several positions before becoming Vice President and General
Counsel, EMEA in November 2001. He was responsible for the legal affairs of Honeywells EMEA
operations with over $7 billion in revenue and 27,000 employees. Prior to joining Honeywell, Mr.
Van Kula spent the first eight years of his legal career with Latham & Watkins LLP in the Los
Angeles and London offices, providing counsel to U.S. and foreign companies and investment
banks in a variety of mergers and acquisitions, corporate finance transactions and general
corporate matters. Mr. Van Kula received his law degree from the University of Michigan Law School
and has a bachelor of arts degree from the University of Notre Dame.
111
Theodore C. Pulkownik is our Senior Vice President, Strategy and Corporate Development, a
position he has held since July 2004. Mr. Pulkownik is responsible for global mergers &
acquisitions, corporate-center led initiatives and strategy. He is also responsible for VWRs
Global Export organization. Prior to joining VWR in 2004, Mr. Pulkownik held two positions with
Standard & Poors Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. that
publishes financial research and analysis on stocks and bonds. From 2002 until 2004, he was a
Managing Director of Standard & Poors Corporate Value Consulting and from 2000 to 2002 was its
Senior Vice President, Business Development. Before joining Standard & Poors, Mr. Pulkownik was a
Senior Vice President for Holberg Industries, Inc., a diversified private holding company located
in Greenwich, Connecticut, from 1999 until 2000. From 1997 until 1999, he was a Managing Director,
Corporate Business and Development, for General Electric Capital Corporation. Prior to General
Electric, Mr. Pulkownik spent five years with McKinsey & Company, a global management consulting
firm, as a consultant in its New York and Connecticut offices and nine years with Procter & Gamble
Co., a global manufacturer of a wide range of consumer goods, in Brand Management and Finance. Mr.
Pulkownik holds a bachelor of business administration degree from the University of Wisconsin and a
master of business administration from the University of Michigan.
Paul A. Dumas is our Senior Vice President, Human Resources, a position he has held since
October 2007. In his role, Mr. Dumas is responsible for VWRs Human Resources initiatives and
processes, including Talent Acquisition, Talent Management & Development, Workforce & Succession
Planning, Organization Effectiveness, Compensation, Benefits, Payroll, HR Services and
Communications. Prior to joining VWR in 2007, Mr. Dumas served as the Executive Vice President,
Human Resources & Administration with Agere Systems Inc., which was an integrated circuit
components company, where he led the global Human Resources, Workplace Services and Communications
functions. He joined Agere Systems in 2001 as the Vice President, Global Human Resources before
being appointed to his most recent position in 2005. Before joining Agere Systems, Mr. Dumas served
as the Senior Vice President of Human Resources with Excel Telecommunications, a leading provider
of integrated voice and data communications products and services to residential, commercial and
carrier customers. Previously, Mr. Dumas held numerous other Human Resources positions with Hyatt
Hotels Corporation, PepsiCo, Inc., ColeHaan Inc., Haagen-Dazs Company Inc. and Merck & Co., Inc.
Mr. Dumas holds a bachelor of science degree from Johnson & Wales University and a masters degree
in human resources and organization development from the University of San Francisco.
Jon Michael Colyer is our Vice President and General Manager of Science Education, a position
he has held since May 2005. In this role, Mr. Colyer is responsible for all sales, marketing,
services and operations for the Companys Science Education business. Mr. Colyer joined VWR in 2004
as our Vice President North American Call Centers. Prior to joining VWR, Mr. Colyer worked for
Textron Inc., a large industrial conglomerate, as the Director for Enterprise Excellence and
Director of Bell Helicopters Composite Manufacturing facility. Prior to Textron, he spent five
years with General Electric Company in various roles including Six Sigma Black Belt, Ecommerce
Program Manager, and Leadership Development Program Member. Mr. Colyer graduated from the
University at Buffalo with a bachelor of science degree in civil engineering and a master of
business administration in corporate finance.
Charles R. Patel is our Senior Vice President and Chief Information Officer, a position he has
held since June 2007. In this role, Mr. Patel is responsible for VWRs global Information Services,
including the management of business unit and corporate shared application services, business
continuity, infrastructure and operations, and information security and risk management. Prior to
joining VWR, Mr. Patel held a variety of leadership roles at Motorola, Inc., a multinational
telecommunications company, from 2002 to 2007, including IT leader for the North American region of
the global handset business, Chief Information Officer for the Integrated Electronics Systems
business unit and Vice President of Information Services supporting enterprise Sales, Service and
Marketing. Previously, he was with A.T. Kearney, Inc. as a Principal in the Strategic Information
Technology Practice. He
began his career at Electronic Data Systems Corporation as a systems engineer, where he
provided a variety of system integrator services for Delphi Corporation including support for
business development activity implementing supply chain solutions for international joint ventures
and acquisitions. Mr. Patel graduated from Marquette University with a bachelor of science degree
in accounting and a master of business administration degree specializing in management information
services from the University of Notre Dame.
112
Theresa A. Balog is our Vice President and Corporate Controller, a position she has held since
September 2009. In her current role, Ms. Balog is responsible for the Companys internal and
external reporting, as well as managing the Companys system of internal controls. Prior to
joining VWR, Ms. Balog served as the Executive Director and Chief Accounting Officer of MSCI Barra,
a provider of investment decision support tools to investment institutions worldwide, since January
2008. While in this position Ms. Balog hired and organized a worldwide accounting organization and
was responsible for the oversight of MSCIs compliance efforts. In addition to her experience at
MSCI Barra, Ms. Balog served as the Vice President and Chief Accounting Officer of Keyspan
Corporation, a large natural gas distributor, from 2002 to 2007. Previously, she held various
financial leadership positions at NiSource, Inc. and Columbia Energy Group Inc. She currently
serves on the Board of Directors of SBLI USA Mutual Life Insurance Company, Inc. Ms. Balog holds a
bachelor of business administration degree in accounting from St. Marys College and a master of
science degree in accounting from the University of Delaware. In addition, Ms. Balog is also a
Certified Public Accountant.
Nicholas W. Alexos has served on our Board since June 2007 and currently is the Chair of the
Audit Committee, as well as a member of the Finance Committee. Mr. Alexos is a Managing Director of
Madison Dearborn Partners, LLC, a private equity investment firm based in Chicago. Prior to
co-founding Madison Dearborn Partners in 1993, he was with First Chicago Venture Capital for four
years. Prior to that position, Mr. Alexos was with The First National Bank of Chicago. He
concentrates on investments in the healthcare sector and currently also serves on the Boards of
Directors of Sirona Dental Systems, Inc., Boys and Girls Clubs of Chicago, Childrens Inner City
Educational Fund and the University of Chicago Booth School of Business Council. Mr. Alexos is a
Certified Public Accountant and holds a bachelor of business administration degree from Loyola
University and a master of business administration degree from the University of Chicago. Mr.
Alexos senior management experience as a Managing Director of Madison Dearborn Partners, board and
advisory experience with other companies in the healthcare industry, and his extensive experience
in the areas of finance, financial accounting (including qualification as an audit committee
financial expert), international business transactions and mergers and acquisitions, make him a
valuable member of our Board of Directors.
Robert L. Barchi, M.D., Ph.D., served on our Board from May 2006 until the Company was
acquired in June 2007 by affiliates of Madison Dearborn Partners, LLC. He rejoined our Board in
September 2007 and currently is a member of the Compensation Committee. Dr. Barchi has been the
President of Thomas Jefferson University since 2004. Prior to his current position at Thomas
Jefferson University, he was Provost of the University of Pennsylvania, having served in various
capacities for more than 30 years. He was Chair of the Universitys Department of Neurology and
founding Chair of its Department of Neuroscience. Dr. Barchi also served as the Director of the
Mahoney Institute of Neurological Sciences for more than 12 years. In addition to his clinical and
administrative responsibilities, he has been published extensively in the field of ion channel
research, and has been elected to membership in the Institute of Medicine of the National Academy
of Sciences. Dr. Barchi is a member of the Board of Covance, Inc. and is a Trustee of Ursinus
College. He received bachelor and master of science degrees from Georgetown University, as well as
doctor of philosophy and doctor of medicine degrees from the University of Pennsylvania. Dr.
Barchis senior leadership experience within the healthcare industry, as both the President of a
major healthcare organization and as a Board member of a drug development services company, along
with his independence, make him a valuable member of our Board of Directors.
Edward A. Blechschmidt has served on our Board since September 2007 and currently is a member
of the Audit Committee. Mr. Blechschmidt previously has served as an executive officer of several
companies, most recently as the Chief Executive Officer of Novelis, Inc., an aluminum rolling and
recycling company, from December 2006 until its sale to the Aditya Birla Group in May 2007. He was
Chairman, Chief Executive Officer and President of Gentiva Health Services, Inc., a leading
provider of specialty pharmaceutical and home health care services, from
March 2000 to June 2002. Prior to that, Mr. Blechschmidt served as Chief Executive Officer and
a Director of Olsten Corporation, the conglomerate from which Gentiva Health Services was split off
and taken public, from March 1999 to March 2000. He also served as President of Olsten Corporation
from October 1998 to March 1999. He served as President and Chief Executive Officer of Siemens
Nixdorf Americas and Siemens Pyramid Technology Corporation from July 1996 to October 1998. Prior
to Siemens, Mr. Blechschmidt spent more than 20 years with Unisys Corporation, including serving as
its Chief Financial Officer. Mr. Blechschmidt currently serves as a Director of HealthSouth
Corporation, Diamond Foods, Inc., Lionbridge Technologies, Inc. and Columbia Laboratories, Inc. and
is Chair of the Audit Committees of HealthSouth Corporation, Diamond Foods, Inc. and Lionbridge
Technologies, Inc. In the past five years, Mr. Blechschmidt also served on the Boards of OptionCare
Inc., Novelis, Inc., Neoforma, Inc. and Gentiva Health Services, Inc. He holds a bachelor of
business administration degree from Arizona State University. Mr. Blechschmidts prior senior
leadership experience at several companies, including as chief executive officer and chief
financial officer, current and past experience as a board member at other companies, and his
expertise in finance, strategy and financial accounting (including qualification as an audit
committee financial expert), along with his independence, make him a valuable member of our Board
of Directors.
113
Thompson Dean has served on our Board since September 2007 and currently is a member of the
Compensation Committee. Mr. Dean is a Co-Managing Partner and Co-Chief Executive Officer of Avista
Capital Partners, L.P., a private equity firm based in New York City. Prior to co-founding Avista
in 2005, Mr. Dean led DLJ Merchant Banking Partners for 10 years. Mr. Dean has served as
Co-Managing Partner of DLJMB since 1995 and was Chairman of the Investment Committees of DLJMB I,
DLJMB II, DLJMB III and DLJ Growth Capital Partners through December 2007. Mr. Dean currently
serves on the Boards of Nycomed S.A., IWCO Corporation and ConvaTec Inc. In the past five years, he
also served as Chairman of the Board of Directors of Arcade Marketing Inc., DeCrane Aircraft Inc.,
Mueller Water Products, Inc. and Von Hoffmann Corporation, and as a Director of The Star Tribune
Company. Mr. Dean serves as Chairman of the Special Projects Committee of Memorial Sloan Kettering
Hospital and served as a member of the College Foundation Board of the University of Virginia. In
addition, Mr. Dean serves on various committees of the Boys Club of New York, the Lenox Hill
Neighborhood Association and the Museum of the City of New York. Mr. Dean received a bachelor of
arts degree from the University of Virginia, where he was an Echols Scholar and a master of
business administration degree with high distinction from Harvard Business School, where he was a
Baker Scholar. Mr. Deans executive level management experience at Avista, board and advisory
experience with other companies in and outside of the healthcare industry, and his extensive
experience in the areas of finance, strategy, international business transactions and mergers and
acquisitions, make him a valuable member of our Board of Directors.
Robert P. DeCresce, M.D., has served on our Board since September 2007 and currently is a
member of the Compensation Committee. Dr. DeCresce is the Harriet B. Borland Professor and Chair of
the Department of Pathology at Rush Medical College in Chicago. He also currently serves as
Associate Vice President for Ancillary Services, is a member of the Board of Trustees and serves as
a member of the Executive Committee of the Board of Trustees at Rush University Medical Center.
Prior to joining Rush in 1991, he was at Michael Reese Hospital and MetPath Laboratories, also in
Chicago. In the past five years, Dr. DeCresce served on the Board of PathLab, Inc. In addition, he
has served as a consultant to a number of in-vitro diagnostic companies over the past 20 years. He
received a bachelor of science degree from Boston College as well as doctor of medicine, master of
public health and master of business administration degrees from Columbia University. Dr.
DeCresces senior leadership experience at a medical college and past board member and current
consulting experience to companies within the healthcare industry, along with his independence,
make him a valuable member of our Board of Directors.
Pamela Forbes Lieberman has served on our Board of Directors since January 2009 and currently
is a member of the Audit Committee. From March 2006 to August 2006, she served as interim Chief
Operating Officer of Entertainment Resource, Inc., which was a distribution business in the
entertainment industry. Ms. Forbes Lieberman served as President, Chief Executive Officer and a
Board member of TruServ Corporation (now known as True Value Company), a member-owned hardware
cooperative, from November 2001 to November 2004, as TruServs Chief Operating Officer and Chief
Financial Officer from July 2001 through November 2001, and as TruServs Chief Financial Officer
from March 2001 through July 2001. Prior to March 2001, she held Chief Financial Officer positions
at ShopTalk Inc., The Martin-Brower Company, L.L.C. and Fel-Pro Inc., as well as
financial leadership positions at Kraft Foods, Inc. and Bunzl Building Supply Inc. Ms. Forbes
Lieberman currently serves on the Board of Directors of A.M. Castle & Co. and Standard Motor
Products, Inc., and serves on the advisory board of WHI Capital Partners. In addition, Ms. Forbes
Lieberman is on the Boards of two non-profit organizations, The Chicago Network and Winning
Workplaces, and serves on several other non-profit advisory councils and guild boards. Ms. Forbes
Lieberman holds a master of business administration degree from Northwestern University Kellogg
School of Management and a bachelor of science degree in accounting from the University of
Illinois, Champaign. Ms. Forbes Lieberman is a Certified Public Accountant. Ms. Forbes Liebermans
senior leadership experience at several distribution and manufacturing companies, including as
chief executive officer, chief financial officer and board member, and her expertise in finance and
financial accounting (including qualification as an audit committee financial expert), along with
her independence, make her a valuable member of our Board of Directors.
114
Harry M. Jansen Kraemer, Jr. has served on our Board since June 2007 and currently is a member
of the Audit Committee. Mr. Kraemer is an Executive Partner of Madison Dearborn Partners, LLC, a
private equity investment firm based in Chicago. Prior to joining Madison Dearborn Partners in
2005, he was the Chairman and Chief Executive Officer of Baxter International Inc., a global
healthcare company, until April 2004. Mr. Kraemer had been a Director of Baxter International since
1995, Chairman of the Board since January 1, 2000, President since 1997 and Chief Executive Officer
since January 1, 1999. Mr. Kraemer now serves as Clinical Professor of Management and Strategy at
the Kellogg School of Management at Northwestern University. Mr. Kraemer currently also serves on
the Board of Directors of SAIC, Inc., where he is the Chairman of the Audit
Committee, and Sirona Dental
Systems, Inc.; on the Boards of Trustees of Northwestern University and Lawrence University; on the
Deans Advisory Boards of the Kellogg School of Management and the Johns Hopkins Bloomberg School
of Public Health; and is a member of the board of trustees of The Conference Board. Mr. Kraemer is
a Certified Public Accountant and holds a bachelor of arts degree from Lawrence University and a
master of business administration degree from Northwestern Universitys Kellogg School of
Management. Mr. Kraemers prior long-term, senior level experience at a major global healthcare
company, including serving as chairman and chief executive officer, and his expertise in financial
accounting (including qualification as an audit committee financial expert), international business
transactions and strategy, make him a valuable member of our Board of Directors.
Carlos del Salto has served on our Board since September 2007 and currently is a member of the
Audit Committee. Mr. del Salto retired from Baxter Healthcare Corporation in March 2006 where he
was the Senior Vice President responsible for Baxters Intercontinental and Asia-Pacific
operations. He had been with Baxter Healthcare Corporation since 1973, and held numerous positions
including President of Baxter Healthcare Corporations Global Renal business, President of Baxter
Latin America/Switzerland/Austria and General Manager of Mexico. Mr. del Salto serves on the Board
of Directors of the Hispanic Unity of Florida. In addition, he is founder and President of the
Natividad de los Andes Foundation in Ecuador. He holds a bachelor of accounting degree from Juan de
Velasco College in Ecuador and a master of finance degree from Roosevelt University in Chicago. Mr.
del Saltos prior senior level experience at a major global healthcare company, including in
capacities leading Latin America and Asia-Pacific operations, and his expertise in financial
accounting (including qualification as an audit committee financial expert) and strategy in
international markets, make him a valuable member of our Board of Directors.
Timothy P. Sullivan has served on our Board since June 2007 and currently is the Chair of the
Compensation Committee and Nominating and Governance Committee, as well as a member of the Finance
Committee. Mr. Sullivan is a Managing Director of Madison Dearborn Partners, LLC, a private equity
investment firm based in Chicago. Prior to co-founding Madison Dearborn Partners in 1993, Mr.
Sullivan was with First Chicago Venture Capital for three years after having served in the U.S.
Navy. Mr. Sullivan concentrates on investments in the healthcare sector and currently also serves
on the Board of Directors of Sirona Dental Systems, Inc. In addition, he is on the Board of
Trustees of Northlight Theatre where he is Chairman, Northwestern Memorial Hospital, Northwestern
University and the Stanford Graduate School of Business Trust. He also serves on the Investment
Committees of Cristo Rey Jesuit High School and on the Investment and Finance Committees of the
Archdiocese of Chicago. Mr. Sullivan received a bachelor of science degree from the United States
Naval Academy, a master of science degree from the University of Southern California and a master
of business administration degree from the Stanford Graduate School of Business. Mr. Sullivans
senior management experience as a Managing Director of
Madison Dearborn Partners, board and advisory experience with other companies in the
healthcare industry, and his extensive experience in the areas of finance, strategy, international
business transactions and mergers and acquisitions, make him a valuable member of our Board of
Directors.
Robert J. Zollars served on our Board from May 2006 until the Company was acquired in June 2007 by
affiliates of Madison Dearborn Partners, LLC. He rejoined our Board in September 2007 and currently
is a member of the Compensation Committee and the Nominating and Governance Committee. Mr. Zollars
has been the Chairman and Chief Executive Officer of Vocera Communications, Inc., a wireless
communications systems company, since June 2007. Prior to Vocera Communications, he served as the
President and Chief Executive Officer and a Director of Wound Care Solutions, LLC, a private equity
backed business serving the chronic wound care segment of healthcare, from June 2006 through April
2007. From June 1999 until March 2006, Mr. Zollars was the Chairman and CEO of Neoforma, Inc., a
healthcare technology company focusing on the supply chain. Prior to joining Neoforma, he was the
Executive Vice President and Group President of Cardinal Health, Inc., where he was responsible for
five of their subsidiaries. From 1992 until 1996, Mr. Zollars was the President of the Hospital
Supply and Scientific Product distribution businesses at Baxter International Inc. Mr. Zollars
currently serves as a Director of Diamond Foods, Inc., InterAct911 Corporation and Silk Road
Technology Inc. In the past five years, Mr. Zollars also served on the Board of Reliant
Technologies, Inc. He is the Chairman of the Center for Services Leadership at Arizona State
University. He holds a bachelor of science degree from Arizona State University and a master of
business administration degree from John F. Kennedy University. Mr. Zollars current and prior
experience as a chief executive officer, extensive senior management experience in various
positions within the healthcare industry, and board member experience at other companies, along
with his independence, make him a valuable member of our Board of Directors.
115
Composition of our Board of Directors
Our business and affairs are managed under the direction of our Board of Directors. As of
December 31, 2009, our Board was composed of eleven directors, none of whom, with the exception of
Mr. Ballbach, are executive officers of the Company.
Audit Committee
As of December 31, 2009, our audit committee consisted of Ms. Forbes Lieberman and Messrs.
Alexos (Chairman), Blechschmidt, Kraemer and del Salto. Our Board of Directors has determined that
each of the audit committee members qualifies as an audit committee financial expert for purposes
of the Securities and Exchange Act of 1934. Each of Ms. Forbes Lieberman and Mr. Blechschmidt is an
independent director within the meaning of the Securities and Exchange Act of 1934. Our audit
committee has responsibility for, among other things, assisting our Board of Directors in
monitoring:
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the quality of our financial reporting and other internal control processes, |
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the quality and integrity of our financial statements, |
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the independent registered public accounting firm qualifications and independence, |
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the performance of our internal audit function and independent registered public
accounting firm, and |
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our compliance with legal and regulatory requirements and our code of conduct. |
Code of Ethics
The Company has adopted the VWR International, LLC Code of Ethics and Conduct (the Ethics
Code), a code of ethics as defined under Regulation S-K promulgated under the Securities Act of
1933, that applies to all of the Companys employees including the Companys Chief Executive
Officer, Chief Financial Officer, Corporate
Controller and all professionals in finance and finance-related departments. This Ethics Code
is available on the Companys website at www.vwr.com on the Investors portion of the site. The
Company intends to satisfy its disclosure obligations under Item 5.05 of Form 8-K by posting
information about amendments to, or waivers from, a provision of the Ethics Code that apply to the
Companys Chief Executive Officer, Chief Financial Officer, and Corporate Controller on the
Companys website at the address above.
116
ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
We are the direct parent company of VWR International, LLC (VWR). We do not have our own
employees, and the same individuals serve on both VWRs Board of Managers and our Board of
Directors (and committees thereof) and the senior management teams for both entities are the same.
These individuals do not receive separate cash consideration from us.
The Compensation Committee of our Board of Directors is responsible for developing,
implementing and administering our compensation policies. Each of our executive officers has a
written employment agreement (each, an Executive Officer Employment Agreement), which includes
among other terms, annual base salary and a percentage target for annual cash incentive
compensation. To the extent not in conflict with the respective officers Executive Officer
Employment Agreement, decisions with respect to Mr. Ballbachs compensation terms (including base
salary and cash incentive percentage targets) have been and will continue to be made by our Board
of Directors after review of the recommendations of the Compensation Committee, and decisions with
respect to the compensation terms of the other executive officers have been and will continue to be
made by the Compensation Committee, in consultation with our Chief Executive Officer.
In addition, each of our executive officers, along with certain other members of our
management, have been given the opportunity to purchase equity in Holdings pursuant to the Varietal
Distribution Holdings, LLC 2007 Securities Purchase Plan (the Successor Equity Plan), which was
established at the time of the Merger, as further described below under Components of
Compensation-Equity Participation under Successor Equity Plan. Madison Dearborn established the
Successor Equity Plan to align the interests of our executive officers and management investors
with those of our other equity investors and to encourage our executive officers and management
investors to continue to operate the business following the Merger in a manner that enhances the
Companys equity value.
The discussion below primarily addresses the compensation of the individuals who served as our
Chief Executive Officer and Chief Financial Officer during 2009, as well as the other individuals
included in the Summary Compensation Table (collectively, the named executive officers). However,
the types of compensation and benefits provided to our named executive officers have been, and we
expect them to continue to be, similar to those provided to other executive officers.
Compensation Philosophy and Objectives
The Compensation Committees overall philosophy is to create value for our equity holders by
using all elements of executive compensation to reinforce a results-oriented management culture
focusing on our level of earnings, the achievement of both short-term and long-term goals and
objectives, and specific individual performance measures. The Compensation Committee seeks to
maintain a balanced compensation program that does not incentivize undue or inappropriate risks
that are reasonably likely to have a material adverse effect on the Company. The following are the
primary objectives at which the compensation program is aimed:
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Provide a level of compensation based on appropriate benchmarks to attract,
motivate, retain and reward talented executives who have the ability to contribute to
our success and encourage management to place its primary focus on strategic planning
and financial and operational priorities affecting the business. |
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(ii) |
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Support a pay-for-performance orientation to reward strong financial, operating
and individual performance, including through the use of cash incentive compensation
payments based in whole or in part upon our performance (or that of a particular
business unit) to encourage the achievement of short-term and long-term financial and
operational objectives. |
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(iii) |
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Align the interests of the management investors with those of our other equity
holders thereby providing incentive for, and rewarding, the attainment of objectives
that inure to the benefit of our
equity holders. As discussed above, the alignment of the interests of our executive
officers with those of our other equity investors is being fostered through managements
purchases of the equity of Holdings pursuant to the Successor Equity Plan. |
117
Benchmarking
Our Compensation Committee reviews and evaluates both performance and compensation at least
annually to ensure that we maintain our ability to attract and retain highly qualified executive
officers. As part of this evaluation process, except as noted below, we typically engage an
independent outside global human resources consulting firm to conduct an annual review of our
compensation program for all executive officers and advise our Compensation Committee. In
connection with the 2008 review of our compensation program for potential changes to be effective
in 2009, we engaged Hewitt Associates LLC, an independent compensation consulting firm specializing
in executive and director compensation. Hewitt provided relevant market data, including
information regarding the compensation programs implemented by the following peer group of
companies:
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Agilent Technologies, Inc.
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Omnicare, Inc. |
Amgen, Inc.
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Owens & Minor, Inc. |
Applied Industrial Technologies, Inc.
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Patterson Companies Inc. |
Becton Dickinson & Co.
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PSS World Medical Inc. |
Cintas Corp.
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Sigma-Aldrich Corp. |
Genentech, Inc.
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Thermo Fisher Scientific Inc. |
Grainger (W.W.) Inc.
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Waters Corp. |
Henry Schein, Inc
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Wesco International |
Hospira Inc. |
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The Compensation Committee believes that these companies are an appropriate peer group for
comparison purposes because they have business models similar to ours and/or they represent an
appropriate cross-section of the industries in which we are engaged or serve (i.e., they include
companies in the biotech, distribution, medical instrument, medical supply and pharmaceutical
industries). Our Compensation Committee adjusted the weight given to the compensation information
concerning these companies, as appropriate, to reflect the relative size of each company versus our
size (in terms of annual revenues), so that a proper comparison of compensation programs could be
made.
When assessing the total compensation for each of the executive officers, our Compensation
Committee reviewed summary sheets that reflected the executive officers then current compensation,
including base salary, incentive compensation and equity participation opportunity. We
believe that the base salaries should be at or near the median, or 50th percentile, of our peer
group in order to retain the executives or, when necessary, attract new executives. In
addition, we believe that the combination of base salaries plus performance-based cash
incentive compensation should be set at or near the 60th percentile of our peer group because we
believe that a substantial piece of the overall annual cash compensation should be dependent on
meeting or exceeding the annual performance targets related to key business objectives for that
year. Finally, we believe that the combination of total cash compensation plus equity
participation opportunity should be set at or near the 75th percentile of our
peer group so that the interests of our executive officers are aligned with our other equity
holders.
Notwithstanding the 2008 benchmarking data reviewed by the Committee, due to then-existing and
forecasted general economic and industry conditions, the executive officers proposed and the Board
of Directors and the Compensation Committee determined that there would be no increases to the base
salaries of any of the executive officers for 2009, other than, with respect to the U.S.-based
executive officers, amounts solely to offset the termination of the officers automobile allowances
effective January 1, 2009.
The Compensation Committee did not engage a consulting firm in 2009. However, in the future,
the Compensation Committee expects to engage a consulting firm on an as-needed basis to assist in
providing benchmarking data and to ensure that our actual compensation practices remain competitive
and consistent with our stated goals and compensation philosophies.
Components of Compensation
The primary components of our executive compensation program are:
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annual performance-based cash incentive compensation; |
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equity participation through the Successor Equity Plan; |
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retirement and other benefits; and |
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perquisites and other personal benefits. |
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We believe that these components support our compensation philosophy of providing competitive
pay for performance and aligning the interests of our executives and equity holders, while seeking
to attract and retain talented executives.
Our Compensation Committee does not have a pre-established policy or target for the allocation
between either cash and non-cash or short-term and long-term incentive compensation. Rather, the
Compensation Committee reviews relevant internal and external compensation data, including
information provided by any engaged outside compensation consulting firm, to determine the
appropriate level and mix of incentive compensation, consistent with the goals noted above.
We currently expect short-term incentive compensation to continue to consist of annual cash
bonuses based upon Company and individual performance. With respect to long-term incentive
compensation, we believe that managements investment in Holdings pursuant to the Successor Equity
Plan will provide the appropriate long-term incentive to grow equity holder value. It is therefore
currently anticipated that additional long-term equity incentive grants or investment opportunities
will not be made on an annual basis to existing management investors, and that future investment
opportunities will generally be limited to incoming members of management.
The following summary of our compensation plans should be read in conjunction with the
information contained below under the heading Executive Compensation Tables.
Base Salary
The Compensation Committee determines (or, in the case of Mr. Ballbach, recommends to the
Board of Directors, which then determines) base salaries for our executive officers that it
believes aligns with its compensation objectives to reward strong performance and to attract and
retain key executives. Base salaries are subject to the Compensation Committees annual review, and
the Compensation Committee generally targets the market median (or 50th percentile) of our peer
group when setting or recommending base salaries for the executive officers. The annual review
includes a review of competitive market compensation data from any engaged compensation consultant,
internally prepared market compensation data, the executive officers compensation relative to
other officers in the Company, the executive officers position and responsibilities, and the
executive officers individual performance over given periods. The Committee also considers general
economic and industry conditions, company performance and executive compensation trends generally.
In addition, the Compensation Committee consults with the Chief Executive Officer when reviewing
and considering changes to the base salaries of the executive officers other than our Chief
Executive Officer.
It is the Compensation Committees philosophy that most executive officers who are performing
well would be provided salaries generally consistent with the market median based upon similarly
situated executive officers of the companies comprising our peer group. Variations to this
objective could occur as dictated by the experience level of the individual and market factors as
well as our performance, general economic conditions, retention concerns and other individual
circumstances.
The table below provides the annualized base salaries of our named executive officers for 2009
and 2008. As noted above, due to then-existing and forecasted general economic and industry
conditions in late-2008, the increases in annualized base salaries of the U.S.-based named
executive officers for 2009 were limited to amounts solely to offset the termination of the
officers automobile allowances effective January 1, 2009.
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Annualized |
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Salary |
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John M. Ballbach |
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2009 |
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$ |
939,008 |
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Chairman, President and Chief Executive Officer |
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2008 |
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925,008 |
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Jack L. Wyszomierski (1) |
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2009 |
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464,000 |
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Former Executive Vice President and Chief Financial Officer |
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2008 |
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450,000 |
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Gregory L. Cowan (2) |
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06/26/09-12/31/09 |
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400,000 |
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Senior Vice President and Chief Financial Officer |
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01/01/09-06/25/09 |
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309,008 |
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2008 |
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|
|
295,008 |
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized |
|
Name |
|
Time Period |
|
|
Salary |
|
Matthew C. Malenfant |
|
|
2009 |
|
|
|
394,004 |
|
Senior Vice President and President of North America, Lab
Distribution and Services |
|
|
2008 |
|
|
|
380,004 |
|
|
|
|
|
|
|
|
|
|
Manuel Brocke-Benz (3) |
|
|
2009 |
|
|
|
390,090 |
|
Senior Vice President and Managing Director of Europe, Lab
Distribution and Services |
|
|
2008 |
|
|
|
390,090 |
|
|
|
|
|
|
|
|
|
|
Wu Ming Kei (a/k/a Eddy Wu) (4) |
|
|
2009 |
|
|
|
352,197 |
|
Senior Vice President and President, Asia-Pacific |
|
|
2008 |
|
|
|
352,197 |
|
|
|
|
(1) |
|
Mr. Wyszomierski retired as the Companys Executive Vice President and
Chief Financial Officer, effective June 26, 2009. See the column
Salary of the Summary Compensation Table for the actual amount of
base salary paid to Mr. Wyszomierski for 2009. |
|
(2) |
|
Effective June 26, 2009, Mr. Cowan was promoted from the Companys
Vice President and Controller to the Companys Senior Vice President
and Chief Financial Officer. In connection with his promotion,
Mr. Cowans annualized base salary was increased from $309,008 to
$400,000. See the column Salary of the Summary Compensation Table
for the actual amount of base salary paid to Mr. Cowan for 2009. |
|
(3) |
|
The annualized base salary amounts for Mr. Brocke-Benz have been
converted from Euros to United States dollars using the average of the
monthly average exchange rates for 2009 (1.39318). |
|
(4) |
|
The annualized base salary amounts for Mr. Wu have been converted from
Hong Kong dollars to United States dollars using the average of the
monthly average exchange rates for 2009 (0.12901). |
At its November 9, 2009 meeting, the Compensation Committee reviewed managements updates to
the benchmarking data provided by Hewitt in 2008, and the Board of Directors and the Compensation
Committee approved the following base salary changes for the named executive officers, effective
January 1, 2010: Mr. Ballbach $1,052,909; Mr. Cowan $455,000; Mr. Malenfant $460,464; Mr.
Brocke-Benz $461,507 (converted from Euros to United States dollars using the exchange rate as of
the close of business on November 9, 2009 (1.4984)); and Mr. Wu $385,044 (converted from Hong
Kong dollars to United States dollars using the exchange rate as of the close of business on
November 9, 2009 (0.129041)).
Performance-Based Cash Incentive Compensation
The Compensation Committee administers our annual performance-based cash incentive
compensation program, or the Management Incentive Plan (the MIP).
Under the MIP, target cash bonus percentages (expressed as a percentage of base salary paid
for the year) are reviewed annually by the Compensation Committee. When determining the annual cash
incentive target opportunity for each executive officer, the Compensation Committee considers the
combination of base salary plus performance-based cash incentive compensation and generally targets
at or near the 60th percentile of our peer group. The table below sets forth the target cash bonus
percentages for the named executive officers for 2009.
|
|
|
|
|
|
|
Target |
|
|
|
% of Base |
|
Name |
|
Salary Paid |
|
John M. Ballbach |
|
|
100 |
% |
Jack L. Wyszomierski |
|
|
85 |
% |
Gregory L. Cowan (1) |
|
|
75 |
% |
Matthew C. Malenfant |
|
|
75 |
% |
Manuel Brocke-Benz |
|
|
75 |
% |
Wu Ming Kei (a/k/a Eddy Wu) |
|
|
75 |
% |
|
|
|
(1) |
|
In connection with his promotion to Senior Vice President and Chief
Financial Officer, Mr. Cowans target cash bonus percentage was
increased from 60% to 75%, effective June 26, 2009. |
120
Actual cash bonus payments under the MIP for a given year, if any, are determined based on
company and individual achievement with respect to predetermined performance measures approved by
the Compensation Committee. The predetermined performance measures are consistent with our
financial and operational objectives. The Compensation Committee has discretion to modify all or
any portion of any award as it deems necessary or appropriate.
For 2009, each of our named executive officers cash MIP award was awarded based upon
achievement of the following components:
|
|
|
Year-over-year growth in an internal performance-based metric similar to earnings
before interest, taxes, depreciation and amortization (EBITDA), based on our annual
operating plan (Internal EBITDA). Internal EBITDA is a financial measure that is used by
our senior management to establish financial earnings targets in its annual operating plan,
and differs from the term EBITDA as it is commonly used. Internal EBITDA is generally
calculated as income before consolidated net interest expense, consolidated income taxes,
consolidated depreciation and amortization, and includes adjustments for certain items that
we do not expect to recur and the impacts resulting from changes in accounting principles.
Internal EBITDA is calculated using fixed foreign currency exchange rates, which generally
are established during the fourth quarter of the preceding year in connection with the
development of the operating plan for the year. In addition, Internal EBITDA targets are
adjusted for acquisitions made during the year. Our final Internal EBITDA for 2008 was
$305.9, and our year-over-year growth target for 2009 to receive 100% of the potential
payout for the Internal EBITDA component was 12%, which was set by our Compensation
Committee as challenging, but achievable with considerable effort. The Internal EBITDA
component was given a weighting of 70% of the total potential MIP award as we believe it to
be a very strong measure of contribution to our performance and alignment with the interest
of our stockholders. For Messrs. Malenfant, Brocke-Benz and Wu, half of this 70% weighting
was based on the Internal EBITDA attributable to the respective business units that they
manage, and the targets to receive 100% of the potential payout for the business units
Internal EBITDA were also set at challenging, but achievable levels. |
|
|
|
A total operating expense target for 2009 of $832 million or less. Total operating
expense is calculated using fixed foreign currency exchange rates, which are established as
described above. In addition, this target is subject to adjustment for acquisitions made
during the year. For 2009, this component was given a weighting of 10% of the total
potential MIP award. |
|
|
|
Year-over-year improvements in various working capital metrics, including days sales
outstanding in accounts receivable, days sales in inventory and days payables outstanding.
For 2009, this component was given a weighting of 10% of the total potential MIP award. |
|
|
|
Various strategic objectives, which include safety goals and individual performance
goals. For 2009, performance with respect to these objectives was given a weighting of 10%
of the total potential MIP award. |
The 2009 MIP provided that payments in respect of each component would be calculated as a
product of (i) the components weighting multiplied by (ii) the percentage achievement of the
target for such component (the Component Percentage Achievement) multiplied by (iii) the
participants target cash bonus amount (i.e., based on the participants target cash bonus
percentage of base salary), except that (x) no payment would be made in respect of any component
unless the Company achieved a minimum Internal EBITDA year-over-year growth (2009 vs.
2008) of 6% (the Minimum Internal EBITDA Growth Target), and (y) the Component Percentage
Achievement was capped at 200% for the Internal EBITDA component and 100% for each of the other
components (and the total operating expense target was a pass/fail measure). To the extent that
the MIP for future years does not include Component Percentage Achievement caps, Mr. Ballbachs
Executive Officer Employment Agreement provides that his cash bonus payment would be subject to a
cap of 200% of his base salary for the year; no other named executive officers Executive Officer
Employment Agreement includes such a cap.
Based on 2009 performance, our named executive officers earned the annual incentive cash
compensation reflected for 2009 in the column Non-Equity Incentive Plan Compensation of the
Summary Compensation Table, which was paid in February 2010. The year-over-year Internal EBITDA
growth for the Company was 9.44%, and the corresponding achievement of the Internal EBITDA
component of the 2009 MIP awards was 79.45% for Messrs. Ballbach and Cowan (based on the Companys
Internal EBITDA), and 51.30%, 100.98% and 108.03% for Messrs. Messrs. Malenfant, Brocke-Benz and
Wu, respectively (based on the Companys Internal EBITDA and the Internal EBITDA of the business
units that they manage). In addition, Mr. Malenfants 2009 MIP award includes an additional
$10,000 discretionary amount granted by our Compensation Committee for Mr. Malenfants performance
in 2009.
121
Equity Participation under Successor Equity Plan
Each of our executive officers, along with certain other members of our management, have been
given the opportunity to purchase equity in Holdings pursuant to the Successor Equity Plan, which
was established at the time of the Merger. These investment opportunities are designed to encourage
participants to put their financial resources at risk and focus on our short-term and long-term
performance, thereby aligning their interests with the interests of our other equity holders.
When determining the equity participation opportunity for each
executive officer, the
Compensation Committee considers the combination of total cash compensation plus equity
participation and generally targets at or near the 75th percentile of our peer group. For more
information regarding the current equity arrangements between our named executive officers and
Holdings see Item 13 Certain Relationships and Related Transactions, and Director Independence
Management Equity Arrangements in this Annual Report on Form 10-K.
The following table sets forth the number of common units and preferred units of Holdings
purchased by our named executive officers under the Successor Equity Plan.
|
|
|
|
|
|
|
|
|
|
|
Number of Class A |
|
|
Number of Class A |
|
Name |
|
Common Units(1) |
|
|
Preferred Units |
|
John M. Ballbach (2) |
|
|
298,679.81 |
|
|
|
6,000.60 |
|
Jack L. Wyszomierski (3) |
|
|
83,923.28 |
|
|
|
2,060.73 |
|
Gregory L. Cowan |
|
|
14,244.52 |
|
|
|
349.77 |
|
Matthew C. Malenfant |
|
|
39,131.37 |
|
|
|
960.87 |
|
Manuel Brocke-Benz |
|
|
39,131.37 |
|
|
|
960.87 |
|
Wu Ming Kei (a/k/a Eddy Wu) |
|
|
19,565.68 |
|
|
|
480.43 |
|
|
|
|
(1) |
|
Includes founders common units in the following amounts: Mr.
Ballbach purchased 244,374.39 founders common units; Mr. Wyszomierski
purchased 65,273.66 founders common units; Mr. Cowan purchased
11,079.07 founders common units; Mr. Malenfant purchased 30,435.51
founders common units; Mr. Brocke-Benz purchased 30,435.51 founders
common units; and Mr. Wu purchased 15,217.75 founders common units. |
|
(2) |
|
The number of common units and preferred units listed for Mr. Ballbach
include units held by two Grantor Retained Annuity Trusts of which he
is the sole trustee. |
|
(3) |
|
As a result of Mr. Wyszomierskis retirement from the Company in June
2009, Holdings exercised its rights to repurchase all of his common
units and preferred units in 2009 at a per unit price of $.01 and
$1,000 plus accrued yield, respectively, except for the portion of his
founders common units (i.e., 8,181.56 units) that could not be
repurchased at the time per the transaction documents because those
units were vested for less than six months as of the effective date of
his retirement. Holdings repurchased all remaining units in
January 2010 in accordance with the transaction documents. |
The Class A Preferred Units and a portion of the Class A Common Units included above were
purchased as a strip of securities for which the purchase price paid was the same as that paid by
Madison Dearborn and the other equity investors (i.e., $1,000 for each preferred unit and $1.00 for
each common unit). The preferred and common units purchased pursuant to this strip were 100% vested
upon issuance. Each preferred unit accrues a daily yield at the rate of 8% per annum, compounded on
the last day of each calendar quarter.
Our named executive officers also purchased Class A Common Units in addition to those included
as part of the strip, which we refer to as founders common units, in the amounts set forth in
footnote (1) in the table above. The founders common units were only purchased by management
investors, and the purchase price for the founders common units was the same as the purchase price
for the common units purchased as part of the strip. The founders common units vest on a daily pro
rata basis over four years from the date of issuance. The vesting of founders common units impacts
the purchase price applicable to the repurchase and put options associated with the founders common
units, but the founders common units are owned upon issuance. For instance, if the named executive
officers employment terminates for any reason other than for cause, vested founders common units
can be repurchased by Holdings at fair market value, as calculated in accordance with the relevant
transaction documents, while unvested units can be repurchased by Holdings at the lower of original
cost or fair market value. Upon a termination for cause, both vested and unvested founders common
units can be repurchased by Holdings at the lower of original cost or fair market value.
122
All of the purchases of equity units reflected in the table above were made in 2007, except
Mr. Wus purchase was made in 2008. For those officers who qualified as named executive officers
for the year in which they made their purchase, the grant date fair value of the equity units as of
the date of purchase (as calculated under U.S. Generally Accepted Accounting Principles, or U.S.
GAAP) is reflected in the column Stock Awards of the Summary Compensation Table for the
applicable year.
Retirement and Other Benefits
U.S. Pension Plans. VWR sponsors a defined benefit pension plan that was frozen on May 31,
2005. The pension plan covered substantially all of VWRs full-time U.S. employees who completed
one full year of service as of May 31, 2005 (except employees covered by collective bargaining
agreements who participate in independently operated plans). Because the pension plan complies with
ERISA and Internal Revenue Code maximum compensation and defined benefit limitations, certain of
the annual retirement benefits will be paid pursuant to our Supplemental Benefits Plan. Mr.
Malenfant is the only named executive officer entitled to benefits under these pension plans.
Additional details regarding these pension plans are provided under Executive Compensation Tables
Pension Benefits.
German Pension Plan. Mr. Brocke-Benz is entitled to benefits under a Pension Scheme (the
German Pension Plan) the obligations under which VWRs German subsidiary, VWR International GmbH,
assumed from Merck KGaA in connection with the CD&R Acquisition. Additional details regarding this
pension plan are provided under Executive Compensation Tables Pension Benefits.
Savings Plan. VWR sponsors the VWR International Retirement Savings 401(k) Plan (the Savings
Plan), which is a tax-qualified retirement savings plan pursuant to which all U.S. based
employees, including our U.S. based named executive officers, are able to contribute to the Savings
Plan the lesser of up to 99% of their earnings or the limit prescribed by the Internal Revenue
Service, on a before-tax basis. VWR will match 100% of the first 4% of pay that is contributed to
the Savings Plan, subject to earnings limitations under applicable federal income tax rules. In
addition, VWR may make a supplemental contribution of up to 2% of pay to all eligible participants,
including named executive officers, if we meet certain internal performance measures. This
performance-based contribution also is subject to earnings limitations under applicable federal
income tax rules. In March 2010, VWR will make a performance-based contribution of 1.6% of pay to
all eligible participants, based on our 2009 performance. All contributions to the Savings Plan are
fully-vested upon contribution. Messrs. Ballbach, Wyszomierski, Cowan and Malenfant were eligible
for benefits under the Savings Plan. The Companys contributions to the named executive officers
respective Savings Plan accounts are reflected in the column All Other Compensation of the
Summary Compensation Table.
Retirement Contribution. VWR does not sponsor a retirement or pension plan or benefit for
associates in Asia, but it provides Mr. Wu with a contribution equal to 15% of his base salary
toward his Hong Kong voluntary retirement plan. The Companys contribution to Mr. Wu for 2009 is
reflected in the column All Other Compensation of the Summary Compensation Table.
Nonqualified Deferred Compensation Plan. Our U.S. based executive officers and certain other
key employees are eligible to participate in the VWR Nonqualified Deferred Compensation Plan (the
Nonqualified Deferred Compensation Plan). The Nonqualified Deferred Compensation Plan became
effective May 1, 2007. Under the Nonqualified Deferred Compensation Plan, eligible participants are
entitled to defer up to 50% of their base salaries and up to 100% of their annual cash bonus
awards. In addition, the Nonqualified Deferred Compensation Plan provides for VWR to credit certain
matching amounts to the notional account of each eligible participant for each year, provided
certain company performance goals are satisfied. These matching amounts are provided to restore
matching amounts to which the participant would otherwise be entitled under the Savings Plan but
which are limited due to earnings limitations under federal income tax rules. The Company matching
amounts that will be credited to the participants notional accounts in March 2010 as a result of
our satisfaction of the relevant 2009 performance goal are included in the column All Other
Compensation of the Summary Compensation Table. Additional details regarding this plan are
provided under Executive Compensation Tables Nonqualified Deferred Compensation Plan.
123
Perquisites and Other Personal Benefits
The Compensation Committee periodically reviews the levels of perquisites and other personal
benefits provided to executive officers. The perquisites and other benefits provided to our named
executive officers in 2009 included an annual financial planning assistance allowance for all named
executive officers other than Mr. Brocke-Benz, an automobile allowance for Messrs. Brocke-Benz and
Wu and club membership dues reimbursement for Messrs. Ballbach, Wyszomierski and Malenfant.
Attributed costs of the personal benefits described above for our named executive officers are
included in the column All Other Compensation of the Summary Compensation Table.
In addition, from time to time, the Company makes tickets to cultural and sporting events
available to the named executive officers for business purposes. If not utilized for business
purposes, they are made available to the named executive officers and other employees for personal
use.
Our named executive officers are offered health coverage, life and disability insurance under
the same programs as all other salaried employees.
Tax and Accounting Considerations
Deductibility of Executive Compensation. We generally structure our compensation programs so
that the compensation is deductible for federal income tax purposes.
Accounting for Share-Based Compensation. We account for share-based compensation, including
the founders common units purchased under the Successor Equity Plan, in accordance with U.S.
GAAP, which requires companies to recognize in the income statement the grant date fair value of
equity-based compensation issued to employees.
Compensation Committee Report
Our current Compensation Committee has reviewed and discussed the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and
discussions, recommended that the Compensation Discussion and Analysis be included in this Annual
Report on Form 10-K for filing with the SEC.
COMPENSATION COMMITTEE
Timothy P. Sullivan
Robert L. Barchi
Thompson Dean
Robert P. DeCresce
Robert J. Zollars
Compensation Committee Interlocks and Insider Participation
None of the Compensation Committee members are officers or employees of the Company or its
subsidiaries. No executive officer of the Company has served as a member of the Board of Directors
or Compensation Committee of another entity, one of whose executive officers served as a member of
the Board of Directors or former or current Compensation Committee of the Company.
Executive Officer Employment Agreements
As described above, each of our named executive officers has an Executive Officer Employment
Agreement. These agreements have been included as Exhibits to this Annual Report on Form 10-K.
See Termination and Change of Control Arrangements below for information regarding payments to
which the named executive officers are entitled upon certain employment termination events, as well
as the confidentiality, non-compete and non-solicitation provisions to which the named executive
officers are bound as partial consideration for such payments.
124
Executive Compensation Tables
Summary Compensation Table
The table below summarizes the total compensation paid or earned by each of our named
executive officers for the years since 2007 in which each qualified as a named executive officer.
|
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Change in |
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|
|
|
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Pension Value |
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|
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|
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|
|
|
|
|
|
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|
|
and Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Incentive Plan |
|
|
Compensation |
|
|
All Other |
|
|
|
|
Name and Principal |
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Earnings |
|
|
Compensation |
|
|
Total |
|
Position |
|
Year |
|
|
(2)($) |
|
|
($) |
|
|
(3)($) |
|
|
($) |
|
|
(4)($) |
|
|
(5)($) |
|
|
(6)($) |
|
|
($) |
|
|
John M. Ballbach |
|
|
2009 |
|
|
$ |
939,008 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
803,932 |
|
|
|
|
|
|
$ |
69,877 |
|
|
$ |
1,812,817 |
|
Chairman, President and Chief |
|
|
2008 |
|
|
|
925,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
565,180 |
|
|
|
|
|
|
|
70,070 |
|
|
|
1,560,258 |
|
Executive Officer |
|
|
2007 |
|
|
|
787,506 |
|
|
|
|
|
|
$ |
2,818,202 |
|
|
$ |
|
|
|
|
945,345 |
|
|
|
|
|
|
|
77,615 |
|
|
|
4,628,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack L. Wyszomierski(1) |
|
|
2009 |
|
|
|
225,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,378,082 |
|
|
|
1,603,090 |
|
Former Executive Vice President and |
|
|
2008 |
|
|
|
450,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233,708 |
|
|
|
|
|
|
|
62,167 |
|
|
|
745,875 |
|
Chief Financial Officer |
|
|
2007 |
|
|
|
417,504 |
|
|
|
|
|
|
|
737,693 |
|
|
|
|
|
|
|
441,612 |
|
|
|
|
|
|
|
38,303 |
|
|
|
1,635,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory L. Cowan(1) |
|
|
2009 |
|
|
|
356,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,790 |
|
|
|
|
|
|
|
37,083 |
|
|
|
600,997 |
|
Senior Vice President and
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew C. Malenfant |
|
|
2009 |
|
|
|
394,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,077 |
|
|
$ |
18,340 |
|
|
|
94,053 |
|
|
|
706,474 |
|
Senior Vice President and |
|
|
2008 |
|
|
|
380,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203,207 |
|
|
|
29,870 |
|
|
|
59,685 |
|
|
|
672,766 |
|
President of North America, Lab |
|
|
2007 |
|
|
|
355,002 |
|
|
|
|
|
|
|
343,968 |
|
|
|
|
|
|
|
347,083 |
|
|
|
6,901 |
|
|
|
49,881 |
|
|
|
1,102,835 |
|
Distribution and Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manuel Brocke-Benz |
|
|
2009 |
|
|
|
390,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
284,435 |
|
|
|
287,952 |
|
|
|
15,743 |
|
|
|
978,220 |
|
Senior Vice President and
Managing Director of Europe, Lab
Distribution and Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wu Ming Kei (a/k/a Eddy Wu) |
|
|
2009 |
|
|
|
352,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,066 |
|
|
|
|
|
|
|
652,831 |
|
|
|
1,275,094 |
|
Senior Vice President
and President, Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Effective June 26, 2009, Mr. Wyszomierski retired as the Companys
Executive Vice President and Chief Financial Officer, and Mr. Cowan
was promoted from the Companys Vice President and Controller to the
Companys Senior Vice President and Chief Financial Officer. In
connection with his promotion, Mr. Cowans annualized base salary was
increased from $309,008 to $400,000. |
|
(2) |
|
This column reflects the actual salaries earned in 2009, 2008 and
2007, as applicable. See the discussion under Base Salary in the
Compensation Discussion and Analysis for more information regarding
the annualized base salaries of our named executive officers. The
2009 salary amount for Mr. Brocke-Benz has been converted from Euros
to United States dollars using the average of the monthly average
exchange rates for 2009 (1.39318), and the 2009 salary amount for Mr.
Wu has been converted from Hong Kong dollars to United States dollars
using the average of the monthly average exchange rates for 2009
(0.12901). |
|
(3) |
|
This column reflects the grant date fair value of the equity units
purchased under the Successor Equity Plan as of the date of purchase
(as calculated under U.S. GAAP). See Equity Participation under
Successor Equity Plan for more information. |
|
(4) |
|
This column represents amounts earned under the MIP for each of 2009,
2008 and 2007, as applicable, and, in the cases of Messrs. Ballbach,
Wyszomierski and Malenfant, amounts paid under the Retention Bonus
Plan in 2007 in connection with the consummation of the Merger
($316,603, $158,278 and $158,278, respectively). Information regarding
these Retention Bonus Plan payments was provided in Item 11.
Executive Compensation of our Annual Report on Form 10-K for the year
ended December 31, 2007. The 2009 MIP award amount for Mr. Brocke-Benz
has been converted from Euros to United States dollars based on the
exchange rate as of the close of business on December 31, 2009
(1.44060), and the 2009 MIP award amount for Mr. Wu has been converted
from Hong Kong dollars to United States dollars based on the exchange
rate as of the close of business on December 31, 2009 (0.12896). |
125
|
|
|
(5) |
|
For Mr. Malenfant, this column represents the sum of the changes in
actuarial present value of the aggregate accumulated benefit under the
VWR International Retirement Plan and VWR International Supplemental
Benefits Plan during the years indicated. For Mr. Brocke-Benz, this
column represents the change in actuarial present value of the
accumulated benefit under the German Pension Plan from 2008 to 2009
(the amount has been converted from Euros to United States dollars
based on the exchange rate as of the close of business on December 31,
2009 (1.44060). See Pension Benefits for more information. |
|
|
|
There were no above-market earnings on nonqualified deferred
compensation under the named executive officers Nonqualified Deferred
Compensation Plan notional accounts. |
|
(6) |
|
This column represents all other compensation paid to or earned by the
named executive officers, including the attributed costs to us of the
perquisites and other personal benefits provided in 2009, 2008 and
2007, as applicable. |
|
|
|
The perquisites and other personal benefits for 2009 included:
financial planning assistance for each of the named executive officers
other than Mr. Brocke-Benz; an automobile allowance of $35,866 for Mr.
Wu (converted from Chinese RMB to United States dollars using the
average of the monthly average applicable exchange rate for 2009
(0.14639) and less than $25,000 for Mr. Brocke-Benz; and reimbursement
of club membership dues in the amount of $29,000 for Mr. Malenfant and
less than $25,000 for Messrs. Ballbach and Wyszomierski. |
|
|
|
All Other
Compensation for 2009 for Messrs. Ballbach, Wyszomierski,
Cowan and Malenfant also includes: Company contributions to the
Savings Plan of $13,720, in the aggregate, for Messrs. Ballbach, Cowan
and Malenfant (which includes the performance-based contribution of
$3,920 to be made by the Company for each of these officers in March
2010 based on our 2009 performance see the Compensation Discussion
and Analysis under Retirement and Other Benefits-Savings Plan for
more information), and less than $10,000 for Mr. Wyszomierski; Company
restoration matching contributions to the Nonqualified Deferred
Compensation Plan made by the Company in 2009, based on assumed
maximum contributions to the Savings Plan and actual contributions to
the Nonqualified Deferred Compensation Plan made by the named
executive officers in 2009, in the amount of $14,699 for Mr.
Malenfant, and less than $10,000 for Messrs. Ballbach, Wyszomierski
and Cowan (see Nonqualified Deferred Compensation Plan for
additional information); and tax reimbursements, or gross-ups, for
the taxable portion of perquisites or other compensation provided to
Messrs. Ballbach, Wyszomierski, Cowan and Malenfant in the aggregate
amount of approximately $20,100, $14,900, $6,300 and $26,600,
respectively. |
|
|
|
All Other Compensation
for 2009 for Mr. Wyszomierski also includes: $1,299,892, which represents
the total cash amount and value of health benefits to which he is entitled (and is being paid) as
a result of his retirement in June 2009 pursuant to his Executive Officer Employment Agreement
(see Termination and Change of Control Arrangements for more information); the distribution
to him of all amounts in his notional account under the Nonqualified Deferred Compensation Plan as
of December 31, 2009 in accordance with that plan (see Nonqualified Deferred Compensation Plan
for more information); imputed income based upon the Companys expense for providing him with
health benefits in 2009 following his retirement in accordance with his Executive Officer
Employment Agreement; and a retirement gift provided to him by the Company.
|
|
|
|
All Other Compensation for 2009 for Mr. Wu also includes aggregate
contribution payments to him of $52,220 toward his Hong Kong voluntary
retirement plan, in accordance with his Executive Officer Employment
Agreement (which aggregate amount has been converted from Hong Kong
dollars to United States dollars using the average of the monthly
average exchange rates for 2009 (0.12901)). In addition, Mr. Wu, who
is a Hong Kong national but who has been assigned to work in Shanghai,
China, receives certain allowances and reimbursements from the Company
in connection with his overseas assignment, in accordance with his
Executive Officer Employment Agreement. This compensation, which also
is included in All Other Compensation for 2009 for Mr. Wu, is set
forth in the table below (the amounts in the table been have been
converted from Chinese RMB to United States dollars using the average
of the monthly average exchange rates for 2009 (0.14639), except that
the tuition reimbursement is paid in United States dollars): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tuition |
|
|
Housing |
|
|
|
|
|
|
Tax |
|
|
|
|
|
|
Reimbursement |
|
|
Allowance |
|
|
Utilities |
|
|
Equalization |
|
|
Total |
|
Payment |
|
$ |
57,284 |
|
|
$ |
122,968 |
|
|
$ |
15,371 |
|
|
$ |
257,709 |
|
|
$ |
453,332 |
|
|
|
|
|
|
Lastly, All Other Compensation for 2009 for Mr. Wu includes tax reimbursements, or
gross-ups, for the taxable portion of perquisites or other compensation provided to him in
the aggregate amount of approximately $101,000 (which amount has been converted from Hong Kong
dollars or Chinese RMB to United States
dollars using the average of the monthly average applicable exchange rates for 2009 (0.12901
and 0.14639, respectively). |
126
Grants of Plan-Based Awards
The following table provides information about non-equity award targets for 2009 performance.
No equity awards were issued to our named executive officers in 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future |
|
|
|
|
|
|
Estimated Future |
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
Payouts Under |
|
|
|
|
|
|
Payouts Under |
|
|
All Other Stock |
|
|
Option Awards: |
|
|
Exercise or |
|
|
Grant Date |
|
|
|
Non-Equity Incentive |
|
|
|
|
|
|
Under Equity Incentive |
|
|
Awards: |
|
|
Number of |
|
|
Base Price of |
|
|
Fair Value |
|
|
|
Incentive Plan Awards(1) |
|
|
|
|
|
|
Plan Awards |
|
|
Number of |
|
|
Securities |
|
|
Option |
|
|
of Stock and |
|
|
|
|
|
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Shares of Stock |
|
|
Underlying |
|
|
Awards |
|
|
Option |
|
Name |
|
Grant Date |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
(#) |
|
|
(#) |
|
|
(#) |
|
|
or Units (#) |
|
|
Options (#) |
|
|
($/sh) |
|
|
Awards ($) |
|
John M. Ballbach |
|
|
2/10/2009 |
|
|
$ |
|
|
|
$ |
939,008 |
|
|
$ |
1,596,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Jack L.
Wyszomierski(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory L. Cowan(3). |
|
|
2/10/2009 |
|
|
|
|
|
|
|
242,702 |
|
|
|
412,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew C. Malenfant |
|
|
2/10/2009 |
|
|
|
|
|
|
|
295,503 |
|
|
|
502,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manuel
Brocke-Benz(4) |
|
|
2/10/2009 |
|
|
|
|
|
|
|
292,568 |
|
|
|
497,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wu Ming Kei (a/k/a
Eddy Wu)(4) |
|
|
2/10/2009 |
|
|
|
|
|
|
|
264,148 |
|
|
|
449,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These columns reflect the potential payments under the MIP for 2009 performance. The
2009 MIP is described in the Compensation Discussion and Analysis under Performance-Based
Cash Incentive Compensation. The components of the 2009 MIP were formally approved by the
Compensation Committee at its meeting on February 10, 2009. The Target amounts reflected
in the table assume 100% payout of the named executive officers respective target cash
bonus amounts (i.e., based on their target cash bonus percentages of base salary). The
Maximum amounts reflect the maximum cash bonus amounts payable to the named executive
officers based on the Component Percentage Achievement caps of 200% for the Internal EBITDA
component and 100% for each of the other components. |
|
(2) |
|
Effective June 26, 2009, Mr. Wyszomierski retired as the Companys Executive Vice
President and Chief Financial Officer. |
|
(3) |
|
In connection with his promotion to Senior Vice President and Chief Financial Officer,
Mr. Cowans annualized base salary was increased from $309,008 to $400,000 and his target
cash bonus percentage was increased from 60% to 75%, in each case effective June 26, 2009.
His Target and Maximum amounts in the table are calculated based on his original and
adjusted salary and target cash bonus percentages for the six-month time periods during
which each was effective during 2009. |
|
(4) |
|
The Target and Maximum amounts for Messrs. Brocke-Benz and Wu are calculated based on
the conversion of their 2009 base salaries to United States dollars using the exchange
rates described in Note (2) to the Summary Compensation Table. |
Outstanding Equity Awards at Fiscal Year-end
The following table provides information as of December 31, 2009 regarding the founders common
units purchased by our named executive officers under the Successor Equity Plan. See Equity
Participation under Successor Equity Plan for more information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Plan Awards: |
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
|
Market or |
|
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
Number of |
|
|
Payout Value |
|
|
|
|
|
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Value of |
|
|
Unearned |
|
|
of Unearned |
|
|
|
Number of |
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Shares or |
|
|
Shares or |
|
|
Shares, Units |
|
|
Shares, Units |
|
|
|
Securities |
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Units of |
|
|
Units of |
|
|
or Other |
|
|
or Other |
|
|
|
Underlying |
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
|
|
|
|
Stock That |
|
|
Stock That |
|
|
Rights That |
|
|
Rights That |
|
|
|
Unexercised |
|
|
Options |
|
|
Unearned |
|
|
Exercise |
|
|
Option |
|
|
Have Not |
|
|
Have Not |
|
|
Have Not |
|
|
Have Not |
|
|
|
Options |
|
|
Unexercisable |
|
|
Options |
|
|
Price |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
Name |
|
Exercisable (#) |
|
|
(#) |
|
|
(#) |
|
|
($) |
|
|
Date (#) |
|
|
(#)(1) |
|
|
($)(3) |
|
|
(#) |
|
|
($) |
|
John M. Ballbach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,054.57 |
|
|
$ |
910.55 |
|
|
|
|
|
|
|
|
|
Jack L. Wyszomierski |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
Gregory L. Cowan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,128.09 |
|
|
|
41.28 |
|
|
|
|
|
|
|
|
|
Matthew C. Malenfant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,340.35 |
|
|
|
113.40 |
|
|
|
|
|
|
|
|
|
Manuel Brocke-Benz |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,340.35 |
|
|
|
113.40 |
|
|
|
|
|
|
|
|
|
Wu Ming Kei (a/k/a Eddy Wu) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,670.18 |
|
|
|
56.70 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This column reflects the portion of the founders common units
purchased by our named executive officers that remained unvested at
the end of 2009. Founders common units vest on a daily pro rata basis
over four years from the date of issuance. |
127
|
|
|
(2) |
|
As a result of Mr. Wyszomierskis retirement from the Company in June
2009, the Company exercised its rights to repurchase all of his common
units and preferred units in 2009 at a per unit price of $.01 and
$1,000 plus accrued yield, respectively, except for the portion of his
founders common units (i.e., 8,181.56 units) that could not be
repurchased at the time per the transaction documents because those
units were vested for less than six months as of the effective date of
his retirement. The Company repurchased all remaining units
in January 2010 in accordance with the transaction documents. |
|
(3) |
|
There is no established public trading market for the preferred units
or common units (including the founders common units) of Holdings. The
value of the founders common units at December 31, 2009, for purposes
of the Successor Equity Plan and the related transaction documents,
was $.01 per unit. |
Option Exercises and Stock Vested
The following table provides information regarding the founders common units purchased by our named
executive officers under the Successor Equity Plan that vested during 2009. See Equity
Participation under Successor Equity Plan for more information regarding the founders common
units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
Number of |
|
|
Value |
|
|
Number of |
|
|
|
|
|
|
Shares |
|
|
Realized |
|
|
Shares |
|
|
Value |
|
|
|
Acquired |
|
|
Upon |
|
|
Acquired |
|
|
Realized |
|
|
|
on Exercise |
|
|
Exercise |
|
|
on Vesting |
|
|
on Vesting |
|
Name |
|
(#) |
|
|
($) |
|
|
(#)(1) |
|
|
($)(3) |
|
John M. Ballbach |
|
|
|
|
|
|
|
|
|
|
61,093.60 |
|
|
|
|
|
Jack L. Wyszomierski |
|
|
|
|
|
|
|
|
|
|
7,913.31 |
(2) |
|
|
|
|
Gregory L. Cowan |
|
|
|
|
|
|
|
|
|
|
2,769.77 |
|
|
|
|
|
Matthew C. Malenfant |
|
|
|
|
|
|
|
|
|
|
7,608.88 |
|
|
|
|
|
Manuel Brocke-Benz |
|
|
|
|
|
|
|
|
|
|
7,608.88 |
|
|
|
|
|
Wu Ming Kei (a/k/a Eddy Wu) |
|
|
|
|
|
|
|
|
|
|
3,804.44 |
|
|
|
|
|
|
|
|
(1) |
|
This column reflects the portion of the founders common units purchased by our named
executive officers under the Successor Equity Plan that vested during 2009. |
|
(2) |
|
Mr. Wyszomierskis founders common units ceased vesting upon his retirement in June 2009. |
|
(3) |
|
No value is realized as a result of vesting of the founders common units. See Equity
Participation under Successor Equity Plan for a description of the vesting of founders
common units. |
Pension Benefits
United States
VWR sponsors two defined benefit plans for full-time U.S. employees, the VWR International
Retirement Plan (the U.S. Retirement Plan) and the VWR International Supplemental Benefits Plan
(the U.S. SERP, and together with the U.S. Retirement Plan, the U.S. Plans). Both of the U.S.
Plans were frozen on May 31, 2005, and Mr. Malenfant is the only named executive officer entitled
to benefits under them.
VWR Retirement Plan. The U.S. Retirement Plan is a funded and tax-qualified defined
benefit retirement plan that covers substantially all VWRs full-time U.S. employees who completed
one full year of service as of May 31, 2005. Benefits under the U.S. Retirement Plan were frozen on
May 31, 2005, with a three-year sunset for participants whose age plus service (minimum of ten
years) as of the freeze date equaled 65 or more. The U.S. Retirement Plan excluded employees
covered by a collective bargaining agreement who participated in independently operated plans. As a
result of the freeze of the U.S. Retirement Plan, there have been no new
participants since the freeze date and no additional years of service have been credited since
the freeze date, other than for participants to which the three-year sunset applies. The three-year
sunset does not apply to any of our executive officers. As of December 31, 2009, the plan covered
approximately 3,701 participants. Annual retirement benefits under the U.S. Retirement Plan are
generally calculated as a single life annuity as the greater of:
|
|
|
a participants years of credited service multiplied by $240, and |
|
|
|
1% of a participants average annual compensation earned in the consecutive five year
period during which the participant was most highly paid (referred to as final average
earnings), plus an additional 0.75% of final average earnings in excess of one third of
the Social Security taxable wage base in the year the participant terminates employment, in
each case multiplied by the participants years of credited service (up to a maximum of 33
years). |
128
The Social Security taxable wage base for employees retiring at the end of 2009 was $106,800.
Under the U.S. Retirement Plan, final average earnings includes the participants salary and bonus,
as well as any other bonus or severance payments to which a participant may become entitled but may
not exceed an IRS-prescribed limit applicable to tax-qualified plans ($245,000 for 2009).
The benefit an employee earns is payable starting at retirement on a monthly basis for life.
Benefits are computed on the basis of the life annuity form of pension, with a normal retirement
age consistent with Social Security retirement. Benefits are reduced for retirement prior to Social
Security retirement age. Employees vest in the U.S. Retirement Plan after five years of credited
service. In addition, the plan provides for joint and survivor annuity choices, and does not
require employee contributions.
Benefits under the U.S. Retirement Plan are subject to the limitations imposed under Section
415 of the Internal Revenue Code (the Code). The Section 415 limit for 2009 is $195,000 per year
for a single life annuity payable at an IRS-prescribed retirement age.
Supplemental Benefits Plan. Because the U.S. Retirement Plan complies with ERISA and
Code maximum compensation and defined benefit limitations, VWR also sponsors the U.S. SERP, which
is a benefit equalization plan, or supplemental plan, of the type permitted by ERISA. The U.S. SERP
also was frozen on May 31, 2005, with a similar three-year sunset provision as is applicable to the
U.S. Retirement Plan. The U.S. SERP was available to certain officers to provide for retirement
benefits above amounts available under the U.S. Retirement Plan. As of December 31, 2009, the U.S.
SERP covered three active participants.
The only current executive officer covered by the U.S. SERP is Mr. Malenfant. As a result of
the freeze of the U.S. SERP, there have been no new participants since the freeze date and no
additional years of service have been credited since the freeze date, other than for a
non-executive officer to which the three-year sunset applies. However, Mr. Malenfant was granted an
additional benefit under the U.S. SERP as described below under Pension Plan Table.
The formula for calculating annual benefits under the U.S. SERP is a top hat formula i.e.,
the annual benefit under the U.S. SERP is the amount that would be calculated under the U.S.
Retirement Plan without regard to the U.S. Retirement Plan limits described above less the amount
actually calculated pursuant to the U.S. Retirement Plan including the limits described above.
Benefits under the U.S. SERP are computed on the basis of the life annuity form of pension, with a
normal retirement age consistent with Social Security retirement. Benefits accrued prior to January
1, 2005 under the U.S. SERP are generally payable at the same time and in the same manner as the
U.S. Retirement Plan. Benefits accrued as of January 1, 2005 or later for the non-executive officer
to which the three-year sunset applies are payable, in accordance with his advance election, as a
single sum or as an annuity, including choices of a joint and survivor or years-certain annuity.
Benefits accrued as of January 1, 2005 or later for the other participants, including Mr.
Malenfant, are payable in a lump sum upon termination of employment (the U.S. SERP Lump Sum
Amount).
The U.S. SERP is unfunded and is not qualified for tax purposes. Accrued benefits under the
U.S. SERP are subject to claims of the Companys creditors in the event of bankruptcy.
Germany
Mr. Brocke-Benz is entitled to benefits under the German Pension Plan the obligations under
which VWR International GmbH assumed from Merck KGaA in connection with the CD&R Acquisition. The
German Pension
Plan is a non-funded defined benefit retirement plan that covers certain associates who were
employed by Merck KGaA prior to the CD&R Acquisition. As of December 31, 2009, the German Pension
Plan covered approximately 220 participants. Annual retirement benefits under the German Pension
Plan are generally calculated as a single life annuity as the sum of (i) .5% of a participants
monthly salary (up to German Social Security Threshold Level, which for 2009 was
64,800) plus
(ii) 1.5% of a participants monthly salary (in excess of the German Social Security Threshold), in
each case multiplied by the participants years of pensionable service. The benefit an employee
earns is payable starting at retirement on a monthly basis for life. Benefits are computed on the
basis of the life annuity form of pension, with a normal retirement age of 65. Benefits are
reduced for retirement prior to age 63. Early commencement of the benefit payout is contingent
upon commencement of German social security benefits. In addition, the plan provides for a
spouses pension and does not require employee contributions.
129
Pension Plan Table
No pension benefits were paid to any of the named executive officers in the last fiscal year.
VWR does not have a policy for granting additional years of service under the U.S. Plans or the
German pension plans. However, in 2008, VWR granted Mr. Malenfant the right to be paid
an additional amount under the U.S. SERP calculated as the additional amount that he would receive
under the U.S. Retirement Plan if he had an additional nine years of credited service under the
plan. The total U.S. SERP benefit cannot increase beyond 33 years of service for any participant.
The amounts reported in the table below equal the present value of the accumulated benefit at
December 31, 2009 for Messrs. Malenfant and Brocke-Benz under each plan based upon the assumptions
described in the applicable footnotes. No payments were made in 2009 from any of the plans to
either Mr. Malenfant or Mr. Brocke-Benz.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Present Value of |
|
|
|
|
|
Years Credited |
|
|
Accumulated |
|
Name |
|
Plan Name |
|
Service |
|
|
Benefit |
|
Matthew C. Malenfant(1) |
|
VWR International Retirement Plan |
|
|
9.667 |
|
|
$ |
113,973 |
|
|
|
VWR International Supplemental Benefits Plan |
|
|
9.667 |
|
|
|
160,735 |
|
|
|
|
|
|
|
|
|
|
|
|
Manuel Brocke-Benz(2) |
|
German Pension Plan |
|
|
23 |
|
|
|
1,132,777 |
|
|
|
|
(1) |
|
The accumulated benefit for Mr. Malenfant is based on service and
earnings (as described above) considered by the plans for the period
through December 31, 2009, and includes the additional amounts payable
to him under the U.S. SERP described above. The present value has been
calculated assuming Mr. Malenfant will remain in service until Social
Security retirement, which is the age at which retirement may occur
without any reduction in benefits, and that the benefit is payable (i)
with respect to his U.S. SERP Lump Sum Amount (as defined above under
-Supplemental Executive Retirement Plan), as a lump sum upon
termination of employment, and (ii) with respect to the rest of the
benefit, under the available forms of life annuity consistent with the
assumptions as described in Note 12 under Item 8 Financial
Statements and Supplementary Data in this Annual Report on Form 10-K.
As described in such Note, the interest assumption is 5.75%. |
|
(2) |
|
The accumulated benefit for Mr. Brocke-Benz is based on service and
earnings (as described above) considered by the plan for the period
through December 31, 2009. The present value has been calculated
assuming Mr. Brocke-Benz will remain in service until Social Security
retirement, which is the age at which retirement may occur without any
reduction in benefits, and that the benefit is payable under the
available forms of life annuity consistent with the assumptions as
described in Note 12 under Item 8 Financial Statements and
Supplementary Data in this Annual Report on Form 10-K. The amount
presented in the table has been converted from Euros to United States
dollars based on the exchange rate as of the close of business on
December 31, 2009 (1.44060). As described in such Note, the interest
assumption is 5.3% |
Nonqualified Deferred Compensation Plan
Our U.S. based executive officers and certain other key employees are eligible to participate
in the Nonqualified Deferred Compensation Plan. The Nonqualified Deferred Compensation Plan became
effective May 1, 2007. Under the Nonqualified Deferred Compensation Plan, eligible participants are
entitled to defer up to 50% of their base salaries and up to 100% of their annual bonus awards.
Earnings and losses on each notional account are credited based on the performance of the benchmark
funds available under the Nonqualified Deferred Compensation Plan that the participant selects. Any
deferred amounts and earnings and losses thereon will be credited to a notional account for the
applicable participant and become a liability of VWR to such participant.
The Nonqualified Deferred Compensation Plan provides for VWR to credit matching amounts to the
notional account of each eligible participant for each year, provided certain performance goals are
satisfied. The performance goal for 2009 was the Companys achievement of Internal EBITDA
year-over-year growth (2009 vs. 2008) of 6% (i.e., the Minimum Internal EBITDA Growth Target under
the 2009 MIP). These matching amounts are provided to restore matching amounts to which the
participant would otherwise be entitled under the Savings Plan but which are limited due to
earnings limitations under applicable federal income tax rules. The maximum matching amount under
the Nonqualified Deferred Compensation Plan is 4% of the participants compensation, offset by the
maximum matching contributions that VWR could make into such participants Savings Plan account for
such year. The matching amounts are generally credited to the participants accounts in March of
the following year (e.g., the matching amounts as a result of our satisfaction of the relevant 2009
performance goal will be made in March 2010).
130
Under the terms of the Nonqualified Deferred Compensation Plan, participants become entitled
to distributions of their notional accounts upon (i) their death, disability or separation from
service, (ii) a change in control of VWR, (iii) an unforeseeable emergency, or (iv) an in-service
distribution date elected by the participant. Participants may elect deferred payment dates, and
may elect to receive distributions in installments or a single sum. Regardless of the elections
made, upon the participants death or disability or upon a change in control of the Company, the
entire amount credited to the account will be distributed to the participant or his beneficiary or
estate, as applicable, in a lump sum payment (subject to a six-month delay in the case of the named
executive officers).
The table below provides information with respect to the named executive officers
Nonqualified Deferred Compensation Plan notional accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
Registrant |
|
|
Aggregate |
|
|
Aggregate |
|
|
Aggregate |
|
|
|
Contributions in |
|
|
Contributions in |
|
|
Earnings in |
|
|
Withdrawals/ |
|
|
Balance |
|
Name |
|
Last FY(1) |
|
|
Last FY(2) |
|
|
Last FY(3) |
|
|
Distributions |
|
|
at Last FYE(4) |
|
John M. Ballbach |
|
$ |
|
|
|
$ |
6,700 |
|
|
$ |
62 |
|
|
$ |
|
|
|
$ |
19,680 |
|
Jack L. Wyszomierski |
|
|
|
|
|
|
8,614 |
|
|
|
110 |
|
|
|
23,112 |
|
|
|
8,619 |
|
Gregory L. Cowan |
|
|
|
|
|
|
8,578 |
|
|
|
76 |
|
|
|
|
|
|
|
24,572 |
|
Matthew C. Malenfant |
|
|
15,614 |
|
|
|
14,699 |
|
|
|
10,252 |
|
|
|
|
|
|
|
93,778 |
|
|
|
|
(1) |
|
Represents the amount of 2009 base salary and/or cash bonus under the
2009 MIP (paid in 2010, the 2009 MIP Deferrals), if any, that the
named executive officers deferred into their Nonqualified Deferred
Compensation Plan notional accounts. The amount reflected for Mr.
Malenfant consists solely of 2009 base salary deferrals, which is
included in the column Salary of the Summary Compensation Table for
2009. |
|
(2) |
|
Represents Company restoration matching amounts (described above) that
were made to the named executive officers Nonqualified Deferred
Compensation Plan notional accounts in March 2010 as a result of our
satisfaction of the relevant 2009 performance goal (2009 Matching
Amounts). These amounts are included in the column All Other
Compensation of the Summary Compensation Table for 2009. |
|
(3) |
|
No portion of the amounts in this column constitute above-market
earnings under applicable SEC rules, and so no portion of such
amounts are included in the Summary Compensation Table for 2009. |
|
(4) |
|
The amounts reflect the actual aggregate balances as of December 31,
2009 plus 2009 MIP Deferrals, if any, and 2009 Matching Amounts, less
aggregate withdrawals and distributions. Amounts in this column that
represent contributions by the named executive officer or by the
Company in 2009, 2008 and/or 2007 are reported in the Summary
Compensation Table for the applicable year if the officer qualified as
a named executive officer in such year. The earnings on such
contributions are not, and in the past have not been, reported in the
Summary Compensation Table because such earnings are not at a
preferential or above-market rate. |
Termination and Change of Control Arrangements
The following tables show potential payments to each of our named executive officers, other
than Mr. Brocke-Benz, under existing contracts, agreements, plans or arrangements, whether written
or unwritten, including the Executive Officer Employment Agreements described above, for various
scenarios involving a change in control of us or a termination of employment of such officer,
assuming a December 31, 2009 effective date of such change of control or termination (accordingly,
the base salaries and target bonuses used for the calculations in the tables do not reflect the
adjustments that became effective January 1, 2010, as described under Base Salary in the
Compensation Discussion and Analysis). Mr. Brocke-Benz is not a party to any existing contracts,
agreements, plans or arrangements, whether written or unwritten, providing for the types of
potential payments reflected in the tables below; Mr. Brocke-Benzs rights to any such payments
would be based on applicable laws in Germany. The named executive officers also have certain
benefits that would be payable upon a change of control and/or termination as described above under
Pension Benefits and Nonqualified Deferred Compensation Plan.
As partial consideration for the potential payments provided in the tables below, the named
executive officers are bound by a confidentiality agreement as well as customary non-compete and
non-solicitation provisions set forth in their respective Executive Officer Employment Agreements.
The non-compete provisions prohibit the named executive officers from engaging in or being
affiliated with any business which is competitive with the Company while employed by the Company
and for a period of one year after the termination of such employment for any reason (except that
Mr. Ballbachs provision lasts 18 months). The non-solicitation provision prohibits the named
executive officer, either alone or in association with others, from soliciting any employee of the
Company to leave the employ of the Company unless such individuals employment with the Company has
been terminated for a period of 180 days or longer. The named executive officers receipt of the
payments would be contingent upon the executive signing a release of claims against the Company.
131
Pursuant to Mr. Wyszomierskis Executive Officer Employment Agreement, as a result of his
retirement, he is entitled to receive (and has been receiving) (i) one and a half times the sum of
his 2009 annualized base salary plus his target bonus for 2009, payable in equal installments over
the 12-month period following his retirement, and (ii) continued health benefits for the 12-month
period following his retirement. See note (7) of the Summary Compensation Table for more
information.
JOHN M. BALLBACH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation |
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary |
|
|
Early |
|
|
Normal |
|
|
for Good |
|
|
for Cause |
|
|
Change in |
|
|
|
|
|
|
|
Executive Payments Upon Termination |
|
Termination |
|
|
Retirement |
|
|
Retirement |
|
|
Reason(1) |
|
|
Termination |
|
|
Control(2) |
|
|
Death(3) |
|
|
Disability(4) |
|
Severance or Lump Sum Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,774,354 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
939,008 |
|
|
$ |
939,008 |
|
Founders Common Units (unvested
and accelerated)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GREGORY L. COWAN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation |
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary |
|
|
Early |
|
|
Normal |
|
|
for Good |
|
|
for Cause |
|
|
Change in |
|
|
|
|
|
|
|
Executive Payments Upon Termination |
|
Termination |
|
|
Retirement |
|
|
Retirement |
|
|
Reason(1) |
|
|
Termination |
|
|
Control |
|
|
Death(3) |
|
|
Disability(4) |
|
Severance or Lump Sum Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,062,013 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
300,000 |
|
|
$ |
300,000 |
|
Founders Common Units (unvested
and accelerated)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATTHEW C. MALENFANT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
or |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Resignation |
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary |
|
|
Early |
|
|
Normal |
|
|
for Good |
|
|
for Cause |
|
|
Change in |
|
|
|
|
|
|
|
Executive Payments Upon Termination |
|
Termination |
|
|
Retirement |
|
|
Retirement |
|
|
Reason(1) |
|
|
Termination |
|
|
Control |
|
|
Death(3) |
|
|
Disability(4) |
|
Severance or Lump Sum Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,046,274 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
295,503 |
|
|
$ |
295,503 |
|
Founders Common Units (unvested
and accelerated)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
WU MING KEI (a/k/a EDDY WU)(6)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Not for |
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Cause |
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|
Termination |
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|
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|
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or |
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|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
Resignation |
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary |
|
|
Early |
|
|
Normal |
|
|
for Good |
|
|
for Cause |
|
|
Change in |
|
|
|
|
|
|
|
Executive Payments Upon Termination |
|
Termination |
|
|
Retirement |
|
|
Retirement |
|
|
Reason(1) |
|
|
Termination |
|
|
Control |
|
|
Death(3) |
|
|
Disability(4) |
|
Severance or Lump Sum Payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
941,994 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
264,046 |
|
|
$ |
264,046 |
|
Founders Common Units (unvested
and accelerated)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
132
|
|
|
(1) |
|
Upon termination without cause or resignation for good reason (as
each such term is defined in the Executive Officer Employment
Agreements) our named executive officers are generally entitled to (i)
one and a half times (two times in the case of Mr. Ballbach) the sum
of the executives then current base salary plus his target bonus for
the year in which termination or resignation occurs, payable in equal
installments over the 12-month period following termination and (ii)
continued health benefits for the 12-month period (18-month period in
the case of Mr. Ballbach) following termination. |
|
(2) |
|
In the event excise taxes become payable under Section 280G and
Section 4999 of the Code as a result of any excess parachute
payments, as that phrase is defined by the Internal Revenue Service,
upon a change of control of the Company, Mr. Ballbachs Executive
Officer Employment Agreement provides that the Company will pay the
excise tax as well as a gross-up for the impact of the excise tax
payment. There currently are no arrangements between the Company and
Mr. Ballbach that the Company expects would result in any such excise
tax payment upon a change of control of the Company. |
|
(3) |
|
Upon termination by reason of death, the named executive officers
beneficiary or estate, as applicable, will be entitled to receive a
lump sum payment in an amount equal to the target bonus for the year
in which such termination occurs, prorated for the portion of such
year prior to the death. |
|
(4) |
|
Upon termination by reason of disability, the named executive officer
will be entitled to receive a lump sum payment in an amount equal to
the target bonus for the year in which such termination occurs,
prorated for the portion of such year prior to the termination. In
addition, the named executive officer will be entitled to receive
payments of base salary until payments to him under VWRs long-term
disability plan commence but in any event for a period not to exceed
18 months from the date of termination. |
|
(5) |
|
All founders common units will vest upon the sale of substantially all
of Holdings or our assets or upon certain other change of control
events. Upon an initial public offering of our stock or of Holdings
units, or if the named executive officer becomes permanently disabled
or dies, the founders common units that would have vested in the next
12 months will vest immediately. If the named executive officers
employment terminates for any reason other than for cause, vested
founders common units can be repurchased by or sold to Holdings at
fair market value, as calculated in accordance with the relevant
transaction documents, and unvested units can be repurchased by or
sold to Holdings at the lower of original cost or fair market value.
Upon a termination for cause, both vested and unvested founders
common units can be repurchased by or sold to Holdings at the lower of
original cost or fair market value. See Equity Participation under
Successor Equity Plan for more information. |
|
(6) |
|
The salary-based amounts for Mr. Wu have been converted from Hong Kong
dollars to United States dollars based on the exchange rate as of the
close of business on December 31, 2009 (0.12896). |
133
Director Compensation
Under the Board Compensation Policy in place since 2007 (the Board Compensation Policy), all
directors who are not also (i) officers or employees of VWR or us or (ii) Managing Directors or
Managing Partners of Madison Dearborn (Eligible Directors), receive annual cash compensation of
$100,000 for their service on VWRs and our Board. No separate compensation is paid to Eligible
Directors for their service on the Board committees. In addition, at the discretion of the Board of
Holdings, Eligible Directors may be granted the right to receive or purchase equity interests in
Holdings in accordance with the Successor Equity Plan. See Item 12 Security Ownership of Certain
Beneficial Owners and Management and Certain Stockholder Matters in this Annual Report on Form
10-K for a listing of the equity interests in Holdings beneficially owned by Eligible Directors.
Non-Eligible Directors (which include Messrs. Alexos, Dean and Sullivan) will not be entitled to
separate cash compensation or rights under the Successor Equity Plan in connection with their
service on the Board or Board committees. All Board members, other than those affiliated with
Madison Dearborn, will be entitled to be reimbursed for reasonable travel, lodging and other
expenses incurred in connection with their service on the Board and Board committees.
The table below sets forth director compensation for 2009:
|
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|
|
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|
|
Fees |
|
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|
|
Non-Equity |
|
|
|
|
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|
|
|
|
Earned |
|
|
|
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|
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|
|
Incentive |
|
|
|
|
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|
|
or Paid in |
|
|
Stock |
|
|
Option |
|
|
Plan |
|
|
All Other |
|
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|
|
Cash |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
Total |
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Robert L. Barchi |
|
$ |
100,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
100,000 |
|
Edward A. Blechschmidt |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Robert P. DeCresce |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Harry M. Jansen Kraemer, Jr. |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Pamela Forbes Lieberman(1) |
|
|
95,834 |
|
|
|
32,000 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127,834 |
|
Carlos del Salto |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Robert J. Zollars |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
(1) |
|
Ms. Forbes Lieberman was elected to VWRs and our Board in January 2009, thus her fee for
service has been prorated for the time served. |
|
(2) |
|
This amount reflects the grant date fair value of the equity investment made by Ms. Forbes
Lieberman in 2009 under the Successor Equity Plan, calculated in accordance with U.S. GAAP. |
134
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
All of our capital stock is owned by VWR Investors, which in turn is owned by Holdings. Upon
the consummation of the Merger, the Successor Equity Plan was established to permit members of
management, board members and consultants the opportunity to purchase equity units of Holdings. As
of February 28, 2010, Holdings had 1,409,929 preferred units outstanding and 14,002,666 common
units outstanding.
The following table sets forth certain information regarding the beneficial ownership of the
common units and preferred units of Holdings as of February 28, 2010 by:
|
|
|
each person who is the beneficial owner of more than 5% of outstanding common units and
preferred units; |
|
|
|
each of our directors and our named executive officers; and |
|
|
|
our directors and executive officers as a group. |
To our knowledge, each such holder has sole voting and investment power as to such common
units and preferred units shown unless otherwise noted. Beneficial ownership of the common units
and preferred units listed in the table has been determined in accordance with the applicable rules
and regulations promulgated under the Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Units(1) |
|
|
Class A Preferred Units(1) |
|
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Percent of |
|
|
|
Number |
|
|
Class |
|
|
Number |
|
|
Class |
|
Principal Stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Madison Dearborn(2) |
|
|
10,572,738.12 |
|
|
|
75.51 |
% |
|
|
1,175,259.52 |
|
|
|
83.36 |
% |
Avista Capital Partners(3) |
|
|
1,076,259.68 |
|
|
|
7.69 |
% |
|
|
117,685.69 |
|
|
|
8.35 |
% |
Directors and Executive Officers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Ballbach(4) |
|
|
298,679.81 |
|
|
|
2.13 |
% |
|
|
6,000.60 |
|
|
|
* |
|
Gregory L. Cowan |
|
|
14,244.52 |
|
|
|
* |
|
|
|
349.77 |
|
|
|
* |
|
Matthew C. Malenfant |
|
|
39,131.37 |
|
|
|
* |
|
|
|
960.87 |
|
|
|
* |
|
Manuel Brocke-Benz |
|
|
39,131.37 |
|
|
|
* |
|
|
|
960.87 |
|
|
|
* |
|
Wu Ming Kei (a/k/a Eddy Wu) |
|
|
19,565.68 |
|
|
|
* |
|
|
|
480.43 |
|
|
|
* |
|
George Van Kula |
|
|
70,436.46 |
|
|
|
* |
|
|
|
1,729.56 |
|
|
|
* |
|
Theodore C. Pulkownik |
|
|
97,828.42 |
|
|
|
* |
|
|
|
2,402.17 |
|
|
|
* |
|
Paul A. Dumas |
|
|
29,348.52 |
|
|
|
* |
|
|
|
720.65 |
|
|
|
* |
|
Jon Michael Colyer |
|
|
25,435.39 |
|
|
|
* |
|
|
|
624.56 |
|
|
|
* |
|
Charles R. Patel |
|
|
12,717.69 |
|
|
|
* |
|
|
|
312.28 |
|
|
|
* |
|
Theresa A. Balog |
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
* |
|
Nicholas W. Alexos(2) |
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
* |
|
Robert L. Barchi |
|
|
8,000.00 |
|
|
|
* |
|
|
|
|
|
|
|
* |
|
Edward A. Blechschmidt |
|
|
8,000.00 |
|
|
|
* |
|
|
|
|
|
|
|
* |
|
Thompson Dean(3) |
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
* |
|
Robert P. DeCresce |
|
|
12,249.55 |
|
|
|
* |
|
|
|
170.75 |
|
|
|
* |
|
Harry M. Jansen Kraemer, Jr.(2) |
|
|
83,612.04 |
|
|
|
* |
|
|
|
4,116.39 |
|
|
|
* |
|
Pamela Forbes Lieberman |
|
|
8,000.00 |
|
|
|
* |
|
|
|
|
|
|
|
* |
|
Carlos del Salto |
|
|
8,896.88 |
|
|
|
* |
|
|
|
99.1 |
|
|
|
* |
|
Timothy P. Sullivan(2) |
|
|
|
|
|
|
* |
|
|
|
|
|
|
|
* |
|
Robert J. Zollars(5) |
|
|
9,722.02 |
|
|
|
* |
|
|
|
190.28 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and Executive
Officers as a group (21
persons)(2)(3) |
|
|
12,433,997.52 |
|
|
|
88.80 |
% |
|
|
1,312,063.49 |
|
|
|
93.06 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
|
* |
|
Denotes less than one percent. |
|
(1) |
|
For information regarding the voting rights of Holdings common units
and preferred units, see Description of Equity Capital of Holdings
below. |
|
(2) |
|
Madison Dearborn Capital Partners V-A, L.P. (MDP V-A) is the
indirect beneficial owner of 6,813,173.04 common units and 758,327.30
preferred units, Madison Dearborn Capital Partners V-C, L.P. (MDP
V-C) is the indirect beneficial owner of 1,807,413.56 common units
and 201,171.12 preferred units, Madison Dearborn Capital Partners V
Executive-A, L.P. (MDP Executive) is the indirect beneficial owner
of 68,461.51 common units and 7,619.67 preferred units, MDCP
Co-Investors (Varietal), L.P. (Varietal) is the indirect beneficial
owner of 1,749,749.91 common units and 193,275.36 preferred units and
MDCP Co-Investors (Varietal-2), L.P. (Varietal-2 and together with
MDP V-A, MDP V-C, MDP Executive and Varietal, the MDP Funds) is the
indirect beneficial owner of 133,940.10 common units and 14,866.06
preferred units. Madison Dearborn Partners V-A&C, L.P. (MDP A&C) is
the general partner of each of the MDP Funds. John A. Canning, Jr.,
Paul J. Finnegan and Samuel M. Mencoff are the sole members of a
limited partner committee of MDP A&C that have the power, acting by
majority vote, to vote or dispose of the units directly held by the
MDP Funds. Messrs. Canning, Finnegan and Mencoff each hereby disclaims
any beneficial ownership of any shares directly held by the MDP Funds.
Each of Messrs. Sullivan, Alexos and Kraemer, Jr. are employed by or
associated with the ultimate general partner of the MDP Funds and
disclaim beneficial ownership of the units held by the MDP Funds
except to the extent of his pecuniary interest therein. The address
for MDP A&C and Messrs. Alexos, Sullivan, Kraemer, Canning, Finnegan
and Mencoff is c/o Madison Dearborn Partners, LLC, Three First
National Plaza, Suite 4600, 70 West Madison Street, Chicago, Illinois
60602. |
|
(3) |
|
Avista Capital Partners, L.P. (ACP) is the indirect beneficial owner
of 780,706.14 common units and 85,367.82 preferred units and ACP-VWR
Holdings LLC (ACP-VWR) is the indirect beneficial owner of
295,553.54 common units and 32,317.87 preferred units. Avista Capital
Partners GP, LLC (Avista GP) is the general partner of ACP and
Avista Capital Partners (Offshore), L.P., the managing member of
ACP-VWR. Mr. Dean and Steven Webster are Co-Managing Partners of
Avista Capital Managing Member, LLC, the managing member of Avista GP.
Accordingly, Messrs. Dean and Webster have the power, acting by
majority vote, to vote or dispose of the units held by ACP and
ACP-VWR. Messrs. Dean and Webster each disclaim beneficial ownership
of the units held by ACP and ACP-VWR, except to the extent of his
pecuniary interest therein. The address for Avista Capital Managing
Member, LLC and Messrs. Dean and Webster is c/o Avista Capital
Holdings, LP, 65 East 55th Street, 18th Floor, New York, New York
10022. |
|
(4) |
|
Includes 45,874.54 common units and 921.72 preferred units held by the
John M. Ballbach 2007 Grantor Retained Annuity Trust, and 43,729.40
common units and 878.30 preferred units held by the John M. Ballbach
2009 Grantor Retained Annuity Trust; Mr. Ballbach is the sole trustee
of each of these Trusts. Mr. Ballbach has voting and investment
authority over the securities held by the Trusts, but disclaims
beneficial ownership of the securities held by the Trusts except to
the extent of his pecuniary interest therein. The address for the
Trusts is: The Wilmington Trust Company, c/o Gerhard T. van Arkel, 797
East Lancaster Avenue, Villanova, PA 19085. |
|
(5) |
|
Units are held by Zoco L.P., a Nevada limited partnership. Mr. Zollars
and his wife are the sole general and limited partners of Zoco L.P. |
Description of Equity Capital of Holdings
Holdings is a Delaware limited liability company. Holdings has two outstanding classes of
equity securities designated as Class A Preferred Units (preferred units) and Class A Common
Units (common units). The terms of such securities were established pursuant to the Limited
Liability Company Agreement of Holdings (the LLC Agreement). Set forth below is a discussion of
the material terms of such equity securities.
Preferred Units
Yield. Each preferred unit accrues a daily yield at the rate of 8% per annum, compounded on
the last day of each calendar quarter, on the unreturned capital made in respect of such preferred
unit plus all unpaid yield for all prior quarterly periods. Such yield is payable in cash only when
and to the extent the board of managers of Holdings makes a distribution in accordance with the
terms outlined below.
Redemptions; Distributions. There are no scheduled redemptions of the preferred units, and
there is no maturity date or other scheduled date on which Holdings must redeem or otherwise make
distributions in respect of the preferred units. Instead, the board of managers of Holdings may, in
its sole discretion, make distributions from time
to time in accordance with the LLC Agreement and the Delaware Limited Liability Company Act
(as amended, the LLC Act).
136
Each distribution declared by the board of managers will be made in the following order and
priority, with no payments made in respect of any tranche of the waterfall (other than the first
tranche) until all amounts payable in respect of all prior tranches have been distributed in full:
First, in respect of all accrued and unpaid yield on the preferred units;
Second, in respect of all unreturned capital on the preferred units; and
Third, all remaining amounts to the holders of vested common units.
So long as Holdings is treated as a partnership for federal and state income tax purposes,
Holdings will distribute, after each fiscal quarter, a tax distribution to its members (including
the holders of preferred units) for tax liabilities, if any, of its members for such quarter, but
only to the extent that funds are legally available therefor under the LLC Act and such tax
distribution would not be prohibited under any credit facility to which Holdings or any of its
subsidiaries is a party.
Voting Rights. Except as otherwise expressly provided for in the LLC Agreement or under the
LLC Act, the holders of the preferred units do not have any voting rights.
Common Units
Redemptions; Distributions. There are no scheduled redemptions of the common units, and there
is no maturity date or other scheduled date on which Holdings must redeem or otherwise make
distributions in respect of the common units. Instead, the board of managers of Holdings may, in
its sole discretion, make distributions from time to time in accordance with the LLC Agreement and
the LLC Act with respect to the common units subject to the waterfall outlined above.
Voting Rights. Each outstanding common unit is entitled to one vote on all matters to be
voted on by the members of Holdings pursuant to the LLC Agreement. Except as otherwise set forth in
LLC Agreement, all matters to be voted on by the members of Holdings will require the affirmative
vote of the holders of a majority of the common units then outstanding.
As a holding company that operates through its subsidiaries, Holdings would be dependent on
dividends, payments or other distributions from its subsidiaries to make any dividend payments to
holders of the preferred units or common units. Holdings has not in the past paid any dividends on
any of the preferred units or common units and it currently does not expect to pay any dividends on
the preferred units or common units in the foreseeable future, except for tax distributions to the
extent required by the LLC Agreement. Our debt instruments and related agreements include
significant restrictions on our and Holdings ability to pay dividends on our respective common
equity. See Item 7 Managements Discussion and Analysis of Financial Condition and Results of
Operations Indebtedness in this Annual Report on Form 10-K.
Equity Compensation Plan Information
In connection with the consummation of the Merger, each of our executive officers and certain
other members of our management were given the opportunity to purchase equity in Holdings pursuant
to the Successor Equity Plan. For more information regarding the Successor Equity Plan and the
current equity arrangements between our named executive officers and Holdings see Item 11
Executive Compensation Equity Issuances under Successor Equity Plan, and Item 13 Certain
Relationships and Related Transactions, and Director Independence Certain Relationships and
Related Transactions Management Equity Arrangements in this Annual Report on Form 10-K.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
|
|
|
|
|
Remaining for Future |
|
|
|
|
|
|
|
|
|
|
|
Issuance Under Equity |
|
|
|
Number of Securities to |
|
|
Weighted-Average |
|
|
Compensation Plans |
|
|
|
be Issued Upon Exercise |
|
|
Exercise Price of |
|
|
(Excluding Securities |
|
|
|
of Outstanding Options |
|
|
Outstanding Options |
|
|
Reflected in Column (a)) |
|
Plan Category |
|
(a)(1) |
|
|
(b)(1) |
|
|
(c)(1) |
|
Equity compensation plans
approved by security
holders |
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
not approved by security
holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
|
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|
(1) |
|
The Successor Equity Plan was approved by Holdings Board of Managers
and its members on June 29, 2007. There are no options outstanding
under the Successor Equity Plan; the only securities that have been
issued pursuant to the Successor Equity Plan are preferred units and
common units. See Description of Equity Capital of Holdings above
for a description of the securities. There is no mandatory limitation
on the number of securities remaining for issuance under the Successor
Equity Plan. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
Payments to Madison Dearborn and Avista
Upon closing of the Merger, we entered into a management services agreement with an affiliate
of Madison Dearborn pursuant to which they will provide us with management and consulting services
and financial and other advisory services. Pursuant to such agreement, at the closing of the
Merger, they received a fee of $35.6 million plus out-of-pocket expenses incurred in connection
with the Merger. On August 20, 2007, the management services agreement was amended and restated to
include an affiliate of Avista as an additional party. As of February 28, 2010, Madison Dearborn
and Avista are the beneficial owners of approximately 75.5% and 7.7% of our total outstanding
common stock, respectively, through their ownership interests in Holdings. Pursuant to the amended
management services agreement, Madison Dearborn and Avista are entitled to an aggregate annual
management fee of $2.0 million and reimbursement of out-of-pocket expenses incurred in connection
with the provision of the aforementioned services as well as board level services. In addition,
Madison Dearborn and Avista also will receive a placement fee of 2.5% of any equity financing that
they provide to us prior to a public offering of our common stock. The management services
agreement includes customary indemnification provisions in favor of the affiliates of Madison
Dearborn and Avista.
Management Equity Arrangements
Upon the consummation of the Merger, the Successor Equity Plan was established to permit
members of management (the Management Investors), board members and consultants the opportunity
to purchase equity units of Holdings. Under the equity arrangements entered into pursuant to the
Successor Equity Plan, the Management Investors each purchase a strip of securities comprised of
preferred units and common units of Holdings. Through December 31, 2008, the per unit purchase
price paid by Management Investors was $1,000 for the preferred units and $1.00 for the common
units, the same as that paid by Madison Dearborn for the purchase of preferred units and common
units issued in connection with the consummation of the Merger. Based on the quarterly valuation
reports obtained by the Company in 2009 in accordance with the Successor Equity Plan, the per unit
purchase price for any common units purchased by Management Investors in 2009 was $.01. Common
units purchased pursuant to this strip of securities are 100% vested.
Under these equity arrangements, the Management Investors also purchase additional common
units of Holdings, which we refer to as founders common units. Such founders common units represent
approximately 8.53% of Holdings total outstanding common units as of February 28, 2010. Such
founders common units will vest on a daily pro rata basis over four years from the date of
issuance. If any holder of such unvested founders common units dies or becomes permanently
disabled, such investor will be credited with an additional 12 months worth of vesting for his or
her founders common units. All unvested founders common units will vest upon a sale of all or
substantially all of our business to an independent third party so long as the employee holding
such units continues to be an employee of the Company at the closing of the sale, and upon an
initial public offering of Holdings, the founders common units that would have vested in the year
immediately following the initial public offering will immediately vest and the remaining portion
of the unvested founders common units will continue to vest on a daily pro rata basis through the
third anniversary of the date of issuance so long as the employee holding such units continues to
be an employee of the Company.
Both the preferred unit/common unit strip and the founders common units are subject to
restrictions on transfer, and all units purchased by a Management Investor are subject to the right
of Holdings or, if not exercised by Holdings, the right of Madison Dearborn, to repurchase the
units held by a Management Investor following a
termination of his or her employment over a specified period of time. If neither Holdings nor
Madison Dearborn elects to repurchase the units held by a Management Investor, he or she will have
the right to sell such units to Holdings following the termination of his or her employment over a
specified period of time. If an employees employment with us terminates for any reason other than
for cause, vested units can be repurchased by or sold to Holdings at fair market value and unvested
units can be repurchased by or sold to Holdings at the lower of original cost or fair market value.
Upon a termination for cause, both vested and unvested common units can be repurchased by or sold
to Holdings at the lower of original cost or fair market value.
138
As a result of Mr. Wyszomierskis retirement from the Company in June 2009, the Company
exercised its rights to repurchase all of his common units and preferred units in 2009 for a per
unit purchase price of $0.01 and $1,000 plus accrued yield, respectively, except for the portion of
his founders common units (i.e., 8,181.56 units) that could not be repurchased at the time per the
transaction documents because those units were vested for less than six months as of the effective
date of his retirement. The Company repurchased all remaining units in January 2010 in
accordance with the transaction documents.
If Madison Dearborn seeks to sell all or substantially all of the Company, the Management
Investors must consent to the sale and cooperate with Madison Dearborn, which may include selling
their securities to the buyer on the terms and at the price negotiated by Madison Dearborn and
signing whatever documents are reasonably necessary to consummate the sale.
Prior to an initial public offering, if Madison Dearborn sells a significant portion of its
ownership interest in Holdings to a third party (disregarding sales in the public market, transfers
to its affiliates and certain other exceptions), the Management Investors will have the option (but
will not be required to, except in the case of a sale of the entire Company) to participate in the
sale and sell alongside Madison Dearborn on a pro rata basis.
The Management Investors, Madison Dearborn and certain other co-investors have entered into a
securityholders agreement with Holdings under which Madison Dearborn has the right to require
Holdings to register any or all of its securities under the Securities Act on Form S-1 or Form S-3,
at Holdings expense. Additionally, the Management Investors will be entitled to request the
inclusion of their registrable securities in any registration statement at Holdings expense
whenever Holdings proposes to register any offering of its securities.
The Management Investors, Madison Dearborn and certain other co-investors have also entered
into the LLC Agreement, which specifies the rights and obligations of the members of Holdings and
the rights of the various classes of limited liability company interests therein. Pursuant to the
limited liability company agreement, the preferred units will be entitled to a return of capital
after which the common units will share in future distributions on a pro rata basis. In addition,
prior to an initial public offering or a sale of all or substantially all of the Company, each
Management Investor will be required to vote his or her units in favor of a board of managers
consisting of such representatives as Madison Dearborn designates and the Companys Chief Executive
Officer.
The following table sets forth the number of common units and preferred units of Holdings
purchased by our executive officers pursuant to the Successor Equity Plan and beneficially owned as
of February 28, 2010. Each officer paid $1.00 for each common unit and $1,000 for each preferred
unit.
|
|
|
|
|
|
|
|
|
|
|
Number of Class A |
|
|
Number of Class A |
|
Name |
|
Common Units |
|
|
Preferred Units |
|
John M. Ballbach(1) |
|
|
298,679.81 |
|
|
|
6,000.60 |
|
Gregory L. Cowan |
|
|
14,244.52 |
|
|
|
349.77 |
|
Matthew C. Malenfant |
|
|
39,131.37 |
|
|
|
960.87 |
|
Manuel Brocke-Benz |
|
|
39,131.37 |
|
|
|
960.87 |
|
Wu Ming Kei (a/k/a Eddy Wu) |
|
|
19,565.68 |
|
|
|
480.43 |
|
George Van Kula |
|
|
70,436.46 |
|
|
|
1,729.56 |
|
Theodore C. Pulkownik |
|
|
97,828.42 |
|
|
|
2,402.17 |
|
Paul A. Dumas |
|
|
29,348.52 |
|
|
|
720.65 |
|
Jon Michael Colyer |
|
|
25,435.39 |
|
|
|
624.56 |
|
Charles R. Patel |
|
|
12,717.69 |
|
|
|
312.28 |
|
Theresa A. Balog |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 45,874.54 common units and 921.72 preferred units held by the
John M. Ballbach 2007 Grantor Retained Annuity Trust, and 43,729.40
common units and 878.30 preferred units held by the John M. Ballbach
2009 Grantor Retained Annuity Trust. Mr. Ballbach is the trustee of
both Trusts. |
139
Miscellaneous
The Company, through its subsidiaries, purchases certain products from CDW Corporation
(CDW), which is a portfolio company of affiliated funds of Madison Dearborn. In 2009, we had less
than $460,000 of net purchases from CDW.
The Company, through its subsidiaries, sells certain products to Lantheus Medical Imaging
(Lantheus), which is a portfolio company of affiliated funds of Avista. In 2009, we had less than
$570,000 of net sales to Lantheus.
The Company, through its subsidiaries, sells certain products to Navilyst Medical
(Navilyst), which is a portfolio company of affiliated funds of Avista. In 2009, we had less than
$175,000 of net sales to Navilyst.
Mr. del Saltos sister-in-law joined the Company in August 2007 as the manager of the
Companys operations in Mexico. Her base salary is within the salary band established by the
Company for this position but exceeds the $120,000 amount requiring disclosure of her employment
arrangement under Item 404(a) of Regulation S-K.
Review and Approval of Transactions with Related Persons
The Companys Board of Directors has not formally adopted a written policy and procedure for
approval of transactions involving the Company and related persons (directors and executive
officers or their immediate family members, or shareholders owning five percent or greater of the
Companys outstanding stock). However, the Board believes that any such transactions have in the
past been, and will continue to be, appropriately reviewed, approved and monitored.
Director Independence
The Company is not a listed issuer with securities listed on a national securities exchange or
in an inter-dealer quotation system with requirements that a majority of the Board be
independent. Accordingly, the Company is not subject to rules requiring certain of its Directors
to be independent. However, the Board has determined that each of the following non-employee
Directors who served on the Board during 2009 satisfies the independence requirements of the New
York Stock Exchange and has no material relationship with the Company.
|
(4) |
|
Pamela Forbes Lieberman |
In determining Dr. Barchis independence, the Board considered that the Company had net sales
to Thomas Jefferson University of less than $15,000 during 2009. In determining Mr. DeCresces
independence, the Board considered that he is a limited partner in certain investment funds managed
by Madison Dearborn Partners or its affiliates; his investments in these funds are passive and less
than $1 million.
The Board has four standing committees to facilitate and assist the Board in the execution of
its responsibilities. The committees currently are the Audit Committee, the Compensation Committee,
the Finance Committee and the
Nominating & Corporate Governance Committee. The table below shows the membership for each of
the standing Board committees during 2009. Messrs. Alexos, Ballbach, Dean, del Salto, Kraemer and
Sullivan are not independent.
140
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating & |
|
|
|
|
|
|
Corporate Governance |
Audit Committee |
|
Compensation Committee |
|
Finance Committee |
|
Committee |
Nicholas W. Alexos
|
|
Timothy P. Sullivan
|
|
John M. Ballbach
|
|
Timothy P. Sullivan |
Edward Blechschmidt
|
|
Robert P. DeCresce
|
|
Timothy P. Sullivan
|
|
John M. Ballbach |
Carlos del Salto
|
|
Robert J. Zollars
|
|
Nicholas W. Alexos
|
|
Robert J. Zollars |
Pamela Forbes Lieberman
|
|
Robert L. Barchi |
|
|
|
|
Harry M. Jansen Kraemer, Jr.
|
|
Thompson Dean |
|
|
|
|
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
KPMG LLP (KPMG) served as the Companys independent registered public accounting firm for
the fiscal years ended December 31, 2009 and 2008. Fees and expenses for services rendered by KPMG
in 2009 and 2008 were approved by our Audit Committee. KPMGs fees and expenses for services
rendered to the Company for the past two fiscal years are set forth in the table below. We have
determined that the provision of these services is compatible with maintaining the independence of
our independent registered public accounting firm.
|
|
|
|
|
|
|
|
|
Type of Fees |
|
2009 |
|
|
2008 |
|
|
|
(In thousands) |
|
|
Audit Fees (1) |
|
$ |
3,139 |
|
|
$ |
3,558 |
|
Audit-Related Fees (2) |
|
|
46 |
|
|
|
81 |
|
Tax Fees (3) |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,200 |
|
|
$ |
3,639 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2009 and 2008 audit fees relate to the audit of the Companys global
operations including statutory audits, fees related to the audit of
internal controls over financial reporting and fees related to various
European employee benefit plan audits. |
|
(2) |
|
Audit-related services in 2009 include agreed upon procedures in
support of statutory requirements. Audit-related services in 2008
include agreed upon procedures reports primarily associated with the
statutory merger of certain foreign entities. |
|
(3) |
|
Fees for the year ended 2009 relate to tax compliance services. |
Pre-Approval Policy for Auditor Services
The Audit Committee has adopted a policy that requires it to pre-approve the audit and
non-audit services performed by the Companys auditor in order to assure that providing such
services will not impair the auditors independence.
The Audit Committee has the sole and direct responsibility and authority for the appointment,
termination and compensation to be paid to the independent registered public accounting firm. The
Committee has the responsibility to approve, in advance of the provision thereof, all audit
services and permissible non-audit services to be performed by the independent registered public
accounting firm as well as compensation to be paid with respect to such services.
Our Audit Committee Charter authorizes the Committee to delegate authority to pre-approve
audit and permissible non-audit services to a member of the Committee. Any decisions made by such
member under delegated authority, must be presented to the full Committee at its next scheduled
meeting.
141
PART IV
|
|
|
ITEM 15. |
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
a. Financial statements, financial statement schedule and exhibits filed as part of this
report
1. The following Consolidated Financial Statements, together with the Report of Independent
Registered Public Accounting Firm and Notes to Consolidated Financial Statements, are filed as part
of this Annual Report on Form 10-K:
|
|
|
|
|
|
|
Page |
|
VWR FUNDING, INC. (Successor) and CDRV INVESTORS, INC. (Predecessor) |
|
|
|
|
|
|
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
53 |
|
|
|
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
142
|
|
|
|
|
|
|
Exhibit* |
|
|
|
|
Number |
|
Description of Documents |
|
Method of Filing |
|
|
|
|
|
|
|
|
3.1 |
|
|
Certificate of Incorporation of VWR Funding, Inc.
|
|
Previously filed as Exhibit 3.1 to
Form S-4, filed on December 21,
2007 |
|
|
|
|
|
|
|
|
3.2 |
(a) |
|
Bylaws of VWR Funding, Inc. (pursuant to the
Agreement and Plan of Merger, dated May 2, 2007,
between Varietal Distribution Merger Sub, Inc.
(Merger Sub), Varietal Distribution Holdings,
LLC, and CDRV Investors, Inc., pursuant to which
Merger Sub merged with and into CDRV Investors,
Inc. on June 29, 2007, with CDRV Investors, Inc.
as the surviving corporation, the Bylaws of
Merger Sub became the Bylaws of VWR Funding,
Inc., as the surviving corporation)
|
|
Previously filed as Exhibit 3.2(a)
to Form S-4, filed on December 21,
2007 |
|
|
|
|
|
|
|
|
3.2 |
(b) |
|
Amendment to said Bylaws
|
|
Previously filed as Exhibit 3.2(b)
to Form S-4, filed on December 21,
2007 |
|
|
|
|
|
|
|
|
4.1 |
(a) |
|
Indenture, dated as of April 7, 2004, by and
among CDRV Acquisition Corporation, as Issuer
(the rights and obligations of which were
assumed by VWR International, Inc.), the
Subsidiary Guarantors from time to time parties
thereto, as Subsidiary Guarantors and Wells
Fargo Bank, National Association, as Trustee,
relating to the 8% Senior Subordinated Notes due
2014 of CDRV Acquisition Corporation
|
|
Previously filed as Exhibit 4.5 to
VWR International, Inc. Form S-4,
filed on August 30, 2004 |
|
|
|
|
|
|
|
|
4.1 |
(b) |
|
Supplemental Indenture, dated as of April 7,
2004, relating to the 8% Senior Subordinated
Notes
|
|
Previously filed as Exhibit 4.7 to
VWR International, Inc. Form S-4,
filed on August 30, 2004 |
|
|
|
|
|
|
|
|
4.1 |
(c) |
|
Form of 8% Senior Subordinated Notes
|
|
Previously filed as Exhibit 4.11 to
VWR International, Inc. Form S-4,
filed on August 30, 2004 |
|
|
|
|
|
|
|
|
4.1 |
(d) |
|
Supplemental Indenture, dated as of April 7,
2004, relating to the 8% Senior Subordinated
Notes
|
|
Previously filed as Exhibit 4.13 to
Amendment No. 2 to VWR
International, Inc. Form S-4, filed
on November 19, 2004 |
|
|
|
|
|
|
|
|
4.1 |
(e) |
|
Supplemental Indenture, effective as of June 29,
2007, relating to the 8% Senior Subordinated
Notes
|
|
Previously filed as Exhibit 4.4 to
Quarterly Report on Form 10-Q for
the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
4.2 |
(a) |
|
Credit Agreement, dated as of June 29, 2007,
among VWR Funding, Inc., the Foreign Subsidiary
Borrowers from time to time parties thereto, the
Lenders from time to time parties thereto, Bank
of America, N.A., as Administrative Agent and
Collateral Agent, and the Arrangers and other
Agents named therein
|
|
Previously filed as Exhibit 4.5(a)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
4.2 |
(b) |
|
Guarantee and Collateral Agreement, dated as of
June 29, 2007, among VWR Investors, Inc., VWR
Funding, Inc., the Subsidiaries from time to
time parties thereto, and Bank of America, N.A.,
as Collateral Agent
|
|
Previously filed as Exhibit 4.5(b)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
4.3 |
(a) |
|
Indenture, dated as of June 29, 2007, by and
among VWR Funding, Inc., the Guarantors from
time to time parties thereto, and Law Debenture
Trust Company of New York, as Trustee, relating
to 10.25% Senior Notes due 2015 (including form
of Note attached as an exhibit thereto)
|
|
Previously filed as Exhibit 4.6(a)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
143
|
|
|
|
|
|
|
Exhibit* |
|
|
|
|
Number |
|
Description of Documents |
|
Method of Filing |
|
|
|
|
|
|
|
|
4.3 |
(b) |
|
Purchase Agreement, dated as of June 26, 2007,
by and among VWR Funding, Inc. and the
Representatives of the Purchasers named therein,
relating to 10.25% Senior Notes due 2015
|
|
Previously filed as Exhibit 4.6(b)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
4.3 |
(c) |
|
Exchange and Registration Rights Agreement,
dated as of June 29, 2007, among VWR Funding,
Inc., the Guarantors from time to time parties
thereto, and the Representatives of the
Purchasers named therein
|
|
Previously filed as Exhibit 4.6(c)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
4.4 |
(a) |
|
Indenture, dated as of June 29, 2007, by and
among VWR Funding, Inc., the Guarantors from
time to time parties thereto, and Law Debenture
Trust Company of New York, as Trustee, relating
to 10.75% Senior Subordinated Notes due 2017
(including forms of Notes attached as an exhibit
thereto)
|
|
Previously filed as Exhibit 4.7(a)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
4.4 |
(b) |
|
Purchase Agreement, dated as of June 27, 2007,
by and among VWR Funding, Inc. and the
Purchasers named therein, relating to 10.75%
Senior Subordinated Notes due 2017
|
|
Previously filed as Exhibit 4.7(b)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
4.4 |
(c) |
|
Exchange and Registration Rights Agreement,
dated as of June 29, 2007, among VWR Funding,
Inc., the Guarantors from time to time parties
thereto, and the Purchasers named therein
|
|
Previously filed as Exhibit 4.7(c)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.1 |
(a) |
|
Agreement and Plan of Merger, dated May 2, 2007,
among Varietal Distribution Holdings, LLC,
Varietal Distribution Merger Sub, Inc., and VWR
Funding, Inc. (formerly CDRV Investors, Inc.)
|
|
Previously filed as Exhibit 10.1(a)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.1 |
(b) |
|
First Amendment to said Merger Agreement, dated
May 7, 2007
|
|
Previously filed as Exhibit 10.1(b)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.1 |
(c) |
|
Second Amendment to said Merger Agreement, dated
May 30, 2007
|
|
Previously filed as Exhibit 10.1(c)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.2 |
|
|
Amended and Restated Management Services
Agreement, dated as of June 29, 2007, between
VWR Funding, Inc. and Madison Dearborn Partners
V-B, L.P.
|
|
Previously filed as Exhibit 10.1 to
Quarterly Report on Form 10-Q for
the period ended September 30, 2007 |
|
|
|
|
|
|
|
|
10.3 |
(a) |
|
Varietal Distribution Holdings, LLC 2007
Securities Purchase Plan**
|
|
Previously filed as Exhibit 10.3(a)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.3 |
(b) |
|
Limited Liability Company Agreement, dated June
29, 2007, among Varietal Distribution Holdings,
LLC and the unitholders named therein from time
to time**
|
|
Previously filed as Exhibit 10.3(b)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.3 |
(c) |
|
Securityholders Agreement, dated June 29, 2007,
among Varietal Distribution Holdings, LLC and
the other parties named therein from time to
time**
|
|
Previously filed as Exhibit 10.3(c)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.3 |
(d) |
|
Form of Management Unit Purchase Agreement**
|
|
Previously filed as Exhibit 10.3(d)
to Quarterly Report on Form 10-Q
for the period ended June 30, 2007 |
144
|
|
|
|
|
|
|
Exhibit* |
|
|
|
|
Number |
|
Description of Documents |
|
Method of Filing |
|
|
|
|
|
|
|
|
10.4 |
(a) |
|
Employment Letter, dated June 29, 2007, between
VWR International, LLC and John M. Ballbach**
|
|
Previously filed as Exhibit 10.4 to
Quarterly Report on Form 10-Q for
the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.4 |
(b) |
|
Amendment to Employment Letter, dated December
18, 2008, between VWR International, LLC and
John M. Ballbach**
|
|
Previously filed as Exhibit 10.4(b)
to Annual Report on Form 10-K for
the year ended December 31, 2008 |
|
|
|
|
|
|
|
|
10.4 |
(c) |
|
Amendment to Employment Letter, dated February
10, 2009, between VWR International, LLC and
John M. Ballbach**
|
|
Previously filed as Exhibit 10.4(c)
to Annual Report on Form 10-K for
the year ended December 31, 2008 |
|
|
|
|
|
|
|
|
10.5 |
(a) |
|
Employment Letter, dated June 29, 2007, between
VWR International, LLC and Jack L.
Wyszomierski**
|
|
Previously filed as Exhibit 10.5 to
Quarterly Report on Form 10-Q for
the period ended June 30, 2007 |
|
|
|
|
|
|
|
|
10.5 |
(b) |
|
Amendment to Employment Letter, dated December
18, 2008, between VWR International, LLC and
Jack L. Wyszomierski**
|
|
Previously filed as Exhibit 10.5(b)
to Annual Report on Form 10-K for
the year ended December 31, 2008 |
|
|
|
|
|
|
|
|
10.6 |
(a) |
|
Employment Letter, dated June 29, 2007, between
VWR International, LLC and Gregory L. Cowan**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.6 |
(b) |
|
Amendment to Employment Letter, dated December
18, 2008, between VWR International, LLC and
Gregory L. Cowan**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.7 |
(a) |
|
Employment Letter, dated June 29, 2007, between
VWR International, LLC and Matthew Malenfant**
|
|
Previously filed as Exhibit 10.8 to
Annual Report on Form 10-K for the
year ended December 31, 2007 |
|
|
|
|
|
|
|
|
10.7 |
(b) |
|
Amendment to Employment Letter, dated December
18, 2008, between VWR International, LLC and
Matthew Malenfant**
|
|
Previously filed as Exhibit 10.8(b)
to Annual Report on Form 10-K for
the year ended December 31, 2008 |
|
|
|
|
|
|
|
|
10.8 |
(a) |
|
Employment Agreement, dated April 23, 2003,
between VWR International GmbH and Manuel
Brocke-Benz**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.8 |
(b) |
|
Supplement to Employment Agreement, dated April
23, 2003, between VWR International GmbH and
Manuel Brocke-Benz**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.9 |
|
|
Employment Agreement, dated June 13, 2008,
between VWR International, LLC and Wu Ming Kei
(a/k/a Eddy Wu)**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.10 |
(a) |
|
VWR International Nonqualified Deferred
Compensation Plan, effective May 1, 2007**
|
|
Previously filed as Exhibit 10.1 to
Quarterly Report on Form 10-Q for
the period ended March 31, 2007 |
|
|
|
|
|
|
|
|
10.10 |
(b) |
|
Amendment to said Plan**
|
|
Previously filed as Exhibit 10.9(b)
to Annual Report on Form 10-K for
the year ended December 31, 2007 |
|
|
|
|
|
|
|
|
10.11 |
(a) |
|
VWR International Nonqualified Deferred
Compensation Plan Trust Agreement, dated as of
May 1, 2007, between VWR International, Inc. and
Wells Fargo, N.A.**
|
|
Previously filed as Exhibit 10.2 to
Quarterly Report on Form 10-Q for
the period ended March 31, 2007 |
|
|
|
|
|
|
|
|
10.11 |
(b) |
|
Amendment to said Trust Agreement**
|
|
Previously filed as Exhibit
10.10(b) to Annual Report on Form
10-K for the year ended December
31, 2007 |
145
|
|
|
|
|
|
|
Exhibit* |
|
|
|
|
Number |
|
Description of Documents |
|
Method of Filing |
|
|
|
|
|
|
|
|
10.12 |
(a) |
|
VWR International Amended and Restated
Retirement Plan**
|
|
Previously filed as Exhibit 10.8(a)
to Annual Report on Form 10-K for
the year ended December 31, 2006 |
|
|
|
|
|
|
|
|
10.12 |
(b) |
|
Amendment No. 1 to said Retirement Plan**
|
|
Previously filed as Exhibit 10.8(b)
to Annual Report on Form 10-K for
the year ended December 31, 2006 |
|
|
|
|
|
|
|
|
10.12 |
(c) |
|
Amendment No. 2 to said Retirement Plan**
|
|
Previously filed as Exhibit 10.8(c)
to Annual Report on Form 10-K for
the year ended December 31, 2006 |
|
|
|
|
|
|
|
|
10.12 |
(d) |
|
Amendment No. 3 to said Retirement Plan**
|
|
Previously filed as Exhibit
10.11(d) to Annual Report on Form
10-K for the year ended December
31, 2008 |
|
|
|
|
|
|
|
|
10.12 |
(e) |
|
Amendment No. 4 to said Retirement Plan**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.12 |
(f) |
|
Amendment No. 5 to said Retirement Plan**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.12 |
(g) |
|
Amendment No. 6 to said Retirement Plan**
|
|
Filed herewith |
|
|
|
|
|
|
|
|
10.13 |
|
|
VWR International, LLC Amended and Restated
Supplemental Benefits Plan**
|
|
Previously filed as Exhibit 10.12
to Annual Report on Form 10-K for
the year ended December 31, 2008 |
|
|
|
|
|
|
|
|
10.14 |
|
|
VWR International Retention Bonus Plan**
|
|
Previously filed as Exhibit 10.3 to
VWR International, Inc. Form 8-K,
filed on December 12, 2006 |
|
|
|
|
|
|
|
|
10.15 |
|
|
Board Compensation Policy**
|
|
Previously filed as Exhibit 10.14
to Annual Report on Form 10-K for
the year ended December 31, 2007 |
|
|
|
|
|
|
|
|
12.1 |
|
|
Computation of Ratio of Earnings to Fixed Charges
|
|
Filed herewith |
|
|
|
|
|
|
|
|
21.1 |
|
|
List of Subsidiaries
|
|
Filed herewith |
|
|
|
|
|
|
|
|
24 |
|
|
Power of Attorney
|
|
Filed herewith |
|
|
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification of Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
Filed herewith |
|
|
|
|
|
|
|
|
32.1 |
|
|
Certificate of Principal Executive Officer
pursuant to 18 U.S.C. 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002)
|
|
Furnished herewith |
|
|
|
|
|
|
|
|
32.2 |
|
|
Certificate of Principal Financial Officer
pursuant to 18 U.S.C. 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002)
|
|
Furnished herewith |
|
|
|
* |
|
Investors should not rely on any representations and warranties, or
similar statements, contained in the Exhibits other than those contained
in Exhibits 31.1, 31.2, 32.1 and 32.2. |
|
** |
|
Denotes management contract or compensatory plan, contract or arrangement. |
SUPPLEMENTAL INFORMATION
No annual report to security holders covering the Companys last fiscal year or proxy
statement, form of proxy or other proxy soliciting material has been sent to security holders.
146
Pursuant to the requirements of Sections 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 FUNDING, INC.
|
|
|
By: |
/s/ Theresa A. Balog
|
|
|
|
Name: |
Theresa A. Balog |
|
|
|
Title: |
Vice President and Corporate Controller
(Chief Accounting Officer and Duly Authorized Officer) |
|
March 15, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ John M. Ballbach
John M. Ballbach
|
|
Chairman, President and
Chief Executive Officer
|
|
March 15, 2010 |
|
|
|
|
|
/s/ Gregory L. Cowan
Gregory L. Cowan
|
|
Senior Vice President and
Chief Financial Officer
|
|
March 15, 2010 |
|
|
|
|
|
/s/ Theresa A. Balog
Theresa A. Balog
|
|
Vice President and Corporate Controller
|
|
March 15, 2010 |
Directors:
|
|
|
Nicholas W. Alexos
|
|
Thompson Dean |
Robert L. Barchi
|
|
Pamela Forbes Lieberman |
Edward A. Blechschmidt
|
|
Harry M. Jansen Kraemer, Jr. |
Robert P. DeCresce
|
|
Timothy P. Sullivan |
Carlos del Salto
|
|
Robert J. Zollars |
By George Van Kula pursuant to a Power of Attorney executed by the directors listed above,
which Power of Attorney has been filed as an exhibit hereto.
|
|
|
|
|
/s/ George Van Kula
George Van Kula
|
|
Attorney-in-fact
|
|
March 15, 2010 |
147
Schedule II Valuation and Qualifying Accounts
VWR FUNDING, INC.
For the Years Ended December 31, 2009 and 2008
and for the Period June 30 December 31, 2007 (Successor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
Foreign Currency |
|
|
Increases |
|
|
|
|
|
|
Beginning of |
|
|
Charged to |
|
|
Translation |
|
|
(Deductions) |
|
|
Balance at End |
|
|
|
Period |
|
|
Income |
|
|
Adjustment |
|
|
From Reserves |
|
|
of Period |
|
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
Year ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful
receivables(1) |
|
$ |
10.1 |
|
|
$ |
3.8 |
|
|
$ |
0.6 |
|
|
$ |
(3.7 |
) |
|
$ |
10.8 |
|
Valuation allowance
on deferred
taxes(2) |
|
$ |
47.2 |
|
|
$ |
1.8 |
|
|
$ |
1.6 |
|
|
$ |
6.0 |
|
|
$ |
56.6 |
|
Year ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful
receivables(1) |
|
$ |
12.0 |
|
|
$ |
2.7 |
|
|
$ |
(0.8 |
) |
|
$ |
(3.8 |
) |
|
$ |
10.1 |
|
Valuation allowance
on deferred
taxes(2) |
|
$ |
36.2 |
|
|
$ |
2.8 |
|
|
$ |
(2.4 |
) |
|
$ |
10.6 |
|
|
$ |
47.2 |
|
June 30, 2007 December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful
receivables(1) |
|
$ |
9.6 |
|
|
$ |
2.6 |
|
|
$ |
0.4 |
|
|
$ |
(0.6 |
) |
|
$ |
12.0 |
|
Valuation allowance
on deferred
taxes(2) |
|
$ |
43.6 |
|
|
$ |
3.1 |
|
|
$ |
3.4 |
|
|
$ |
(13.9 |
) |
|
$ |
36.2 |
|
|
|
|
(1) |
|
Deductions from reserves indicates bad debts charged off, less recoveries. |
|
(2) |
|
Increases (deductions) from reserves indicates utilization and other adjustments not charged or credited to income. |
CDRV INVESTORS, INC.
For the Period January 1 June 29, 2007 (Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
Foreign Currency |
|
|
Increases |
|
|
|
|
|
|
Beginning of |
|
|
Charged to |
|
|
Translation |
|
|
(Deductions) |
|
|
Balance at End |
|
|
|
Period |
|
|
Income |
|
|
Adjustment |
|
|
From Reserves |
|
|
of Period |
|
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
January 1, 2007 June 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
doubtful
receivables(1) |
|
$ |
9.8 |
|
|
$ |
1.0 |
|
|
$ |
0.2 |
|
|
$ |
(1.4 |
) |
|
$ |
9.6 |
|
Valuation allowance
on deferred
taxes(2) |
|
$ |
39.5 |
|
|
$ |
0.1 |
|
|
$ |
0.8 |
|
|
$ |
3.2 |
|
|
$ |
43.6 |
|
|
|
|
(1) |
|
Deductions from reserves indicates bad debts charged off, less recoveries. |
|
(2) |
|
Increases from reserves indicates utilization and other adjustments not charged or credited to income. |
148
EXHIBIT INDEX
|
|
|
|
|
Exhibit* |
|
|
Number |
|
Description of Documents |
|
|
|
|
|
|
10.6 |
(a) |
|
Employment Letter, dated June 29, 2007, between VWR International, LLC
and Gregory L. Cowan ** |
|
|
|
|
|
|
10.6 |
(b) |
|
Amendment to Employment Letter, dated December 18, 2008, between VWR
International, LLC and Gregory L. Cowan** |
|
|
|
|
|
|
10.8 |
(a) |
|
Employment Agreement, dated April 23, 2003, between VWR International
GmbH and Manuel Brocke-Benz** |
|
|
|
|
|
|
10.8 |
(b) |
|
Supplement to Employment Agreement, dated April 23, 2003, between VWR
International GmbH and Manuel Brocke-Benz** |
|
|
|
|
|
|
10.9 |
|
|
Employment Agreement, dated June 13, 2008, between VWR International,
LLC and Wu Ming Kei (a/k/a Eddy Wu)** |
|
|
|
|
|
|
10.12 |
(e) |
|
Amendment No. 4 to said Retirement Plan** |
|
|
|
|
|
|
10.12 |
(f) |
|
Amendment No. 5 to said Retirement Plan** |
|
|
|
|
|
|
10.12 |
(g) |
|
Amendment No. 6 to said Retirement Plan** |
|
|
|
|
|
|
12.1 |
|
|
Computation of Ratio of Earnings to Fixed Charges |
|
|
|
|
|
|
21.1 |
|
|
List of Subsidiaries |
|
|
|
|
|
|
24 |
|
|
Power of Attorney |
|
|
|
|
|
|
31.1 |
|
|
Certification of Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
31.2 |
|
|
Certification of Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
32.1 |
|
|
Certificate of Principal Executive Officer pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002) |
|
|
|
|
|
|
32.2 |
|
|
Certificate of Principal Financial Officer pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002) |
|
|
|
* |
|
Investors should not rely on any representations and warranties, or similar statements,
contained in the Exhibits other than those contained in Exhibits 31.1, 31.2, 32.1 and 32.2. |
|
** |
|
Denotes management contract or compensatory plan, contract or arrangement. |
149