<PAGE>1
United States
Securities & Exchange Commission
Washington, DC 20549
Form 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1994
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to _________________
Commission File No. 0-14139
VWR CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 91-1319190
- ------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1310 Goshen Parkway, West Chester, PA 19380
- ------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number (610-431-1700)
--------------
- ------------------------------------------------------------------------------
(Former name, address, and fiscal year if changed since last report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 3 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(x) No( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of October 31, 1994
Class Outstanding at October 31, 1994
- ------------------------------------------------------------------------------
Common stock, par value $1.00 11,036,494 shares
<PAGE>2
VWR CORPORATION
INDEX
- -----
Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1994, and December 31, 1993 3
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1994, and 1993 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES 11
INDEX 12
EXHIBIT 13
<PAGE>3
VWR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
September 30, 1994 December 31, 1993
(Thousands of dollars) (Unaudited)
------------- -----------------
ASSETS
Receivables $ 81,147 $ 64,178
Inventories 44,684 30,243
Other 7,229 8,484
-------- --------
Total Current Assets 133,060 102,905
Property and Equipment-net 39,278 41,562
Other Assets 9,796 5,727
-------- --------
$182,134 $150,194
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank Checks Outstanding, Less Cash in Bank $ 2,098 $ 1,062
Current Portion of Long-term Debt 150
Accounts Payable and Other 58,623 36,496
-------- --------
Total Current Liabilities 60,721 37,708
Long-term Debt 69,420 61,757
Deferred Income Taxes and Other 9,837 9,672
Shareholders' Equity 42,156 41,057
-------- --------
$182,134 $150,194
======== ========
See notes to condensed consolidated financial statements.
<PAGE>4
VWR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- ------------------------------------------------------------------------------
Three Months Nine Months
(Thousands of dollars, Ended September 30, Ended September 30,
except per share data) 1994 1993 1994 1993
-------------------- ---------------------
Sales $145,562 $135,746 $398,502 $388,332
Cost of Sales 114,701 103,884 314,219 299,292
-------- -------- -------- ---------
Gross Margin 30,861 31,862 84,283 89,040
Operating Expenses 26,643 25,662 76,729 76,286
-------- -------- -------- ---------
Operating Income 4,218 6,200 7,554 12,754
Interest Expense 1,142 1,194 3,313 3,355
-------- -------- -------- ---------
Income before Income Taxes 3,076 5,006 4,241 9,399
Income Taxes 948 2,086 1,414 3,754
-------- -------- -------- ---------
Income before Cumulative
Effect of Accounting Change 2,128 2,920 2,827 5,645
Cumulative effect of change in
accounting for postretirement
benefits, net of tax (1,400)
-------- -------- -------- ---------
Net Income $ 2,128 $ 2,920 $ 2,827 $ 4,245
======== ======== ======== =========
Earnings (Loss) per share:
Income before cumulative
effect of accounting change $ 0.19 $ 0.26 $ 0.25 $ 0.51
Cumulative effect of
accounting change (0.13)
-------- -------- -------- --------
Net Income $ 0.19 $ 0.26 $ 0.25 $ 0.38
======== ======== ======== ========
Weighted average number of
common shares outstanding-
(thousands) 11,086 11,135 11,112 11,152
See notes to condensed consolidated financial statements.
<PAGE>5
VWR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
- ------------------------------------------------------------------------------
Nine Months Ended September 30,
(Thousands of dollars) 1994 1993
- ------------------------------------------------------------------------------
Operating Activities
Net Income $ 2,827 $ 4,245
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Cumulative effect of accounting change 1,400
Depreciation and amortization 7,247 6,824
Changes in assets and liabilities:
Receivables (16,969) (13,873)
Inventories (14,441) (6,356)
Other current assets (265) (3,454)
Accounts payable and other 23,609 4,264
--------- --------
Cash Provided (Used) by Operating Activities 2,008 (6,950)
--------- --------
Investing Activities
Additions to property and equipment, net (2,368) (13,021)
Investment in Joint Venture (2,881)
Other (2,042) (506)
-------- --------
Cash Used by Investing Activities (7,291) (13,527)
-------- --------
Financing Activities
Proceeds from long-term debt 119,733 191,317
Repayment of long-term debt (112,220) (173,944)
Cash dividends (3,312) (3,295)
Proceeds from exercise of stock options 109 73
Other (63) (326)
-------- --------
Cash Provided by Financing Activities 4,247 13,825
-------- --------
Net Decrease in Cash (1,036) (6,652)
Bank Checks Outstanding Less Cash in
Bank at Beginning of Year (1,062) (1,803)
-------- --------
Bank Checks Outstanding Less Cash in
bank at End of Period $(2,098) $(8,455)
======== ========
Supplemental disclosures of cash flow information:
Cash paid (received) during period for:
Interest (net of capitalized interest) $ 3,283 $ 3,044
Income taxes (978) 3,491
See notes to condensed consolidated financial statements
<PAGE>6
VWR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three- and nine-month periods ended September 30, 1994, are not
necessarily indicative of the results which may be expected for the year ended
December 31, 1994. Refer to the consolidated financial statements and
footnotes thereto included in the Company's 1993 Annual Report on Form 10-K
for further information.
2. Joint Venture
On January 1, 1994 the Company formed a joint venture with E. Merck of Germany
to acquire an interest in Bender & Hobein GmbH, a distributor of laboratory
supplies and equipment in Germany. The investment will be accounted for using
the cost method of accounting and was funded through the Company's revolving
credit line.
The initial term of this agreement is for a period of three years. During the
initial term, VWR has the right to "put" its investment to E. Merck and
receive the original DM cost of the investment. Subsequent to the initial
term, if either party terminates the agreement, E. Merck will have to re-
acquire the shares from VWR at market value.
3. Canlab Acquisition
Effective October 31, 1994, the Company, through its wholly-owned Canadian
subsidiary, acquired certain assets related to the laboratory supply business
of Canlab, a division of Baxter Corporation for approximately $14.4 million.
The acquisition was accounted for under the purchase method of accounting and
was funded through the Company's revolving credit line. The $4.7 million
excess purchase price over net assets acquired is being amortized over 40
years.
4. Inventory Pricing
The LIFO method of pricing is used for substantially all of the Company's
inventory. Because the actual inventory determination under the LIFO method
is an annual calculation, interim financial results are based on estimated
LIFO amounts and are subject to final year-end LIFO inventory adjustments.
<PAGE>7
Inventory values under the LIFO method at September 30, 1994 and December 31,
1993, were approximately $27.9 million and $26.8 million, respectively, less
than current cost.
5. Dividends
For the three months ended September 30, 1994 and 1993, dividends of $.10 per
share were paid. For the nine months ended September 30, 1994, and 1993,
dividends of $.30 per share were paid.
6. Income Taxes
The Company made adjustments in its valuation allowance due to the expected
realization of foreign net operating loss carryforwards.
7. Long-Term Debt
On October 27, 1994 the Company replaced its existing revolving credit
facility with a dual-currency secured revolving credit agreement, expiring in
1997, with four banks which provides for committed facilities of $80 million
subject to the maintenance of certain levels of accounts receivable and
inventory, and a $20 million five year secured loan due quarterly in varying
installments beginning December 31, 1994. The agreement is secured by the
Company's accounts receivable and inventory. Interest on borrowings is at
short-term interest rates.
<PAGE>8
VWR CORPORATION
Management's Discussion and Analysis
of Financial Condition and Results of Operations
This discussion and analysis of financial condition and results of operations
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto for the year ended December 31, 1993, and management's
discussion and analysis of financial condition and results of operations
included in the Company's 1993 Annual Report on Form 10-K.
OPERATIONS AND EARNINGS
Sales increased 7.2% for the three months ended September 30, 1994, when
compared to the three months ended September 30, 1993. Sales for the nine
months ended September 30, 1994 were up 2.6% from the comparable prior year
period. The increase was due to improvements in all areas of our business.
During the quarter, our Canadian operations showed strong sales growth,
improving margins and operating results.
Gross margin percentages of 21.2% and 21.1% for the respective three- and
nine-month periods ended September 30, 1994 were below the 23.5% and 22.9%,
respectively, achieved in the comparable periods of the prior year. The
decrease is a result of continued competitive price pressures and customer
mix.
Operating expenses as a percentage of sales of 18.3% and 19.3% for the
respective three- and nine-month periods ended September 30, 1994 were below
the 18.9% and 19.6%, respectively, achieved in the comparable periods of the
prior year. The decrease is a result of sales growth at a rate higher than
expenses. However, the decline in gross margin dollars and the dollar growth
in operating expenses lead to declining operating profits.
Operating income for the three- and nine-month periods ended September 30,
1994 was 2.9% and 1.9%, respectively, of sales compared to the respective 4.6%
and 3.3% levels achieved in comparable 1993 periods. The decrease is a result
of the Company's lower gross margin.
Interest expense for the three months ended September 30, 1994 decreased 4.4%
when compared to the three months ended September 30, 1993. The decrease is a
result of replacing the Company's expired interest rate collars with fixed
rate interest swaps.
Income before the cumulative effect of an accounting change for the three- and
nine-month periods ended September 30, 1994 decreased 27.1% and 49.9%,
respectively, from the comparable 1993 periods. The decrease is primarily due
to the effect of lower than expected margins. The decrease in the effective
tax rate of 33.3% for the nine-month period ended September 30, 1994 versus
39.9% in the comparable prior year period is due to a reduction in the
valuation allowance for foreign net operating loss carryforwards.
<PAGE>9
Initiatives taken throughout 1994 to streamline and improve our Canadian
operations are starting to show benefits with improved sales and margin levels
and reduced expenses over the last couple of months. Coupled with certain tax
planning strategies, we expect income at levels that will utilize the
carryforwards over the next year.
FINANCIAL CONDITION AND LIQUIDITY
For the nine months ended September 30, 1994, operating income, plus
depreciation and amortization was 4.5 times interest expense. VWR continued
to have a liquid financial position. VWR's current ratio was 2.2 at September
30, 1994 and 2.7 at December 31, 1993. Accounts receivable and inventory
accounted for approximately 69% of total assets. The increase in accounts
receivable is due to transition issues related to the consolidation of the
Company's credit department and higher sales growth during the quarter
compared to the third quarter of 1993. The increase in inventory is primarily
due to various marketing programs, and to supporting new supplier partnerships
with several customers.
The Company's credit agreements in effect at September 30, 1994 provided,
among other terms, various limitations on working capital, tangible net worth,
current ratio and ratio of total liabilities to tangible net worth, which may
restrict the Company's ability to declare or pay dividends. The Company is in
compliance with each term of the agreement, and approximately $.4 million of
retained earnings at September 30, 1994 are available to pay dividends.
On October 27, 1994 the Company replaced its existing revolving credit
facility with a dual-currency secured revolving credit agreement, expiring in
1997, with four banks which provides for committed facilities of $80 million
subject to the maintenance of certain levels of accounts receivable and
inventory, and a $20 million five-year secured loan due quarterly in varying
installments beginning December 31, 1994. Interest on borrowings is at short-
term interest rates. The agreement is secured by the
Company's accounts receivable and inventory. It is expected that we will have
sufficient accounts receivable and inventory to provide adequate availability
under these facilities. The new agreement also provides, among other terms,
various limitations on working capital, tangible net worth, the current ratio,
and debt-to-equity ratio. The first measurement date of these covenants under
the new agreement is December 31, 1994.
Interest rate collars of $20 million expired on March 27, 1994 and $5 million
expired on May 3, 1994. The Company has entered into interest rate swap
agreements with a financial institution which effectively change the Company's
interest rate exposure on $10 million of floating rate debt to a fixed rate of
4.86% from March 28, 1994 through February 29, 1996, and $30 million at a
fixed rate of 6.38% from February 29, 1996 through February 28, 1999. The
Company is exposed to credit loss in the event of nonperformance by the other
parties to the interest rate swap agreements. However, the Company does not
anticipate nonperformance by the counterparties.
<PAGE>10
As of September 30, 1994 the Company has completed the consolidation of
certain administrative functions which was provided for in the fourth quarter
of 1993. Substantially all of the cash expenditures have been made related to
the $2 million which was accrued at December 31, 1993.
At December 31, 1993, it was anticipated that the impact of the consolidation
of certain functions and the reduction of expenses as a result of
restructuring and other charges would result in annualized cost savings of
approximately $2 million, beginning in the first half of 1994. It is
anticipated that cost savings for the fiscal year 1994 will be approximately
$1.2 million. Additional investments in sales and marketing have offset those
savings in the results for the third quarter and nine months ended September
30, 1994 when compared to the comparable periods of 1993.
On October 31, 1994, the Company, through its wholly-owned Canadian
subsidiary, acquired certain assets related to the laboratory supply business
of Canlab, a division of Baxter Corporation.
<PAGE>11
OTHER INFORMATION
ITEM 6 Exhibits and Reports on From 8-K
a. Exhibits
Exhibit 11--Computation of Earnings per Share
Exhibit 27--ART. 5 FDS for 3rd Quarter 10-Q
(submitted for the benefit of the SEC)
b. Reports on Form 8-K
None.
<PAGE>12
SIGNATURES
- ----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(REGISTRANT) VWR CORPORATION
BY (SIGNATURE)
(NAME AND TITLE) WALTER S. SOBON
VICE-PRESIDENT FINANCE
(Principal Financial and Accounting Officer)
DATE November 14, 1994
<PAGE>11
EXHIBIT INDEX
- -------------
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ----------- ----
11 Computation of Earnings per Share 12
<PAGE>12
COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11
Three Months Ended June 30,
1994 1993
---- ----
(Amounts in thousands except per share data)
PRIMARY
Average shares outstanding 11,025 11,003
Net effect of dilutive stock options-
based on the treasury stock method using
average market price 102 162
------- -------
TOTAL 11,127 11,165
======= =======
Net Income $ 516 $ 1,420
Per Share Amount 0.05 0.13
======= =======
FULLY DILUTED
Average shares outstanding 11,025 11,003
Net effect of dilutive stock options-
based on the treasury stock method using
the period-end market price, if higher than
the average market price 105 166
------- -------
TOTAL 11,130 11,169
======= =======
Net Income $ 516 $ 1,420
Per Share Amount 0.05 0.13
======= =======
<PAGE>13
COMPUTATION OF EARNINGS PER SHARE
Six Months Ended June 30,
1994 1993
---- ----
(Amounts in thousands except per share data)
PRIMARY
Average shares outstanding 11,022 10,988
Net effect of dilutive stock options-
based on the treasury stock method using
average market price 103 173
------- -------
TOTAL 11,125 11,161
======= =======
Income Before Cumulative Effect
of Accounting Change $ 699 $ 2,725
Per Share Amount 0.06 0.24
======= =======
Cumulative Effect of Accounting Change --- $ 1,400
Per Share Amount --- 0.12
======= =======
Net Income $ 699 $ 1,325
Per Share Amount .06 0.12
======= =======
FULLY DILUTED
Average shares outstanding 11,022 10,988
Net effect of dilutive stock options-
based on the treasury stock method using
the period-end market price, if higher than
the average market price 106 179
------- -------
TOTAL 11,128 11,167
======= =======
Income Before Cumulative Effect
of Accounting Change $ 699 $ 2,725
Per Share Amount 0.06 0.24
======= =======
Cumulative Effect of Accounting Change --- $ 1,400
Per Share Amount --- 0.12
======= =======
Net Income $ 699 $ 1,325
Per Share Amount .06 0.12
======= =======
Since the effect of full dilution is not material, such amount is not
included in the Quarterly Report to Shareholders.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000788043
<NAME> VWR CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 81,147
<ALLOWANCES> 0
<INVENTORY> 44,684
<CURRENT-ASSETS> 133,060
<PP&E> 39,278
<DEPRECIATION> 0
<TOTAL-ASSETS> 182,134
<CURRENT-LIABILITIES> 60,721
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 42,156
<TOTAL-LIABILITY-AND-EQUITY> 182,134
<SALES> 398,502
<TOTAL-REVENUES> 398,502
<CGS> 314,219
<TOTAL-COSTS> 314,219
<OTHER-EXPENSES> 76,729
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,313
<INCOME-PRETAX> 4,241
<INCOME-TAX> 1,414
<INCOME-CONTINUING> 2,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,827
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
