<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 June 30, 1995
( ) 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
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(Exact name of registrant as specified in its charter)
Pennsylvania 91-1319190
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(State of Incorporation) (I.R.S. Employer Identification No.)
1310 Goshen Parkway, West Chester, PA 19380
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(Address of principal executive offices) (zip code)
Registrant's telephone number (610-431-1700)
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(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 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(x) No( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of July 31, 1995.
Class Outstanding at July 31, 1995
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Common stock, par value $1.00 12,898,870
<PAGE>2
VWR CORPORATION
INDEX
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Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1995, and December 31, 1994 3
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1995, and 1994 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995, and 1994 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 1 - Legal Proceedings 11
Item 4 - Submission of Matters to a Vote of 12
Security Holders
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX 14
EXHIBIT 15
<PAGE>3
VWR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
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June 30, 1995 December 31, 1994
(Thousands of dollars) (Unaudited)
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ASSETS
Receivables $ 81,848 $ 73,530
Inventories 50,676 40,091
Other 6,932 6,378
-------- --------
Total Current Assets 139,456 119,999
Property and Equipment-net 37,832 38,259
Other Assets 17,024 15,117
-------- --------
$194,312 $173,375
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank Checks Outstanding, Less Cash in Bank $ 5,795 $ 1,398
Current Portion of Long-term Debt 2,722 2,250
Accounts Payable and Other 48,121 41,231
-------- --------
Total Current Liabilities 56,638 44,879
Long-term Debt 67,527 79,170
Deferred Income Taxes and Other 9,135 9,158
Shareholders' Equity 61,012 40,168
-------- --------
$194,312 $173,375
======== ========
See notes to condensed consolidated financial statements.
<PAGE>4
VWR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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Three Months Six Months
(Thousands of dollars, Ended June 30, Ended June 30,
except per-share data) 1995 1994 1995 1994
-------------------- ---------------------
Sales $144,810 $130,896 $291,186 $252,940
Cost of Sales 112,760 103,980 228,204 199,518
-------- -------- -------- --------
Gross Margin 32,050 26,916 62,982 53,422
Operating Expenses 29,537 24,979 58,064 50,067
-------- -------- -------- --------
Operating Income 2,513 1,937 4,918 3,355
Interest Expense 1,334 1,079 2,821 2,190
-------- -------- -------- --------
Income before Income Taxes 1,179 858 2,097 1,165
Income Taxes 460 342 818 466
-------- -------- -------- --------
Net Income $ 719 $ 516 $ 1,279 $ 699
======== ======== ======== ========
Earnings per share: $ 0.06 $ 0.05 $ 0.11 $ 0.06
Weighted average number of
common shares outstanding-
(thousands) 12,729 11,127 11,916 11,125
See notes to condensed consolidated financial statements.
<PAGE>5
VWR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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Six Months Ended June 30,
(Thousands of dollars) 1995 1994
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Operating Activities
Net Income $ 1,279 $ 699
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization 5,461 4,632
Changes in assets and liabilities:
Receivables (8,318) (10,202)
Inventories (10,585) (12,166)
Other current assets (2,042) 19
Accounts payable and other 7,309 21,267
--------- --------
Cash (Used) Provided by Operating Activities (6,896) 4,249
--------- --------
Investing Activities
Additions to property and equipment, net (1,502) (1,908)
Investment in Joint Venture (2,881)
Other (2,398) (763)
-------- --------
Cash Used by Investing Activities (3,900) (5,552)
-------- --------
Financing Activities
Proceeds from long-term debt 75,341 73,509
Repayment of long-term debt (87,917) (70,887)
Proceeds from issuance of common stock 20,000
Cash dividends (958) (2,204)
Net change in bank checks outstanding 4,397 1,177
Proceeds from exercise of stock options 51 63
Other (118) (355)
-------- --------
Cash Provided by Financing Activities 10,796 1,303
-------- --------
Net change in cash 0 0
Cash at beginning of year 0 0
-------- --------
Cash at end of year $ 0 $ 0
======== ========
Supplemental disclosures of cash flow information:
Cash paid (received) during period for:
Interest (net of capitalized interest) $ 2,789 $ 2,182
Income taxes 362 (986)
In 1995, a capital lease obligation of approximately $1.4 million was
incurred.
See notes to condensed consolidated financial statements
<PAGE>6
VWR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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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 six-month periods ended June 30, 1995, are not necessarily
indicative of the results which may be expected for the year ended December
31, 1995. Refer to the consolidated financial statements and footnotes
thereto included in the Company's 1994 Annual Report on Form 10-K for further
information.
2. STOCK ISSUANCE AND ASSET PURCHASE AGREEMENT
On April 13, 1995 VWR issued and sold to EM Laboratories, Incorporated,
("EML") 1,818,181 Common Shares and a warrant exercisable to purchase an
additional 967,015 Common Shares at $11.00 per share. The Company received
$20 million for the shares and the warrant which proceeds were used to retire
debt.
On May 24, 1995, VWR entered into an Asset Purchase Agreement to acquire
substantially all of the assets of Baxter Healthcare Corporation's industrial
distribution business of its Industrial and Life Sciences Division for $400
million. To fund, in part, such acquisition, on May 24, 1995 VWR and an
affiliate of EML entered into a Common Share and Debenture Purchase Agreement
providing for the issuance of 6,832,797 Common Shares of VWR to EML at $12.44
per share; the exercise of EML's warrant to purchase 967,015 Common Shares at
$11.00 per share; and the purchase by EML of a $135 million subordinated note
from VWR (interest in the first year is payable in approximately 1,409,000
Common Shares of VWR). The balance of the cost of the acquisition is expected
to be funded from a $285 million senior bank credit facility which would
replace VWR's existing credit facility.
After giving effect to the above transactions, EML's beneficial ownership of
Common Shares will be approximately 49.9%; however, pursuant to an amendment
to the standstill agreement between VWR and EML (to be executed at closing),
EML will be prohibited from further increasing its ownership without the
approval by a majority of the directors of VWR not affiliated with EML. The
closings under the Asset Purchase and Common Share and Debenture Agreements
are subject to shareholder approval of the issuance of the Common Shares to
EML, customary regulatory approvals and the completion of due diligence
procedures.
<PAGE>7
3. INVENTORY COSTING
Inventory valued using the LIFO method comprised approximately 86% and 88% of
inventory at June 30, 1995 and December 31, 1994, respectively. Cost of the
remaining inventories is determined using the FIFO method. 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.
Inventory values under the LIFO method at June 30, 1995 and December 31, 1994,
were approximately $28.9 million and $27.7 million, respectively, less than
current cost.
4. DIVIDENDS
For the three months ended June 30, 1995 and 1994, dividends of $.04 per share
and $.10 per share, respectively, were paid. For the six months ended June
30, 1995, and 1994, dividends of $.08 per share and $.20 per share,
respectively, were paid.
<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, 1994, and management's
discussion and analysis of financial condition and results of operations
included in the Company's Annual Report on Form 10-K.
OPERATIONS AND EARNINGS
Sales for the three- and six-month periods ended June 30, 1995 increased 10.6%
and 15.1%, respectively, from the comparable prior year periods.
Approximately 79% of the dollar increase for the three-month period and 58% of
the increase for the six-month period is due to growth resulting from the
acquisition of Canlab in the fourth quarter of 1994. U.S. sales growth slowed
in the second quarter. Our Canadian operations continue to show improving
margins and operating results.
Gross margin percentages of 22.1% and 21.6% for the respective three- and
six-month periods ended June 30, 1995 were above the 20.6% and 21.1% achieved
in the comparable periods of the prior year. The increase is primarily the
result of the implementation of internal programs to improve margins and
improvement in our Canadian operations.
Operating expenses grew at a rate higher than sales growth, but slower than
margin growth. Operating expenses increased primarily as a result of higher
costs in Canada reflecting the acquisition of Canlab and approximately $1.2
million (pre-tax) of office consolidation costs in the first half of 1995 and
$.4 million (pre-tax) in the first quarter.
Operating income for the three- and six-month periods ended June 30, 1995 was
1.7% of sales compared to the 1.5% and 1.3% levels achieved in comparable 1994
periods. The increase is a result of the Company's higher gross margin.
Interest expense for the three- and six-month periods ended June 30, 1995
increased 23.6% and 28.8%, respectively, when compared to prior year periods.
The increase is a result of increased borrowing levels which occurred
primarily from the acquisition of Canlab, partially offset by the $20 million
debt repayment in April 1995.
Net income for the three- and six-month periods ended June 30, 1995 increased
39.3% and 83.0%, respectively, from the comparable 1994 periods. The increase
is primarily due to increases in operating income along with a lower effective
tax rate of 39.0% in 1995 compared to 40.0% in 1994, partially offset by
higher interest costs.
<PAGE>9
FINANCIAL CONDITION AND LIQUIDITY
VWR continued to have a liquid financial position. For the six months ended
June 30, 1995, operating income, plus depreciation and amortization was 3.7
times interest expense. VWR's current ratio was 2.5 at June 30, 1995 and 2.7
at December 31, 1994. Accounts receivable and inventory at June 30, 1995
accounted for approximately 68% of total assets. The increase in accounts
receivable and inventory is primarily due to increased sales.
The Company has a secured revolving credit and term loan agreement, expiring
in 1997, with four banks which provide for committed facilities of $80 million
subject to the maintenance of certain levels of accounts receivable and
inventory and a $20 million five-year term loan due in varying installments.
The facility provides for the ability to borrow Canadian dollars in an amount
up to $16 million in U.S. dollars. The Company expects to have sufficient
accounts receivable and inventory to provide availability under these
facilities.
Included in interest expense for the three months ended June 30, 1994 were net
payments of $.3 million, related to the Company's use of collars and swaps for
interest rate protection. The corresponding amounts for the six months ended
June 30, 1995 and 1994 was $.1 million and $.8 million, respectively. For the
calendar years ended December 31, 1994, 1993 and 1992, the amounts were $1.2
million, $2.2 million and $1.8 million, respectively.
On April 13, 1995 VWR issued and sold to EM Laboratories, Incorporated,
("EML") 1,818,181 Common Shares and a warrant exercisable to purchase an
additional 967,015 Common Shares at $11.00 per share. The Company received
$20 million for the shares and the warrant which proceeds were used to retire
debt.
On May 24, 1995, VWR entered into an Asset Purchase Agreement to acquire
substantially all of the assets of Baxter Healthcare Corporation's industrial
distribution business of its Industrial and Life Sciences Division for $400
million. To fund, in part, such acquisition, on May 24, 1995 VWR and an
affiliate of EML entered into a Common Share and Debenture Purchase Agreement
providing for the issuance of 6,832,797 Common Shares of VWR to EML at $12.44
per share; the exercise of EML's warrant to purchase 967,015 Common Shares at
$11.00 per share; and the purchase by EML of a $135 million subordinated note
from VWR (interest in the first year is payable in approximately 1,409,000
Common Shares of VWR). The balance of the cost of the acquisition is expected
to be funded from a $285 million senior bank credit facility which would
replace VWR's existing credit facility.
<PAGE>10
After giving effect to the above transactions, EML's beneficial ownership of
Common Shares will be approximately 49.9%; however, pursuant to an amendment
to the standstill agreement between VWR and EML (to be executed at closing),
EML will be prohibited from further increasing its ownership without the
approval by a majority of the directors of VWR not affiliated with EML. The
closings under the Asset Purchase and Common Share and Debenture Agreements
are subject to shareholder approval of the issuance of the Common Shares to
EML, customary regulatory approvals and the completion of due diligence
procedures.
The consolidation of the U.S. sales offices is in process and is expected to
be completed during the third quarter of 1995. Approximately, $1.2 million of
the estimated $2 million in expenses, primarily personnel-related, have been
incurred during the first six months of 1995. Savings from the consolidation
will begin during the second half of 1995
<PAGE>11
OTHER INFORMATION
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ITEM 1 - LEGAL PROCEEDINGS
Litigation relating to the proposed issuance by VWR of approximately 8,242,000
Common Shares and a $135,000,000 subordinate Debenture to EML Laboratories,
Inc. ("EML") pursuant to the terms of a Common Share and Debenture Purchase
Agreement (the "Securities Purchase Agreement") dated May 24, 1995 between VWR
and EMI Industries, Incorporated ("EMI"), EML's parent company, has been
commenced in Delaware by a person who alleges he is a shareholder of VWR
against VWR, VWR's President and Chief Executive Officer, seven members of
VWR's board of directors and EMI. In the complaint the plaintiff seeks to
have this action certified as a class action and, on behalf of all
shareholders of VWR (except those named as defendants), to enjoin VWR from
consummating the transactions contemplated by the Securities Purchase
Agreement, an award of class rescissory and/or compensatory damages, an award
of costs and disbursements (including fees of attorneys and experts) and such
other further relief as the court might deem just and proper. In addition,
the plaintiff, on behalf of the shareholders, seeks an order that the director
defendants take appropriate measures to maximize shareholder value, including,
without limitation, creating an active auction for VWR.
The plaintiff alleges, among other things, that the consummation of the
transactions contemplated by the Securities Purchase Agreement will transfer
control of VWR to EMI and because EMI will own nearly 50% of VWR, no third
party will make a bid for VWR. The plaintiff also alleges that the individual
defendants have participated in unfair dealings towards plaintiff and the
other shareholders by failing to implement procedures for maximization of
shareholder value and permitting the transfer of control of VWR at a value
which fails to reflect the long term value of VWR's Common Shares,
particularly in light of VWR's future prospects upon consummation of VWR's
proposed acquisition of the industrial distribution business of the Industrial
and Life Sciences Division of Baxter Healthcare Corporation ("Baxter") and the
industrial distribution business conducted by certain Baxter affiliates
pursuant to the terms of the Asset Purchase Agreement dated as of May 24, 1995
by and among VWR, Baxter and EMI.
VWR believes that this suit is without merit and VWR, EMI and the individual
defendants intend to vigorously defend this action. VWR believes that the
Standstill Agreement dated February 27, 1995 by and between VWR and EMI, as
proposed to be amended pursuant to the Securities Purchase Agreement will
protect shareholder value following the consummation of the transactions
contemplated by the Securities Purchase Agreement.
<PAGE>12
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. Annual Meeting - May 4, 1995
b. Not Applicable
c. 1. Election of Directors for a three year term
FOR WITHHELD
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Jerrold B. Harris 9,829,628 134,343
Donald P. Nielsen 9,858,387 105,584
James H. Wiborg 9,844,820 119,151
2. Ratify the selection of Ernst & Young LLP as independent
auditors for the year ending December 31, 1995.
FOR 9,881,310
AGAINST 49,346
ABSTAIN 33,315
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 10(a)--Asset Purchase Agreement dated as of May 24, 1995
by and among VWR Corporation, Baxter Healthcare Corporation and
EM Laboratories, Incorporated is incorporated by reference to
Exhibit VI of Registrant's definitive proxy statement filed with
the Commission on August 11, 1995.
Exhibit 10(b)--Common Share and Debenture Purchase Agreement
dated as of May 24, 1995 between VWR Corporation and EM
Industries, Incorporated is incorporated by reference to Exhibit
II of Registrant's definitive proxy statement filed with the
Commission on August 11, 1995.
Exhibit 11--Computation of Earnings per Share
Exhibit 27--ART. 5 FDS for Second Quarter 10-Q (submitted for
the benefit of the SEC)
b. Report on Form 8-K dated April 13, 1995
was filed reporting on Item 5.
<PAGE>13
SIGNATURES
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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 August 14, 1995
<PAGE>14
EXHIBIT INDEX
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PAGE
Exhibit 10(a)--Asset Purchase Agreement dated as of May 24, 1995
by and among VWR Corporation, Baxter Healthcare Corporation and
EM Laboratories, incorporated is incorporated by reference to
Exhibit VI of Registrant's definitive proxy statement filed with
the Commission on August 11, 1995.
Exhibit 10(b)--Common Share and Debenture Purchase Agreement dated
as of May 24, 1995 between VWR Corporation and EM Industries,
Incorporated is incorporated by reference to Exhibit II of
Registrant's definitive proxy statement filed with the Commission
on August 11, 1995.
Exhibit 11--Computation of Earnings per Share 15
Exhibit 27--ART. 5 FDS for Second Quarter *
* Submitted for the benefit of the SEC.
<PAGE>15
COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11
Three Months Ended June 30,
1995 1994
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(Amounts in thousands except per share data)
PRIMARY
Average shares outstanding 12,652 11,025
Net effect of dilutive stock options-
based on the treasury stock method using
average market price 77 102
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TOTAL 12,729 11,127
======= =======
Net Income $ 719 516
Per Share Amount .06 .05
======= =======
FULLY DILUTED
Average shares outstanding 12,652 11,025
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 86 105
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TOTAL 12,738 11,130
======= =======
Net Income $ 719 $ 516
Per Share Amount .06 .05
======= =======
<PAGE>16
COMPUTATION OF EARNINGS PER SHARE
Six Months Ended June 30,
1995 1994
---- ----
(Amounts in thousands except per share data)
PRIMARY
Average shares outstanding 11,860 11,022
Net effect of dilutive stock options-
based on the treasury stock method using
average market price 56 103
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TOTAL 11,916 11,125
======= =======
Net Income $ 1,279 $ 699
Per Share Amount .11 .06
======= =======
FULLY DILUTED
Average shares outstanding 11,860 11,022
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 63 106
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TOTAL 11,923 11,128
======= =======
Net Income $ 1,279 $ 699
Per Share Amount .11 .06
======= =======
Since the effect of full dilution is not material, such amount is not
included in the Quarterly Report to Shareholders.
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