VWR International, LLC
VWR Corp (Form: 10-Q, Received: 11/05/2015 16:12:10)

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
¨ 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: 001-36673
 
VWR Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
26-0237871
(State of incorporation)
(I.R.S. Employer Identification No.)
Radnor Corporate Center, Building One, Suite 200
100 Matsonford Road
Radnor, Pennsylvania 19087
(Address of principal executive offices)
(610) 386-1700
(Registrant’s telephone number, including area code)
 
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. ý  Yes ¨  No
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). ý  Yes ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ¨  Large accelerated filer ¨  Accelerated filer ý  Non‑accelerated filer ¨  Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨  Yes ý  No
On October 29, 2015 , 131,358,700 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.
 



VWR Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended September 30, 2015
Table of Contents
 
Page
 
 
 
 
 
 
 
 
 

i


Glossary of Commonly Used Terms
Term
 
Description
the Company, we, us, our
 
VWR Corporation and its consolidated subsidiaries
4.625% Senior Notes
 
4.625% unsecured senior notes due 2022
7.25% Senior Notes
 
7.25% unsecured senior notes, which were redeemed in the third quarter of 2015
Adjusted EBITDA*
 
our earnings or loss before interest, taxes, depreciation, amortization and certain other adjustments
Adjusted EBITDA margin*
 
the ratio of Adjusted EBITDA to net sales
Adjusted EPS*
 
our Adjusted Net Income divided by diluted weighted average shares outstanding, normalized for the shares issued in our IPO
Adjusted Net Income*
 
our net income or loss adjusted for certain items
Americas
 
a geographically-defined reportable segment covering North, Central and South America
Annual Report
 
our Annual Report on Form 10-K filed with the SEC on March 4, 2015
A/R Facility
 
an accounts receivable securitization facility due 2018
Biopharma
 
the combination of the pharmaceutical and biotechnology sectors
EMEA-APAC
 
a geographically-defined reportable segment covering Europe, Middle East, Africa and Asia-Pacific
GAAP
 
United States generally accepted accounting principles
Hedging Instruments
 
€503.8 million of our 4.625% Senior Notes and €370.0 million of our term loan B facility, which hedge a portion of our euro-denominated net investment in foreign operations
IPO
 
our initial public offering, which occurred on October 1, 2014 and closed on October 7, 2014, and included an additional purchase of shares by the underwriters pursuant to an over-allotment option
ITRA
 
the income tax receivable agreement with VWR Holdings
LTM Adjusted EBITDA*
 
our Adjusted EBITDA over the most recent twelve-month period
Net Debt*
 
our indebtedness less cash and cash equivalents and compensating cash balance
Net Leverage*
 
the ratio of Net Debt to LTM Adjusted EBITDA
Prior Senior Credit Facility
 
a senior secured credit facility with a syndicate of lenders consisting of a multi-currency revolving loan facility and a term loan B facility denominated in U.S. dollars and euros that was repaid in full in the third quarter of 2015
SEC
 
the United States Securities and Exchange Commission
Senior Credit Facility
 
a senior secured credit facility with a syndicate of lenders consisting of a multi-currency revolving loan facility, a term loan A facility and a term loan B facility
SG&A expenses
 
selling, general and administrative expenses as defined by GAAP and SEC regulations
SG&A items
 
certain items in SG&A expenses that are discussed in Part I, Item 2 of this report and contributed significantly to our prior period comparisons
Subordinated Notes
 
10.75% unsecured senior subordinated notes, which were redeemed in the fourth quarter of 2014
VWR Holdings
 
Varietal Distribution Holdings, LLC, our majority stockholder
 
*
Denotes non-GAAP financial measurements. See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Indicators of Performance and Financial Condition” for more information, including where to find reconciliations from the most directly comparable GAAP-based financial measurements.

ii


Cautionary Factors Regarding Forward-Looking Statements
This report contains forward-looking statements. All statements other than statements of historical fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” believe,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “can,” “could,” “may,” “should,” “would,” “will,” the negatives thereof and other words and terms of similar meaning.
Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You should not place undue reliance on these statements. 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.
You should understand that the following important factors, in addition to those discussed in our Annual Report under Item 1A, “Risk Factors” and elsewhere, 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:
unfavorable political, economic, capital and credit market conditions in the regions where we operate;
changes in our customers’ research and development and other scientific endeavors;
changes to the life science industry adversely affecting our business;
increased competition from other companies in our industry and our ability to increase our market shares in the geographic regions where we operate;
our ability to maintain relationships with our customers and suppliers;
our ability to consummate and integrate recent and future acquisitions;
the international scope of our operations;
the need to record impairment charges against our goodwill, other intangible and/or other long-lived assets;
existing and increased government regulations to which we and our suppliers are subject;
our ability to comply with applicable antitrust or competition laws;
increased costs to comply with environmental, health and safety laws and regulations;
product liability and other claims in the ordinary course of business;
our ability to hire, train and retain executive officers and other key personnel;
significant interruptions in the operations of our distribution centers or the operations of our suppliers;
failure of our information services and its connectivity to our customers, suppliers and/or certain service providers;
our failure to register and in some cases own the existing applications and registrations for our material trademarks or service marks in certain countries where we do business;
foreign currency exchange rate fluctuations; and
unanticipated increases to our income tax liabilities.
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 report. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.

iii


PART I — FINANCIAL INFORMATION
Item 1.
Financial Statements
VWR Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in millions, except per share data)
 
September 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
122.8

 
$
118.0

Trade accounts receivable, net of reserves of $12.5 and $12.2
599.2

 
583.5

Other receivables
42.0

 
62.1

Inventories
409.5

 
394.5

Other current assets
51.8

 
44.5

Total current assets
1,225.3

 
1,202.6

Property and equipment, net
217.9

 
231.5

Goodwill
1,809.8

 
1,853.6

Other intangible assets, net
1,486.4

 
1,594.9

Other assets
113.4

 
106.2

Total assets
$
4,852.8

 
$
4,988.8

Liabilities, Redeemable Equity and Stockholder Equity
 
 
 
Current liabilities:
 
 
 
Current portion of debt and capital lease obligations
$
100.5

 
$
95.3

Accounts payable
455.9

 
466.2

Employee-related liabilities
66.3

 
82.3

Current amount due to VWR Holdings — ITRA
70.9

 
9.8

Other current liabilities
136.0

 
132.5

Total current liabilities
829.6

 
786.1

Debt and capital lease obligations, net of current portion
1,952.5

 
2,016.6

Amount due to VWR Holdings — ITRA, net of current portion
92.2

 
163.1

Deferred income tax liabilities
460.7

 
462.2

Other liabilities
168.4

 
169.7

Total liabilities
3,503.4

 
3,597.7

Commitments and contingencies (Note 8)

 

Redeemable equity, at redemption value
50.6

 
51.4

Stockholder equity:
 
 
 
Preferred stock, $0.01 par value; 50.0 shares authorized, no shares issued and outstanding

 

Common stock, $0.01 par value; 750.0 shares authorized, 131.4 shares issued and outstanding
1.3

 
1.3

Additional paid-in capital
1,720.8

 
1,716.3

Accumulated deficit
(47.2
)
 
(148.0
)
Accumulated other comprehensive loss
(376.1
)
 
(229.9
)
Total stockholder equity
1,298.8


1,339.7

Total liabilities, redeemable equity and stockholder equity
$
4,852.8


$
4,988.8

See accompanying notes to condensed consolidated financial statements.

1


VWR Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in millions, except per share data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
1,095.5

 
$
1,114.4

 
$
3,206.3

 
$
3,273.7

Cost of goods sold
796.0

 
803.9

 
2,317.1

 
2,339.3

Gross profit
299.5

 
310.5

 
889.2

 
934.4

Selling, general and administrative expenses
218.4

 
217.9

 
656.7

 
702.8

Operating income
81.1

 
92.6

 
232.5

 
231.6

Interest expense
(28.2
)
 
(44.2
)
 
(83.9
)
 
(135.3
)
Interest income
0.1

 
0.1

 
0.2

 
0.5

Other income (expense), net
(4.8
)
 
62.3

 
46.9

 
67.5

Loss on extinguishment of debt
(30.3
)
 

 
(32.7
)
 

Income before income taxes
17.9

 
110.8

 
163.0

 
164.3

Income tax provision
(6.9
)
 
(41.0
)
 
(62.2
)
 
(60.5
)
Net income
11.0

 
69.8

 
100.8

 
103.8

Accretion of dividends on redeemable convertible preferred stock

 
(4.4
)
 

 
(29.4
)
Net income applicable to common stockholders
$
11.0

 
$
65.4

 
$
100.8

 
$
74.4

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 


 


Basic
$
0.08

 
$
0.97

 
$
0.77

 
$
3.25

Diluted
0.08

 
0.97

 
0.76

 
3.25

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
131.4

 
67.7

 
131.4

 
22.9

Diluted
131.5

 
67.7

 
131.9

 
22.9

See accompanying notes to condensed consolidated financial statements.

2


VWR Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income or Loss (Unaudited)
(in millions)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
11.0

 
$
69.8

 
$
100.8

 
$
103.8

Other comprehensive loss, net of income taxes:
 
 
 
 
 
 
 
Foreign currency translation:
 
 
 
 
 
 
 
Net unrealized loss arising during the period
(19.8
)
 
(129.6
)
 
(150.0
)
 
(137.2
)
Derivative instruments:
 
 
 
 
 
 
 
Net unrealized gain (loss) arising during the period
2.6

 
0.7

 
1.8

 
(0.2
)
Reclassification of net (gain) loss into earnings
(0.3
)
 
0.7

 
(0.1
)
 
0.9

Defined benefit plans:
 
 
 
 
 
 
 
Net unrealized gain arising during the period

 

 

 
3.7

Reclassification of net loss (gain) into earnings
0.8

 
0.3

 
2.1

 
(3.6
)
Other comprehensive loss
(16.7
)
 
(127.9
)
 
(146.2
)
 
(136.4
)
Comprehensive loss
$
(5.7
)
 
$
(58.1
)
 
$
(45.4
)
 
$
(32.6
)
See accompanying notes to condensed consolidated financial statements.

3


VWR Corporation and Subsidiaries
Condensed Consolidated Statements of Redeemable Equity and Stockholder Equity (Unaudited)
(in millions)
 
 
 
Stockholder Equity
 
Redeemable Equity
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Total
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2014
$
51.4

 
131.4

 
$
1.3

 
$
1,716.3

 
$
(148.0
)
 
$
(229.9
)
 
$
1,339.7

Share-based compensation expense

 

 

 
3.7

 

 

 
3.7

Reclassifications to state redeemable equity at redemption value
(0.8
)
 

 

 
0.8

 

 

 
0.8

Net income

 

 

 

 
100.8

 

 
100.8

Other comprehensive loss

 

 

 

 

 
(146.2
)
 
(146.2
)
Balance at September 30, 2015
$
50.6

 
131.4

 
$
1.3

 
$
1,720.8

 
$
(47.2
)
 
$
(376.1
)
 
$
1,298.8

See accompanying notes to condensed consolidated financial statements.

4


VWR Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in millions)
 
Nine Months Ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
100.8

 
$
103.8

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
92.5

 
97.6

Net foreign currency remeasurement gain
(44.3
)
 
(70.2
)
Deferred income tax provision
23.4

 
20.2

Loss on extinguishment of debt
32.7

 

Impairment charges
3.2

 
11.3

Gain on disposition of business

 
(11.1
)
Share-based compensation expense
3.7

 
0.5

Amortization of debt issuance costs
4.3

 
5.6

Other, net
4.0

 
2.3

Changes in working capital, net of business acquisitions:
 
 
 
Trade accounts receivable
(41.3
)
 
(54.9
)
Inventories
(26.6
)
 
(35.1
)
Accounts payable
9.1

 
14.7

Other assets and liabilities
(4.2
)
 
2.5

Net cash provided by operating activities
157.3

 
87.2

Cash flows from investing activities:
 
 
 
Acquisitions of businesses, net of cash acquired
(45.6
)
 
(45.4
)
Proceeds from disposition of business, net of cash disposed

 
13.0

Capital expenditures
(24.7
)
 
(23.3
)
Other investing activities
2.1

 
0.5

Net cash used in investing activities
(68.2
)
 
(55.2
)
Cash flows from financing activities:
 
 
 
Proceeds from debt
2,673.2

 
459.9

Repayment of debt
(2,694.2
)
 
(484.9
)
Net change in bank overdrafts
(4.5
)
 
(16.3
)
Net change in compensating cash balance
2.5

 
12.0

Repurchases of redeemable equity

 
(8.9
)
Payment to VWR Holdings under ITRA
(9.8
)
 

Payment of debt issuance costs and redemption premium
(40.3
)
 
(1.1
)
Other financing activities
(2.4
)
 

Net cash used in financing activities
(75.5
)
 
(39.3
)
Effect of exchange rate changes on cash
(8.8
)
 
(7.5
)
Net increase (decrease) in cash and cash equivalents
4.8

 
(14.8
)
Cash and cash equivalents at beginning of period
118.0

 
135.6

Cash and cash equivalents at end of period
$
122.8

 
$
120.8

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
81.7

 
$
138.8

Cash paid for income taxes, net
29.1

 
26.9

See accompanying notes to condensed consolidated financial statements.

5


VWR Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
( 1 )
Nature of Operations and Basis of Presentation
VWR Corporation, together with its consolidated subsidiaries (the “Company,” “we,” “us,” and “our”), is a leading, independent provider of laboratory products, services and solutions to the global life science, general research and applied markets. We have a significant market share position in Europe and North America. We also have operations in Asia-Pacific and other key emerging markets to support our multinational customers across the globe. We serve a critical role in connecting customer sites with core laboratory product suppliers across multiple industries and geographies. We offer one of the broadest portfolios of branded and private label laboratory products. We also offer a full range of value-added services, including custom manufacturing, to meet our customers’ needs. These services represent a growing but currently small portion of our overall net sales. We offer a wide selection of unique products and have developed an extensive global infrastructure including thousands of sales and service-focused professionals. We deliver value to our customers by improving the costs, efficiency and effectiveness of their research laboratories and production operations. We deliver value to our suppliers by providing them with cost-effective channel access to a global and diverse customer base.
Basis of Presentation
We report financial results on the basis of two reportable segments organized by geographic region: (i) North, Central and South America (collectively, the “Americas”); and (ii) Europe, Middle East, Africa and Asia Pacific (collectively, “EMEA-APAC”).
We have prepared the condensed consolidated financial statements included herein without audit pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) has been condensed or omitted pursuant to such rules and regulations. The financial information presented herein reflects all adjustments (consisting only of normal, recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The results for interim periods are not necessarily indicative of the results to be expected for the full year.
We believe that the disclosures included herein are adequate to make the information presented not misleading in any material respect when read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2014 included in our most recent Annual Report on Form 10-K. Those audited consolidated financial statements include a summary of our significant accounting policies, to which there have been no material changes.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of VWR Corporation, its subsidiaries and certain accounts of our parent company after the elimination of intercompany balances and transactions. The following describes our corporate organization at September 30, 2015 and the principles followed in consolidating our financial statements:

6


Varietal Distribution Holdings, LLC (“VWR Holdings”) — Prior to our initial public offering in the fourth quarter of 2014 (“IPO”), VWR Corporation was a wholly-owned subsidiary of VWR Holdings, a Delaware limited liability company. Private equity funds managed by Madison Dearborn Partners hold a controlling interest in VWR Holdings.
Our consolidated balance sheets reflect the investment cost basis of VWR Holdings in the assets and liabilities acquired in a merger in June 2007 and the estimated fair values of those assets and liabilities at that time. This resulted in a significant increase in the carrying value of our identifiable intangible assets and goodwill. In addition, we re-valued our pension obligations, recorded significant deferred income taxes and incurred substantial additional indebtedness.
VWR Holdings sponsors a share-based compensation program for the benefit of certain of our employees and others. We present the expense and changes to equity related to this program in our consolidated financial statements. We also present as redeemable equity the redemption value of certain of VWR Holdings’ equity held by management.
VWR Corporation — VWR Corporation, a Delaware corporation, was formed in June 2007 as VWR Investors, Inc. in connection with a merger. In June 2014, VWR Investors, Inc. changed its name to VWR Corporation. VWR Corporation has no operations other than its ownership of VWR Funding, Inc.
VWR Funding, Inc. and its wholly-owned subsidiaries (“VWR Funding”) — VWR Funding is our wholly-owned subsidiary and the primary issuer of our debt. VWR Funding’s debt agreements limit its ability to, among other things, pay dividends to us.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 revenue, expenses, income and loss during the reporting period. Actual results could differ significantly from those estimates.
( 2 )
New Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued comprehensive revenue recognition guidance. The new guidance provides a single model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The new standard also requires expanded disclosures regarding the qualitative and quantitative information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for us beginning in the first quarter of 2018. The standard may be adopted using either a full retrospective or a modified retrospective approach. We are continuing to evaluate the impact of this pronouncement and the method by which we will adopt it.
In April 2015, the FASB issued new guidance about the presentation of debt issuance costs, which it updated in August 2015. Under the new guidance, deferred issuance costs for debt instruments other than our A/R Facility and our multi-currency revolving loan facility will be presented on our balance sheet as a reduction to debt and capital lease obligations instead of as a component of other assets, as currently required by GAAP. The new guidance becomes effective for us beginning in the first quarter of 2016. We plan to adopt the standard for our consolidated financial statements for the fiscal year ended December 31, 2015. Had we adopted the new standard in the accompanying condensed consolidated financial statements, it would have caused us to reclassify $15.1 million and $11.7 million of deferred debt issuance costs from other assets to debt and capital lease obligations at September 30, 2015 and December 31, 2014 , respectively.
( 3 )
Earnings or Loss per Share
Basic earnings or loss per share is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings or loss per share is computed in a similar way but adjusted for the dilutive effect, if any, of the assumed exercise or conversion of dilutive instruments into common stock.

7


The following table presents the reconciliation of the denominators of basic and diluted earnings or loss per share (in millions):
 
Three Months Ended
September 30, 2015
 
Nine Months Ended
September 30, 2015
Weighted average shares outstanding, basic
131.4

 
131.4

Dilutive effect of stock options
0.1

 
0.5

Weighted average shares outstanding, diluted
131.5

 
131.9

In the third quarter, we revised our calculation of the dilutive effect of stock options. The revision had no impact to diluted earnings per share for any period presented. For the three and nine months ended September 30, 2015 , 2.1 million stock options were excluded from the calculation of diluted earnings per share on the basis that they were anti-dilutive.
( 4 )
Acquisitions
We have acquired a number of businesses to broaden our product offerings and strengthen our market positions. The following list provides information about businesses we acquired since December 31, 2013 (collectively, the “Acquisitions”):
on May 1, 2015, we acquired Hichrom Limited and its subsidiaries (“Hichrom”), a UK-based chromatography column manufacturer and distributor;
on February 2, 2015, we acquired National Biochemicals Corporation (“NBC”), a domestic full service raw material manufacturer and supplier to the biochemical industry;
on November 7, 2014, we acquired Integra Companies, Inc. (“Integra”) and STI Components, Inc. (“STI”). Integra and STI are two separate domestic manufacturers and distributors of single-use disposable products and clean room kitting for bioprocessing applications;
on September 8, 2014, we acquired Klinipath BV and its affiliates (collectively, “Klinipath”), a manufacturer and distributor of equipment, consumables and reagents based in The Netherlands and Belgium;
on June 1, 2014, we acquired a business, and in August 2014, we subsequently rescinded the purchase agreement, receiving a full refund of the purchase price; and
on March 3, 2014, we acquired Peqlab Biotechnologie GmbH, including its subsidiaries and operations in the United States, the United Kingdom, Austria and Germany (collectively, “Peqlab”). Peqlab is headquartered in Germany and develops, manufactures and supplies molecular and cell biology reagents, consumables and instruments.
None of the Acquisitions had an individually material impact on our consolidated financial statements. The Acquisitions were funded through a combination of cash and cash equivalents on hand and incremental borrowings under our credit facilities.
The results of NBC, Integra and STI have been included in our Americas segment, and the results of Hichrom and Klinipath have been included in our EMEA-APAC segment, each from their respective dates of acquisition. The results of Peqlab from its date of acquisition have been included in our EMEA-APAC segment, except for Peqlab’s operations in the United States which have been included in the Americas segment. The results of the disposed business were included in our Americas segment from June 1, 2014 through its disposition in August 2014.

8


The following table presents the components and allocation of the purchase price and the weighted average life of acquired amortizable intangible assets for the Acquisitions in the aggregate (in millions, except as indicated):
 
Nine Months Ended
September 30, 2015
Components of purchase price:
 
Cash paid, net of cash acquired
$
45.6

Estimated fair value of contingent consideration
13.4

Deferred purchase price, net of (settlements)
(3.4
)
Purchase price
$
55.6

Allocation of purchase price:
 
Net tangible assets
$
5.5

Identifiable intangible assets
16.9

Goodwill
33.2

Purchase price
$
55.6

 
 
Weighted average life of acquired amortizable intangible assets
9.7 years

The purchase price for the Acquisitions was higher than the fair value of the acquired identifiable assets, resulting in goodwill, due to the existence of intangible assets not recognizable under GAAP and other market factors. During the nine months ended September 30, 2015 , we recorded goodwill of $16.2 million that we expect to be deductible for tax purposes. The purchase price allocations for the acquisitions of Hichrom and NBC are preliminary pending finalization of opening balance sheets and may be adjusted subsequently.
The acquisitions completed in 2015 contributed aggregate net sales of $6.1 million and $12.4 million and aggregate operating income of $1.2 million and $2.0 million for the three and nine months ended September 30, 2015 , respectively.
The following table presents unaudited supplemental pro forma financial information as if the Acquisitions, excluding the disposed business, had occurred as of January 1, 2014 (in millions, except per share data):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
1,095.5

 
$
1,132.6

 
$
3,212.1

 
$
3,334.6

Net income
11.0

 
70.9

 
101.3

 
107.2

Earnings per share:
 
 
 
 
 
 
 
Basic
0.08

 
0.98

 
0.77

 
3.40

Diluted
0.08

 
0.98

 
0.77

 
3.40

These results do not purport to be indicative of our results of operations which actually would have resulted had the Acquisitions, excluding the disposed business, occurred on January 1, 2014, or of our future results of operations.
On October 1, 2015, we acquired Purification Technologies, Inc., a domestic specialty solvent company that performs high volume purification of selected high purity solvents.

9


( 5 )
Goodwill and Other Intangible Assets, net
The following table presents changes in goodwill by segment (in millions):
 
Americas
 
EMEA-APAC
 
Total
Balance at December 31, 2014
$
1,042.3

 
$
811.3

 
$
1,853.6

Acquisitions
16.2

 
17.0

 
33.2

Currency translation
(13.5
)
 
(63.3
)
 
(76.8
)
Other

 
(0.2
)
 
(0.2
)
Balance at September 30, 2015
$
1,045.0

 
$
764.8

 
$
1,809.8

The following table presents the gross amount of goodwill and accumulated impairment losses by segment (in millions):
 
September 30, 2015
 
December 31, 2014
 
Gross Carrying Amount
 
Accumulated Impairment Losses
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Impairment Losses
 
Net Carrying Amount
Americas
$
1,251.6

 
$
206.6

 
$
1,045.0

 
$
1,248.9

 
$
206.6

 
$
1,042.3

EMEA-APAC
764.8

 

 
764.8

 
811.3

 

 
811.3

Total
$
2,016.4

 
$
206.6

 
$
1,809.8

 
$
2,060.2

 
$
206.6

 
$
1,853.6

The following table presents the components of other intangible assets (in millions):
 
September 30, 2015
 
December 31, 2014
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Amortizable intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
1,413.5

 
$
567.7

 
$
845.8

 
$
1,456.9

 
$
531.3

 
$
925.6

Other
27.4

 
13.9

 
13.5

 
28.2

 
12.1

 
16.1

Total
1,440.9

 
581.6

 
859.3

 
1,485.1

 
543.4

 
941.7

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Trademarks and tradenames
627.1

 

 
627.1

 
653.2

 

 
653.2

Other intangible assets
$
2,068.0

 
$
581.6

 
$
1,486.4

 
$
2,138.3

 
$
543.4

 
$
1,594.9

( 6 )
Debt and Capital Lease Obligations
Debt and capital lease obligations consist of: (i) an accounts receivable securitization facility due 2018 (the “A/R Facility”); (ii) a senior secured credit facility (“Senior Credit Facility”) that consists of a multi-currency revolving loan facility due 2020, a term loan A facility denominated in U.S. dollars due 2020 and a term loan B facility denominated in euros due 2022; (iii) prior to its repayment in full in September 2015, a prior senior secured credit facility (“Prior Senior Credit Facility”) that consisted of multi-currency revolving loan facility and a term loan B facility with borrowings denominated in U.S. dollars and euros; (iv) 4.625% unsecured senior notes due 2022 (the “4.625% Senior Notes”); (v) prior to their redemption in the third quarter of 2015, 7.25% unsecured senior notes (the “7.25% Senior Notes”); (vi) capital lease obligations; and (vii) other debt.
All of our debt and capital lease obligations are held by our wholly-owned subsidiary, VWR Funding. Certain of those debt instruments limit the ability of VWR Funding to make payments to VWR Corporation. Any disclosures about debt and capital lease obligations that refer to “we,” “us,” and “our” apply only to VWR Funding unless otherwise noted.

10


The following table presents the components of debt and capital lease obligations, interest rate terms and weighted-average interest rates (dollars in millions):
 
September 30, 2015
 
December 31,
2014
 
Interest Terms
 
Rate
 
Amount
 
A/R Facility
LIBOR plus 1.15%
 
1.35
%
 
$
55.0

 
$
73.0

Senior Credit Facility:
 
 
 
 
 
 
 
Term loan A facility
LIBOR plus 2.00%
 
2.38
%
 
910.0

 

Term loan B facility, net of discount of $1.3
EURIBOR plus 3.25%
 
4.00
%
 
512.3

 

Prior Senior Credit Facility:
 
 
 
 
 
 
 
Term loan B facility, U.S. dollar-denominated

 
581.4

Term loan B facility, euro-denominated

 
686.7

4.625% Senior Notes, net of discount of $3.9
Fixed rate
 
4.63
%
 
558.5

 

7.25% Senior Notes

 
750.0

Capital lease obligations
13.8

 
15.9

Other debt
3.4

 
4.9

Debt and capital lease obligations
$
2,053.0


$
2,111.9

 
 
 
 
Current portion of debt and capital lease obligations
$
100.5

 
$
95.3

Debt and capital lease obligations, net of current portion
1,952.5

 
2,016.6

Debt and capital lease obligations
$
2,053.0

 
$
2,111.9

Borrowings under the A/R Facility are collateralized by the trade accounts receivable of certain of our domestic wholly-owned subsidiaries. Those receivables are not available to satisfy the claims of other creditors. Borrowings under the Senior Credit Facility are secured by substantially all of our other assets and rank higher than the remainder of our debt.
The following table presents the principal maturities of debt and capital lease obligations at September 30, 2015 (in millions):
 
Three Months Ending December 31, 2015
 
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
 
Total
A/R Facility
$

 
$

 
$

 
$
55.0

 
$

 
$

 
$

 
$
55.0

Senior Credit Facility:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Term loan A facility

 
45.5

 
45.5

 
68.3

 
91.0

 
659.7

 

 
910.0

Term loan B facility

 
5.1

 
5.2

 
5.1

 
5.1

 
5.2

 
487.9

 
513.6

4.625% Senior Notes

 

 

 

 

 

 
562.4

 
562.4

Capital lease obligations
1.0

 
3.9

 
4.0

 
3.3

 
1.1

 
0.5

 

 
13.8

Other debt
0.8

 
2.6

 

 

 

 

 

 
3.4

Debt and capital lease obligations, excluding discounts
$
1.8

 
$
57.1

 
$
54.7

 
$
131.7

 
$
97.2

 
$
665.4

 
$
1,050.3

 
$
2,058.2


11


A/R Facility
The A/R Facility provides for funding of up to $175.0 million . In the second quarter of 2015, we amended the A/R Facility. The amendment extended the maturity date to May 18, 2018 and decreased the variable interest rate margin to 1.15% per annum. In connection with the amendment, we paid financing fees of $0.2 million during the nine months ended September 30, 2015 , which were deferred and are being recognized as interest expense through the maturity date.
At September 30, 2015 , we had $108.5 million of available borrowing capacity under the A/R Facility. Available borrowing capacity was calculated as: (i) the lesser of (a) the $175.0 million maximum amount of the facility and (b) a borrowing base of $174.8 million , calculated as a percentage of eligible trade accounts receivable; less (ii) undrawn letters of credit outstanding of $11.3 million and (iii) outstanding borrowings of $55.0 million .
The A/R Facility includes representations and covenants that we consider usual and customary for arrangements of this type and includes a consolidated interest expense test if our available liquidity is less than $115.0 million . In addition, borrowings under the A/R Facility are subject to termination upon the occurrence of certain events that we also consider usual and customary. At September 30, 2015 , we were in compliance with the covenants under the A/R Facility.
Senior Credit Facility
In September 2015, we entered into the Senior Credit Facility. The Senior Credit Facility is with a syndicate of lenders and provides for borrowings consisting of (i) 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 (including swingline loans of up to $25.0 million and letters of credit of up to $70.0 million ); (ii) a term loan A facility, denominated in U.S. dollars, providing for term A loans in an aggregate principal amount of $910.0 million ; and (iii) a term loan B facility, denominated in euros, providing for term B loans in an aggregate principal amount of €460.0 million .
As a result of entering into the Senior Credit Facility, we paid debt issuance costs of $14.0 million during the nine months ended September 30, 2015 and accrued debt issuance costs of $1.6 million at September 30, 2015 . The loans under the term loan B facility were offered at an original issue discount of €1.2 million . Debt issuance costs of $12.6 million and all of the original issue discount were deferred and are being recognized as interest expense through the maturity date.
At September 30, 2015 , we had $243.0 million of available borrowing capacity under our multi-currency revolving loan facility. Available borrowing capacity was calculated as: (i) the maximum borrowing capacity of $250.0 million , less (ii) undrawn letters of credit outstanding of $7.0 million and (iii) outstanding borrowings, of which there were none .
Maturity and Repayment
The multi-currency revolving loan facility and the term loan A facility will mature on September 28, 2020 . The term loan B facility will mature on January 15, 2022 . Subject to any mandatory or optional prepayments, the term loans are required to be repaid as follows: (i) for the term loan A facility, (a) $11.4 million per quarter from March 31, 2016 to December 31, 2017; (b) $17.1 million per quarter from March 31, 2018 to December 31, 2018; (iii) $22.8 million per quarter from March 31, 2019 to June 30, 2020; and (iv) all remaining principal on September 28, 2020; and (ii) for the term loan B facility, €1.2 million per quarter from March 31, 2016 to December 31, 2021, with all remaining principal due on January 15, 2022.
Subject to certain exceptions, the Senior Credit Facility is subject to mandatory prepayments equal to (i) the net cash proceeds from certain asset sales, insurance recoveries and proceeds from certain additional indebtedness, each as defined; and (ii) beginning in 2016, up to half of our excess operating cash flow, as defined, depending on our net leverage.

12


Interest and Fees
All interest rates are based on a variable index rate plus one of the following types of margins: (i) a margin ranging from 1.50% to 2.00% per annum, depending on our net leverage (the “Standard Margin,” which was 2.00% at September 30, 2015); (ii) a margin ranging from 0.50% to 1.00% per annum, depending on our net leverage (the “Alternate Margin,” which was 1.00% at September 30, 2015); or (iii) a margin of 3.25% per annum (the “EURIBOR Margin”).
Depending on the currency denomination of revolving loans, the interest rate on the multi-currency revolving loan facility is based on either (i) the then applicable British Bankers Association London Interbank Offered Rate (“LIBOR”) plus the Standard Margin; or (ii) a contractually-defined alternate base rate plus the Alternate Margin.
The interest rate on the term loan A facility is determined at our election in the same way as the multi-currency revolving loan facility previously described. The interest rate on the term loan B facility is based on the euro interbank offered rate administered by the Banking Federation of the European Union (“EURIBOR”), subject to a minimum rate of 0.75% per annum, plus the EURIBOR margin.
We also pay fees related to the Senior Credit Facility. The largest of these fees is a commitment fee on the unused portion of the multi-currency revolving loan facility, ranging from 0.38% to 0.50% per annum, depending on our net leverage. None of these fees were material to interest expense for the periods presented.
Security Provisions
The obligations under the Senior Credit Facility are guaranteed by VWR Corporation and each of VWR Funding’s wholly-owned domestic subsidiaries, with certain exceptions as defined. In addition, the obligations under the Senior Credit Facility and the guarantees thereunder are secured by security interests in and pledges of or liens on substantially all of the tangible and intangible assets of VWR Funding and the guarantors, including pledges of all of the capital stock of each of domestic subsidiaries and a substantial portion of the capital stock of certain foreign subsidiaries.
Covenants
Beginning December 31, 2015, the Senior Credit Facility requires us not to exceed a first lien net leverage ratio of 4 :1, as defined, at each quarter end in addition to a number of other customary affirmative and negative covenants, representations, warranties and events of default. At September 30, 2015 , we were in compliance with the covenants under the Senior Credit Facility.
The Senior Credit Facility imposes restrictions on VWR Funding’s ability to make payments to VWR Corporation, including for the purpose of paying dividends on capital stock. Under those restrictions, lifetime payments to VWR Corporation cannot exceed the sum of (i) $100.0 million ; (ii) 50% of VWR Funding’s cumulative consolidated net income since July 1, 2015; and (iii) any amounts it has received from sales of equity or capital contributions since September 28, 2015 that are not used for other restricted payments, provided that there is no default under the credit agreement and that VWR Funding meets certain net leverage ratios after giving effect to any such restricted payment.
Additional Borrowings
Subject to our continued compliance with our covenants, we may request incremental term loan borrowings and / or revolving loan commitments under the Senior Credit Facility in an amount up to (i) $450.0 million or (ii) the maximum amount at such time that could be incurred without causing VWR Funding to exceed a certain net leverage ratio, in each case subject to certain other restrictions. The actual extension of any such incremental term loans or increases in revolving loan commitments would be subject to us and our lenders reaching agreement on applicable terms and conditions, which may depend on market conditions at the time of any request.

13


Prior Senior Credit Facility
During the nine months ended September 30, 2015 , we repaid our Prior Senior Credit Facility in full as follows:
In the first half of 2015, using a portion of the net proceeds from the issuance of the 4.625% Senior Notes and availability under our credit facilities, we repaid all of our then outstanding U.S. dollar-denominated term loan B facility.
In the third quarter of 2015, we entered into the Senior Credit Facility, using the net proceeds therefrom to repay all remaining outstanding borrowings under the Prior Senior Credit Facility and our 7.25% Senior Notes.
As a result of these actions, we incurred a loss on extinguishment of debt of $5.5 million and $7.9 million for the three and nine months ended September 30, 2015 , respectively, representing fees paid to term loan lenders who continued from the prior facility to the new facility and the write-off of certain unamortized deferred financing costs.
4.625% Senior Notes
In the first quarter of 2015, we completed the private sale of €503.8 million of 4.625% Senior Notes due 2022. The notes were offered at an original issue discount of €3.8 million . We paid debt issuance costs of $5.4 million during the nine months ended September 30, 2015 . The original issue discount and the debt issuance costs were deferred and are being recognized as interest expense through the maturity date.
The 4.625% Senior Notes will mature on April 15, 2022 . Interest on the notes is payable in arrears on April 15 and October 15 of each year commencing October 15, 2015 at a rate of 4.625% per annum.
Redemption
We may, at our option, redeem some or all of the 4.625% Senior Notes prior to April 15, 2018 at a price equal to the present value of: (i) the redemption price on April 15, 2018 plus (ii) all remaining interest payments through April 15, 2018. Beginning on April 15, 2018, 2019 and 2020, the redemption price changes to 102.3125% , 101.1563% and 100% , respectively, of the principal amount of the notes to be redeemed. In addition, at any time prior to April 15, 2018, on one or more occasions, we may redeem up to 35% of the aggregate principal amount of the notes with the net proceeds of one or more equity offerings, as described in the indenture, at a redemption price equal to 104.625% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. If we experience certain change of control events, holders of the notes may require us to repurchase all or part of their notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
Security Provisions
The obligations under the 4.625% Senior Notes are guaranteed, jointly and severally and fully and unconditionally, on a senior basis by each of our wholly-owned U.S. subsidiaries other than our U.S. foreign subsidiary holding companies. The guarantors’ obligations under the guarantees of the notes are not secured by any of our assets, VWR Funding’s assets or the guarantors’ assets.
Covenants
The indenture governing the 4.625% Senior Notes contains a number of customary affirmative and negative covenants. At September 30, 2015 , we were in compliance with the covenants under the indenture.
The indenture governing the 4.625% Senior Notes restricts VWR Funding’s ability to make payments to VWR Corporation, including for the purpose of paying dividends on capital stock. Under those restrictions, lifetime payments to VWR Corporation cannot exceed the sum of (i) $100.0 million ; (ii) 50% of VWR Funding’s consolidated net income since January 1, 2015; and (iii) any amounts it has received from sales of equity or capital contributions since March 25, 2015 that are not used for other restricted payments, provided that there is no default under the indenture and that VWR Funding meets a fixed charge coverage ratio after giving effect to any such restricted payment.
7.25% Senior Notes
In the third quarter of 2015, using proceeds from the Senior Credit Facility, we redeemed all of the 7.25% Senior Notes at a redemption price of 102.719% plus accrued and unpaid interest through the redemption date. In connection with the redemption, we recognized a loss on extinguishment of debt of $24.8 million for the three and nine months ended September 30, 2015 , representing the redemption premium and the write-off of unamortized deferred financing costs.

14


( 7 )
Financial Instruments and Fair Value Measurements
Our financial instruments include cash and cash equivalents, trade accounts receivable, accounts payable, debt and capital lease obligations and an amount due to VWR Holdings. Our financial instruments are held or issued by a number of institutions, which reduces the risk of material non-performance, except for the amount due to VWR Holdings.
Assets and Liabilities for which Fair Value is Only Disclosed
The carrying amount of cash and cash equivalents is stated at its fair value, a Level 1 measurement. The carrying amounts for trade accounts receivable and accounts payable approximate fair value due to their short-term nature and are Level 2 measurements.
The following table presents the carrying amounts and estimated fair values of our primary debt instruments (in millions):
 
September 30, 2015
 
December 31, 2014
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
A/R Facility
$
55.0

 
$
55.0

 
$
73.0

 
$
73.0

Senior Credit Facility
1,422.3

 
1,405.2

 

 

Prior Senior Credit Facility

 

 
1,268.1

 
1,256.5

4.625% Senior Notes
558.5

 
529.8

 

 

7.25% Senior Notes

 

 
750.0

 
780.2

The fair values of our primary debt instruments 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 these qualify as Level 2 measurements, except for our 7.25% Senior Notes, which were publicly traded prior to their redemption and we believe qualified as a Level 1 measurement. The carrying amounts of the remainder of our debt and capital lease obligations not included in the table above approximate fair value due to their primarily short-term nature and are Level 2 measurements.
At September 30, 2015 and December 31, 2014 , the amount due to VWR Holdings under the ITRA (see Note 13 ) had a carrying amount of $163.1 million and $172.9 million , respectively, and a fair value of $134.0 million and $132.0 million , respectively. The fair value was estimated using a combination of observable and unobservable inputs using an income-based approach, a Level 3 measurement.
Recurring Fair Value Measurements with Significant Unobservable Inputs
The following table presents changes in recurring fair value measurements with significant unobservable inputs, which are Level 3 measurements (in millions):
 
Contingent Consideration
Balance at December 31, 2014
$
11.6

Acquisitions
13.4

Changes to estimated fair value recognized as income in earnings
(0.6
)
Settlements in cash
(2.4
)
Currency translation
(0.5
)
Balance at September 30, 2015
$
21.5

Certain of the business acquisitions we completed entitle the sellers to contingent consideration if earnings targets are met during a period of time following the acquisition. The fair value of contingent consideration was estimated using the average of probability-weighted potential earn-out payments specified in the purchase agreements, ranging from approximately $0 million to $23 million at September 30, 2015 . The significant assumptions used in these calculations include forecasted results and the estimated likelihood for each performance scenario.
In the table above, acquisitions includes finalization of provisional amounts from acquisitions completed in the fourth quarter of 2014.

15


Non-Recurring Fair Value Measurements
At September 30, 2015, we estimated the fair value of an asset group and its long-lived assets, primarily consisting of an amortizable intangible asset, in connection with a test of impairment (see Note 14 ) . We determined the fair values using an income approach (Level 3 measurement). The valuations required us to make various assumptions, including, but not limited to, assumptions related to changes in profitability and future cash flows associated with the asset group and the intangible asset and selecting appropriate discount rates. Our estimates were principally based upon our knowledge and experience and overall economic factors, including the regulatory environment. We believe the estimates and assumptions used were reasonable.
Derivative Instruments and Hedging Activities
We engage in hedging activities to reduce our exposure to changes in foreign currency exchange rates. Our hedging activities are designed to mitigate specific foreign currency risks according to our strategies, as summarized below, which may change from time to time. Our hedging activities currently consist of the following:
Net investment hedging — We hedge a portion of our net investment in euro-denominated foreign operations using our 4.625% Senior Notes and a portion of our term loan B facility.
Economic hedge — We experience opposite foreign currency exchange rate effects related to (i) an intercompany loan denominated in euros and (ii) the unhedged portion of our term loan B facility. Both effects are recorded through earnings in the period of change and substantially offset one another without the need for hedge designation under GAAP; and
Other hedging activities — Some of our subsidiaries hedge short-term foreign-denominated business transactions and intercompany financing positions using foreign currency forward contracts. There have been no significant changes to those hedging activities since December 31, 2014 , and they are not material to our consolidated financial statements.
Net Investment Hedging
In March 2015 and September 2015, we designated all €503.8 million of our 4.625% Senior Notes and €370.0 million of our term loan B facility, respectively (collectively, the “Hedging Instruments”), as hedges to protect a portion of our net investment in euro-denominated foreign operations from the impact of changes in the euro to U.S. dollar exchange rate (see Note 14 ). As a result of the hedge designations, the net foreign currency remeasurement gain or loss on the Hedging Instruments, which otherwise would be recognized in earnings (see Note 10 ), is deferred as accumulated other comprehensive income or loss. That deferred net gain or loss equally offsets the net unrealized gain or loss that is recognized in other comprehensive income or loss from the translation of the hedged portion of our net investment in euro-denominated foreign operations. The Hedging Instruments have no other impact to our financial position, financial performance or cash flows.
The following table presents the balance sheet classification and fair value of the Hedging Instruments, which are Level 2 measurements (in millions):
 
Balance Sheet Classification
 
September 30, 2015
Portion of term loan B facility
Debt and capital lease obligations, net of current portion
 
$
382.5

4.625% Senior Notes
Debt and capital lease obligations, net of current portion
 
529.8

The following table presents information about the net unrealized gain (loss) recognized in other comprehensive income as a result of net investment hedging (in millions):
 
Description
 
Three Months Ended
September 30, 2015
 
Nine Months Ended
September 30, 2015
Portion of euro-denominated net investment in foreign operations
Hedged item
 
$
0.9

 
$
23.1

Portion of term loan B facility
Hedging instrument
 
1.1

 
1.1

4.625% Senior Notes
Hedging instrument
 
(2.0
)
 
(24.2
)
We determined that our hedges of the net investment were fully effective for the three and nine months ended September 30, 2015 , and no amounts were recognized in or reclassified to earnings.

16


( 8 )
Commitments and Contingencies
Our business involves 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 or produce ourselves, as well as from the services we provide. 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 and to the extent that we expand our manufacturing operations. We maintain insurance policies, including product liability insurance, and in many cases the manufacturers of the products we distribute have indemnified us against such claims. 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 manufacturers’ 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 the Asia-Pacific region 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.
We are also involved in various disputes, litigation and regulatory matters incidental to our business, including employment matters, commercial disputes, government contract compliance matters, disputes regarding environmental clean-up costs, and other matters arising out of the normal conduct of our business. We intend to vigorously defend ourselves in such matters. From time to time, we are named 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 these disputes or litigation has historically been immaterial, and we believe the range of reasonably possible loss from current matters continues to be 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.
Employment Agreements
The employment agreements with our executive officers include non-compete, non-solicitation 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 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 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 $10.4 million as of September 30, 2015 .
Registration Rights Agreement
We are party to a registration rights agreement with VWR Holdings that could require us to pay securities registration costs in future periods. Under the registration rights agreement, VWR Holdings is entitled to request that we register (i) any shares of our common stock that it held at October 7, 2014 and (ii) any shares held by Madison Dearborn Partners. Should we register such common stock, we would be required to pay costs related to the registration as well as VWR Holdings’ expenses in connection with its exercise of these rights.
In June 2015, we incurred expenses pursuant to the registration rights agreement. See Note 13 .

17


( 9 )
Benefit Plans
We sponsor a number of defined benefit plans for our employees worldwide. We present our defined benefit plans in two groups due to their different geographies, characteristics and actuarial assumptions: (i) the defined benefit plan in the United States (the “U.S. Retirement Plan”); and (ii) the defined benefit plans in Germany, France and the United Kingdom in the aggregate (the “German, French and UK Plans”).
U.S. Retirement Plan
The following table presents the components of net periodic pension income for the U.S. Retirement Plan (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Service cost
$
0.2

 
$
0.1

 
$
0.6

 
$
0.5

Interest cost
2.0

 
1.9

 
5.8

 
6.5

Expected return on plan assets
(3.6
)
 
(3.5
)
 
(10.7
)
 
(10.9
)
Recognized net actuarial gain

 
(0.1
)
 

 
(0.3
)
Gain from partial settlement

 

 

 
(6.9
)
Net periodic pension income
$
(1.4
)
 
$
(1.6
)
 
$
(4.3
)
 
$
(11.1
)
We made no contributions to the U.S. Retirement Plan during the nine months ended September 30, 2015 and expect to make no contributions during the remainder of 2015.
German, French and UK Plans
The following table presents the components of net periodic pension cost for the German, French and UK Plans (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Service cost
$
0.4

 
$
0.3

 
$
1.2

 
$
1.1

Interest cost
1.3

 
1.7

 
3.9

 
5.1

Expected return on plan assets
(1.2
)
 
(1.4
)
 
(3.6
)
 
(4.3
)
Recognized net actuarial loss
0.9

 
0.6

 
2.7

 
1.6

Net periodic pension cost
$
1.4

 
$
1.2

 
$
4.2

 
$
3.5

We made $0.7 million of contributions to the German, French and UK Plans during the nine months ended September 30, 2015 and expect to make contributions of $5.3 million during the remainder of 2015.
( 10 )
Other Income (Expense), net
Other income (expense), net, consists primarily of foreign currency remeasurement gains and losses. Prior to September 2015, we had a significant amount of foreign-denominated debt on our U.S. dollar-denominated balance sheet. The translation of that debt was reported in other income (expense), net each period. Such gains or losses were unrealized until repayment of the debt and related to the weakening or strengthening, respectively, of the euro against the U.S. dollar.
In March 2015 and September 2015, we designated new euro-denominated debt as hedges of our net investment in foreign operations with an objective of minimizing our earnings exposure to remeasurement gains and losses (see Note 7 ).

18


( 11 )
Income Taxes
Since the year ended December 31, 2014, our effective tax rate has increased, reflecting a higher proportion of pretax income from jurisdictions with higher tax rates and the recognition of a non-recurring deferred charge of $1.4 million in the first quarter of 2015 related to an intercompany asset transfer.
( 12 )
Comprehensive Income or Loss
The following table presents changes in the components of accumulated other comprehensive income (loss), net of tax (in millions):
 
Foreign
Currency
Translation
 
Derivative
Instruments
 
Defined
Benefit Plans
 
Total
Balance at December 31, 2014
$
(190.9
)
 
$
(0.3
)
 
$
(38.7
)
 
$
(229.9
)
Net unrealized (loss) gain arising during the period
(150.0
)
 
1.8

 

 
(148.2
)
Reclassification of net (gain) loss into earnings

 
(0.1
)
 
2.1

 
2.0

Balance at September 30, 2015
$
(340.9
)
 
$
1.4

 
$
(36.6
)
 
$
(376.1
)
The following table presents details about the reclassification of net (gain) loss from accumulated other comprehensive income or loss into earnings (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Derivative instruments:
 
 
 
 
 
 
 
Cost of goods sold
$
(0.9
)
 
$
0.7

 
$
(1.3
)
 
$
0.9

Interest expense
0.1

 
0.2

 
0.3

 
0.5

Loss on extinguishment of debt
0.4

 

 
0.7

 

Income tax provision
0.1

 
(0.2
)
 
0.2

 
(0.5
)
Net income
$
(0.3
)
 
$
0.7

 
$
(0.1
)
 
$
0.9

Defined benefit plans:
 
 
 
 
 
 
 
Selling, general and administrative expenses
$
1.1

 
$
0.3

 
$
3.0

 
$
(6.1
)
Income tax provision
(0.3
)
 

 
(0.9
)
 
2.5

Net income
$
0.8

 
$
0.3

 
$
2.1

 
$
(3.6
)
The following table presents the income tax effects of the components of comprehensive income or loss (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Foreign currency translation:
 
 
 
 
 
 
 
Net unrealized income tax benefit arising during the period
$
0.6

 
$

 
$
9.3

 
$

Derivative instruments:
 
 
 
 
 
 
 
Net unrealized income tax (provision) benefit arising during the period
(1.1
)
 
(0.3
)
 
(1.2
)
 
0.2

Reclassification of net income tax provision (benefit) into earnings
0.1

 
(0.2
)
 
0.2

 
(0.5
)
Defined benefit plans:
 
 
 
 
 
 
 
Net unrealized income tax provision arising during the period

 

 

 
(2.4
)
Reclassification of net income tax (benefit) provision into earnings
(0.3
)
 

 
(0.9
)
 
2.5


19


( 13 )
Related Party Transactions
Due to VWR Holdings — ITRA
We are party to an income tax receivable agreement (“ITRA”) with VWR Holdings. The ITRA provides for the payment of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax realized as a result of utilizing net operating losses that were generated in periods prior to the IPO.
The timing of payments under the ITRA corresponds to the beginning of the year in which the net operating loss carryforwards are claimed on our tax return. We made a payment under the ITRA of $9.8 million in the first quarter of 2015. At September 30, 2015 , the liability due to VWR Holdings under the ITRA was $163.1 million . We have included $70.9 million of the ITRA liability as a current liability, representing our estimate of the payment that will become due in the beginning of 2016 based on current forecasts.
Registration Rights Agreement
In the second quarter of 2015, VWR Holdings completed a registered sale of 18.4 million shares of our common stock. We received no proceeds from this sale and issued no additional shares of our common stock. Pursuant to our registration rights agreement with VWR Holdings (see Note 8 ), we incurred expenses of $0.9 million in connection with the registration and the sale of common stock.
( 14 )
Risks and Uncertainties
Testing Goodwill and Other Long-Lived Assets for Impairment
We have acquired 39 businesses since June 2007. Following their recognition in business combinations, we are required to monitor goodwill and other long-lived assets for possible indicators of impairment. If identified, we are required to perform impairment testing, which may require us to estimate the fair value of those assets. Estimating fair value requires management to exercise considerable judgment.
Based on a review of financial performance in September 2015, we decreased our forecast of the profitability of a business in our EMEA-APAC segment. We considered this to be an indicator of impairment and performed impairment testing on the asset group, recording impairment charges of $3.2 million primarily related to an amortizable intangible asset for the three and nine months ended September 30, 2015. See Note 7 for more information about fair value measurements. Should we identify other indicators of impairment related to long-lived assets in future periods, we may be required to recognize additional impairment charges.
Strengthening of the U.S. Dollar
The U.S. dollar has strengthened against most foreign currencies. For example, since its month-end high in April 2014 of $1.39 = €1.00, the spot euro exchange rate has declined to $1.12 = €1.00 at September 30, 2015 . Year-over-year, the average euro exchange rate was $1.32 = €1.00 for the third quarter of 2014 compared to $1.11 = €1.00 for the third quarter of 2015. Further strengthening of the U.S. dollar would impact us for the remainder of 2015 as follows:
It would have a negative impact on the reported results of our foreign-denominated operations proportional to the decline in the applicable foreign currency exchange rates. Of our total net sales for the year ended December 31, 2014, approximately one-half were foreign-denominated.
It would have a negative impact on the reported value of our foreign-denominated net assets proportional to the decline in the applicable foreign currency exchange rates. Of our total assets at December 31, 2014, approximately one-half were foreign-denominated.
In order to partially offset our exposure to these changes, we designated all of our 4.625% Senior Notes and a portion of our term loan B facility as hedges of our net investment in euro-denominated foreign operations.
We are not able to predict the impact that future changes in currency exchange rates may have on our operating results, but their impact could be significant.

20


( 15 )
Segment Financial Information
We report financial results on the basis of two reportable segments organized by geographic region: the Americas and EMEA-APAC. Both the Americas and EMEA-APAC segments provide laboratory products, services and solutions to customers in the life science, general research and applied markets, including the pharmaceutical, biotechnology, agricultural, chemical, environmental, food and beverage, health care, microelectronic and petrochemical industries, as well as governmental agencies, universities and research institutes and environmental organizations.
Beginning January 1, 2015, we are comprised of two operating segments: Americas and EMEA-APAC. Previously, we had a third operating segment, Emerging Businesses, which is now part of the Americas. We changed our operating segments to align with our new basis of managing the business.
Corporate costs are managed centrally and attributed to the Americas segment.
The following table presents segment financial information (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net sales:
 
 
 
 
 
 
 
Americas
$
667.9

 
$
635.5

 
$
1,925.0

 
$
1,818.7

EMEA-APAC
427.6

 
478.9

 
1,281.3

 
1,455.0

Total
$
1,095.5

 
$
1,114.4

 
$
3,206.3

 
$
3,273.7

Operating income:
 
 
 
 
 
 
 
Americas
$
47.2

 
$
50.1

 
$
124.1

 
$
102.2

EMEA-APAC
33.9

 
42.5

 
108.4

 
129.4

Total
$
81.1

 
$
92.6

 
$
232.5

 
$
231.6

Inter-segment activity has been eliminated; therefore, net sales for each reportable segment are all from external customers.

21


Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Basis of Presentation
Pursuant to the rules and regulations of the SEC for reports covering interim periods, we have prepared this discussion and analysis to enable you to assess material changes in our financial condition and results of operations since December 31, 2014, the end of the most recent annual period covered by our Annual Report. Therefore, this discussion and analysis should be read in conjunction with the Annual Report as well as the condensed consolidated financial statements and related notes included in Part I, Item 1 — “Financial Statements.”
Overview
We are a leading, independent provider of laboratory products, services and solutions to the global life science, general research and applied markets. We have a significant market share position in Europe and North America. We also have operations in Asia-Pacific and other key emerging markets to support our multinational customers across the globe. We serve a critical role in connecting customer sites with core laboratory product suppliers across multiple industries and geographies. We offer one of the broadest portfolios of branded and private label laboratory products. We also offer a full range of value-added services, including custom manufacturing, to meet our customers’ product needs. These services represent a growing but currently small portion of our overall net sales. We offer a wide selection of unique products and have developed an extensive global infrastructure including thousands of sales and service-focused professionals. We deliver value to our customers by improving the costs, efficiency and effectiveness of their research laboratories and production operations. We deliver value to our suppliers by providing them with cost-effective channel access to a global and diverse customer base.
Our growth strategies include expanding our global strategic relationships, developing complementary new products and services, expanding our customer and supplier base, implementing best practices across our operations, broadening our offerings to underserved customer segments and executing our targeted acquisition strategy.
We report financial results on the basis of two reportable segments organized by geographic region: the Americas and EMEA-APAC. Both the Americas and EMEA-APAC segments provide laboratory products, services and solutions to customers in the life science, general research and applied markets, including the Biopharma, agricultural, chemical, environmental, food and beverage, healthcare, microelectronic and petrochemical industries, as well as governmental agencies, universities, primary education and research institutes and environmental organizations.
Trends and Key Factors Affecting our Performance and Financial Condition
Certain trends and key factors have affected our recent operating results and may continue to affect our performance and financial condition in future periods.
Debt Refinancing
During the nine months ended September 30, 2015 , we refinanced substantially all of our debt. The refinancing extended the maturity of our debt, lowered our variable interest rate margins and increased our quarterly required principal repayments. As a result, we expect that our interest expense will decrease, more cash will be provided by operating cash flows and more cash will be used in financing activities.
In the first quarter of 2015, we completed the private sale of €503.8 million of 4.625% Senior Notes due 2022. The notes were offered at an original issue discount of €3.8 million . We paid debt issuance costs of $5.4 million during the nine months ended September 30, 2015 . The original issue discount and the debt issuance costs were deferred and are being recognized as interest expense through the maturity date.
In the second quarter of 2015, we amended the A/R Facility. The amendment extended the maturity date to May 18, 2018 and decreased the interest rate margin to 1.15% per annum. In connection with the amendment, we paid financing fees of $0.2 million during the nine months ended September 30, 2015 , which were deferred and are being recognized as interest expense through the maturity date.

22


In September 2015, we entered into the Senior Credit Facility. The Senior Credit Facility is with a syndicate of lenders and provides for borrowings consisting of (i) a $250.0 million multi-currency revolving loan facility; (ii) a $910.0 million term loan A facility; and (iii) a €460.0 million term loan B facility. As a result of entering into the Senior Credit Facility, we paid debt issuance costs of $14.0 million during the nine months ended September 30, 2015 and accrued debt issuance costs of $1.6 million at September 30, 2015. The loans under the term loan B facility were offered at an original issue discount of €1.2 million. Debt issuance costs of $12.6 million and all of the original issue discount were deferred and are being recognized as interest expense through the maturity date.
During the nine months ended September 30, 2015, we repaid our Prior Senior Credit Facility in full as follows:
In the first half of 2015, using a portion of the net proceeds from the issuance of the 4.625% Senior Notes and availability under our credit facilities, we repaid all of our then outstanding U.S. dollar-denominated term loan B facility.
In the third quarter of 2015, we entered into the Senior Credit Facility, using the net proceeds therefrom to repay all remaining outstanding borrowings under the Prior Senior Credit Facility and our 7.25% Senior Notes.
As a result of these actions, we incurred a loss on extinguishment of debt of $5.5 million and $7.9 million for the three and nine months ended September 30, 2015, respectively, representing fees paid to term loan lenders who continued from the prior facility to the new facility and the write-off of certain unamortized deferred financing costs.
In the third quarter of 2015, using proceeds from the Senior Credit Facility, we redeemed all of the 7.25% Senior Notes at a redemption price of 102.719% plus accrued and unpaid interest through the redemption date. In connection with the redemption, we recognized a loss on extinguishment of debt of $24.8 million for the three and nine months ended September 30, 2015, representing the redemption premium and the write-off of unamortized deferred financing costs.
Strengthening of the U.S. Dollar
The U.S. dollar has strengthened against most foreign currencies. For example, since its month-end high in April 2014 of $ 1.39 = €1.00, the spot euro exchange rate has declined to $ 1.12 = €1.00 at September 30, 2015 . Year-over-year, the average euro exchange rate was $ 1.32 = €1.00 for the second quarter of 2014 compared to $ 1.11 = €1.00 for the second quarter of 2015. Further strengthening of the U.S. dollar would impact us for the remainder of 2015 as follows:
It would have a negative impact on the reported results of our foreign-denominated operations proportional to the decline in the applicable foreign currency exchange rates. Of our total net sales for the year ended December 31, 2014, approximately one-half were foreign-denominated.
It would have a negative impact on the reported value of our foreign-denominated net assets proportional to the decline in the applicable foreign currency exchange rates. Of our total assets at December 31, 2014, approximately one-half were foreign-denominated.
In order to partially offset our exposure to these changes, we designated all of our 4.625% Senior Notes and a portion of our term loan B facility as hedges of our net investment in euro-denominated foreign operations.
We are not able to predict the impact that future changes in currency exchange rates may have on our operating results, but their impact could be significant.
Acquisitions
On October 1, 2015, we acquired Purification Technologies, Inc., a specialty solvent company that performs high volume purification of selected high purity solvents.
On May 1, 2015, we acquired Hichrom Limited and its subsidiaries, a UK-based chromatography column manufacturer and distributor.
On February 2, 2015, we acquired National Biochemicals Corporation, a domestic full service raw material manufacturer and supplier to the biochemical industry.
None of these acquisitions individually had annual net sales in excess of $50 million.

23


Key Indicators of Performance and Financial Condition
To evaluate our performance, we monitor a number of key indicators of our performance and financial condition as follows:
Net sales , operating income and operating income margin , which we discuss on both a consolidated and reportable segment basis in the section entitled “Results of Operations;”
Gross margin and net income or loss , which we discuss on a consolidated basis in the section entitled “Results of Operations;”
Adjusted EBITDA , Adjusted EBITDA margin , Adjusted Net Income and Adjusted EPS , which are non-GAAP financial measurements and key performance indicators used by our investors, creditors and management to measure and evaluate our operating performance. A reconciliation of Adjusted Net Income and Adjusted EBITDA from net income or loss, the most directly comparable GAAP-based financial measurement, the calculations of Adjusted EBITDA margin and Adjusted EPS and our discussion and analysis of changes therein are included at the end of the section entitled “Results of Operations” under the subheading “Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted EPS.”
Beginning in the first quarter of 2015, we changed our calculations of Adjusted Net Income and Adjusted EPS so that they include share-based compensation expense. Adjusted EBITDA and Adjusted EBITDA margin continue to exclude share-based compensation expense;
Net Debt and Net Leverage , which are non-GAAP financial measurements and key performance indicators used by our creditors, investors and management to monitor our financial condition and our continuing ability to service debt. Our calculation of Net Debt reduces our total debt and capital lease obligations by the amount of cash and cash equivalents on hand as well as by our compensating cash balance, a component of other current assets. Net Leverage is calculated by dividing our Net Debt by LTM Adjusted EBITDA. A reconciliation of Net Debt from total debt and capital lease obligations, the most directly comparable GAAP-based financial measurement, the calculation of Net Leverage and the reconciliation of LTM Adjusted EBITDA from net income or loss are included in the section entitled “Liquidity and Capital Resources” under the subheading “Net Debt and Net Leverage;” and
Cash flows, particularly cash flows from operating activities and Free Cash Flow . Free Cash Flow is a non-GAAP financial measurement and a key performance indicator used by our investors, creditors and management to measure and evaluate our ability to generate cash. A reconciliation of Free Cash Flow to cash flows from operating activities, the most directly comparable GAAP-based financial measurement, and our discussion and analysis of changes therein are included at the end of the section entitled “Liquidity and Capital Resources” under the subheading “Free Cash Flow.”
Non-GAAP Financial Measurements
As appropriate, we supplement our results of operations determined in accordance with GAAP with certain non-GAAP financial measurements that we believe are useful to investors, creditors and others in assessing our performance. These measurements should not be considered in isolation or as a substitute for reported GAAP results because they may include or exclude certain items as compared to similar GAAP-based measurements, and such measurements may not be comparable to similarly-titled measurements reported by other companies. Rather, these measurements should be considered as an additional way of viewing aspects of our operations that provide a more complete understanding of our business. We strongly encourage readers to review our consolidated financial statements included elsewhere herein and in publicly filed reports in their entirety and not rely solely on any one, single financial measurement.
Comparable Operations
Another way in which we evaluate our performance is to exclude certain non-comparable items when reviewing the changes in our reported results. When we discuss our results in this way, we refer to them as comparable operations. We believe that removing non-comparable items from our reported results provides a useful means for readers to understand and evaluate our operating performance. Our results from comparable operations exclude the following items:
Changes in foreign currency exchange rates — Our presentation of results from comparable operations excludes the impact of changes in foreign currency exchange rates. We calculate the impact of such changes 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 comparable prior period(s).
Recent acquisitions — Our presentation of results from comparable operations excludes the contribution from recent acquisitions to the extent such contributions were not present in the comparable period.

24


Results of Operations
This discussion and analysis includes a summary of our historical results of operations below, followed by detailed comparisons of our results for the three and nine months ended September 30, 2015 and 2014 . We have derived this data from our condensed consolidated financial statements included elsewhere in this report.
The following table presents a summary of our results of operations (dollars in millions, except per share data):
 
Three Months Ended
September 30,
 
Reported Change
 
Nine Months Ended
September 30,
 
Reported Change
 
2015
 
2014
 
Amount
 
%
 
2015
 
2014
 
Amount
 
%
Net sales
$
1,095.5

 
$
1,114.4

 
$
(18.9
)
 
(1.7
)%
 
$
3,206.3

 
$
3,273.7

 
$
(67.4
)
 
(2.1
)%
Operating income
81.1

 
92.6

 
(11.5
)
 
(12.4
)%
 
232.5

 
231.6

 
0.9

 
0.4
 %
Net income
11.0

 
69.8

 
(58.8
)
 
**

 
100.8

 
103.8

 
(3.0
)
 
(2.9
)%
Adjusted EBITDA*
117.8

 
112.9

 
4.9

 
4.3
 %
 
335.0

 
329.9

 
5.1

 
1.5
 %
Adjusted Net Income*
49.8

 
34.6

 
15.2

 
43.9
 %
 
138.0

 
103.1

 
34.9

 
33.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
27.3
%
 
27.9
%
 
(60
)
basis points
 
27.7
%
 
28.5
%
 
(80
)
basis points
Operating income margin
7.4
%
 
8.3
%
 
(90
)
basis points
 
7.3
%
 
7.1
%
 
20

basis points
Adjusted EBITDA margin*
10.8
%
 
10.1
%
 
70

basis points
 
10.4
%
 
10.1
%
 
30

basis points
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EPS*
$
0.38

 
$
0.26

 
$
0.12

 
46.2
 %
 
$
1.05

 
$
0.78

 
$
0.27

 
34.6
 %
 
*
Denotes non-GAAP financial measurements. See “Key Indicators of Performance and Financial Condition” above for more information, including where to find reconciliations to the most directly comparable GAAP-based financial measurements.
**
Not meaningful
The following summarizes our 2015 results of operations as compared to prior periods:
Our reported results decreased due to a stronger U.S. dollar and benefited from new acquisitions. Certain distinct items also impacted the comparisons of SG&A expense. Excluding these effects, net sales, Adjusted EBITDA and operating income each increased.
We experienced comparable net sales growth in both segments, each reflecting continuing strength in Biopharma. As a result, the Americas experienced its sixth consecutive quarter of year-over-year comparable net sales growth in the third quarter of 2015. EMEA-APAC growth included more purchases of integrated procurement services and other specialized offerings by our largest customers.
Comparable operating income was impacted by a number of distinct SG&A items, detailed below under “SG&A Expenses.” When excluding the impact of these items, comparable operating income and comparable Adjusted EBITDA each increased as a result of better operating leverage. These increases were partially offset by two transitory factors related to EMEA-APAC, discussed further below under “Gross Profit.” In addition, a less favorable product sales mix and changes to a supply agreement negatively impacted the year-to-date comparison.
Adjusted Net Income and Adjusted EPS grew by double-digit rates as a result of operating income growth and reductions to interest expense, the latter caused primarily by the repayment of our Subordinated Notes using a portion of the net proceeds from our IPO. During the nine months ended September 30, 2015 , we refinanced substantially all of our debt. The refinancing extended the maturity of our debt and lowered our variable interest rate margins.
Net income for the three and nine months ended September 30, 2015 also reflects losses incurred in connection with the debt refinancing and volatility associated with the remeasurement of certain euro-denominated debt. Most of our euro-denominated debt is now part of a hedging strategy, so going forward we expect to experience less volatility in earnings from foreign currency remeasurement.

25


Net Sales
The following table presents net sales and net sales changes by reportable segment (dollars in millions):
 
Three Months Ended
September 30,
 
 
 
 
 
Components of Reported Change
 
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2015
 
2014
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Americas
$
667.9

 
$
635.5

 
$
32.4

 
5.1
 %
 
$
(12.8
)
 
$
17.0

 
$
28.2

 
4.4
%
EMEA-APAC
427.6

 
478.9

 
(51.3
)
 
(10.7
)%
 
(71.5
)
 
6.8

 
13.4

 
2.8
%
Total
$
1,095.5

 
$
1,114.4

 
$
(18.9
)
 
(1.7
)%
 
$
(84.3
)
 
$
23.8

 
$
41.6

 
3.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
September 30,
 
 
 
 
 
Components of Reported Change
 
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2015
 
2014
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Americas
$
1,925.0

 
$
1,818.7

 
$
106.3

 
5.8
 %
 
$
(28.3
)
 
$
48.8

 
$
85.8

 
4.7
%
EMEA-APAC
1,281.3

 
1,455.0

 
(173.7
)
 
(11.9
)%
 
(239.0
)
 
19.7

 
45.6

 
3.1
%
Total
$
3,206.3

 
$
3,273.7

 
$
(67.4
)
 
(2.1
)%
 
$
(267.3
)
 
$
68.5

 
$
131.4

 
4.0
%
Net sales from comparable operations for the three and nine months ended September 30, 2015 increase d $41.6 million or 3.7% and increase d $131.4 million or 4.0% , respectively, compared to prior periods. Net sales from comparable operations in our Americas segment for the three and nine months ended September 30, 2015 increase d $28.2 million or 4.4% and increase d $85.8 million or 4.7% , respectively, compared to prior periods. Net sales from comparable operations in our EMEA-APAC segment for the three and nine months ended September 30, 2015 increase d $13.4 million or 2.8% and increase d $45.6 million or 3.1% , respectively, compared to prior periods. Growth in our comparable net sales was driven by improved performance in both segments, reflecting continued strength in Biopharma and more purchases of integrated procurement services and other specialized offerings by our largest customers in EMEA-APAC.
Gross Profit
The following table presents gross profit, gross margin and changes therein (dollars in millions):
 
Three Months Ended
September 30,
 
 
 
 
 
Components of Reported Change
 
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2015
 
2014
 
Amount
 
%