VWR International, LLC
VWR Corp (Form: 10-K, Received: 03/04/2015 16:51:21)

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
¨ 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)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01 per share
The NASDAQ Stock Market LLC
(Title of class)
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨  Yes ý  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨  Yes   ý  No
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. ¨  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
There were no shares of common stock held by non-affiliates of the registrant on June 30, 2014.
On February 27, 2015 , 131,358,700 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our definitive proxy statement for our 2015 annual meeting of stockholders are incorporated by reference into Part III of this report.
 



VWR CORPORATION AND SUBSIDIARIES
FORM 10-K
For the fiscal year ended December 31, 2014
TABLE OF CONTENTS
 
Page
 
 

i


Glossary of Commonly Used Terms
Term
 
Description
the Company, we, us, our
 
VWR Corporation and its consolidated subsidiaries
Additional Sale
 
our sale of common stock via the underwriters’ over-allotment option in the IPO
Adjusted EBITDA*
 
our earnings or loss before interest, taxes, depreciation, amortization and certain other adjustments
Adjusted EPS*
 
our Adjusted Net Income divided by adjusted weighted average shares outstanding on a diluted basis
Adjusted Net Income*
 
our net income or loss adjusted for certain items
Americas
 
a geographically-defined reportable segment covering North, Central and South America
A/R Facility
 
an accounts receivable securitization facility due 2016
Biopharma
 
the combination of the pharmaceutical and biotechnology sectors
Board
 
the board of directors of VWR Corporation
EMEA-APAC
 
a geographically-defined reportable segment covering Europe, Middle East, Africa and Asia-Pacific
FASB
 
the Financial Accounting Standards Board
GAAP
 
United States generally accepted accounting principles
IPO
 
our initial public offering, which occurred on October 1, 2014 and closed on October 7, 2014
ITRA
 
the income tax receivable agreement with VWR Holdings
NASDAQ
 
the stock exchange on which our common stock is traded
Prospectus
 
the final prospectus for our IPO, filed pursuant to Rule 424(b)(4) with the SEC on October 3, 2014
SEC
 
The United States Securities and Exchange Commission
Senior Credit Facility
 
a senior secured credit facility, consisting of term loans denominated in euros and U.S. dollars and a multi-currency revolving loan facility
Senior Notes
 
7.25% unsecured senior notes due 2017
SG&A expenses
 
selling, general and administrative expenses as defined by GAAP and SEC regulations
Sponsors
 
Madison Dearborn Partners, Avista Capital Partners and their affiliates
Subordinated Notes
 
10.75% unsecured senior subordinated notes due 2017
VWR Acquisition
 
the 2007 merger through which we became controlled by our Sponsors
VWR Funding
 
VWR Funding, Inc., our wholly-owned subsidiary
VWR Holdings
 
Varietal Distribution Holdings, LLC, our parent company
 
*
Denotes non-GAAP financial measurements. See Item 7, “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 this report, 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
Item 1.
Business
We are a leading, independent provider of laboratory products, services and solutions to the global life science, general research and applied markets. We have significant market share positions 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.
Our portfolio includes chemicals, reagents, consumables, durable products and scientific equipment and instruments with a range of complexity and sophistication. We offer most of the leading branded products to the customer segments we serve. Our private label products enhance our branded product offerings by providing additional choice at varying price points to our customers. We complement our branded and private label product portfolio with value-added service offerings marketed under the “VWRCATALYST” brand, including sourcing and procurement, logistics, chemical and equipment tracking and sample management. We have recently expanded our service offerings to include more complex scientific research support services, such as DNA extraction, bioreactor servicing and compound management. In addition, we offer custom manufacturing solutions, including buffers, reagents and other chemicals used in biopharmaceutical and industrial applications and production processes. We believe these growing value-added service offerings integrate us within our customers’ critical operational processes and further differentiate our value proposition from that of our competitors. We believe our range of offerings and capabilities enhances our ability to expand our addressable market and gain market share leading to incremental net sales and profits.
Business Segments
We report financial results on the basis of two reportable segments organized by geographic region: Americas and EMEA-APAC. Our Americas segment is comprised of operations located principally in the United States and Canada as well as in Puerto Rico, Mexico and select countries in Central and South America, including Costa Rica, Brazil, Argentina and Chile, and includes 59 facilities located in 8 countries. The EMEA-APAC segment is comprised of our operations located principally in Europe as well as in certain Asia-Pacific countries, and includes 105 facilities located in 26 countries.
The following table presents the percentage of net sales from each of our reportable segments:
 
Year Ended December 31,
 
2014
 
2013
 
2012
Americas
56
%
 
56
%
 
58
%
EMEA-APAC
44

 
44

 
42

Total
100
%

100
%

100
%
Both of our 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. We also offer a similar portfolio of laboratory products and other supplies in both of our segments.


1


We use operational data and management assumptions to estimate our product and customer mix as a percentage of consolidated net sales. The following charts present estimated net sales by product and customer group as a percentage of total net sales for the year ended December 31, 2014 :
For more information about our reportable segments, see Note 23 to our consolidated financial statements beginning on page F-1 of this report.
Products and Services
Branded and Private Label Laboratory Products
We provide value to our customers by offering one of the broadest portfolios of branded and private label laboratory products in our industry, including custom manufacturing. Our portfolio of branded products gives our customers access to some of the most recognized brands in the world. We enhance our customers’ choice by offering a lower cost, private label alternative to branded products. Private label laboratory products represented approximately 19% of our 2014 net sales. During 2014 , we processed approximately 17,000 customer orders per day with an average order size of approximately $700. We distinguish between product types within our branded and private label laboratory products as consumable or durable.
Consumable Products
Many of our products, including chemicals, laboratory and production supplies and science education products, are consumable in nature. These products are basic and essential supplies required by research and quality control laboratories and are generally used on a recurring basis. In addition to our extensive selection of branded products, we offer a robust suite of private label offerings. Further, we offer custom manufactured chemicals, including buffers, reagents and other chemicals used in Biopharma and industrial applications and production process. Consumable products represented approximately 72% of our 2014 net sales.
Durable Products and Equipment
We also offer durable products and scientific instruments with varying levels of complexity and sophistication. These products represented approximately 18% of our 2014 net sales.
Value-Added Services
We complement our branded and private label product portfolio with a number of customized value-added services, which we collectively have branded “VWRCATALYST.” In addition to our traditional service offerings such as procurement, logistics, chemical and equipment tracking and glassware autoclaving, we have expanded our service offerings to include more complex scientific research support services, such as DNA extraction, bioreactor servicing and compound management. This enables us to support a higher level of science on behalf of our customers, enabling them to focus on core areas of research.

2


History
The origins of our business date to 1852 in Sacramento, California when we initially sold glassware and laboratory supplies for mining markets. We first became a publicly-owned company in 1986 after a spin-off from Univar Corporation, and later we were acquired by Merck KGaA in 1999. In 2001, we expanded internationally into Europe to become a leader in the global laboratory products market when Merck KGaA combined our operations with those of its European scientific supplies distribution business under the name “VWR International Corporation.” In 2004, we were divested by Merck KGaA and acquired by a newly formed entity controlled by Clayton, Dubilier & Rice, Inc., a private equity firm, in a leveraged transaction.
On June 29, 2007, we were acquired by VWR Holdings, which is owned by private equity funds managed by our Sponsors and certain members of our management team. Under the stewardship of Madison Dearborn Partners, we have undertaken several initiatives, including: (i) enhancing our technological infrastructure through the implementation of an integrated enterprise resource planning system in North America and a global web infrastructure; (ii) upgrading our distribution network with the construction of a new facility in central California; (iii) augmenting the effectiveness of our North American sales force by shifting our marketing strategy to a customer segment-specific approach consistent with that of our EMEA-APAC segment; and (iv) implementing a targeted acquisition strategy that has resulted in our purchase and integration of 37 businesses.
Customers
We maintain a diverse and stable customer base. We provided solutions to approximately 120,000 customers in 2014 , including over 230 Fortune 500 companies, approximately 5,000 leading academic institutions and thousands of smaller businesses in multiple industries. We centrally manage and actively collaborate with our largest global customers and provide them with value-added services, optimize the efficiency of their research, production and procurement activities and support them with dedicated on-site professionals and technicians. In addition, we manage relationships with our regional customers on a local basis, with a focus on their particular customer segment-specific needs. We estimate that we shipped products to approximately 290,000 unique customer sites in 2014 .
We seek to be an important provider of laboratory products and services to our customer base. The substantial majority of our 50 largest customer relationships are governed by three- to five-year contracts that typically include pricing and volume incentives intended to position us as the primary provider of laboratory products and services.
We are a significant provider of laboratory products, chemicals, safety equipment and life science supplies to a majority of the world’s 20 largest pharmaceutical companies. In 2014 , our top 20 customers accounted for approximately 20% of our net sales, with no single customer representing more than 4% of our net sales. As of December 31, 2014 , our top ten customers have had relationships with us averaging more than 12 years.
Suppliers
We distribute branded and private label products sourced from approximately 4,500 core laboratory product suppliers located across the globe. This includes a majority of the leading developers and manufacturers of laboratory chemicals and reagents, glassware, plastics, instruments and other laboratory equipment, protective clothing and laboratory furniture, who sell through distributors. We strive to maintain strong relationships with our largest suppliers, most of which have utilized our infrastructure for more than 20 years. Our top five suppliers in 2014 were Corning, Eppendorf, GE Healthcare, Merck KGaA and Thermo Fisher Scientific. In 2014, our largest supplier, Merck KGaA, supplied products to us that accounted for approximately 9% of our consolidated net sales, approximately 4% of our net sales in the Americas and approximately 17% of our net sales in EMEA-APAC. We benefit from our longstanding and strong relationship with Merck KGaA and its affiliates. Our business operated as a division of Merck KGaA from 1999 until we were acquired by Clayton, Dubilier & Rice, Inc. in 2004. In connection with the acquisition, Merck KGaA agreed to enter into a long-term, exclusive supply agreement with us primarily covering Western Europe, which had an initial five-year term that was subsequently extended for an additional five-year period. In April 2014, we began operating under new, non-exclusive supply agreements with Merck KGaA that extend through December 2018.
Our supplier relationships are based on contracts that vary in terms of geographic scope, duration, product and service type, with some relationships including exclusivity provisions. Depending on our relationships and agreements, our services to suppliers may include distribution, sales and marketing support as well as servicing of instruments and equipment.
We manufacture a portion of our private label products, primarily lab and production chemicals, including buffers, reagents and other chemicals used in biopharmaceutical and industrial applications, and source the remainder from third-parties, including our established branded suppliers. We utilize a disciplined process to ensure the high quality of our private label products. Private label products provide our customers with a value-focused alternative to branded products and generally provide us higher margins.

3


Sales and Marketing
We reach customers through a well-trained global sales force, comprehensive websites and targeted catalogs. Our sales force is comprised of approximately 3,100 sales and sales support professionals, including approximately 280 sales specialists in areas such as life science, chromatography, production, chemicals and furniture, selected for their in-depth industry and product knowledge. Our sales professionals include native speakers for each of the countries in which we operate, allowing them to have high impact interactions with our customers across the globe.
Our e-commerce platform plays a vital role in how we conduct business with our customers. Over half of the orders that we process originate from our e-commerce platform, including our websites which feature our full product offering on a multi-language platform. Our websites utilize Google® search analytics and feature personalized search tools, customer specific web solutions as well as enhanced data on over 2.1 million products, all of which allow us to optimize the online purchasing experience for our customers. Our customers make use of the rich functionality that our websites have to offer, many of which better integrate our customers’ processes with our own. The flexibility and scalability of our websites allow us to integrate acquisitions, drive geographical expansion and serve segmented market needs with relative ease.
We also provide printed literature including flyers, brochures, magazines and catalogs. Our general catalogs, which present the most comprehensive view of our product portfolio, are printed in over 20 languages and distributed worldwide. Our general catalogs are supplemented by specialty catalogs, as well as brochures, geared toward specific industries, applications and product lines. For example, we have developed “all you need” catalogs for industries such as brewing, dairy, life science and genomics. In addition, we produce several serial publications that engage our customers with informative articles and a focused product offering, timed to release during prime purchasing seasons.
Distribution Network, Facilities and Infrastructure
Our global infrastructure consists of over 160 facilities, which enables us to deliver a broad array of products to our customers generally within 24 to 48 hours. We have the broadest Pan-European platform, which enables us to reach customers throughout Europe with industry-leading efficiency and service levels. We operate a distribution network of over 4.5 million square feet of distribution space, consisting of strategically located distribution centers, various smaller regional service centers, and “just-in-time” facilities and customer contract centers for customer-specific requirements. Below is a summary of these facilities:
our distribution centers receive products from manufacturers, manage inventory and fill and ship customer orders;
our regional service centers are located near selected customer locations and are designed to supply a limited number of products to those customers that require a high level of service;
we also operate “just-in-time” facilities at or near customer sites to meet customer needs promptly;
customer contact centers have the responsibility for order entry and customer service; and
our two captive service centers employ more than 800 associates who provide commercial and administrative support services to us and our customers and suppliers.
We also contract with third parties to ship products directly to our customers.
We maintain our corporate headquarters in Radnor, Pennsylvania for executive, financial, legal, information systems, marketing and other administrative activities. Our European executive, financial, legal, information systems, marketing and other administrative activities are in Darmstadt, Germany and Haasrode, Belgium.
Technology
We have a highly automated ERP system that promotes standardization and simplicity. Our global web infrastructure provides seamless integration with our customers. Furthermore, our technology platforms support rapid development and deployment of enhancements so that we may quickly adapt to meet the technology needs of our customers and seamlessly integrate new acquisitions. We have recently made significant investments in our IT platform to implement a common ERP and e-commerce platform to enhance the customer experience. In 2014 , over half of our orders were derived from e-commerce. We have more than 175,000 integrated e-commerce connections with our customers using www.vwr.com as their purchasing platform.
Our IT operating strategy is to act globally when possible and locally where necessary to strategically facilitate our business objectives and to develop a stable, growth oriented infrastructure and global informational system platform. Our IT infrastructure has evolved into a cohesive group of core global computing platforms. This development has reduced costs while improving our overall quality and delivering more value.

4


Competition
We operate in a highly competitive environment with a diverse and fragmented base of competitors, many of whom focus on specific regions and market segments. Competitive factors in the customer segments we serve include service and delivery, breadth of product line, price, customer support, e-commerce capabilities and the ability to meet the special and local needs of our customers.
In our Americas segment within our laboratory products business, we compete primarily with Thermo Fisher Scientific and Sigma-Aldrich. The majority of our other competitors include laboratory equipment manufacturers, which sell direct to their customers, and smaller distributors that focus on specific geographies and product categories. With respect to our value-added services business, we compete with local service providers and life science companies, which offer laboratory management services to their clients, such as Thermo Fisher Scientific, PerkinElmer and Agilent Technologies and other service outsourcing companies.
In our EMEA-APAC segment within our laboratory products business, we have the broadest Pan-European platform, which provides us with an important competitive advantage. We principally compete with Thermo Fisher Scientific for certain global customers, Sigma-Aldrich in chemicals and reagents, and certain regional competitors, including Geyer and Omnilab in Germany and Dutscher in France and Switzerland in specific product categories. With respect to our valued-added services business, we predominantly compete with small businesses operating on a regional basis.
We believe our competitive strengths position us well in our customer segments and in the geographies we serve. We rely on our scale, market position, customer access, depth of product and value-added service offerings, marketing strategies and sales force, acquisition strategy, financial profile and management team to deliver superior solutions to our customers and provide extensive market channel access to our suppliers.
Employees
As of December 31, 2014 , we had approximately 8,800 employees, including approximately 3,900 in North America, 3,600 in Europe, 1,100 in Asia-Pacific (including over 800 employees in our shared service centers) and 200 in Central and South America. Of these employees, approximately 3,100 employees (or approximately 35% of our global workforce) are in customer facing roles. As of December 31, 2014 , approximately 5% of our employees in North America were represented by unions, and virtually all of our employees in Europe are represented by workers’ councils and/or unions. We believe our relations with our employees are good.
Trademarks and Tradenames
We believe the VWR tradename is well recognized in the global laboratory products market and by scientists and is therefore a valuable asset to us. We use a number of different registered and unregistered trademarks and service marks for our products and services, substantially all of which are owned by us. However, we have not registered all of our trademarks or service marks in each country in which we do business. Generally, registered trademarks have perpetual lives, provided that they are renewed on a timely basis and continue to be used properly as trademarks, subject only to the rights of third parties to seek cancellation of the marks.
Our business is not dependent to a material degree on patents, copyrights or trade secrets although we consider our catalogs, websites and proprietary software integral to our operations. Although we believe we have adequate policies and procedures in place to protect our intellectual property, we have not sought patent protection for our processes nor have we registered the copyrights in any of our catalogs, websites or proprietary software. Other than licenses to commercially available third-party software, we have no licenses to intellectual property that are significant to our business.
Government Regulation
Some of the products we offer and our operations are subject to a number of complex and stringent laws and regulations governing the production, storage, handling, transportation, import, export and distribution of chemicals, drugs and other similar products, including the operating and security standards of the United States Drug Enforcement Administration, the Alcohol and Tobacco Tax and Trade Bureau, the Food and Drug Administration, the Bureau of Industry and Security and various state boards of pharmacy as well as comparable state and foreign agencies. In addition, our operational activities must comply with the rules and regulations of the Department of Transportation, the Federal Aviation Administration and similar foreign agencies. We are also required to abide by the anti-corruption and anti-bribery laws of all countries in which we operate, including the United States Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”). While we believe we are in compliance in all material respects with such laws and regulations, any non-compliance could result in substantial fines, penalties or assessments or otherwise restrict our ability to provide competitive distribution services and thereby have an adverse impact on our financial condition.

5


Environmental, Health and Safety Matters
We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those pertaining to air emissions, water discharges, the manufacturing, handling, disposal and transport of solid and hazardous materials and wastes, the investigation and remediation of contamination and otherwise relating to health and safety and the protection of the environment and natural resources. As our global operations have involved and continue to involve the manufacturing, handling, transport and distribution of materials that are, or could be, classified as toxic or hazardous, there is a risk of contamination and environmental damage inherent in our operations and the products we manufacture, handle, transport and distribute. Our environmental, health and safety liabilities and obligations may result in significant capital expenditures and other costs, which could negatively impact our business, financial condition and results of operations. We may be fined or penalized by regulators for failing to comply with environmental, health and safety laws and regulations. In addition, contamination resulting from our current or past operations may trigger investigation or remediation obligations, which may have a material adverse effect on our business, financial condition and results of operations.
Based on current information, we believe that any costs we may incur relating to environmental, health and safety matters will not be material. We cannot be certain, however, that identification of presently unidentified environmental, health and safety conditions, new regulations, more vigorous enforcement by regulatory authorities or other unanticipated events will not arise in the future and give rise to additional environmental liabilities, business interruptions, compliance costs or penalties which could have a material adverse effect on our business, financial condition and results of operations. In addition, environmental laws and regulations are constantly evolving and it is not possible to predict accurately the effect they, or any new regulations or legislation, may have in future periods.
Insurance
We maintain commercial insurance programs with third parties in the areas of executive risk, commercial property, business interruption and casualty (including product liability). We also self-insure certain risks inherent in our business which, taken together with the deductible levels and exclusions contained within our third-party programs, results in our recording of accruals for incurred claims. Our ultimate exposure may be mitigated by amounts we expect to recover from third parties associated with such claims.
Available Information
We file or furnish annual and quarterly reports and other information with or to the SEC. You may read and copy any documents we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public free of charge at the SEC’s website at www.sec.gov.
You may also access our press releases, financial information and reports filed with or furnished to the SEC (for example, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those forms) online at www.vwr.com. Copies of any documents on our website are available without charge, and reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC. The information found on our website is not part of this or any other report filed with or furnished to the SEC.
Corporate Information
Our principal executive offices are located at Radnor Corporate Center, Building One, Suite 200, 100 Matsonford Road, Radnor, PA 19087. Our telephone number is (610) 386-1700. Our Internet website is located at www.vwr.com.

6


Item 1A.
Risk Factors
There are many factors that affect our business and the results of operations, some of which are beyond our control. The following is a description of some important factors that may cause our results of operations or financial condition in future periods to differ materially from those currently expected or desired.
Risks Related to Our Business
Our business is affected by general economic conditions in the United States, Europe and the other regions in which we operate, and unfavorable global economic conditions or instability in the capital and credit markets could adversely impact our business.
With operations in many parts of the world, the global economy has a significant impact on our business. Unfavorable economic conditions in the United States, Europe and other regions in which we operate, and volatility in the global capital and credit markets, could materially and adversely affect our business, financial condition and results of operations. In particular, a deterioration of global economic conditions, or a prolonged period of market instability, could present the following additional risks and uncertainties for our business:
a reduction in revenues from and/or less favorable pricing or terms with new and existing customers;
the inability to expand our customer base in existing or new markets;
difficulties in collecting trade accounts receivable;
an increase in product prices from our suppliers that we are not able to pass through to our customers;
an acceleration of payment terms with our suppliers and/or the imposition of more restrictive credit terms and other contractual requirements;
an increased risk of excess and obsolete inventory;
a reduction in research and development spending by our customers, especially those in the Biopharma industry;
the inability to access additional capital or refinance existing indebtedness;
a limited availability to enter into new derivative financial instruments; and
the need to record impairment charges against our goodwill, other intangible and/or other long-lived assets.
Our business, financial condition and results of operations may be harmed if our customers discontinue, outsource or spend less on research and development and other scientific endeavors or discontinue or lessen their relationship with us.
Our customers are engaged in research, development and production in the Biopharma, agricultural, chemical, environmental, food and beverage, healthcare, microelectronic and petrochemical industries as well as in the education and government sectors. The amount of customer spending on research, development and production has a large impact on our sales and profitability. Our customers determine the amounts that they will spend on the basis of, among other things, general economic conditions, their financial condition and liquidity, spending priorities and their need to develop new products, which, in turn, is dependent upon a number of factors, including their competitors’ research, development and production initiatives.
In addition, consolidation in the industries in which our customers operate may have an impact on such spending as customers integrate acquired operations, including research and development departments and their budgets. Our customers finance their research and development spending from private and public sources. Government funding of scientific research and education has varied for several reasons, including general economic conditions, growth in population, political priorities, changes in the number of students and other demographic changes.
A deterioration in general economic conditions or a return to a period of economic contraction could result in reductions, or further reductions as the case may be, in spending by our customers across all customer segments that we serve, including the Biopharma industry as our largest customer segment. In addition, certain of our customers who depend on U.S. federal funding to finance their scientific research may be adversely impacted by U.S. federal spending cuts required by the “sequestration” mechanism in the Budget Control Act of 2011 and the Bipartisan Budget Act of 2013. Sequestration, which went into effect in March 2013, mandates $1.2 trillion of spending reductions split between domestic and defense spending over a ten-year period. A reduction in spending by our customers could have a material adverse effect on our business, financial condition and results of operations.

7


The substantial majority of our 50 largest customer relationships are governed by three- to five-year contracts that typically include pricing and volume incentives intended to position us as the primary provider of laboratory products and services. These contracts typically do not contain minimum purchase requirements or provide us with an exclusive supplier relationship during the term of such contract. In many cases, our customers will undertake a competitive process at the expiration of these contracts and have on occasion not selected us to continue as their provider of laboratory products and services. The loss of one or more of our large customers, a material reduction in their purchase of products or services from us, extended disruptions or interruptions in their operations or material changes in the terms based on which we sell to them, could have a material adverse effect on our business, financial condition and results of operations.
The life science industry has and will continue to experience significant changes that could adversely affect our business.
Many of our customers in the life science industry have experienced significant changes in the last several years and are expected to continue to experience significant changes, including reductions in governmental payments for pharmaceutical products, expirations of significant patents, lower funding for research and development and adverse changes in legislation or regulations regarding the delivery or pricing of general healthcare services or mandated benefits. In response to these and other changes, some of our life science customers have implemented or may in the future implement actions in an effort to control and reduce costs, including:
development of large and sophisticated group purchasing organizations that reduces spending on laboratory products;
consolidation of pharmaceutical companies resulting in a rationalization of research expenditures;
purchasing the products that we supply directly from manufacturers;
closing of domestic facilities and the establishment of facilities at low-cost offshore locations; and
significant reductions in and/or outsourcing of research, development and production activities, including outsourcing to low-cost offshore locations.
The ability of our life science customers to develop new products to replace revenue decreases attributable to expirations of significant patents, along with the impact of other past or potential future changes in the general healthcare industry may result in our customers significantly reducing their purchases of products and services from us or the prices they are willing to pay for those products or services. In addition, we will need to adapt our business to maintain existing customer relationships and develop new customer relationships as our customers consolidate or outsource certain activities domestically or to low-cost offshore locations.
We compete in a highly competitive market. Failure to compete successfully could have a material adverse effect on our business, financial condition and results of operations.
We compete in the global laboratory products market, primarily with Thermo Fisher Scientific, which has a portion of its business dedicated to the distribution of laboratory products and services. We also compete with many smaller regional, local and specialty distributors, as well as with manufacturers of all sizes selling directly to their customers. Competitive factors include price, service and delivery, breadth of product line, customer support, e-business capabilities, service offerings and the ability to meet the special requirements of customers.
A few of our competitors have greater financial and other resources than we do. Most of our products are available from several sources, and some of our customers have relationships with several distributors. Our agreements with customers generally provide that the customer can terminate the agreement or reduce the scope of products or services provided pursuant to the agreement with little or no notice. Lack of product availability, stemming from either our inability to acquire products or interruptions in the supply of products from manufacturers, could have a material adverse effect on our ability to compete. Our competitors could also obtain exclusive rights to distribute some products, thereby foreclosing our ability to distribute these products. Vertically integrated distributors may also have an advantage with respect to the total delivered product cost of certain of their captive products. Additionally, manufacturers could increase their efforts to sell directly to consumers and effectively bypass distributors like us. Consolidation in the global laboratory products market could result in existing competitors increasing their market share, which could have a material adverse effect on our business, financial condition and results of operations. The entry of new participants in the industry could also have a material adverse effect on our ability to compete.

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We are subject to currency risks with respect to our international operations and certain outstanding foreign-denominated debt.
While we report our consolidated financial results in U.S. dollars, we derive a significant portion of our sales and incur costs in foreign currencies (principally the euro, the British pound sterling, the Canadian dollar and the Swiss franc) from our operations outside the United States. For example, in 2014 approximately one-half of our net sales came from our operations outside the United States. Fluctuations in the relative values of currencies occur from time to time and could adversely affect our operating results. Specifically, during times of a strengthening U.S. dollar, our reported international sales and earnings will be reduced because the local currency will translate into fewer U.S. dollars. This could also make it more difficult to pay amounts due on our debt, the majority of which is denominated in U.S. dollars.
Although the majority of our outstanding debt is denominated in U.S. dollars, as of December 31, 2014 we had €567.1 million ($686.7 million on a U.S. dollar equivalent basis) of euro-denominated debt recorded on our U.S. dollar-denominated balance sheet, which constitutes approximately 33% of our total outstanding debt. As a result, our operating results are exposed to foreign currency risk with respect to this indebtedness. Specifically, during times of a weakening U.S. dollar, the relative value of this debt would increase, which would require us to record foreign exchange losses. For example, during the years ended December 31, 2014 , 2013 and 2012 , we recognized a net foreign currency remeasurement gain (loss) of $90.9 million , $(38.8) million and $(14.4) million, respectively.
Our business, financial condition and results of operations depend upon maintaining our relationships with suppliers.
We offer products from a wide range of suppliers. While there is generally more than one source of supply for most of the categories of products that we sell, we currently do not manufacture the majority of our products and are dependent on these suppliers for access to those products. Our most significant supplier is Merck KGaA and its affiliates, which supplied products to us that accounted for approximately 9% of our net sales in 2014 . In April 2014, we began operating under new, non-exclusive chemical distribution agreements with Merck KGaA that extend through December 2018. These new agreements cover a portion of our overall sales of products from Merck KGaA in Europe. The economics of these agreements include less favorable pricing terms than our previous agreement. The new agreements began negatively impacting our gross margin in April 2014.
Our ability to sustain our gross margins has been, and will continue to be, dependent in part upon our ability to obtain favorable terms from our suppliers. These terms may change from time to time, and such changes could adversely affect our gross margins over time. In addition, our results of operations and cash flows could be adversely impacted by the acceleration of payment terms to our suppliers and/or the imposition of more restrictive credit terms and other contractual requirements.
Some of our competitors are increasing their manufacturing operations both internally and through acquisitions of manufacturers, including manufacturers that supply products to us. In addition, we manufacture certain products that may compete directly with products we source from our suppliers. To date, we have not experienced an adverse impact on our ability to continue to source products from manufacturers that have been vertically integrated or otherwise compete with us, although there is no assurance that we will not experience such an impact in the future.
The loss of one or more of our large suppliers, a material reduction in their supply of products or provision of services to us, extended disruptions or interruptions in their operations or material changes in the terms we obtain from them, could have a material adverse effect on our business, financial condition and results of operations.
Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance. Fluctuations in our quarterly financial results could affect our stock price in the future.
Our net sales and operating results have historically varied from period-to-period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control. If our quarterly financial results or our predictions of future financial results fail to meet the expectations of securities analysts and investors, our stock price could be negatively affected. Any volatility in our quarterly financial results may make it more difficult for us to raise capital in the future or pursue acquisitions that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of future performance.

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A significant part of our growth strategy is to engage in acquisitions, which will subject us to a variety of risks that could harm our business.
As part of our business strategy, we intend to continue to review and complete selective acquisition opportunities focusing initially in North America and Europe and, over the longer term, in other select geographies. There can be no assurances that we will be able to complete suitable acquisitions for a variety of reasons, including the identification of and competition for acquisition targets, the need for regulatory approvals, the inability of the parties to agree to the structure or purchase price of the transaction and our inability to finance the transaction on commercially acceptable terms. In addition, any completed acquisition will subject us to a variety of other risks:
we may need to allocate substantial operational, financial and management resources in integrating new businesses, technologies and products, and management may encounter difficulties in integrating the operations, personnel or systems of the acquired businesses;
acquisitions may have a material adverse effect on our business relationships with existing or future suppliers, in particular, to the extent we consummate acquisitions that vertically integrate portions of our business;
we may assume substantial actual or contingent liabilities, known and unknown;
acquisitions may not meet our expectations of future financial performance;
we may experience delays or reductions in realizing expected synergies;
we may incur substantial unanticipated costs or encounter other problems associated with acquired businesses or devote time and capital investigating a potential acquisition and not complete the transaction;
we may be unable to achieve our intended objectives for the transaction; and
we may not be able to retain the key personnel, customers and suppliers of the acquired business.
In addition, we may be unable to maintain uniform standards, controls, procedures and policies as we attempt to integrate the acquired businesses, and this may lead to operational inefficiencies. These factors related to our acquisition strategy, among others, could have a material adverse effect on our business, financial condition and results of operations.
The international scope of our operations may adversely affect our business.
We are continuing to expand our sourcing, commercial operations and administrative activities internationally. In 2014 , we derived approximately one-half of our net sales from operations outside the United States. Our ability to manage our business and conduct our operations internationally require considerable management attention and resources and is subject to the challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems and commercial markets. Expansion has required and will continue to require us to invest significant funds and other resources. Accordingly, we face certain risks, including:
restrictions on foreign ownership of subsidiaries;
tariffs and other trade barriers and restrictions;
operating in jurisdictions that do not protect intellectual property rights to the same extent as the United States;
differing laws or administrative practices;
recruiting and retaining talented and capable employees in foreign countries and maintaining our corporate culture across all geographies;
business practices that are inconsistent with local or U.S. law, such as the United States Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), or other applicable anti-bribery regulations;
violating sanctions established by the Office of Foreign Assets Control of the U.S. Department of the Treasury, with respect to threats to the national security, foreign policy or the economy of the United States;
political risks;

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disruptions in the efficiency and effectiveness of, and difficulty in overseeing and managing, operations, supply chain and certain important administrative functions, including those that have been or in the future may be transferred to our shared services operations;
restrictions imposed by foreign governments on international cash transfers;
fluctuations in foreign currency exchange rates; and
potentially adverse tax consequences of operating in multiple international jurisdictions.
In addition, an adverse change in laws or administrative practices in countries within which we operate could have a material adverse effect on us. Our operations outside the United States also may present additional risk with respect to compliance with government regulations and licensing requirements. If we are unable to manage the complexity of our global operations successfully, our business, financial condition and operating results could be adversely affected.
In recent years, we incurred, and we may in the future incur, impairment charges related to our goodwill and other intangible assets, which could negatively impact our results of operations.
We carry significant amounts of goodwill and other intangible assets, including indefinite-lived intangible assets, on our balance sheet as a result of the VWR Acquisition and acquisitions subsequent to the VWR Acquisition. Our intangible assets with finite useful lives primarily relate to customer and supplier relationships and are amortized over their respective estimated useful lives on a straight-line basis. Our indefinite-lived intangible assets relate to our trademarks and tradenames.
Goodwill and other intangible assets with indefinite useful lives are not amortized and are tested annually for impairment, and they must also be tested for impairment between the annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of the asset below its carrying amount. Other amortizable intangible assets are reviewed for impairment whenever an indication of potential impairment exists.
Future changes in our estimates or judgments could reduce our fair value measurements, which could in turn result in an impairment charge:
During 2014, we recognized an $11.3 million impairment of goodwill related to a recent acquisition, which was associated with acquisition-specific factors.
Our expected net sales, cash flow performance or market conditions could be adversely affected due to, among other things, negative macroeconomic or industry-specific factors. For example, in 2011 and 2010, we recognized impairment charges of $3.3 million and $48.1 million, respectively, resulting primarily from factors specific to the science education industry, while in 2008, we recognized impairment charges of $392.1 million related primarily to macroeconomic factors. We could also experience adverse changes in market factors such as discount rates, valuation multiples derived from comparable publicly-traded companies, a decline in the trading price of our common stock or control premiums derived from market transactions.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Testing Goodwill and Other Intangible Assets for Impairment” for more information.
As of December 31, 2014 , goodwill and other intangible assets represented approximately $3.4 billion or 69% of our total assets. We may recognize additional impairment charges in the future should our operating results, market conditions or fair value assumptions decline due to, among other things, ongoing or worsening economic instability and volatility or other macroeconomic or industry-specific pressures, including but not limited to rising interest rates.
We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in sales to these customers.  
We sell products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. The laws governing government contracts differ from the laws governing private contracts and government contracts may contain pricing terms and conditions that are not applicable to private contracts. We are also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.

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If we do not comply with existing government regulations or if we or our suppliers become subject to more onerous government regulations, we could be adversely affected.
Some of the products we offer and our operations are subject to a number of complex and stringent laws and regulations governing the production, handling, transportation, storage, import, export and distribution of chemicals, drugs and other similar products, including the operating and security standards of the United States Drug Enforcement Administration, the Alcohol and Tobacco Tax and Trade Bureau, the Food and Drug Administration, the Bureau of Industry and Security and various state boards of pharmacy as well as comparable state and foreign agencies. In addition, our operational activities must comply with the rules and regulations of the Department of Transportation, the Federal Aviation Administration and similar foreign agencies. We are also required to abide by the anti-corruption and anti-bribery laws of all countries in which we operate, including the FCPA. While we believe we are in compliance in all material respects with such laws and regulations, any non-compliance could result in substantial fines, penalties or assessments or otherwise restrict our ability to provide competitive products and solutions and thereby have an adverse impact on our financial condition. We cannot assure you that existing laws and regulations will not be revised or that new, more restrictive laws will not be adopted or become applicable to us or the products that we manufacture and distribute.
If our suppliers become subject to more stringent laws, they may seek to recover any or all increased costs of compliance from us by increasing prices, and we may not be able to recover all such increased prices from our customers. Accordingly, we cannot assure you that our business and financial condition will not be materially and adversely affected by future changes in applicable laws and regulations applicable to our suppliers.
If any of our operations are found not to comply with applicable antitrust or competition laws, our business may suffer.
Our operations are subject to applicable antitrust and competition laws in the countries in which we conduct our business, in particular in the United States and in the European Union. These laws prohibit, among other things, anticompetitive agreements and practices. If any of our commercial agreements are found to violate or infringe upon such laws, we may be subject to civil and other penalties and/or third-party claims for damages. Further, agreements that infringe upon these laws may be void and unenforceable, in whole or in part, or require modification in order to be lawful and enforceable. If we are unable to enforce any of our commercial agreements, whether at all or in material part, our business could be adversely affected.
We are subject to environmental, health and safety laws and regulations, and costs to comply with such laws and regulations, or any liability or obligation imposed under such laws or regulations, could negatively impact our business, financial condition and results of operations.
We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those pertaining to air emissions, water discharges, the manufacturing, handling, disposal and transport of solid and hazardous materials and wastes, the investigation and remediation of contamination and otherwise relating to health and safety and the protection of the environment and natural resources. As our global operations have involved and continue to involve the manufacturing, handling, transport and distribution of materials that are, or could be classified as toxic or hazardous, there is a risk of contamination and environmental damage inherent in our operations and the products we manufacture, handle, transport and distribute. Our environmental, health and safety liabilities and obligations may result in significant capital expenditures and other costs, which could negatively impact our business, financial condition and results of operations. We may be fined or penalized by regulators for failing to comply with environmental, health and safety laws and regulations. In addition, contamination resulting from our current or past operations may trigger investigation or remediation obligations, which may have a material adverse effect on our business, financial condition and results of operations.
Based on current information, we believe that any costs we may incur relating to environmental, health and safety matters will not be material. We cannot be certain, however, that identification of presently unidentified environmental, health and safety conditions, new regulations, more vigorous enforcement by regulatory authorities or other unanticipated events will not arise in the future and give rise to additional environmental liabilities, business interruptions, compliance costs or penalties which could have a material adverse effect on our business, financial condition and results of operations. In addition, environmental, health and safety laws and regulations are constantly evolving and it is not possible to predict accurately the effect they, or any new regulations or legislation may have in future periods.

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We are subject to product liability and other claims in the ordinary course of business.
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 Asia-Pacific and other developing locations, we expect that we will increase our exposure to potential defaults under the related indemnification arrangements. Insurance coverage in general or coverage for certain types of liabilities, such as product liability or patent infringement in these developing markets may not be readily available for purchase or cost-effective for us to purchase. Furthermore, insurance for liability relating to asbestos, lead and silica exposure is not available, and we do not maintain insurance for product recalls. Accordingly, we could be subject to uninsured and unindemnified future liabilities, and an unfavorable result in a case for which adequate insurance or indemnification is not available could result in a material adverse effect on our business, financial condition and results of operations.
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 this litigation has historically been immaterial, there can be no assurance that the impact of the pending and any future claims will not be material to our business, financial condition or results of operations in the future.
If we are unable to hire, train and retain key personnel, our business, financial condition and results of operations could be adversely affected.
Our success depends in large part upon our continuing ability to identify, hire, retain and motivate skilled professionals. We face intense competition for these professionals from our competitors, customers, suppliers and other companies within the industries in which we compete and the geographical regions in which we operate. Any failure on our part to hire, train and retain a sufficient number of qualified professionals could have a significant adverse impact on our business.
We depend heavily on the services of our senior management. We believe that our future success will depend upon the continued services of our senior management. Our business may be harmed by the loss of one or more members of our senior management. We currently do not maintain key-man life insurance with respect to our executive officers.
We rely upon our distribution centers and third parties to ship products to our customers, and significant interruptions in the operations of our distribution centers or the operations of such third parties could harm our business, financial condition and results of operations.
Our infrastructure primarily consists of strategically located distribution centers and various smaller regional service centers where we receive products from manufacturers, manage inventory and fill and ship customer orders. We also ship a significant amount of our orders through various independent package delivery providers. Prompt shipment of our products is important to our business. Any significant disruptions to the operations of our distribution centers or such third parties for any reason, including labor relations issues, power interruptions, severe weather, fire or other circumstances beyond the control of us or such third parties, could cause our operating expenses to increase or seriously harm our ability to fulfill our customers’ orders or deliver products on a timely basis, or both. In addition, an increase in prices by our third-party carriers, due to increases in fuel prices or otherwise, could adversely impact our financial condition and results of operations if we are unable to find alternative providers or make adjustments to our selling prices.

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Problems with or failure of our information services and their connectivity to our customers, suppliers and/or certain service providers could significantly disrupt our operations, which could reduce our customer or supplier base and could harm our business, financial condition and results of operations.
Our businesses rely on sophisticated information systems to obtain, rapidly process, analyze and manage data to facilitate the purchase and distribution of millions of inventory items from numerous distribution centers; to receive, process and ship orders on a timely basis; to account for other product and service transactions with customers; to manage the accurate billing and collections for thousands of customers; and to process payments to suppliers. Our business and results of operations may be adversely affected if these systems are interrupted or damaged by unforeseen events or if they fail for any extended period of time, including due to the actions of third parties. To reduce our risks against unforeseen events, we continually deploy, test and refine disaster recovery and business continuity preparedness plans.
Information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. A failure in or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyber-attacks or information security breaches could disrupt our business and/or our supply chain, result in the improper disclosure or misuse of confidential or proprietary information, damage our reputation and/or increase our costs. As a result, cyber security and the continued development and enhancement of the controls and processes designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a high priority for us. Although we believe that we have robust information security procedures and other safeguards in place, as cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.
In addition, we accept payment by credit card and similar payment instruments for a material portion of our sales, and our ability to accept, process and settle credit card transactions is subject to rules and regulations issued and/or amended from time to time by payment card companies, such as American Express, VISA, MasterCard and Discover. These rules and regulations, which vary based on annual transaction volume and transaction experience, require us to safeguard customer information, including applying the minimum security standards for the manner in which we capture, store, process and transmit such information. Our failure to comply with such changing rules and standards can subject us to fines, restrictions or expulsion from these card acceptance programs, which could have a material adverse effect on our business, financial condition and results of operations.
We have recently completed the implementation of an enterprise resource planning system in our U.S. laboratory products business and we plan to continue to make technology and infrastructure investments, including with respect to our enterprise resource planning and e-commerce capabilities. Our technology initiatives are designed to enhance the security, confidentiality, integrity and availability of data and systems, to ensure our operations continue to provide a high quality service to our customers and to provide important information to our management. We are continually assessing the risks and costs associated with potential problems and interruptions that could reduce the efficiency and effectiveness of our operations in the near term, looking for opportunities to transfer or share these risks with specialized information systems security providers and insuring against these risks where appropriate. Despite these efforts, the cost and potential problems and interruptions associated with the implementation of our technology initiatives could disrupt or reduce our productivity, including our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business, as well as disrupt or impair our ability to provide important information to our management and investors.
We have not registered and in some cases do not own the existing applications and registrations for our material trademarks or service marks in every country in which we do business.
We serve our customers globally through our operations in 34 countries and use a number of registered and unregistered trademarks and service marks for our products and services, substantially all of which are owned by us. Although we have registered our material trademarks in the United States and the primary European countries in which we conduct business, we have not registered and in some cases do not own the existing applications and registrations for our material trademarks or service marks in all countries in which we conduct business. Our efforts to protect our intellectual property rights in certain countries, especially those in Asia-Pacific, may only provide us with limited protection. In addition, in some countries, we may be blocked from registering or otherwise protecting certain of our marks by others who have already registered identical or similar marks for similar goods or services, and in those cases, we run the risk of being sued for infringement or being unable to effectively establish brand identity.
The failure to own and have enforceable rights in the trademarks and service marks used in our business could have a material adverse effect on our business, financial condition and results of operations.

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Unanticipated increases to our income tax liabilities could adversely impact our results of operations.
As a global corporation, our business is subject to a wide variety of U.S. federal, state and non-U.S. laws, regulations and policies. There can be no assurance that laws, regulations and policies will not be changed in ways that will impact our income tax provision or our income tax assets and liabilities. We are also subject to income tax audits in the United States and numerous foreign jurisdictions. Judgment is required in determining our global provision for income taxes and other tax liabilities. Although we believe that our tax estimates are reasonable, we cannot assure you that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals. Tax authorities in the various jurisdictions in which we have a presence and conduct business may disagree with our tax positions and assess additional taxes.
In addition, our effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of new information in the course of our tax return preparation process. The carrying value of deferred tax assets, which are predominantly in the United States, is dependent on our ability to generate future taxable income in the United States. Increases in our income tax liabilities or risks related to the realization of our deferred tax assets as a result of any of the foregoing could adversely affect our financial position or results of operations.
As a U.S. company doing business in international markets through subsidiaries, we are subject to intercompany pricing rules in the jurisdictions where we operate. Tax rates vary from country to country and if regulators determine that our profits in one jurisdiction should be increased, we might not be able to fully offset the adjustment in the other jurisdictions; which would increase our effective tax rate. Additionally, the Organization for Economic Cooperation and Development, or OECD, has issued certain proposed guidelines regarding base erosion and profit shifting. If these guidelines are formally adopted by the OECD, individual taxing jurisdictions may also adopt some form of these guidelines as well. In such case, we may need to change our approach to intercompany transfer pricing in order to maintain compliance under the new rules. Our effective tax rate may increase or decrease depending on the current location of global operations at the time of the change.
Risks Related to Our Indebtedness
Our substantial indebtedness could have a material adverse effect on our financial condition and prevent us from fulfilling our debt or contractual obligations.
We have a substantial amount of debt, which requires us to make significant interest and principal payments. At December 31, 2014 , we had outstanding indebtedness of $2,111.9 million , including our Senior Credit Facility, Senior Notes and our A/R Facility. Our high level of debt could have important consequences to us including the following:
making it more difficult for us to satisfy our debt or contractual obligations;
exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our Senior Credit Facility and our A/R Facility, are at variable rates of interest;
requiring us to dedicate a substantial portion of our cash flow from operations to debt service payments, which would reduce the funds available for working capital, capital expenditures, investments, acquisitions and other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business, future business opportunities and the industry in which we operate;
placing us at a competitive disadvantage compared to any of our less leveraged competitors;
increasing our vulnerability to a downturn in our business and both general and industry-specific adverse economic conditions; and
limiting our ability to obtain additional financing at a favorable cost of borrowing, or if at all, to fund future working capital, capital expenditures, investments, acquisitions or other general corporate requirements.
Despite current indebtedness levels and restrictive covenants, we may incur additional indebtedness in the future, which would intensify our leverage risks.
Although the terms of the credit agreement governing the Senior Credit Facility and the indenture governing the Senior Notes restrict us and our restricted subsidiaries from incurring additional indebtedness, these restrictions are subject to significant exceptions and qualifications, including with respect to our ability to incur additional senior secured debt. The risks that we and our subsidiaries face as a result of our leverage could intensify to the extent that we incur a significant amount of additional indebtedness.

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Our debt agreements contain restrictions on our ability to operate our business and to pursue our business strategies, and our failure to comply with, cure breaches of, or obtain waivers for covenants could result in an acceleration of the due date of our indebtedness.
The credit agreement governing our Senior Credit Facility and the indenture governing the Senior Notes contain, and agreements governing future debt issuances may contain, covenants that restrict our ability to finance future operations or capital needs, to respond to changing business and economic conditions or to engage in other transactions or business activities that may be important to our growth strategy or otherwise important to us. The credit agreement and the indenture restrict, among other things, our ability and the ability of our subsidiaries to:
incur or create additional indebtedness;
pay dividends or make distributions in respect of our capital stock or to make certain other restricted payments;
purchase or redeem stock;
make investments;
create liens;
sell assets and subsidiary stock;
enter into transactions with affiliates;
enter into agreements that restrict dividends and liens;
change our lines of business or our fiscal year; and
enter into mergers, consolidations and sales of substantially all assets.
Additionally, our Senior Credit Facility contains a financial maintenance covenant for the benefit of our revolving commitment lenders. Specifically, we are required to maintain a Senior Secured Net Leverage Ratio (as defined therein) of not more than 5.50:1.00. The financial maintenance covenant is only applicable if revolving loans or swing loans are outstanding or if outstanding letters of credit (other than cash collateralized letters of credit) are in excess of $20.0 million. We cannot assure you that we will be able to maintain compliance with the covenants related to our debt in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders or noteholders and/or amend the covenants. In particular, if our financial condition or operating results deteriorate, our relations with our lenders and noteholders may be materially and adversely affected, which could impact our ability to obtain waivers if necessary.
Any breach of the covenants in the credit agreement or the indenture could result in a default of the obligations under such debt and cause a default under other debt. If there were an event of default under the credit agreement related to our Senior Credit Facility that was not cured or waived, the lenders under our Senior Credit Facility could cause all amounts outstanding with respect to the borrowings under the Senior Credit Facility to be due and payable immediately. Our assets and cash flow may not be sufficient to fully repay borrowings under our Senior Credit Facility and our obligations under the Senior Notes if accelerated upon an event of default. If, as or when required, we are unable to repay, refinance or restructure our indebtedness under, or amend the covenants contained in, our Senior Credit Facility, the lenders under our Senior Credit Facility could institute foreclosure proceedings against the assets securing borrowings under the Senior Credit Facility. Any such acceleration may also constitute a termination event under our A/R Facility, which could result in the amount outstanding under that facility becoming due and payable.
We may not be able to generate sufficient cash flows or access sufficient additional capital to meet our debt obligations or to fund our other liquidity needs.
Our business may not generate sufficient cash flow from operations, or future borrowings under our Senior Credit Facility, our A/R Facility or from other sources may not be available to us in an amount sufficient to enable us to make required interest payments on our indebtedness or to fund our other liquidity needs, including capital expenditure requirements, investments, acquisitions and other transactions that are important to the execution of our business strategy. Additionally, the revolving loan portion of our Senior Credit Facility and our A/R Facility are scheduled to mature in 2016, and significant portions of our other long-term debt are scheduled to mature in 2017, and we will need to refinance or satisfy this debt as it matures. We may not be able to refinance our maturing debt on favorable terms, or at all, based on general economic or market conditions, our historical or projected growth or other factors, including those beyond our control. If our cash flow from operations or other liquidity sources are not sufficient to make required interest payments or we are not able to refinance maturing debt on favorable terms, we may have to take actions such as selling assets, seeking additional equity or debt capital on commercially unreasonable terms or reducing or delaying important business transactions. Our Senior Credit Facility and the indenture governing our Senior Notes restrict our ability to sell assets and use the proceeds from such sales for purposes other than debt payment obligations.

16


Risks Related to Ownership of our Common Stock
Our common stock price may be volatile or may decline regardless of our operating performance, and holders of our common stock could lose a significant portion of their investment.
The market price for our common stock is likely to be volatile. Our stockholders may not be able to resell their shares of common stock at or above the price at which they purchased their shares, due to fluctuations in the market price of our common stock, which may be caused by a number of factors, many of which we cannot control, including those described under “Risks Related to Our Business” and “Risks Related to Our Indebtedness” and the following:
changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of securities analysts to initiate or maintain coverage of our common stock;
downgrades by any securities analysts who follow our common stock;
future sales of our common stock by our officers, directors and significant stockholders, including VWR Holdings, which is controlled by Madison Dearborn Partners;
market conditions or trends in our industry or the economy as a whole;
investors’ perceptions of our prospects;
announcements by us or our competitors of significant contracts, acquisitions, joint ventures or capital commitments;
changes in key personnel; and
our limited public float in light of the Sponsors’ beneficial ownership of a majority of our common stock, which may result in the trading of relatively small quantities of shares by our stockholders having a disproportionate positive or negative influence on the market price of our common stock.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, including companies in our industry. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs, and our resources and the attention of management could be diverted from our business.
Madison Dearborn Partners has the ability to control significant corporate activities, and their interests may not coincide with yours.
At December 31, 2014, Madison Dearborn Partners beneficially owned, through its control of VWR Holdings, approximately 77.6% of our common stock. As a result of its beneficial ownership, Madison Dearborn Partners, so long as it continues to beneficially own a majority of our outstanding common stock, will have the ability to control the outcome of matters submitted to a vote of stockholders and, through the Board, the ability to control decision-making with respect to our business direction and policies. Matters over which Madison Dearborn Partners, directly or indirectly, exercise control include:
the election of the Board and the appointment and removal of our officers;
mergers and other business combination transactions, including proposed transactions that would result in our stockholders receiving a premium price for their shares;
other acquisitions or dispositions of businesses or assets;
incurrence of indebtedness and the issuance of equity securities;
repurchase of stock and payment of dividends; and
the issuance of shares to management under our equity incentive plans.
Even if Madison Dearborn Partners’ beneficial ownership of our shares falls below a majority, it may continue to be able to strongly influence or effectively control our decisions. Under our amended and restated certificate of incorporation, Madison Dearborn Partners and its affiliates will not have any obligation to present to us, and Madison Dearborn Partners and its affiliates may separately pursue corporate opportunities of which they become aware, even if those opportunities are ones that we would have pursued if granted the opportunity.

17


In addition, we have entered into a Director Nomination Agreement with VWR Holdings that provides VWR Holdings the right to designate nominees for election to our board of directors for so long as VWR Holdings beneficially owns 10% or more of the total number of shares of our common stock then outstanding. The Director Nomination Agreement provides that Madison Dearborn Partners may cause VWR Holdings to assign such right to Madison Dearborn Partners or to a Madison Dearborn Partners’ affiliate so long as Madison Dearborn Partners and its affiliates are the beneficial owners of 50% or more of VWR Holdings’ voting equity interests.
We are a “controlled company” and, as a result, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements.
Madison Dearborn Partners through its control of VWR Holdings beneficially owns a majority of our common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards under NASDAQ. Under the rules of NASDAQ, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain stock exchange corporate governance requirements, including the requirement that (i) a majority of the Board consist of “independent directors,” as defined under the rules of NASDAQ, (ii) the Nominating and Governance Committee is composed entirely of independent directors or (iii) the Compensation Committee is composed entirely of independent directors.
The NASDAQ independence standards are intended to ensure that directors who meet the independence standards are free of any conflicting interest that could influence their actions as directors. Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the stock exchange corporate governance requirements.
Conflicts of interest may arise because some of our directors are principals of our largest stockholders.
Each of Messrs. Alexos and Sullivan, who are officers of Madison Dearborn Partners, and Mr. Kraemer, who is associated with Madison Dearborn Partners, serve on the Board. VWR Holdings, which is controlled by Madison Dearborn Partners, continues to hold a majority of our outstanding common stock. Madison Dearborn Partners and the entities respectively controlled by them may hold equity interests in entities that directly or indirectly compete with us, and companies in which they currently invest may begin competing with us. As a result of these relationships, when conflicts between the interests of Madison Dearborn Partners, on the one hand, and of other stockholders, on the other hand, arise, these directors may not be disinterested. Although our directors and officers have a duty of loyalty to us under Delaware law and our amended and restated certificate of incorporation, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible so long as (i) the material facts relating to the director’s or officer’s relationship or interest as to the transaction are disclosed to the Board and a majority of our disinterested directors approves the transaction, (ii) the material facts relating to the director’s or officer’s relationship or interest as to the transaction are disclosed to our stockholders and a majority of our disinterested stockholders approve the transaction or (iii) the transaction is otherwise fair to us. Our amended and restated certificate of incorporation provides that any principal, officer, member, manager and/or employee of Madison Dearborn Partners or any entity that controls, is controlled by or under common control with Madison Dearborn Partners (other than us or any company that is controlled by us) or a Madison Dearborn Partners-managed investment fund is not required to offer any transaction opportunity of which they become aware to us and could take any such opportunity for themselves or offer it to other companies in which they have an investment, unless such opportunity is offered to them solely in their capacities as our directors.
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. On February 27, 2015 , 131,358,700 shares of common stock were outstanding. The shares of common stock sold in our initial public offering are freely tradable without restriction under the Securities Act, except that any shares of our common stock that may be acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, may be sold only in compliance with certain volume limitations and other restrictions of Rule 144 of the Securities Act.
The remaining 102,000,000 shares, representing 77.6% of our total outstanding shares of common stock, will continue to be “restricted securities” within the meaning of Rule 144 and subject to certain restrictions on resale. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144 or Rule 701 under the Securities Act.
In the future, we may also issue our securities in connection with investments or acquisitions. The number of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock.

18


Anti-takeover provisions in our charter documents and as provided under Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
Our charter documents contain provisions that may make the acquisition of the Company more difficult without the approval of the Board. These provisions:
authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;
establish a classified board of directors so that not all members of the Board are elected at one time;
generally prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders, except that any action required or permitted to be taken by our stockholders may be effected by written consent until such time as Madison Dearborn Partners ceases to beneficially own 50% or more of our common stock;
provide that special meetings of the stockholders can only be called by (i) the chairman or vice chairman of the Board, (ii) our chief executive officer, (iii) a majority of the Board through a special resolution or (iv) the holders of at least 10% of our common stock until such time as Madison Dearborn Partners ceases to beneficially own 50% or more of our common stock, effected by consent in writing by such stockholders;
establish advance notice requirements for nominations for elections to the Board or for proposing matters that can be acted upon by stockholders at stockholder meetings; and
provide that the Board is expressly authorized to make, alter or repeal our amended and restated by-laws.
These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of the Company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware (the “DGCL”), our certificate of incorporation or our by-laws or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine may, in each case, be brought only in the Court of Chancery in the State of Delaware and if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Because we do not intend to pay cash dividends in the foreseeable future, you may not receive any return on investment unless you are able to sell your common stock for a price greater than your purchase price.
We do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of the Board and will depend upon results of operations, financial condition, contractual restrictions, including those under the Senior Credit Facility and the indenture governing the Senior Notes, any potential indebtedness we may incur, restrictions imposed by applicable law, tax considerations and other factors the Board deems relevant. Accordingly, if we do not pay dividends in the future, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur.

19


We are required to pay our existing owners for certain tax benefits to the extent realized by us (or deemed realized by us in the case of a change of control, certain divestitures or certain other events), which amounts are expected to be material and, in some instances, may exceed the tax benefits actually realized by us.
We have entered into an ITRA with our existing stockholder, VWR Holdings. The ITRA provides for the payment by us to VWR Holdings of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we along with our domestic subsidiaries actually realize as a result of the utilization of our pre-IPO net operating loss carryforwards.
These payment obligations are our obligations and not obligations of any of our subsidiaries. The actual utilization of net operating losses as well as the timing of any payments under the ITRA will vary depending upon a number of factors, including the amount, character and timing of our and our domestic subsidiaries’ taxable income in the future. We expect that the payments we will be required to make under the ITRA will be material.
At December 31, 2014 , we reported a liability of $172.9 million for the ITRA, which represents 85% of the full amount of applicable recognized deferred tax assets related to our domestic net operating loss carryforwards. Any future changes in the realizability of our net operating loss carryforwards that were generated prior to our IPO will impact the amount that will ultimately be paid to VWR Holdings, if any. We believe that any changes in the obligation under the ITRA will be recorded in other income or expense. We expect to repay the obligation within the carryforward period of the tax attributes without expiration.
In addition, the ITRA provides that upon certain mergers, stock and asset sales, other forms of business combinations or other changes of control, the ITRA will terminate and we will be required to make a payment equal to the present value (at a discount rate of LIBOR plus 1.00%) of anticipated future payments under the ITRA. Such payment would be based on certain assumptions, including those relating to our and our domestic subsidiaries’ future taxable income, and may therefore significantly exceed the actual tax benefits we ultimately realize from our net operating losses. We will have a similar obligation to make a present value accelerated payment based on certain assumptions if we dispose of certain subsidiaries or if we breach any of our material obligations under the ITRA, each of which also may result in a payment significantly in excess of the actual tax benefits we ultimately realize from our net operating losses. In these situations, our obligations under the ITRA could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. Additionally, under the terms of the ITRA, VWR Holdings may be permitted to assign its rights under the agreement without our consent, in which case we may be required to deal with an unrelated counterparty under the agreement.
VWR Holdings will not reimburse us for any payments previously made under the ITRA if such benefits are subsequently disallowed (although future payments would be adjusted to the extent possible to reflect the result of such disallowance). As a result, in certain circumstances, payments could be made under the ITRA in excess of our cash tax savings. To the extent that we are unable to make timely payments under the ITRA for any reason, such payments will be deferred and will accrue interest at a rate of LIBOR plus 3.00% per annum until paid. We have agreed under the ITRA not to incur, and not to permit any of our domestic subsidiaries to incur, any new restrictions that would limit our ability to make payments under such agreement or the ability of our domestic subsidiaries to make payments to us for that purpose. This restriction could make it more difficult or costly for us to refinance our outstanding indebtedness, the majority of which will mature during 2016 and 2017. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 13, “Certain Relationships and Related Transactions” for more information on the ITRA.
We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.
We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or other distributions to us. Additionally, deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us.
Item 1B.
Unresolved Staff Comments
Not applicable.

20


Item 2.
Properties
We operate more than 160 facilities, which aggregate in excess of five million square feet, including offices, warehouse space and manufacturing facilities. We maintain our corporate headquarters in Radnor, Pennsylvania for executive, financial, legal, information systems, marketing and other administrative activities. Our European executive, financial, legal, information systems, marketing and other administrative activities are in Darmstadt, Germany and Haasrode, Belgium.
The following table sets forth information with respect to our principal distribution and other office facilities:
Location
 
Owned/Leased
 
Size (sq. ft.)
 
Type of Facility
Americas:
 
 
 
 
 
 
Batavia, Illinois
 
Owned
 
360,000

 
Distribution
Bridgeport, New Jersey
 
Owned
 
369,475

 
Distribution
Denver, Colorado
 
Leased
 
130,091

 
Distribution
Franklin, Massachusetts
 
Leased
 
55,486

 
Distribution
Lachine, Quebec, Canada
 
Owned
 
52,000

 
Distribution, manufacturing and offices
Manati, Puerto Rico
 
Owned
 
130,450

 
Distribution
Mexico City, Mexico
 
Leased
 
63,948

 
Distribution
Mississauga, Ontario, Canada
 
Leased
 
110,194

 
Distribution
Radnor, Pennsylvania
 
Leased
 
149,858

 
Offices
Rochester, New York
 
Owned
 
339,600

 
Distribution, assembly and offices
Solon, Ohio
 
Leased
 
175,815

 
Distribution, manufacturing and offices
Sugar Land, Texas
 
Leased
 
62,280

 
Distribution
Suwanee, Georgia
 
Leased
 
168,925

 
Distribution
Tualatin, Oregon
 
Leased
 
56,400

 
Distribution
Visalia, California
 
Owned
 
500,000

 
Distribution
Wangara, Australia
 
Leased
 
63,261

 
Distribution, manufacturing and offices
EMEA-APAC:
 
 
 
 
 
 
Briare, France
 
Owned/Leased
 
358,675

 
Distribution, repackaging and mixing
Bruchsal, Germany
 
Owned
 
218,906

 
Distribution
Darmstadt, Germany
 
Leased
 
58,007

 
Offices
Debrecen, Hungary
 
Leased
 
67,188

 
Distribution, repackaging and mixing
Dublin, Ireland
 
Leased
 
77,067

 
Distribution
Haasrode, Belgium
 
Owned
 
201,447

 
Offices, distribution, repackaging and mixing
Karlskoga, Sweden
 
Leased
 
129,167

 
Distribution
Kelsterbach, Germany
 
Leased
 
59,642

 
Distribution
Llinars del Vallés, Spain
 
Leased
 
72,955

 
Distribution
Lutterworth, United Kingdom
 
Leased
 
183,205

 
Distribution
Shanghai, China
 
Leased
 
31,000

 
Distribution and offices
Singapore
 
Leased
 
74,034

 
Distribution
We also lease various regional distribution centers and service facilities globally that support our sales and warehouse functions. Our facility located in Batavia, Illinois is subject to a mortgage lien under the Senior Credit Facility.
Item 3.
Legal Proceedings
For information regarding legal proceedings and matters, see Note 11 to our consolidated financial statements beginning on page F-1 of this report, which information is incorporated into this item by reference.
Item 4.
Mine Safety Disclosures
Not applicable.

21


Executive Officers
The following chart sets forth certain information regarding our directors and executive officers as of February 27, 2015 :
Name
 
Age
 
Position
Manuel Brocke-Benz
 
56
 
Director, President and Chief Executive Officer
Gregory L. Cowan
 
61
 
Senior Vice President and Chief Financial Officer
Peter Schuele
 
56
 
Senior Vice President and President, EMEA-APAC Lab and Distribution Services
Mark T. McLoughlin
 
59
 
Senior Vice President and President, Americas Lab and Distribution Services
George Van Kula
 
51
 
Senior Vice President, Human Resources, General Counsel and Secretary
Theodore C. Pulkownik
 
57
 
Senior Vice President, Strategy and Corporate Development
Gerard J. Christian
 
46
 
Senior Vice President and Chief Information Officer
Stephan W. Labonté
 
55
 
Senior Vice President, Marketing
Ulf Kepper
 
49
 
Senior Vice President, VWR Services
Douglas J. Pitts
 
56
 
Vice President and Corporate Controller
Manuel Brocke-Benz  was named our President and Chief Executive Officer on January 3, 2013. From July 25, 2012 to January 3, 2013, Mr. Brocke-Benz served as our interim Chief Executive Officer, while also serving as the Senior Vice President and Managing Director of Europe, Lab and Distribution Services, a position he held since January 2006. Mr. Brocke-Benz was elected to the Board in September 2012 and currently is the Chair of the Finance Committee. Mr. Brocke-Benz initially joined the Company in 1987. Mr. Brocke-Benz earned a law degree from Albert-Ludwigs University in Freiburg, Germany. Mr. Brocke-Benz’s leadership role and more than 20 years of service with us in a variety of senior-level positions, together with his extensive knowledge of our business, strategy and industry on an international basis and his training as a lawyer make him a valuable member of the Board.
Gregory L. Cowan  is our Senior Vice President and Chief Financial Officer, a position he has held since June 2009. In his current role, Mr. Cowan is responsible for our financial operations on a global basis and for overseeing our Investor Relations activities. Prior to assuming his current position, Mr. Cowan served as our Vice President and Corporate Controller since December 2004. Since joining us, Mr. Cowan has overseen compliance efforts, the development of global policies and procedures, as well as internal and external reporting processes. He has also been directly involved in various strategic projects involving commercial activities and changes to systems and infrastructure. In the past five years, Mr. Cowan also served as a Director of Emtec, Inc. Mr. Cowan earned a B.A. in accounting from Rutgers University.
Peter Schuele  is our Senior Vice President and President, EMEA-APAC Lab and Distribution Services. Mr. Schuele has served as our Senior Vice President, Europe Lab and Distribution Services since June 2013, and in January 2014, was given additional responsibility for our Asia-Pacific business. In his current role, Mr. Schuele is responsible for our sales, marketing, services and operations for the European and Asia-Pacific business. Prior to joining us in 2013, Mr. Schuele served as the vice president supply chain for Europe, the Middle East and Africa for Sigma-Aldrich Corporation. Mr. Schuele earned an M.B.A. from Heilbronn University in Heilbronn, Germany.
Mark T. McLoughlin  is our Senior Vice President and President, Americas Lab and Distribution Services, a position he has held since November 2014. In his current role, Mr. McLoughlin leads all sales, marketing, services and operations for our business in the United States, Canada, Mexico and Puerto Rico. Prior to assuming his current position, Mr. McLoughlin served as our Senior Vice President and President, U.S. Lab and Distribution Services from July 2012 to November 2012 and as Senior Vice President of Category Management and Senior Vice President of Emerging Businesses after joining the Company in September 2008. Mr. McLoughlin is currently a member of the Board of Directors at Cytomedix, Inc. and serves on the Board of Advisors for the Center for Services Leadership, W.P. Carey School of Business at Arizona State University. Mr. McLoughlin earned a B.A. in psychology from the University of Arizona.
George Van Kula  is our Senior Vice President, Human Resources, General Counsel and Secretary. Mr. Van Kula has served as Senior Vice President, General Counsel and Secretary since May 2006, and in March 2013, Mr. Van Kula was given additional responsibility for our Human Resources organization. Mr. Van Kula earned a J.D. from the University of Michigan Law School and a B.A. from the University of Notre Dame.
Theodore C. Pulkownik  is our Senior Vice President, Strategy and Corporate Development, a position he has held since July 2004. Mr. Pulkownik’s responsibilities include global mergers and acquisitions, corporate-center led initiatives and strategy and several of our businesses in the Americas, including Central and South America, global mining, North America Export and our serum business. Mr. Pulkownik earned a B.A. in business administration from the University of Wisconsin and an M.B.A. from the University of Michigan.

22


Gerard J. Christian  is our Senior Vice President and Chief Information Officer, a position he has held since August 2012. In this role, Mr. Christian is responsible for our global information services, including the management of business unit and corporate shared application services, business continuity, infrastructure and operations, and information security and risk management. From January 2011 until August 2012, Mr. Christian served as Vice President of Shared Services as well as Vice President, Pricing and Contract Administration and from March 2007 until December 2010, as Vice President and Country Manager for VWR Ireland. Mr. Christian earned a B.S. in accounting from Canisius College and an M.B.A. from the University of Buffalo, with a concentration in finance.
Stephan W. Labonté  is our Senior Vice President, Marketing, a position he has held since October 2012. In his current role, Mr. Labonté is responsible for our supplier relationships, marketing and category management functions on a global basis and the customer segment teams in Europe. Mr. Labonté joined us in 1995. Prior to his current role, Mr. Labonté served as Senior Vice President of EU Marketing from February 2009 to September 2012. Mr. Labonté earned an M.S. in biology from Johann Goethe University in Frankfurt, Germany.
Ulf Kepper  is our Senior Vice President for VWR Services, a position he has held since June 2014. In his current role, Mr. Kepper is responsible for our global service offerings under the VWRCATALYST brand including onsite services to support our customer’s operations. Prior to this role, Mr. Kepper served as Vice President for Global Marketing Services responsible for product data management, marketing communications and e-business. Mr. Kepper earned degrees in computer science and economics from the University of Darmstadt in Darmstadt, Germany.
Douglas J. Pitts  is our Vice President and Corporate Controller, a position he has held since July 2013. In his current role, Mr. Pitts is responsible for our internal and external reporting, as well as managing our system of internal controls. Prior to this role, Mr. Pitts served as Vice President, Internal Audit from 2011 to June 2013 and Vice President and Assistant Corporate Controller from 2007 to 2010. Mr. Pitts earned a B.S. from the University of Illinois. Mr. Pitts is also a Certified Public Accountant.
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Principal Markets for Common Stock
In connection with our initial public offering, our common stock began trading on NASDAQ on October 2, 2014 under the symbol “VWR.” During the period from October 2, 2014 to December 31, 2014, the high and low selling prices of our common stock reported by NASDAQ were $27.14 and $20.60, respectively. At February 27, 2015 , NASDAQ reported that the closing price of our common stock was $24.55.
Holders of Common Stock
As of February 27, 2015 , we had only one holder of record of our common stock, VWR Holdings. This does not include holdings in street or nominee names.
Dividends
On October 1, 2014, we paid a $25.0 million dividend to our then sole shareholder, VWR Holdings, which equated to $0.25 per share.
Prior to our recapitalization on July 31, 2014, our redeemable convertible preferred stock accrued dividends at a rate of 8% per annum, but such dividends were never paid. Following the recapitalization, all accrued but unpaid dividends became available to common stockholders.
Our Senior Credit Facility and Senior Notes include significant restrictions on the ability of our subsidiaries to pay dividends to us. For more information, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 9 to our consolidated financial statements beginning on page F-1 of this report.
We currently do not expect to pay any additional dividends on our common stock.

23


Stock Performance Graph
The following graph compares the return on a $100 investment in our common stock made on October 2, 2014, the day we first began trading on NASDAQ, with a $100 investment also made on October 2, 2014 in the S&P MidCap 400® index and the S&P MidCap 400® Health Care index. The S&P MidCap 400® index is a broad equity market index of companies having market capitalization similar to ours. The S&P MidCap 400® Health Care index is an industry-specific equity market index that we believe closely aligns to us based on the following: (i) the index follows companies of a similar size to us in terms of net sales and market capitalization; (ii) the index includes health care distributors, the segment of the Global Industry Classification Standard, or GICS®, that we believe most closely aligns to us; and (iii) the index includes companies in the Biopharma and healthcare industries, two of our primary customer groups that together comprise approximately half of our net sales.
The information in this section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, except to the extent that we specifically incorporate such information by reference. The stock performance shown below is not necessarily indicative of future performance.
 
October 2,
2014
 
December 31,
2014
VWR Corporation
$
100.00

 
$
123.19

S&P MidCap 400® Index
100.00

 
107.57

S&P MidCap 400® Health Care Index
100.00

 
112.74


24


Use of Proceeds from Registered Securities
On October 7, 2014, we completed our IPO by issuing 25.5 million shares of common stock at a price of $21.00 for aggregate proceeds of $536.2 million. Underwriting discounts, commissions and other estimated offering costs were $34.3 million, resulting in net proceeds of $501.9 million.
On November 5, 2014, the underwriters of the IPO completed the Additional Sale by purchasing an additional 3.9 million shares of common stock at the public offering price of $21.00 per share, representing the sale of substantially all shares available to the underwriters in the over-allotment option granted in connection with the IPO. Aggregate proceeds were $80.4 million. Underwriting discounts, commissions and other estimated offering costs were $4.5 million, resulting in net proceeds to us of $75.9 million.
All of the shares sold in the IPO and the Additional Sale were registered under the Securities Act of 1933, as amended, pursuant to our registration statement on Form S-1 (File 333-196996), which was declared effective by the SEC on October 1, 2014. Following the IPO and the Additional Sale, substantially no additional shares are available for issuance under the aforementioned registration statement. The common shares are listed on NASDAQ under the symbol “VWR.”
We used the net proceeds from the IPO and the Additional Sale to redeem all of the Subordinated Notes and a portion of the borrowings under our credit facilities.
Merrill Lynch, Pierce, Fenner & Smith, Incorporated, Goldman, Sachs & Co. and J.P. Morgan Securities LLC acted as joint book-running managers of the IPO and as representatives of the underwriters. Barclays Capital Inc., Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Jefferies LLC, William Blair & Company, L.L.C., Cowen and Company, LLC, Mizuho Securities USA Inc., SMBC Nikko Securities America, Inc., Drexel Hamilton, LLC and Loop Capital Markets LLC acted as managing underwriters in the IPO.

25


Item 6.
Selected Financial Data
We have derived the selected financial data as of December 31, 2014, 2013 and 2012 and for the years ended December 31, 2014, 2013, 2012 and 2011 from our audited consolidated financial statements and related notes beginning on page F-1 of this report and included in the Prospectus.
We have derived the selected financial data as of December 31, 2011 and 2010 and for the year ended December 31, 2010 from our unaudited consolidated financial statements and related notes, which are not included in this report or the Prospectus. The consolidated financial statements of VWR Funding, our direct wholly-owned subsidiary, have been audited for these periods and are substantially identical to our unaudited consolidated financial statements for such periods, except with respect to redeemable equity and stockholder equity accounts and related disclosures.
The information in this item is only a summary and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes beginning on page F-1 of this report.
The following tables set forth selected financial data as of and for the periods indicated below (in millions, except per share amounts):
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
Statement of Operations Data:
 
 
 
 
 
 
 
 
(Unaudited)
Net sales (1)
$
4,375.3

 
$
4,187.8

 
$
4,129.4

 
$
4,161.1

 
$
3,638.7

Cost of goods sold (1)
3,131.9

 
2,991.5

 
2,962.0

 
2,981.6

 
2,599.8

Gross profit
1,243.4

 
1,196.3

 
1,167.4

 
1,179.5

 
1,038.9

Selling, general and administrative expenses (1)
925.5

 
942.3

 
915.4

 
913.6

 
853.5

Operating income
317.9

 
254.0

 
252.0

 
265.9

 
185.4

Interest expense, net (2)(3)
(166.3
)
 
(190.7
)
 
(199.5
)
 
(199.6
)
 
(202.7
)
Other income (expense), net (4)
90.9

 
(38.8
)
 
(15.1
)
 
21.8

 
66.8

Loss on extinguishment of debt (2)(3)
(5.1
)
 
(2.0
)
 
(25.5
)
 

 

Income before income taxes
237.4

 
22.5

 
11.9

 
88.1

 
49.5

Income tax provision
(84.8
)
 
(8.4
)
 
(8.1
)
 
(30.4
)
 
(28.0
)
Net income
152.6

 
14.1

 
3.8

 
57.7

 
21.5

Accretion of dividends on redeemable convertible preferred stock (5)
(29.4
)
 
(47.9
)
 
(45.5
)
 
(42.4
)
 
(39.0
)
Net income (loss) applicable to common stockholders
$
123.2

 
$
(33.8
)
 
$
(41.7
)
 
$
15.3

 
$
(17.5
)
Earnings (loss) per share: (6)
 
 
 
 
 
 
 
 
 
Basic
$
2.50

 
$
(338.00
)
 
$
(417.00
)
 
$
153.00

 
$
(175.00
)
Diluted
2.49

 
(338.00
)
 
(417.00
)
 
153.00

 
(175.00
)
 
 
 
 
 
 
 
 
 
 
Other Financial Data:
 
 
 
 
 
 
 
 
 
Net cash provided by (used in): (7)
 
 
 
 
 
 
 
 
 
Operating activities
$
191.1

 
$
200.9

 
$
34.7

 
$
139.3

 
$
122.3

Investing activities
(123.0
)
 
(89.5
)
 
(160.9
)
 
(209.2
)
 
(74.4
)
Financing activities
(71.8
)
 
(117.9
)
 
98.3

 
90.3

 
(22.3
)
Depreciation and amortization
129.3

 
130.0

 
125.9

 
120.9

 
116.5

Cash paid for income taxes, net
39.3

 
37.3

 
45.7

 
26.8

 
24.1

Acquisitions of businesses, net of cash acquired (7)
102.9

 
44.4

 
113.3

 
168.5

 
32.8

Capital expenditures
33.6

 
45.3

 
51.8

 
42.5

 
41.6

Gross profit as a percentage of net sales
28.4
%
 
28.6
%
 
28.3
%
 
28.3
%
 
28.6
%
Dividends paid per share (8)
$
0.25

 
$

 
$

 
$

 
$


26


 
December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
Balance Sheet Data:
 
 
 
 
 
 
(Unaudited)
 
(Unaudited)
Cash and cash equivalents (7)
$
118.0

 
$
135.6

 
$
139.8

 
$
164.6

 
$
142.1

Total assets
4,988.8

 
5,209.0

 
5,402.0

 
5,189.7

 
5,001.4

Debt and capital lease obligations (2)
2,111.9

 
2,854.4

 
3,148.6

 
2,908.7

 
2,757.7

Total redeemable equity (8)
51.4

 
670.6

 
627.9

 
610.6

 
562.8

Total stockholder equity (2)(8)
1,339.7

 
425.8

 
406.1

 
404.1

 
452.4

 
(1)
For information about recent changes to net sales, cost of goods sold and selling, general and administrative expense, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” From 2010 to 2011, these same items each grew due to organic operating growth, business acquisitions and the strengthening of foreign currencies against the U.S. dollar at that time.
(2)
In the fourth quarter of 2014, we completed our IPO, including the Additional Sale. We received aggregate net proceeds of $577.8 million , which we used to redeem all of our Subordinated Notes and to repay borrowings under our credit facilities. The repayment of debt caused a loss on extinguishment of debt in 2014, representing the write-off of unamortized deferred financing costs on the Subordinated Notes, and the elimination of interest expense and foreign currency remeasurement in the fourth quarter of 2014 that will continue into future periods. For additional information, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(3)
We have experienced a favorable trend in interest expense, net, and we have incurred losses on extinguishment of debt following various actions we have taken to extend the maturity dates of our debt and to obtain more favorable rates of interest. See “—Results of Operations” and “—Liquidity and Capital Resources” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(4)
We have a significant amount of foreign-denominated debt on our U.S. dollar-denominated balance sheet, the translation of which is reported in other income (expense), net each period. Such gains or losses are unrealized until repayment of the debt and primarily relate to the weakening or strengthening of the euro against the U.S. dollar, respectively.
(5)
The consolidated statement of operations data include the accretion of accrued but unpaid dividends on the redeemable convertible preferred stock for periods prior to July 31, 2014. Following the recapitalization, the accretion of these dividends ceased, and all accrued but unpaid dividends and unreturned capital on the redeemable convertible preferred stock became available to common stockholders.
(6)
For all periods presented, earnings or loss per share has been adjusted for the 102-for-1 stock split that occurred on October 7, 2014. On July 31, 2014, the conversion of all shares of common stock and redeemable convertible preferred stock into newly-issued shares of common stock was considered period activity when calculating earnings or loss per share, which affects the comparability of 2014 results to prior periods.
(7)
Short-term changes in working capital have caused volatility in historical operating cash flows, while changes in investing cash flows were primarily caused by the relative magnitude of business acquisitions completed each year. We manage changes in operating and investing cash flows by utilizing cash on hand and / or availability to borrow under our credit facilities, which contributed to the changes in cash and cash equivalents and financing cash flows. Absent these changes, operating cash flows have generally increased as a result of improvements to our Adjusted EBITDA and lower cash interest paid. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
(8)
In anticipation of our IPO, we recapitalized our equity on July 31, 2014 by (i) exchanging all of our redeemable convertible preferred stock for newly issued common shares and (ii) completing a 102-for-1 stock split. On October 1, 2014 we paid a dividend of $25.0 million to VWR Holdings, who held all 102.0 million shares of our then outstanding common stock.

27


Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes beginning on page F-1. This discussion and analysis contains forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those forward-looking statements. Refer to “Cautionary Factors Regarding Forward-Looking Statements” and Item 1A, “Risk Factors” for additional information.
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 significant market share positions 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 generated net sales of $4,375.3 million , Adjusted EBITDA of $449.4 million , Adjusted Net Income of $159.6 million and net income of $152.6 million for the year ended December 31, 2014 . Since 2006, the year prior to our acquisition by the Sponsors, we have been able to increase net sales and Adjusted EBITDA at compound annual growth rates of 3.8% and 8.5%, respectively, we have improved our gross margin from 27.1% to 28.4% and we have improved our Adjusted EBITDA margin from 7.2% to 10.3% through 2014. See “Key Indicators of Performance and Financial Condition” for the definitions of Adjusted EBITDA and Adjusted Net Income, the reason for their inclusion and a reconciliation to them from net income or loss.
We report financial results on the basis of two reportable segments organized by geographic region: (1) North, Central and South America (collectively, the “Americas”); and (2) Europe, Middle East, Africa and Asia-Pacific (collectively, “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.

28


Initial Public Offering
On October 7, 2014, we completed our IPO by issuing 25.5 million common shares at a price of $21.00 per share. After deducting underwriting discounts, commissions and other offering costs, the IPO resulted in net proceeds of $501.9 million.
On November 5, 2014, the underwriters of the IPO completed the Additional Sale by purchasing an additional 3.9 million shares of common stock at the public offering price of $21.00 per share under an option granted to them in connection with the IPO. After deducting underwriting discounts and commissions, the Additional Sale resulted in net proceeds of $75.9 million.
In anticipation of and in connection with the IPO and the Additional Sale, we entered into a number of transactions (collectively, the “Transactions”) that had a significant impact to our financial position and results of operations:
On July 31, 2014, we completed an internal recapitalization, pursuant to which: (i) all then outstanding equity, consisting of 0.1 million shares of common stock (1,000 shares on a pre-split basis) and 0.4 million shares of redeemable convertible preferred stock, were exchanged for 102.0 million shares (1.0 million shares on a pre-split basis) of newly-issued common stock; and (ii) 204.0 million shares (2.0 million shares on a pre-split basis) of common stock were authorized for issuance.
On October 1, 2014, we paid a $25.0 million dividend to VWR Holdings, who held all 102.0 million shares of our then outstanding common stock.
On October 7, 2014, we: (i) terminated a management services agreement with affiliates of the Sponsors; (ii) executed an income tax receivable agreement with VWR Holdings; (iii) filed an amended and restated certificate of incorporation and amended and restated bylaws; (iv) awarded options to purchase shares of our common stock to certain of our employees and directors under a new stock-based compensation plan; (v) adopted the VWR Corporation Employee Stock Purchase Plan; and (vi) received the net proceeds from the sale of common shares in the IPO. For additional information, see Notes 13 , 14 and 21 to the consolidated financial statements beginning on page F-1 of this report.
On October 7, 2014 and November 5, 2014, we received the net proceeds from the sales of common shares in the IPO and the Additional Sale, respectively. We used the proceeds to redeem all of the Subordinated Notes and a portion of the borrowings under our credit facilities.
Our consolidated balance sheet at December 31, 2014 reflects all of the Transactions, and we have provided an unaudited consolidated pro forma statement of operations to present the effect the Transactions would have had on our results of operations had they occurred on January 1, 2013. See Note 25 to the consolidated financial statements beginning on page F-1 of this report.
As a result of the initial public offering, we expect our future results to reflect significant reductions in cash interest expense, net of taxes, which we expect to be partially offset by cash payments to our Sponsors pursuant to the ITRA. We also expect our future results to reflect less exposure from the remeasurement of foreign-denominated debt to changes in foreign currency rates. A significant amount of euro-denominated debt was redeemed using the net proceeds of the IPO and the Additional Sale, which has since been partially offset by new euro-denominated borrowings under our credit facility in January 2015.

29


Trends and Key Factors Affecting our Performance and Financial Condition
We believe the following trends and key factors have affected our recent operating results and are likely to continue to affect our performance and financial condition.
Foreign Currency
Our operations span the globe. Approximately one half of our net sales originate in currencies other than the U.S. dollar — principally the euro, as well as the British pound sterling, the Canadian dollar and the Swiss franc. As a result, changes in foreign currency exchange rates impact our reported results. Our results from comparable operations exclude the effect of foreign currency translation. See “Key Indicators of Performance and Financial Condition” for additional information.
We have a significant amount of foreign-denominated debt on our U.S. dollar-denominated balance sheet, the translation of which is reported in other income (expense), net each period. Such gains or losses are unrealized until repayment of the debt and relate to the weakening or strengthening, respectively, of the euro against the U.S. dollar. We expect this exposure to be partially mitigated by the redemption of our euro-denominated Subordinated Notes as previously discussed.
Recently, spot rates for the euro, the British pound sterling and the Canadian dollar have weakened compared to the U.S. dollar. For example, the average euro exchange rate for the first quarter of 2014 was $1.37 = €1.00, whereas the euro exchange rate at February 27, 2015 was $1.12 = €1.00, an 18.2% decline. The weakening of these foreign currency exchange rates could impact us in 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 for the year ended December 31, 2014, approximately one-half were foreign-denominated. In order to partially offset our exposure to these recent changes, in January 2015 we borrowed €88.5 million under our euro-denominated credit facilities to repay $101.2 million of borrowings under our U.S. denominated credit facilities.
We are not able to predict the impact that changes in currency exchange rates will have on our operating results, but their impact could be significant. Because any such changes would not require cash settlement in the near-term, we have determined not to hedge these risks through derivative contracts. For additional information about the effect of foreign currency exchange rates on our results of operations, see Item 7A, “Qualitative and Quantitative Disclosures about Market Risk.”
Acquisitions
Since the VWR Acquisition, we have completed 37 business acquisitions. These acquisitions have broadened our product offerings, strengthened our existing market positions and expanded our geographic presence. As part of our business strategy, we expect to pursue additional acquisition opportunities.
We are typically able to improve the profitability of acquired businesses by integrating them into our enterprise resource planning and web systems, streamlining various back-office functions and consolidating facilities when appropriate. In most cases, these measures generate cost savings that exceed any near-term disruptions that such businesses may experience. We also analyze their operations to identify any new suppliers, customers, products and other capabilities that we can leverage across operations on a local, regional and global basis. It generally takes us between 12 and 18 months to realize the benefits of this strategy.
We include the operating results of acquired companies in our consolidated results of operations from their respective dates of acquisition. As a result, the number, timing and relative size of our acquisitions that we complete in any period impacts the comparability of our period-to-period operating results. Our results from comparable operations exclude the effect of recent acquisitions to the extent they were not present in the comparable prior period. See “Key Indicators of Performance and Financial Condition” for additional information.
For additional information regarding our recent acquisitions, see Note 5 to our consolidated financial statements beginning on page F-1 of this report.

30


Mix of Products Sold
We offer one of the broadest portfolios of branded and private label laboratory products in our industry and a full range of value-added services, including custom manufacturing. We typically realize differing gross margins on these products and services, with greater gross margin coming from the sale of private label products as well as chemicals and reagents that we manufacture. Private label products, which enhance customer choice with lower cost alternatives, represented 19% of our 2014 product sales. We intend to further expand our private label product offering through focused sales and marketing efforts to offer our customers both branded and private label products. We also offer custom manufactured chemicals, including buffers, reagents and other chemicals used in biopharmaceutical and industrial applications and production process. We are focused on enhancing our capabilities as a manufacturer of high quality biochemicals, chemicals and reagents that generally do not conflict with the offering of our existing supplier base. The mix of products sold by us in any given period will impact our gross margin.
Recent Initiatives in our Americas Segment
Excluding the effect of foreign currency and acquisitions, our Americas segment experienced an increase in comparable net sales in 2014. Prior to this, our Americas segment had experienced declines in comparable net sales for recent historical periods. Net sales in our Americas segment were $2,430.1 million , $2,352.7 million and $2,400.9 million for the years ended December 31, 2014, 2013 and 2012, respectively. We believe that the future operating results of our Americas segment will be positively impacted by the recent strategic initiatives we have implemented as discussed below.
The Americas segment recently completed a series of initiatives to significantly upgrade its information technology infrastructure, optimize its U.S. distribution network and modify its marketing strategy. We implemented a new enterprise resource planning system and an e-commerce platform to better support our new marketing initiatives, growing infrastructure and integration of acquired companies. We opened a new 500,000 square foot warehouse facility in central California, strategically located to reduce shipping costs and improve delivery time to our customers throughout the western United States. We also shifted our North American regional go-to-market (“GTM”) strategy to a customer segment-specific approach, which we believe allows us to better address the unique needs of our customers.
All these initiatives were completed during 2012 and 2013, required a capital investment of approximately $70 million, resulted in charges for restructuring and other cost reduction initiatives and caused some disruption to our business over that period. Our 2014 operating results in the Americas segment were positively impacted by these initiatives, including improved U.S. sales performance and customer satisfaction and lower support costs for infrastructure. We believe that the impact of these initiatives will continue to affect our operating results in future periods.
European Systems, Infrastructure and Strategy
Our European operations benefit from a highly integrated and robust enterprise resource planning system, efficient distribution infrastructure and customer segment-specific GTM strategy. For example, our European business has operated on a common, highly integrated enterprise resource planning system for more than 12 years, enabling a stable and efficient distribution model, and a customer segment-specific GTM strategy, including advanced and tailored marketing materials, which was implemented over the past several years. Our enterprise resource planning system has also enabled us to rapidly integrate the operations of newly acquired companies. In July 2014, we launched our new, feature-rich e-commerce platform in EMEA-APAC, which we first introduced in the United States in April 2012.
We believe our Pan-European platform and acquisition strategy have increased our customer penetration and product offerings, which have collectively resulted in strong revenue growth and improved margins. Our strengthened market leadership position in Europe gives us the opportunity to continue to achieve strong financial results.
Relationship with Merck KGaA
We benefit from our longstanding and strong relationship with Merck KGaA and its affiliates. Our business operated as a division of Merck KGaA from 1999 until we were acquired by a private equity firm in 2004. In connection with that disposition, Merck KGaA agreed to enter into a long-term, exclusive supply agreement with us primarily covering Western Europe, which had an initial five-year term that was subsequently extended for an additional five-year period. In April 2014, we began operating under new, non-exclusive supply agreements that extend through December 2018. These new agreements govern a portion of our overall sales of products from Merck KGaA in Europe and provide us with preferred, non-exclusive access to Merck KGaA’s branded products across multiple jurisdictions. The new agreements include less favorable pricing terms to us than our previous agreement, which began negatively impacting our comparable gross margin in April 2014 and which offset other improvements to gross margin during 2014. We expect that the year-over-year impact of these changes will substantially cease beginning in the second quarter of 2015.

31


Capital Structure
As a result of the VWR Acquisition, we carry significant amounts of goodwill, other intangible assets and debt on our balance sheet. This has caused us to report significant amounts of amortization and interest expense and to pay significant amounts of cash for interest. We have also recognized impairment charges on our goodwill and other intangible assets. A large portion of our goodwill, other intangible assets and debt are denominated in currencies other than the U.S. dollar, which causes us to report significant currency translation adjustments. We have also taken a number of actions to address pending maturity dates on our indebtedness and to take advantage of strong debt markets, which has caused us to record losses on extinguishment of debt while lowering interest expense and cash paid for interest prospectively.
We continually monitor the capital markets for financing opportunities. The majority of our long-term debt obligations will mature during 2016 and 2017. We intend to reduce our net leverage in advance of these maturities as we seek to refinance or otherwise satisfy these debt obligations.
Restructuring and Other Cost Reduction Initiatives
During September 2013, we initiated a global restructuring program designed to enhance interaction with our customers and suppliers, improve the efficiency of our operations and reduce operating expenses. In connection with these actions, we recognized restructuring charges of $32.5 million during the year ended December 31, 2013 and expect to realize approximately $38 million of savings from this program when fully implemented, the substantial majority of which we realized during 2014.
From time to time, we have undertaken other cost reduction initiatives including severance and facility closure costs. Expenses associated with such actions were $16.9 million for the year ended December 31, 2012.
For additional information, see Note 15 to our consolidated financial statements beginning on page F-1 of this report
Seasonality and Inflation
Neither seasonality nor inflation have had a significant impact on our historical results of operations or financial condition. Although the prices we pay for our products may increase, we believe we will continue to be able to pass through the majority of these increases to our customers. However, our earnings and cash flows could be adversely affected if we are unable to pass through future cost increases arising from inflation.
Due to VWR Holdings — Income Tax Receivable Agreement
On October 7, 2014, we entered into an 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. As noted previously, our Sponsors own a controlling interest in VWR Holdings.
At December 31, 2014, we reported a liability of $172.9 million due to VWR Holdings related to the ITRA. The value of the ITRA liability is based upon the expected future value of our net operating loss carryforwards. Changes to the value of the ITRA liability will be presented as other income (expense), net in the consolidated statement of operations. As a result, any changes that might occur to the valuation allowance with respect to our domestic deferred tax assets, which would be included in income tax expense or benefit, would be substantially offset by opposite changes in the value of the ITRA liability. Therefore, our net income exposure from changes in valuation allowance has been substantially reduced as a result of the ITRA.
The timing of payments under the ITRA correspond to the beginning of the year in which the net operating loss carryforwards will be claimed on our tax return. We expect to make our first payment under the ITRA of $9.8 million in March 2015, which is presented within other current liabilities on our consolidated balance sheet.

32


Key Indicators of Performance and Financial Condition
To evaluate our performance, we monitor a number of key indicators of our performance and financial condition, some of which are non-GAAP financial measurements. The key indicators that we monitor are as follows:
Net sales and operating income , 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 , which we also discuss as a percentage of net sales (“ Adjusted EBITDA margin ”), Adjusted Net Income and Adjusted EPS . Adjusted EBITDA, Adjusted Net Income and Adjusted EPS 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 these indicators from net income or loss, 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 “Results of Operations” under the subheading “Adjusted EBITDA, Adjusted Net Income and Adjusted EPS;”
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. Net Leverage is calculated by dividing our Net Debt by our Adjusted EBITDA for the latest twelve-month period. A reconciliation of Net Debt from total debt and capital lease obligations, the most directly comparable GAAP-based financial measurement, and the calculation of Net Leverage 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 “Historical Cash Flows.”
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.

33


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 years ended December 31, 2014 and 2013 and for the years ended December 31, 2013 and 2012. We have derived this data from our consolidated financial statements beginning on page F-1 of this report.
The following table presents a summary of our results of operations (dollars in millions, except per share data):
 
Year Ended December 31,
 
Change — 2014 vs. 2013
 
Change — 2013 vs. 2012
 
2014
 
2013
 
2012
 
Amount
 
%
 
Amount
 
%
Net sales
$
4,375.3

 
$
4,187.8

 
$
4,129.4

 
$
187.5

 
4.5
%
 
$
58.4

 
1.4
%
Gross margin
28.4
%
 
28.6
%
 
28.3
%
 
(20
)
basis points
 
30

basis points
Operating income
$
317.9

 
$
254.0

 
$
252.0

 
$
63.9

 
25.2
%
 
$
2.0

 
0.8
%
Net income
152.6

 
14.1

 
3.8

 
138.5

 
**

 
10.3

 
**

Adjusted EBITDA*
449.4

 
418.5

 
401.5

 
30.9

 
7.4
%
 
17.0

 
4.2
%
Adjusted EBITDA margin*
10.3
%
 
10.0
%
 
9.7
%
 
30

basis points
 
30

basis points
Adjusted Net Income*
$
159.6

 
$
123.6

 
$
102.2

 
$
36.0

 
29.1
%
 
$
21.4

 
20.9
%
Adjusted EPS*
1.21

 
0.94

 
0.78

 
0.27

 
28.7
%
 
0.16

 
20.5
%
 
*
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 consolidated results of operations:
We achieved record operating results during 2014, including net sales of $4.4 billion , operating income of $317.9 million , Adjusted EBITDA of $449.4 million and Adjusted Net Income of $159.6 million .
Net sales improved in 2014, reflecting a turnaround in our Americas segment and continued strong performance in our EMEA-APAC segment. Comparable net sales growth accelerated in the Americas; volume grew from recent investments in infrastructure and management and a strategic shift to a more targeted, customer-centric sales approach, and pricing was higher on our suite of products and services. Comparable net sales growth in our EMEA-APAC continued to exceed our estimates of market growth in those regions.
We were more profitable in 2014, achieving record Adjusted EBITDA margin of 10.3% . Excluding restructuring charges, we improved comparable SG&A expenses as a percentage of net sales, reflecting cost reductions in 2014 from a restructuring program, partially offset by the changes to our agreements with Merck KGaA in Europe, which negatively impacted our margins.
Net income, Adjusted Net Income and Adjusted EPS benefited from reductions in our interest expense following the redemption of our Subordinated Notes and amendments to our credit facilities. During 2014, interest on the Subordinated Notes was $47.2 million, the absence of which will favorably impact our 2015 results.
Business acquisitions continued to improve our operating results from 2012 to 2014.
Generally, changes in foreign currency exchange rates slightly lowered our operating results in 2014. Recently, spot rates for many foreign currencies, particularly the euro, have weakened considerably compared to the U.S. dollar. This will reduce our reported results in 2015 unless these currencies strengthen against the U.S. dollar later in the year.
Net income continued to experience significant changes due to the remeasurement of euro-denominated debt on our U.S. dollar-denominated balance sheet, which was significant and varied from year to year. Although we redeemed a significant portion of our euro-denominated debt, we expect continued volatility in future periods. We lowered interest expense in 2014 as discussed above, but we also incurred losses on the extinguishment of debt, which varied from year to year.

34


Comparison of Years Ended December 31, 2014 and 2013
Net Sales
The following table presents net sales and net sales changes by reportable segment (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2014
 
2013
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Americas
$
2,430.1

 
$
2,352.7

 
$
77.4

 
3.3
%
 
$
(18.7
)
 
$
47.0

 
$
49.1

 
2.1
%
EMEA-APAC
1,945.2

 
1,835.1

 
110.1

 
6.0
%
 
0.1

 
27.5

 
82.5

 
4.5
%
Total
$
4,375.3

 
$
4,187.8

 
$
187.5

 
4.5
%
 
$
(18.6
)
 
$
74.5

 
$
131.6

 
3.1
%
Net sales from comparable operations for the year ended December 31, 2014 increase d $131.6 million or 3.1% compared to the prior year. The increase was primarily attributable to higher sales volume and pricing.
Net sales from comparable operations in our Americas segment for the year ended December 31, 2014 increase d $49.1 million or 2.1% compared to the prior year. Volume increased as a result of recent initiatives that were put in place to improve Americas segment performance. These initiatives include investments in infrastructure and management and a strategic shift to a more targeted, customer-centric sales approach. Pricing also improved the year-over-year result. Comparable net sales declined on a year over year basis in the first quarter of fiscal 2014, were slightly positive in the second quarter and accelerated to our strongest growth in the fourth quarter of 2014. Net sales to Biopharma and industrial customers as a group increased by low to mid single-digit rates compared to prior year, with the fourth quarter showing mid to high single-digit growth. Net sales to educational and governmental customers decreased by low to mid single-digit rates compared to prior year but improved during the year, with the fourth quarter showing low to mid single-digit growth. Net sales of consumables increased by low to mid single-digit rates, while net sales of durable goods and equipment were flat.
Net sales from comparable operations in our EMEA-APAC segment for the year ended December 31, 2014 increase d $82.5 million or 4.5% compared to the prior year. The increase in net sales was driven by consistently higher sales volume throughout the year, which exceeded our estimates of 2% to 2.5% market growth in those regions. Net sales improved across all primary product groups and customer segments by mid to high single-digit rates. Net sales were particularly strong for private label consumables and durable goods and equipment, which grew by low double-digit rates, and private label chemicals, which grew by high single-digit rates.
Gross Profit
The following table presents gross profit, gross margin and changes therein (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2014
 
2013
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Gross profit
$
1,243.4

 
$
1,196.3

 
$
47.1

 
3.9
%
 
$
(4.5
)
 
$
25.7

 
$
25.9

 
2.2
%
Gross margin
28.4
%
 
28.6
%
 
(20
)
basis points
Gross profit from comparable operations for the year ended December 31, 2014 increase d $25.9 million or 2.2% compared to the prior year. The increase was caused by comparable net sales growth, partially offset by lower gross margin.
Gross margin for the year ended December 31, 2014 decrease d 20 basis points to 28.4% compared to the prior year. Changes to our agreements with Merck KGaA negatively impacted our gross margins, particularly in the EMEA-APAC segment, as discussed previously in “Trends and Key Factors Affecting our Performance and Financial Condition.” We expect that the year-over-year impact of these changes will substantially cease beginning in the second quarter of 2015. These changes were substantially offset by higher pricing and, to a lesser extent, a more favorable product and customer sales mix in the Americas.

35


SG&A Expenses
The following table presents SG&A expenses, SG&A expenses as a percentage of net sales and changes therein (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2014
 
2013
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
SG&A expenses
$
925.5

 
$
942.3

 
$
(16.8
)
 
(1.8
)%
 
$
(5.8
)
 
$
19.8

 
$
(30.8
)
 
(3.3
)%
SG&A expenses as a percentage of net sales
21.2
%
 
22.5
%
 
(130
)
basis points
SG&A expenses from comparable operations for the year ended December 31, 2014 decrease d $30.8 million or 3.3% compared to the prior year. During 2013, we incurred $31.7 million of charges related to our global restructuring program and $2.2 million of charges related to executive departures that were not present in 2014. Absent these items, SG&A expenses from comparable operations were flat, but decreased as a percentage of net sales. Increased employee compensation provisions in 2014, including the expense related to new stock option awards, were substantially offset by lower overall personnel costs in 2014, including savings from our 2013 global restructuring program. We also recognized a gain on the partial settlement of our U.S. Retirement Plan obligations, and we terminated the management services agreement with our Sponsors in the fourth quarter of 2014. For more information about our restructuring programs, our stock options, the partial settlement of our U.S. Retirement Plan and the termination of the management services agreement, see Notes 15 , 14 , 16 and 21 , respectively, to our consolidated financial statements beginning on page F-1 of this report.
Operating Income
The following table presents operating income and operating income changes by reportable segment (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2014
 
2013
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Americas
$
141.0

 
$
115.8

 
$
25.2

 
21.8
%
 
$
1.1

 
$
3.4

 
$
20.7

 
17.9
%
EMEA-APAC
176.9

 
138.2

 
38.7

 
28.0
%
 
0.2

 
2.5

 
36.0

 
26.0
%
Total
$
317.9

 
$
254.0

 
$
63.9

 
25.2
%
 
$
1.3

 
$
5.9

 
$
56.7

 
22.3
%
Operating income from comparable operations for the year ended December 31, 2014 increase d $56.7 million or 22.3% compared to the prior year. Absent the 2013 charges for restructuring and executive departures discussed previously, operating income from comparable operations increased primarily due to comparable improvements in gross profit.
Operating income from comparable operations in our Americas segment for the year ended December 31, 2014 increase d $20.7 million or 17.9% compared to the prior year. During 2013, we recognized $7.6 million of restructuring charges and $2.2 million of charges related to executive departures that were not present in 2014. The remaining increase in comparable operating income was caused by higher net sales volume and pricing and the changes in SG&A expenses described previously.
Operating income from comparable operations in our EMEA-APAC segment for the year ended December 31, 2014 increase d $36.0 million or 26.0% compared to the prior year. During 2013, we recognized $24.1 million of restructuring charges that were not present in 2014. The remaining increase in operating income was primarily due to higher net sales volume and lower overall personnel costs resulting from our 2013 global restructuring program, partially offset by increased employee compensation provisions, including the expense related to new stock option awards.

36


Interest Expense, Net of Interest Income
Interest expense, net of interest income, for the years ended December 31, 2014 and 2013 was $166.3 million and $190.7 million , respectively, a decrease of $24.4 million or 12.8% . Net interest expense decreased as a result of lower rates of interest on our term loans, which we refinanced in January 2014, the redemption of our Subordinated Notes in the fourth quarter of 2014 using the net proceeds from the IPO and the Additional Sale and lower average borrowings under our multi-currency revolving loan facility.
During 2014, interest on the Subordinated Notes was $47.2 million, the absence of which will favorably impact interest expense in 2015.
Other Income (Expense), Net
Other income (expense), net, for the years ended December 31, 2014 and 2013 was $90.9 million and $(38.8) million , respectively. Other income (expense), net, represents the net foreign currency remeasurement gain or loss on our foreign-denominated debt, which fluctuates with changes in currency exchange rates, particularly with respect to the euro.
Loss on Extinguishment of Debt
We recognized a loss on extinguishment of debt of $5.1 million for the year ended December 31, 2014 , representing the write-off of unamortized deferred financing costs following the redemption of our Subordinated Notes in the fourth quarter of 2014. We recognized a loss on extinguishment of debt of $2.0 million for the year ended December 31, 2013, representing the write-off of unamortized deferred financing costs following an amendment of our Senior Credit Facility on January 31, 2013.
Income Taxes
We recognized income tax provisions of $84.8 million and $8.4 million for the years ended December 31, 2014 and 2013 , respectively. For more information about the components of our income tax provisions, and a reconciliation of our income tax provisions to income taxes calculated at the U.S. federal statutory rate, see Note 19 to our consolidated financial statements beginning on page F-1 of this report.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted EPS
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted EPS are non-GAAP financial measurements used by our investors, creditors and management to measure and evaluate our operating performance. We strongly encourage readers to review our results of operations in their entirety and not to rely solely on any one, single financial measure. See “Key Indicators of Performance and Financial Condition.”
The following table presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS and changes therein (dollars in millions, except per share amounts):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2014
 
2013
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Adjusted EBITDA
$
449.4

 
$
418.5

 
$
30.9

 
7.4
%
 
$
(1.3
)
 
$
8.3

 
$
23.9

 
5.7
%
Adjusted EBITDA margin
10.3
%
 
10.0
%
 
30

basis points
Adjusted Net Income
$
159.6

 
$
123.6

 
$
36.0

 
29.1
%
 
 
 
 
 
 
 
 
Adjusted EPS
1.21

 
0.94

 
0.27

 
28.7
%
 
 
 
 
 
 
 
 

37


Adjusted EBITDA from comparable operations for the year ended December 31, 2014 increase d $23.9 million or 5.7% compared to the prior year. The increase was caused by the comparable improvement in operating income of $56.7 million discussed previously, reduced by $32.5 million for restructuring charges that were present in 2013 and absent in 2014, as such charges are excluded from Adjusted EBITDA.
Adjusted EBITDA margin increased 30 basis points to 10.3% due to lower SG&A expenses as a percentage of net sales, primarily the result of cost savings in 2014 stemming from the 2013 restructuring program. This improvement was partially offset by the changes to our agreements with Merck KGaA in Europe, which negatively impacted our margins.
Adjusted Net Income for the year ended December 31, 2014 increased $36.0 million or 29.1% compared to the prior year. The increase was caused by the same factors that caused our Adjusted EBITDA to increase and also includes the $24.4 million decrease in net interest expense previously discussed, both net of income taxes.
Adjusted EPS for the year ended December 31, 2014 increased $0.27 or 28.7% as a result of the increase to Adjusted Net Income.
The following table presents the reconciliations of Adjusted Net Income, Adjusted EBITDA and Adjusted EPS from net income or loss (in millions, except per share amounts):
 
Year Ended December 31,
 
2014
 
2013
Net income
$
152.6

 
$
14.1

Pre-tax adjustments:
 
 
 
Amortization of acquired intangible assets
88.9

 
91.7

Net foreign currency remeasurement (gain) loss from financing activities
(90.9
)
 
38.0

Charges for restructuring and other cost reduction initiatives

 
32.5

Impairment charges
11.3

 

Gain on disposition of business
(11.1
)
 

Loss on extinguishment of debt
5.1

 
2.0

Charges associated with executive departures

 
2.2

Share-based compensation expense
2.0

 
0.6

Income tax provision (benefit) applicable to pre-tax adjustments
1.7

 
(57.5
)
Adjusted Net Income
159.6

 
123.6

Interest expense, net of interest income
166.3

 
190.7

Depreciation expense
40.4

 
38.3

Income tax provision applicable to Adjusted Net Income
83.1

 
65.9

Adjusted EBITDA
$
449.4

 
$
418.5

 
 
 
 
Adjusted EPS
$
1.21

 
$
0.94

 
 
 
 
Weighted average shares outstanding, diluted
49.5

 
0.1

Normalization for recent share activity*
82.0

 
131.3

Adjusted weighted average shares outstanding, diluted
131.5

 
131.4

 
*
This adjustment states adjusted weighted average shares outstanding, diluted, at the amounts that would have been reported under GAAP had the IPO, the Additional Sale and the recapitalization occurred on January 1 of each year presented.

38


Comparison of Years Ended December 31, 2013 and 2012
Net Sales
The following table presents net sales and net sales changes by reportable segment (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2013
 
2012
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Americas
$
2,352.7

 
$
2,400.9

 
$
(48.2
)
 
(2.0
)%
 
$
(6.8
)
 
$
27.4

 
$
(68.8
)
 
(2.9
)%
EMEA-APAC
1,835.1

 
1,728.5

 
106.6

 
6.2
 %
 
40.0

 
61.0

 
5.6

 
0.3
 %
Total
$
4,187.8

 
$
4,129.4

 
$
58.4

 
1.4
 %
 
$
33.2

 
$
88.4

 
$
(63.2
)
 
(1.5
)%
Net sales from comparable operations for the year ended December 31, 2013 decreased $63.2 million or 1.5% compared to the prior year. The decrease was primarily due to a reduction in sales volume in our Americas segment.
Net sales from comparable operations in our Americas segment for the year ended December 31, 2013 decreased $68.8 million or 2.9% compared to the prior year. Net sales of durable goods and equipment increased slightly, while net sales of consumable products decreased by low single-digit rates. Net sales across all primary customer channels were flat or decreased by low single-digit rates.
Net sales from comparable operations in our EMEA-APAC segment for the year ended December 31, 2013 increased $5.6 million or 0.3% compared to the prior year. Net sales of consumable products increased by low single-digit rates, while net sales of durable goods and equipment decreased by low single-digit rates. Net sales to Biopharma, industrial and other customers increased by low single-digit rates. Net sales to education customers and governmental entities were generally flat.
Gross Profit
The following table presents gross profit, gross margin and changes therein (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2013
 
2012
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Gross profit
$
1,196.3

 
$
1,167.4

 
$
28.9

 
2.5
%
 
$
11.5

 
$
28.0

 
$
(10.6
)
 
(0.9
)%
Gross margin
28.6
%
 
28.3
%
 
30

basis points
Gross profit from comparable operations for the year ended December 31, 2013 decreased $10.6 million or 0.9% compared to the prior year. The impact of lower sales volumes in the Americas was partially offset by a favorable sales mix and higher sales volume in EMEA-APAC.
Gross margin for the year ended December 31, 2013 was 28.6%, a 30 basis point increase compared to the prior year. Gross margin performance in 2013 was positively influenced by a more favorable product and customer sales mix in our EMEA-APAC segment, partially offset by an unfavorable product sales mix in our Americas segment and, more globally, an increasingly competitive pricing environment. In 2012, our consolidated gross margin was negatively impacted by unfavorable product costs associated with lower rebates earned from suppliers as compared to 2013.

39


SG&A Expenses
The following table presents SG&A expenses, SG&A expenses as a percentage of net sales and changes therein (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2013
 
2012
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
SG&A expenses
$
942.3

 
$
915.4

 
$
26.9

 
2.9
%
 
$
9.2

 
$
23.5

 
$
(5.8
)
 
(0.6
)%
SG&A expenses as a percentage of net sales
22.5
%
 
22.2
%
 
30

basis points
SG&A expenses from comparable operations for the year ended December 31, 2013 decreased $5.8 million or 0.6% compared to the prior year. The decrease was primarily attributable to lower overall personnel costs and a decrease of $4.0 million in severance charges associated with executive departures, partially offset by increases of $14.8 million in restructuring charges and $6.6 million related to our performance-based cash incentive compensation program.
SG&A expenses for 2013 included $31.7 million for charges associated with our 2013 global restructuring program, of which $7.6 million was for Americas and $24.1 million was for EMEA-APAC (including $3.2 million in non-cash charges recognized in our Asia-Pacific operations). SG&A expenses for 2012 included $16.9 million for charges associated with implementing cost reduction initiatives, of which $5.4 million was for Americas (including $4.0 million related to lease and pension costs associated with the closure of a regional distribution center in Brisbane, California) and $11.5 million was for EMEA-APAC (primarily severance and personnel costs).
Operating Income
The following table presents operating income and operating income changes by reportable segment (dollars in millions):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2013
 
2012
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Americas
$
115.8

 
$
123.2

 
$
(7.4
)
 
(6.0
)%
 
$
0.2

 
$

 
$
(7.6
)
 
(6.2
)%
EMEA-APAC
138.2

 
128.8

 
9.4

 
7.3
 %
 
2.1

 
4.5

 
2.8

 
2.2
 %
Total
$
254.0

 
$
252.0

 
$
2.0

 
0.8
 %
 
$
2.3

 
$
4.5

 
$
(4.8
)
 
(1.9
)%
Operating income from comparable operations for the year ended December 31, 2013 decreased $4.8 million or 1.9% compared to the prior year. The decrease was due to lower comparable gross profit of $10.6 million, partially offset by a decrease in comparable SG&A expense of $5.8 million.
Operating income from comparable operations in the Americas segment for the year ended December 31, 2013 decreased $7.6 million or 6.2% compared to the prior year. The decrease was due to a decrease in gross profit, primarily attributable to lower sales volume, partially offset by a decrease in SG&A expenses, largely attributable to the implementation of cost reduction initiatives.
Operating income from comparable operations in our EMEA-APAC segment for the year ended December 31, 2013 increased $2.8 million or 2.2% compared to the prior period. The increase was due to an increase in gross profit, attributable to higher sales volume and a favorable sales mix, partially offset by an increase in SG&A expenses, largely attributable to increased charges for restructuring and incentive compensation.

40


Interest Expense, Net of Interest Income
Interest expense, net of interest income, for the years ended December 31, 2013 and 2012 was $190.7 million and $199.5 million, respectively, a decrease of $8.8 million or 4.4%. The decrease was primarily attributable to the maturity of our interest rate swap arrangements in 2012, a reduction in amortization of deferred debt issuance costs and net savings associated with the recent refinancings of our Senior Credit Facility and our Senior Notes, partially offset by increased interest associated with higher average aggregate borrowings under our A/R Facility and our multi-currency revolving loan facility in 2013.
Other Income (Expense), Net
Other income (expense), net, for the years ended December 31, 2013 and 2012 was $(38.8) million and $(15.1) million, respectively, and consisted primarily of the net foreign currency remeasurement gain or loss on our foreign-denominated debt, which fluctuates with changes in currency exchange rates, particularly with respect to the euro. Other income (expense), net for the year ended December 31, 2012 also includes $0.7 million of third-party fees and fees paid to lenders associated with an amendment to our Senior Credit Facility.
Loss on Extinguishment of Debt
We recognized a loss on extinguishment of debt of $2.0 million for the year ended December 31, 2013, representing the write-off of unamortized deferred financing costs following an amendment of our Senior Credit Facility on January 31, 2013. In connection with the issuance of the Senior Notes in 2012 to refinance our previously issued senior notes, we recognized a loss on extinguishment of debt of $25.5 million. The loss included $18.7 million in tender and redemption premiums paid, $6.6 million for the write-off of unamortized deferred financing costs and $0.2 million of third-party fees and fees paid to lenders.
Income Taxes
We recognized income tax provisions of $8.4 million and $8.1 million for the years ended December 31, 2013 and 2012, respectively. For more information about the components of our income tax provisions, and a reconciliation of our income tax provisions to income taxes calculated at the U.S. federal statutory rate, see Note 19 to our consolidated financial statements beginning on page F-1 of this report.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted EPS
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted EPS are non-GAAP financial measurements used by our investors, creditors and management to measure and evaluate our operating performance. We strongly encourage readers to review our results of operations in their entirety and not to rely solely on any one, single financial measure. See “Key Indicators of Performance and Financial Condition.”
The following table presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS and changes therein (dollars in millions, except per share amounts):
 
 
 
 
 
 
 
Components of Reported Change
 
Year Ended December 31,
 
Reported Change
 
 
 
 
 
Comparable Operations
 
2013
 
2012
 
Amount
 
%
 
Currency
 
Acquisitions
 
Amount
 
%
Adjusted EBITDA
$
418.5

 
$
401.5

 
$
17.0

 
4.2
%
 
$
3.3

 
$
7.2

 
$
6.5

 
1.6
%
Adjusted EBITDA margin
10.0
%
 
9.7
%
 
30

basis points
Adjusted Net Income
$
123.6

 
$
102.2

 
$
21.4

 
20.9
%
 
 
 
 
 

 

Adjusted EPS
0.94

 
0.78

 
0.16

 
20.5
%
 
 
 
 
 

 


41


Adjusted EBITDA from comparable operations for the year ended December 31, 2013 increased $6.5 million or 1.6% compared to the prior year. Adjusted EBITDA margin increased 30 basis points . The increase was primarily due to reductions in SG&A expenses when excluding the impact of charges for restructuring and other cost reduction initiatives, executive departures and certain others items which are excluded from the calculation of Adjusted EBITDA.
Adjusted Net Income for the year ended December 31, 2013 increased $21.4 million or 20.9% compared to the prior period. The increase in Adjusted Net Income was primarily due to the increase in Adjusted EBITDA and the $8.8 million reduction in net interest expense discussed previously, both net of income taxes.
Adjusted EPS for the year ended December 31, 2013 increased $0.16 or 20.5% as a result of the increase to Adjusted Net Income discussed previously.
The following table presents the reconciliations of Adjusted Net Income, Adjusted EBITDA and Adjusted EPS from net income or loss (in millions, except per share amounts):
 
Year Ended December 31,
 
2013
 
2012
Net income
$
14.1

 
$
3.8

Pre-tax adjustments:
 
 
 
Amortization of acquired intangible assets
91.7

 
89.9

Net foreign currency remeasurement loss from financing activities
38.0

 
16.0

Charges for restructuring and other cost reduction initiatives
32.5

 
16.9

Loss on extinguishment of debt
2.0

 
25.5

Charges associated with executive departures
2.2

 
6.2

Share-based compensation expense
0.6

 
0.9

Other

 
(1.3
)
Income tax benefit applicable to pre-tax adjustments
(57.5
)
 
(55.7
)
Adjusted Net Income
123.6

 
102.2

Interest expense, net of interest income
190.7

 
199.5

Depreciation expense
38.3

 
36.0

Income tax provision applicable to Adjusted Net Income
65.9

 
63.8

Adjusted EBITDA
$
418.5

 
$
401.5

 
 
 
 
Adjusted EPS
$
0.94

 
$
0.78

 
 
 
 
Weighted average shares outstanding, diluted
0.1

 
0.1

Normalization for recent share activity*
131.3

 
131.3

Adjusted weighted average shares outstanding, diluted
131.4

 
131.4

 
*
This adjustment states adjusted weighted average shares outstanding, diluted, at the amounts that would have been reported under GAAP had the IPO, the Additional Sale and the recapitalization occurred on January 1 of each year presented.

42


Liquidity and Capital Resources
We fund our business primarily from operating cash flows and liquidity from cash on hand and our credit facilities. Operating cash flows were $191.1 million for the year ended December 31, 2014 . At December 31, 2014 , we had $118.0 million of cash and cash equivalents on hand, and we had aggregate unused availability of $285.1 million under our credit facilities. Most of our cash on hand resides outside of the United States; we do not intend to repatriate our foreign cash and cash equivalents.
We use cash to satisfy our contractual obligations and to fund other non-contractual business needs. Our most significant contractual obligations are scheduled principal and interest payments under our debt and capital lease obligations. We also have obligations to make payments under non-cancelable operating leases, to pay VWR Holdings under the ITRA and to fund pension obligations. In addition to contractual obligations, we use cash to fund business acquisitions, purchase capital and pay taxes. Changes in working capital may be a source or a use of cash depending on our operations during the period.
As discussed previously, we completed our IPO on October 7, 2014 and the Additional Sale on November 5, 2014, receiving aggregate proceeds of $582.6 million , net of underwriting discounts. We used these proceeds to redeem all of our outstanding Subordinated Notes and to repay a portion of the borrowings under our credit facilities. We also entered into a number of other transactions that caused us or may cause us in the future to make significant cash payments. See “Initial Public Offering” above.
Our future financial and operating performance, ability to service or refinance our debt and ability to comply with covenants and restrictions contained in our debt agreements will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control and will be substantially dependent on the global economy, demand for our products and our ability to successfully implement our business strategies.
Based on the terms and conditions of our debt obligations and our current operations and expectations for future growth, we believe that cash generated from operations, together with available borrowings under our credit facilities will be adequate to meet our current and expected operating, capital investment, acquisition financing and debt service obligations prior to maturity for the foreseeable future, although no assurance can be given in this regard.
Liquidity
As of December 31, 2014 , we had $118.0 million of cash and cash equivalents on hand. We had aggregate unused availability of $285.1 million under our multi-currency revolving loan facility and our A/R Facility, calculated as follows:
 
Multi-currency revolving loan facility
 
A/R Facility
 
Total
Maximum potential availability
$
241.3

 
$
175.0

 
$
416.3