Full Press Release Details
INDEX TO FINANCIAL STATEMENTS
| VWR CORPORATION | ||||
| Glossary | 2 | |||
| Audited Consolidated Financial Statements as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 | ||||
| Report of Independent Registered Public Accounting Firm | 3 | |||
| Consolidated balance sheets | 4 | |||
| Consolidated income statements | 5 | |||
| Consolidated statements of comprehensive income or loss | 6 | |||
| Consolidated statements of redeemable equity and stockholders equity | 7 | |||
| Consolidated statements of cash flows | 8 | |||
| Notes to consolidated financial statements | 9 |
| Description | ||
| Company, we, us, our | VWR Corporation and its consolidated subsidiaries | |
| 2014 Plan | the VWR Corporation 2014 Equity Incentive Plan | |
| Americas | a segment covering North, Central and South America | |
| A/R Facility | an accounts receivable securitization facility due 2018 | |
| AOCI | accumulated other comprehensive income or loss | |
| Annual Report | our Annual Report on Form 10-K filed with the SEC on February 4, 2017 | |
| Avantor | Avantor, Inc., a company with which we are agreed to merge | |
| Biopharma | the combination of the pharmaceutical and biotechnology sectors | |
| Board | the Board of Directors of VWR Corporation | |
| EMEA-APAC | a segment covering Europe, Middle East, Africa and Asia-Pacific | |
| EURIBOR | the applicable interest rate determined by the Banking Federation of the European Union | |
| FASB | the Financial Accounting Standards Board | |
| GAAP | United States generally accepted accounting principles | |
| German, French, and UK Plans | the defined benefit plans in Germany, France and the United Kingdom | |
| IPO | our initial public offering which occurred in 2014 | |
| ITRA | the income tax receivable agreement between us and Varietal | |
| LIBOR | the applicable British Bankers Association London Interbank Offered Rate | |
| LIFO | last-in, first-out inventory method | |
| SEC | the United States Securities and Exchange Commission | |
| SG&A expenses | selling, general and administrative expenses | |
| U.S. Retirement Plan | the defined benefit plan in the United States | |
| Varietal | Varietal Distribution Holdings, LLC, a significant stockholder and affiliate | |
| VWR Funding | VWR Funding, Inc., our wholly-owned subsidiary |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
We have audited the accompanying consolidated balance sheets of VWR Corporation and subsidiaries as of December 31, 2016 and 2015, and the related
consolidated statements of income, comprehensive income or loss, redeemable equity and stockholders equity and cash flows for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are
the responsibility of the Company s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
VWR Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, in conformity with U.S. generally accepted
accounting principles.
VWR Corporation and subsidiaries
Consolidated balance sheets
| December 31, | ||||||||
| (in millions, except per share data) | 2016 | 2015 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 168.7 | $ | 136.3 | ||||
| Trade accounts receivable, net of reserves of $10.5 and $12.0 | 607.2 | 583.2 | ||||||
| Inventories | 483.1 | 424.0 | ||||||
| Other current assets | 93.1 | 89.5 | ||||||
| Total current assets | 1,352.1 | 1,233.0 | ||||||
| Property and equipment, net of accumulated depreciation of $248.9 and $216.2 | 253.8 | 228.2 | ||||||
| Goodwill | 1,844.0 | 1,791.4 | ||||||
| Other intangible assets, net | 1,407.8 | 1,455.6 | ||||||
| Other assets | 104.8 | 85.6 | ||||||
| Total assets | $ | 4,962.5 | $ | 4,793.8 | ||||
| Liabilities, redeemable equity and stockholders equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of debt | $ | 250.1 | $ | 92.8 | ||||
| Accounts payable | 476.3 | 474.5 | ||||||
| Employee-related liabilities | 79.3 | 61.4 | ||||||
| Current amount due to Varietal ITRA | 27.7 | 78.1 | ||||||
| Other current liabilities | 152.7 | 112.3 | ||||||
| Total current liabilities | 986.1 | 819.1 | ||||||
| Debt, net of current portion | 1,766.9 | 1,896.2 | ||||||
| Amount due to Varietal ITRA, net of current portion | 57.3 | 85.0 | ||||||
| Deferred income tax liabilities | 477.2 | 459.5 | ||||||
| Other liabilities | 159.4 | 158.8 | ||||||
| Total liabilities | 3,446.9 | 3,418.6 | ||||||
| Commitments and contingencies (Note 10) | ||||||||
| Redeemable equity, at redemption value | 21.2 | 38.8 | ||||||
| Stockholders equity: | ||||||||
| Preferred stock, $0.01 par value; 50.0 shares authorized, no shares issued or outstanding | ||||||||
| Common stock, $0.01 par value; 750.0 shares authorized, 131.6 and 131.4 shares issued and outstanding | 1.3 | 1.3 | ||||||
| Additional paid-in capital | 1,766.0 | 1,735.1 | ||||||
| Retained earnings | 154.5 | 6.3 | ||||||
| Accumulated other comprehensive loss | (427.4 | ) | (406.3 | ) | ||||
| Total stockholders equity | 1,494.4 | 1,336.4 | ||||||
| Total liabilities, redeemable equity and stockholders equity | $ | 4,962.5 | $ | 4,793.8 |
See accompanying notes to consolidated financial statements.
VWR Corporation and subsidiaries
Consolidated income statements
| Year ended December 31, | ||||||||||||
| (in millions, except per share data) | 2016 | 2015 | 2014 | |||||||||
| Net sales | $ | 4,514.2 | $ | 4,318.8 | $ | 4,375.3 | ||||||
| Cost of goods sold | 3,252.4 | 3,121.7 | 3,131.9 | |||||||||
| Gross profit | 1,261.8 | 1,197.1 | 1,243.4 | |||||||||
| Selling, general and administrative expenses | 946.2 | 876.9 | 925.5 | |||||||||
| Operating income | 315.6 | 320.2 | 317.9 | |||||||||
| Interest expense | (79.7 | ) | (102.8 | ) | (166.3 | ) | ||||||
| Other income (expense), net | (1.1 | ) | 45.4 | 90.9 | ||||||||
| Loss on extinguishment of debt | (0.5 | ) | (32.7 | ) | (5.1 | ) | ||||||
| Income before income taxes | 234.3 | 230.1 | 237.4 | |||||||||
| Income tax provision | (86.1 | ) | (75.8 | ) | (84.8 | ) | ||||||
| Net income | 148.2 | 154.3 | 152.6 | |||||||||
| Accretion of dividends on redeemable equity | (29.4 | ) | ||||||||||
| Net income applicable to common stockholders | $ | 148.2 | $ | 154.3 | $ | 123.2 | ||||||
| Earnings per share: | ||||||||||||
| Basic | $ | 1.13 | $ | 1.17 | $ | 2.50 | ||||||
| Diluted | 1.12 | 1.17 | 2.49 | |||||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 131.5 | 131.4 | 49.3 | |||||||||
| Diluted | 131.8 | 131.8 | 49.5 |
See accompanying notes to consolidated financial statements.
VWR Corporation and subsidiaries
Consolidated statements of comprehensive income or loss
| Year ended December 31, | ||||||||||||
| (in millions) | 2016 | 2015 | 2014 | |||||||||
| Net income | $ | 148.2 | $ | 154.3 | $ | 152.6 | ||||||
| Other comprehensive loss: | ||||||||||||
| Foreign currency translation: | ||||||||||||
| Net unrealized loss arising during the period | (22.4 | ) | (174.4 | ) | (204.2 | ) | ||||||
| Reclassification of net loss into earnings | 1.2 | |||||||||||
| Derivative instruments: | ||||||||||||
| Net unrealized gain arising during the period | 9.1 | 3.0 | 0.7 | |||||||||
| Reclassification of net (gain) loss into earnings | (2.3 | ) | (0.7 | ) | 1.1 | |||||||
| Defined benefit plans: | ||||||||||||
| Net unrealized loss arising during the period | (9.4 | ) | (7.0 | ) | (27.0 | ) | ||||||
| Reclassification of net loss (gain) into earnings | 2.7 | 2.7 | (3.0 | ) | ||||||||
| Other comprehensive loss | (21.1 | ) | (176.4 | ) | (232.4 | ) | ||||||
| Comprehensive income (loss) | $ | 127.1 | $ | (22.1 | ) | $ | (79.8 | ) |
See accompanying notes to consolidated financial statements.
VWR Corporation and subsidiaries
Consolidated statements of redeemable equity and stockholders equity
| Redeemable equity, at redemption value | Stockholders equity | |||||||||||||||||||||||||||
| Common stock | Additional paid-in capital | Retained earnings (deficit) | AOCI | Total | ||||||||||||||||||||||||
| (in millions) | Shares | Par value | ||||||||||||||||||||||||||
| Balance at December 31, 2013 | $ | 670.6 | 0.1 | $ | $ | 723.9 | $ | (300.6 | ) | $ | 2.5 | $ | 425.8 | |||||||||||||||
| Redemption | (11.5 | ) | 4.1 | 4.1 | ||||||||||||||||||||||||
| Accretion of dividends | 29.4 | (29.4 | ) | (29.4 | ) | |||||||||||||||||||||||
| Recapitalization: | ||||||||||||||||||||||||||||
| Retirement of prior stock | (650.0 | ) | (0.1 | ) | (679.4 | ) | (679.4 | ) | ||||||||||||||||||||
| Issuance of new stock | 102.0 | 1.0 | 1,328.4 | 1,329.4 | ||||||||||||||||||||||||
| Payment of dividend | (25.0 | ) | (25.0 | ) | ||||||||||||||||||||||||
| Recognition of ITRA | (172.9 | ) | (172.9 | ) | ||||||||||||||||||||||||
| Issuance of common stock | 29.4 | 0.3 | 582.3 | 582.6 | ||||||||||||||||||||||||
| Payment of stock issuance costs | (4.8 | ) | (4.8 | ) | ||||||||||||||||||||||||
| Stock-based compensation expense | 2.0 | 2.0 | ||||||||||||||||||||||||||
| Reclassifications to state redeemable equity at redemption value | 12.9 | (12.9 | ) | (12.9 | ) | |||||||||||||||||||||||
| Net income | 152.6 | 152.6 | ||||||||||||||||||||||||||
| Other comprehensive loss | (232.4 | ) | (232.4 | ) | ||||||||||||||||||||||||
| Balance at December 31, 2014 | 51.4 | 131.4 | 1.3 | 1,716.3 | (148.0 | ) | (229.9 | ) | 1,339.7 | |||||||||||||||||||
| Issuance of common stock | 1.3 | 1.3 | ||||||||||||||||||||||||||
| Stock-based compensation expense | 4.9 | 4.9 | ||||||||||||||||||||||||||
| Reclassifications to state redeemable equity at redemption value | (12.6 | ) | 12.6 | 12.6 | ||||||||||||||||||||||||
| Net income | 154.3 | 154.3 | ||||||||||||||||||||||||||
| Other comprehensive loss | (176.4 | ) | (176.4 | ) | ||||||||||||||||||||||||
| Balance at December 31, 2015 | 38.8 | 131.4 | 1.3 | 1,735.1 | 6.3 | (406.3 | ) | 1,336.4 | ||||||||||||||||||||
| Issuance of common stock | 0.2 | 4.7 | 4.7 | |||||||||||||||||||||||||
| Stock-based compensation expense | 8.6 | 8.6 | ||||||||||||||||||||||||||
| Reclassifications to state redeemable equity at redemption value | (17.6 | ) | 17.6 | 17.6 | ||||||||||||||||||||||||
| Net income | 148.2 | 148.2 | ||||||||||||||||||||||||||
| Other comprehensive loss | (21.1 | ) | (21.1 | ) | ||||||||||||||||||||||||
| Balance at December 31, 2016 | $ | 21.2 | 131.6 | $ | 1.3 | $ | 1,766.0 | $ | 154.5 | $ | (427.4 | ) | $ | 1,494.4 |
See accompanying notes to consolidated
financial statements.
VWR Corporation and subsidiaries
Consolidated statements of cash flows
| Year ended December 31, | ||||||||||||
| (in millions) | 2016 | 2015 | 2014 | |||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 148.2 | $ | 154.3 | $ | 152.6 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 130.1 | 124.5 | 129.3 | |||||||||
| Net foreign currency remeasurement loss (gain) | 2.3 | (45.1 | ) | (95.7 | ) | |||||||
| Deferred income tax provision | 3.4 | 27.3 | 33.9 | |||||||||
| Loss on extinguishment of debt | 0.5 | 32.7 | 5.1 | |||||||||
| Other, net | 23.3 | 17.9 | 13.0 | |||||||||
| Changes in working capital, net of business acquisitions: | ||||||||||||
| Trade accounts receivable | (25.8 | ) | (30.2 | ) | (30.1 | ) | ||||||
| Inventories | (63.1 | ) | (43.8 | ) | (41.5 | ) | ||||||
| Accounts payable | 15.0 | 25.1 | 27.5 | |||||||||
| Other assets and liabilities | 32.3 | (37.7 | ) | (3.0 | ) | |||||||
| Net cash provided by operating activities | 266.2 | 225.0 | 191.1 | |||||||||
| Cash flows from investing activities: | ||||||||||||
| Acquisitions of businesses, net of cash acquired | (142.8 | ) | (59.1 | ) | (89.9 | ) | ||||||
| Capital expenditures | (59.9 | ) | (40.9 | ) | (33.6 | ) | ||||||
| Other investing activities | 2.1 | 0.5 | ||||||||||
| Net cash used in investing activities | (202.7 | ) | (97.9 | ) | (123.0 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from issuance of common stock | 4.7 | 1.3 | 582.6 | |||||||||
| Proceeds from debt | 674.4 | 2,767.0 | 742.2 | |||||||||
| Repayment of debt | (623.8 | ) | (2,810.2 | ) | (1,353.8 | ) | ||||||
| Redemption of redeemable equity | (8.9 | ) | ||||||||||
| Payment of dividend | (25.0 | ) | ||||||||||
| Payment to Varietal under ITRA | (78.1 | ) | (9.8 | ) | ||||||||
| Payment of debt issuance costs and redemption premium | (0.9 | ) | (41.9 | ) | (1.1 | ) | ||||||
| Other financing activities | (3.1 | ) | (2.5 | ) | (7.8 | ) | ||||||
| Net cash used in financing activities | (26.8 | ) | (96.1 | ) | (71.8 | ) | ||||||
| Effect of exchange rate changes on cash | (4.3 | ) | (12.7 | ) | (13.9 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | 32.4 | 18.3 | (17.6 | ) | ||||||||
| Cash and cash equivalents at beginning of period | 136.3 | 118.0 | 135.6 | |||||||||
| Cash and cash equivalents at end of period | $ | 168.7 | $ | 136.3 | $ | 118.0 | ||||||
| Supplemental disclosures of cash flow information: | ||||||||||||
| Cash paid for interest | $ | 79.2 | $ | 104.9 | $ | 158.9 | ||||||
| Cash paid for income taxes, net | 78.3 | 48.0 | 39.3 |
See accompanying notes to consolidated
financial statements.
VWR Corporation and subsidiaries
Notes to consolidated financial statements
We are a leading global independent provider of product and service solutions to laboratory and production customers. We have significant market 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 laboratory product suppliers across
multiple industries and geographies. We offer a broad portfolio of branded and private label laboratory products, a full range of value-added services and custom manufacturing capabilities to meet our customers needs. 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.
The following describes our corporate organization at December 31, 2016:
In April 2016, Varietal completed a sale of our common stock
that caused it to no longer hold a majority ownership interest in us. As a result, we experienced a change in control under U.S. federal tax regulations which has impacted (i) the amount and timing of the utilization of our net operating loss
carryforwards; (ii) the timing of payments under an ITRA with Varietal (see Note 20); and (iii) the amount of cash taxes we are paying.
Basis of presentation
We report financial results on the basis of two segments organized by geographic region: the Americas and EMEA-APAC.
In 2014, we recapitalized our equity (see Note 12). For all periods presented, the number of shares of common stock outstanding has been adjusted for a stock
split. Separately, a conversion of prior equity into newly-issued
shares of common stock is presented as a retirement and issuance of shares; share counts for periods prior to that conversion were not adjusted. The consolidated financial statements present the
accretion of dividends on redeemable convertible preferred stock for periods prior to the recapitalization. Those dividends were never paid and became available to common stockholders following the recapitalization.
Principles of consolidation
consolidated financial statements include the accounts of VWR Corporation and the redeemable equity of Varietal, each after the elimination of intercompany balances and transactions.
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue, expense, income and loss during the reporting period. Actual results could differ significantly from those estimates.
Additional disclosures about significant estimates are provided in the following areas: (i) impairment testing, particularly determining whether
indicators of impairment were present and whether assets were impaired (see Note 21); (ii) estimating the valuation allowance on deferred tax assets, such as net operating loss carryforwards (see Note 18); (iii) accounting for defined benefit plans,
in particular determining key assumptions such as discount rates and the expected return on plan assets (see Note 15); (iv) estimating outcomes of loss contingencies (see Note 10); and (v) estimating fair value, particularly related to
measurements based on unobservable inputs (see Note 9).
Cash and cash equivalents
equivalents are comprised of highly liquid investments with original maturities of three months or less, primarily consisting of euro-denominated overnight deposits. Bank overdrafts are classified as current liabilities and presented as a financing
activity on our consolidated statements of cash flows.
Trade accounts receivable, net of reserves
Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest. The carrying amount of trade accounts receivable is presented
net of a reserve representing our estimate of the amounts that will not be collected and for estimated sales returns and allowances. In addition to reviewing delinquent accounts receivable, we consider many factors in estimating our reserve,
including historical data, experience, customer types, creditworthiness and economic trends. From time to time, we may adjust our assumptions for anticipated changes in any of these or other factors expected to affect collectability. Account
balances are written off against the allowance when we determine it is probable that the receivable will not be recovered.
Our inventories consist primarily of products held for sale. Inventories are valued at the lower of cost or market, cost being primarily determined by the LIFO
method for certain of our U.S. subsidiaries and the first-in, first-out method for all other subsidiaries. We regularly review quantities of inventories on hand and
compare these amounts to the expected use of each product or product line. We record a charge to cost of goods sold for the amount required to reduce the carrying value of inventory to net realizable value.
At December 31, 2016 and 2015, the percentage of inventories valued using the LIFO method was 36% for both years, and the excess of current cost over
LIFO value for those inventories was $24.8 million and $24.6 million, respectively.
Property and equipment
Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over estimated useful lives of 10 to 40 years for
buildings and improvements and 3 to 10 years for equipment and computer software. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the estimated remaining life of the
lease. Costs for repairs and maintenance that do not significantly increase the value or estimated lives of property and equipment are expensed as incurred. Property and equipment held under capital leases were not material for any periods
Impairment of long-lived assets
We evaluate the recoverability of long-lived assets when events or changes in circumstances indicate a possible inability to recover carrying amounts. We
assess recoverability by comparing the carrying value of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If an asset is impaired, the loss is measured as the amount by which the asset s carrying
value exceeds its fair value.
Goodwill and other intangible assets
Goodwill represents the excess of purchase price over the fair value of net assets acquired in a business combination. Other intangible assets consist of both
amortizable and indefinite-lived intangible assets. Amortizable intangible assets are amortized over their estimated useful lives on a straight-line basis. Indefinite-lived intangible assets are not amortized.
We reevaluate the estimated useful lives of our amortizable intangible assets annually. For indefinite-lived intangible assets, we reevaluate annually whether
they continue to have indefinite lives, considering whether they have any legal, regulatory, contractual, competitive or economic limitations and whether they are expected to contribute to the generation of cash flows indefinitely.
Goodwill and other indefinite-lived intangible assets are tested annually for impairment on October 1 of each year. Goodwill impairment testing is
performed at the reporting unit level. Our reporting units are the same as our operating segments and reportable segments. All of our intangible assets, including goodwill, are tested for impairment whenever an indication of potential impairment
arises. Events or circumstances that might require an interim evaluation include unexpected adverse business conditions, economic factors, unanticipated technological changes or competitive activities, loss of key personnel and acts or anticipated
acts by governments and courts. Indefinite-lived intangible assets are tested for impairment prior to testing of goodwill or amortizable intangible assets.
The impairment analysis for goodwill and indefinite-lived intangible assets consists of an optional qualitative assessment potentially followed by a two-step quantitative analysis. If we determine that the carrying value of goodwill or indefinite-lived intangible assets exceeds its fair value, an impairment charge is recorded for the excess. Impairment charges
cannot be reversed in subsequent periods.
The impairment analysis for amortizable intangible assets is performed in the same way as for our other
long-lived assets, as previously discussed.
Fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at a measurement date. Classification within the fair value hierarchy is based on the lowest of the following levels that is significant to the fair value measurement:
We exercise considerable judgment when estimating fair