Hospira Reports Second-Quarter 2010 Results

Hospira Reports Second-Quarter 2010 Results
Maintains sales and adjusted* earnings projections for 2010 --
LAKE FOREST, Ill., July 28, 2010 /PRNewswire via COMTEX/ --

Hospira, Inc. (NYSE: HSP), a leading global specialty pharmaceutical and medication delivery company, today reported results for the second quarter ended June 30, 2010. Net sales for the quarter were $968 million, and adjusted* diluted earnings per share were $0.86. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.)


"Hospira delivered another solid quarter, driven by strong performance in our Specialty Injectable Pharmaceuticals business and by continued momentum of our Project Fuel optimization initiatives," said Christopher B. Begley, chairman and chief executive officer. "We made significant progress in advancing our business during the quarter, launching our first product from Hospira India, commercializing our second biosimilar product in Europe and strengthening our position in acute-care proprietary pharmaceuticals. We are highly focused on executing our strategy of investing for growth and improving margins and cash flow, as well as on driving quality improvements across our global manufacturing organization. We remain on track to achieve our full-year earnings projections."

Second-Quarter 2010 Results

The following table highlights selected financial results for the second quarter of 2010 compared to the same period in 2009:


    In $ millions,             GAAP                      Adjusted*
     except per         Three Months Ended          Three Months Ended
     share amounts           June 30,                    June 30,
                        ------------------     %    ------------------     %
                          2010       2009   Change    2010       2009   Change
                        -------    -------  ------  -------    -------  ------
    Net Sales            $968.2     $956.9    1.2%     n/a        n/a     n/a

    Gross Profit
     (Net Sales
     less Cost of
     Products Sold)      $369.2     $346.2    6.6%   $416.8     $365.8   13.9%
    Income from
     Operations          $116.3      $91.1   27.7%   $213.1     $176.7   20.6%
    Diluted EPS           $0.49      $0.16  206.3%    $0.86      $0.73   17.8%

    Statistics (as a % of Net Sales)
    --------------------------------
    Gross Profit
     (Net Sales
     less Cost of
     Products Sold)        38.1%      36.2%            43.0%      38.2%
    Operating
     Income                12.0%       9.5%            22.0%      18.5%


Results under U.S. Generally Accepted Accounting Principles (GAAP) include items as detailed in the schedules attached to this press release.

Net sales increased 1.2 percent to $968 million in the second quarter of 2010, compared to $957 million in the second quarter of 2009. Strong sales in Specialty Injectable Pharmaceuticals, resulting from the U.S. sales of the generic oncolytic oxaliplatin and Precedex(TM), Hospira's proprietary sedation agent, were primarily offset by a decline in Medication Management Systems as a result of the company's voluntary hold on shipments of its Symbiq(TM) Infusion System to new customers.

Adjusted* income from operations increased 20.6 percent to $213 million in the second quarter of 2010, compared to $177 million in the second quarter of 2009. Driving the majority of the increase were more favorable product mix and improved manufacturing efficiency from the company's Project Fuel optimization initiatives, offset by charges associated with certain quality and product-related matters.

The effective tax rate on an adjusted basis* in the quarter was 23.8 percent, up from the second-quarter 2009 rate of 21.5 percent. The increase is primarily related to the expiration of certain U.S. tax credits in 2010 as well as a shift in earnings mix to higher tax jurisdictions relative to the second quarter of 2009.

Cash Flow

Cash flow from operations for the first six months of 2010 was $144 million, compared to the $236 million generated for the same period in 2009. The decrease primarily reflects the timing of chargeback payments associated with the U.S. sales of oxaliplatin, increased inventory levels and higher U.S. income tax payments.

Capital expenditures were $79 million for the first six months of 2010, compared to $78 million for the first six months of 2009.

2010 Projections

Hospira is maintaining guidance for net sales growth of approximately 3 to 5 percent on a constant-currency basis. Including the impact of foreign exchange, the company currently expects net sales growth to also be 3 to 5 percent.

Hospira is maintaining its adjusted* diluted earnings per share projection for full-year 2010, which is expected to range between $3.35 and $3.45 per share.

The reconciliation between the projected 2010 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:


    Diluted earnings per share -- adjusted*                     $3.35 - $3.45
                                                                -------------

    Estimated charges related to Project Fuel
    initiatives (mid-point of an estimated range of
    $0.06 to $0.08 per diluted share)                                  ($0.07)

    Estimated charges related to facilities optimization
    initiatives (mid-point of an estimated range of
    $0.04 to $0.06 per diluted share)                                  ($0.05)

    Estimated $67 million for the amortization of
    intangibles related to the acquisitions of
    Mayne Pharma, the specialty injectable business
    of Orchid Chemicals & Pharmaceuticals
    and Javelin Pharmaceuticals                                        ($0.25)

    Estimated acquisition and integration-related charges
    associated with the Orchid and Javelin acquisitions
    (mid-point of an estimated range of $0.06 to
    $0.08 per diluted share)                                           ($0.07)

    Certain quality and product-related charges
    (mid-point of an estimated range of
    $0.18 to $0.24 per diluted share)                                  ($0.21)

    Litigation settlement and related charges                          ($0.05)

    Initial research and development milestone charge
    associated with a partnered proprietary
    pharmaceutical product                                             ($0.10)
                                                                -------------

    Diluted earnings per share -- GAAP                          $2.55 - $2.65
                                                                =============


The adjusting items are shown net of tax in aggregate of $83 million, which is calculated for the specified adjustments stated above, based on the statutory tax rate in the various tax jurisdictions in which the items are expected to occur.

The company now expects cash flow from operations to range between $525 million and $575 million. The projected range for depreciation and amortization remains unchanged at $250 million to $260 million, as does the projected range for capital expenditures, at $195 million to $215 million.

*Use of Non-GAAP Financial Measures

Adjusted measures used in this press release are reconciled to the most comparable measures calculated in accordance with GAAP in the schedules attached to this release. For more information regarding these non-GAAP financial measures, please see Hospira's Current Report on Form 8-K furnished to the Securities and Exchange Commission on the date of this press release.

Webcast/Complementary Material

Hospira will hold a conference call for investors and media at 8 a.m. Central time on Wednesday, July 28, 2010. A live webcast of the conference call will be available on Hospira's Web site at www.hospirainvestor.com. Listeners should log on approximately 10 minutes in advance to ensure proper setup for receiving the webcast. In addition, complementary information will be available on the presentations page of the Investor Relations Web site at the beginning of the conference call. A replay will be available on the Hospira Web site for 30 days following the call.

About Hospira

Hospira, Inc. is a global specialty pharmaceutical and medication delivery company dedicated to Advancing Wellness(TM). As the world leader in specialty generic injectable pharmaceuticals, Hospira offers one of the broadest portfolios of generic acute-care and oncology injectables, as well as integrated infusion therapy and medication management solutions. Through its products, Hospira helps improve the safety, cost and productivity of patient care. The company is headquartered in Lake Forest, Ill., and has approximately 13,500 employees. Learn more at www.hospira.com.


               Private Securities Litigation Reform Act of 1995 --
                 A Caution Concerning Forward-Looking Statements


This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections of certain measures of Hospira's results of operations, projections of certain charges and expenses, and other statements regarding Hospira's goals and strategy. Hospira cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, regulatory, legal, technological and other factors that may affect Hospira's operations and may cause actual results to be materially different from expectations include the risks, uncertainties and factors discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Hospira's latest Annual Report on Form 10-K and subsequent Forms 10-Q, filed with the Securities and Exchange Commission, which are incorporated by reference. Hospira undertakes no obligation to release publicly any revisions to forward-looking statements as the result of subsequent events or developments.


                                 Hospira, Inc.
                  Condensed Consolidated Statements of Income
                                  (Unaudited)
         (dollars and shares in millions, except for per share amounts)


                                                Three Months Ended
                                                     June 30,
                                                  --------------        %
                                                   2010    2009      Change
                                                  ------  ------    -------
    Net sales                                     $968.2  $956.9       1.2 %
                                                  ------  ------

    Cost of products sold                          599.0   610.7      (1.9)%
    Restructuring, impairment and (gain)
     on disposition of assets, net                   2.6    55.9     (95.3)%
    Research and development                        80.4    52.9      52.0 %
    Selling, general and administrative            169.9   146.3      16.1 %
                                                  ------  ------
        Total operating costs and expenses         851.9   865.8      (1.6)%
                                                  ------  ------
          Income From Operations                   116.3    91.1      27.7 %

    Interest expense                                24.2    28.2     (14.2)%
    Other (income) expense, net                     (0.8)   14.5    (105.5)%
                                                  ------  ------
          Income Before Income Taxes                92.9    48.4      91.9 %

    Income tax expense                               9.4    22.9     (59.0)%
                                                  ------  ------
          Net Income                               $83.5   $25.5     227.5 %
                                                  ======  ======

    Earnings Per Common Share:
        Basic                                      $0.50   $0.16     212.5 %
                                                  ======  ======
        Diluted                                    $0.49   $0.16     206.3 %
                                                  ======  ======

    Weighted Average Common Shares Outstanding:
        Basic                                      165.8   160.5       3.3 %
                                                  ======  ======
        Diluted                                    169.1   162.4       4.1 %
                                                  ======  ======


    Adjusted Gross Profit (1)(2)                  $416.8  $365.8      13.9 %
    Adjusted Income From Operations (1)           $213.1  $176.7      20.6 %
    Adjusted Net Income (1)                       $144.7  $118.2      22.4 %
    Adjusted Diluted Earnings Per Share (1)        $0.86   $0.73      17.8 %


    Statistics (as a % of net sales,
     except for income tax rate):

                                       GAAP              Adjusted (1)
                                Three Months Ended    Three Months Ended
                                     June 30,              June 30,
                                ------------------    ------------------
                                  2010      2009        2010      2009
                                --------  --------    --------  --------
    Gross Profit (2)              38.1 %    36.2 %      43.0 %    38.2 %
    Income From Operations        12.0 %     9.5 %      22.0 %    18.5 %
    Net Income                     8.6 %     2.7 %      14.9 %    12.4 %
    Income Tax Rate               10.1 %    47.3 %      23.8 %    21.5 %


    (1) Adjusted financial measures exclude certain specified items as
        described and reconciled to comparable GAAP financial measures in the
        Reconciliation of GAAP to Non-GAAP Financial Measures contained in
        this press release.
    (2) Gross profit is defined as Net sales less Cost of products sold.
        Adjusted gross profit excludes certain specified items, as indicated
        in the previous footnote.

 

                                 Hospira, Inc.
                  Condensed Consolidated Statements of Income
                                  (Unaudited)
         (dollars and shares in millions, except for per share amounts)


                                                 Six Months Ended
                                                     June 30,
                                                ------------------      %
                                                  2010      2009     Change
                                                --------  --------  -------
    Net sales                                   $1,975.8  $1,816.6     8.8 %
                                                --------  --------

    Cost of products sold                        1,176.3   1,150.8     2.2 %
    Restructuring, impairment and (gain)
     on disposition of assets, net                  (5.0)     65.3  (107.7)%
    Research and development                       132.1     102.9    28.4 %
    Selling, general and administrative            348.5     291.8    19.4 %
                                                --------  --------
        Total operating costs and expenses       1,651.9   1,610.8     2.6 %
                                                --------  --------
          Income From Operations                   323.9     205.8    57.4 %

    Interest expense                                47.6      55.1   (13.6)%
    Other (income) expense, net                     (2.5)     14.2  (117.6)%
                                                --------  --------
          Income Before Income Taxes               278.8     136.5   104.2 %

    Income tax expense (benefit)                    53.6     (54.5) (198.3)%
                                                --------  --------
          Net Income                              $225.2    $191.0    17.9 %
                                                ========  ========

    Earnings Per Common Share:
        Basic                                      $1.36     $1.19    14.3 %
                                                ========  ========
        Diluted                                    $1.34     $1.18    13.6 %
                                                ========  ========

    Weighted Average Common Shares Outstanding:
        Basic                                      165.0     160.0     3.1 %
                                                ========  ========
        Diluted                                    168.5     161.5     4.3 %
                                                ========  ========


    Adjusted Gross Profit (1)(2)                  $871.5    $705.4    23.5 %
    Adjusted Income From Operations (1)           $453.0    $326.6    38.7 %
    Adjusted Net Income (1)                       $304.1    $215.0    41.4 %
    Adjusted Diluted Earnings Per Share (1)        $1.80     $1.33    35.3 %


    Statistics (as a % of net sales,
     except for income tax rate):

                                       GAAP              Adjusted (1)
                                 Six Months Ended      Six Months Ended
                                     June 30,              June 30,
                                ------------------    ------------------
                                  2010      2009        2010      2009
                                --------  --------    --------  --------
    Gross Profit (2)              40.5 %    36.7 %      44.1 %    38.8 %
    Income From Operations        16.4 %    11.3 %      22.9 %    18.0 %
    Net Income                    11.4 %    10.5 %      15.4 %    11.8 %
    Income Tax Rate               19.2 %   (39.9)%      25.5 %    21.5 %


    (1) Adjusted financial measures exclude certain specified items as
        described and reconciled to comparable GAAP financial measures in the
        Reconciliation of GAAP to Non-GAAP Financial Measures contained in
        this press release.
    (2) Gross profit is defined as Net sales less Cost of products sold.
        Adjusted gross profit excludes certain specified items, as indicated
        in the previous footnote.

 

                                Hospira, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
                                (Unaudited)
       (dollars and shares in millions, except for per share amounts)


    Three months ended June 30, 2010 Reconciliation of GAAP to Non-GAAP
    Financial Measures:
    -------------------------------------------------------------------

                                                 Income
                                      Gross       From       Net      Diluted
                                    Profit(1)  Operations  Income(2)    EPS
                                    --------   ----------  --------   -------
    GAAP financial measures           $369.2       $116.3     $83.5     $0.49
    Specified items:
      Project Fuel and related
       charges (A)                       4.0         11.1       7.4      0.05
      Facilities Optimization
       charges (B)                       2.1          2.5       1.8      0.01
      Amortization of certain
       intangible assets (C)            15.7         15.7       9.6      0.06
      Certain quality and product
       related charges (D)              25.8         25.8      16.6      0.10
      Acquisition and integration-
       related charges (E)                 -          0.2       0.1         -
      Litigation settlement and
       related charges (F)                 -         14.0       8.5      0.05
      Research and development
       charge (G)                          -         27.5      17.2      0.10
                                    --------   ----------  --------   -------
    Adjusted financial measures (3)   $416.8       $213.1    $144.7     $0.86
                                    ========   ==========  ========   =======

    GAAP results for the three months ended June 30, 2010 include:
    A -- Project Fuel and related charges: $4.0 million reported in Cost of
         products sold, $2.2 million reported in Restructuring, impairment and
         (gain) on disposition of assets, net, $0.1 million reported in
         Research and development and $4.8 million reported in Selling,
         general and administrative. Project Fuel initiatives include costs
         for process optimization implementation, severance and other employee
         benefits, exit costs and other asset charges.
    B -- Facilities Optimization charges: $2.1 million reported in Cost of
         products sold and $0.4 million reported in Restructuring, impairment
         and (gain) on disposition of assets, net. These charges relate to
         facilities optimization from the closure or departure from certain
         manufacturing and research and development ("R&D") facilities and
         include costs for severance and other employee benefits, accelerated
         depreciation and relocation of production and R&D operations.
    C -- Amortization of certain intangible assets reported in Cost of
         products sold resulting from acquisitions including Mayne Pharma
         Limited ("Mayne Pharma") and a generic injectable business by Hospira
         Healthcare India Private Limited ("Hospira India").
    D -- Certain quality and product related charges reported in Cost of
         products sold primarily include third party oversight and consulting
         costs and penalties for failure to supply certain product to
         customers. These charges are directly associated with Hospira's
         response to the United States Food and Drug Administration ("FDA")
         Warning Letter received in April 2010.
    E -- Acquisition and integration-related charges: $1.2 million reported in
         Research and development and $(1.0) million reported in Selling,
         general and administrative. These charges include acquisition and
         integration costs resulting from acquisitions including Javelin
         Pharmaceuticals, Inc. ("Javelin Pharma") and a generic injectable
         business by Hospira India.
    F -- Retractable Technologies, Inc. ("RTI") litigation settlement and
         related charges reported in Selling, general and administrative.
    G -- Research and development charge resulting from an initial payment
         related to an agreement with DURECT and corresponding milestone
         reached for development of a long-acting local anesthetic product
         that has not yet achieved regulatory approval.


    Three months ended June 30, 2009 Reconciliation of GAAP to Non-GAAP
    Financial Measures:
    -------------------------------------------------------------------

                                                 Income
                                      Gross       From       Net      Diluted
                                    Profit(1)  Operations  Income(2)    EPS
                                    --------   ----------  --------   -------
    GAAP financial measures           $346.2        $91.1     $25.5     $0.16
    Specified items:
      Project Fuel and related
       charges (A)                       4.8         67.6      64.0      0.40
      Facilities Optimization
       charges (B)                       0.4          3.6       2.4      0.01
      Amortization of certain
       intangible assets (C)            14.4         14.4       9.7      0.06
      Impairment of marketable
       equity securities (D)               -            -      16.6      0.10
                                    --------   ----------  --------   -------
    Adjusted financial measures (3)   $365.8       $176.7    $118.2     $0.73
                                    ========   ==========  ========   =======

    GAAP results for the three months ended June 30, 2009 include:
    A -- Project Fuel and related charges: $4.8 million reported in Cost of
         products sold, $52.7 million reported in Restructuring, impairment
         and (gain) on disposition of assets, net, $0.9 million reported in
         Research and development and $9.2 million reported in Selling,
         general and administrative. Project Fuel initiatives include costs
         for severance and other employee benefits, process optimization
         implementation, other asset charges, exit costs and charges
         associated with certain non-strategic businesses and underlying
         assets committed for disposal and the related inventory, property and
         equipment, allocated goodwill and intangible assets.
    B -- Facilities Optimization charges: $0.4 million reported in Cost of
         products sold and $3.2 million reported in Restructuring, impairment
         and (gain) on disposition of assets, net. These charges relate to
         facilities optimization from the closure or departure from certain
         manufacturing and R&D facilities and include costs for severance and
         other employee benefits, accelerated depreciation and relocation of
         production and R&D operations.
    C -- Amortization of certain intangible assets resulting from the
         acquisition of Mayne Pharma reported in Cost of products sold.
    D -- Impairment of marketable equity securities is reported in Other
         (income) expense, net.

    (1) Gross profit is defined as Net sales less Cost of products sold.
    (2) Specified items are shown net of tax of $35.7 million and $9.5 million
        for the three months ended June 30, 2010 and 2009, respectively, based
        on the statutory tax rate in the various tax jurisdictions in which
        the items occurred.
    (3) The Non-GAAP financial measures contained in this press release
        (including adjusted gross profit, adjusted income from operations,
        adjusted net income and adjusted diluted Earnings Per Share) adjust
        for certain specified items. All Non-GAAP financial measures are
        intended to supplement the applicable GAAP measures and should not be
        considered in isolation from, or a replacement for, financial measures
        prepared in accordance with GAAP. Refer to Hospira's filing on Form
        8-K filed on July 28, 2010 for additional information.

 

                                Hospira, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
                                (Unaudited)
       (dollars and shares in millions, except for per share amounts)


    Six months ended June 30, 2010 Reconciliation of GAAP to Non-GAAP
    Financial Measures:
    -----------------------------------------------------------------

                                                 Income
                                      Gross       From       Net      Diluted
                                    Profit(1)  Operations  Income(2)    EPS
                                    --------   ----------  --------   -------
    GAAP financial measures           $799.5       $323.9    $225.2     $1.34
    Specified items:
      Project Fuel and related
       charges (A)                       7.7          9.7       2.8      0.02
      Facilities Optimization
       charges (B)                       4.1          5.5       3.9      0.02
      Amortization of certain
       intangible assets (C)            34.4         34.4      22.2      0.13
      Certain quality and product
       related charges (D)              25.8         25.8      16.6      0.10
      Acquisition and integration-
       related charges (E)                 -         12.2       7.7      0.04
      Litigation settlement and
       related charges (F)                 -         14.0       8.5      0.05
      Research and development
       charge (G)                          -         27.5      17.2      0.10
                                    --------   ----------  --------   -------
    Adjusted financial measures (3)   $871.5       $453.0    $304.1     $1.80
                                    ========   ==========  ========   =======

    GAAP results for the six months ended June 30, 2010 include:
    A -- Project Fuel and related charges: $7.7 million reported in Cost of
         products sold, $5.0 million reported in Restructuring, impairment and
         (gain) on disposition of assets, net, $0.3 million reported in
         Research and development and $8.1 million reported in Selling,
         general and administrative. Project Fuel initiatives include costs
         for process optimization implementation, severance and other employee
         benefits, exit costs and other asset charges. These charges are
         offset by a $11.4 million gain reported in Restructuring, impairment
         and (gain) on disposition of assets, net related to the disposal of
         the non-strategic net assets associated with the Wasserburg, Germany,
         facility.
    B -- Facilities Optimization charges: $4.1 million reported in Cost of
         products sold and $1.4 million reported in Restructuring, impairment
         and (gain) on disposition of assets, net. These charges relate to
         facilities optimization from the closure or departure from certain
         manufacturing and R&D facilities and include costs for severance and
         other employee benefits, accelerated depreciation and relocation of
         production and R&D operations.
    C -- Amortization of certain intangible assets reported in Cost of
         products sold resulting from acquisitions including Mayne Pharma and
         a generic injectable business by Hospira India.
    D -- Certain quality and product related charges reported in Cost of
         products sold primarily include third party oversight and consulting
         costs and penalties for failure to supply certain product to
         customers. These charges are directly associated with Hospira's
         response to the FDA Warning Letter received in April 2010.
    E -- Acquisition and integration-related charges: $2.2 million reported in
         Research and development and $10.0 million reported in Selling,
         general and administrative. These charges include acquisition and
         integration costs resulting from acquisitions including Javelin
         Pharma and a generic injectable business by Hospira India.
    F -- RTI litigation settlement and related charges reported in Selling,
         general and administrative.
    G -- Research and development charge resulting from an initial payment
         related to an agreement with DURECT and corresponding milestone
         reached for development of a long-acting local anesthetic product
         that has not yet achieved regulatory approval.


    Six months ended June 30, 2009 Reconciliation of GAAP to Non-GAAP
    Financial Measures:
    -----------------------------------------------------------------

                                                 Income
                                      Gross       From       Net      Diluted
                                    Profit(1)  Operations  Income(2)    EPS
                                    --------   ----------  --------   -------
    GAAP financial measures           $665.8       $205.8    $191.0     $1.18
    Specified items:
      Project Fuel and related
       charges (A)                       4.8         78.1      70.5      0.44
      Facilities Optimization
       charges (B)                       7.4         15.3      10.1      0.06
      Amortization of certain
       intangible assets (C)            27.4         27.4      18.7      0.12
      Impairment of marketable
       equity securities (D)               -            -      16.6      0.10
      Resolution of IRS tax
       audit benefit (E)                   -            -     (91.9)    (0.57)
                                    --------   ----------  --------   -------
    Adjusted financial measures (3)   $705.4       $326.6    $215.0     $1.33
                                    ========   ==========  ========   =======

    GAAP results for the six months ended June 30, 2009 include:
    A -- Project Fuel and related charges: $4.8 million reported in Cost of
         products sold, $57.4 million reported in Restructuring, impairment
         and (gain) on disposition of assets, $1.3 million reported in
         Research and development and $14.6 million reported in Selling,
         general and administrative. Project Fuel initiatives include costs
         for severance and other employee benefits, process optimization
         implementation, other asset charges, exit costs and charges
         associated with certain non-strategic businesses and underlying
         assets committed for disposal and the related inventory, property and
         equipment, allocated goodwill and intangible assets.
    B -- Facilities Optimization charges: $7.4 million reported in Cost of
         products sold and $7.9 million reported in Restructuring, impairment
         and (gain) on disposition of assets, net. These charges relate to
         facilities optimization from the closure or departure from certain
         manufacturing and R&D facilities and include costs for severance and
         other employee benefits, accelerated depreciation and relocation of
         production and R&D operations.
    C -- Amortization of certain intangible assets resulting from the
         acquisition of Mayne Pharma reported in Cost of products sold.
    D -- Impairment of marketable equity securities is reported in Other
         (income) expense, net.
    E -- Resolution of IRS tax audit benefit of $91.9 million reported in
         Income tax expense (benefit). This discrete income tax benefit is
         related to the completion and effective settlement of U.S. tax return
         audits.

    (1) Gross profit is defined as Net sales less Cost of products sold.
    (2) Specified items are shown net of tax of $50.5 million and $113.4
        million for the six months ended June 30, 2010 and 2009, respectively,
        based on the statutory tax rate in the various tax jurisdictions in
        which the items occurred.
    (3) The Non-GAAP financial measures contained in this press release
        (including adjusted gross profit, adjusted income from operations,
        adjusted net income and adjusted diluted Earnings Per Share) adjust
        for certain specified items. All Non-GAAP financial measures are
        intended to supplement the applicable GAAP measures and should not be
        considered in isolation from, or a replacement for, financial measures
        prepared in accordance with GAAP. Refer to Hospira's filing on Form
        8-K filed on July 28, 2010 for additional information.

 

                                  Hospira, Inc.
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)
                              (dollars in millions)


                                                       June 30, December 31,
                         Assets                          2010       2009
                                                       --------   --------
    Current Assets:
      Cash and cash equivalents                          $783.3     $946.0
      Trade receivables, less allowances of
       $9.1 in 2010 and $6.2 in 2009                      613.0      498.1
      Inventories                                         794.2      755.4
      Deferred income taxes                               171.2      185.9
      Prepaid expenses                                     44.4       34.3
      Other receivables                                   105.0       41.5
      Assets held for sale                                    -       65.0
                                                       --------   --------
          Total Current Assets                          2,511.1    2,526.2
                                                       --------   --------
    Property and equipment, net                         1,211.5    1,147.8
    Intangible assets, net                                469.8      406.5
    Goodwill                                            1,366.1    1,243.4
    Deferred income taxes                                  56.2       54.5
    Investments                                            50.5       49.3
    Other assets                                           65.9       75.2
                                                       --------   --------
          Total Assets                                 $5,731.1   $5,502.9
                                                       ========   ========

          Liabilities and Shareholders' Equity
    Current Liabilities:
      Short-term borrowings                               $23.8      $23.6
      Trade accounts payable                              253.0      229.5
      Salaries, wages and commissions                     115.6      176.5
      Other accrued liabilities                           447.2      438.4
      Liabilities related to assets held for sale             -       13.9
                                                       --------   --------
          Total Current Liabilities                       839.6      881.9
                                                       --------   --------
    Long-term debt                                      1,717.4    1,707.3
    Deferred income taxes                                  16.3       18.6
    Post-retirement obligations and other
     long-term liabilities                                277.2      271.4
    Commitments and Contingencies
                                                       --------   --------
    Total Shareholders' Equity                          2,880.6    2,623.7
                                                       --------   --------
    Total Liabilities and Shareholders' Equity         $5,731.1   $5,502.9
                                                       ========   ========

 

                                 Hospira, Inc.
                Condensed Consolidated Statements of Cash Flows
                                  (Unaudited)
                             (dollars in millions)


                                                            Six Months Ended
                                                                June 30,
                                                            ---------------
                                                             2010     2009
                                                            ------   ------
    Cash Flow From Operating Activities:
      Net income                                            $225.2   $191.0
      Adjustments to reconcile net income to net cash from
       operating activities-
        Depreciation                                          79.9     83.2
        Amortization of intangible assets                     40.2     30.7
        Stock-based compensation expense                      27.8     22.7
        Deferred income tax and other tax adjustments         12.1    (98.3)
        Impairment and other asset (benefits) charges         (5.9)    69.7
        Gain on disposition of assets                        (11.4)       -
      Changes in assets and liabilities-
        Trade receivables                                   (126.7)    (2.8)
        Inventories                                          (41.9)    (6.3)
        Prepaid expenses and other assets                    (12.6)   (11.4)
        Trade accounts payable                                34.0    (32.8)
        Other liabilities                                    (94.7)   (18.2)
      Other, net                                              17.8      8.5
                                                            ------   ------
          Net Cash Provided by Operating Activities          143.8    236.0
                                                            ------   ------

    Cash Flow From Investing Activities:
      Capital expenditures (including instruments placed
       with or leased to customers)                          (79.4)   (77.8)
      Acquisitions, net of cash acquired, and payments for
       contingent consideration                             (397.7)   (14.2)
      Purchases of intangibles and other investments         (11.2)    (3.2)
      Proceeds on disposition of assets                       62.6        -
                                                            ------   ------
          Net Cash Used in Investing Activities             (425.7)   (95.2)
                                                            ------   ------

    Cash Flow From Financing Activities:
      Issuance of long-term debt, net of fees paid               -    246.7
      Repayment of long-term debt                                -   (306.1)
      Other borrowings, net                                   (3.5)     0.7
      Excess tax benefit from stock-based compensation
       arrangements                                           16.3      0.2
      Proceeds from stock options exercised                  112.4     35.4
                                                            ------   ------
          Net Cash Provided by (Used in) Financing
           Activities                                        125.2    (23.1)
                                                            ------   ------

    Effect of exchange rate changes on cash and cash
     equivalents                                              (6.0)     7.0
                                                            ------   ------

    Net change in cash and cash equivalents                 (162.7)   124.7
    Cash and cash equivalents at beginning of period         946.0    483.8
                                                            ------   ------
    Cash and cash equivalents at end of period              $783.3   $608.5
                                                            ======   ======

    Supplemental Cash Flow Information:
    Cash paid during the period-
        Interest                                             $50.3    $54.8
        Income taxes, net of refunds                         $70.9    $18.7

 

                                    Hospira, Inc.
                              Net Sales by Product Line
                                     (Unaudited)
                                (dollars in millions)


                                              Three Months Ended June 30,
                                          ----------------------------------
                                                           % Change % Change
                                                             at       at
                                                           Actual   Constant
                                                           Currency Currency
                                           2010     2009   Rates    Rates (1)
                                          ------   ------  --------  --------
    Americas--
    Pharmaceuticals
        Specialty Injectables             $453.0   $368.5   22.9 %   21.6 %
        Other Pharma                       122.9    139.4  (11.8)%  (12.3)%
                                          ------   ------
                                           575.9    507.9   13.4 %   12.3 %
    Devices
        Medication Management Systems      120.4    152.2  (20.9)%  (21.9)%
        Other Devices                       84.8     91.6   (7.4)%   (8.8)%
                                          ------   ------
                                           205.2    243.8  (15.8)%  (17.0)%
    Total Americas                         781.1    751.7    3.9 %    2.8 %

    Europe, Middle East & Africa--
    Pharmaceuticals
        Specialty Injectables               67.3     68.1   (1.2)%    4.3 %
        Other Pharma                        24.9     35.4  (29.7)%  (27.1)%
                                          ------   ------
                                            92.2    103.5  (10.9)%   (6.5)%
    Devices
        Medication Management Systems       16.5     17.5   (5.7)%    0.6 %
        Other Devices                       12.1     17.4  (30.5)%  (24.7)%
                                          ------   ------
                                            28.6     34.9  (18.1)%  (12.0)%
    Total Europe, Middle East & Africa     120.8    138.4  (12.7)%   (7.9)%

    Asia Pacific--
    Pharmaceuticals
        Specialty Injectables               54.1     53.0    2.1 %   (7.9)%
        Other Pharma                         1.8      2.7  (33.3)%  (44.4)%
                                          ------   ------
                                            55.9     55.7    0.4 %   (9.7)%
    Devices
        Medication Management Systems        5.5      4.9   12.2 %    4.1 %
        Other Devices                        4.9      6.2  (21.0)%  (27.4)%
                                          ------   ------
                                            10.4     11.1   (6.3)%  (13.5)%
    Total Asia Pacific                      66.3     66.8   (0.7)%  (10.3)%
                                          ------   ------
    Net Sales                             $968.2   $956.9    1.2 %    0.3 %
                                          ======   ======

    Global--
    Pharmaceuticals
        Specialty Injectables             $574.4   $489.6   17.3 %   16.0 %
        Other Pharma                       149.6    177.5  (15.7)%  (15.8)%
                                         -------   ------
                                           724.0    667.1    8.5 %    7.5 %
    Devices
        Medication Management Systems      142.4    174.6  (18.4)%  (19.0)%
        Other Devices                      101.8    115.2  (11.6)%  (12.2)%
                                         -------   ------
                                           244.2    289.8  (15.7)%  (16.3)%
                                         -------   ------
    Net Sales                             $968.2   $956.9    1.2 %    0.3 %
                                         =======   ======


                                              Six Months Ended June 30,
                                        ------------------------------------
                                                           % Change % Change
                                                             at       at
                                                           Actual   Constant
                                                           Currency Currency
                                          2010     2009    Rates    Rates (1)
                                        -------- --------  --------  --------
    Americas--
    Pharmaceuticals
        Specialty Injectables             $936.9   $701.6   33.5 %   31.8 %
        Other Pharma                       248.3    277.2  (10.4)%  (10.9)%
                                        -------- --------
                                         1,185.2    978.8   21.1 %   19.7 %
    Devices
        Medication Management Systems      246.8    273.6   (9.8)%  (11.5)%
        Other Devices                      164.9    184.0  (10.4)%  (11.8)%
                                        -------- --------
                                           411.7    457.6  (10.0)%  (11.6)%
    Total Americas                       1,596.9  1,436.4   11.2 %    9.7 %

    Europe, Middle East & Africa--
    Pharmaceuticals
        Specialty Injectables              137.2    125.7    9.1 %    8.3 %
        Other Pharma                        43.5     63.1  (31.1)%  (31.4)%
                                        -------- --------
                                           180.7    188.8   (4.3)%   (5.0)%
    Devices
        Medication Management Systems       35.6     36.6   (2.7)%   (2.5)%
        Other Devices                       27.0     34.2  (21.1)%  (21.3)%
                                        -------- --------
                                            62.6     70.8  (11.6)%  (11.6)%
    Total Europe, Middle East & Africa     243.3    259.6   (6.3)%   (6.8)%

    Asia Pacific--
    Pharmaceuticals
        Specialty Injectables              111.7     92.0   21.4 %    3.5 %
        Other Pharma                         3.9      6.3  (38.1)%  (49.2)%
                                        -------- --------
                                           115.6     98.3   17.6 %    0.1 %
    Devices
        Medication Management Systems       10.8      9.6   12.5 %    2.1 %
        Other Devices                        9.2     12.7  (27.6)%  (36.2)%
                                        -------- --------
                                            20.0     22.3  (10.3)%  (19.7)%
    Total Asia Pacific                     135.6    120.6   12.4 %   (3.6)%
                                        -------- --------
    Net Sales                           $1,975.8 $1,816.6    8.8 %    6.5 %
                                        ======== ========

    Global--
    Pharmaceuticals
        Specialty Injectables           $1,185.8   $919.3   29.0 %   25.8 %
        Other Pharma                       295.7    346.6  (14.7)%  (15.3)%
                                        -------- --------
                                         1,481.5  1,265.9   17.0 %   14.5 %
    Devices
        Medication Management Systems      293.2    319.8   (8.3)%  (10.0)%
        Other Devices                      201.1    230.9  (12.9)%  (14.6)%
                                        -------- --------
                                           494.3    550.7  (10.2)%  (11.9)%
                                        -------- --------
    Net Sales                           $1,975.8 $1,816.6    8.8 %    6.5 %
                                        ======== ========


    (1) The Non-GAAP financial measures contained in this press release
        include comparisons at constant currency rates (reflecting comparative
        local currency balances at prior period foreign exchange rates), which
        we define as current period net sales excluding the impact of the
        change in foreign exchange rates less prior period reported net sales
        divided by prior period reported net sales. This financial measure
        provides information on the change in net sales assuming that foreign
        currency exchange rates have not changed between the prior and the
        current period. Management believes the use of this financial measure
        aids in the understanding of our change in net sales without the
        impact of foreign currency. All Non-GAAP financial measures are
        intended to supplement the applicable GAAP measures and should not be
        considered in isolation from, or a replacement for, financial measures
        prepared in accordance with GAAP.


SOURCE Hospira, Inc.
 

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