Hospira Reports Fourth-Quarter and Full-Year 2010 Results -- Provides Sales and Earnings Projections for 2011 --

LAKE FOREST, Ill., Feb. 2, 2011 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), a leading global specialty pharmaceutical and medication delivery company, today reported results for the fourth quarter and full year ended Dec. 31, 2010. For the fourth quarter of 2010, net sales were $992 million, and adjusted* diluted earnings per share were $0.77. For full-year 2010, net sales were $3.9 billion, and adjusted* diluted earnings per share were $3.31. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.)

"2010 marked a year of progress for Hospira, despite several unanticipated challenges," said Christopher B. Begley, chairman and chief executive officer. "We launched gemcitabine, a large oncology drug, in the United States during the fourth quarter, the first generic version of the drug in the market; we expanded both our operations and portfolio geographically; we made substantial progress with our quality initiatives; and we met our commitments with Project Fuel, our corporate-wide optimization initiative. Looking forward, we expect a year of good growth in 2011, as we remain committed to transforming challenges into opportunities and driving continuous improvement across the organization."

Fourth-Quarter 2010 Results

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

    
    
    In $ millions,           GAAP                        Adjusted*
    except per        Three Months Ended            Three Months Ended
    share amounts          Dec. 31,                      Dec. 31,
                      ------------------      %     ------------------    %
                       2010        2009    Change    2010        2009  Change
                      ------     -------   ------   ------      ------ ------
    Net Sales         $992.1    $1,055.2    (6.0)%    n/a         n/a    n/a
    
    Gross Profit
     (Net Sales
     less Cost of
     Products Sold)   $347.9      $395.0   (11.9)%  $388.1     $427.5   (9.2)%
    Income from
     Operations        $53.6      $135.6   (60.5)%  $141.6     $204.2  (30.7)%
    Diluted EPS        $0.36       $0.58   (37.9)%   $0.77      $0.87  (11.5)%
    
    Statistics (as a % of Net Sales)
    --------------------------------
    Gross Profit
     (Net Sales
     less Cost
     of Products
     Sold)              35.1%       37.4%             39.1%      40.5%
    Income from
     Operations          5.4%       12.9%             14.3%      19.4%

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

Net sales decreased 6.0 percent to $992 million in the fourth quarter of 2010, compared to $1.1 billion in the fourth quarter of 2009. Sales in Specialty Injectable Pharmaceuticals were solid, despite the year-over-year impact of the temporary discontinuation of U.S. sales of the oncolytic oxaliplatin pursuant to a litigation settlement. The solid Specialty Injectable Pharmaceutical sales were more than offset, however, by the decline in Medication Management, which was primarily a result of the company's voluntary hold on shipments of its Symbiq™ Infusion System to new customers; and the decline in Other Pharma, mainly a result of the impact of non-strategic asset divestitures.

Adjusted* income from operations decreased 30.7 percent to $142 million in the fourth quarter of 2010, compared to $204 million in the fourth quarter of 2009. Improved manufacturing efficiency from the company's Project Fuel optimization initiatives was more than offset by lower net sales; the impact of charges associated with certain quality and product related matters; and higher research and development expenses related to new product development programs, including clinical trials.

Full-Year 2010 Results

The following table highlights selected financial results for the full-year 2010 compared to the same period in 2009:

    
    
    In $ millions,             GAAP                       Adjusted*
    except per              Year Ended                   Year Ended
    share amounts            Dec. 31,                     Dec. 31,
                        -----------------      %     -----------------    %
                          2010      2009    Change     2010      2009  Change
                        -------   -------   ------   -------   ------- ------
    
    Net Sales          $3,917.2  $3,879.3     1.0 %      n/a       n/a    n/a
    Gross Profit
     (Net Sales
     less Cost of
     Products Sold)    $1,514.4  $1,456.4     4.0 % $1,666.0  $1,551.3    7.4%
    Income from
     Operations          $519.2    $502.9     3.2 %   $783.9    $738.0    6.2%
    Diluted EPS           $2.11     $2.47   (14.6)%    $3.31     $3.11    6.4%
    
    Statistics (as a % of Net Sales)
    --------------------------------
    Gross Profit
     (Net Sales
     less Cost of
     Products Sold)        38.7%     37.5%              42.5%     40.0%
    Income from
     Operations            13.3%     13.0%              20.0%     19.0%

Net sales increased 1.0 percent to $3.9 billion for the year ended Dec. 31, 2010. Strong global net sales of Specialty Injectable Pharmaceuticals were substantially offset by the decline in Medication Management, which was primarily a result of the company's voluntary hold on Symbiq shipments to new customers, as well as by Other Pharma, which was affected by the impact of non-strategic asset divestitures.

Adjusted* income from operations increased 6.2 percent to $784 million for the full year of 2010, compared to $738 million for the full year of 2009. Higher net sales volume and cost savings from Project Fuel contributed to the full-year operating income performance. However, these positive factors were partially offset by the impact of charges associated with certain quality and product related matters; higher research and development expenses related to new product development programs, including clinical trials; and higher selling, general and administrative costs, primarily related to certain sales and promotional expenses.

Cash Flow

Cash flow from operations for the full-year 2010 was $315 million, compared to the $945 million generated in 2009. The decrease is due to several factors, including the increased inventory for new product launches and future strategic opportunities and the timing of chargeback and rebate payments related to the sale of oxaliplatin. In addition, late in the fourth quarter the company made an unplanned discretionary contribution to its U.S. pension plan, resulting in fully funded status under regulatory guidelines.

Capital expenditures were $209 million for the full year, compared to $159 million in 2009.

2011 Projections

Hospira expects net sales growth for full-year 2011 to be approximately 5 to 7 percent on a constant-currency basis. The company expects foreign exchange to provide a positive contribution of approximately 1 percent, based on current exchange rates. The net sales projections assume U.S. launches during 2011 of two oncolytics, docetaxel and a solution presentation of gemcitabine.

Adjusted* diluted earnings per share for 2011 are expected to be in the range of $3.90 to $4.00, or year-over-year growth of 18 to 21 percent.

The reconciliation between the projected 2011 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:

    
    
    Diluted earnings per share -- adjusted*                    $3.90 - $4.00
                                                               -------------
    
    Estimated charges related to remaining Project Fuel
    initiatives (mid-point of an estimated range of
    $0.03 to $0.05 per diluted share)                                 ($0.04)
    
    Estimated $70 million for the amortization of
    intangibles related to the acquisitions of
    Mayne Pharma, the specialty injectable business
    of Orchid Chemicals & Pharmaceuticals
    and Javelin Pharmaceuticals                                       ($0.27)
                                                               -------------
    
    Diluted earnings per share -- GAAP                         $3.59 - $3.69
                                                               =============

The adjusting items are shown net of tax in aggregate of $26 million, which is calculated for the specified adjustments stated above, based on the statutory tax rates in the various tax jurisdictions in which the items are expected to occur.

The company projects that cash flow from operations in 2011 will be between $650 million and $700 million. Depreciation and amortization is expected to be between $230 million and $250 million. Capital expenditures are projected to range between $250 million and $275 million.

"Hospira is on track for a good year in 2011, with our projections for solid sales and earnings growth," said Begley. "We are driving continued improvement throughout the organization with our crisp focus on executing our strategy, and we look forward to progressing toward our longer-term financial goals, creating sustainable growth and driving shareholder value."

*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, Feb. 2, 2011. 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™. 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 14,000 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 
                                                       December 31,          
                                                    ----------------      %   
                                                     2010     2009     Change 
                                                    ------  --------   ------ 
    Net sales                                       $992.1  $1,055.2    (6.0)%
                                                    ------  --------          
                                                                              
    Cost of products sold                            644.2     660.2    (2.4)%
    Restructuring, impairment and (gain) on                                   
     disposition of assets, net                       23.5      15.1    55.6 %
    Research and development                         103.2      79.7    29.5 %
    Selling, general and administrative              167.6     164.6     1.8 %
                                                    ------  --------          
        Total operating costs and expenses           938.5     919.6     2.1 %
                                                    ------  --------          
          Income From Operations                      53.6     135.6   (60.5)%
                                                                              
    Interest expense                                  27.0      26.1     3.4 %
    Other income, net                                 (5.5)     (2.5)  120.0 %
                                                    ------  --------          
          Income Before Income Taxes                  32.1     112.0   (71.3)%
                                                                              
    Income tax (benefit) expense                     (28.5)     15.3  (286.3)%
                                                    ------  --------          
          Net Income                                 $60.6     $96.7   (37.3)%
                                                    ======  ========          
                                                                              
    Earnings Per Common Share:                                                
        Basic                                        $0.36     $0.59   (39.0)%
                                                    ======  ========          
        Diluted                                      $0.36     $0.58   (37.9)%
                                                    ======  ========          
                                                                              
    Weighted Average Common Shares Outstanding:                               
        Basic                                        167.0     162.6     2.7 %
                                                    ======  ========          
        Diluted                                      170.1     165.9     2.5 %
                                                    ======  ========          
                                                                              
                                                                              
    Adjusted Gross Profit (1)(2)                    $388.1    $427.5    (9.2)%
    Adjusted Income From Operations (1)             $141.6    $204.2   (30.7)%
    Adjusted Net Income (1)                         $131.0    $144.6    (9.4)%
    Adjusted Diluted Earnings Per Share (1)          $0.77     $0.87   (11.5)%
    
    
    Statistics (as a % of net sales, 
    except for income tax rate):  
    
                                      GAAP             Adjusted (1)
                              Three Months Ended    Three Months Ended
                                  December 31,          December 31,     
                              -------------------   -------------------
                                2010       2009       2010       2009 
                              --------   --------   --------   --------
    Gross Profit (2)            35.1 %     37.4 %     39.1 %     40.5 %
    Income From Operations       5.4 %     12.9 %     14.3 %     19.4 %
    Net Income                   6.1 %      9.2 %     13.2 %     13.7 %
    Income Tax Rate            (88.8)%     13.7 %     (1.7)%     19.9 %
    
    
    (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)      
                                                                              
                                                                              
                                                     Years Ended            
                                                     December 31,           
                                                 -------------------      %   
                                                   2010       2009     Change 
                                                 --------   --------   ------ 
    Net sales                                    $3,917.2   $3,879.3     1.0 %
                                                 --------   --------          
                                                                              
    Cost of products sold                         2,402.8    2,422.9    (0.8)%
    Restructuring, impairment and (gain) on                                   
     disposition of assets, net                      19.7       94.2   (79.1)%
    Research and development                        300.5      240.5    24.9 %
    Selling, general and administrative             675.0      618.8     9.1 %
                                                 --------   --------          
        Total operating costs and expenses        3,398.0    3,376.4     0.6 %
                                                 --------   --------          
          Income From Operations                    519.2      502.9     3.2 %
                                                                              
    Interest expense                                101.1      106.3    (4.9)%
    Other expense, net                               26.6       11.8   125.4 %
                                                 --------   --------          
          Income Before Income Taxes                391.5      384.8     1.7 %
                                                                              
    Income tax expense (benefit)                     34.3      (19.1) (279.6)%
                                                 --------   --------          
          Net Income                               $357.2     $403.9   (11.6)%
                                                 ========   ========          
                                                                              
    Earnings Per Common Share:                                                
        Basic                                       $2.15      $2.51   (14.3)%
                                                 ========   ========          
        Diluted                                     $2.11      $2.47   (14.6)%
                                                 ========   ========          
                                                                              
    Weighted Average Common Shares Outstanding:                               
        Basic                                       166.0      161.0     3.1 %
                                                 ========   ========          
        Diluted                                     169.5      163.2     3.9 %
                                                 ========   ========          
                                                                              
                                                                              
    Adjusted Gross Profit (1)(2)                 $1,666.0   $1,551.3     7.4 %
    Adjusted Income From Operations (1)            $783.9     $738.0     6.2 %
    Adjusted Net Income (1)                        $560.5     $507.0    10.6 %
    Adjusted Diluted Earnings Per Share (1)         $3.31      $3.11     6.4 %
      
    
                                                             
    Statistics (as a % of net sales,
     except for income tax rate):     
                                                             
                                       GAAP             Adjusted (1) 
                                   Years Ended          Years Ended 
                                   December 31,         December 31, 
                              -------------------   -------------------
                                2010       2009       2010       2009 
                              --------   --------   --------   --------
    Gross Profit (2)            38.7 %     37.5 %     42.5 %     40.0 %
    Income From Operations      13.3 %     13.0 %     20.0 %     19.0 %
    Net Income                   9.1 %     10.4 %     14.3 %     13.1 %
    Income Tax Rate              8.8 %     (5.0)%     20.1 %     20.3 %
    
    
    (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 December 31, 2010 Reconciliation of GAAP to Non-GAAP 
    Financial Measures: 
    --------------------------------------------------------------------------
                                                                              
                                                   Income                     
                                        Gross       From       Net     Diluted
                                      Profit(1)  Operations  Income(2)   EPS  
                                      --------   ----------  --------  -------
    GAAP financial measures             $347.9        $53.6     $60.6    $0.36
    Specified items:                                                          
       Project Fuel and related                                               
        charges (A)                        4.3         11.4       9.2     0.05
       Facilities Optimization                                                
        charges (B)                        2.8          7.7       4.9     0.03
       Amortization of certain                                                
        intangible assets (C)             19.4         19.4      13.3     0.08
       Certain quality and product                                            
        related charges (D)               13.4         13.4       8.1     0.05
       Acquisition and integration-                                           
        related charges (E)                0.3          2.1       1.4        -
       Impairment of certain
        assets (F)                           -         12.7      20.4     0.12
       Research and development                                               
        charge (G)                           -         21.3      13.1     0.08
                                     ---------   ----------  --------  -------
    Adjusted financial measures (3)     $388.1       $141.6    $131.0    $0.77
                                     =========   ==========  ========  =======
                                                                              
    GAAP results for the three months ended December 31, 2010 include:
    A -- Project Fuel and related charges: $4.3 million reported in Cost of 
         products sold, $5.7 million reported in Restructuring, impairment and
         (gain) on disposition of assets, net and $1.4 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: $2.8 million reported in Cost of 
         products sold, $5.1 million reported in Restructuring, impairment 
         and (gain) on disposition of assets, net and $(0.2) million reported 
         in Research and development. 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"), Javelin Pharmaceuticals, Inc. ("Javelin 
         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: $0.3 million reported in
         Cost of products sold, $1.4 million reported in Research and 
         development and $0.4 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 -- Impairment of certain assets: $12.7 million reported in 
         Restructuring, impairment and (gain) on disposition of assets, net 
         for impairment of a Mayne Pharma related intangible asset and $8.8 
         million reported in Other income, net for impairment of cost-method 
         investments.
    G -- Research and development charge resulting from an initial payment 
         related to an agreement and corresponding milestone reached for 
         development of a hematology product that has not yet achieved 
         regulatory approval.
    
    
    Three months ended December 31, 2009 Reconciliation of GAAP to Non-GAAP 
    Financial Measures: 
    --------------------------------------------------------------------------
                                                                              
                                                   Income                     
                                        Gross       From       Net     Diluted
                                      Profit(1)  Operations  Income(2)   EPS  
                                      --------   ----------  --------  -------
    GAAP financial measures             $395.0       $135.6     $96.7    $0.58
    Specified items:                                                          
       Project Fuel and related                                               
        charges (A)                       13.8         31.0      19.7     0.12
       Facilities Optimization                                                
        charges (B)                        5.4          8.3       5.4     0.03
       Amortization of certain                                                
        intangible assets (C)             13.3         13.3      11.4     0.07
       Research and development                                               
        charge (D)                           -         16.0      11.4     0.07
                                      --------    ---------  --------  -------
    Adjusted financial measures (3)     $427.5       $204.2    $144.6    $0.87
                                      ========    =========  ========  =======
    
    GAAP results for the three months ended December 31, 2009 include:
    A -- Project Fuel and related charges: $13.8 million reported in Cost of 
         products sold, $12.2 million reported in Restructuring, impairment 
         and (gain) on disposition of assets, net, $0.7 million reported in 
         Research and development and $4.3 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: $5.4 million reported in Cost of 
         products sold and $2.9 million reported in Restructuring and 
         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 -- Research and development charge resulting from an initial payment 
         related to an agreement and corresponding milestones reached for 
         development of an oncology product that has not yet achieved 
         regulatory approval.
    
    (1) Gross profit is defined as Net sales less Cost of products sold.
    (2) Specified items are shown net of tax of $26.4 million and $20.7 
        million for the three months ended December 31, 2010 and 2009, 
        respectively, based on the statutory tax rates 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 February 2, 2011 for additional information.
    
    
                                  Hospira, Inc.                              
              Reconciliation of GAAP to Non-GAAP Financial Measures          
                                   (Unaudited)                               
          (dollars and shares in millions, except for per share amounts)     
                                                                             
                                                                             
    Year ended December 31, 2010 Reconciliation of GAAP to Non-GAAP
    Financial Measures: 
    -------------------------------------------------------------------------
                                                                             
                                                   Income                     
                                        Gross       From       Net     Diluted
                                      Profit(1)  Operations  Income(2)   EPS  
                                      --------   ----------  --------  -------
    GAAP financial measures           $1,514.4       $519.2    $357.2    $2.11
    Specified items:                                                         
       Project Fuel and related                                              
        charges (A)                       16.4         27.8      15.7     0.09
       Facilities Optimization                                               
        charges (B)                       10.0         16.9      11.2     0.07
       Amortization of certain                                               
        intangible assets (C)             70.0         70.0      47.7     0.28
       Certain quality and product                                           
        related charges (D)               54.3         54.3      33.8     0.20
       Acquisition and integration-                                           
        related charges (E)                0.9         20.2      12.8     0.07
       Impairment of certain assets (F)      -         12.7      20.4     0.12
       Research and development                                              
        charges (G)                          -         48.8      30.3     0.18
       Litigation settlement and                                             
        related charges (H)                  -         14.0       8.5     0.05
       Loss on early debt                                                    
        extinguishment (I)                   -            -      22.9     0.14
                                      --------   ----------  --------  -------
    Adjusted financial measures (3)   $1,666.0       $783.9    $560.5    $3.31
                                      ========   ==========  ========  =======
    
    GAAP results for the year ended December 31, 2010 include:
    A -- Project Fuel and related charges: $16.4 million reported in Cost of 
         products sold, $11.3 million reported in Restructuring, impairment 
         and (gain) on disposition of assets, net, $0.3 million reported in 
         Research and development and $11.2 million reported in Selling, 
         general and administrative. Project Fuel initiatives include costs 
         for process optimization implementation, severance and other employee
         benefits, exit costs, accelerated depreciation 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: $10.0 million reported in Cost of 
         products sold, $7.1 million reported in Restructuring, impairment and
         (gain) on disposition of assets, net and $(0.2) million reported in 
         Research and development. 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, 
         Javelin 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, idle facility 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: $0.9 million reported in
         Cost of products sold, $5.1 million reported in Research and 
         development and $14.2 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 -- Impairment of certain assets: $12.7 million reported in 
         Restructuring, impairment and (gain) on disposition of assets, net 
         for impairment of a Mayne Pharma related intangible asset and $8.8 
         million reported in Other expense, net for impairment of cost-method 
         investments.
    G -- Research and development charges resulting from initial payments 
         related to agreements and corresponding milestones reached for 
         development of a long-acting local anesthetic and a hematology 
         product that have not yet achieved regulatory approval.
    H -- RTI litigation settlement and related charges reported in Selling, 
         general and administrative.
    I -- Loss on early debt extinguishment of $36.8 million reported in Other 
         expenses, net.
    
    
    Year ended December 31, 2009 Reconciliation of GAAP to Non-GAAP
    Financial Measures: 
    -------------------------------------------------------------------------
                                                                             
                                                  Income                     
                                       Gross       From       Net     Diluted
                                     Profit(1)  Operations  Income(2)   EPS  
                                     --------   ----------  --------  -------
    GAAP financial measures          $1,456.4       $502.9    $403.9    $2.47
    Specified items:                                                         
       Project Fuel and related                                              
        charges (A)                      26.4        136.5     111.2     0.69
       Facilities Optimization                                               
        charges (B)                      14.3         28.4      18.8     0.12
       Amortization of certain                                               
        intangible assets (C)            54.2         54.2      37.3     0.23
       Research and development                                              
        charge (D)                          -         16.0      11.1     0.07
       Impairment of marketable                                              
        equity securities (E)               -            -      16.6     0.10
       Resolution of IRS tax audit                                           
        benefit (F)                         -            -     (91.9)   (0.57)
                                     --------     --------  --------  -------
    Adjusted financial measures (3)  $1,551.3       $738.0    $507.0    $3.11
                                     ========     ========  ========  =======
    
    GAAP results for the year ended December 31, 2009 include:
    A -- Project Fuel and related charges: $26.4 million reported in Cost of 
         products sold, $80.1 million reported in Restructuring, impairment 
         and (gain) on disposition of assets, net, $3.3 million reported in 
         Research and development and $26.7 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: $14.3 million reported in Cost of 
         products sold and $14.1 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 -- Research and development charge resulting from an initial payment 
         related to an agreement and corresponding milestones reached for 
         development of an oncology product that has not yet achieved 
         regulatory approval.
    E -- Impairment of marketable equity securities is reported in Other 
         expense, net.
    F -- 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 $106.8 million and $148.6 
        million for the years ended December 31, 2010 and 2009, respectively, 
        based on the statutory tax rates 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 February 2, 2011 for additional information.
    
    
                                  Hospira, Inc.                       
                      Condensed Consolidated Balance Sheets           
                                   (Unaudited)                        
                              (dollars in millions)                   
                                                                
                                                                
                                                    December 31,  December 31,
                         Assets                         2010          2009
                                                      --------     --------
                                                                
    Current Assets:                                             
      Cash and cash equivalents                         $604.3       $946.0
      Trade receivables, less allowances of
       $8.2 in 2010 and $6.2 in 2009                     605.0        498.1
      Inventories                                        955.5        755.4
      Deferred income taxes                              165.2        185.9
      Prepaid expenses                                    43.6         34.3
      Other receivables                                  103.9         41.5
      Assets held for sale                                   -         65.0
                                                      --------     --------
          Total Current Assets                         2,477.5      2,526.2
                                                      --------     --------
    Property and equipment, net                        1,279.2      1,147.8
    Intangible assets, net                               527.7        406.5
    Goodwill                                           1,471.2      1,243.4
    Deferred income taxes                                161.0         54.5
    Investments                                           64.7         49.3
    Other assets                                          65.0         75.2
                                                      --------     --------
          Total Assets                                $6,046.3     $5,502.9
                                                      ========     ========
          Liabilities and Shareholders' Equity            
                                                                
    Current Liabilities:                                        
      Short-term borrowings                              $33.5        $23.6
      Trade accounts payable                             320.7        229.5
      Salaries, wages and commissions                    136.0        176.5
      Deferred income taxes                                0.1          0.1
      Other accrued liabilities                          441.3        438.3
      Liabilities related to assets held for sale            -         13.9
                                                      --------     --------
          Total Current Liabilities                      931.6        881.9
                                                      --------     --------
    Long-term debt                                     1,714.4      1,707.3
    Deferred income taxes                                  4.4         18.6
    Post-retirement obligations and other
     long-term liabilities                               212.4        271.4
    Commitments and Contingencies                               
                                                      --------     --------
    Total Shareholders' Equity                         3,183.5      2,623.7
                                                      --------     --------
    Total Liabilities and Shareholders' Equity        $6,046.3     $5,502.9
                                                      ========     ========
    
    
                                   Hospira, Inc.                              
                  Condensed Consolidated Statements of Cash Flows             
                                    (Unaudited)                               
                               (dollars in millions)                          
                                                                              
                                                                              
                                                                              
                                                                Years Ended  
                                                                December 31, 
                                                              --------------- 
                                                               2010     2009 
                                                              ------   ------ 
                                                                              
    Cash Flow From Operating Activities:                                      
      Net income                                              $357.2   $403.9 
      Adjustments to reconcile net income to net cash from                   
       operating activities-                                                 
        Depreciation                                           164.3    168.6 
        Amortization of intangible assets                       81.6     61.5 
        Loss on early debt extinguishment                       36.8        - 
        Stock-based compensation expense                        47.5     40.5 
        Deferred income tax and other tax adjustments          (14.0)   (66.3)
        Impairment and other asset charges                      25.1     95.8 
        Gain on disposition of assets                          (11.4)       - 
      Changes in assets and liabilities-                                      
        Trade receivables                                      (94.5)    97.2 
        Inventories                                           (201.8)    54.4 
        Prepaid expenses and other assets                      (18.5)     8.2 
        Trade accounts payable                                  84.6     (4.2)
        Other liabilities                                      (76.0)   107.5 
      Other, net                                               (66.0)   (22.2)
                                                              ------   ------ 
          Net Cash Provided by Operating Activities            314.9    944.9 
                                                              ------   ------ 
                                                                              
    Cash Flow From Investing Activities:                                      
      Capital expenditures (including instruments placed
       with or leased to customers)                           (208.5)  (159.4)
      Acquisitions, net of cash acquired, and payments for                    
       contingent consideration                               (540.8)   (86.6)
      Purchases of intangibles and other investments           (18.7)   (14.3)
      Proceeds on disposition of assets                         62.6     49.2 
                                                              ------   ------ 
        Net Cash Used in Investing Activities                 (705.4)  (211.1)
                                                              ------   ------ 
                                                                              
    Cash Flow From Financing Activities:                                      
      Issuance of long-term debt, net of fees paid             492.5    246.7 
      Repayment of long-term debt                             (500.3)  (681.2)
      Payment on early debt extinguishment                     (36.8)       - 
      Other borrowings, net                                      5.1      2.6 
      Common stock repurchased                                (100.0)       - 
      Excess tax benefit from stock-based compensation                        
       arrangements                                             21.3      0.8 
      Proceeds from stock options exercised                    153.3    122.5 
                                                              ------   ------ 
        Net Cash Provided by (Used in) Financing Activities     35.1   (308.6)
                                                              ------   ------ 
                                                                              
    Effect of exchange rate changes on cash and cash                          
     equivalents                                                13.7     37.0 
                                                              ------   ------ 
                                                                              
    Net change in cash and cash equivalents                   (341.7)   462.2 
    Cash and cash equivalents at beginning of year             946.0    483.8 
                                                              ------   ------ 
    Cash and cash equivalents at end of year                  $604.3   $946.0 
                                                              ======   ====== 
                                                                              
    Supplemental Cash Flow Information:                                       
    Cash paid during the year-                                              
       Interest                                               $101.8   $108.7 
       Income taxes, net of refunds                            $78.8    $28.4 
    
    
                                   Hospira, Inc.                              
                             Net Sales by Product Line                        
                                    (Unaudited)                               
                               (dollars in millions)                          
                                                                              
                                                                              
                                           Three Months Ended December 31,    
                                           -------------------------------    
                                                          % Change   % Change
                                                            at         at   
                                                          Actual     Constant
                                                          Currency   Currency
                                     2010        2009     Rates      Rates (1)
                                   --------    --------   --------   --------
    Americas--                                                              
       Specialty Injectable                                                 
        Pharmaceuticals              $458.7      $439.2      4.4 %       3.9 %
       Medication Management (2)      206.2       231.1    (10.8)%     (11.1)%
       Other Pharma                   114.0       153.2    (25.6)%     (25.6)%
                                   --------    --------                       
    Total Americas                    778.9       823.5     (5.4)%      (5.8)%
                                                                              
    Europe, Middle East & Africa--                                            
       Specialty Injectable                                                   
        Pharmaceuticals                77.7        76.7      1.3 %       7.6 %
       Medication Management (2)       32.9        37.2    (11.6)%      (4.3)%
       Other Pharma                    18.4        39.7    (53.7)%     (50.6)%
                                   --------    --------                       
    Total Europe, Middle East &                                               
     Africa                           129.0       153.6    (16.0)%     (10.4)%
                                                                              
    Asia Pacific--                                                            
       Specialty Injectable                                                   
        Pharmaceuticals                68.6        62.4      9.9 %       3.4 %
       Medication Management (2)       13.0        11.4     14.0 %       5.3 %
       Other Pharma                     2.6         4.3    (39.5)%     (48.8)%
                                   --------    --------                       
    Total Asia Pacific                 84.2        78.1      7.8 %       0.8 %
                                                                              
                                   --------    --------                       
    Net Sales                        $992.1    $1,055.2     (6.0)%      (6.0)%
                                   ========    ========                       
                                                                              
    Global--                                                                  
       Specialty Injectable                                                   
        Pharmaceuticals              $605.0      $578.3      4.6 %       4.3 %
       Medication Management (2)      252.1       279.7     (9.9)%      (9.5)%
       Other Pharma                   135.0       197.2    (31.5)%     (31.1)%
                                                                              
                                   --------    --------                       
    Net Sales                        $992.1    $1,055.2     (6.0)%      (6.0)%
                                   ========    ========                       
                                                                              
                                                                              
                                                                              
                                              Years Ended December 31,        
                                              ------------------------        
                                                          % Change   % Change
                                                            at         at   
                                                          Actual     Constant
                                                          Currency   Currency
                                     2010        2009     Rates      Rates (1)
                                   --------    --------   --------   --------
    Americas--                                                                
       Specialty Injectable                                                   
        Pharmaceuticals            $1,829.0    $1,589.9     15.0 %      14.0 %
       Medication Management (2)      827.5       917.0     (9.8)%     (10.8)%
       Other Pharma                   481.4       556.4    (13.5)%     (13.7)%
                                   --------    --------                       
    Total Americas                  3,137.9     3,063.3      2.4 %       1.5 %
                                                                              
    Europe, Middle East & Africa--                                            
       Specialty Injectable                                                   
        Pharmaceuticals               283.2       272.0      4.1 %       7.6 %
       Medication Management (2)      126.6       142.4    (11.1)%      (7.0)%
       Other Pharma                    78.7       128.4    (38.7)%     (37.0)%
                                   --------    --------                       
    Total Europe, Middle East &                                               
     Africa                           488.5       542.8    (10.0)%      (6.8)%
                                                                              
    Asia Pacific--                                                            
       Specialty Injectable                                                   
        Pharmaceuticals               237.3       211.4     12.3 %       0.7 %
       Medication Management (2)       45.0        45.4     (0.9)%      (9.0)%
       Other Pharma                     8.5        16.4    (48.2)%     (54.9)%
                                   --------    --------                       
    Total Asia Pacific                290.8       273.2      6.4 %      (4.3)%
                                                                              
                                   --------    --------                       
    Net Sales                      $3,917.2    $3,879.3      1.0 %         - %
                                   ========    ========                       
                                                                              
    Global--                                                                  
       Specialty Injectable                                                   
        Pharmaceuticals            $2,349.5    $2,073.3     13.3 %      11.8 %
       Medication Management (2)      999.1     1,104.8     (9.6)%     (10.2)%
       Other Pharma                   568.6       701.2    (18.9)%     (19.0)%
                                                                              
                                   --------    --------                       
    Net Sales                      $3,917.2    $3,879.3      1.0 %         - %
                                   ========    ========                       
    
    
    (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.
    
    (2) As part of Project Fuel, Hospira disposed of the non-strategic 
        critical care business, during 2009. As a result, the former Other 
        Devices product line is now included in a single device product line, 
        Medication Management.  Medication Management includes infusion pumps,
        related software and services, dedicated administration sets, gravity 
        administration sets, critical care products (through August 2009) and 
        other device products.

SOURCE Hospira, Inc.



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