Hospira Reports Second-Quarter 2012 Results -- Reaffirms sales, guides to low end of adjusted* earnings range for 2012 --

LAKE FOREST, Ill., Aug. 1, 2012 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), the world's leading provider of injectable drugs and infusion technologies, today reported results for the second quarter ended June 30, 2012. Net sales for the quarter were $1.0 billion, and adjusted* diluted earnings per share were $0.51. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.)

"Hospira's second-quarter results were in line with expectations," said F. Michael Ball, chief executive officer. "The quarter's performance reflected the impact of our quality-improvement initiatives, as well as a difficult comparison to strong second-quarter 2011 performance. During the quarter, we made progress with our remediation efforts and remain fully committed to reinforcing Hospira's foundation, which will allow us to better serve our customers and the patients who rely on our products. We believe that the initiatives we are taking this year will position Hospira with an even stronger competitive advantage and create sustainable, long-term shareholder value."

Second-Quarter 2012 Results

The following table highlights selected financial results for the second quarter of 2012 compared to the same period in 2011:


In $ millions,

except per share

amounts

GAAP

Three Months Ended

June 30,


Adjusted*

Three Months Ended

June 30,



2012

2011

%

Change

2012

2011

%

Change

Net Sales

$1,033.3

$1,064.1

(2.9)%

n/a

n/a

n/a

Gross Profit (Net Sales less

Cost of Products Sold)

$283.5

$413.4

(31.4)%

$370.8

$433.4

(14.4)%

(Loss) Income from

Operations

$(2.2)

$190.5

(101.2)%

$117.3

$212.0

(44.7)%

Diluted (Loss) Earnings Per

Share

$(0.02)

$0.85

(102.4)%

$0.51

$0.94

(45.7)%

Statistics (as a % of Net Sales)

Gross Profit (Net Sales less

Cost of Products Sold)

27.4%

38.8%


35.9%

40.7%


(Loss) Income from

Operations

(0.2)%

17.9%


11.4%

19.9%





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

Net sales were $1.0 billion in the second quarter of 2012, a decrease of 3 percent compared to the second quarter of 2011. Excluding the impact of foreign exchange, net sales were flat on a year-over-year basis. Higher volumes for certain Specialty Injectable Pharmaceutical compounds outside the U.S. and favorable Medication Management sales were offset by a difficult year-over-year comparison to strong second-quarter 2011 performance, driven primarily by strong U.S. sales of the oncolytic docetaxel and other newer compounds, as well as the adverse impact to supply in 2012 of the company's quality-improvement and remediation initiatives.

Adjusted* income from operations decreased 45 percent to $117 million in the second quarter of 2012. The majority of the decline reflects the impact of costs associated with higher year-over-year manufacturing expense and inventory losses. Additionally, operating costs increased in the second quarter of 2012 due to expected higher research and development spending, as well as higher selling and promotional costs.  

The effective tax rate on an adjusted basis* in the quarter was 19.0 percent compared to 23.0 percent in the second quarter of 2011. The decrease is primarily due to lower operating income in higher-tax-rate jurisdictions.

Cash Flow

Cash flow from operations for the first six months of 2012 was $216 million compared to $253 million in the same period of 2011. The decrease primarily reflects lower net income in 2012, partially offset by lower investments in working capital in 2012, including inventory.

Capital expenditures were $137 million for the first six months of 2012, compared to $139 million for the same period in 2011.

2012 Projections

Hospira continues to project 2012 net sales to range between negative 1 to positive 2 percent on a constant-currency basis, with foreign exchange expected to detract from results by a negative 1 to negative 2 percent.

The company continues to believe that full-year 2012 adjusted* diluted earnings per share will be within the original projected range, but now expects full-year 2012 adjusted* diluted earnings per share to be at the low end of the range, approximately $2.00.

The reconciliation between the projected 2012 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:

Diluted earnings per share -- adjusted*

$2.00 - $2.30



Estimated amortization of intangible assets
related to certain acquisitions (mid-point of an
estimated range of $0.28 to $0.32 per diluted share)

$(0.30)



Estimated charges for certain quality and
product-related matters (mid-point of an
estimated range of $0.70 to $0.80 per diluted share)

                                                                                 $(0.75)



Estimated charges related to capacity expansion
(mid-point of an estimated range of $0.07 to $0.09
per diluted share)

$(0.08)



Estimated charges related to facilities optimization
(mid-point of an estimated range of $0.08 to $0.10
per diluted share)

$(0.09)



Charges for other restructuring

$(0.11)



Charges related to impairment of certain assets

         $(0.04)



Diluted earnings per share -- GAAP

$0.63 - $0.93



The adjusting items are shown net of tax in aggregate of $117 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 is revising its guidance for cash flow from operations, which is now projected to range between $475 million and $525 million in 2012. The company continues to project that depreciation and amortization will range between $240 million and $260 million, and capital expenditures between $350 million and $400 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, Aug. 1, 2012. A live webcast of the conference call will be available on Hospira's website 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 website at the beginning of the conference call. A replay will be available on the Hospira website for 30 days following the call.

About Hospira

Hospira, Inc. is the world's leading provider of injectable drugs and infusion technologies. Through its broad, integrated portfolio, Hospira is uniquely positioned to Advance Wellness™ by improving patient and caregiver safety while reducing healthcare costs. The company is headquartered in Lake Forest, Ill., and has approximately 15,000 employees. Learn more at www.hospira.com.

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