Hospira Reports Third-Quarter 2012 Results -- Reaffirms sales and adjusted earnings projections for 2012 --

LAKE FOREST, Ill., Nov. 7, 2012 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), the world's leading provider of injectable drugs and infusion technologies, today reported results for the third quarter ended Sept. 30, 2012. Net sales for the quarter were $994 million, and adjusted* diluted earnings per share were $0.47. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.) Diluted earnings per share on a Generally Accepted Accounting Principles (GAAP) basis were $0.01.

"Results for the third quarter were in line with our expectations, and we continued to advance our overall quality improvement initiatives," said F. Michael Ball, chief executive officer. "We remain fully committed to reinforcing Hospira's foundation, and we believe we are making progress in this regard. As we head toward the end of what has been a challenging year for Hospira, I am pleased with our dedicated focus, the improvements we are making across the organization and the advancements of Hospira's growth expansion initiatives. I remain confident that our actions are positioning Hospira to be a stronger, more competitive global company, one that will serve the needs of our customers and patients, and deliver strong value to our shareholders."

Third-Quarter 2012 Results

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


In $ millions,

except per share

amounts

GAAP

Three Months Ended

September 30,


Adjusted*

Three Months Ended

September 30,



2012

2011

%

Change

2012

2011

%

Change

Net Sales

$994.0

$976.7

1.8%

n/a

n/a

n/a

Gross Profit (Net Sales less

Cost of Products Sold)

$214.3

$303.9

(29.5)%

$334.0

$361.3

(7.6)%

(Loss) Income from

Operations

$(16.5)

$(85.2)

80.6%

$112.6

$142.4

(20.9)%

Diluted Earnings (Loss) per

Share

$0.01

$(0.54)

101.9%

$0.47

$0.66

(28.8)%

Statistics (as a % of Net Sales)

Gross Profit (Net Sales less

Cost of Products Sold)

21.6%

31.1%


33.6%

37.0%


(Loss) Income from

Operations

(1.7)%

(8.7)%


11.3%

14.6%





Results under U.S. GAAP include items as detailed in the schedules attached to this press release.

Net sales for the quarter were $994 million, an increase of 1.8 percent compared to $977 million in the third quarter of 2011. On a constant-currency basis, third-quarter 2012 net sales increased 3.9 percent compared to the third quarter of 2011. Strong U.S. sales of several Specialty Injectable Pharmaceutical (SIP) products, including Precedex™ and the oncolytic oxaliplatin, which was relaunched during the quarter, as well as higher volumes for certain SIP products in the company's Europe, Middle East and Africa (EMEA) region, contributed to the positive performance in the quarter. The strong SIP performance more than offset the impact to supply in 2012 of the company's quality-improvement and remediation initiatives.

Adjusted* income from operations for the third quarter of 2012 was $113 million compared to $142 million in the third quarter of 2011. The majority of the decline reflects the impact of costs associated with higher year-over-year manufacturing expense. On a GAAP basis, the loss from operations for the third quarter of 2012 was $17 million compared to a loss from operations of $85 million in the third quarter of 2011. On a GAAP basis, in addition to the higher year-over-year manufacturing expense, the third quarter of 2012, and to a lesser extent, the third quarter of 2011, included charges associated with certain quality- and product-related matters. The third quarter of 2011 also included the impact of a goodwill impairment charge.

The effective tax rate on an adjusted basis* in the quarter was 19.0 percent compared to 16.9 percent in the third-quarter 2011. The increase is due to the impact in 2011 of a reduction in the full-year annual effective tax rate, reflected in the third quarter of 2011. The third quarter 2012 effective tax rate on a GAAP basis was a benefit of 85.9 percent compared to a benefit of 8.1 percent in the third quarter of 2011. The third-quarter 2012 GAAP tax benefit, and to a lesser extent the third-quarter 2011 tax benefit, resulted from higher quality- and product-related charges in higher-tax rate jurisdictions.

Cash Flow

Cash flow from operations for the first nine months of 2012 was $404 million, compared to the $277 million in the same period of 2011. The increase primarily reflects lower working capital investments and lower income tax and interest payments in 2012 compared to 2011.

Capital expenditures were $202 million for the first nine months of 2012, compared to $211 million for the first nine months of 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 approximately $2.00.

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

Projected diluted earnings per share -- adjusted*

$2.00



Estimated amortization of intangible assets

related to certain acquisitions (mid-point of an

estimated range of $0.30 to $0.32 per diluted share)

$(0.31)



Estimated charges for certain quality and

product-related matters (mid-point of an

estimated range of $0.78 to $0.88 per diluted share)

                                                                               $(0.83)



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)



Estimated charges for other restructuring

$(0.07)



Charges related to impairment of certain assets

$(0.09)



Projected diluted earnings per share -- GAAP

$0.53



The adjusting items are shown net of tax in aggregate of $131 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 narrowing the projected range for cash flow from operations in 2012 to between $475 million and $500 million. The company continues to project that depreciation and amortization will range between $240 million and $260 million. Capital expenditures are now projected to range between $325 million and $350 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, Nov. 7, 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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