Hospira Reports Third-Quarter 2013 Results

GAAP

Three Months Ended

September 30,

%

Change

Adjusted*

Three Months Ended

September 30,

%

Change

2013

2013

2012

Net Sales

$1,008.2

$994.0

1.4%

n/a

n/a

$290.2

$214.3

35.4%

$371.4

$334.0

11.2%

Income (Loss) from

Operations

$29.8

280.6%

$122.0

$112.6

8.3%

Diluted Earnings per Share

$0.01

$0.01

--

$0.51

$0.47

8.5%

Statistics (as a % of Net Sales)

Gross Profit (Net Sales less

Cost of Products Sold)

28.8%

21.6%

36.8%

33.6%

Income (Loss) from

Operations

3.0%

12.1%

11.3%

Hospira, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(dollars and shares in millions, except for per share amounts)

Three Months Ended September 30,

% Change

2013

2012

Net sales

$  1,008.2

$   994.0

1.4 %

Cost of products sold

718.0

779.7

(7.9)%

Restructuring and impairment

9.8

9.4

4.3 %

Research and development

69.9

66.2

5.6 %

Selling, general and administrative

180.7

155.2

16.4 %

Total operating costs and expenses

978.4

1,010.5

(3.2)%

   Income (Loss) From Operations

29.8

(16.5)

280.6 %

Interest expense

23.3

21.1

10.4 %

Other expense, net

39.0

2.8

nm

   Loss Before Income Taxes

(32.5)

(40.4)

(19.6)%

Income tax benefit

(31.7)

(34.7)

(8.6)%

Equity income from affiliates, net

(2.7)

(6.9)

(60.9)%

   Net Income

$        1.9

$       1.2

58.3 %

Earnings Per Common Share:

  Basic

$       0.01

$     0.01

—%

  Diluted

$       0.01

$     0.01

—%

Weighted Average Common Shares Outstanding:

  Basic

165.7

165.1

0.4 %

  Diluted

167.0

165.9

0.7 %

Adjusted Gross Profit ⁽¹⁾⁽²⁾

$     371.4

$   334.0

11.2 %

Adjusted Income From Operations ⁽¹⁾

$     122.0

$   112.6

8.3 %

Adjusted Net Income ⁽¹⁾

$       84.5

$     78.4

7.8 %

Adjusted Diluted Earnings Per Share ⁽¹⁾

$       0.51

$     0.47

8.5 %

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

GAAP Three Months Ended September 30,

Adjusted ⁽¹⁾ Three Months Ended September 30,

2013

2012

2013

2012

Gross Profit ⁽²⁾

28.8 %

21.6 %

36.8 %

33.6 %

Income (Loss) From Operations

3.0 %

(1.7)%

12.1 %

11.3 %

Net Income

0.2 %

0.1 %

8.4 %

7.9 %

Income Tax Rate

97.5 %

85.9 %

17.5 %

19.0 %

(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.

nm

Percentage change is not meaningful.

Hospira, Inc.

Condensed Consolidated Statements of (Loss) Income

(Unaudited)

(dollars and shares in millions, except for per share amounts)

Nine Months Ended September 30,

% Change

2013

2012

Net sales

$  2,918.4

$  2,993.2

(2.5)%

Cost of products sold

2,159.5

2,195.4

(1.6)%

Restructuring and impairment

21.4

41.6

(48.6)%

Research and development

218.1

218.9

(0.4)%

Selling, general and administrative

556.0

509.3

9.2 %

Total operating costs and expenses

2,955.0

2,965.2

(0.3)%

   (Loss) Income From Operations

(36.6)

28.0

(230.7)%

Interest expense

62.8

64.3

(2.3)%

Other expense, net

51.3

12.8

300.8 %

   Loss Before Income Taxes

(150.7)

(49.1)

(206.9)%

Income tax benefit

(96.2)

(61.0)

57.7 %

Equity income from affiliates, net

(12.7)

(27.0)

(53.0)%

   Net (Loss) Income

$      (41.8)

$       38.9

(207.5)%

(Loss) Earnings Per Common Share:

  Basic

$       0.24

(204.2)%

  Diluted

$      (0.25)

$       0.23

(208.7)%

Weighted Average Common Shares Outstanding:

  Basic

165.5

165.0

0.3 %

  Diluted

165.5

166.0

(0.3)%

Adjusted Net Sales ⁽¹⁾⁽²⁾

$  3,022.7

$  2,993.2

1.0 %

Adjusted Gross Profit ⁽¹⁾⁽³⁾

$  1,119.8

$  1,062.3

5.4 %

Adjusted Income From Operations ⁽¹⁾

$     349.6

$     334.1

4.6 %

Adjusted Net Income ⁽¹⁾

$     262.7

$     242.0

8.6 %

Adjusted Diluted Earnings Per Share ⁽¹⁾

$       1.58

$       1.46

8.2 %

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

GAAP Nine Months Ended September 30,

 Adjusted ⁽¹⁾ Nine Months Ended September 30,

2013

2012

2013

2012

Gross Profit ⁽³⁾

26.0 %

26.7 %

37.0 %

35.5 %

(Loss) Income From Operations

(1.3)%

0.9 %

11.6 %

11.2 %

Net (Loss) Income

(1.4)%

1.3 %

8.7 %

8.1 %

Income Tax Rate

63.8 %

124.2 %

12.7 %

19.0 %

(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)

There were no adjustments included in GAAP Net sales for the nine months ended September 30, 2012.

(3)

Gross profit is defined as Net sales less Cost of products sold. Adjusted gross profit excludes certain specified items, as indicated in the previous footnotes.

Hospira, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

(dollars in millions, except for per share amounts)

Three months ended September 30, 2013 Reconciliation of GAAP to Non-GAAP Financial Measures:

Gross Profit⁽¹⁾

Income From
Operations

Net Income⁽²⁾

Diluted EPS

GAAP Financial Measures

$        290.2

$              29.8

$          1.9

$       0.01

Specified Items:

   Device strategy charges ^(A)

15.7

18.9

13.8

0.08

   Amortization of certain intangible assets ^(B)

16.4

16.4

11.5

0.07

   Impairment of certain assets ^(C)

—

3.5

(0.4)

—

   Certain quality and product related charges ^(D)

42.5

42.5

27.7

0.17

   Capacity expansion related charges ^(E)

6.6

6.6

4.3

0.03

   Acquisition and integration related charges ^(F)

—

1.2

0.7

—

   Other restructuring charges ^(G)

—

3.1

2.2

0.01

   Early debt extinguishment charges ^(H)

—

—

22.8

0.14

Adjusted financial measures ⁽³⁾

$        371.4

$            122.0

$         84.5

$       0.51

GAAP results for the three months ended September 30, 2013 include:

^(A)

Device strategy charges: $15.7 million in Cost of products sold and $3.2 million reported in Restructuring and impairment. These charges include consulting, customer accommodations, other asset impairments, accelerated depreciation, and other costs associated with Hospira's device strategy.

^(B)

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").

^(C)

Impairment of certain assets: $3.5 million reported in Restructuring and impairment and $3.1 million reported in Other expense, net. These charges relate to impairments of certain intangible assets and investments, respectively.

^(D)

Certain quality and product related charges reported in Cost of products sold primarily include third party oversight and consulting costs, extended production downtime related costs, and device product review and remediation costs to address identified issues. These charges are primarily associated with Hospira's response to the United States Food and Drug Administration ("FDA") warning letters and charges related to certain device related remediation activities.

^(E)

Capacity expansion related charges reported in Cost of products sold include start-up charges related to manufacturing capacity expansion in India.

^(F)

Acquisition and integration related charges reported in Selling, general, and administrative include costs for the pending acquisition and integration of an active pharmaceutical ingredient business.

^(G)

Other restructuring charges: $3.1 million reported in Restructuring and impairment. These charges include severance charges associated with Hospira's commercial reorganization.

^(H)

Early debt extinguishment charges:  $33.4 million reported in Other expenses, net and $3.0 million reported in Interest expense. These charges include a make whole provision, write-off of debt issue costs, discounts and deferred gain on interest rate hedges, and interest expense associated with an overlap of outstanding debt.

Three months ended September 30, 2012 Reconciliation of GAAP to Non-GAAP Financial Measures:

Gross Profit⁽¹⁾

(Loss) Income From

Operations

Net Income⁽²⁾

Diluted EPS

GAAP Financial Measures

$        214.3

$             (16.5)

$          1.2

$       0.01

Specified Items:

   Amortization of certain intangible assets^(A)

18.3

18.3

12.4

0.07

   Impairment of certain assets^(B)

—

11.3

8.2

0.05

   Certain quality and product related charges ^(C)

97.3

97.3

60.9

0.37

   Capacity expansion related charges ^(D)

4.1

4.1

2.4

0.01

   Other restructuring charges ^(E)

—

(1.9)

(6.7)

(0.04)

Adjusted financial measures ⁽³⁾

$        334.0

$            112.6

$         78.4

$       0.47

GAAP results for the three months ended September 30, 2012 include:

^(A)

Amortization of certain intangible assets reported in Cost of products sold resulting from acquisitions including Mayne Pharma, Javelin Pharmaceuticals, Inc ("Javelin Pharma") and a generic injectable business by Hospira India.

^(B)

Impairment of certain assets: $11.3 million reported in Restructuring and impairment related to impairments of certain intangible assets.

^(C)

Certain quality and product related charges reported in Cost of products sold primarily include third party oversight and consulting costs, extended production downtime related costs, device product review and remediation costs to address identified issues. These charges are primarily associated with Hospira's response to the FDA warning letters and charges related to certain device related remediation activities.

^(D)

Capacity expansion related charges reported in Cost of products sold include start-up charges related to manufacturing capacity expansion in India.

^(E)

Other Restructuring Charges: $(1.9) million reported in Restructuring and impairment for a gain on disposition of a non-strategic product line.

⁽¹⁾

Gross profit is defined as Net sales less Cost of products sold.

⁽²⁾

Adjusted net income is shown net of tax of $49.0 million and $51.6 million for the three months ended September 30, 2013 and 2012, 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 Form 8-K furnished on November 6, 2013.

Hospira, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

(dollars in millions, except for per share amounts)

Nine months ended September 30, 2013 Reconciliation of GAAP to Non-GAAP Financial Measures:

Net Sales

Gross Profit⁽¹⁾

(Loss) Income From

Operations

Net (Loss) Income⁽²⁾

Diluted EPS

GAAP Financial Measures

$  2,918.4

$        758.9

$           (36.6)

$           (41.8)

$      (0.25)

Specified Items:

   Device strategy charges ^(A)

104.3

207.1

217.4

159.8

0.97

   Amortization of certain intangible assets ^(B)

—

52.3

52.3

36.5

0.22

   Impairment of certain assets ^(C)

—

—

3.5

10.8

0.06

   Certain quality and product related charges ^(D)

—

87.2

87.2

57.6

0.35

   Capacity expansion related charges ^(E)

—

14.3

14.3

9.3

0.06

   Acquisition and integration related charges ^(F)

—

—

3.9

2.4

0.01

   Other restructuring charges ^(G)

—

—

7.6

5.3

0.03

   Early debt extinguishment charges ^(H)

—

—

—

22.8

0.14

   Diluted share impact

(0.01)

Adjusted financial measures ⁽³⁾

$  3,022.7

$     1,119.8

$          349.6

$          262.7

$       1.58

GAAP results for the nine months ended September 30, 2013 include:

^(A)

Device strategy charges: $104.3 million reported in Net sales, $102.8 million in Cost of products sold and $10.3 million in Restructuring and impairment. These charges include customer sales allowances, consulting, customer accommodations, contract termination, collection and destruction costs, inventory charges, other asset impairments, accelerated depreciation, and other costs associated with Hospira's device strategy.

^(B)

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.

^(C)

Impairment of certain assets: $3.5 million reported in Restructuring and impairment and $14.5 million reported in Other expense, net. These charges relate to impairment of certain intangible assets and investments, respectively.

^(D)

Certain quality and product related charges reported in Cost of products sold primarily include third party oversight and consulting costs, extended production downtime related costs, and device product review and remediation costs to address identified issues. These charges are primarily associated with Hospira's response to the FDA warning letters and charges related to certain device related remediation activities.

^(E)

Capacity expansion related charges reported in Cost of products sold include start-up charges related to manufacturing capacity expansion in India.

^(F)

Acquisition and integration related charges reported in Selling, general, and administrative include costs for the pending acquisition and integration of an active pharmaceutical ingredient business.

^(G)

Other restructuring charges: $7.6 million reported in Restructuring and impairment. These charges include severance charges associated with Hospira's commercial reorganization.

^(H)

Early debt extinguishment charges: $33.4 million reported in Other expenses, net and $3.0 million reported in Interest expense. These charges include a make whole provision, write-off of debt issue costs, discounts and deferred gain on interest rate hedges, and interest expense associated with an overlap of outstanding debt.

Nine months ended September 30, 2012 Reconciliation of GAAP to Non-GAAP Financial Measures:

Gross Profit⁽¹⁾

Income From

Operations

Net Income⁽²⁾

Diluted EPS

GAAP Financial Measures

$        797.8

$            28.0

$            38.9

$       0.23

Specified Items:

   Facilities optimization charges ^(A)

—

17.4

10.7

0.06

   Amortization of certain intangible assets ^(B)

54.8

54.8

37.8

0.23

   Impairment of certain assets^(C)

—

14.0

15.3

0.09

   Certain quality and product related charges ^(D)

192.6

192.6

120.5

0.73

   Capacity expansion related charges ^(E)

11.3

11.3

7.6

0.05

   Other restructuring charges^(F)

5.8

16.0

11.2

0.07

Adjusted financial measures ⁽³⁾

$     1,062.3

$          334.1

$          242.0

$       1.46

GAAP results for the nine months ended September 30, 2012 include:

^(A)

Facilities optimization charges: $17.4 million reported in Restructuring and impairment. The equipment and facility impairment charges relate to Hospira's plans to exit a specialty injectable drug finishing operation.

^(B)

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.

^(C)

Impairment of certain assets: $14.0 million reported in Restructuring and impairment, and $8.4 million reported in Other expense, net. These charges relate to impairments of certain intangible assets and an investment, respectively.

^(D)

Certain quality and product related charges reported in Cost of products sold primarily include third party oversight and consulting costs, extended production downtime related costs, device product review and remediation costs to address identified issues. These charges are primarily associated with Hospira's response to the FDA warning letters and charges related to certain device related remediation activities.

^(E)

Capacity expansion related charges reported in Cost of products sold include start-up charges related to manufacturing capacity expansion in India.

^(F)

Other Restructuring Charges: $5.8 million reported in Cost of products sold and $10.2 million reported in Restructuring and impairment. These charges include inventory charges, equipment impairments, contract termination charges and gain on disposition associated with Hospira's exit of non-strategic product lines.

⁽¹⁾

Gross profit is defined as Net sales less Cost of products sold.

⁽²⁾

Adjusted net income is shown net of tax of $132.6 million and $111.4 million for the nine months ended September 30, 2013 and 2012, 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 net sales, 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 Form 8-K furnished on November 6, 2013.

Hospira, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(dollars in millions)

September 30,

December 31,

2013

2012

Assets

Current Assets:

   Cash and cash equivalents

$         631.8

$        772.1

   Trade receivables, less allowances of $14.4 in 2013 and $12.7 in 2012

630.1

646.9

   Inventories, net

1,071.4

997.8

   Deferred income taxes

188.8

214.4

   Prepaid expenses

85.9

53.9

   Other receivables

101.7

75.3

    Total Current Assets

2,709.7

2,760.4

Property and equipment, net

1,487.0

1,445.1

Intangible assets, net

192.0

266.8

Goodwill

1,058.6

1,079.1

Deferred income taxes

399.7

296.8

Investments

35.8

71.8

Other assets

149.4

168.6

    Total Assets

$      6,032.2

$     6,088.6

Liabilities and Shareholders' Equity

Current Liabilities:

   Short-term borrowings

$           74.1

$          28.9

   Trade accounts payable

255.4

276.0

   Salaries, wages and commissions

166.4

144.0

   Other accrued liabilities

518.1

580.3

    Total Current Liabilities

1,014.0

1,029.2

Long-term debt

1,747.4

1,706.8

Deferred income taxes

3.6

4.4

Post-retirement obligations and other long-term liabilities

356.0

306.5

Commitments and Contingencies

Total Shareholders' Equity

2,911.2

3,041.7

Total Liabilities and Shareholders' Equity

$      6,032.2

$     6,088.6

Hospira, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(dollars in millions)

Nine Months Ended September 30,

Cash Flow From Operating Activities:

2013

2012

   Net (loss) income

$   (41.8)

$    38.9

   Adjustments to reconcile net (loss) income to net cash from operating activities-

        Depreciation

128.9

122.2

        Amortization of intangible assets

63.8

62.6

        Loss on early debt extinguishment

33.4

—

        Stock-based compensation expense

31.1

29.9

        Undistributed equity income from affiliates

(12.7)

(27.0)

        Distributions received from equity affiliates

30.1

—

        Deferred income taxes

(119.7)

(47.0)

        Impairments and other asset charges

73.1

58.3

        Gains on disposition of assets

(0.9)

(5.9)

   Changes in assets and liabilities-

        Trade receivables

11.2

55.4

        Inventories

(144.3)

9.5

        Prepaid expenses and other assets

(48.7)

(39.9)

        Trade accounts payable

(11.3)

31.1

       Other liabilities

60.0

114.5

   Other, net

9.3

1.8

        Net Cash Provided by Operating Activities

404.4

Cash Flow From Investing Activities:

     Capital expenditures (including instruments placed with or leased to customers)

(248.5)

(201.8)

     Other payments to acquire business

—

(15.0)

     Purchases of intangibles and other investments

(12.2)

(9.6)

     Proceeds from disposition of businesses and assets

1.4

9.6

        Net Cash Used in Investing Activities

(259.3)

(216.8)

Cash Flow From Financing Activities:

    Issuance of long-term debt, net of fees paid

691.8

—

    Repayment of long-term debt

(650.0)

—

    Payment on early debt extinguishment

(39.8)

—

    Other borrowings, net

56.0

45.8

    Excess tax benefit from stock-based compensation arrangements

1.1

2.1

    Proceeds from stock options exercised

13.0

6.9

        Net Cash Provided by Financing Activities

72.1

54.8

Effect of exchange rate changes on cash and cash equivalents

(14.6)

1.3

Net change in cash and cash equivalents

(140.3)

243.7

Cash and cash equivalents at beginning of period

772.1

597.5

Cash and cash equivalents at end of period

$  841.2

Supplemental Cash Flow Information:

Cash paid during the period-

        Interest

$    93.7

$    65.8

        Income taxes, net of refunds

$    55.7

$      0.5

Accrued capital expenditures

$    12.2

$      8.0

Hospira, Inc.

Net Sales by Product Line

(Unaudited)

(dollars in millions)

Three Months Ended September 30,

2012

% Change at Actual

Currency Rates

% Change at Constant

Currency Rates⁽¹⁾

Americas—

Specialty Injectable Pharmaceuticals

$     539.8

$  502.0

7.5 %

8.1 %

Medication Management

175.2

197.6

(11.3)%

(10.5)%

Other Pharma

89.2

89.5

(0.3)%

0.4 %

Total Americas

804.2

789.1

1.9 %

2.6 %

Europe, Middle East & Africa ("EMEA")—

Specialty Injectable Pharmaceuticals

80.4

76.6

5.0 %

0.4 %

Medication Management

23.9

27.1

(11.8)%

(16.2)%

Other Pharma

19.2

19.2

—%

0.5 %

Total EMEA

123.5

122.9

0.5 %

(3.2)%

Asia Pacific ("APAC")—

Specialty Injectable Pharmaceuticals

64.8

64.6

0.3 %

9.6 %

Medication Management

10.7

11.9

(10.1)%

(4.2)%

Other Pharma

5.0

5.5

(9.1)%

(9.1)%

Total APAC

80.5

82.0

(1.8)%

6.5 %

Net Sales

$  1,008.2

$  994.0

1.4 %

2.2 %

Global—

Specialty Injectable Pharmaceuticals

$     685.0

$  643.2

6.5 %

7.4 %

Medication Management

209.8

236.6

(11.3)%

(10.8)%

Other Pharma

113.4

114.2

(0.7)%

—%

Net Sales

$  1,008.2

$  994.0

1.4 %

2.2 %

(1)

Hospira, Inc.

Net Sales by Product Line

(Unaudited)

(dollars in millions)

Nine Months Ended September 30,

Adjusted⁽¹⁾⁽³⁾

GAAP Net Sales

2013

Adjusted Net Sales

2013⁽¹⁾⁽³⁾

GAAP Net Sales

2012

% Change at Actual

Currency Rates

% Change at Constant

Currency Rates⁽²⁾

% Change at Actual

Currency Rates

% Change at Constant

Currency Rates⁽²⁾

Americas—

Specialty Injectable Pharmaceuticals

$          1,590.4

$             1,590.4

$          1,451.4

9.6 %

9.9 %

9.6 %

9.9 %

Medication Management

450.4

538.8

624.2

(27.8)%

(27.4)%

(13.7)%

(13.2)%

Other Pharma

278.1

278.1

294.1

(5.4)%

(5.2)%

(5.4)%

(5.2)%

Total Americas

2,318.9

2,407.3

2,369.7

(2.1)%

(1.8)%

1.6 %

2.0 %

EMEA—

Specialty Injectable Pharmaceuticals

244.7

244.7

235.1

4.1 %

1.7 %

4.1 %

1.7 %

Medication Management

69.2

82.4

88.1

(21.5)%

(23.5)%

(6.5)%

(8.5)%

Other Pharma

56.0

56.0

62.9

(11.0)%

(10.2)%

(11.0)%

(10.2)%

Total EMEA

369.9

383.1

386.1

(4.2)%

(6.0)%

(0.8)%

(2.6)%

APAC—

Specialty Injectable Pharmaceuticals

191.6

191.6

187.3

2.3 %

7.3 %

2.3 %

7.3 %

Medication Management

28.5

31.2

35.6

(19.9)%

(17.7)%

(12.4)%

(10.1)%

Other Pharma

9.5

9.5

14.5

(34.5)%

(34.5)%

(34.5)%

(34.5)%

Total APAC

229.6

232.3

237.4

(3.3)%

1.0 %

(2.1)%

2.1 %

Net Sales

$          2,918.4

$             3,022.7

$          2,993.2

(2.5)%

(2.1)%

1.0 %

1.4 %

Global—

Specialty Injectable Pharmaceuticals

$          2,026.7

$             2,026.7

$          1,873.8

8.2 %

8.6 %

8.2 %

8.6 %

Medication Management

548.1

652.4

747.9

(26.7)%

(26.4)%

(12.8)%

(12.5)%

Other Pharma

343.6

343.6

371.5

(7.5)%

(7.2)%

(7.5)%

(7.2)%

Net Sales

$          2,918.4

$             3,022.7

$          2,993.2

(2.5)%

(2.1)%

1.0 %

1.4 %

(1)

Adjusted Net sales for the nine months ended September 30, 2013 excludes charges of $104.3 million related to the device strategy. The device strategy charges are reported in the respective Medication Management Net sales by product line as follows: Americas-$88.4 million, EMEA-$13.2 million and APAC-$2.7 million. There were no adjustments included in GAAP Net sales for the nine months ended September 30, 2012.

(2)

The Non-GAAP financial measures contained in this press release include comparisons at constant currency rates, which reflect comparative local currency balances at prior period foreign exchange rates. Hospira calculated these percentages by taking current period reported net sales less the respective prior period reported net sales, divided by the prior period reported net sales, all at the respective prior period's foreign exchange rates. This 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 measure aids in the understanding of our change in net sales without the impact of foreign currency and provides greater transparency into Hospira's results of operations.

(3)

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.