HSP

-- Increases Earnings Projections for 2005 Full Year -- LAKE FOREST, Ill., Nov. 10 /PRNewswire-FirstCall/ -- Hospira, Inc. (NYSE:HSP), one of the largest hospital products manufacturers in the United States, today reported results for the third quarter ended Sept. 30, 2005. Net sales were $656.6 million, 0.1 percent above the third quarter of 2004. Adjusted* net income increased 14.0 percent to $78.0 million, compared to $68.5 million in the third quarter of 2004. Adjusted* diluted earnings per share were $0.48 versus $0.44 in the prior year's third quarter. GAAP (U.S. Generally Accepted Accounting Principles) net income was $59.9 million, compared to $61.3 million in the same quarter of 2004. GAAP diluted earnings per share were $0.37 versus $0.39 in the prior year's third quarter. Certain results in this press release are discussed on both a GAAP and a non-GAAP (adjusted) basis. A description of the adjusted financial information is provided in the section "Use of Non-GAAP Financial Measures" contained in this press release. A reconciliation of the adjusted financial information to the most comparable GAAP measure is contained in the schedules attached to the press release. "We had an extremely positive third quarter as we continued our strong performance in the marketplace and made progress on our transition activities," said Christopher B. Begley, chief executive officer, Hospira. "Robust growth in our higher-margin products within Specialty Injectable Pharmaceuticals and Medication Delivery Systems was an important driver of our results." Significant Events in the Third Quarter -- Launched the generic injectable drug ceftriaxone in the United States on the day of patent expiration, capturing an estimated initial hospital market share of 35 percent. -- Added five new compounds to the generic injectable drug pipeline, scheduled for launch in 2008 and beyond. -- Launched the international regional headquarters for Latin America in Mexico City. Transferred the operations and net assets in 18 countries from Abbott Laboratories to Hospira. Through Sept. 30, 2005, Hospira has launched three of its four regional headquarters, and transferred operations in 20 countries. -- Announced the planned closure of a medical device manufacturing plant in Donegal, Ireland. Products manufactured at the Donegal plant are expected to move to Hospira's facilities in Costa Rica and the Dominican Republic. -- Completed the acquisition of Physiometrix, Inc., a medical device manufacturer. The acquisition will broaden Hospira's portfolio of products for the hospital operating room and intensive care unit, providing brain-function monitoring devices used during surgical and diagnostic procedures. Financial and Operating Review Consolidated net sales in the quarter increased 0.1 percent to $656.6 million, compared to $656.1 million in the third quarter of 2004. A schedule detailing sales by product line for the third quarter and the first nine months of 2005 and 2004 is attached to this press release. In the third quarter of 2005, compared to the same quarter of 2004, the components of consolidated net sales growth were as follows: -- Volume and mix (excluding Berlex and the impact of sales-type lease accounting for certain pumps) -- 4.5 percentage points, -- Favorable pricing -- 1.9 percentage points, -- Impact of sales-type lease accounting for certain pumps -- 1.1 percentage points, and -- Foreign currency translation -- 0.5 percentage points. Offsetting these components of growth was the negative effect of 7.9 percentage points related to the termination of the agreement to distribute Berlex imaging agents. Gross profit in the quarter was $227.6 million, an increase of 17.4 percent from $193.8 million in the same period last year. Gross margin in the quarter was 34.7 percent, compared to 29.5 percent in the prior year's third quarter. Adjusted* gross profit grew 19.2 percent to $232.6 million, compared to $195.1 million in the same quarter of 2004. The adjusted* gross margin for the 2005 third quarter improved to 35.4 percent, from 29.7 percent last year. The adjusted* gross margin improvement was primarily attributable to: -- Improved volume and mix -- 3.9 percentage points, of which 2.0 percentage points represented the impact of the termination of the Berlex agreement, and -- Favorable pricing on sales -- 1.2 percentage points. Research and development (R&D) expense rose 26.9 percent in the quarter to $35.5 million, or 5.4 percent of sales, compared to $28.0 million, or 4.3 percent of sales, in the third quarter of 2004. The company continues to increase its investment in R&D as part of its stated strategy to build its product pipeline to drive longer-term sales growth. Selling, general and administrative (S,G&A) expense in the quarter was $91.5 million, compared to $71.9 million in the 2004 third quarter. As a percentage of sales, S,G&A was 13.9 percent in the quarter, compared to 11.0 percent in 2004. Adjusted* S,G&A expense in the quarter was $84.3 million, or 12.8 percent of sales, compared to $63.6 million in the third quarter of 2004, or 9.7 percent of sales. As expected, the increase in the adjusted* S,G&A primarily was driven by higher ongoing, incremental costs associated with being an independent, public company. Income from operations in the quarter was $100.6 million, compared to $93.9 million in the third quarter of 2004. The operating margin for the quarter was 15.3 percent, compared to 14.3 percent for the same period in 2004. Adjusted* income from operations in the quarter was $113.0 million, an increase of 8.9 percent from $103.7 million in the third quarter of 2004. The adjusted* operating margin for the quarter was 17.2 percent, compared to 15.8 percent in 2004. The increase was attributable to the improvement in gross margin, partially offset by higher R&D and S,G&A spending. Interest expense in the quarter was $6.9 million, compared to $8.3 million in the same period of 2004. The decline was due to an interest rate swap entered into in 2005 and higher capitalized interest in the current quarter. Other income was $3.4 million in the quarter, compared to other income of $2.5 million for 2004. The majority of the change is due to higher interest income in 2005. Net income in the quarter was $59.9 million, compared to $61.3 million in the third quarter of 2004. Adjusted* net income for the quarter increased 14.0 percent to $78.0 million, from $68.5 million in 2004. The tax rate for the quarter, excluding the tax charge of $9.5 million related to the repatriation of foreign earnings under the Jobs Creation Act of 2004, was 28.7 percent, compared to 30.1 percent in 2004. The company is now projecting the full-year tax rate to be 25.5 percent. This is an increase from the previously projected rate of 24.0 percent, as a greater proportion of income is now anticipated to be sourced from the United States rather than from lower-tax-rate non-U.S. jurisdictions. As a result, the 2005 third-quarter tax rate reflects the adjustment necessary to provide for income taxes at a 25.5 percent rate through the first nine months of 2005, excluding the impact of the repatriation. Nine-Month Results Results for the nine months of 2005 reflect the company's status as an independent public company. The nine months of 2004 reflect results for the business operated as a part of Abbott for the months of January through April, and as a stand-alone business for the subsequent five months. For the nine months ended Sept. 30, 2005, consolidated net sales increased 1.8 percent to $1.98 billion, compared to $1.94 billion in the same period of 2004. Net sales were favorably affected by foreign currency translation of $11.0 million. Excluding the benefit from foreign currency translation, net sales increased 1.3 percent. Net income was $209.1 million, compared to $252.1 million in the first nine months of 2004. Diluted earnings per share were $1.30, compared to $1.61 last year. Adjusted* net income was $255.2 million, compared to $222.7 million last year. Adjusted* diluted earnings per share in the first nine months of 2005 were $1.59, compared to $1.42 in the prior year. Cash Flow Items Cash flow from operations for the first nine months of 2005 was $471.3 million, compared to $285.9 million in last year's same period. Depreciation and amortization expense was $118.0 million for the first nine months, compared to $103.1 million for the same period in 2004. The increase is due to higher levels of capital spending and increased depreciation related to the change in the fourth quarter of 2004 in the estimated useful life for certain drug delivery pumps placed with customers. Capital expenditures were $189.5 million for the first nine months of 2005, compared to $168.7 million for 2004. The increase is driven by spending related to building the company's independent infrastructure, capacity expansion and ongoing projects. Updated 2005 Projections Hospira's projection for annual net sales for the 2005 year remains approximately $2.6 billion. The company increased its diluted earnings per share projection to a range of $1.53 to $1.58, including the items listed below. Adjusted* diluted earnings per share for 2005, which exclude the items listed below, are projected to be in the range of $1.90 to $1.95. The reconciliation between the projected adjusted* diluted earnings per share and earnings per share on a GAAP basis is: Diluted earnings per share -- adjusted* $1.90 - $1.95 Estimated non-recurring transition expenses related to becoming an independent, stand-alone company (mid-point of an estimated $0.19 to $0.21 per diluted share range for 2005) ($0.20) Charges for ICU Medical transaction ($15.8 million on a pre-tax basis) ($0.07) Estimated charges related to planned closing of the Donegal, Ireland, plant ($8.5 million on a pre-tax basis) ($0.04) Tax impact of repatriation of foreign earnings under the Jobs Creation Act of 2004 ($9.5 million) ($0.06) Diluted earnings per share -- GAAP basis $1.53 - $1.58 The earnings per share projections on both a GAAP and adjusted* basis do not include the effect of any expensing of stock options. The company expects to implement the accounting standard related to stock option expensing on Jan. 1, 2006. In addition, the company now projects that cash flow from operations will be in the $550 million to $600 million range in 2005. Depreciation and amortization for 2005 is projected to be in the $155 million to $165 million range. Capital expenditures for 2005 are projected to be in the $250 million to $275 million range. *Use of Non-GAAP Financial Measures In addition to the results reported in accordance with GAAP in the United States included within this press release, Hospira has provided certain information that is considered to be non-GAAP financial measures. As used in this press release, "adjusted" refers to operating performance measures that exclude the non-recurring transition expenses in 2005 and 2004 related to becoming an independent, stand-alone company; charges related to the ICU Medical transaction, charges related to the planned closing of the Donegal, Ireland, facility, and the tax impact of the repatriation of foreign earnings in 2005, and a one-time curtailment gain in 2004. The adjusted information is reconciled to its closest GAAP measure in accordance with Securities and Exchange Commission Rules and is included in the attached supplemental data. Management believes that these non-GAAP financial measures are useful to both management and its investors in their analysis of the company's ongoing business and operating performance. Management also uses this information for operational planning and decision-making purposes. Non-GAAP financial measures should not be considered a substitute for any GAAP measure. Additionally, non-GAAP financial measures as presented by Hospira may not be comparable to similarly titled measures reported by other companies. In the third quarter of 2005, Hospira incurred non-recurring pre-tax transition expenses of $10.1 million ($7.5 million, or $0.04 per share, after tax) related to establishing an independent infrastructure. The company has previously stated that these non-recurring transition expenses are expected to total approximately $100 million over the 24-month period ending April 30, 2006. Of these costs, a total of $63.4 million has been incurred through Sept. 30, 2005. Also included in the third quarter 2005 GAAP diluted earnings per share are $0.01 per share for charges related to the previously announced planned closing of the Donegal, Ireland, manufacturing plant, and $0.06 per share related to the company's decision to repatriate undistributed foreign earnings of $175.0 million under the Jobs Creation Act of 2004. Included in the third quarter 2004 GAAP diluted earnings per share are non-recurring transition expenses of $0.05 per share related to building the company's independent infrastructure. Webcast A conference call for investors and media will be held at 9 a.m. Central Time, Thursday, Nov. 10, 2005. A live webcast of the conference call will be available at http://www.hospirainvestor.com/ . Listeners should log on approximately 10 minutes in advance to ensure proper computer setup to receive the webcast. A replay will be available on the Hospira Web site for 30 days following the call. About Hospira Hospira, Inc. is a global specialty pharmaceutical and medication delivery company dedicated to Advancing Wellness(TM) by developing, manufacturing and marketing products that help improve the productivity, safety and efficacy of patient care. With 70 years of service to the hospital industry, Hospira's portfolio includes one of the industry's broadest lines of generic acute-care injectables, which help address the high cost of proprietary pharmaceuticals; integrated solutions for medication management and infusion therapy; and the leading U.S. injectable contract manufacturing business. Headquartered in Lake Forest, Ill., north of Chicago, Hospira has approximately 13,000 employees and 14 manufacturing facilities worldwide. Hospira's news releases and other information can be found at http://www.hospira.com/ . Private Securities Litigation Reform Act of 1995 -- A Caution Concerning Forward-Looking Statements Some statements in this news release may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. 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, technological and other factors that may affect Hospira's operations and may cause actual results to be materially different from expectations include the risks and uncertainties set forth under the heading "Item 1 Business -- Risk Factors" in Hospira's Annual Report on Form 10-K for the year ended Dec. 31, 2004, 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 thousands, except for per share amounts) Three Months Ended Nine Months Ended September 30 % September 30 % 2005 2004 Change 2005 2004 Change Net sales $613,898 $618,184 (0.7) $1,849,103 $1,810,749 2.1 Net sales to Abbott Laboratories 42,672 37,926 12.5 131,443 133,971 (1.9) Total Net Sales 656,570 656,110 0.1 1,980,546 1,944,720 1.8 Cost of products sold 429,008 462,283 (7.2) 1,316,790 1,371,927 (4.0) Gross Profit 227,562 193,827 17.4 663,756 572,793 15.9 Research and development 35,525 28,001 26.9 96,767 80,534 20.2 Selling, general and administrative 91,483 71,899 27.2 260,767 196,340 32.8 Curtailment of post-retirement medical and dental benefits - - nm - (64,636) nm Income From Operations 100,554 93,927 7.1 306,222 360,555 (15.1) Interest expense 6,916 8,268 (16.4) 20,942 10,952 91.2 Other (income), net (3,409) (2,538) nm (8,090) (1,144) nm Income Before Income Taxes 97,047 88,197 10.0 293,370 350,747 (16.4) Income tax expense 37,192 26,882 38.4 84,309 98,671 (14.6) Net Income $59,855 $61,315 (2.4) $209,061 $252,076 (17.1) Earnings Per Common Share: Basic $0.38 $0.39 (2.6) $1.32 $1.61 (18.0) Diluted $0.37 $0.39 (5.1) $1.30 $1.61 (19.3) Weighted Average Common Shares Outstanding: Basic 160,103 156,059 2.6 158,643 156,054 1.7 Diluted 162,842 156,672 3.9 160,797 156,623 2.7 Hospira, Inc. Reconciliation of Condensed Consolidated Statements of Income (Unaudited) (dollars and shares in thousands, except per share amounts) Three Months Ended September 30, 2005 2004 Adjust- Adjust- GAAP ments Adjusted GAAP ments Adjusted Net sales $613,898 $613,898 $618,184 $618,184 Net sales to Abbott Laboratories 42,672 42,672 37,926 37,926 Total Net Sales 656,570 - 656,570 656,110 - 656,110 Cost of products sold 429,008 (5,070)A 423,938 462,283 (1,317)B 460,966 Gross Profit 227,562 5,070 232,632 193,827 1,317 195,144 Research and development 35,525 (155)B 35,370 28,001 (162)B 27,839 Selling, general and administrative 91,483 (7,178)B 84,305 71,899 (8,309)B 63,590 Income From Operations 100,554 12,403 112,957 93,927 9,788 103,715 Interest expense 6,916 - 6,916 8,268 8,268 Other (income), net (3,409) - (3,409) (2,538) - (2,538) Income Before Income Taxes 97,047 12,403 109,450 88,197 9,788 97,985 Income tax expense 37,192 (5,787)C 31,405 26,882 2,646 D 29,528 Net Income $59,855 $18,190 $78,045 $61,315 $7,142 $68,457 Earnings Per Common Share: Basic $0.38 $0.11 $0.49 $0.39 $0.05 $0.44 Diluted $0.37 $0.11 $0.48 $0.39 $0.05 $0.44 Weighted Average Common Shares Outstanding: Basic 160,103 160,103 160,103 156,059 156,059 156,059 Diluted 162,842 162,842 162,842 156,672 156,672 156,672 Statistics (as a % of Total Net Sales, except for income tax rate) Gross Profit 34.7% 35.4% 29.5% 29.7% R&D 5.4% 5.4% 4.3% 4.2% SG&A 13.9% 12.8% 11.0% 9.7% Income From Operations 15.3% 17.2% 14.3% 15.8% Income Before Income Taxes 14.8% 16.7% 13.4% 14.9% Net Income 9.1% 11.9% 9.3% 10.4% Income tax rate 38.3% 28.7% 30.5% 30.1% % Change vs. Prior Year GAAP Adjusted Net sales (0.7) (0.7) Net sales to Abbott Laboratories 12.5 12.5 Total Net Sales 0.1 0.1 Cost of products sold (7.2) (8.0) Gross Profit 17.4 19.2 Research and development 26.9 27.1 Selling, general and administrative 27.2 32.6 Income From Operations 7.1 8.9 Interest expense (16.4) (16.4) Other (income), net nm nm Income Before Income Taxes 10.0 11.7 Income tax expense 38.4 6.4 Net Income (2.4) 14.0 Earnings Per Common Share: Basic (2.6) 11.4 Diluted (5.1) 9.1 Weighted Average Common Shares Outstanding: Basic 2.6 2.6 Diluted 3.9 3.9 A -- Includes non-recurring charges of $2,278 related to the closure of the Donegal manufacturing plant, and non-recurring transition costs of $2,792. B -- Non-recurring transition costs. C -- Includes $9,500 tax impact of earnings repatriation related to The American Jobs Creations Act, and the impact of increasing the overall effective tax rate from 24% to 25.5%. D -- Includes the impact of increasing the overall effective tax rate from 24% to 26%. Hospira, Inc. Reconciliation of Condensed Consolidated Statements of Income (Unaudited) (dollars and shares in thousands, except per share amounts) Nine Months Ended September 30, 2005 2004 Adjust- Adjust- GAAP ments Adjusted GAAP ments Adjusted Net sales $1,849,103 $1,849,103 $1,810,749 $1,810,749 Net sales to Abbott Laboratories 131,443 131,443 133,971 133,971 Total Net Sales 1,980,546 - 1,980,546 1,944,720 - 1,944,720 Cost of products sold 1,316,790 (23,441)A 1,293,349 1,371,927 (2,308)B 1,369,619 Gross Profit 663,756 23,441 687,197 572,793 2,308 575,101 Research and development 96,767 (375)B 96,392 80,534 (192)B 80,342 Selling, general and administra- tive 260,767 (25,315)B 235,452 196,340 (12,158)B 184,182 Curtailment of post-retirement medical and dental benefits - - - (64,636) 64,636 C - Income From Operations 306,222 49,131 355,353 360,555 (49,978) 310,577 Interest expense 20,942 20,942 10,952 10,952 Other (income), net (8,090) - (8,090) (1,144) (189) (1,333) Income Before Income Taxes 293,370 49,131 342,501 350,747 (49,789) 300,958 Income tax expense 84,309 3,028 D 87,337 98,671 (20,379)C 78,292 Net Income $209,061 $46,103 $255,164 $252,076 $(29,410) $222,666 Earnings Per Common Share: Basic $1.32 $0.29 $1.61 $1.61 $(0.19) $1.42 Diluted $1.30 $0.29 $1.59 $1.61 $(0.19) $1.42 Weighted Average Common Shares Outstanding: Basic 158,643 158,643 158,643 156,054 156,054 156,054 Diluted 160,797 160,797 160,797 156,623 156,623 156,623 Statistics (as a % of Total Net Sales, except for income tax rate) Gross Profit 33.5% 34.7% 29.5% 29.6% R&D 4.9% 4.9% 4.1% 4.1% SG&A 13.2% 11.9% 10.1% 9.5% Income From Operations 15.5% 17.9% 18.5% 16.0% Income Before Income Taxes 14.8% 17.3% 18.0% 15.5% Net Income 10.6% 12.9% 13.0% 11.4% Income tax rate 28.7% 25.5% 28.1% 26.0% % Change vs. Prior Year GAAP Adjusted Net sales 2.1 2.1 Net sales to Abbott Laboratories (1.9) (1.9) Total Net Sales 1.8 1.8 Cost of products sold (4.0) (5.6) Gross Profit 15.9 19.5 Research and development 20.2 20.0 Selling, general and administra- tive 32.8 27.8 Curtailment of post-retirement medical and dental benefits nm nm Income From Operations (15.1) 14.4 Interest expense 91.2 91.2 Other (income), net nm nm Income Before Income Taxes (16.4) 13.8 Income tax expense (14.6) 11.6 Net Income (17.1) 14.6 Earnings Per Common Share: Basic (18.0) 13.4 Diluted (19.3) 12.0 Weighted Average Common Shares Outstanding: Basic 1.7 1.7 Diluted 2.7 2.7 A -- Includes an impairment charge of $2,429 and other charges of $13,404 related to the sale of the Salt Lake City manufacturing plant to ICU Medical, $2,278 related to the closure of the Donegal manufacturing plant, and non-recurring transition costs of $5,330. B -- Non-recurring transition costs. C -- 2004 Curtailment gain ($64,636) is tax effected at 37.5%, while first six months of 2004 non-recurring transition costs were tax effected at 24%. D -- Includes $9,500 tax impact of earnings repatriation related to The American Jobs Creations Act. Hospira, Inc. Condensed Consolidated Balance Sheets (Unaudited) (dollars in thousands) September 30 December 31 Assets 2005 2004 Current Assets: Cash and cash equivalents $477,509 $127,695 Marketable securities - 72,438 Net trade receivables 316,915 326,356 Inventory 509,208 518,324 Prepaid expenses, deferred income taxes and other receivables 172,570 153,512 Total Current Assets 1,476,202 1,198,325 Net property and equipment 982,206 946,304 Intangible assets, net of amortization 15,408 1,057 Goodwill 89,197 80,973 Other assets 125,493 116,131 Total Assets $2,688,506 $2,342,790 Liabilities and Shareholders' Equity Current Liabilities: Short-term borrowings $ 5,038 $ - Trade accounts payable 128,673 101,537 Salaries payable and other accruals 392,827 268,615 Due to Abbott, net 66,230 166,042 Total Current Liabilities 592,768 536,194 Due to Abbott, net - 23,100 Long-term debt 693,658 698,841 Post-retirement obligations, deferred income taxes and other long-term liabilities 104,795 100,736 Commitments and Contingencies - - Total Liabilities 1,391,221 1,358,871 Total Shareholders' Equity 1,297,285 983,919 Total Liabilities and Shareholders' Equity $2,688,506 $2,342,790 Hospira, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (dollars in thousands) Nine Months Ended September 30 2005 2004 Cash Flow From (Used in) Operating Activities: Net income $209,061 $252,076 Adjustments to reconcile net income to net cash from operating activities-- Depreciation 116,647 99,867 Amortization of intangibles 1,349 3,215 Curtailment of post-retirement medical and dental benefits - (64,636) Trade receivables 398 (37,079) Inventories (7,788) 694 Prepaid expenses and other assets (13,527) (7,300) Trade accounts payable and other liabilities 77,375 85,357 Other, net 87,790 (46,315) Net Cash From Operating Activities 471,305 285,879 Cash Flow (Used in) From Investing Activities: Acquisitions of property and equipment (189,525) (168,721) Proceeds from asset dispositions 31,818 - Acquisitions (23,590) - Purchase of intangibles and other investments (7,200) - Sale of marketable securities 72,438 - Net Cash (Used in) Investing Activities (116,059) (168,721) Cash Flow From (Used in) Financing Activities: Net transactions with Abbott Laboratories prior to spin-off - 24,209 Pre-distribution dividend to Abbott - (700,000) Payment to Abbott for international net assets (106,521) - Issuance of long-term debt, net of fees paid 1,750 1,393,344 Repayment of long-term debt (84) (700,000) Other borrowings, net 3,843 - Proceeds from stock options exercised 97,612 486 Net Cash (Used in) From Financing Activities (3,400) 18,039 Effect of exchange rate changes on cash and cash equivalents (2,032) 251 Net change in cash and cash equivalents 349,814 135,448 Cash and cash equivalents at beginning of period 127,695 - Cash and cash equivalents at end of period $477,509 $135,448 Hospira, Inc. Sales by Product Line (Unaudited) (dollars in millions) Three Months Ended Nine Months Ended September 30 September 30 Percent Percent Change Change vs. vs. Prior Prior 2005 2004 Year* 2005 2004 Year* U.S. -- Specialty Injectable Pharmaceuticals $205 $235 (12.6) $631 $661 (4.6) Medication Delivery Systems 206 187 10.3 599 566 5.8 Injectable Pharmaceutical Contract Manufacturing 44 46 (4.5) 146 130 12.6 Sales to Abbott Laboratories 26 24 4.1 80 95 (15.1) Other 71 65 8.9 195 181 7.4 Total U.S. 552 557 (1.0) 1,651 1,633 1.1 International -- Sales to Third Parties 88 85 2.6 279 273 2.3 Sales to Abbott Laboratories 17 14 27.9 51 39 30.3 Total International Sales 105 99 6.0 330 312 5.8 Consolidated Net Sales $657 $656 0.1 $1,981 $1,945 1.8 * Percent change computed based on unrounded numbers. Note: Consolidated Net Sales for third quarter and year-to-date 2005 include the favorable impact of 1.1% and 1.0%, respectively, related to the change in business model in late 2004, which resulted in sales-type lease accounting for certain new pump leases. Hospira, Inc. Segment Information (Unaudited) (dollars in thousands) Three Months Ended September 30 Income from Net Sales % Operations % 2005 2004 Change 2005 2004 Change U.S. $551,329 $556,830 (1.0) $98,905 $87,452 13.1 International 105,241 99,280 6.0 15,805 22,333 (29.2) Total reportable segments $656,570 $656,110 0.1 114,710 109,785 4.5 Corporate functions (14,156) (15,858) (10.7) Income from operations 100,554 93,927 7.1 Other, net (3,507) (5,730) nm Income before income taxes $97,047 $88,197 10.0 Nine Months Ended September 30 Income from Net Sales % Operations % 2005 2004 Change 2005 2004(1) Change U.S. $1,651,099 $1,633,262 1.1 $289,731 $327,091 (11.4) International 329,447 311,458 5.8 57,997 74,165 (21.8) Total reportable segments $1,980,546 $1,944,720 1.8 347,728 401,256 (13.3) Corporate functions (41,506) (40,701) 2.0 Income from operations 306,222 360,555 (15.1) Other, net (12,852) (9,808) nm Income before income taxes $293,370 $350,747 (16.4) (1) 2004 U.S. Income from operations includes curtailment benefit of $64,636. http://www.newscom.com/cgi-bin/prnh/20040503/HSPLOGO http://photoarchive.ap.org/ DATASOURCE: Hospira, Inc. CONTACT: Media, Stacey Eisen, +1-224-212-2276, Tareta Adams, +1-224-212-2535, or Financial Community, Lynn McHugh, +1-224-212-2363, all of Hospira Web site: http://www.hospira.com/

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