Hospira Inc - Current report filing (8-K)
06 Agosto 2008 - 9:58AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 6, 2008
Date of Report (Date of Earliest Event Reported)
HOSPIRA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-31946
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20-0504497
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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275 N. Field Drive
Lake Forest, Illinois 60045
(Address Of Principal Executive Offices, including Zip Code)
Registrants Telephone Number, Including Area Code:
(224) 212-2000
Not Applicable
(Former Name or Former Address, If Changed Since Last Report)
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Item
2.02 Results of Operations and Financial Condition
On August 6, 2008,
we issued a press release announcing our 2008 second quarter results of
operations. Such press release is furnished as Exhibit 99.1, and
incorporated by reference into this Item 2.02.
Forward-Looking
Statements
This Item 2.02, including
the press release incorporated by reference herein, contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, including projections of certain measures of our results of
operations, projections of certain charges and expenses, statements regarding
the financial impact of the acquisition of Mayne Pharma Limited (Mayne Pharma)
and other statements regarding our 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, technological
and other factors that may affect Hospiras 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 Managements
Discussion and Analysis of Financial Condition and Results of Operations in
Hospiras Annual Report on Form 10-K for the year ended December 31, 2007,
and Hospiras subsequent quarterly reports on Form 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.
Use of
Non-GAAP Financial Measures
We present non-GAAP
financial measures in the press release, including:
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adjusted cost of products sold;
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adjusted gross profit;
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adjusted research and development (R&D)
expense;
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adjusted selling, general and
administrative (SG&A) expense;
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adjusted income from operations;
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adjusted interest expense;
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adjusted other income, net;
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adjusted income tax expense;
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adjusted net income;
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adjusted basic and diluted earnings per
share;
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net sales comparisons at constant
currency rates; and
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statistics using one or more of such
adjusted measures.
These non-GAAP financial
measures exclude certain items from the most comparable financial measure
calculated in accordance with generally accepted accounting principles of the
United States (GAAP). Each of these measures is presented together with
the most comparable measure calculated in accordance with GAAP. The
excluded items are:
Facilities
Optimization Charges.
These charges and expenses relate to the sale, closure,
or pending closures, of our Ashland, Ohio; Donegal, Ireland; Montreal, Canada; Morgan
Hill, California; and Salt Lake City, Utah, facilities and our departure from
the North Chicago, Illinois leased manufacturing facility, which were announced
in 2005, 2006, and 2008. In addition, in 2007, as a result of changes in sales
projections, management made a decision to limit, and transfer, R&D
facility operations related to brain-function monitoring devices. These charges
and expenses include restructuring charges and expenses relating to the
relocation of production and R&D operations from the affected facilities to
other facilities.
Management determined
that these facilities would not be used in our operations in future periods to
reduce our future ongoing operating costs and improve the efficiency of our
manufacturing operations. Further, management makes strategic decisions on the
allocation of resources to improve the efficiency of our R&D facility operations.
We do not believe that the charges and expenses relating to the closure or
disposal of these facilities, and the transfer of production and R&D
operations to other facilities, are necessarily indicative of our ongoing
business performance
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and normal
operations. We expect to incur expenses for these initiatives through 2011.
As the product relocation expenses and certain restructuring charges are
incurred in cash, excluding these items has the effect of excluding significant
cash expenditures from the adjusted financial measures.
We incurred these charges
and expenses, on a pre-tax basis in the amount of $9.9 million and $13.0
million in the three months ended June 30, 2008 and 2007 and in the amount
of $17.7 million and $23.8 million in the six months ended June 30, 2008
and 2007, which are recorded in cost of products sold as detailed in the
schedules to the press release.
Purchase
Accounting Charges.
On February 2, 2007, we acquired Mayne Pharma and in 2008 we
acquired a medical device technology developer. In connection with these
acquisitions, for the three and six months ended June 30, 2007, we
recorded a $31.7 million and $53.1 million non-cash inventories step-up charge
in cost of products sold. During the three
months ended March 31, 2007, and the three months ended June 30,
2008, we also incurred non-cash charges of acquired in-process research and
development of $84.8 million and $0.5 million, respectively. As these types of charges are incurred in
connection with, and in the period of, the completion of acquisitions, and the
amount of these charges depends upon the allocation of the purchase price in
accordance with applicable accounting rules, the timing and amount of these
charges are unpredictable. These charges have materially affected our
reported financial results, but are not necessarily reflective of our ongoing
business performance. Exclusion of these
charges from the adjusted financial measures results in economic costs to us
not being reflected in our adjusted net income and earnings per share.
Acquisition
and Integration-Related Expenses.
During the three months ended June 30, 2008 and
2007 we incurred $8.2 million and $13.5 million, respectively, of expenses
relating to the integration of Mayne Pharma and other acquisitions into our
operations. During the six months ended June 30,
2008 and 2007 we incurred $18.2 million and $24.3 million, respectively, of
expenses relating to the integration of Mayne Pharma and other acquisitions
into our operations. These are recorded as cost of products sold, R&D
expense and S,G&A expense as detailed in the schedules to the press
release. During the three months ended March 31, 2007, we also
incurred $7.9 million of other acquisition-related charges, including foreign
exchange losses relating to the Mayne Pharma acquisition (recorded in other
income, net) and fees incurred in connection with the bridge loan to finance
the acquisition (recorded in interest expense). During the two-year
period after the closing of the Mayne Pharma acquisition, we estimate that we
will incur approximately $60 million to $75 million of aggregate cash expenses
related to the integration and other acquisition-related expenses. To
date, $61.8 million of expenses have been incurred. We do not believe that
these expenses are necessarily indicative of our ongoing business operations,
as they were necessitated by acquisitions and will be incurred over a finite
period. Excluding these expenses will have the effect of excluding
significant cash expenditures from the adjusted financial measures.
Amortization
of Mayne Pharma Intangible Assets.
Based on our purchase price allocation relating to the
Mayne Pharma acquisition, we recorded $518.2 million of intangible assets on
our balance sheet, which will be amortized over their estimated useful lives,
resulting in significant non-cash expenses.
During the three months ended June 30,
2008 and 2007, we recorded $15.9 million and $13.2 million, respectively, of
amortization expense resulting from the Mayne Pharma acquisition in cost of products
sold. During the six months ended June 30, 2008 and 2007, we recorded
$31.6 million and $21.6 million, respectively, of amortization expense
resulting from the Mayne Pharma acquisition in cost of products sold.
The amount of
amortization expense can vary significantly among companies in our industry
depending on the frequency, size and nature of acquisitions. While recording
amortization is intended to represent the decrease in value of these intangible
assets over time, the amount of recorded amortization may not necessarily
represent our operating performance during the periods recorded because of the
uncertainties inherent in estimating the fair value and useful lives of
intangible assets at the time of the acquisition. In order to assist
comparability to our prior results and to the results of other companies in our
industry with different acquisition histories, we have excluded the
amortization of acquired intangible assets in connection with the Mayne Pharma
acquisition from our adjusted financial measures. We have not previously
excluded amortization expense in calculating our adjusted measures. Prior
to the Mayne Pharma acquisition, amortization has not been material to prior
periods. Exclusion of amortization relating to the Mayne Pharma
acquisition effectively results in the recording of acquired intangible assets
without recording any expense relating to the use of these assets in our
business.
Net Sales Comparisons at Constant
Currency Rates
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Our presentation of net sales by segment
and product line includes comparisons at constant currency rates (reflecting comparative
local currency balances and prior period foreign exchange rates), which we
define as current period net sales excluding the impact of foreign
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exchange less prior
period reported net sales divided by prior period reported net sales. 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. We believe use of this measure aids in the understanding of our change
in net sales without the impact of foreign currency.
The schedules included in
the press release that reconcile the adjusted financial measures to the
financial measures calculated in accordance with GAAP indicate the amount of
such net expenses excluded from cost of products sold, R&D expense, SG&A
expense, interest expense and other income, net to arrive at the corresponding
adjusted financial measure.
Adjustments have been
made to income tax expense in the appropriate period to take into account any
tax effect of each excluded item.
All adjusted measures are
reconciled to the most comparable measure calculated in accordance with GAAP in
the press release. We believe that presenting measures excluding the
items described above, along with measures calculated in accordance with GAAP,
provide investors with more information to assess our operating performance and
prospects. We also believe that excluding these items assists
comparability with past performance. Our management uses these adjusted
measures as supplemental measures in assessing its own performancefor example,
these measures are used in establishing our annual and long-term operating
plans, presented to our board of directors in its review of our financial
performance and considered in establishing targets under employee incentive
plans. Since these measures allow investors to assess our performance on a
similar basis as our management assesses our performance, we believe that
investors have more information to assess the performance of management in
executing its goals and strategies.
Non-GAAP financial
measures are not presented in accordance with a body of comprehensive
accounting principles and should not be considered a substitute for any GAAP
measure. The measures we use result largely from our managements
determination as to whether the facts and circumstances surrounding certain
transactions and events are indicative of the ordinary course of the ongoing
operation of our business. As a result, non-GAAP financial measures as
presented by us may not be comparable to similarly titled measures reported by
other companies.
Our management uses
non-GAAP financial measures as a supplement to, and not a substitute for,
measures prepared in accordance with GAAP. Accordingly, these measures
should be considered together with the corresponding financial measures
prepared in accordance with GAAP. In addition, our management reviews,
and encourages investors to review, our balance sheets and statements of cash
flows in order to make a complete evaluation and assessment of our financial
performance.
Item 9.01
Financial Statements and Exhibits
(d) Exhibits.
This exhibit is furnished
pursuant to Item 2.02 hereof and should not be deemed to be filed under the
Securities Exchange Act of 1934.
Exhibit No.
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Exhibit
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99.1
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Press Release, dated
August 6, 2008
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SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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HOSPIRA, INC.
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Dated: August 6,
2008
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By:
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/s/ Brian J. Smith
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Brian J. Smith
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Its:
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Senior Vice President,
General
Counsel and Secretary
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