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.
Private
Securities Litigation Reform Act of 1995 --
|
|
A Caution
Concerning Forward-Looking Statements
|
|
|
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including projections of certain measures of Hospira's
results of operations, projections of certain charges and expenses,
cash flow and other statements regarding Hospira's 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,
regulatory, legal, technological, manufacturing supply, quality and
other factors that may affect Hospira's 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 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Hospira's latest
Annual Report on Form 10-K and subsequent Forms 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.
Hospira,
Inc.
|
|
Condensed
Consolidated Statements of Income (Loss)
|
|
(Unaudited)
|
|
(dollars and
shares in millions, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
Net sales
|
|
|
|
|
$
994.0
|
|
|
$
976.7
|
|
|
1.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
|
779.7
|
|
|
672.8
|
|
|
15.9%
|
|
|
Restructuring, impairment and
(gain) on disposition of assets, net
|
|
|
9.4
|
|
|
170.2
|
|
|
(94.5)%
|
|
|
Research and
development
|
|
|
|
66.2
|
|
|
69.3
|
|
|
(4.5)%
|
|
|
Selling, general and
administrative
|
|
|
|
155.2
|
|
|
149.6
|
|
|
3.7%
|
|
|
Total operating
costs and expenses
|
|
|
|
1,010.5
|
|
|
1,061.9
|
|
|
(4.8)%
|
|
|
Loss
From Operations
|
|
|
|
(16.5)
|
|
|
(85.2)
|
|
|
80.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
21.1
|
|
|
23.4
|
|
|
(9.8)%
|
|
|
Other expense (income),
net
|
|
|
|
2.8
|
|
|
(1.8)
|
|
|
255.6%
|
|
|
Loss
Before Income Taxes
|
|
|
|
(40.4)
|
|
|
(106.8)
|
|
|
62.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
|
|
(34.7)
|
|
|
(8.6)
|
|
|
(303.5)%
|
|
|
Equity income from affiliates,
net
|
|
|
|
(6.9)
|
|
|
(9.3)
|
|
|
(25.8)%
|
|
|
Net
Income (Loss)
|
|
|
|
$
1.2
|
|
|
$
(88.9)
|
|
|
101.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Common
Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
0.01
|
|
|
$
(0.54)
|
|
|
101.9%
|
|
|
Diluted
|
|
|
|
|
$
0.01
|
|
|
$
(0.54)
|
|
|
101.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares
Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
165.1
|
|
|
164.5
|
|
|
0.4%
|
|
|
Diluted
|
|
|
|
|
165.9
|
|
|
164.5
|
|
|
0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Gross Profit
(1)(2)
|
|
|
|
$
334.0
|
|
|
$
361.3
|
|
|
(7.6)%
|
|
|
Adjusted Income From Operations
(1)
|
|
|
|
$
112.6
|
|
|
$
142.4
|
|
|
(20.9)%
|
|
|
Adjusted Net Income
(1)
|
|
|
|
$
78.4
|
|
|
$
109.7
|
|
|
(28.5)%
|
|
|
Adjusted Diluted Earnings Per
Share (1)
|
|
|
|
$
0.47
|
|
|
$
0.66
|
|
|
(28.8)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistics (as a % of net sales, except for income tax rate):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Three
Months Ended September 30,
|
|
|
Adjusted (1)
Three Months Ended September 30,
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
Gross Profit (2)
|
21.6%
|
|
|
31.1%
|
|
|
33.6%
|
|
|
37.0%
|
|
|
(Loss) Income From
Operations
|
(1.7)%
|
|
|
(8.7)%
|
|
|
11.3%
|
|
|
14.6%
|
|
|
Net Income (Loss)
|
0.1%
|
|
|
(9.1)%
|
|
|
7.9%
|
|
|
11.2%
|
|
|
Income Tax Rate
|
85.9%
|
|
|
8.1%
|
|
|
19.0%
|
|
|
16.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(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.
|
|
| |
Hospira,
Inc.
|
|
Condensed
Consolidated Statements of Income
|
|
(Unaudited)
|
|
(dollars and
shares in millions, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended September 30,
|
|
|
%
Change
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
Net sales
|
|
|
|
|
$
2,993.2
|
|
|
$
3,043.1
|
|
|
(1.6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
|
2,195.4
|
|
|
1,926.7
|
|
|
13.9%
|
|
|
Restructuring, impairment and
(gain) on disposition of assets, net
|
|
|
41.6
|
|
|
184.9
|
|
|
(77.5)%
|
|
|
Research and
development
|
|
|
|
218.9
|
|
|
192.0
|
|
|
14.0%
|
|
|
Selling, general and
administrative
|
|
|
|
509.3
|
|
|
470.4
|
|
|
8.3%
|
|
|
Total operating
costs and expenses
|
|
|
|
2,965.2
|
|
|
2,774.0
|
|
|
6.9%
|
|
|
Income From Operations
|
|
|
|
28.0
|
|
|
269.1
|
|
|
(89.6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
64.3
|
|
|
70.7
|
|
|
(9.1)%
|
|
|
Other expense (income),
net
|
|
|
|
12.8
|
|
|
(6.0)
|
|
|
313.3%
|
|
|
(Loss) Income Before Income Taxes
|
|
|
|
(49.1)
|
|
|
204.4
|
|
|
(124.0)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
|
(61.0)
|
|
|
38.0
|
|
|
(260.5)%
|
|
|
Equity income from affiliates,
net
|
|
|
|
(27.0)
|
|
|
(38.2)
|
|
|
(29.3)%
|
|
|
Net
Income
|
|
|
|
$
38.9
|
|
|
$
204.6
|
|
|
(81.0)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Common
Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
0.24
|
|
|
$
1.23
|
|
|
(80.5)%
|
|
|
Diluted
|
|
|
|
|
$
0.23
|
|
|
$
1.21
|
|
|
(81.0)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares
Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
165.0
|
|
|
165.8
|
|
|
(0.5)%
|
|
|
Diluted
|
|
|
|
|
166.0
|
|
|
168.7
|
|
|
(1.6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Gross Profit
(1)(2)
|
|
|
|
$
1,062.3
|
|
|
$
1,219.0
|
|
|
(12.9)%
|
|
|
Adjusted Income From Operations
(1)
|
|
|
|
$
334.1
|
|
|
$
557.8
|
|
|
(40.1)%
|
|
|
Adjusted Net Income
(1)
|
|
|
|
$
242.0
|
|
|
$
425.3
|
|
|
(43.1)%
|
|
|
Adjusted Diluted Earnings Per
Share (1)
|
|
|
|
$
1.46
|
|
|
$
2.52
|
|
|
(42.1)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistics (as a % of net sales, except for income tax rate):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Nine
Months Ended September 30,
|
|
|
Adjusted (1)
Nine Months Ended September 30,
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
Gross Profit (2)
|
26.7%
|
|
|
36.7%
|
|
|
35.5%
|
|
|
40.1%
|
|
|
Income From
Operations
|
0.9%
|
|
|
8.8%
|
|
|
11.2%
|
|
|
18.3%
|
|
|
Net Income
|
|
1.3%
|
|
|
6.7%
|
|
|
8.1%
|
|
|
14.0%
|
|
|
Income Tax Rate
|
124.2%
|
|
|
18.6%
|
|
|
19.0%
|
|
|
21.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(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.
|
|
| |
Hospira,
Inc.
|
|
Reconciliation of GAAP to
Non-GAAP Financial Measures
|
|
(Unaudited)
|
|
(dollars in
millions, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Limited ("Mayne Pharma"),
Javelin Pharmaceuticals, Inc. ("Javelin Pharma") and a generic
injectable business by Hospira Healthcare India Private Limited
("Hospira India").
|
|
|
(B)
|
Impairment of certain assets:
$11.3 million reported in Restructuring, impairment, and (gain) on
disposition of assets, net, 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, and costs for corrective actions. These charges are
directly 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.
|
|
|
(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, impairment, and (gain) on
disposition of assets, net, for a gain on disposition of a
non-strategic product line.
|
|
|
| |
Three months ended September 30, 2011 Reconciliation of GAAP to Non-GAAP Financial Measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit (1)
|
|
(Loss) Income
From Operations
|
|
Net (Loss)
Income (2)
|
|
Diluted EPS
|
|
|
GAAP financial measures
|
|
$
303.9
|
|
$
(85.2)
|
|
$
(88.9)
|
|
$
(0.54)
|
|
|
Specified item:
|
|
|
|
|
|
|
|
|
|
|
Amortization of certain
intangible assets (A)
|
|
19.2
|
|
19.2
|
|
13.0
|
|
0.08
|
|
|
Impairment of certain
assets (B)
|
|
-
|
|
15.2
|
|
10.4
|
|
0.06
|
|
|
Certain quality and
product related charges (C)
|
|
36.7
|
|
36.7
|
|
22.9
|
|
0.14
|
|
|
Capacity expansion
related charges (D)
|
|
1.5
|
|
1.5
|
|
1.0
|
|
0.01
|
|
|
Goodwill impairment
(E)
|
|
-
|
|
155.0
|
|
151.3
|
|
0.92
|
|
|
Diluted shares
impact
|
|
|
|
|
|
|
|
(0.01)
|
|
|
Adjusted financial measures
(3)
|
|
$
361.3
|
|
$
142.4
|
|
$
109.7
|
|
$
0.66
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
GAAP results for the three
months ended September 30, 2011 include:
|
|
|
(A)
|
Amortization of certain intangible assets: $19.2 million reported in Cost of products sold resulting from acquisitions including Mayne Pharma, Javelin Pharma and a generic injectable business
by Hospira India.
|
|
|
(B)
|
Impairment of certain assets:
$15.2 million reported in Restructuring, impairment and (gain) on
disposition of assets, net, 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, and costs for corrective actions.
These charges are directly associated with Hospira's response to
the FDA warning letter 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)
|
Goodwill impairment: $155.0
million reported in Restructuring, impairment and (gain) on
disposition of assets, net related to Hospira's Europe, Middle East
& Africa ("EMEA") reporting unit.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Gross profit is defined as Net
sales less Cost of products sold.
|
|
(2)
|
Adjusted Net income is shown net
of tax of $51.6 million and $29.0 million for the three months
ended September 30, 2012 and 2011, 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 filing on Form 8-K
filed on November 7, 2012 for additional information.
|
|
|
|
|
|
|
|
|
|
|
| |
Hospira,
Inc.
|
|
Reconciliation of GAAP to
Non-GAAP Financial Measures
|
|
(Unaudited)
|
|
(dollars in
millions, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, impairment, and (gain)
disposition of assets, net. 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, impairment, and (gain) on
disposition of assets, net, and $8.4 million reported in Other
expense (income), net. These charges relate to impairments of
certain intangible assets and a cost method 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, and costs for corrective actions. These charges are
directly 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, impairment, and (gain) on disposition of
assets, net. These charges include inventory charges, equipment
impairments, contract termination charges and gain on disposition
associated with Hospira's exit of non-strategic product
lines.
|
|
|
| |
Nine months ended September 30, 2011 Reconciliation of GAAP to Non-GAAP Financial Measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit (1)
|
|
Income From
Operations
|
|
Net Income (2)
|
|
Diluted EPS
|
|
|
GAAP financial measures
|
|
$
1,116.4
|
|
$
269.1
|
|
$
204.6
|
|
$
1.21
|
|
|
Specified items:
|
|
|
|
|
|
|
|
|
|
|
Project Fuel and related
charges (A)
|
|
5.0
|
|
9.6
|
|
6.3
|
|
0.04
|
|
|
Facilities Optimization
charges (B)
|
|
0.8
|
|
1.1
|
|
0.7
|
|
0.01
|
|
|
Amortization of certain
intangible assets (C)
|
|
58.6
|
|
58.6
|
|
40.9
|
|
0.24
|
|
|
Impairment of certain
assets (D)
|
|
-
|
|
18.4
|
|
11.5
|
|
0.07
|
|
|
Certain quality and
product related charges (E)
|
|
36.7
|
|
36.7
|
|
22.9
|
|
0.13
|
|
|
Capacity expansion
related charges (F)
|
|
1.5
|
|
1.5
|
|
1.0
|
|
0.01
|
|
|
Other restructuring
charges (G)
|
|
-
|
|
7.8
|
|
5.8
|
|
0.03
|
|
|
Goodwill impairment
(H)
|
|
-
|
|
155.0
|
|
151.3
|
|
0.90
|
|
|
Settlement of IRS tax
audit benefit (I)
|
|
-
|
|
-
|
|
(19.7)
|
|
(0.12)
|
|
|
Adjusted financial measures
(3)
|
|
$
1,219.0
|
|
$
557.8
|
|
$
425.3
|
|
$
2.52
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
GAAP results for the nine months
ended September 30, 2011 include:
|
|
|
(A)
|
Project Fuel and related
charges: $5.0 million reported in Cost of products sold, $3.4
million reported in Restructuring, impairment and (gain) on
disposition of assets, net and $1.2 million reported in Selling,
general and administrative. Project Fuel initiatives include costs
for process optimization implementation, severance and other
employee benefits, exit costs, and other asset charges.
|
|
|
(B)
|
Facilities Optimization charges:
$0.8 million reported in Cost of products sold and $0.3 million
reported in Restructuring, impairment and (gain) on disposition of
assets, net. These charges relate to facilities optimization from
the closure or departure from certain manufacturing and R&D
facilities and include costs for severance and other employee
benefits, accelerated depreciation and relocation of production and
R&D operations.
|
|
|
(C)
|
Amortization of certain intangible assets: $58.6 million reported in Cost of products sold resulting from acquisitions including Mayne Pharma, Javelin Pharma, and a generic injectible business
by Hospira India.
|
|
|
(D)
|
Impairment of certain assets:
$18.4 million reported in Restructuring, impairment and (gain) on
disposition of assets, net, related to impairments of certain
intangible assets.
|
|
|
(E)
|
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, and costs for corrective actions.
These charges are directly associated with Hospira's response to
the FDA warning letter and charges related to certain device
related remediation activities.
|
|
|
(F)
|
Capacity expansion related
charges reported in Cost of products sold include start-up charges
related to manufacturing capacity expansion in India.
|
|
|
(G)
|
Other restructuring charges:
$7.8 million reported in Restructuring, impairment and (gain) on
disposition of assets, net for distribution contract termination
charges related to certain Latin America operations.
|
|
|
(H)
|
Goodwill impairment: $155.0
million reported in Restructuring, impairment and (gain) on
disposition of assets, net related to Hospira's EMEA reporting
unit.
|
|
|
(I)
|
Settlement of IRS tax audit
benefit of $19.7 million reported in Income tax expense. This
discrete income tax benefit is related to the completion and
effective settlement of U.S. tax return audits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Gross profit is defined as Net
sales less Cost of products sold.
|
|
(2)
|
Adjusted Net income is shown net
of tax of $111.4 million and $48.3 million exclusive of the 2011
tax audit settlement for the nine months ended September 30, 2012
and 2011, 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 filing on Form 8-K
filed on November 7, 2012 for additional information.
|
|
|
|
|
|
|
|
|
|
|
| |
Hospira,
Inc.
|
|
Condensed
Consolidated Balance Sheets
|
|
(Unaudited)
|
|
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
Assets
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
841.2
|
|
$
597.5
|
|
|
Trade receivables, less allowances of $14.1 in 2012 and $15.7 in 2011
|
585.1
|
|
639.9
|
|
|
Inventories
|
1,009.2
|
|
1,027.0
|
|
|
Deferred income taxes
|
163.8
|
|
174.4
|
|
|
Prepaid expenses
|
70.6
|
|
45.9
|
|
|
Other receivables
|
120.1
|
|
86.0
|
|
|
Total
Current Assets
|
2,790.0
|
|
2,570.7
|
|
Property and equipment,
net
|
1,405.7
|
|
1,355.0
|
|
Intangible assets,
net
|
288.5
|
|
355.8
|
|
Goodwill
|
|
1,083.8
|
|
1,082.9
|
|
Deferred income taxes
|
284.1
|
|
232.2
|
|
Investments
|
64.7
|
|
48.7
|
|
Other assets
|
157.4
|
|
133.8
|
|
|
Total
Assets
|
$
6,074.2
|
|
$
5,779.1
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Short-term borrowings
|
$
87.0
|
|
$
36.6
|
|
|
Trade accounts
payable
|
267.7
|
|
241.3
|
|
|
Salaries, wages and
commissions
|
130.0
|
|
113.0
|
|
|
Other accrued
liabilities
|
519.5
|
|
456.9
|
|
|
Total
Current Liabilities
|
1,004.2
|
|
847.8
|
|
Long-term debt
|
1,708.8
|
|
1,711.9
|
|
Deferred income taxes
|
2.8
|
|
5.7
|
|
Post-retirement obligations and
other long-term liabilities
|
327.4
|
|
275.7
|
|
Commitments and
Contingencies
|
|
|
|
|
Total Shareholders'
Equity
|
3,031.0
|
|
2,938.0
|
|
Total Liabilities and
Shareholders' Equity
|
$
6,074.2
|
|
$
5,779.1
|
|
|
|
|
|
|
| |
Hospira,
Inc.
|
|
Condensed
Consolidated Statements of Cash Flows
|
|
(Unaudited)
|
|
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended September 30,
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
Cash Flow From Operating
Activities:
|
|
|
|
|
Net income
|
$
38.9
|
|
$
204.6
|
|
Adjustments to reconcile
net income to net cash from operating activities-
|
|
|
|
|
Depreciation
|
122.2
|
|
123.6
|
|
Amortization of
intangible assets
|
62.6
|
|
67.1
|
|
Stock-based
compensation expense
|
29.9
|
|
32.1
|
|
Undistributed
equity income from affiliates
|
(27.0)
|
|
(38.2)
|
|
Distributions
received from equity method affiliates
|
-
|
|
30.3
|
|
Deferred income tax
and other tax adjustments
|
(47.0)
|
|
(31.9)
|
|
Impairment and
other asset charges
|
58.3
|
|
181.4
|
|
Gains on
disposition of assets
|
(5.9)
|
|
-
|
|
Changes in assets and
liabilities-
|
|
|
|
|
Trade
receivables
|
55.4
|
|
(7.8)
|
|
Inventories
|
9.5
|
|
(161.4)
|
|
Prepaid expenses
and other assets
|
(39.9)
|
|
(53.7)
|
|
Trade accounts
payable
|
31.1
|
|
(84.8)
|
|
Other
liabilities
|
114.5
|
|
4.6
|
|
Other, net
|
1.8
|
|
11.1
|
|
Net Cash
Provided by Operating Activities
|
404.4
|
|
277.0
|
|
|
|
|
|
|
Cash Flow From Investing
Activities:
|
|
|
|
|
Capital expenditures
(including instruments placed with or leased to
customers)
|
(201.8)
|
|
(211.3)
|
|
Other payments to acquire
business
|
(15.0)
|
|
-
|
|
Purchases of intangibles
and other investments
|
(9.6)
|
|
(5.2)
|
|
Proceeds from disposition
of businesses and assets
|
9.6
|
|
13.3
|
|
Net Cash Used in
Investing Activities
|
(216.8)
|
|
(203.2)
|
|
|
|
|
|
|
Cash Flow From Financing
Activities:
|
|
|
|
|
Other borrowings,
net
|
45.8
|
|
8.5
|
|
Common stock
repurchased
|
-
|
|
(200.0)
|
|
Excess tax benefit from
stock-based compensation arrangements
|
2.1
|
|
7.4
|
|
Proceeds from stock
options exercised
|
6.9
|
|
47.5
|
|
Net Cash Provided
by (Used in) Financing Activities
|
54.8
|
|
(136.6)
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash and cash equivalents
|
1.3
|
|
(14.1)
|
|
|
|
|
|
|
Net change in cash and cash
equivalents
|
243.7
|
|
(76.9)
|
|
Cash and cash equivalents at
beginning of period
|
597.5
|
|
604.3
|
|
Cash and cash equivalents at end
of period
|
$
841.2
|
|
$
527.4
|
|
|
|
|
|
|
Supplemental Cash Flow
Information:
|
|
|
|
|
Cash paid during the
period-
|
|
|
|
|
Interest
|
$
65.8
|
|
$
82.4
|
|
Income taxes, net of
refunds
|
$
0.5
|
|
$
34.0
|
|
|
|
| |
Hospira,
Inc.
|
|
Net Sales by
Product Line
|
|
(Unaudited)
|
|
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
|
2012
|
|
2011
|
|
% Change at
Actual Currency
Rates
|
|
|
% Change at
Constant Currency
Rates (1)
|
|
|
|
2012
|
|
2011
|
|
% Change at
Actual Currency
Rates
|
|
% Change at
Constant Currency
Rates (1)
|
|
|
Americas--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty Injectable
Pharmaceuticals
|
$
502.0
|
|
$
485.2
|
|
3.5%
|
|
|
4.4%
|
|
|
|
$
1,451.4
|
|
$
1,525.2
|
|
(4.8)%
|
|
(4.0)%
|
|
|
Medication
Management
|
197.6
|
|
199.9
|
|
(1.2)%
|
|
|
(0.3)%
|
|
|
|
624.2
|
|
596.4
|
|
4.7%
|
|
5.3%
|
|
|
Other Pharma
|
89.5
|
|
82.8
|
|
8.1%
|
|
|
8.2%
|
|
|
|
294.1
|
|
298.3
|
|
(1.4)%
|
|
(1.1)%
|
|
|
Total Americas
|
789.1
|
|
767.9
|
|
2.8%
|
|
|
3.6%
|
|
|
|
2,369.7
|
|
2,419.9
|
|
(2.1)%
|
|
(1.3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East &
Africa--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty Injectable
Pharmaceuticals
|
76.6
|
|
75.2
|
|
1.9%
|
|
|
13.5%
|
|
|
|
235.1
|
|
219.8
|
|
7.0%
|
|
16.6%
|
|
|
Medication
Management
|
27.1
|
|
29.6
|
|
(8.4)%
|
|
|
2.7%
|
|
|
|
88.1
|
|
97.3
|
|
(9.5)%
|
|
(1.2)%
|
|
|
Other Pharma
|
19.2
|
|
24.5
|
|
(21.6)%
|
|
|
(17.3)%
|
|
|
|
62.9
|
|
66.8
|
|
(5.8)%
|
|
(1.3)%
|
|
|
Total Europe, Middle East &
Africa
|
122.9
|
|
129.3
|
|
(4.9)%
|
|
|
5.2%
|
|
|
|
386.1
|
|
383.9
|
|
0.6%
|
|
8.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty Injectable
Pharmaceuticals
|
64.6
|
|
66.4
|
|
(2.7)%
|
|
|
(0.9)%
|
|
|
|
187.3
|
|
195.6
|
|
(4.2)%
|
|
(2.5)%
|
|
|
Medication
Management
|
11.9
|
|
11.1
|
|
7.2%
|
|
|
8.2%
|
|
|
|
35.6
|
|
33.6
|
|
6.0%
|
|
6.4%
|
|
|
Other Pharma
|
5.5
|
|
2.0
|
|
175.0%
|
|
|
177.0%
|
|
|
|
14.5
|
|
10.1
|
|
43.6%
|
|
43.6%
|
|
|
Total Asia Pacific
|
82.0
|
|
79.5
|
|
3.1%
|
|
|
4.9%
|
|
|
|
237.4
|
|
239.3
|
|
(0.8)%
|
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
$
994.0
|
|
$
976.7
|
|
1.8%
|
|
|
3.9%
|
|
|
|
$
2,993.2
|
|
$
3,043.1
|
|
(1.6)%
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty Injectable
Pharmaceuticals
|
$
643.2
|
|
$
626.8
|
|
2.6%
|
|
|
4.9%
|
|
|
|
$
1,873.8
|
|
$
1,940.6
|
|
(3.4)%
|
|
(1.5)%
|
|
|
Medication
Management
|
236.6
|
|
240.6
|
|
(1.7)%
|
|
|
0.5%
|
|
|
|
747.9
|
|
727.3
|
|
2.8%
|
|
4.5%
|
|
|
Other Pharma
|
114.2
|
|
109.3
|
|
4.5%
|
|
|
5.6%
|
|
|
|
371.5
|
|
375.2
|
|
(1.0)%
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
$
994.0
|
|
$
976.7
|
|
1.8%
|
|
|
3.9%
|
|
|
|
$
2,993.2
|
|
$
3,043.1
|
|
(1.6)%
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1)
|
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. Management uses these measures internally to
monitor business unit performance and in evaluating management
performance. These 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.
|
|
| |
SOURCE Hospira, Inc.