LAKE FOREST, Ill., Nov. 6, 2013 /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, 2013. Net sales for
the quarter were $1.0 billion and
adjusted* diluted earnings per share were $0.51. (Adjusted* measures exclude certain
specified items as described later in this press release and the
attached schedules.) On a U.S. Generally Accepted Accounting
Principles (GAAP) basis, diluted earnings per share were
$0.01.
"The third quarter was one of continued progress in several
areas," said F. Michael Ball, chief
executive officer. "We were especially pleased to receive European
approval in the quarter of our biosimilar infliximab, Inflectra™ –
the first monoclonal antibody biosimilar to be approved in
Europe. We are also seeing
continued demand for the new premix versions of our branded
sedation agent, Precedex™. At the same time, we have made
meaningful advances in both our supply recovery efforts and
quality-improvement initiatives. We believe our progress across
these fronts is positioning Hospira for a stronger, more
competitive future, which we believe will provide sustainable,
long-term growth and value to our shareholders."
Third-Quarter 2013 Results
The following table highlights selected financial results for
the third quarter of 2013 compared to the same period in 2012:
In $
millions,
except per share
amounts
|
GAAP
Three Months
Ended
September
30,
|
%
Change
|
Adjusted*
Three Months
Ended
September
30,
|
%
Change
|
|
2013
|
2012
|
2013
|
2012
|
Net Sales
|
$1,008.2
|
$994.0
|
1.4%
|
n/a
|
n/a
|
n/a
|
Gross Profit (Net
Sales less
Cost of
Products Sold)
|
$290.2
|
$214.3
|
35.4%
|
$371.4
|
$334.0
|
11.2%
|
Income (Loss)
from
Operations
|
$29.8
|
$(16.5)
|
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%
|
(1.7)%
|
|
12.1%
|
11.3%
|
|
Results under GAAP include items as detailed in the schedules
attached to this press release.
Net sales were $1.0 billion in the
third quarter of 2013, an increase of 1.4 percent compared to the
third quarter of 2012. Continued strong global sales of Precedex
and other Specialty Injectable Pharmaceuticals (SIP) products in
the United States more than offset
the impact of pricing erosion of certain newer U.S. SIP products
and lower device sales. The lower device sales primarily resulted
from the impact of the ship-hold of most of the company's infusion
devices previously put in place due to prior actions of various
regulatory authorities.
Adjusted* income from operations increased 8.3 percent to
$122 million in the third quarter of
2013, compared to $113 million in the
third quarter of 2012. The increase mainly reflects favorable
product mix compared to the third quarter of 2012 and supply
recovery in the United States,
which more than offset a year-over-year increase in Selling,
General and Administration expense. On a GAAP basis, income from
operations was $30 million compared
to a loss from operations of $17
million in the third quarter of 2012. Although GAAP income
from operations in the third quarter of 2013 was negatively
affected by charges related to the company's device strategy
initiative, the quality- and product-related charges were lower in
the third quarter of 2013 than in the same period last year.
The effective tax rate on an adjusted basis* in the quarter was
17.5 percent compared to 19.0 percent in the third quarter of 2012.
The decrease is primarily due to a 2013 tax benefit related to the
reinstatement of the U.S. federal Research & Development tax
credit and other corporate provisions. On a GAAP basis, the
third-quarter 2013 effective tax rate was a benefit of 97.5 percent
compared to a benefit of 85.9 percent in the third quarter of 2012.
The benefit during both periods primarily resulted from the impact
of higher quality- and device-related charges incurred in higher
tax-rate jurisdictions.
Cash Flow
Cash flow from operations for the first nine months of 2013 was
$62 million compared to $404 million for the same period of 2012. The
decrease is primarily due to increases in working capital,
including inventory, as well as higher tax and interest
payments.
Capital expenditures were $249
million for the first nine months of 2013, compared to
$202 million for the same period in
2012. The increase reflects additional planned expenditures at
several of the company's manufacturing facilities related to
modernization initiatives, as well as Information Technology
projects.
2013 Projections
Hospira continues to project the year-over-year change to 2013
adjusted* net sales to be negative 1 percent to positive 1 percent,
on a constant-currency basis. Adjusted* net sales exclude the
first-quarter 2013 impact of customer sales allowances associated
with the company's new device strategy announced in May 2013. On a GAAP basis, the year-over-year
change to net sales is expected to range between negative 5 percent
and negative 3 percent. Foreign exchange is expected to detract
from GAAP net sales by negative 1 percent.
The company continues to expect full-year 2013 adjusted* diluted
earnings per share to range between $2.00
and $2.10, representing flat to 5 percent growth.
The reconciliation between the projected 2013 adjusted* diluted
earnings per share and projected GAAP diluted earnings per share
follows:
Diluted earnings per
share -- adjusted*
|
$2.00 - $2.10
|
|
|
Estimated charges
related to the company's device
strategy (mid-point
of an estimated range of
$1.04 to $1.08 per
diluted share)
|
$(1.06)
|
|
|
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)
|
|
|
Impairment of certain
assets
|
$(0.06)
|
|
|
Estimated charges for
certain quality and product-related
matters (mid-point of
an estimated range of
$0.45 to $0.51 per
diluted share)
|
$(0.48)
|
|
|
Estimated charges
related to capacity expansion
(mid-point of an
estimated range of $0.09 to $0.11
per diluted
share)
|
$(0.10)
|
|
|
Estimated acquisition
and integration-related charges
associated with the
pending acquisition of an API-related
business from Orchid
Chemicals & Pharmaceuticals
(mid-point of an
estimated range of $0.01 to $0.03
per diluted
share)
|
$(0.02)
|
|
|
Other restructuring
charges
|
$(0.03)
|
|
|
Early debt
extinguishment charges
|
$(0.14)
|
|
|
Diluted share
impact
|
$
0.02
|
|
|
Diluted loss per
share -- GAAP
|
$(0.18) - $(0.08)
|
The adjusting items are shown net of tax in aggregate of
$158 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 continues to expect cash flow from operations in
2013 to be between $200 million and $250
million. Depreciation and amortization guidance also remains
unchanged at between $255 million and $275
million. The company continues to expect capital
expenditures to range between $350 million
and $400 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. 6, 2013. 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
16,000 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, expenses,
and cash flow; and other statements regarding Hospira's goals,
plans and strategy. Hospira cautions that these forward-looking
statements are subject to risks and uncertainties, including
adequate and sustained progress on the company's quality
initiatives, continuous improvement activities and device
strategy, that may cause actual results to differ materially
from those indicated in the forward-looking statements. Economic,
competitive, governmental, regulatory, legal, technological,
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
|
(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
|
$
(0.25)
|
|
$
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
|
|
61.5
|
|
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
|
|
$
631.8
|
|
$
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,
|
|
|
2013
|
|
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)
|
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.
|
Hospira,
Inc.
|
Net Sales by
Product Line
|
(Unaudited)
|
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
|
Reported
|
|
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.
|
SOURCE Hospira, Inc.