Press Release
| Hospira Reports First-Quarter 2010 Results |
LAKE FOREST, Ill., April 27, 2010 /PRNewswire via COMTEX/ --Hospira, Inc. (NYSE: HSP), a leading global specialty pharmaceutical and medication delivery company, today reported results for the first quarter ended March 31, 2010. Net sales for the quarter were $1.0 billion, and adjusted* diluted earnings per share were $0.94. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.) "Hospira started out the year with very strong sales and profitability. Our positive performance was driven by continued momentum in our Specialty Injectable Pharmaceuticals business, as well as by additional progress on our Project Fuel optimization initiatives," said Christopher B. Begley, chairman and chief executive officer. "Based on our first-quarter performance and the expected benefit to sales from acquiring Orchid Chemicals & Pharmaceuticals' generic injectable business, we have increased our full-year guidance. We remain dedicated to delivering on our commitments to our customers and patients through focused execution and improving shareholder value through sustainable top- and bottom-line growth." First-Quarter 2010 Results The following table highlights selected financial results for the first quarter of 2010 compared to the same period in 2009:
In $ millions, GAAP Adjusted*
except per Three Months Ended Three Months Ended
share amounts March 31, March 31,
------------------ % ------------------ %
2010 2009 Change 2010 2009 Change
-------- ------ ------ -------- ------- ------
Net Sales $1,007.6 $859.7 17.2% n/a n/a n/a
Gross Profit
(Net Sales
less Cost of
Products Sold) $430.3 $319.6 34.6% $454.7 $339.6 33.9%
Income from
Operations $207.6 $114.7 81.0% $239.9 $149.9 60.0%
Diluted EPS $0.84 $1.03 (18.4%) $0.94 $0.60 56.7%
Statistics (as a % of Net Sales)
--------------------------------
Gross Profit
(Net Sales
less Cost of
Products Sold) 42.7% 37.2% 45.1% 39.5%
Operating
Income 20.6% 13.3% 23.8% 17.4%
Results under U.S. Generally Accepted Accounting Principles (GAAP) include items as detailed in the schedules attached to this press release, including a $0.57 benefit to first-quarter 2009 GAAP diluted earnings per share from the settlement of a U.S. Internal Revenue Service audit. Net sales increased 17.2 percent to $1.0 billion in the first quarter of 2010, compared to $860 million in the first quarter of 2009. Specialty Injectable Pharmaceuticals drove the majority of the growth, primarily a result of continued strong U.S. sales of the generic oncolytic oxaliplatin and Precedex(TM), Hospira's proprietary sedation agent, as well as several products launched in the last year. Adjusted* income from operations increased 60.0 percent to $240 million in the first quarter of 2010, compared to $150 million in the first quarter of 2009. Driving the majority of the increase were higher net sales, more favorable product mix and improved manufacturing efficiency from the company's Project Fuel optimization initiatives. The effective tax rate on an adjusted basis in the quarter was 27.0 percent, up from the first-quarter 2009 rate of 21.5 percent. The increase is primarily related to the expiration of certain U.S. tax provisions in the first quarter of 2010. A shift of earnings to higher tax jurisdictions relative to the first-quarter 2009 earnings mix also contributed to the increase. Cash Flow Cash flow from operations for the first quarter of 2010 resulted in an outflow of $6 million compared to an inflow of $89 million in the same period in 2009. The decrease primarily reflects the timing of chargeback payments associated with U.S. sales of oxaliplatin. Capital expenditures were $41 million for the first quarter of 2010, compared to $34 million in the first quarter of 2009, mainly a result of Project Fuel-related spending. 2010 Projections Hospira now expects net sales to increase approximately 3 to 5 percent on a constant-currency basis. Including the impact of foreign exchange, the company expects net sales growth to be 4 to 6 percent. Hospira is also increasing its adjusted* diluted earnings per share projection for full-year 2010, which now is expected to range between $3.35 and $3.45 per share. The reconciliation between the projected 2010 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:
Diluted earnings per share -- adjusted* $3.35 - $3.45
-------------
Estimated charges related to Project Fuel
initiatives (mid-point of an estimated range of
$0.24 to $0.28 per diluted share) ($0.26)
Estimated charges related to facilities optimization
initiatives (mid-point of an estimated range of
$0.04 to $0.06 per diluted share) ($0.05)
Estimated $67 million for the amortization of
intangibles related to the Mayne Pharma and
Orchid Pharma acquisitions ($0.27)
Estimated acquisition and integration-related charges
associated with the Orchid Pharma acquisition
(mid-point of an estimated range of $0.05 to
$0.07 per share) ($0.06)
-------------
Diluted earnings per share -- GAAP $2.71 - $2.81
=============
The estimated charges are shown net of tax of $53 million, which is calculated for the specified components stated above based on the statutory tax rate in the various tax jurisdictions in which the items are expected to occur. The company is increasing its projection for cash flow from operations, which is now expected to range between $625 million and $675 million. Depreciation and amortization are now projected to be in a range of $250 million to $260 million, reflecting the impact of the Orchid Pharma acquisition. The projected range for capital expenditures remains unchanged at $195 million to $215 million. *Use of Non-GAAP Financial Measures Non-GAAP financial 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 Tuesday, April 27, 2010. A live webcast of the conference call will be available on Hospira's Web site 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 Web site at the beginning of the conference call. A replay will be available on the Hospira Web site for 30 days following the call. About Hospira Hospira, Inc. is a global specialty pharmaceutical and medication delivery company dedicated to Advancing Wellness(TM). As the world leader in specialty generic injectable pharmaceuticals, Hospira offers one of the broadest portfolios of generic acute-care and oncology injectables, as well as integrated infusion therapy and medication management solutions. Through its products, Hospira helps improve the safety, cost and productivity of patient care. The company is headquartered in Lake Forest, Ill., and has approximately 13,500 employees. Learn more at http://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, 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, legal, technological 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
March 31,
---------------- %
2010 2009 Change
-------- ------ -------
Net sales $1,007.6 $859.7 17.2 %
-------- ------
Cost of products sold 577.3 540.1 6.9 %
Restructuring, impairment and (gain)
on disposition of assets, net (7.6) 9.4 (180.9)%
Research and development 51.7 50.0 3.4 %
Selling, general and administrative 178.6 145.5 22.7 %
-------- ------
Total operating costs and expenses 800.0 745.0 7.4 %
-------- ------
Income From Operations 207.6 114.7 81.0 %
Interest expense 23.4 26.9 (13.0)%
Other income, net (1.7) (0.3) 466.7 %
-------- ------
Income Before Income Taxes 185.9 88.1 111.0 %
Income tax expense (benefit) 44.2 (77.4) (157.1)%
-------- ------
Net Income $141.7 $165.5 (14.4)%
======== ======
Earnings Per Common Share:
Basic $0.86 $1.04 (17.3)%
======== ======
Diluted $0.84 $1.03 (18.4)%
======== ======
Weighted Average Common Shares Outstanding:
Basic 164.1 159.5 2.9 %
======== ======
Diluted 169.3 160.6 5.4 %
======== ======
Adjusted Gross Profit (1)(2) $454.7 $339.6 33.9 %
Adjusted Income From Operations (1) $239.9 $149.9 60.0 %
Adjusted Net Income (1) $159.4 $96.8 64.7 %
Adjusted Diluted Earnings Per Share (1) $0.94 $0.60 56.7 %
Statistics (as a % of net sales,
except for income tax rate):
GAAP Adjusted (1)
Three Months Ended Three Months Ended
March 31, March 31,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- -------
Gross Profit (2) 42.7 % 37.2 % 45.1 % 39.5 %
Income From Operations 20.6 % 13.3 % 23.8 % 17.4 %
Net Income 14.1 % 19.3 % 15.8 % 11.3 %
Income Tax Rate 23.8 % (87.8)% 27.0 % 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 and shares in millions, except for per share amounts)
Three months ended March 31, 2010 Reconciliation of GAAP to Non-GAAP
Financial Measures:
------------------------------------------------------------------------
Income
Gross From Net Diluted
Profit(1) Operations Income(2) EPS
-------- ---------- -------- -------
GAAP financial measures $430.3 $207.6 $141.7 $0.84
Specified items:
Project Fuel and related
charges (A) 3.7 (1.4) (4.6) (0.03)
Facilities Optimization
charges (B) 2.0 3.0 2.1 0.01
Amortization of Mayne Pharma
and Orchid Pharma intangible
assets (C) 18.7 18.7 12.6 0.08
Acquisition and integration-
related charges (D) - 12.0 7.6 0.04
-------- ---------- -------- -------
Adjusted financial measures (3) $454.7 $239.9 $159.4 $0.94
======== ========== ======== =======
GAAP results for the three months ended March 31, 2010 include:
A -- Project Fuel and related charges: $3.7 million reported in Cost of
products sold, $(8.6) million reported in Restructuring, impairment
and (gain) on disposition of assets, net, $0.2 million reported in
Research and development and $3.3 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. These charges are
offset by a $11.4 million gain reported in Restructuring, impairment
and (gain) on disposition of assets, net related to the disposal of
the non-strategic net assets associated with the Wasserburg, Germany,
facility.
B -- Facilities Optimization charges: $2.0 million reported in Cost of
products sold and $1.0 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 research and development ("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 Mayne Pharma Limited ("Mayne Pharma") and Orchid
Chemicals and Pharmaceuticals Ltd. ("Orchid Pharma") intangible
assets resulting from the Mayne Pharma and Orchid Pharma acquisitions
are reported in Cost of products sold.
D -- Acquisition and integration-related charges: $1.0 million reported in
Research and development and $11.0 million reported in Selling,
general and administrative. These charges include acquisition and
integration costs related to the acquisition of the generic
injectable pharmaceutical businesses of Orchid Pharma.
Three months ended March 31, 2009 Reconciliation of GAAP to Non-GAAP
Financial Measures:
---------------------------------------------------------------------
Income
Gross From Net Diluted
Profit(1) Operations Income(2) EPS
-------- ---------- -------- -------
GAAP financial measures $319.6 $114.7 $165.5 $1.03
Specified items:
Project Fuel and related
charges (A) - 10.5 6.5 0.04
Facilities Optimization
charges (B) 7.0 11.7 7.7 0.05
Amortization of Mayne Pharma
intangible assets (C) 13.0 13.0 9.0 0.05
Resolution of IRS tax audit
benefit (D) - - (91.9) (0.57)
-------- ---------- -------- -------
Adjusted financial measures (3) $339.6 $149.9 $96.8 $0.60
======== ========== ======== =======
GAAP results for the three months ended March 31, 2009 include:
A -- Project Fuel and related charges: $4.7 million reported in
Restructuring, impairment and (gain) on disposition of assets, net,
$0.4 million reported in Research and development and $5.4 million
reported in Selling, general and administrative. Project Fuel
initiatives include costs for severance and other employee benefits,
process optimization implementation, exit costs, and other asset
charges.
B -- Facilities Optimization charges: $7.0 million reported in Cost of
products sold and $4.7 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 Mayne Pharma intangible assets resulting from the
Mayne Pharma acquisition is reported in Cost of products sold.
D -- Resolution of IRS tax audit benefit of $91.9 million reported in
Income tax expense (benefit). 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) Specified items are shown net of tax of $14.8 million and $103.9
million for the three months ended March 31, 2010 and 2009,
respectively, based on the statutory tax rate 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 April 27, 2010 for additional information.
Hospira, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in millions)
March 31, December 31,
Assets 2010 2009
-------- --------
Current Assets:
Cash and cash equivalents $646.3 $946.0
Trade receivables, less allowances of
$7.3 in 2010 and $6.2 in 2009 647.1 498.1
Inventories 773.7 755.4
Deferred income taxes 167.7 185.9
Prepaid expenses 37.3 34.3
Other receivables 63.5 41.5
Assets held for sale - 65.0
-------- --------
Total Current Assets 2,335.6 2,526.2
-------- --------
Property and equipment, net 1,233.6 1,147.8
Intangible assets, net 507.8 406.5
Goodwill 1,407.6 1,243.4
Deferred income taxes 69.8 54.5
Investments 49.0 49.3
Other assets 77.2 75.2
-------- --------
Total Assets $5,680.6 $5,502.9
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $23.9 $23.6
Trade accounts payable 244.7 229.5
Salaries, wages and commissions 117.4 176.5
Other accrued liabilities 429.7 438.4
Liabilities related to assets held for sale - 13.9
-------- --------
Total Current Liabilities 815.7 881.9
-------- --------
Long-term debt 1,712.7 1,707.3
Deferred income taxes 21.4 18.6
Post-retirement obligations and other
long-term liabilities 274.9 271.4
Commitments and Contingencies
-------- --------
Total Shareholders' Equity 2,855.9 2,623.7
-------- --------
Total Liabilities and Shareholders' Equity $5,680.6 $5,502.9
======== ========
Hospira, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions)
Three Months Ended
March 31,
---------------
2010 2009
------ ------
Cash Flow From Operating Activities:
Net income $141.7 $165.5
Adjustments to reconcile net income to net cash from
operating activities-
Depreciation 39.1 41.2
Amortization of intangible assets 21.5 14.7
Stock-based compensation expense 17.3 13.1
Deferred income taxes and other tax adjustments 22.3 (89.4)
Gain on disposition of assets (11.4) -
Changes in assets and liabilities-
Trade receivables (141.2) 20.0
Inventories (10.7) (11.5)
Prepaid expenses and other assets (7.3) (13.1)
Trade accounts payable 18.1 (14.2)
Other liabilities (94.6) (41.7)
Other, net (0.5) 4.7
------ ------
Net Cash (Used In) Provided by Operating
Activities (5.7) 89.3
------ ------
Cash Flow From Investing Activities:
Capital expenditures (including instruments placed
with or leased to customers) (40.6) (33.8)
Acquisition, net of cash acquired, and payments for
contingent consideration (381.0) (7.1)
Purchases of intangibles and other investments (8.7) (3.0)
Proceeds on disposition of assets 62.6 -
------ ------
Net Cash Used in Investing Activities (367.7) (43.9)
------ ------
Cash Flow From Financing Activities:
Repayment of long-term debt - (5.0)
Other borrowings, net 0.1 (0.7)
Excess tax benefit from stock-based compensation
arrangements 7.9 -
Proceeds from stock options exercised 67.3 12.6
------ ------
Net Cash Provided by Financing Activities 75.3 6.9
------ ------
Effect of exchange rate changes on cash and cash
equivalents (1.6) (6.7)
------ ------
Net change in cash and cash equivalents (299.7) 45.6
Cash and cash equivalents at beginning of period 946.0 483.8
------ ------
Cash and cash equivalents at end of period $646.3 $529.4
====== ======
Supplemental Cash Flow Information:
Cash paid during the period-
Interest $30.5 $33.1
Income taxes, net of refunds $21.0 $9.9
Hospira, Inc.
Net Sales by Product Line
(Unaudited)
(dollars in millions)
Three Months Ended March 31,
-----------------------------------
% Change % Change
at at
Actual Constant
Currency Currency
2010 2009 Rates Rates (1)
------ ------ ------- ---------
Americas--
Pharmaceuticals
Specialty Injectables $483.9 $333.1 45.3 % 43.1 %
Other Pharma 125.4 137.8 (9.0)% (9.4)%
-------- ------
609.3 470.9 29.4 % 27.8 %
Devices
Medication Management Systems 126.4 121.4 4.1 % 1.6 %
Other Devices 80.1 92.4 (13.3)% (14.7)%
-------- ------
206.5 213.8 (3.4)% (5.4)%
Total Americas 815.8 684.7 19.1 % 17.4 %
Europe, Middle East & Africa--
Pharmaceuticals
Specialty Injectables 69.9 57.6 21.4 % 12.8 %
Other Pharma 18.6 27.7 (32.9)% (36.5)%
-------- ------
88.5 85.3 3.8 % (3.2)%
Devices
Medication Management Systems 19.1 19.1 0.0 % (5.8)%
Other Devices 14.9 16.8 (11.3)% (17.9)%
-------- ------
34.0 35.9 (5.3)% (11.4)%
Total Europe, Middle East & Africa 122.5 121.2 1.1 % (5.6)%
Asia Pacific--
Pharmaceuticals
Specialty Injectables 57.6 39.0 47.7 % 19.2 %
Other Pharma 2.1 3.6 (41.7)% (55.6)%
-------- ------
59.7 42.6 40.1 % 12.9 %
Devices
Medication Management Systems 5.3 4.7 12.8 % 0.0 %
Other Devices 4.3 6.5 (33.8)% (46.2)%
-------- ------
9.6 11.2 (14.3)% (26.8)%
Total Asia Pacific 69.3 53.8 28.8 % 4.6 %
-------- ------
Net Sales $1,007.6 $859.7 17.2 % 13.4 %
======== ======
Global--
Pharmaceuticals
Specialty Injectables $611.4 $429.7 42.3 % 36.9 %
Other Pharma 146.1 169.1 (13.6)% (14.8)%
-------- ------
757.5 598.8 26.5 % 22.3 %
Devices
Medication Management Systems 150.8 145.2 3.9 % 0.6 %
Other Devices 99.3 115.7 (14.2)% (16.9)%
-------- ------
250.1 260.9 (4.1)% (7.2)%
-------- ------
Net Sales $1,007.6 $859.7 17.2 % 13.4 %
======== ======
(1) The Non-GAAP financial measures contained in this press release
include comparisons at constant currency rates (reflecting comparative
local currency balances at prior period foreign exchange rates), which
we define as current period net sales excluding the impact of the
change in foreign exchange rates less prior period reported net sales
divided by prior period reported net sales. This financial 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 financial measure
aids in the understanding of our change in net sales without the
impact of foreign currency. 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.
SOURCE Hospira, Inc. |