"Hospira delivered another solid quarter, driven by strong performance in our Specialty Injectable Pharmaceuticals business and by continued momentum of our Project Fuel optimization initiatives," said Christopher B. Begley, chairman and chief executive officer. "We made significant progress in advancing our business during the quarter, launching our first product from Hospira India, commercializing our second biosimilar product in Europe and strengthening our position in acute-care proprietary pharmaceuticals. We are highly focused on executing our strategy of investing for growth and improving margins and cash flow, as well as on driving quality improvements across our global manufacturing organization. We remain on track to achieve our full-year earnings projections."
Results under U.S. Generally Accepted Accounting Principles (GAAP) include items as detailed in the schedules attached to this press release.
Net sales increased 1.2 percent to $968 million in the second quarter of 2010, compared to $957 million in the second quarter of 2009. Strong sales in Specialty Injectable Pharmaceuticals, resulting from the U.S. sales of the generic oncolytic oxaliplatin and Precedex™, Hospira's proprietary sedation agent, were primarily offset by a decline in Medication Management Systems as a result of the company's voluntary hold on shipments of its Symbiq™ Infusion System to new customers.
The adjusting items are shown net of tax in aggregate of $83 million, which is calculated for the specified adjustments stated above, based on the statutory tax rate in the various tax jurisdictions in which the items are expected to occur.
The company now expects cash flow from operations to range between $525 million and $575 million. The projected range for depreciation and amortization remains unchanged at $250 million to $260 million, as does the projected range for capital expenditures, at $195 million to $215 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, July 28, 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™. 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 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, regulatory, 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.
Adjusted* income from operations increased 20.6 percent to $213 million in the second quarter of 2010, compared to $177 million in the second quarter of 2009. Driving the majority of the increase were more favorable product mix and improved manufacturing efficiency from the company's Project Fuel optimization initiatives, offset by charges associated with certain quality and product-related matters.
The effective tax rate on an adjusted basis* in the quarter was 23.8 percent, up from the second-quarter 2009 rate of 21.5 percent. The increase is primarily related to the expiration of certain U.S. tax credits in 2010 as well as a shift in earnings mix to higher tax jurisdictions relative to the second quarter of 2009.
Cash Flow
Cash flow from operations for the first six months of 2010 was $144 million, compared to the $236 million generated for the same period in 2009. The decrease primarily reflects the timing of chargeback payments associated with the U.S. sales of oxaliplatin, increased inventory levels and higher U.S. income tax payments.
Capital expenditures were $79 million for the first six months of 2010, compared to $78 million for the first six months of 2009.
2010 Projections
Hospira is maintaining guidance for net sales growth of approximately 3 to 5 percent on a constant-currency basis. Including the impact of foreign exchange, the company currently expects net sales growth to also be 3 to 5 percent.
Hospira is maintaining its adjusted* diluted earnings per share projection for full-year 2010, which is expected to range between $3.35 and $3.45 per share.
