Hospira, Inc. Reports Second-Quarter 2012 Results

LAKE FOREST, Ill., Aug. 1, 2012 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), the world’s leading provider of injectable drugs and infusion technologies, today reported results for the second quarter ended June 30, 2012. 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.)

“Hospira’s second-quarter results were in line with expectations,” said F. Michael Ball, chief executive officer. “The quarter’s performance reflected the impact of our quality-improvement initiatives, as well as a difficult comparison to strong second-quarter 2011 performance. During the quarter, we made progress with our remediation efforts and remain fully committed to reinforcing Hospira’s foundation, which will allow us to better serve our customers and the patients who rely on our products. We believe that the initiatives we are taking this year will position Hospira with an even stronger competitive advantage and create sustainable, long-term shareholder value.”

Second-Quarter 2012 Results

The following table highlights selected financial results for the second quarter of 2012 compared to the same period in 2011:

Results under U.S. Generally Accepted Accounting Principles (GAAP) include items as detailed in the schedules attached to this press release.

Net sales were $1.0 billion in the second quarter of 2012, a decrease of 3 percent compared to the second quarter of 2011. Excluding the impact of foreign exchange, net sales were flat on a year-over-year basis. Higher volumes for certain Specialty Injectable Pharmaceutical compounds outside the U.S. and favorable Medication Management sales were offset by a difficult year-over-year comparison to strong second-quarter 2011 performance, driven primarily by strong U.S. sales of the oncolytic docetaxel and other newer compounds, as well as the adverse impact to supply in 2012 of the company’s quality-improvement and remediation initiatives.

Adjusted* income from operations decreased 45 percent to $117 million in the second quarter of 2012. The majority of the decline reflects the impact of costs associated with higher year-over-year manufacturing expense and inventory losses. Additionally, operating costs increased in the second quarter of 2012 due to expected higher research and development spending, as well as higher selling and promotional costs.

The effective tax rate on an adjusted basis* in the quarter was 19.0 percent compared to 23.0 percent in the second quarter of 2011. The decrease is primarily due to lower operating income in higher-tax-rate jurisdictions.

Cash Flow

Cash flow from operations for the first six months of 2012 was $216 million compared to $253 million in the same period of 2011. The decrease primarily reflects lower net income in 2012, partially offset by lower investments in working capital in 2012, including inventory.

Capital expenditures were $137 million for the first six months of 2012, compared to $139 million for the same period in 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 within the original projected range, but now expects full-year 2012 adjusted* diluted earnings per share to be at the low end of the range, approximately $2.00.

The reconciliation between the projected 2012 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:

The adjusting items are shown net of tax in aggregate of $117 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.