LAKE FOREST, Ill., Oct. 26, 2011 /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, 2011. Net sales for the quarter were $977 million, and adjusted* diluted earnings per share were $0.66. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.)
“As we indicated in our Oct. 18 press release, despite the continued contribution of recently launched products to revenue growth, our third-quarter results were significantly impacted by developments related to our quality-improvement initiatives,” said F. Michael Ball, chief executive officer. “Addressing these issues is Hospira’s top priority, and our organization is committed to full resolution. I remain confident that Hospira will emerge from this process a stronger, more competitive global company that is optimally positioned to serve the needs of our customers and patients, and deliver strong value to our shareholders.”
Third-Quarter 2011 Results
The following table highlights selected financial results for the third quarter of 2011 compared to the same period in 2010:
In $ millions, except per share amounts | GAAP Three Months Ended September 30, | Adjusted* Three Months Ended September 30, | |||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | ||
Net Sales | $976.7 | $949.3 | 2.9% | n/a | n/a | n/a | |
Gross Profit (Net Sales less Cost of Products Sold) | $303.9 | $367.0 | (17.2)% | $361.3 | $406.4 | (11.1)% | |
(Loss) Income from Operations | $(85.2) | $141.7 | (160.1)% | $142.4 | $189.3 | (24.8)% | |
Diluted EPS | $(0.54) | $0.42 | (228.6)% | $0.66 | $0.74 | (10.8)% | |
Statistics (as a % of Net Sales) | |||||||
Gross Profit (Net Sales less Cost of Products Sold) | 31.1% | 38.7% | 37.0% | 42.8% | |||
(Loss) Income from Operations | (8.7)% | 14.9% | 14.6% | 19.9% | |||
Results under U.S. Generally Accepted Accounting Principles (GAAP) include items as detailed in the schedules attached to this press release.
Net sales for the quarter were $977 million, an increase of 2.9 percent compared to $949 million in the third quarter of 2010, with the increase primarily driven by continued strong U.S. net sales of the oncolytic docetaxel. This was partially offset by the impact of certain quality actions taken in response to a U.S. Food and Drug Administration (FDA) 2010 warning letter and subsequent observations related to the company’s manufacturing facility in Rocky Mount, N.C., and device quality and supply-related issues. On a constant-currency basis, third-quarter net sales increased slightly compared to the third quarter of 2010.
Adjusted* income from operations for the third quarter of 2011 was $142 million compared to $189 million in the third quarter of 2010. The decline is primarily due to charges and costs associated with certain quality actions and related inventory losses.
The effective tax rate on an adjusted basis* in the quarter was 16.9 percent, a decrease from the third-quarter 2010 rate of 24.0 percent. The decrease primarily reflects the revised projections for full-year 2011 adjusted earnings before taxes.
Cash Flow
Cash flow from operations for the first nine months of 2011 was $277 million, compared to the $235 million generated for the same period in 2010. The increase primarily reflects the timing of chargeback and rebate payments, partially offset by higher inventory levels and timing of accounts payable payments.
Capital expenditures were $211 million for the first nine months of 2011, compared to $142 million for the first nine months of 2010. The increase is primarily related to the company’s capacity-expansion initiatives.
2011 Projections
As a result of the lower-than-expected third-quarter results, the company now projects net sales for full-year 2011 to increase approximately 1 to 2 percent on a constant-currency basis. On a reported basis, the company expects full-year 2011 net sales growth of 2 to 3 percent.
As the company announced on Oct. 18, 2011, adjusted* diluted earnings per share for full-year 2011 are expected to range between $2.95 and $3.05.
The reconciliation between the projected 2011 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:
