Hospira Reports Fourth-Quarter and Full-Year 2008 Results

-- Provides Sales and Earnings Projections for 2009 --

LAKE FOREST, Ill., February 17, 2009 /PRNewswire-FirstCall/ -- Hospira, Inc. , a leading global specialty pharmaceutical and medication delivery company, today reported results for the fourth quarter and full year ended Dec. 31, 2008. For the fourth quarter of 2008, net sales were $914 million, and adjusted* diluted earnings per share were $0.78. For the full year of 2008, net sales were $3.6 billion, and adjusted* diluted earnings per share were $2.53. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.)

"Hospira delivered another positive year of performance in 2008, generating solid revenue and strong profit growth, further advancing key areas of our business and successfully completing the integration of the Mayne Pharma acquisition," said Christopher B. Begley, chairman and chief executive officer. "Looking forward, as a diversified healthcare company primarily serving the acute-care market, Hospira is well positioned in 2009. Hospira's underlying businesses remain solid, and we expect another year of growth guided by our focus on execution and operational optimization."

Fourth-Quarter 2008 Results

The following table highlights selected financial results for the fourth quarter of 2008 compared to the same period in 2007:

 


    In $ millions,         GAAP                      Adjusted*
     except per     Three Months Ended          Three Months Ended
     share amounts       Dec. 31,                    Dec. 31,
                     ----------------     %      ----------------     %
                      2008      2007   Change     2008      2007   Change
                     ------    ------  ------    ------    ------  ------
    Net Sales        $913.7    $946.1   (3.4)%     n/a       n/a     n/a
    Gross Profit     $348.6    $338.6    3.0 %   $376.4    $363.7    3.5 %
    Income from
     Operations      $155.7    $114.0   36.6 %   $188.2    $153.6   22.5 %
    Diluted EPS       $0.65     $0.47   38.3 %    $0.78     $0.63   23.8 %

    Statistics (as a % of Net Sales)
    --------------------------------
    Gross Profit       38.2 %    35.8 %            41.2 %    38.4 %
    Operating Income   17.0 %    12.0 %            20.6 %    16.2 %

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

Net sales decreased 3.4 percent to $914 million in the fourth quarter of 2008, compared to $946 million in the fourth quarter of 2007. The decline was primarily driven by three factors: unfavorable foreign currency translation; unusually high U.S. wholesaler purchasing patterns for Specialty Injectable Pharmaceuticals in the fourth quarter of 2007; and decreased demand in Other Pharma from some contract manufacturing customers.

Medication Management Systems (MMS) reported solid sales growth based on continued demand for its newest general infusion system, Symbiq(R).

Adjusted* operating income increased 22.5 percent to $188 million in the fourth quarter of 2008, compared to $154 million in the fourth quarter of 2007. Contributing to the increase was favorable volume/mix, improved manufacturing efficiency and the impact of Selling, General & Administrative (SG&A) cost-containment measures.

Full-Year 2008 Results

The following table highlights selected financial results for the full year 2008 compared to the same period in 2007:

 


    In $ millions,         GAAP                      Adjusted*
     except per         Year Ended                  Year Ended
     share amounts       Dec. 31,                    Dec. 31,
                     ----------------     %      ----------------     %
                      2008      2007   Change     2008      2007   Change
                     ------    ------  ------    ------    ------  ------
    Net Sales      $3,629.5  $3,436.2    5.6 %     n/a       n/a     n/a
    Gross Profit   $1,322.0  $1,173.9   12.6 % $1,426.5  $1,325.1    7.7 %
    Income from
     Operations      $517.8    $302.6   71.1 %   $647.1    $579.6   11.6 %
    Diluted EPS       $1.99     $0.85  134.1 %    $2.53     $2.19   15.5 %

    Statistics (as a % of Net Sales)
    --------------------------------
    Gross Profit       36.4 %    34.2 %            39.3 %    38.6 %
    Operating Income   14.3 %     8.8 %            17.8 %    16.9 %

Net sales increased 5.6 percent to $3.6 billion for the year ended Dec. 31, 2008, compared to $3.4 billion for the prior year. The increase was primarily a result of the impact of new group purchasing organization (GPO) awards; strong demand for the company's MMS product lines; and favorable foreign currency translation.

Adjusted* operating income increased 11.6 percent to $647 million for the full year of 2008, compared to $580 million for the full year of 2007. The increase is primarily a result of favorable volume/mix, improved manufacturing efficiencies and the impact of foreign exchange.

Cash Flow

Cash flow from operations for the full-year 2008 was $584 million, an increase compared to the $551 million generated in 2007.

Capital expenditures were $164 million for the full year, compared to $211 million in 2007. The decline is partly due to lower spending in 2008 than in 2007 related to the company's facilities optimization initiatives, as well as to capital-spending controls the company effected in the second half of 2008.

2009 Projections

Hospira expects net sales growth for full-year 2009 to be approximately 4 to 6 percent on a constant-currency basis. Including the impact of foreign exchange, the company expects net sales to be relatively flat. Adjusted* diluted earnings per share for 2009 are expected to be in the range of $2.62 to $2.72.

The reconciliation between the projected 2009 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:

 

    Diluted earnings per share -- adjusted*                    $2.62 - $2.72
                                                               --------------
    Estimated charges related to planned facilities
     optimization initiatives (mid-point of an estimated
     range of $0.10 to $0.12 per diluted share for 2009)              ($0.11)

    Estimated $53 million for the amortization of
     intangibles related to the Mayne Pharma acquisition              ($0.23)
                                                               --------------
    Diluted earnings per share -- GAAP                         $2.28 - $2.38
                                                               ==============

The company projects that cash flow from operations in 2009 will be in the $565 million to $615 million range. Depreciation and amortization is expected to be between $210 million and $220 million. Capital expenditures are projected to be between $155 million and $175 million.

"Our 2009 guidance aligns with our core strategies to improve margins and cash flow and invest for growth," said Begley. "We have a robust global generic drug pipeline and attractive growth opportunities in generic injectables. With our expanded GPO contracts, we expect to attract additional customers to our broad portfolio of products. We also expect continued momentum with MMS as we advance our technologically enhanced offerings. Through our streamlined, focused management and optimization initiatives, we are well positioned to advance our growth opportunities and drive sustainable long-term growth."

*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 filed with the Securities and Exchange Commission on the date of this press release.

Webcast

Hospira will hold a conference call for investors and media at 8 a.m. Central time on Tuesday, Feb. 17, 2009. A live webcast of the conference call will be available at www.hospirainvestor.com. Listeners should log on approximately 10 minutes in advance to ensure proper computer setup for receiving the webcast. 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 14,000 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 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, 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 is 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           Years Ended
                          December 31,              December 31,
                        ---------------     %     ------------------     %
                         2008     2007    Change    2008      2007     Change
                        ------   ------  -------  --------  --------  -------
    Net sales           $913.7   $946.1   (3.4)%  $3,629.5  $3,436.2    5.6 %
    Cost of products
     sold                565.1    607.5   (7.0)%   2,307.5   2,262.3    2.0 %
                        ------   ------           --------  --------
      Gross Profit       348.6    338.6    3.0 %   1,322.0   1,173.9   12.6 %

    Research and
     development          53.5     53.7   (0.4)%     213.6     201.2    6.2 %
    Acquired
     in-process
     research and
     development            -       3.2 (100.0)%       0.5      88.0  (99.4)%
    Selling,
     general and
     administrative      139.4    167.7  (16.9)%     590.1     582.1    1.4 %
                        ------   ------           --------  --------
      Income From
       Operations        155.7    114.0   36.6 %     517.8     302.6   71.1 %

    Interest expense      29.0     32.0   (9.4)%     116.2     134.5  (13.6)%
    Other expense
     (income), net         0.6     (7.7)(107.8)%      (5.9)    (19.7) (70.1)%
                        ------   ------           --------  --------
      Income Before
       Income Taxes      126.1     89.7   40.6 %     407.5     187.8  117.0 %

    Income tax expense    21.5     13.6   58.1 %      86.6      51.0   69.8 %
                        ------   ------           --------  --------
      Net Income        $104.6    $76.1   37.5 %    $320.9    $136.8  134.6 %
                        ======   ======           ========  ========

    Earnings Per
     Common Share:
      Basic              $0.66    $0.48   37.5 %     $2.02     $0.87  132.2 %
                        ======   ======           ========  ========
      Diluted            $0.65    $0.47   38.3 %     $1.99     $0.85  134.1 %
                        ======   ======           ========  ========

    Weighted Average
     Common Shares
     Outstanding:
      Basic              159.5    157.8    1.1 %     159.2     156.9    1.5 %
                        ======   ======           ========  ========
      Diluted            160.9    160.3    0.4 %     161.3     160.2    0.7 %
                        ======   ======           ========  ========



                                Hospira, Inc.
        Reconciliation of Condensed Consolidated Statements of Income
                                 (Unaudited)
          (dollars and shares in millions, except per share amounts)

                                 Three Months Ended December 31,
                      -------------------------------------------------------
                                2008                         2007
                      --------------------------   --------------------------
                       GAAP  Adjustments Adjusted   GAAP  Adjustments Adjusted
                      ------    ------    ------   ------    ------    ------

    Net sales         $913.7     $ -      $913.7   $946.1     $ -      $946.1
    Cost of
     products sold     565.1     (27.8)A   537.3    607.5     (25.1)E   582.4
                      ------    ------    ------   ------    ------    ------
       Gross Profit    348.6      27.8     376.4    338.6      25.1     363.7

    Research and
     development        53.5      (0.5)B    53.0     53.7      (0.3)C    53.4
    Acquired
     in-process
     research and
     development         -         -         -        3.2      (3.2)G     -
    Selling,
     general and
     administrative    139.4      (4.2)C   135.2    167.7     (11.0)C   156.7
                      ------    ------    ------   ------    ------    ------
       Income From
        Operations     155.7      32.5     188.2    114.0      39.6     153.6

    Interest expense    29.0       -        29.0     32.0       1.4 F    33.4
    Other expense
     (income), net       0.6       -         0.6     (7.7)      -        (7.7)
                      ------    ------    ------   ------    ------    ------
       Income Before
        Income Taxes   126.1      32.5     158.6     89.7      38.2     127.9

    Income tax
     expense            21.5      10.8 D    32.3     13.6      14.0 D    27.6
                      ------    ------    ------   ------    ------    ------
       Net Income     $104.6     $21.7    $126.3    $76.1     $24.2    $100.3
                      ======    ======    ======   ======    ======    ======

    Earnings Per
     Common Share:
      Basic            $0.66     $0.13     $0.79    $0.48     $0.16     $0.64
                      ======    ======    ======   ======    ======    ======
      Diluted          $0.65     $0.13     $0.78    $0.47     $0.16     $0.63
                      ======    ======    ======   ======    ======    ======

    Weighted Average
     Common Shares
     Outstanding:
      Basic            159.5     159.5     159.5    157.8     157.8     157.8
                      ======    ======    ======   ======    ======    ======
      Diluted          160.9     160.9     160.9    160.3     160.3     160.3
                      ======    ======    ======   ======    ======    ======


    Statistics
     (as a % of
     Net Sales,
     except for
     income tax rate)
    -----------------

    Gross Profit        38.2%               41.2%    35.8%               38.4%
    R&D                  5.9%                5.8%     5.7%                5.6%
    SG&A                15.3%               14.8%    17.7%               16.6%
    Income From
     Operations         17.0%               20.6%    12.0%               16.2%
    Income Before
     Income Taxes       13.8%               17.4%     9.5%               13.5%
    Net Income          11.4%               13.8%     8.0%               10.6%
    Income Tax Rate     17.1%               20.4%    15.2%               21.5%


                                                    % Change vs. Prior Year
                                                    -----------------------
                                                      GAAP         Adjusted
                                                    -------        --------

    Net sales                                        (3.4)%          (3.4)%
    Cost of products sold                            (7.0)%          (7.7)%
         Gross Profit                                 3.0 %           3.5 %

    Research and development                         (0.4)%          (0.7)%
    Acquired in-process research and
     development                                   (100.0)%            nm
    Selling, general and administrative             (16.9)%         (13.7)%
         Income From Operations                      36.6 %          22.5 %

    Interest expense                                 (9.4)%         (13.2)%
    Other expense (income), net                    (107.8)%        (107.8)%
         Income Before Income Taxes                  40.6 %          24.0 %

    Income tax expense                               58.1 %          17.0 %
         Net Income                                  37.5 %          25.9 %

    Earnings Per Common Share:
      Basic                                          37.5 %          23.4 %
      Diluted                                        38.3 %          23.8 %

    Weighted Average Common Shares Outstanding:
      Basic                                           1.1 %           1.1 %
      Diluted                                         0.4 %           0.4 %


    A -- Includes intangible assets amortization of $16.0 related to the Mayne
         Pharma acquisition; charges of $9.0 related to the planned closures
         of the Ashland, OH; Montreal, Canada; North Chicago, IL; and Morgan
         Hill, CA facilities as part of Hospira's facilities optimization
         initiatives; and Mayne Pharma integration and other acquisition-
         related charges of $2.8.
    B -- Facilities optimization initiatives.
    C -- Mayne Pharma integration and other acquisition-related charges.
    D -- Reflects the tax effect of the above adjustments.
    E -- Includes intangible assets amortization of $12.6 related to the Mayne
         Pharma acquisition; charges of $4.1 related to the planned closures
         of the Donegal, Ireland; Ashland, OH; Montreal, Canada; and North
         Chicago, IL facilities as part of Hospira's facilities optimization
         initiatives; Mayne Pharma integration charges of $0.9; and intangible
         asset impairment of $7.5 related to a non-strategic device product.
    F -- Other acquisition-related (charge) refund: refund of bridge loan fees
         incurred as a result of the Mayne Pharma acquisition expensed upon
         refinancing of loan during the first quarter of 2007.
    G -- Acquired in-process research and development.

    nm = Percent change is not meaningful.



                                Hospira, Inc.
        Reconciliation of Condensed Consolidated Statements of Income
                                 (Unaudited)
          (dollars and shares in millions, except per share amounts)

                                     Years Ended December 31,
                    ---------------------------------------------------------
                                2008                         2007
                    ----------------------------  ---------------------------
                      GAAP  Adjustments  Adjusted  GAAP  Adjustments  Adjusted
                    --------   -----     -------  -------   ------    -------

    Net sales       $3,629.5   $ -      $3,629.5 $3,436.2    $ -     $3,436.2
    Cost of
     products sold   2,307.5  (104.5)A   2,203.0  2,262.3   (151.2)F  2,111.1
                    --------   -----     -------  -------   ------    -------
       Gross Profit  1,322.0   104.5     1,426.5  1,173.9    151.2    1,325.1

    Research and
     development       213.6    (3.3)B     210.3    201.2     (1.6)D    199.6
    Acquired
     in-process
     research and
     development         0.5    (0.5)C       -       88.0    (88.0)C      -
    Selling,
     general and
     administrative    590.1   (21.0)D     569.1    582.1    (36.2)D    545.9
                    --------   -----     -------  -------   ------    -------
       Income From
        Operations     517.8   129.3       647.1    302.6    277.0      579.6

    Interest expense   116.2     -         116.2    134.5     (0.8)G    133.7
    Other expense
     (income), net      (5.9)    -          (5.9)   (19.7)    (5.7)H    (25.4)
                    --------   -----     -------  -------   ------    -------
       Income Before
        Income Taxes   407.5   129.3       536.8    187.8    283.5      471.3

    Income tax
     expense            86.6    42.1 E     128.7     51.0     69.3 E    120.3
                    --------   -----     -------  -------   ------    -------
       Net Income     $320.9   $87.2      $408.1   $136.8   $214.2     $351.0
                    ========   =====     =======  =======   ======    =======

    Earnings Per
     Common Share:
      Basic            $2.02   $0.54       $2.56    $0.87    $1.37      $2.24
                    ========   =====     =======  =======   ======    =======
      Diluted          $1.99   $0.54       $2.53    $0.85    $1.34      $2.19
                    ========   =====     =======  =======   ======    =======

    Weighted Average
     Common Shares
     Outstanding:
      Basic            159.2   159.2       159.2    156.9    156.9      156.9
                    ========   =====     =======  =======   ======    =======
      Diluted          161.3   161.3       161.3    160.2    160.2      160.2
                    ========   =====     =======  =======   ======    =======


    Statistics
     (as a % of
     Net Sales,
     except for
     income tax rate)
    -----------------

    Gross Profit        36.4%                39.3%    34.2%              38.6%
    R&D                  5.9%                 5.8%     5.9%               5.8%
    SG&A                16.3%                15.7%    16.9%              15.9%
    Income From
     Operations         14.3%                17.8%     8.8%              16.9%
    Income Before
     Income Taxes       11.2%                14.8%     5.5%              13.7%
    Net Income           8.8%                11.2%     4.0%              10.2%
    Income Tax Rate     21.3%                24.0%    27.2%              25.5%


                                                    % Change vs. Prior Year
                                                    -----------------------
                                                      GAAP         Adjusted
                                                    -------        --------

    Net sales                                         5.6 %           5.6 %
    Cost of products sold                             2.0 %           4.4 %
         Gross Profit                                12.6 %           7.7 %

    Research and development                          6.2 %           5.4 %
    Acquired in-process research and
     development                                    (99.4)%            nm
    Selling, general and administrative               1.4 %           4.2 %
         Income From Operations                      71.1 %          11.6 %

    Interest expense                                (13.6)%         (13.1)%
    Other expense (income), net                     (70.1)%         (76.8)%
         Income Before Income Taxes                 117.0 %          13.9 %

    Income tax expense                               69.8 %           7.0 %
         Net Income                                 134.6 %          16.3 %

    Earnings Per Common Share:
      Basic                                         132.2 %          14.3 %
      Diluted                                       134.1 %          15.5 %

    Weighted Average Common Shares Outstanding:
      Basic                                           1.5 %           1.5 %
      Diluted                                         0.7 %           0.7 %


    A -- Includes intangible assets amortization of $62.8 related to the Mayne
         Pharma acquisition; charges of $35.6 related to the planned closures
         of the Ashland, OH; Montreal, Canada; North Chicago, IL; and Morgan
         Hill, CA facilities as part of Hospira's facilities optimization
         initiatives; a gain on the sale of the Montreal, Canada manufacturing
         plant ($2.5); and Mayne Pharma integration and other acquisition-
         related charges of $8.6.
    B -- Includes Mayne Pharma integration and other acquisition-related
         charges of $1.0 and facilities optimization initiatives of $2.3.
    C -- Acquired in-process research and development.
    D -- Mayne Pharma integration and other acquisition-related charges.
    E -- Reflects the tax effect of the above adjustments.
    F -- Includes inventory step-up charge of $53.1 and intangible assets
         amortization of $47.6 related to the Mayne Pharma acquisition;
         charges of $37.6 related to the planned closures of the Donegal,
         Ireland; Ashland, OH; Montreal, Canada; and North Chicago, IL
         facilities as part of Hospira's facilities optimization initiatives;
         a reduction of the obligation associated with the sale of the Salt
         Lake City, UT manufacturing plant to ICU Medical ($1.6); Mayne Pharma
         integration charges of $7.0; and intangible asset impairment of
         $7.5 related to a non-strategic device product.
    G -- Other acquisition-related charge: $2.2 of bridge loan fees incurred
         as a result of the Mayne Pharma acquisition expensed upon refinancing
         of loan during the first quarter of 2007 net of a refund of $1.4
         received in the fourth quarter of 2007.
    H -- Other acquisition-related charge: foreign exchange losses related to
         the Mayne Pharma acquisition.

    nm = Percent change is not meaningful.



                                Hospira, Inc.
                 Reconciliation of Diluted Earnings Per Share
                                 (Unaudited)

                               Three Months Ended           Years Ended
                                  December 31,              December 31,
                              -------------------       --------------------
                               2008         2007         2008          2007
                              ------       ------       ------        ------
    Diluted Earnings Per
     Share - GAAP              $0.65        $0.47        $1.99         $0.85

    Adjustments:

       Mayne Pharma acquisition
        related:

         Acquired in-process
          research and
          development            -            -            -            0.53

         Inventory step-up
          charge                 -            -            -            0.23

         Integration and
          other acquisition-
          related charges       0.02         0.04         0.12          0.21

         Intangible assets
          amortization          0.06         0.06         0.27          0.20

       Charges related to
        facilities optimization
        initiatives             0.04         0.02         0.15          0.14

       Intangible asset
        impairment related to
        a non-strategic device
        product                  -           0.03          -            0.03

       Acquired in-process
        research and
        development related to
        product acquisition      -           0.01          -            0.01

       Integration and other
        acquisition-related
        charges                 0.01          -           0.01           -

       Gain on the sale of the
        Montreal, Canada
        manufacturing plant      -            -          (0.01)          -

       Reduction of obligation
        associated with the
        sale of the Salt Lake
        City, UT manufacturing
        plant                    -            -            -           (0.01)
                              ------       ------       ------        ------

       Subtotal of Adjustments  0.13         0.16         0.54          1.34

    Diluted Earnings Per
     Share - Adjusted          $0.78        $0.63        $2.53         $2.19
                              ======       ======       ======        ======



                                Hospira, Inc.
                    Condensed Consolidated Balance Sheets
                                 (Unaudited)
                            (dollars in millions)

                                                  December 31,    December 31,
                               Assets                 2008            2007
                                                    --------        --------
    Current Assets:
      Cash and cash equivalents                       $483.8          $241.1
      Trade receivables, less allowances of
       $6.7 in 2008 and $14.1 in 2007                  583.4           559.0
      Inventories                                      830.5           766.6
      Deferred income taxes                            172.2           176.7
      Prepaid expenses                                  35.7            23.8
      Other receivables                                 43.7            73.8
                                                    --------        --------
         Total Current Assets                        2,149.3         1,841.0
                                                    --------        --------
    Property and equipment, net                      1,192.1         1,276.9
    Intangible assets, net                             404.4           554.0
    Goodwill                                         1,167.4         1,240.9
    Deferred income taxes                               70.1            79.4
    Investments                                         37.6            23.7
    Other assets                                        53.2            68.8
                                                    --------        --------
         Total Assets                               $5,074.1        $5,084.7
                                                    ========        ========

           Liabilities and Shareholders' Equity
    Current Liabilities:
      Short-term borrowings                           $338.3           $58.5
      Trade accounts payable                           231.5           190.3
      Salaries, wages and commissions                  144.7           143.6
      Deferred income taxes                              1.5             8.4
      Other accrued liabilities                        331.5           393.5
                                                    --------        --------
         Total Current Liabilities                   1,047.5           794.3
                                                    --------        --------
    Long-term debt                                   1,834.0         2,184.4
    Deferred income taxes                               25.2            50.7
    Post-retirement obligations and other
     long-term liabilities                             391.0           310.1
    Commitments and Contingencies
                                                    --------        --------
    Total Shareholders' Equity                       1,776.4         1,745.2
                                                    --------        --------
    Total Liabilities and Shareholders' Equity      $5,074.1        $5,084.7
                                                    ========        ========



                                Hospira, Inc.
               Condensed Consolidated Statements of Cash Flows
                                 (Unaudited)
                            (dollars in millions)

                                                     Years Ended December 31,
                                                     ------------------------
                                                       2008            2007
                                                     --------        --------
    Cash Flow From Operating Activities:

      Net income                                      $320.9          $136.8
      Adjustments to reconcile net income to net
       cash from operating activities --
        Depreciation                                   183.2           183.0
        Amortization of intangibles                     68.7            52.1
        Write-off of acquired in-process research
         and development                                 0.5            88.0
        Step-up value of acquired inventories sold       -              53.1
        Stock-based compensation expense                42.0            39.4
        Impairment of long-lived assets                  -               7.5
        Net gains on sales of assets                    (3.0)           (5.0)
      Changes in assets and liabilities --
        Trade receivables                              (55.4)          (47.6)
        Inventories                                   (117.9)           34.4
        Prepaid expenses and other assets               12.9            17.7
        Trade accounts payable                          49.5            11.5
        Other liabilities                               52.9           (40.3)
      Other, net                                        29.8            20.5
                                                     --------        --------
        Net Cash Provided by Operating Activities      584.1           551.1
                                                     --------        --------

    Cash Flow From Investing Activities:

      Capital expenditures (including instruments
       placed with or leased to customers)            (164.3)         (210.5)
      Acquisitions, net of cash acquired, including
       payments for deferred consideration             (26.1)       (1,980.5)
      Purchases of intangibles and other investments   (50.8)           (5.5)
      (Purchases) Sales of marketable securities       (24.5)           10.4
      Settlements of foreign currency contracts          -             (55.7)
      Proceeds from dispositions of product rights       -              13.8
      Proceeds from disposal of facilities               0.8             -
                                                     --------        --------
        Net Cash Used in Investing Activities         (264.9)       (2,228.0)
                                                     --------        --------

    Cash Flow From Financing Activities:

      Issuance of long-term debt, net of fees paid       -           3,336.2
      Repayment of long-term debt                      (95.2)       (1,825.2)
      Other borrowings, net                              6.3            (6.2)
      Excess tax benefit from stock-based
       compensation arrangements                         1.0             2.3
      Proceeds from stock options exercised             27.8            73.1
                                                     --------        --------
        Net Cash (Used in) Provided by Financing
         Activities                                    (60.1)        1,580.2
                                                     --------        --------

    Effect of exchange rate changes on cash
     and cash equivalents                              (16.4)           15.8
                                                     --------        --------

    Net change in cash and cash equivalents            242.7           (80.9)
    Cash and cash equivalents at beginning of year     241.1           322.0
                                                     --------        --------
    Cash and cash equivalents at end of year          $483.8          $241.1
                                                     ========        ========

    Supplemental Cash Flow Information:

    Cash paid during the year --
       Interest                                       $120.8          $127.4
       Income taxes, net of refunds                    $14.9           $72.4



                                Hospira, Inc.
                          Net Sales by Product Line
                                 (Unaudited)
                            (dollars in millions)

                                         Three Months Ended December 31,
                                    ----------------------------------------
                                                        % Change    % Change
                                                        at Actual  at Constant
                                      2008      2007      Rates       Rates
                                    --------  --------   -------     -------
    Americas --
    Pharmaceuticals
       Specialty Injectables          $347.2    $349.7    (0.7)%       1.3 %
       Other Pharma                    147.6     155.6    (5.1)%      (2.4)%
                                    --------  --------
                                       494.8     505.3    (2.1)%       0.1 %
    Devices
       Medication Management Systems   140.6     129.1     8.9 %      12.4 %
       Other Devices                    85.8      94.1    (8.8)%      (6.6)%
                                    --------  --------
                                       226.4     223.2     1.4 %       4.3 %
    Total Americas                     721.2     728.5    (1.0)%       1.4 %

    Europe, Middle East & Africa --
    Pharmaceuticals
       Specialty Injectables            63.2      71.1   (11.1)%       0.3 %
       Other Pharma                     31.9      51.0   (37.5)%     (25.8)%
                                    --------  --------
                                        95.1     122.1   (22.1)%     (10.6)%
    Devices
       Medication Management Systems    16.7      16.6     0.6 %      11.6 %
       Other Devices                    16.0      16.9    (5.3)%       5.6 %
                                    --------  --------
                                        32.7      33.5    (2.4)%       8.5 %
    Total Europe, Middle East &
     Africa                            127.8     155.6   (17.9)%      (6.5)%

    Asia Pacific --
    Pharmaceuticals
       Specialty Injectables            50.1      47.3     5.9 %      27.7 %
       Other Pharma                      3.1       3.3    (6.1)%      21.2 %
                                    --------  --------
                                        53.2      50.6     5.1 %      27.2 %
    Devices
       Medication Management Systems     4.4       4.4     0.0 %      11.9 %
       Other Devices                     7.1       7.0     1.4 %       5.7 %
                                    --------  --------
                                        11.5      11.4     0.9 %       8.1 %
    Total Asia Pacific                  64.7      62.0     4.4 %      23.8 %
                                    --------  --------
    Net Sales                         $913.7    $946.1    (3.4)%       1.6 %
                                    ========  ========



                                            Years Ended December 31,
                                    ----------------------------------------
                                                        % Change    % Change
                                                        at Actual  at Constant
                                      2008      2007      Rates       Rates
                                    --------  --------   -------     -------
    Americas --
    Pharmaceuticals
       Specialty Injectables        $1,328.9  $1,240.9     7.1 %       7.1 %
       Other Pharma                    522.0     549.2    (5.0)%      (4.7)%
                                    --------  --------
                                     1,850.9   1,790.1     3.4 %       3.5 %
    Devices
       Medication Management Systems   558.9     501.3    11.5 %      11.4 %
       Other Devices                   368.5     367.5     0.3 %       0.1 %
                                    --------  --------
                                       927.4     868.8     6.7 %       6.6 %
    Total Americas                   2,778.3   2,658.9     4.5 %       4.5 %

    Europe, Middle East & Africa --
    Pharmaceuticals
       Specialty Injectables           287.4     255.4    12.5 %       8.0 %
       Other Pharma                    152.1     162.3    (6.3)%      (8.1)%
                                    --------  --------
                                       439.5     417.7     5.2 %       1.8 %
    Devices
       Medication Management Systems    75.9      66.4    14.3 %       7.6 %
       Other Devices                    68.4      68.0     0.6 %      (4.6)%
                                    --------  --------
                                       144.3     134.4     7.4 %       1.4 %
    Total Europe, Middle East &
     Africa                            583.8     552.1     5.7 %       1.6 %

    Asia Pacific --
    Pharmaceuticals
       Specialty Injectables           205.4     168.9    21.6 %      19.6 %
       Other Pharma                     15.2      14.1     7.8 %       4.8 %
                                    --------  --------
                                       220.6     183.0    20.5 %      18.4 %
    Devices
       Medication Management Systems    19.9      16.7    19.2 %      15.5 %
       Other Devices                    26.9      25.5     5.5 %      (0.7)%
                                    --------  --------
                                        46.8      42.2    10.9 %       5.7 %
    Total Asia Pacific                 267.4     225.2    18.7 %      16.1 %
                                    --------  --------
    Net Sales                       $3,629.5  $3,436.2     5.6 %       4.8 %
                                    ========  ========

    Notes:
    Specialty Injectables include generic injectables and proprietary
    specialty injectables. Other Pharmaceuticals include large volume IV
    solutions, nutritionals and contract manufacturing services (including
    former "Sales to Abbott"). Medication Management Systems include infusion
    pumps, related software, services and administration sets. Other Devices
    include gravity administration sets, critical care products, and other
    device products.

    Net sales for the years ended December 31, 2008 and 2007, include twelve
    and eleven months, respectively, of Mayne Pharma net sales.



                                Hospira, Inc.
                             Segment Information
                                 (Unaudited)
                            (dollars in millions)

                                Three Months Ended December 31,
                   ----------------------------------------------------------
                        Net Sales             Income from Operations
                   -----------------            ------------------
                                         %                               %
                    2008       2007    Change    2008        2007      Change
                   ------     ------   ------   ------      ------     ------

    Americas       $721.2     $728.5   (1.0)%   $172.0 A    $142.4 A   20.8 %
    Europe,
     Middle East
     & Africa       127.8      155.6  (17.9)%      2.1 B      (0.4)B  625.0 %
    Asia Pacific     64.7       62.0    4.4 %      9.4 C       4.9 C   91.8 %
                   ------     ------            ------      ------

    Total
     reportable
     segments      $913.7     $946.1   (3.4)%    183.5       146.9     24.9 %
                   ======     ======

    Corporate
     functions                                   (19.0)D     (25.1)D  (24.3)%
    Stock-based
     compensation                                 (8.8)       (7.8)    12.8 %
                                                ------      ------
    Income from
     operations                                  155.7       114.0     36.6 %
    Interest
     expense and
     other income,
     net                                         (29.6)E     (24.3)E   21.8 %
                                                ------      ------
    Income before
     income taxes                               $126.1       $89.7     40.6 %
                                                ======      ======


    Included in the reported Income before
    income taxes above, are the following charges:

    A -- Americas
      Mayne Pharma acquisition related:
        Acquired in-process research and
         development                             $ -         $ -
        Inventories step-up charge                 -           -
        Integration and other acquisition-
         related charges                           1.5         1.8
        Intangible assets amortization             4.2         2.0
      Charges related to facilities
       optimization initiatives                    9.5         3.5
      Intangible asset impairment related
       to a non-strategic device product           -           7.5
      Integration and other acquisition-
       related charges                             0.1         -
      Acquired in-process research and
       development                                 -           -
      Gain on the sale of the Montreal,
       Canada manufacturing plant                  -           -
      Reduction of obligation associated with
       the sale of the Salt Lake City, UT
       manufacturing plant                         -           -
                                                ------      ------
    Total Americas                                15.3        14.8

    B -- Europe, Middle East & Africa
      Mayne Pharma acquisition related:
        Acquired in-process research and
         development                               -           -
        Inventories step-up charge                 -           -
        Integration and other acquisition-
         related charges                           0.5         4.3
        Intangible assets amortization             8.1         5.8
      Charges related to facilities
       optimization initiatives                    -           0.6
      Acquired in-process research and
       development                                 -           3.2
                                                ------      ------
    Total Europe, Middle East & Africa             8.6        13.9

    C -- Asia Pacific
      Mayne Pharma acquisition related:
        Inventories step-up charge                 -           -
        Integration and other acquisition-
         related charges                           1.6         1.7
        Intangible assets amortization             3.7         4.8
      Integration and other acquisition-
       related charges                             0.2         -
                                                ------      ------
    Total Asia Pacific                             5.5         6.5

    D -- Corporate functions
      Integration and other acquisition-
       related charges                             3.1         4.4
                                                ------      ------
    Total Corporate functions                      3.1         4.4

    E -- Interest expense and other
      income, net
      Integration and other acquisition-
       related charges, net of refund              -          (1.4)
                                                ------      ------
    Total Interest expense and other
     income, net                                   -          (1.4)
                                                ------      ------
    Total                                        $32.5       $38.2
                                                ======      ======



                                Hospira, Inc.
                             Segment Information
                                 (Unaudited)
                            (dollars in millions)

                                    Years Ended December 31,
                   ----------------------------------------------------------
                        Net Sales             Income from Operations
                   -------------------          ------------------
                                          %                              %
                     2008       2007    Change   2008        2007      Change
                   --------   --------  ------  ------      ------     ------

    Americas       $2,778.3   $2,658.9   4.5 %  $598.0 A    $445.3 A   34.3 %
    Europe,
     Middle East
     & Africa         583.8      552.1   5.7 %    12.8 B     (16.6)B  177.1 %
    Asia Pacific      267.4      225.2  18.7 %    23.0 C      (4.2)C  647.6 %
                   --------   --------          ------      ------

    Total
     reportable
     segments      $3,629.5   $3,436.2   5.6 %   633.8       424.5     49.3 %
                   ========   ========

    Corporate
     functions                                   (74.0)D     (82.5)D  (10.3)%
    Stock-based
     compensation                                (42.0)      (39.4)     6.6 %
                                                ------      ------
    Income from
     operations                                  517.8       302.6     71.1 %
    Interest
     expense and
     other income,
     net                                        (110.3)E    (114.8)E   (3.9)%

                                                ------      ------
    Income before
     income taxes                               $407.5      $187.8    117.0 %
                                                ======      ======


    Included in the reported Income before
     income taxes above, are the following charges:

    A -- Americas
      Mayne Pharma acquisition related:
        Acquired in-process research and
         development                             $ -         $66.2
        Inventories step-up charge                 -          10.0
        Integration and other acquisition-
         related charges                           3.6        14.8
        Intangible assets amortization            19.2         9.4
      Charges related to facilities
       optimization initiatives                   37.9        35.7
      Intangible asset impairment related
       to a non-strategic device product           -           7.5
      Integration and other acquisition-
       related charges                             0.1         -
      Acquired in-process research and
       development                                 0.5         -
      Gain on the sale of the Montreal,
       Canada manufacturing plant                 (2.5)        -
      Reduction of obligation associated with
       the sale of the Salt Lake City, UT
       manufacturing plant                         -          (1.6)
                                                ------      ------
    Total Americas                                58.8       142.0

    B -- Europe, Middle East & Africa
      Mayne Pharma acquisition related:
        Acquired in-process research and
         development                               -          18.6
        Inventories step-up charge                 -          18.0
        Integration and other acquisition-
         related charges                          10.6         6.4
        Intangible assets amortization            25.8        21.5
      Charges related to facilities
       optimization initiatives                    -           1.9
      Acquired in-process research
       and development                             -           3.2
                                                ------      ------
    Total Europe, Middle East & Africa            36.4        69.6

    C -- Asia Pacific
      Mayne Pharma acquisition related:
        Inventories step-up charge                 -          25.1
        Integration and other acquisition-
         related charges                           7.1         3.6
        Intangible assets amortization            17.8        16.7
      Integration and other acquisition-
       related charges                             1.4         0.6
                                                ------      ------
    Total Asia Pacific                            26.3        46.0

    D -- Corporate functions
      Integration and other acquisition-
       related charges                             7.8        19.4
                                                ------      ------
    Total Corporate functions                      7.8        19.4

    E -- Interest expense and other
      income, net
      Integration and other acquisition-
       related charges, net of refund              -           6.5
                                                ------      ------
    Total Interest expense and other
     income, net                                   -           6.5
                                                ------      ------
    Total                                       $129.3      $283.5
                                                ======      ======

CONTACT: Media, Stacey Eisen, +1-224-212-2276, or Tareta Adams,+1-224-212-2535, or Financial Community, Karen King, +1-224-212-2711, allof Hospira, Inc.

Web site: http://www.hospira.com/

Ticker Symbol: (NYSE:HSP)

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A United Business Media Company

Posted: February 2009


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