Hospira Reports Second-Quarter 2011 Results

-- Increases 2011 sales projections; maintains adjusted* earnings projections --

 

 

 

 

LAKE FOREST, Ill., July 27, 2011 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), a leading global specialty pharmaceutical and medication delivery company, today reported results for the second quarter ended June 30, 2011. Net sales for the quarter were $1.1 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 delivered strong second-quarter performance, driven primarily by positive results for the oncolytic docetaxel in the United States," said F. Michael Ball, chief executive officer. "We continued to advance the business and make progress on our quality and product supply improvement initiatives. In part due to the quarter's results, we are increasing our sales projections for the year, and remain focused on driving value for our customers, patients and shareholders."

Second-Quarter 2011 Results

The following table highlights selected financial results for the second quarter of 2011 compared to the same period in 2010:


 
 

In $ millions,

except per share

amounts

GAAP

Three Months Ended

June 30,


 

Adjusted*

Three Months Ended

June 30,


 
 

 

2011

2010

%

Change

2011

2010

%

Change

 

Net Sales

$1,064.1

$968.2

9.9%

n/a

n/a

n/a

 

Gross Profit (Net Sales less

Cost of Products Sold)

$413.4

$369.2

12.0%

$433.4

$416.8

4.0%

 

Income from Operations

$190.5

$116.3

63.8%

$212.0

$213.1

(0.5)%

 

Diluted EPS

$0.85

$0.49

73.5%

$0.94

$0.86

9.3%

 

Statistics (as a % of Net Sales)

 

Gross Profit (Net Sales less

Cost of Products Sold)

38.8%

38.1%


 

40.7%

43.0%


 
 

Income from Operations

17.9%

12.0%


 

19.9%

22.0%


 
 

 
 
               


 

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

Net sales increased 9.9 percent to $1.1 billion in the second quarter of 2011, compared to $968 million in the second quarter of 2010. Driving the quarter's performance was strong sales in Specialty Injectable Pharmaceuticals, primarily driven by U.S. sales of the oncolytic docetaxel, as well as by contribution from several other newer compounds.

Adjusted* income from operations decreased 0.5 percent to $212 million in the second quarter of 2011, compared to $213 million in the second quarter of 2010. The decrease is primarily due to a difficult year-over-year comparison driven by strong margin contribution from U.S. sales of oncolytic oxaliplatin in the second quarter of 2010, as well as the 2011 impact of the joint-venture arrangement related to the production of docetaxel, which tempered the margin contribution of U.S. docetaxel sales.

The effective tax rate on an adjusted basis* in the quarter was 23.0 percent, a slight decrease from the second-quarter 2010 rate of 23.8 percent.

Cash Flow

Cash flow from operations for the first six months of 2011 was $253 million, compared to the $144 million generated for the same period in 2010. The increase primarily reflects the timing of rebate and chargeback payments, partially offset by higher inventory levels.

Capital expenditures were $139 million for the first six months of 2011, compared to $79 million for the first six months of 2010. The increase is related to the company's capacity expansion and information technology (IT) initiatives.

During the second quarter, Hospira entered into accelerated share repurchase (ASR) agreements under its $1 billion share repurchase authorization. Under the agreements, which the company completed in July 2011, the company repurchased 3.7 million shares of common stock for a total of $200 million.

2011 Projections

Hospira is now projecting full-year net sales growth of approximately 7 to 9 percent on a constant-currency basis, with foreign exchange now expected to contribute an additional 2 percent.

The company anticipates that the projected higher sales growth will be offset by lower than originally anticipated gross margin performance. As a result, Hospira is maintaining its adjusted* diluted earnings per share projection for full-year 2011, which is expected to range between $3.90 and $4.00 per share, representing year-over-year growth of 18 to 21 percent.

The reconciliation between the projected 2011 adjusted* diluted earnings per share and GAAP diluted earnings per share follows:

Diluted earnings per share -- adjusted*

                                                                     $3.90 - $4.00

 

 

 
 

Charges related to Project Fuel initiatives

($0.04)

 

 

 
 

Charges related to facilities optimization initiatives

($0.01)

 

 

 
 

Charges related to certain Latin America


 
 

distributor operations

($0.03)

 

 

 
 

Tax benefit from the first-quarter 2011 settlement


 
 

of a U.S. income tax audit

$0.12

 

 

 
 

Estimated $81 million for the amortization and impairment


 
 

of intangible assets related to certain acquisitions

($0.33)

 

 

 
 

Diluted earnings per share -- GAAP

$3.61 - $3.71

 
     


 

The adjusting items are shown net of tax in aggregate of $32 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 is maintaining its guidance for cash flow from operations, depreciation and amortization and capital expenditures. Cash flow from operations is projected to range between $650 million and $700 million. Depreciation and amortization is projected to range between $230 million to $250 million, and capital expenditures are projected to range between $375 million and $400 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 27, 2011. A simultaneous webcast of the conference call will be available on Hospira's website 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 website at the beginning of the conference call. A replay will be available on the website 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 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, cash flow 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.

Hospira, Inc.

 

Condensed Consolidated Statements of Income

 

(Unaudited)

 

(dollars and shares in millions, except for per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

Three Months Ended June 30,


 

 

% Change


 
 

 

 

 

 

 

 

2011


 

2010


 

 

 

 
 

Net sales


 

 

 

 

$           1,064.1


 

$               968.2


 

 

9.9%


 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Cost of products sold


 

 

 

      650.7


 

   599.0


 

 

8.6%


 
 

Restructuring, impairment and (gain) on disposition of assets, net

          1.5


 

       2.6


 

 

(42.3)%


 
 

Research and development


 

 

 

        65.8


 

     80.4


 

 

(18.2)%


 
 

Selling, general and administrative


 

 

 

      155.6


 

   169.9


 

 

(8.4)%


 
 

   Total operating costs and expenses


 

 

 

      873.6


 

   851.9


 

 

2.5%


 
 

         Income From Operations


 

 

 

      190.5


 

   116.3


 

 

63.8%


 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Interest expense


 

 

 

        23.9


 

     24.2


 

 

(1.2)%


 
 

Other income, net


 

 

 

        (2.0)


 

     (0.3)


 

 

566.7%


 
 

         Income Before Income Taxes


 

 

 

      168.6


 

     92.4


 

 

82.5%


 
 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Income tax expense


 

 

 

        36.7


 

       9.4


 

 

Posted: July 2011


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