HOSPIRA, INC. LAKE FOREST, Ill., Feb. 12, 2015 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), the world's leading provider of injectable drugs and infusion technologies, and a global leader in biosimilars, today reported results for the fourth quarter and full year ended Dec. 31, 2014. For the fourth quarter of 2014, net sales were $1.1 billion, and adjusted* diluted earnings per share were $0.53. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.) On a U.S. Generally Accepted Accounting Principles (GAAP) basis, fourth-quarter 2014 diluted earnings per share were $0.21. For full-year 2014, net sales were $4.5 billion, and adjusted* diluted earnings per share were $2.59. On a GAAP basis, full-year 2014 diluted earnings per share were $1.95.
"Hospira's solid fourth-quarter results contributed to a year of excellent growth for the company," said F. Michael Ball, chief executive officer. "Despite the entry of generic competition in the United States for our proprietary sedative Precedex(TM), we delivered a very good year for Hospira. Our results speak to the significant progress we made -- as well as the multiple milestones we achieved -- in our key growth areas of generic injectables, biosimilars and devices.
"In addition," Ball continued, "on Feb. 5, 2015, Pfizer and Hospira announced that the two companies have entered into a definitive merger agreement under which Pfizer will acquire Hospira for $90 a share in cash for a total enterprise value of approximately $17 billion. The Pfizer-Hospira combination is an excellent strategic fit, presenting a unique opportunity to leverage the complementary strengths of our robust portfolios and rich pipelines."
The transaction, which is subject to customary closing conditions, including regulatory approvals in several jurisdictions and approval of Hospira's shareholders, is expected to close in the second half of 2015.
Fourth-Quarter 2014 Results
The following table highlights selected financial results for the fourth quarter of 2014 compared to the same period in 2013:
In $
millions,
except per
share
amounts GAAP Adjusted*
Three Months Ended Three Months Ended
Dec. 31, Dec. 31,
% Change % Change
--- --- --- --------
2014 2013 2014 2013
---- ---- ---- ----
Net Sales $1,126.5 $1,084.4 3.9% $1,126.5 $1,084.4 3.9%
--------- -------- -------- --- -------- -------- ---
Gross Profit
(Net Sales
less Cost of
Products
Sold) $385.6 $321.6 19.9% $439.1 $398.2 10.3%
------------- ------ ------ ---- ------ ------ ----
Income from
Operations $39.7 $53.2 (25.4)% $121.4 $128.8 (5.7)%
----------- ----- ----- ------ ------ ------ -----
Diluted
Earnings per
Share $0.21 $0.20 5.0% $0.53 $0.51 3.9%
------------- ----- ----- --- ----- ----- ---
Statistics (as a % of Net Sales, except for Income Tax Rate)
-----------------------------------------------------------
Gross Profit
(Net Sales
less Cost of
Products
Sold) 34.2% 29.7% 39.0% 36.7%
------------- ---- ---- ---- ----
Income from
Operations 3.5% 4.9% 10.8% 11.9%
----------- --- --- ---- ----
Income Tax
Rate (55.7)% (7.6)% 13.1% 21.4%
---------- ------ ----- ---- ----
Results under U.S. GAAP include items as detailed in the schedules attached to this press release.
Net sales increased 3.9 percent to $1.1 billion in the fourth quarter of 2014. Excluding the impact of foreign currency fluctuations, net sales increased 6.2 percent. The majority of the increase was due to continued strong U.S. Specialty Injectable Pharmaceuticals (SIP) and Other Pharma sales, driven primarily by favorable pricing, competitive supply issues and continued strength in supply. Offsetting the positive results were the expected decline of Precedex, the oncolytic drug docetaxel and Medication Management sales, which related primarily to the divestiture of the TheraDoc(TM) clinical surveillance software business.
Adjusted* income from operations decreased 5.7 percent to $121 million in the fourth quarter of 2014, compared to $129 million in the fourth quarter of 2013. Improved adjusted* gross margin performance, driven by the growth in net sales, was more than offset by the year-over-year increase in selling, general and administration (SG&A) and research and development (R&D) expenses. On a GAAP basis, income from operations was $40 million compared to $53 million in the fourth quarter of 2013. The year-over-year change in fourth-quarter GAAP income from operations is primarily related to facility optimization charges in 2014, partially offset by lower quality- and product-related charges.
The effective tax rate on an adjusted* basis in the quarter was 13.1 percent compared to 21.4 percent in the fourth-quarter 2013. The decrease mainly reflects the enactment of the U.S. Tax Increase Prevention Act of 2014 in December 2014, which reinstated the research credit and other expired tax provisions. On a GAAP basis, the fourth-quarter 2014 effective tax rate was a benefit of 55.7 percent, also impacted by the Tax Increase Prevention Act, compared to a benefit of 7.6 percent in the fourth quarter of 2013.
Full-Year 2014 Results
The following table highlights selected financial results for the full-year 2014 compared to the same period in 2013:
In $
millions,
except per
share
amounts GAAP Adjusted*
Year Ended Year Ended
Dec. 31, Dec. 31,
% %
Change Change
--- --- --- ------
2014 2013 2014 2013
---- ---- ---- ----
Net Sales $4,463.7 $4,002.8 11.5% $4,463.7 $4,107.1 8.7%
--------- -------- -------- ---- -------- -------- ---
Gross Profit
(Net Sales
less Cost of
Products
Sold) $1,586.5 $1,080.5 46.8% $1,801.2 $1,518.0 18.7%
------------- -------- -------- ---- -------- -------- ----
Income from
Operations $466.3 $16.6 nm $644.8 $478.4 34.8%
----------- ------ ----- --- ------ ------ ----
Diluted
(Loss)
Earnings per
Share $1.95 $(0.05) nm $2.59 $2.09 23.9%
------------- ----- ------ --- ----- ----- ----
Statistics (as a % of Net Sales, except for Income Tax Rate)
-----------------------------------------------------------
Gross Profit
(Net Sales
less Cost of
Products
Sold) 35.5% 27.0% 40.4% 37.0%
------------- ---- ---- ---- ----
Income from
Operations 10.4% 0.4% 14.4% 11.6%
----------- ---- --- ---- ----
Income Tax
Rate 18.5% (79.8)% 23.8% 15.0%
---------- ---- ------ ---- ----
nm: Percentage change is not
meaningful.
Net sales for full-year 2014 were $4.5 billion, an increase of 8.7 percent compared to full-year adjusted* net sales of $4.1 billion in 2013, which exclude the impact of customer sales allowances associated with the company's Device Strategy incurred in the first quarter of 2013. On a constant-currency basis, net sales increased 9.7 percent compared to full-year 2013 adjusted* net sales. Strong U.S. SIP and Other Pharma sales, primarily driven by improved pricing and supply recovery, were the main contributor to the year-over-year increase. On a GAAP basis, net sales for full-year 2014 were $4.5 billion, an increase of 11.5 percent compared to GAAP full-year net sales in 2013, or 12.5 percent on a constant-currency basis. GAAP full-year net sales in 2013 include the impact of the customer sales allowances associated with the company's Device Strategy.
Adjusted* income from operations increased 34.8 percent to $645 million for the full year of 2014, compared to $478 million for the full year of 2013. Improved full-year adjusted* gross margin performance, driven by the growth in net sales, more than offset higher SG&A and R&D expenses. On a GAAP basis, full-year 2014 income from operations was $466 million compared to $17 million in 2013. Full-year 2014 GAAP income reflects divestiture gains as well as a decrease in Device Strategy charges and quality- and product-related charges.
The full-year 2014 effective tax rate on an adjusted* basis was 23.8 percent compared to 15.0 percent in 2013. The increase mainly relates to increased earnings in high-tax-rate jurisdictions and the retroactive reinstatement in the first quarter of 2013 of certain U.S. tax provisions for 2012 and 2013. On a GAAP basis, the 2014 effective tax rate was an expense of 18.5 percent compared to a benefit of 79.8 percent in 2013. The tax rate in full-year 2014 reflects increased earnings. The tax benefit in full-year 2013 mainly reflects the impact of charges associated with the company's Device Strategy.
Cash Flow
Cash flow from operations for full-year 2014 was $661 million, compared to $317 million in 2013. The increase is primarily due to higher net income in 2014.
Capital expenditures were $392 million for full-year 2014 compared to $354 million in 2013. The increase primarily reflects capital spending associated with the company's new facility in Vizag, India, as well as the company's modernization initiatives.
2015 Projections
Given the announcement earlier this month that Pfizer and Hospira have entered into a definitive merger agreement, the company is not providing annual projections.
"Just as 2014 was a year of significant accomplishments for Hospira, we expect 2015 to be another year of achievements and milestones, including the expected formation of the U.S. biosimilars market," said Ball. "We are excited by the opportunity this important development presents to Hospira and the U.S. healthcare system, as well as the prospects in our other growth areas. We remain focused on delivering results that meet the needs of our customers around the world, as well as creating value for our shareholders."
*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 Information
Given the proposed definitive merger agreement, Hospira will not hold conference calls for its quarterly results. The transaction, which is subject to customary closing conditions, including regulatory approvals in several jurisdictions and approval of Hospira's shareholders, is expected to close in the second half of 2015.
Complementary information to this press release on the fourth-quarter and full-year results is available on the Presentations page of the Investor Relations website.
About Hospira
Hospira, Inc. is the world's leading provider of injectable drugs and infusion technologies, and a global leader in biosimilars. Through its broad, integrated portfolio, Hospira is uniquely positioned to Advance Wellness(TM) by improving patient and caregiver safety while reducing healthcare costs. The company is headquartered in Lake Forest, Ill., and has approximately 19,000 employees. Learn more at www.hospira.com.
Private Securities Litigation Reform Act of 1995 --
A Caution Concerning Forward-Looking Statements
Information provided and statements contained in this release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy and statements regarding the contemplated merger with Pfizer Inc. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Additional factors may include the effect of the announcement of the merger and related transactions on Hospira's business relationships, operating results and business generally; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Pfizer Inc., and the risk that the merger agreement with Pfizer Inc. may be terminated in circumstances that require Hospira to pay a termination fee to Pfizer Inc.; the outcome of any legal proceedings that may be instituted against Hospira related to the merger agreement with Pfizer Inc.; and the failure to satisfy conditions to completion of the merger with Pfizer Inc., including the receipt of all required regulatory approvals related to the merger with Pfizer Inc. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Except for our ongoing obligations to disclose material information as required by the federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.
Important Additional Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition of Hospira. In connection with the proposed merger, Hospira intends to file relevant materials with the Securities and Exchange Commission (the "SEC"), including a preliminary proxy statement on Schedule 14A. Following the filing of the definitive proxy statement with the SEC, Hospira will mail the definitive proxy statement and a proxy card to each stockholder entitled to vote at the special meeting relating to the proposed merger. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE MERGER THAT HOSPIRA WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT HOSPIRA AND THE PROPOSED MERGER. The preliminary proxy statement, the definitive proxy statement and other relevant materials in connection with the proposed merger (when they become available), and any other documents filed by Hospira with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC through the Investor Relations section of Hospira's website, www.hospirainvestor.com, or by sending a request to: Investor Relations, Hospira, Inc.,
275 North Field Drive, Dept. 051M, Bldg. H1, Lake Forest, Illinois 60045.
Hospira and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Hospira's stockholders with respect to the proposed merger. Information about Hospira's directors and executive officers and their ownership of Hospira's common stock is set forth in Hospira's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which was filed with the SEC on February 12, 2015 and Hospira's proxy statement for its 2014 Annual Meeting of Shareholders, which was filed with the SEC on March 21, 2014. Information regarding the identity of the potential participants, and their direct or indirect interests in the merger, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with the proposed merger.
Hospira, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(dollars and shares in millions, except for per share amounts)
Three Months Ended December 31, % Change
------------------------------- --------
2014 2013
---- ----
Net sales $1,126.5 $1,084.4 3.9 %
-------- --------
Cost of products sold 740.9 762.8 (2.9)%
Restructuring, impairment and (gain) on disposal of assets, net 26.8 (1.8) nm
Research and development 99.2 83.6 18.7 %
Selling, general and administrative 219.9 186.6 17.8 %
----- -----
Total operating costs and expenses 1,086.8 1,031.2 5.4 %
------- -------
Income From Operations 39.7 53.2 (25.4)%
Interest expense 18.2 23.3 (21.9)%
Other (income) expense, net (0.4) 2.4 (116.7)%
---- ---
Income Before Income Taxes 21.9 27.5 (20.4)%
Income tax benefit (12.2) (2.1) (481.0)%
Equity income from affiliates, net (1.7) (3.9) (56.4)%
---- ----
Net Income $35.8 $33.5 6.9 %
===== =====
Earnings Per Common Share:
Basic $0.21 $0.20 5.0 %
===== =====
Diluted $0.21 $0.20 5.0 %
===== =====
Weighted Average Common Shares Outstanding:
Basic 169.6 165.9 2.2 %
===== =====
Diluted 172.9 167.3 3.3 %
===== =====
Adjusted Gross Profit (1)(2) $439.1 $398.2 10.3 %
Adjusted Income From Operations (1) $121.4 $128.8 (5.7)%
Adjusted Net Income(1) $91.7 $84.9 8.0 %
Adjusted Diluted Earnings Per Share(1) $0.53 $0.51 3.9 %
Statistics (as a % of net sales, except for income tax rate)
GAAP Three Months Ended December 31, Adjusted (1) Three Months Ended December
31,
------------------------------------ -----------------------------------------
2014 2013 2014 2013
---- ---- ---- ----
Gross Profit (2) 34.2 % 29.7 % 39.0 % 36.7 %
Income From
Operations 3.5 % 4.9 % 10.8 % 11.9 %
Net Income 3.2 % 3.1 % 8.1 % 7.8 %
Income Tax Rate (55.7)% (7.6)% 13.1 % 21.4 %
(1) Adjusted
financial
measures are
Non-GAAP
measures and
exclude
specified
items as
described
and
reconciled
to
comparable
GAAP
financial
measures in
the
Reconciliation
of GAAP to
Non-GAAP
Financial
Measures
contained in
this press
release.
(2) Gross profit
is defined
as Net sales
less Cost of
products
sold.
Adjusted
gross profit
excludes
specified
items, as
indicated in
the previous
footnote.
nm Percentage
change is
not
meaningful.
Hospira, Inc.
Condensed Consolidated Statements of Income (Loss)
(Unaudited)
(dollars and shares in millions, except for per share amounts)
Years Ended December 31, % Change
------------------------ --------
2014 2013
---- ----
Net sales $4,463.7 $4,002.8 11.5 %
-------- --------
Cost of products sold 2,877.2 2,922.3 (1.5)%
Restructuring, impairment and (gain) on disposal of assets, net (65.2) 19.6 (432.7)%
Research and development 344.3 301.7 14.1 %
Selling, general and administrative 841.1 742.6 13.3 %
----- -----
Total operating costs and expenses 3,997.4 3,986.2 0.3 %
------- -------
Income From Operations 466.3 16.6 nm
Interest expense 77.2 86.2 (10.4)%
Other expense, net 0.9 53.6 (98.3)%
--- ----
Income (Loss) Before Income Taxes 388.2 (123.2) 415.1 %
Income tax expense (benefit) 71.9 (98.3) 173.1 %
Equity income from affiliates, net (16.9) (16.6) 1.8 %
----- -----
Net Income (Loss) $333.2 $(8.3) nm
====== =====
Earnings (Loss) Per Common Share:
Basic $1.98 $(0.05) nm
===== ======
Diluted $1.95 $(0.05) nm
===== ======
Weighted Average Common Shares Outstanding:
Basic 168.2 165.6 1.6 %
===== =====
Diluted 170.8 165.6 3.1 %
===== =====
Adjusted Net Sales (1) $4,463.7 $4,107.1 8.7 %
Adjusted Gross Profit (1)(2) $1,801.2 $1,518.0 18.7 %
Adjusted Income From Operations (1) $644.8 $478.4 34.8 %
Adjusted Net Income (1) $443.0 $347.6 27.4 %
Adjusted Diluted Earnings Per Share (1) $2.59 $2.09 23.9 %
Statistics (as a % of net sales, except for income tax rate)
GAAP Years Ended December 31, Adjusted (1) Years Ended December
31,
----------------------------- ----------------------------------
2014 2013 2014 2013
---- ---- ---- ----
Gross Profit
(2) 35.5 % 27.0 % 40.4 % 37.0 %
Income From
Operations 10.4 % 0.4 % 14.4 % 11.6 %
Net Income
(Loss) 7.5 % (0.2)% 9.9 % 8.5 %
Income Tax
Rate 18.5 % (79.8)% 23.8 % 15.0 %
(1) Adjusted
financial
measures are
Non-GAAP
measures and
exclude
specified
items as
described
and
reconciled
to
comparable
GAAP
financial
measures in
the
Reconciliation
of GAAP to
Non-GAAP
Financial
Measures
contained in
this press
release.
(2) Gross profit
is defined
as Net sales
less Cost of
products
sold.
Adjusted
gross profit
excludes
specified
items, as
indicated in
the previous
footnote.
nm Percentage
change is
not
meaningful.
Hospira, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(dollars in millions, except for per share amounts)
Three months ended December 31, 2014 Reconciliation of GAAP to Non-GAAP Financial Measures:
-------------------------------------------------------------------------------------------
Gross Profit (1) Income From Operations Net Income Diluted EPS
--------------- -----------
GAAP Financial Measures $385.6 $39.7 $35.8 $0.21
Specified Items (2)
Device Strategy charges(A) 11.6 11.6 8.6 0.05
Amortization of certain intangible assets (B) 12.4 12.4 8.6 0.05
Divestitures (C) - 3.2 4.6 0.03
Certain quality and product related charges(D) 8.5 8.5 5.5 0.03
Capacity expansion related charges(E) 17.9 17.9 11.2 0.05
Acquisition and integration related charges (F) 3.1 4.5 2.8 0.02
Facilities optimization charges (G) - 21.9 13.7 0.08
Other restructuring charges(H) - 1.7 0.9 0.01
--- ----
Adjusted financial measures (3) $439.1 $121.4 $91.7 $0.53
====== ====== ===== =====
GAAP results for the three months ended December 31, 2014
include:
(A) Device Strategy
charges: $11.6
million
reported in
Cost of
products sold.
These charges
include
consulting,
customer
accommodations,
inventory
charges, and
other costs
associated with
Hospira's
Device
Strategy.
(B) Amortization of
certain
intangible
assets reported
in Cost of
products sold
resulting from
acquisitions
including Mayne
Pharma Limited
("Mayne
Pharma") (which
closed in 2007)
and both a
generic
injectable
business (which
closed in 2010)
and an active
pharmaceutical
ingredient
business (which
closed in 2014)
by Hospira
Healthcare
India Private
Limited
("Hospira
India").
(C) Divestiture
losses reported
in
Restructuring,
impairment and
(gain) on
disposal of
assets, net,
related to the
sale of
previously
reported
product lines
and a business.
(D) Certain quality
and product
related charges
reported in
Cost of
products sold
primarily
include third
party oversight
and consulting
costs, extended
production
downtime
related costs,
and device
product review
and remediation
costs to
address
identified
issues. These
charges are
primarily
associated with
Hospira's
response to
certain United
States Food and
Drug
Administration
("FDA") warning
letters and
charges related
to certain
device related
remediation
activities.
(E) Capacity
expansion
related charges
reported in
Cost of
products sold
include start-
up charges
related to
manufacturing
capacity
expansion in
India.
(F) Acquisition and
integration
related
charges: $3.1
million
reported in
Cost of
products sold
and $1.4
million
reported in
Selling,
general and
administrative
("SG&A")
related to the
acquisition and
integration of
an active
pharmaceutical
ingredient
business.
(G) Facilities
optimization
charges
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net
related to the
announced
closure of the
Clayton, North
Carolina
manufacturing
facility.
(H) Other
restructuring
charges
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net,
include
severance costs
associated with
Hospira's
commercial
reorganization.
Three months ended December 31, 2013 Reconciliation of GAAP to Non-GAAP Financial Measures:
-------------------------------------------------------------------------------------------
Gross Profit (1) Income From Operations Net Income Diluted EPS
--------------- ---------------------- ---------- -----------
GAAP Financial Measures $321.6 $53.2 $33.5 $0.20
Specified Items (2)
Device Strategy charges (A) 8.0 9.6 8.2 0.05
Facilities optimization charges(B) - (3.4) (3.4) (0.02)
Amortization of certain intangible assets(C) 17.6 17.6 12.1 0.07
Certain quality and product related charges(D) 42.8 42.8 28.7 0.18
Capacity expansion related charges(E) 8.2 8.2 5.3 0.03
Acquisition and integration related charges(F) - 0.8 0.5 -
Adjusted financial measures (3) $398.2 $128.8 $84.9 $0.51
====== ====== ===== =====
GAAP results for the three months ended December 31, 2013 include:
(A) Device Strategy charges:
$8.0 million in Cost of
products sold and $1.6
million reported in
Restructuring, impairment
and (gain) on disposal of
assets, net. These charges
include consulting,
customer accommodations,
accelerated depreciation,
and other costs associated
with Hospira's Device
Strategy.
(B) Facilities optimization
charges: $(3.4) million
reported in Restructuring,
impairment and (gain) on
disposal of assets, net.
Hospira recovered amounts
related to equipment
associated with Hospira's
exit of a specialty
injectable drug finishing
operation.
(C) Amortization of certain
intangible assets reported
in Cost of products sold
resulting from acquisitions
including Mayne Pharma and
a generic injectable
business by Hospira India.
(D) Certain quality and product
related charges reported in
Cost of products sold
primarily include third
party oversight and
consulting costs, extended
production downtime related
costs, failure to supply
penalties, and device
product review and
remediation costs to
address identified issues,
and costs for corrective
actions including product
recalls. These charges are
primarily associated with
Hospira's response to the
FDA warning letters and
charges related to certain
device related remediation
activities.
(E) Capacity expansion related
charges reported in Cost of
products sold include
start-up charges related
to manufacturing capacity
expansion in India.
(F) Acquisition and integration
related charges reported in
SG&A include costs for the
then pending acquisition
and integration of an
active pharmaceutical
ingredient business.
(1) Gross profit is defined as Net
sales less Cost of products
sold.
(2) Specified items are shown net of
tax in aggregate of $25.8
million and $24.1 million for
the three months ended December
31, 2014 and 2013, respectively,
based on the statutory tax rates
in the various tax jurisdictions
in which the items occurred.
(3) The Non-GAAP financial measures
contained in this press release
(including Adjusted Gross
Profit, Adjusted Income From
Operations, Adjusted Net Income
and Adjusted Diluted Earnings
Per Share) adjust for specified
items. Management believes the
Non-GAAP financial measures
represent the amounts directly
related to the ongoing
operations of the business and
uses these measures in
evaluating performance. All Non-
GAAP financial measures are
intended to supplement the
applicable GAAP measures and
should not be considered in
isolation from, or a replacement
for, financial measures prepared
in accordance with GAAP and may
not be comparable to, or
calculated in the same manner
as, Non-GAAP financial measures
published by other companies.
Refer to Hospira's Form 8-K
furnished on February 12, 2015.
Hospira, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(dollars in millions, except for per share amounts)
Year Ended December 31, 2014 Reconciliation of GAAP to Non-GAAP Financial Measures:
-----------------------------------------------------------------------------------
Gross Profit(1) Income From Operations Net Income Diluted EPS
-------------- -----------
GAAP Financial Measures $1,586.5 $466.3 $333.2 $1.95
Specified Items (2)
Device Strategy charges (A) 26.8 28.2 22.1 0.13
Amortization of certain intangible assets (B) 60.8 60.8 43.7 0.26
Impairment of certain assets(C) - 6.1 3.8 0.02
Certain quality and product related charges(D) 59.9 59.9 38.3 0.22
Capacity expansion related charges(E) 62.2 62.2 40.4 0.23
Acquisition and integration related charges(F) 5.0 34.0 25.1 0.15
Facilities optimization charges(G) - 26.9 16.8 0.10
Divestitures (H) - (102.6) (82.2) (0.48)
Other restructuring charges (I) - 3.0 1.8 0.01
--- --- ---
Adjusted financial measures (3) $1,801.2 $644.8 $443.0 $2.59
======== ====== ====== =====
GAAP results for the year ended December 31, 2014
include:
(A) Device Strategy
charges: $26.8
million
reported in
Cost of
products sold
and $1.4
million
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net.
These charges
include
consulting,
customer
accommodations,
contract
termination,
collection and
destruction
costs,
inventory
charges, other
asset
impairments,
accelerated
depreciation,
and other costs
associated with
Hospira's
Device
Strategy.
(B) Amortization of
certain
intangible
assets reported
in Cost of
products sold
resulting from
acquisitions
including Mayne
Pharma and both
a generic
injectable
business and an
active
pharmaceutical
ingredient
business by
Hospira India.
(C) Impairments of
certain
property and
equipment
assets reported
in
Restructuring,
impairment and
(gain) on
disposal of
assets, net.
(D) Certain quality
and product
related charges
reported in
Cost of
products sold
primarily
include third
party oversight
and consulting
costs, extended
production
downtime
related costs,
and device
product review
and remediation
costs to
address
identified
issues. These
charges are
primarily
associated with
Hospira's
response to
certain FDA
warning letters
and charges
related to
certain device
related
remediation
activities.
(E) Capacity
expansion
related charges
reported in
Cost of
products sold
include start-
up charges
related to
manufacturing
capacity
expansion in
India.
(F) Acquisition and
integration
related
charges: $5.0
million
reported in
Cost of
products sold,
$29.0 million
reported in
SG&A and ($5.8)
million of
foreign
exchange hedge
gains reported
in Other
expense, net
related to the
acquisition and
integration of
an active
pharmaceutical
ingredient
business.
Charges
reported in
SG&A include an
allowance on an
advance to an
entity
controlled by
the primary
shareholder of
Orchid
Chemicals &
Pharmaceuticals
Ltd.
(G) Facilities
optimization
charges
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net
related to the
announced
closure of the
Clayton, North
Carolina
manufacturing
facility and
the sale of the
Buffalo, NY,
manufacturing
facility.
(H) Divestiture
gains, net
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net
related
primarily to
the sale of
Hospira's
clinical
surveillance
software
business,
Theradoc, and
Hospira's
surgical
suction product
line.
(I) Other
restructuring
charges
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net,
include
severance costs
associated with
Hospira's
commercial
reorganization.
Year Ended December 31, 2013 Reconciliation of GAAP to Non-GAAP Financial Measures:
-----------------------------------------------------------------------------------
Net Sales Gross Profit(1) Income From Operations Net (Loss) Income Diluted EPS
--------- -------------- ---------------------- ----------------- -----------
GAAP Financial Measures $4,002.8 $1,080.5 $16.6 $(8.3) $(0.05)
Specified Items (2)
Device Strategy charges(A) 104.3 215.0 226.9 167.9 1.01
Facilities optimization charges(B) - - (3.4) (3.4) (0.02)
Amortization of certain intangible assets(C) - 70.0 70.0 48.6 0.29
Impairment of certain assets (D) - - 3.5 10.8 0.07
Certain quality and product related charges (E) - 130.0 130.0 86.4 0.52
Capacity expansion related charges (F) - 22.5 22.5 14.6 0.09
Other restructuring charges (G) - - 7.7 5.4 0.03
Acquisition and integration related charges (H) - - 4.6 2.8 0.02
Early debt extinguishment charges (I) - - - 22.8 0.14
Diluted share impact - - - - (0.01)
Adjusted financial measures (3) $4,107.1 $1,518.0 $478.4 $347.6 $2.09
======== ======== ====== ====== =====
GAAP results for the year ended December 31, 2013 include:
(A) Device Strategy
charges: $104.3
million
reported in Net
sales, $110.7
million in Cost
of products
sold and $11.9
million in
Restructuring,
impairment and
(gain) on
disposal of
assets, net.
These charges
include
customer sales
allowances,
consulting,
customer
accommodations,
contract
termination,
collection and
destruction
costs,
inventory
charges, other
asset
impairments,
accelerated
depreciation,
and other costs
associated with
Hospira's
Device
Strategy.
(B) Facilities
optimization
charges: $(3.4)
million
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net.
Hospira
recovered
amounts related
to equipment
associated with
Hospira's exit
of a specialty
injectable drug
finishing
operation.
(C) Amortization of
certain
intangible
assets reported
in Cost of
products sold
resulting from
acquisitions
including Mayne
Pharma and a
generic
injectable
business by
Hospira India.
(D) Impairment of
certain assets:
$3.5 million
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net and
$14.5 million
reported in
Other expense,
net. These
charges relate
to impairment
of certain
intangible
assets and
investments,
respectively.
(E) Certain quality
and product
related charges
reported in
Cost of
products sold
primarily
include third
party oversight
and consulting
costs, extended
production
downtime
related costs,
failure to
supply
penalties, and
device product
review and
remediation
costs to
address
identified
issues, and
costs for
corrective
actions
including
product
recalls. These
charges are
primarily
associated with
Hospira's
response to the
FDA warning
letters and
charges related
to certain
device related
remediation
activities.
(F) Capacity
expansion
related charges
reported in
Cost of
products sold
include start-
up charges
related to
manufacturing
capacity
expansion in
India.
(G) Other
restructuring
charges
reported in
Restructuring,
impairment and
(gain) on
disposal of
assets, net,
include
severance costs
associated with
Hospira's
commercial
reorganization.
(H) Acquisition and
integration
related charges
reported in
SG&A include
costs for the
then pending
acquisition and
integration of
an active
pharmaceutical
ingredient
business.
(I) Early debt
extinguishment
charges: $33.4
million
reported in
Other expense,
net and $3.0
million
reported in
Interest
expense. These
charges include
a make whole
provision,
write-off of
debt issue
costs,
discounts and
deferred gain
on interest
rate hedges,
and interest
expense
associated with
an overlap of
outstanding
debt.
(1) Gross profit is
defined as Net sales
less Cost of products
sold.
(2) Adjusted net income is
shown net of tax of
$62.9 million and
$156.6 million, for
the years ended
December 31, 2014 and
2013, respectively,
based on the
statutory tax rates
in the various tax
jurisdictions in
which the items
occurred.
(3) The Non-GAAP
financial measures
contained in this
press release
(including Adjusted
Net Sales, Adjusted
Gross Profit,
Adjusted Income From
Operations, Adjusted
Net Income and
Adjusted Diluted
Earnings Per Share)
adjust for specified
items. Management
believes the Non-
GAAP financial
measures represent
the amounts directly
related to the
ongoing operations of
the business and uses
these measures in
evaluating
performance. All Non-
GAAP financial
measures are intended
to supplement the
applicable GAAP
measures and should
not be considered in
isolation from, or a
replacement for,
financial measures
prepared in
accordance with GAAP
and may not be
comparable to, or
calculated in the
same manner as, Non-
GAAP financial
measures published by
other companies.
Refer to Hospira's
Form 8-K furnished
on February 12, 2015.
Hospira, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in millions)
December 31, December 31,
2014 2013
---- ----
Assets
Current Assets:
Cash and cash equivalents $802.4 $798.1
Trade receivables, less allowances of $9.6
and $11.2, respectively 601.9 574.3
Inventories, net 1,133.3 1,066.2
Deferred income taxes and other 230.0 208.6
Prepaid expenses 69.3 90.0
Other receivables 117.3 101.3
----- -----
Total Current Assets 2,954.2 2,838.5
------- -------
Property and equipment, net 1,816.7 1,574.2
Intangible assets, net 123.4 172.2
Goodwill 1,089.1 1,057.7
Deferred income taxes 295.4 358.9
Investments 252.2 33.1
Other assets 119.0 144.3
----- -----
Total Assets $6,650.0 $6,178.9
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $6.8 $93.7
Trade accounts payable 414.5 329.2
Salaries, wages and commissions 252.0 185.4
Other accrued liabilities 626.8 556.8
----- -----
Total Current Liabilities 1,300.1 1,165.1
------- -------
Long-term debt 1,749.2 1,747.0
Deferred income taxes 5.4 3.2
Post-retirement obligations and other
long-term liabilities 258.7 301.7
Commitments and Contingencies
Total Shareholders' Equity 3,336.6 2,961.9
------- -------
Total Liabilities and Shareholders' Equity $6,650.0 $6,178.9
======== ========
Hospira, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions)
Years Ended December
31,
--------------------
Cash Flow From
Operating
Activities: 2014 2013
---- ----
Net Income (Loss) $333.2 $(8.3)
Adjustments to reconcile Net Income
(Loss) to net cash from operating
activities-
Depreciation 181.4 171.8
Amortization of
intangible assets 76.7 85.7
Loss on early debt
extinguishment - 33.4
Stock-based
compensation
expense 52.0 41.6
Undistributed
equity income from
affiliates (16.9) (16.6)
Distributions
received from
equity affiliates 16.3 37.5
Deferred income
taxes and other
tax adjustments 49.2 (117.9)
Impairment and
other asset
charges 30.9 73.1
Gains on
dispositions of
assets, net (100.2) (0.9)
Changes in assets and liabilities, net of
the effects of acquisitions
Trade receivables (61.4) 66.3
Inventories (72.9) (138.2)
Prepaid expenses
and other assets 12.2 (45.1)
Trade accounts
payable 87.5 41.3
Other liabilities 56.6 73.7
Other, net 16.8 20.0
----
Net Cash Provided
by Operating
Activities 661.4 317.4
----- -----
Cash Flow From Investing Activities:
Capital
expenditures
(including
instruments placed
with or leased to
customers) (392.2) (353.5)
Acquisitions, net
of cash acquired (223.4) -
Purchases of
intangibles and
other investments (35.2) (18.2)
Purchase of debt
security (200.0) -
Proceeds from
disposition of
businesses and
assets 141.4 1.4
Net Cash Used in
Investing
Activities (709.4) (370.3)
------ ------
Cash Flow From Financing Activities:
Issuance of long-
term debt, net of
fees paid - 691.8
Repayment of long-
term debt - (650.0)
Payment on early
debt
extinguishment - (39.8)
Other borrowings,
net (91.1) 74.6
Excess tax benefit
from stock-based
compensation
arrangements 9.3 1.4
Proceeds from stock
options exercised 153.3 16.3
Net Cash Provided
by Financing
Activities 71.5 94.3
---- ----
Effect of exchange
rate changes on
cash and cash
equivalents (19.2) (15.4)
----- -----
Net change in cash
and cash
equivalents 4.3 26.0
Cash and cash
equivalents at
beginning of year 798.1 772.1
-----
Cash and cash
equivalents at end
of year $802.4 $798.1
====== ======
Supplemental Cash Flow Information:
Cash paid during the year-
Interest $102.3 $94.4
Income taxes, net
of refunds $49.8 $66.5
Accrued capital
expenditures $36.6 $42.2
Hospira, Inc.
Net Sales by Product Line
(Unaudited)
(dollars in millions)
Three Months Ended December 31,
-------------------------------
2014 2013 % Change at Actual % Change at Constant
Currency Rates Currency Rates(1)
-----------------
Americas-
Specialty Injectable Pharmaceuticals $606.8 $572.6 6.0 % 6.7 %
Medication Management 174.2 179.5 (3.0)% (1.1)%
Other Pharma 130.1 104.8 24.1 % 24.5 %
----- -----
Total Americas 911.1 856.9 6.3 % 7.3 %
Europe, Middle East & Africa ("EMEA")-
Specialty Injectable Pharmaceuticals 78.1 88.2 (11.5)% (3.4)%
Medication Management 25.1 28.6 (12.2)% (4.5)%
Other Pharma 28.3 21.9 29.2 % 35.6 %
---- ----
Total EMEA 131.5 138.7 (5.2)% 2.5 %
Asia Pacific ("APAC")-
Specialty Injectable Pharmaceuticals 67.9 71.9 (5.6)% 1.7 %
Medication Management 11.4 13.6 (16.2)% (11.8)%
Other Pharma 4.6 3.3 39.4 % 39.4 %
--- ---
Total APAC 83.9 88.8 (5.5)% 1.0 %
Net Sales $1,126.5 $1,084.4 3.9 % 6.2 %
======== ========
Global-
Specialty Injectable Pharmaceuticals $752.8 $732.7 2.7 % 5.0 %
Medication Management 210.7 221.7 (5.0)% (2.2)%
Other Pharma 163.0 130.0 25.4 % 26.8 %
----- -----
Net Sales $1,126.5 $1,084.4 3.9 % 6.2 %
======== ========
(1) The Non-GAAP financial
measures contained in
this press release
include comparisons at
constant currency rates,
which reflect
comparative local
currency balances at
prior period foreign
exchange rates. Hospira
calculated these
percentages by taking
current period reported
net sales less the
respective prior period
reported net sales,
divided by the prior
period reported net
sales, all at the
respective prior
period's foreign
exchange rates. This
measure provides
information on the
change in net sales
assuming that foreign
currency exchange rates
have not changed between
the prior and the
current period.
Management believes the
use of this measure aids
in the understanding of
our change in net sales
without the impact of
foreign currency and
provides greater
transparency into
Hospira's results of
operations.
Hospira, Inc.
Net Sales by Product Line
(Unaudited)
(dollars in millions)
Years Ended December 31,
------------------------
Reported Adjusted(1)(3)
-------- -------------
GAAP Net Sales GAAP Net Sales Adjusted Net Sales % Change at Actual % Change at Constant % Change at Actual % Change at Constant
2014 2013 2013(1)(3) Currency Rates Currency Rates(2) Currency Rates Currency Rates(2)
---- ---- --------- -------------- ---------------- -------------- ----------------
Americas-
Specialty Injectable Pharmaceuticals $2,432.6 $2,163.0 $2,163.0 12.5 % 13.2 % 12.5 % 13.2 %
Medication Management 690.9 629.9 718.3 9.7 % 11.6 % (3.8)% (2.2)%
Other Pharma 481.6 382.9 382.9 25.8 % 26.2 % 25.8 % 26.2 %
----- ----- -----
Total Americas 3,605.1 3,175.8 3,264.2 13.5 % 14.4 % 10.4 % 11.3 %
EMEA-
Specialty Injectable Pharmaceuticals 335.6 332.9 332.9 0.8 % 0.7 % 0.8 % 0.7 %
Medication Management 104.3 97.8 111.0 6.6 % 6.4 % (6.0)% (6.2)%
Other Pharma 92.1 77.9 77.9 18.2 % 15.8 % 18.2 % 15.8 %
---- ---- ----
Total EMEA 532.0 508.6 521.8 4.6 % 4.1 % 2.0 % 1.5 %
APAC-
Specialty Injectable Pharmaceuticals 266.4 263.5 263.5 1.1 % 5.8 % 1.1 % 5.8 %
Medication Management 44.8 42.1 44.8 6.4 % 10.5 % -% 3.8 %
Other Pharma 15.4 12.8 12.8 20.3 % 20.3 % 20.3 % 20.3 %
---- ---- ----
Total APAC 326.6 318.4 321.1 2.6 % 7.0 % 1.7 % 6.1 %
Net Sales $4,463.7 $4,002.8 $4,107.1 11.5 % 12.5 % 8.7 % 9.7 %
======== ======== ========
Global-
Specialty Injectable Pharmaceuticals $3,034.6 $2,759.4 $2,759.4 10.0 % 11.0 % 10.0 % 11.0 %
Medication Management 840.0 769.8 874.1 9.1 % 10.8 % (3.9)% (2.4)%
Other Pharma 589.1 473.6 473.6 24.4 % 24.3 % 24.4 % 24.3 %
----- ----- -----
Net Sales $4,463.7 $4,002.8 $4,107.1 11.5 % 12.5 % 8.7 % 9.7 %
======== ======== ========
(1) Adjusted Net sales for the year ended December 31,
2013 excludes charges of $104.3 million related to
the Device Strategy. The Device Strategy charges
are reported in the respective Medication
Management Net sales by product line as follows:
Americas-$88.4 million, EMEA-$13.2 million and
APAC-$2.7 million. There were no adjustments
included in GAAP Net sales for the year ended
December 31, 2014.
(2) The Non-GAAP financial measures contained in this
press release include comparisons at constant
currency rates, which reflect comparative local
currency balances at prior period foreign exchange
rates. Hospira calculated these percentages by
taking current period reported net sales less the
respective prior period reported net sales,
divided by the prior period reported net sales,
all at the respective prior period's foreign
exchange rates. This measure provides information
on the change in net sales assuming that foreign
currency exchange rates have not changed between
the prior and the current period. Management
believes the use of this measure aids in the
understanding of our change in net sales without
the impact of foreign currency and provides
greater transparency into Hospira's results of
operations.
(3) Adjusted financial measures exclude certain
specified items as described and reconciled to
comparable GAAP financial measures in the
Reconciliation of GAAP to Non-GAAP Financial
Measures contained in this press release.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hospira-reports-fourth-quarter-and-full-year-2014-results-300035173.html
SOURCE Hospira, Inc.
