HOSPIRA, INC. 
By LAKE FOREST, Ill., Feb. 12, 2014 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), the world's leading provider of injectable drugs and infusion technologies, today reported results for the fourth quarter and full year ended Dec. 31, 2013. For the fourth quarter of 2013, net sales were $1.1 billion, and adjusted* diluted earnings per share were $0.51. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.) On a U.S. Generally Accepted Accounting Principles (GAAP) basis, fourth-quarter 2013 diluted earnings per share were $0.20. For full-year 2013, adjusted* net sales were $4.1 billion, and adjusted* diluted earnings per share were $2.09. On a GAAP basis, full-year 2013 net sales were $4.0 billion, with a diluted loss per share of $(0.05).
"In 2013, Hospira made significant progress advancing the company's dual priorities of reinforcing our foundation and turbocharging growth, while also achieving solid financial performance, delivering adjusted* earnings per share at the higher end of our projections," said F. Michael Ball, chief executive officer. "We believe our quality-improvement efforts and growth initiatives are positioning Hospira for a stronger, more competitive future, driving sustainable growth and value to our shareholders."
Fourth-Quarter 2013 Results
The following table highlights selected financial results for the fourth quarter of 2013 compared to the same period in 2012:
In $ millions, GAAP % Adjusted* %
except per share Three Months Change Three Months
Ended Ended Change
amounts Dec. 31, Dec. 31,
-------- --------
2013 2012 2013 2012
---- ---- ---- ----
Net Sales $1,084.4 $1,098.9 (1.3)% n/a n/a n/a
--------- -------- -------- ----- --- --- ---
Gross Profit (Net Sales
less $321.6 $314.7 2.2% $398.2 $383.5 3.8%
Cost of Products Sold)
--------------------- ---
Income from Operations $53.2 $30.8 72.7% $128.8 $121.5 6.0%
---------------------- ----- ----- ---- ------ ------ ---
Diluted Earnings per Share $0.20 $0.03 nm $0.51 $0.55 (7.3)%
-------------------------- ----- ----- --- ----- ----- -----
Statistics (as a % of Net Sales)
-------------------------------
Gross Profit (Net Sales
less 29.7% 28.6% 36.7% 34.9%
Cost of Products Sold)
---------------------
Income from Operations 4.9% 2.8% 11.9% 11.1%
---------------------- --- --- ---- ----
nm: Percentage change
is not meaningful.
Results under U.S. GAAP include items as detailed in the schedules attached to this press release.
Net sales decreased 1.3 percent to $1.1 billion in the fourth quarter of 2013. The majority of the decrease was due to the impact of the ship-hold in place on most of the company's infusion devices, the expected year-over-year decline of U.S. sales of the oncolytic docetaxel and the negative impact of foreign currency. Partially offsetting the decrease was strong global Specialty Injectable Pharmaceuticals (SIP) growth, which benefited from supply recovery and improved pricing in the United States.
Adjusted* income from operations increased 6.0 percent to $129 million in the fourth quarter of 2013, compared to $122 million in the fourth quarter of 2012. The increase primarily relates to the impact of supply recovery and improved pricing in the company's SIP products, which more than offset the year-over-year increase in selling, general and administration (SG&A) expense. On a GAAP basis, income from operations was $53 million compared to $31 million in the fourth quarter of 2012. The year-over-year change in fourth quarter GAAP income from operations is primarily attributed to restructuring charges in 2012.
The effective tax rate on an adjusted* basis in the quarter was 21.4 percent compared to 16.3 percent in the fourth-quarter 2012. The increase mainly reflects a shift in earnings mix to higher tax-rate jurisdictions relative to the fourth quarter of 2012. On a GAAP basis, the fourth-quarter 2013 effective tax rate was a benefit of 7.6 percent compared to an expense of 137.5 percent in the fourth quarter of 2012. The benefit during the fourth-quarter 2013 primarily results from the impact of quality- and device-related charges incurred in higher tax-rate jurisdictions. The fourth-quarter 2012 effective tax rate on a GAAP basis included a charge related to the effective settlement of a U.S. federal tax audit.
Full-Year 2013 Results
The following table highlights selected financial results for the full-year 2013 compared to the same period in 2012:
In $ millions, GAAP % Adjusted* %
except per share Year Ended Change Year Ended Change
amounts Dec. 31, Dec. 31,
-------- --------
2013 2012 2013 2012
---- ---- ---- ----
Net Sales $4,002.8 $4,092.1 (2.2)% $4,107.1 $4,092.1 0.4%
--------- -------- -------- ----- -------- -------- ---
Gross Profit (Net Sales less $1,080.5 $1,113.4 (3.0)% $1,518.0 $1,445.9 5.0%
Cost of Products Sold)
--------------------- ---
Income from Operations $16.6 $58.8 (71.8)% $478.4 $455.6 5.0%
---------------------- ----- ----- ------ ------ ------ ---
Diluted (Loss) Earnings per $(0.05) $0.27 (118.5)% $2.09 $2.01 4.0%
Share
----- ---
Statistics (as a % of Net Sales)
-------------------------------
Gross Profit (Net Sales less 27.0% 27.2% 37.0% 35.3%
Cost of Products Sold)
---------------------
Income from Operations 0.4% 1.4% 11.6% 11.1%
---------------------- --- --- ---- ----
Adjusted* net sales for full-year 2013 (which exclude the impact of customer sales allowances associated with the company's device strategy incurred in the first quarter of 2013) were $4.1 billion, relatively flat compared to full-year net sales in 2012. Strong global sales of SIP products, driven mainly by improved pricing in the United States and supply recovery, were partially offset by the expected decline in U.S. docetaxel sales and the decrease in Medication Management (MM) sales, which was due to the 2013 device ship-hold. On a GAAP basis, net sales for full-year 2013 were $4.0 billion, a decrease of 2.2 percent compared to the previous period. In addition to the factors that affected adjusted* full-year 2013 net sales, GAAP full-year net sales were adversely impacted by the customer sales allowances associated with the device strategy.
Adjusted* income from operations increased 5.0 percent to $478 million for the full year of 2013, compared to $456 million for the full year of 2012. The increase primarily reflects the full-year impact of improved pricing and supply recovery in the company's SIP products, partially offset by higher SG&A expense. On a GAAP basis, full-year 2013 income from operations was $17 million compared to $59 million in 2012. In addition to the higher SG&A expense, full-year 2013 GAAP income from operations was negatively impacted by charges associated with the device strategy, partially offset by a decrease in quality- and product-related charges.
The full-year 2013 effective tax rate on an adjusted* basis was 15.0 percent compared to 18.3 percent in 2012. The full-year 2013 effective tax rate benefited from the retroactive reinstatement in the first quarter of 2013 of certain U.S. tax provisions for 2012 and 2013. On a GAAP basis, the 2013 effective tax rate was a benefit of 79.8 percent compared to a benefit of 121.7 percent in 2012. The tax rates on a GAAP basis benefited in both periods from the impact of quality- and device-related charges incurred in higher tax-rate jurisdictions, partially offset in 2012 by a charge related to the effective settlement of a U.S. federal tax audit.
Cash Flow
Cash flow from operations for full-year 2013 was $317 million, compared to $478 million in 2012. The decrease is primarily due to higher taxes paid and increases in inventory related to supply recovery in 2013.
Capital expenditures were $354 million for full-year 2013 compared to $290 million in 2012. The increase was primarily a result of spending on modernization initiatives at several of the company's manufacturing facilities, as well as on information-technology projects.
2014 Projections
The projection ranges for full-year 2014 net sales and adjusted* diluted earnings per share include, among several factors, assumptions related to the timing of genericization of Precedex(TM) (dexmedetomidine HCl), the company's proprietary pharmaceutical for sedation.
Hospira expects the change to net sales for full-year 2014 to range between negative 2 and positive 3 percent on a constant-currency basis, with a flat to negative 1 percent impact from foreign currency.
Adjusted* diluted earnings per share for 2014 are expected to be in a range of $2.00 to $2.25.
The reconciliation between the projected 2014 adjusted* diluted earnings per share and projected GAAP diluted earnings per share follows:
Diluted earnings per share --
adjusted* $2.00 - $2.25
=============
Estimated charges related to the
company's device
strategy (mid-point of an
estimated range of
$0.13 to $0.19 per diluted share) $(0.16)
Estimated amortization of
intangible assets related to
certain acquisitions (mid-point
of an estimated range
of $0.23 to $ 0.27 per diluted
share) $(0.25)
Estimated charges for certain
quality and product-related
matters (mid-point of an
estimated range of
$0.25 to $0.31 per diluted share) $(0.28)
Estimated charges related to
capacity expansion
(mid-point of an estimated
range of $0.30 to $0.38
per diluted share) $(0.34)
Estimated acquisition and
integration-related charges
associated with the pending
acquisition of an API-related
business from Orchid Chemicals &
Pharmaceuticals
(mid-point of an estimated
range of $0.05 to $0.07
per diluted share) $(0.06)
------
Diluted earnings per share --
GAAP $0.91 - $1.16
=============
The adjusting items are shown net of tax in aggregate of $85 million, which is calculated for the specified adjustments stated above, based on the statutory tax rates in the various tax jurisdictions in which the items are expected to occur.
The company projects that cash flow from operations in 2014 will range between $100 million and $200 million. Capital expenditures are projected to range between $375 million to $425 million. Depreciation and amortization is expected to range between $225 million to $275 million.
"We are on track for continued progress in 2014 for our quality-improvement efforts and our initiatives to advance our strategic growth drivers, which include our SIP pipeline, global expansion and emerging market initiatives, our biosimilars program and our device strategy," said Ball. "In addition, we expect continued progress in efforts that support our strategic priorities, such as our facility modernization and manufacturing capacity expansion initiatives. Together, we believe these efforts will enable Hospira to most effectively serve the needs of our customers and patients, and deliver strong value to 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 Material
Hospira will hold a conference call for investors and media at 8 a.m. Central time on Wednesday, Feb. 12, 2014. A live 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 Hospira website for 30 days following the call.
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 17,000 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, expenses, and cash flow; and other statements regarding Hospira's goals, plans and strategy. Hospira cautions that these forward-looking statements are subject to risks and uncertainties, including adequate and sustained progress on the company's quality initiatives, continuous improvement activities, and device strategy, that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, regulatory, legal, intellectual property, product development, technological, supply, quality, 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 "Forward-Looking Statements," "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, filed with the Securities and Exchange Commission and 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 December 31, % Change
------------------------------- --------
2013 2012
---- ----
Net sales $1,084.4 $1,098.9 (1.3)%
-------- --------
Cost of products sold 762.8 784.2 (2.7)%
Restructuring and impairment (1.8) 20.9 (108.6)%
Research and development 83.6 84.7 (1.3)%
Selling, general and administrative 186.6 178.3 4.7%
----- -----
Total operating costs and expenses 1,031.2 1,068.1 (3.5)%
------- -------
Income From Operations 53.2 30.8 72.7%
Interest expense 23.3 21.9 6.4 %
Other expense, net 2.4 1.7 41.2 %
--- ---
Income Before Income Taxes 27.5 7.2 281.9 %
Income tax (benefit) expense (2.1) 9.9 (121.2)%
Equity income from affiliates, net (3.9) (8.0) (51.3)%
---- ----
Net Income $33.5 $5.3 nm
===== ====
Earnings Per Common Share:
Basic $0.20 $0.03 nm
===== =====
Diluted $0.20 $0.03 nm
===== =====
Weighted Average Common Shares Outstanding:
Basic 165.9 165.1 0.5 %
===== =====
Diluted 167.3 165.8 0.9 %
===== =====
Adjusted Gross Profit (1)(2) $398.2 $383.5 3.8 %
Adjusted Income From Operations (1) $128.8 $121.5 6.0 %
Adjusted Net Income (1) $84.9 $91.4 (7.1)%
Adjusted Diluted Earnings Per Share (1) $0.51 $0.55 (7.3)%
Statistics (as a % of net sales, except for income tax rate)
GAAP Three Months Ended December 31, Adjusted(1) Three Months Ended
December 31,
------------------------------------ -------------------------------
2013 2012 2013 2012
---- ---- ---- ----
Gross Profit (2) 29.7 % 28.6 % 36.7 % 34.9 %
Income From Operations 4.9 % 2.8 % 11.9 % 11.1 %
Net Income 3.1 % 0.5 % 7.8 % 8.3 %
Income Tax Rate (7.6)% 137.5 % 21.4 % 16.3 %
(1) 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.
(2) Gross
profit is
defined
as Net
sales
less Cost
of
products
sold.
Adjusted
gross
profit
excludes
certain
specified
items, as
indicated
in the
previous
footnote.
nm Percentage
change is
not
meaningful.
Hospira, Inc.
Condensed Consolidated Statements of (Loss) Income
(Unaudited)
(dollars and shares in millions, except for per share amounts)
Years Ended December 31, % Change
------------------------ --------
2013 2012
---- ----
Net sales $4,002.8 $4,092.1 (2.2)%
-------- --------
Cost of products sold 2,922.3 2,978.7 (1.9)%
Restructuring and impairment 19.6 63.3 (69.0)%
Research and development 301.7 303.6 (0.6)%
Selling, general and administrative 742.6 687.7 8.0 %
----- -----
Total operating costs and expenses 3,986.2 4,033.3 (1.2)%
------- -------
Income From Operations 16.6 58.8 (71.8)%
Interest expense 86.2 86.3 (0.1)%
Other expense, net 53.6 14.4 272.2 %
---- ----
Loss Before Income Taxes (123.2) (41.9) 194.0 %
Income tax benefit (98.3) (51.0) 92.7 %
Equity income from affiliates, net (16.6) (35.1) (52.7)%
----- -----
Net (Loss) Income $(8.3) $44.2 (118.8)%
===== =====
(Loss) Earnings Per Common Share:
Basic $(0.05) $0.27 (118.5)%
====== =====
Diluted $(0.05) $0.27 (118.5)%
====== =====
Weighted Average Common Shares Outstanding:
Basic 165.6 165.0 0.4 %
===== =====
Diluted 165.6 166.0 (0.2)%
===== =====
Adjusted Net Sales (1)(2) $4,107.1 $4,092.1 0.4 %
Adjusted Gross Profit (1)(3) $1,518.0 $1,445.9 5.0 %
Adjusted Income From Operations (1) $478.4 $455.6 5.0 %
Adjusted Net Income (1) $347.6 $333.3 4.3 %
Adjusted Diluted Earnings Per Share (1) $2.09 $2.01 4.0 %
Statistics (as a % of net sales, except for income tax rate)
GAAP Years Ended December 31, Adjusted(1) Years Ended
December 31,
----------------------------- ------------------------
2013 2012 2013 2012
---- ---- ---- ----
Gross Profit (3) 27.0% 27.2% 37.0 % 35.3 %
Income From Operations 0.4% 1.4% 11.6 % 11.1 %
Net (Loss) Income (0.2)% 1.1% 8.5 % 8.1 %
Income Tax Rate 79.8% 121.7% 15.0 % 18.3 %
(1) 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.
(2) There were
no
adjustments
included
in GAAP
Net sales
for the
year
ended
December
31, 2012.
(3) Gross
profit is
defined
as Net
sales
less Cost
of
products
sold.
Adjusted
gross
profit
excludes
certain
specified
items, as
indicated
in the
previous
footnotes.
Hospira, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(dollars in millions, except for per share amounts)
Three months ended December 31, 2013 Reconciliation of GAAP to Non-GAAP Financial Measures:
-------------------------------------------------------------------------------------------
Gross Profit (1) Income From Net Income (2) Diluted EPS
Operations
GAAP Financial Measures $321.6 $53.2 $33.5 $0.20
Specified Items:
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 and
impairment. 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 and
impairment. 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 Limited
("Mayne Pharma") and
a generic injectable
business by Hospira
Healthcare India
Private Limited
("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
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 reported in
Selling, general,
and administrative
("SG&A") include
costs for the
pending acquisition
and integration of
an active
pharmaceutical
ingredient business.
Three months ended December 31, 2012 Reconciliation of GAAP to Non-GAAP Financial Measures:
-------------------------------------------------------------------------------------------
Gross Profit(1) Income From Net Income(2) Diluted EPS
Operations
----------
GAAP Financial Measures $314.7 $30.8 $5.3 $0.03
Specified Items:
Facilities optimization charges (A) - 1.2 0.9 0.01
Amortization of certain intangible assets (B) 17.6 17.6 12.8 0.08
Impairment of certain assets (C) - - 1.7 0.01
Certain quality and product related charges (D) 44.1 44.1 33.3 0.20
Capacity expansion related charges (E) 6.6 6.6 4.4 0.03
Other restructuring charges (F) 0.5 20.2 13.6 0.08
Acquisition and integration related charges (G) - 1.0 0.6 -
Effective settlement of IRS tax audit (H) - - 18.8 0.11
Adjusted financial measures (3) $383.5 $121.5 $91.4 $0.55
====== ====== ===== =====
GAAP results for the three months ended December
31, 2012 include:
(A) Facilities optimization charges: $1.2 million
reported in Restructuring and impairment.
The equipment and facility impairment charges
relate to Hospira's plans to exit a specialty
injectable drug finishing operation.
(B) Amortization of certain intangible assets
reported in Cost of products sold resulting
from acquisitions including Mayne Pharma,
Javelin Pharmaceuticals, Inc. ("Javelin
Pharma") and a generic injectable business by
Hospira India.
(C) Impairment of certain assets: $1.7 million
reported in Other expense, net, related to a
marketable equity investment.
(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, 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) Other restructuring charges: $0.5 million
reported in Cost of products sold and $19.7
million reported in Restructuring and
impairment. These charges include inventory
charges, equipment impairments, contract
termination charges and severance charges
associated with Hospira's exit of non-
strategic product lines and commercial
optimization.
(G) Acquisition and integration related charges
reported in SG&A include cost related to the
pending acquisition and integration of an
active pharmaceutical ingredient business.
(H) Settlement of IRS tax audit expense of $18.8
million reported in Income tax (benefit)
expense. This discrete income tax expense is
related to the completion and effective
settlement of U.S. tax return audits.
(1) Gross profit is defined as Net sales less Cost of
products sold.
(2) Adjusted net income is shown net of tax of $24.1
million and $25.1 million, exclusive of the tax
audit settlement, for the three months ended
December 31, 2013 and 2012, 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 certain specified
items. 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.
Refer to Hospira's Form 8-K furnished on
February 12, 2014.
Hospira, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(dollars in millions, except for per share amounts)
Year Ended December 31, 2013 Reconciliation of GAAP to Non-GAAP Financial Measures:
-----------------------------------------------------------------------------------
Net Sales Gross Profit(1) Income From Net (Loss) Income(2) Diluted EPS
Operations
GAAP Financial Measures $4,002.8 $1,080.5 $16.6 $(8.3) $(0.05)
Specified Items:
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
and
impairment.
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
and
impairment.
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
and impairment
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: $7.7
million
reported in
Restructuring
and
impairment.
These charges
include
severance
charges
associated
with Hospira's
commercial
optimization.
(H) Acquisition and
integration
related
charges
reported in
SG&A include
costs for the
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.
Year Ended December 31, 2012 Reconciliation of GAAP to Non-GAAP Financial Measures:
-----------------------------------------------------------------------------------
Gross Profit(1) Income From Net Income(2) Diluted EPS
Operations
----------
GAAP financial measures $1,113.4 $58.8 $44.2 $0.27
Specified items:
Facilities optimization charges (A) - 18.6 11.6 0.07
Amortization of certain intangible assets (B) 72.4 72.4 50.5 0.31
Impairment of certain assets (C) - 14.0 17.0 0.10
Certain quality and product related charges (D) 236.8 236.8 153.9 0.93
Capacity expansion related charges (E) 17.9 17.9 11.9 0.07
Other restructuring charges (F) 5.4 36.1 24.8 0.15
Acquisition and integration related charges (G) - 1.0 0.6 -
Effective settlement of IRS tax audit (H) - - 18.8 0.11
Adjusted financial measures (3) $1,445.9 $455.6 $333.3 $2.01
======== ====== ====== =====
GAAP results
for the year
ended
December 31,
2012 include:
(A) Facilities
optimization
charges:
$18.6
million
reported in
Restructuring
and
impairment.
The
equipment
and
facility
impairment
charges
relate to
Hospira's
plans to
exit a
specialty
injectable
drug
finishing
operation.
(B) Amortization
of certain
intangible
assets
reported in
Cost of
products
sold
resulting
from
acquisitions
including
Mayne
Pharma,
Javelin
Pharma and a
generic
injectable
business by
Hospira
India.
(C) Impairment
of certain
assets:
$14.0
million
reported in
Restructuring
and
impairment,
and $10.1
million
reported in
Other
expense,
net. These
charges
relate to
impairments
of certain
intangible
assets and
investments,
respectively.
(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,
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) Other
Restructuring
Charges:
$5.4
million
reported in
Cost of
products
sold and
$30.7
million
reported in
Restructuring
and
impairment.
These
charges
include
inventory
charges,
equipment
impairments,
contract
termination
charges,
severance
charges and
gain on
disposition
associated
with
Hospira's
exit of
non-
strategic
product
lines and
commercial
optimization.
(G) Acquisition
and
integration
related
charges
reported in
SG&A
include
cost
related to
the pending
acquisition
and
integration
of an
active
pharmaceutical
ingredient
business.
(H) Settlement
of IRS tax
audit
expense of
$18.8
million
reported in
Income tax
benefit.
This
discrete
income tax
expense is
related to
the
completion
and
effective
settlement
of U.S. tax
return
audits.
(1) Gross profit
is defined as
Net sales
less Cost of
products
sold.
(2) Adjusted net
income is
shown net of
tax of $156.6
million and
$136.6
million,
exclusive of
the tax audit
settlement,
for the years
ended
December 31,
2013 and
2012,
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 certain
specified
items. 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.
Refer to
Hospira's
Form 8-K
furnished on
February 12,
2014.
Hospira, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in millions)
December 31, December 31,
2013 2012
---- ----
Assets
Current
Assets:
Cash
and
cash
equivalents $798.1 $772.1
Trade
receivables,
less
allowances
of
$11.2
and
$12.7,
respectively 574.3 646.9
Inventories,
net 1,066.2 997.8
Deferred
income
taxes
and
other 208.6 214.4
Prepaid
expenses 90.0 53.9
Other
receivables 101.3 75.3
----- ----
Total
Current
Assets 2,838.5 2,760.4
------- -------
Property
and
equipment,
net 1,574.2 1,445.1
Intangible
assets,
net 172.2 266.8
Goodwill 1,057.7 1,079.1
Deferred
income
taxes 358.9 296.8
Investments 33.1 71.8
Other
assets 144.3 168.6
----- -----
Total
Assets $6,178.9 $6,088.6
======== ========
Liabilities
and
Shareholders'
Equity
Current
Liabilities:
Short-
term
borrowings $93.7 $28.9
Trade
accounts
payable 329.2 276.0
Salaries,
wages
and
commissions 185.4 144.0
Other
accrued
liabilities 556.8 580.3
----- -----
Total
Current
Liabilities 1,165.1 1,029.2
------- -------
Long-
term
debt 1,747.0 1,706.8
Deferred
income
taxes 3.2 4.4
Post-
retirement
obligations
and
other
long-
term
liabilities 301.7 306.5
Commitments
and
Contingencies
Total
Shareholders'
Equity 2,961.9 3,041.7
------- -------
Total
Liabilities
and
Shareholders'
Equity $6,178.9 $6,088.6
======== ========
Hospira, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions)
Years Ended
December 31,
------------
Cash Flow From Operating Activities: 2013 2012
---- ----
Net (Loss) Income $(8.3) $44.2
Adjustments to reconcile Net (Loss) Income to net cash from operating activities-
Depreciation 171.8 164.0
Amortization of intangible assets 85.7 83.6
Loss on early debt extinguishment 33.4 -
Stock-based compensation expense 41.6 40.0
Undistributed equity income from affiliates (16.6) (35.1)
Distributions received from equity affiliates 37.5 -
Deferred income taxes and other tax adjustments (117.9) (90.3)
Impairment and other asset charges 73.1 72.8
Gains on dispositions of assets (0.9) (5.9)
Changes in assets and liabilities-
Trade receivables 66.3 (4.1)
Inventories (138.2) 27.5
Prepaid expenses and other assets (45.1) (37.4)
Trade accounts payable 41.3 26.5
Other liabilities 73.7 183.8
Other, net 20.0 8.4
----
Net Cash Provided by Operating Activities 317.4 478.0
----- -----
Cash Flow From Investing Activities:
Capital expenditures (including instruments placed with or leased to customers) (353.5) (290.1)
Other payments to acquire business - (15.0)
Purchases of intangibles and other investments (18.2) (11.6)
Proceeds from disposition of businesses and assets 1.4 12.7
Net Cash Used in Investing Activities (370.3) (304.0)
------ ------
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 74.6 (10.7)
Excess tax benefit from stock-based compensation arrangements 1.4 2.2
Proceeds from stock options exercised 16.3 7.9
Net Cash Provided by (Used in) Financing Activities 94.3 (0.6)
---- ----
Effect of exchange rate changes on cash and cash equivalents (15.4) 1.2
----- ---
Net change in cash and cash equivalents 26.0 174.6
Cash and cash equivalents at beginning of year 772.1 597.5
-----
Cash and cash equivalents at end of year $798.1 $772.1
====== ======
Supplemental Cash Flow Information:
Cash paid during the year-
Interest $94.4 $102.2
Income taxes, net of refunds $66.5 $10.7
Accrued capital expenditures $42.2 $28.8
Hospira, Inc.
Net Sales by Product Line
(Unaudited)
(dollars in millions)
Three Months Ended December 31,
-------------------------------
2013 2012 % Change at Actual % Change at Constant
Currency Rates Currency Rates(1)
-------------- ----------------
Americas-
Specialty Injectable Pharmaceuticals $572.6 $539.6 6.1 % 7.0 %
Medication Management 179.5 222.6 (19.4)% (18.3)%
Other Pharma 104.8 107.5 (2.5)% (2.0)%
----- -----
Total Americas 856.9 869.7 (1.5)% (0.6)%
Europe, Middle East & Africa ("EMEA")-
Specialty Injectable Pharmaceuticals 88.2 83.3 5.9 % 1.7 %
Medication Management 28.6 31.8 (10.1)% (13.8)%
Other Pharma 21.9 24.6 (11.0)% (11.8)%
---- ----
Total EMEA 138.7 139.7 (0.7)% (4.2)%
Asia Pacific ("APAC")-
Specialty Injectable Pharmaceuticals 71.9 73.3 (1.9)% 7.4 %
Medication Management 13.6 14.2 (4.2)% 2.1 %
Other Pharma 3.3 2.0 65.0 % 65.0 %
--- ---
Total APAC 88.8 89.5 (0.8)% 7.8 %
Net Sales $1,084.4 $1,098.9 (1.3)% (0.4)%
======== ========
Global-
Specialty Injectable Pharmaceuticals $732.7 $696.2 5.2 % 6.4 %
Medication Management 221.7 268.6 (17.5)% (16.7)%
Other Pharma 130.0 134.1 (3.1)% (2.8)%
----- -----
Net Sales $1,084.4 $1,098.9 (1.3)% (0.4)%
======== ========
(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 Adjusted Net Sales GAAP Net Sales % Change at Actual % Change at Constant % Change at Actual % Change at Constant
2013 2013(1)(3) 2012 Currency Rates Currency Rates(2) Currency Rates Currency Rates(2)
---- --------- ---- -------------- ---------------- -------------- ----------------
Americas-
Specialty Injectable Pharmaceuticals $2,163.0 $2,163.0 $1,991.0 8.6 % 9.1 % 8.6 % 9.1 %
Medication Management 629.9 718.3 846.8 (25.6)% (25.0)% (15.2)% (14.5)%
Other Pharma 382.9 382.9 401.6 (4.7)% (4.3)% (4.7)% (4.3)%
----- ----- -----
Total Americas 3,175.8 3,264.2 3,239.4 (2.0)% (1.4)% 0.8 % 1.3 %
EMEA-
Specialty Injectable Pharmaceuticals 332.9 332.9 318.4 4.6 % 1.7 % 4.6 % 1.7 %
Medication Management 97.8 111.0 119.9 (18.4)% (20.9)% (7.4)% (9.9)%
Other Pharma 77.9 77.9 87.5 (11.0)% (10.6)% (11.0)% (10.6)%
---- ---- ----
Total EMEA 508.6 521.8 525.8 (3.3)% (5.5)% (0.8)% (3.0)%
APAC-
Specialty Injectable Pharmaceuticals 263.5 263.5 260.6 1.1 % 7.3 % 1.1 % 7.3 %
Medication Management 42.1 44.8 49.8 (15.5)% (12.0)% (10.0)% (6.6)%
Other Pharma 12.8 12.8 16.5 (22.4)% (21.8)% (22.4)% (21.8)%
---- ---- ----
Total APAC 318.4 321.1 326.9 (2.6)% 2.9 % (1.8)% 3.7 %
Net Sales $4,002.8 $4,107.1 $4,092.1 (2.2)% (1.6)% 0.4 % 0.9 %
======== ======== ========
Global-
Specialty Injectable Pharmaceuticals $2,759.4 $2,759.4 $2,570.0 7.4 % 8.0 % 7.4 % 8.0 %
Medication Management 769.8 874.1 1,016.5 (24.3)% (23.9)% (14.0)% (13.6)%
Other Pharma 473.6 473.6 505.6 (6.3)% (6.0)% (6.3)% (6.0)%
----- ----- -----
Net Sales $4,002.8 $4,107.1 $4,092.1 (2.2)% (1.6)% 0.4 % 0.9 %
======== ======== ========
(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, 2012.
(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.
SOURCE Hospira, Inc.
