Hospira’s net sales increase 6.3% to $1.1B in first quarter 2014

Hospira, Inc. (NYSE: HSP), the world's leading provider of injectable drugs and infusion technologies, today reported results for the first quarter ended March 31, 2014. Net sales for the quarter were $1.1 billion and adjusted* diluted earnings per share were $0.60. (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, first-quarter 2014 diluted earnings per share were $0.40.

"Hospira generated stronger-than-expected first-quarter results, starting the year off on a positive note," said F. Michael Ball, chief executive officer. "Our performance underscores the value of our strategy and the investments we have been making to reinforce our foundation and drive growth. As we mark Hospira's 10-year anniversary as an independent company, we remain committed to advancing wellness around the world, and are well positioned to build on the many achievements of our first decade, with a focus on driving profitable growth and shareholder value."

First-Quarter 2014 Results

The following table highlights selected financial results for the first quarter of 2014 compared to the same period in 2013:

Results under GAAP include items as detailed in the schedules attached to this press release.

Net sales were $1.1 billion in the first quarter of 2014, an increase of 6.3 percent compared to the first quarter of 2013 adjusted* net sales of $988 million. Adjusted* net sales in the first quarter of 2013 exclude the impact of customer sales allowances associated with the company's device strategy, which was launched in 2013 to streamline and modernize Hospira's device portfolio. Net sales benefitted from continued strong global sales of Specialty Injectable Pharmaceuticals (SIP) products, which were driven mainly by improved pricing and increased volume. Volume increased due to continued supply recovery as well as competitor supply issues in the United States. Partially offsetting the quarter's net sales performance was the negative impact of the expected year-over-year decline of U.S. sales of the oncolytic docetaxel; the device ship-hold effected in February 2013; and foreign currency. On a GAAP basis, first-quarter 2013 net sales were $884 million, which included the impact of customer sales allowances in the first quarter of 2013 associated with the company's device strategy.

Adjusted* income from operations increased 49.7 percent to $152 million in the first quarter of 2014, compared to $101 million in the first quarter of 2013. The increase primarily reflects the impact of improved pricing and increased volume in the company's SIP products, partially offset by the device ship-hold, declining docetaxel sales and higher R&D expense. On a GAAP basis, income from operations was $100 million, compared to a loss from operations of $119 million in the first quarter of 2013. In addition to the factors impacting the adjusted* income from operations results, the year-over-year increase in first-quarter GAAP income from operations primarily reflects higher device-strategy related charges in first-quarter 2013.

The effective tax rate on an adjusted basis* in the first quarter of 2014 was an expense of 24.5 percent, compared to an expense of 1.0 percent in the first quarter of 2013. The increase is primarily due to the benefit in 2013 related to the retroactive reinstatement of the U.S. federal R&D tax credit and other corporate provisions for 2012 and 2013. In addition, the effective tax rate on an adjusted* basis reflects a shift in the mix of earnings to higher tax-rate jurisdictions in 2014 compared to 2013. On a GAAP basis, the first-quarter 2014 effective tax rate was an expense of 20.3 percent, compared to a benefit of 41.6 percent for the same period in 2013.

Cash Flow

Cash flow from operations for the first three months of 2014 was $18 million, compared to $21 million in the first three months of 2013. The decrease is primarily due to higher working capital, partially offset by higher income from operations.

Capital expenditures were $95 million for the first three months of 2014, compared to $69 million for the same period in 2013. The increase reflects capital spending primarily associated with modernization initiatives at several of the company's manufacturing facilities, as well as on the construction of the company's facility in Vizag, India.

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™ (dexmedetomidine HCl), the company's proprietary pharmaceutical for sedation.

Hospira continues to expect 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.

The company also continues to expect adjusted* diluted earnings per share for 2014 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:

The adjusting items are shown net of tax in aggregate of $87 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 continues to project that cash flow from operations in 2014 will range between $100 million and $200 million. Capital expenditure projections remain in a range between $375 million to $425 million. The company continues to expect depreciation and amortization to range between $225 million and $275 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, April 30, 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.