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Hospira Reports Fourth-Quarter and Full-Year 2007 Results
Date:2/28/2008

-- Provides Sales and Earnings Projections for 2008 --

LAKE FOREST, Ill., Feb. 28 /PRNewswire-FirstCall/ -- Hospira, Inc. (NYSE: HSP), a leading global specialty pharmaceutical and medication delivery company, today reported results for the fourth quarter and full year ended Dec. 31, 2007.

Fourth Quarter:

-- Net sales increased 33.9 percent to $946.1 million in the fourth

quarter of 2007, compared to $706.5 million in the fourth quarter last

year. Net sales excluding Mayne Pharma sales grew 8.4 percent.

-- Adjusted* fourth-quarter 2007 diluted earnings per share were $0.63

versus $0.43 in 2006. GAAP fourth-quarter 2007 diluted earnings per

share were $0.47 versus $0.30 for the same period last year.

Full Year:

-- Net sales increased 27.8 percent to $3.44 billion versus $2.69 billion

in 2006. Net sales excluding Mayne Pharma sales grew 4.1 percent.

-- Adjusted* full-year 2007 diluted earnings per share were $2.19 versus

$1.94 last year. GAAP full-year 2007 diluted earnings per share were

$0.85 versus $1.48 in 2006.

"In 2007, Hospira delivered another strong year of revenue and profit growth, and we are energized as we begin 2008," said Christopher B. Begley, chairman and chief executive officer. "We are advancing our global performance and long-term goals with an increased focus on innovating our products and business to meet healthcare needs worldwide."

Significant Events in 2007

-- Completed the Mayne Pharma acquisition and made significant progress

integrating the two organizations. Hospira attained its acquisition-

related operational and financial milestones, including red2

-------- -------- -------- -------- -------- --------

Net Income $76,057 $24,243 $100,300 $47,401 $20,372 $67,773

======== ======== ======== ======== ======== ========

Earnings Per

Common Share:

Basic $0.48 $0.16 $0.64 $0.30 $0.13 $0.43

======== ======== ======== ======== ======== ========

Diluted $0.47 $0.16 $0.63 $0.30 $0.13 $0.43

======== ======== ======== ======== ======== ========

Weighted Average

Common Shares

Outstanding:

Basic 157,770 157,770 157,770 155,814 155,814 155,814

======== ======== ======== ======== ======== ========

Diluted 160,282 160,282 160,282 157,629 157,629 157,629

======== ======== ======== ======== ======== ========

Statistics

(as a % of

Net Sales,

except for

income tax rate)

------------------

Gross Profit 35.8% 38.4% 35.4% 36.6%

R&D 5.7% 5.6% 7.8% 7.7%

S,G&A 17.7% 16.6% 15.8% 15.0%

Income From

Operations 12.0% 16.2% 10.4% 13.9%

Income Before

Income Taxes 9.5% 13.5% 9.8% 13.3%

Net Income 8.0% 10.6% 6.7% 9.6%

Income Tax Rate 15.2% 21.5% 31.6% 27.7%

% Change vs. Prior Year

------------------------

GAAP Adjusted

------ --------

Net sales 33.9 % 33.9 %

Cost of products sold 33.2 % 30.1 %

Gross Profit 35.3 % 40.5 %

Research and development (2.4)% (2.1)%

Acquired in-process research and

development (68.1)% nm

Selling, general and administrative 50.2 % 47.5 %

Income From Operations 54.9 % 56.6 %

Interest expense 298.5 % 316.2 %

Other income, net 104.7 % 104.7 %

Income Before Income Taxes 29.4 % 36.3 %

Income tax expense (37.8)% 5.8 %

Net Income 60.5 % 48.0 %

Earnings Per Common Share:

Basic 60.0 % 48.8 %

Diluted 56.7 % 46.5 %

Weighted Average Common Shares Outstanding:

Basic 1.3 % 1.3 %

Diluted 1.7 % 1.7 %

A -- Includes intangible assets amortization of $12,515 related to the

Mayne Pharma acquisition; charges of $4,137 related to the planned

closures of the Donegal, Ireland; Ashland, OH; Montreal, Canada; and

North Chicago, IL facilities as part of Hospira's manufacturing

optimization initiatives; Mayne Pharma integration charges of $927;

and $7,508 related to the impairment of the intangible asset for

brain-function monitoring devices.

B -- Acquisition integration charges.

C -- Acquired in-process research and development related to a product

acquisition.

D -- Other acquisition-related (charge) refund: refund of bridge loan fees

incurred as a result of the Mayne Pharma acquisition expensed upon

refinancing of loan during the first quarter.

E -- Reflects the tax effect of the above adjustments.

F -- Includes charges of $14,009 related to the planned closures of the

Donegal, Ireland; Ashland, OH; Montreal, Canada; and North Chicago,

IL facilities as part of Hospira's manufacturing optimization

initiatives; a reduction of the obligation associated with the sale

of the Salt Lake City, UT manufacturing plant to ICU Medical

($5,725); non-recurring transition charges of $130 as a result of the

spin-off from Abbott Laboratories; and Mayne Pharma integration

charges of $114.

G -- Non-recurring transition charges as a result of the spin-off from

Abbott Laboratories, integration and other acquisition-related

charges.

H -- Acquired in-process research and development related to the

acquisition of BresaGen.

nm = Percent change is not meaningful.

Hospira, Inc.

Reconciliation of Condensed Consolidated Statements of Income

(Unaudited)

(dollars and shares in thousands, except per share amounts)

Twelve Months Ended December 31,

-------------------------------------------------------------

2007 2006

------------------------------ -----------------------------

GAAP Adjustments Adjusted GAAP Adjustments Adjusted

--------- -------- --------- --------- ------- ---------

Net sales $3,436,238 $ - $3,436,238 $2,688,505 $ - $2,688,505

Cost of

products

sold 2,262,315 (151,168)A 2,111,147 1,749,262 (54,225)G 1,695,037

--------- -------- --------- --------- ------- ---------

Gross

Profit 1,173,923 151,168 1,325,091 939,243 54,225 993,468

Research and

development 201,232 (1,604)B 199,628 161,621 (3,794)H 157,827

Acquired

in-process

research and

development 87,987 (87,987)C - 10,000 (10,000)I -

Selling,

general and

administra-

tive 582,078 (36,153)B 545,925 428,038 (28,592)H 399,446

--------- -------- --------- --------- ------- ---------

Income

From

Operations 302,626 276,912 579,538 339,584 96,611 436,195

Interest

expense 134,517 (840)D 133,677 31,024 - 31,024

Other income,

net (19,677) (5,653)E (25,330) (16,137) - (16,137)

--------- -------- --------- --------- ------- ---------

Income Before

Income

Taxes 187,786 283,405 471,191 324,697 96,611 421,308

Income tax

expense 51,028 69,218 F 120,246 87,018 22,519 F 109,537

--------- -------- --------- --------- ------- ---------

Net Income $136,758 $214,187 $350,945 $237,679 $74,092 $311,771

========= ======== ========= ========= ======= =========

Earnings

Per Common

Share:

Basic $0.87 $1.37 $2.24 $1.51 $0.47 $1.98

========= ======== ========= ========= ======= =========

Diluted $0.85 $1.34 $2.19 $1.48 $0.46 $1.94

========= ======== ========= ========= ======= =========

Weighted Average

Common Shares

Outstanding:

Basic 156,919 156,919 156,919 157,368 157,368 157,368

========= ======== ========= ========= ======= =========

Diluted 160,164 160,164 160,164 160,424 160,424 160,424

========= ======== ========= ========= ======= =========

Statistics

(as a % of

Net Sales,

except for

income tax rate)

------------------

Gross Profit 34.2% 38.6% 34.9% 37.0%

R&D 5.9% 5.8% 6.0% 5.9%

S,G&A 16.9% 15.9% 15.9% 14.9%

Income From

Operations 8.8% 16.9% 12.6% 16.2%

Income Before

Income Taxes 5.5% 13.7% 12.1% 15.7%

Net Income 4.0% 10.2% 8.8% 11.6%

Income Tax Rate 27.2% 25.5% 26.8% 26.0%

% Change vs. Prior Year

------------------------

GAAP Adjusted

------ --------

Net sales 27.8 % 27.8 %

Cost of products sold 29.3 % 24.5 %

Gross Profit 25.0 % 33.4 %

Research and development 24.5 % 26.5 %

Acquired in-process research and development 779.9 % nm

Selling, general and administrative 36.0 % 36.7 %

Income From Operations (10.9)% 32.9 %

Interest expense 333.6 % 330.9 %

Other income, net 21.9 % 57.0 %

Income Before Income Taxes (42.2)% 11.8 %

Income tax expense (41.4)% 9.8 %

Net Income (42.5)% 12.6 %

Earnings Per Common Share:

Basic (42.4)% 13.1 %

Diluted (42.6)% 12.9 %

Weighted Average Common Shares Outstanding:

Basic (0.3)% (0.3)%

Diluted (0.2)% (0.2)%

A -- Includes inventories step-up charge of $53,113 and intangible assets

amortization of $47,455 related to the Mayne Pharma acquisition;

charges of $37,571 related to the planned closures of the Donegal,

Ireland; Ashland, OH; Montreal, Canada; and North Chicago, IL

facilities as part of Hospira's manufacturing optimization

initiatives; a reduction of the obligation associated with the 2005

sale of the Salt Lake City, UT manufacturing plant to ICU Medical

($1,579); Mayne Pharma integration charges of $7,100; and $7,508

related to the impairment of the intangible asset for brain-function

monitoring devices.

B -- Acquisition integration charges.

C -- Acquired in-process research and development related to the

acquisition of Mayne Pharma of $84,800 and $3,187 related to a

product acquisition.

D -- Other acquisition-related charge: $2,265 of bridge loan fees incurred

as a result of the Mayne Pharma acquisition expensed upon refinancing

of loan during the first quarter net of a refund of $1,425 received

in the fourth quarter.

E -- Other acquisition-related charge: foreign exchange losses related to

the Mayne Pharma acquisition.

F -- Reflects the tax effect of the above adjustments, except for the

non-tax deductible write-off of acquired in-process research and

development related to certain acquisitions.

G -- Includes charges of $64,251 related to the planned closures of the

Donegal, Ireland; Ashland, OH; Montreal, Canada; and North Chicago,

IL facilities as part of Hospira's manufacturing optimization

initiatives; a reduction of the obligation associated with the sale

of the Salt Lake City, UT manufacturing plant to ICU Medical

($6,825); a gain on the sale of the Donegal, Ireland facility

($7,851); Mayne Pharma integration charges of $114; and non-recurring

transition charges of $4,536 as a result of the spin-off from

Abbott Laboratories.

H -- Non-recurring transition charges as a result of the spin-off from

Abbott Laboratories, integration and other acquisition-related

charges.

I -- Acquired in-process research and development related to the

acquisition of BresaGen.

nm = Percent change is not meaningful.

Hospira, Inc.

Reconciliation of Diluted Earnings Per Share

(Unaudited)

Three Months Ended Twelve Months Ended

December 31, December 31,

----------------- ------------------

2007 2006 2007 2006

------ ------ ------ ------

Diluted Earnings Per

Share - GAAP $0.47 $0.30 $0.85 $1.48

Adjustments:

Mayne Pharma acquisition

related:

Acquired in-process

research and

development - - 0.53 -

Inventories step-up

charge - - 0.23 -

Integration and

other acquisition-

related charges 0.04 0.01 0.21 0.01

Intangible assets

amortization 0.06 - 0.20 -

Charges related to

manufacturing optimization

initiatives 0.02 0.07 0.14 0.30

Intangible asset impairment

for brain-function monitoring

devices 0.03 - 0.03 -

Acquired in-process

research and development related

to product acquisition 0.01 - 0.01 -

Non-recurring transition

charges as a result of

the spin-off from

Abbott Laboratories - 0.02 - 0.16

Acquired in-process

research and

development - BresaGen - 0.06 - 0.06

Gain on the sale of

the Donegal, Ireland facility - (0.03) - (0.04)

Reduction of obligation

related to the 2005 sale

of the Salt Lake City, UT

manufacturing plant - - (0.01) (0.03)

------- ------ ------ -------

Subtotal of Adjustments 0.16 0.13 1.34 0.46

Diluted Earnings per Share -

Adjusted $0.63 $0.43 $2.19 $1.94

======= ====== ====== =======

Hospira, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(dollars in thousands)

December 31, December 31,

Assets 2007 2006

---------- ----------

Current Assets:

Cash and cash equivalents $241,068 $322,045

Net trade receivables 558,989 335,334

Inventories 766,620 626,934

Prepaid expenses, deferred income

taxes and other receivables 274,343 238,577

---------- ----------

Total Current Assets 1,841,020 1,522,890

---------- ----------

Net property and equipment 1,276,934 1,039,431

Net intangible assets 553,977 17,103

Goodwill 1,240,870 91,857

Deferred income taxes 79,435 76,367

Investments 23,742 31,341

Other assets 68,688 68,598

---------- ----------

Total Assets $5,084,666 $2,847,587

========== ==========

Liabilities and Shareholders' Equity

Current Liabilities:

Short-term borrowings $58,494 $4,532

Trade accounts payable 190,312 130,968

Salaries, wages and commissions 143,597 102,037

Other accrued liabilities and

deferred income taxes 401,886 368,689

---------- ----------

Total Current Liabilities 794,289 606,226

---------- ----------

Long-term debt 2,184,385 702,044

Post-retirement obligations, deferred income

taxes and other long-term liabilities 360,768 178,228

Commitments and Contingencies

Shareholders' Equity 1,745,224 1,361,089

---------- ----------

Total Liabilities and Shareholders'

Equity $5,084,666 $2,847,587

========== ==========

Hospira, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(dollars in thousands)

Twelve Months Ended

December 31,

-------------------------

2007 2006

---------- ----------

Cash Flow From Operating Activities:

Net income $136,758 $237,679

Adjustments to reconcile net income to

net cash from operating activities--

Depreciation 183,031 154,790

Amortization of intangibles 52,108 ucing its

acquisition-related debt by $400 million, primarily funded by the

$551 million in cash flow generated from operations in 2007.

-- Launched four new generic injectables in selected countries from

Hospira's research and development (R&D) pipeline, and introduced

22 generic compounds already in the company's portfolio into additional

countries around the world.

-- Received approval from the European Commission to market Hospira's

first biosimilar, Retacrit(TM) (epoetin zeta), in Europe for the

treatment of anemia associated with chronic renal failure and

chemotherapy.

-- Introduced Hospira MedNet(R), a scalable and upgradeable patient safety

platform, in Australia, its first market outside North America.

-- Broadened the U.S. launch, late in the year, of the Symbiq(R) infusion

system, an advanced medication management system that combines ease of

use, reliability and next-generation technology.

Fourth-quarter Financial Highlights

The following table highlights net sales, net income and diluted earnings per share (EPS) results for the quarter ended Dec. 31:

In $ millions, GAAP Adjusted*

except per Three Months Ended Three Months Ended

share amounts Dec. 31, Dec. 31,

---------------- % ---------------- %

2007 2006 Change 2007 2006 Change

------ ------ ------ ------ ------ ------

Net Sales $946.1 $706.5 33.9% n/a n/a n/a

Net Income $76.1 $47.4 60.5% $100.3 $67.8 48.0%

Diluted EPS $0.47 $0.30 56.7% $0.63 $0.43 46.5%

The primary components of the year-over-year increase in net sales for the fourth quarter are as follows:

Write-off of acquired in-process

research and development 87,987 10,000

Step-up value of acquired inventories sold 53,113 -

Stock-based compensation expense 39,427 35,900

Impairment of long-lived assets 7,508 -

Net gains on sales of assets (4,988) (7,851)

Changes in assets and liabilities--

Trade receivables (30,623) (1,132)

Inventories 34,429 (106,056)

Prepaid expenses and other assets 17,941 (19,660)

Trade accounts payable 7,052 7,899

Other liabilities (40,136) 88,240

Other, net 7,444 22,454

---------- ----------

Net Cash Provided by Operating Activities 551,051 424,190

---------- ----------

Cash Flow From Investing Activities:

Capital expenditures (including instruments

placed with or leased to customers of

$36,694 in 2007 and $46,283 in 2006) (210,517) (234,961)

Acquisition of Mayne Pharma,

net of cash acquired (1,961,285) -

Acquisitions, including payments for

deferred consideration (19,240) (17,109)

Purchases of intangibles and other

investments (5,501) (18,449)

Settlements of foreign currency contracts (55,701) -

Proceeds from dispositions of product rights 13,771 -

Proceeds from sale of facility - 19,283

Sales of marketable securities 10,434 -

---------- ----------

Net Cash Used in Investing Activities (2,228,039) (251,236)

---------- ----------

Cash Flow From Financing Activities:

Issuance of long-term debt, net of

fees paid 3,336,198 -

Repayment of long-term debt (1,825,165) (144)

Other borrowings, net (6,198) 2,653

Payment to Abbott Laboratories for

international assets - (126,235)

Common stock repurchased - (299,766)

Excess tax benefit from stock-based

compensation arrangements 2,282 3,403

Proceeds from stock options exercised 73,102 42,361

---------- ----------

Net Cash Provided by (Used in)

Financing Activities 1,580,219 (377,728)

---------- ----------

Effect of exchange rate changes on cash

and cash equivalents 15,792 6,209

---------- ----------

Net change in cash and cash equivalents (80,977) (198,565)

Cash and cash equivalents at beginning

of year 322,045 520,610

---------- ----------

Cash and cash equivalents at end of year $241,068 $322,045

========== ==========

Supplemental Cash Flow Information:

Cash paid during the year-

Interest $127,445 $43,989

Income taxes, net $72,444 $28,592

Hospira, Inc.

Net Sales by Product Line

(Unaudited)

(dollars in thousands)

Three Months Ended Twelve Months Ended

December 31, December 31,

-------------------------- -----------------------------

2007 2006 % Change 2007 2006 % Change

-------- -------- -------- ---------- ---------- --------

U.S. --

Specialty

Injectable

Pharmaceuticals $255,858 $216,642 18.1 % $875,619 $807,557 8.4 %

Medication

Delivery

Systems 229,956 228,985 0.4 % 890,005 855,483 4.0 %

Injectable

Pharmaceutical

Contract

Manufacturing 37,400 43,387 (13.8)% 149,032 183,266 (18.7)%

Sales to Abbott

Laboratories 18,920 19,604 (3.5)% 74,711 90,464 (17.4)%

Mayne Pharma 25,422 - nm 101,284 - nm

Other 70,418 71,982 (2.2)% 283,447 283,731 (0.1)%

-------- -------- ---------- ----------

Total U.S. 637,974 580,600 9.9 % 2,374,098 2,220,501 6.9 %

-------- -------- ---------- ----------

International --

Sales to Third

Parties 130,514 107,445 21.5 % 464,984 397,677 16.9 %

Sales to Abbott

Laboratories 22,715 18,425 23.3 % 60,597 70,327 (13.8)%

Mayne Pharma 154,862 - nm 536,559 - nm

-------- -------- ---------- ----------

Total

International 308,091 125,870 144.8 % 1,062,140 468,004 127.0 %

-------- -------- ---------- ----------

-------- -------- ---------- ----------

Net Sales $946,065 $706,470 33.9 % $3,436,238 $2,688,505 27.8 %

======== ======== ========== ==========

Net Sales

excluding

Mayne Pharma $765,781 $706,470 8.4 % $2,798,395 $2,688,505 4.1 %

======== ======== ========== ==========

nm = Percent change is not meaningful.

Hospira, Inc.

Segment Information

(Unaudited)

(dollars in thousands)

Three Months Ended December 31,

----------------------------------------------------------

Net Sales Income from Operations

------------------ -------------------

% %

2007 2006 Change 2007 2006 Change

-------- -------- ------- -------- ------- --------

U.S. $637,974 $580,600 9.9 % $96,894 A $106,502 A (9.0)%

International 308,091 125,870 144.8 % 42,258 B (13,873)B 404.6 %

-------- -------- -------- -------

Total

reportable

segments $946,065 $706,470 33.9 % 139,152 92,629 50.2 %

======== ========

Corporate

functions (25,173)C (19,056)C 32.1 %

-------- -------

Income from

operations 113,979 73,573 54.9 %

Other, net (24,313)D (4,282) 467.8 %

-------- -------

Income before

income taxes $89,666 $69,291 29.4 %

======== =======

Included in the reported Income before

income taxes above, are the following charges:

A -- U.S.

Mayne Pharma acquisition related:

Acquired in-process research and

development $ - $ -

Inventories step-up charge - -

Integration and other acquisition-related

charges 1,203 1,934

Intangible assets amortization 3,270 -

Charges related to manufacturing

optimization initiatives 8,054 9,827

Non-recurring transition charges as a

result of the spin-off from Abbott

Laboratories, integration and other

acquisition-related charges 9 3,851

Intangible asset impairment for the

brain-function monitoring devices 7,508 -

Reduction of obligation related to the

2005 sale of the Salt Lake City, UT

manufacturing plant - (5,725)

-------- -------

Total U.S. 20,044 9,887

-------- -------

B -- International

Mayne Pharma acquisition related:

Acquired in-process research and

development - -

Inventories step-up charge - -

Integration and other acquisition-related

charges 6,924 -

Intangible assets amortization 9,245 -

Charges related to manufacturing

optimization initiatives (3,917) 4,182

Non-recurring transition charges as a

result of the spin-off from Abbott

Laboratories, integration and other

acquisition-related charges - 287

Acquired in-process research and

development - BresaGen - 10,000

Acquired in-process research and

development related to product

acquisition 3,187 -

Gain on the sale of the Donegal, Ireland

facility - -

-------- -------

Total International 15,439 14,469

-------- -------

C -- Corporate

Integration and other acquisition-related

charges 4,118 -

Non-recurring transition charges as a

result of the spin-off from Abbott

Laboratories - 148

-------- -------

Total Corporate 4,118 148

-------- -------

D -- Other, net

Integration and other acquisition-related

charges, net of refund (1,425) -

-------- -------

Total Other, net (1,425) -

-------- -------

Total $38,176 $24,504

======== =======

Hospira, Inc.

Segment Information

(Unaudited)

(dollars in thousands)

Twelve Months Ended December 31,

------------------------------------------------------------

Net Sales Income from Operations

--------------------- -------------------

% %

2007 2006 Change 2007 2006 Change

---------- ---------- ------- -------- -------- -------

U.S. $2,374,098 $2,220,501 6.9 % $308,494 A $384,240 E (19.7)%

International 1,062,140 468,004 127.0 % 76,636 B 15,572 F 392.1 %

---------- ---------- -------- --------

Total

reportable

segments $3,436,238 $2,688,505 27.8 % 385,130 399,812 (3.7)%

========== ==========

Corporate

functions (82,504)C (60,228)G 37.0 %

-------- --------

Income from

operations 302,626 339,584 (10.9)%

Other, net (114,840)D (14,887) 671.4 %

-------- --------

Income before

income taxes $187,786 $324,697 (42.2)%

======== ========

Included in the reported Income before

income taxes above, are the following charges:

A -- U.S.

Mayne Pharma acquisition related:

Acquired in-process research and

development $66,300 $-

Inventories step-up charge 11,171 -

Integration and other acquisition-

related charges 14,841 1,934

Intangible assets amortization 11,990 -

Charges related to manufacturing

optimization initiatives 32,216 35,333

Non-recurring transition charges as a

result of the spin-off from Abbott

Laboratories, integration and other

acquisition-related charges 575 23,741

Intangible asset impairment for the

brain-function monitoring devices 7,508 -

Reduction of obligation related to the

2005 sale of the Salt Lake City, UT

manufacturing plant (1,579) (6,825)

-------- --------

Total U.S. 143,022 54,183

-------- --------

B -- International

Mayne Pharma acquisition related:

Acquired in-process research and

development 18,500 -

Inventories step-up charge 41,942 -

Integration and other acquisition-

related charges 10,009 -

Intangible assets amortization 35,465 -

Charges related to manufacturing

optimization initiatives 5,355 28,918

Non-recurring transition charges as a

result of the spin-off from Abbott

Laboratories, integration and other

acquisition-related charges - 8,613

Acquired in-process research and

development - BresaGen - 10,000

Acquired in-process research and

development related to product

acquisition 3,187 -

Gain on the sale of the Donegal, Ireland

facility - (7,851)

-------- --------

Total International 114,458 39,680

-------- --------

C -- Corporate

Integration and other acquisition-

related charges 19,432 -

Non-recurring transition charges as a

result of the spin-off from Abbott

Laboratories - 2,748

-------- --------

Total Corporate 19,432 2,748

-------- --------

D -- Other, net

Integration and other acquisition-

related charges, net of refund 6,493 -

-------- --------

Total Other, net 6,493 -

-------- --------

Total $283,405 $96,611

======== ========

p>

-- Mayne Pharma acquisition -- 25.5 percentage points;

-- Favorable volume/mix in the legacy Hospira business -- 6.1 percentage

points;

-- Favorable foreign currency translation -- 1.7 percentage points; and

-- Favorable pricing in the U.S. -- 0.4 percentage point.

A schedule detailing net sales by product line for the three- and 12-month periods ended Dec. 31, 2007 and 2006, is attached to this press release.

In conjunction with the previous table, the following summarizes selected financial results for the fourth quarter of 2007 compared to the same period in 2006:

In $ millions GAAP Adjusted*

Three Months Ended Three Months Ended

Dec. 31, Dec. 31,

---------------- % ---------------- %

2007 2006 Change 2007 2006 Change

------ ------ ------ ------ ------ ------

Gross Profit $338.6 $250.3 35.3% $363.7 $258.9 40.5%

R&D $53.8 $55.1 (2.4)% $53.4 $54.6 (2.1)%

S,G&A $167.7 $111.7 50.2% $156.7 $106.2 47.5%

Income from

Operations $114.0 $73.6 54.9% $153.6 $98.1 56.6%

Statistics (as a % of Net Sales)

--------------------------------

Gross Profit 35.8% 35.4% 38.4% 36.6%

R&D 5.7% 7.8% 5.6% 7.7%

S,G&A 17.7% 15.8% 16.6% 15.0%

Income from

Operations 12.0% 10.4% 16.2% 13.9%

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

The year-over-year improvement in adjusted* gross profit as a percentage of net sales, or adjusted* gross margin, was primarily driven by a better sales mix of Hospira legacy products.

The decrease in adjusted* R&D expense was due to the inclusion of a $21.7 million upfront payment in the fourth quarter of 2006 to STADA Arzneimittel AG for a biogenerics R&D collaboration, which was partially offset by the inclusion of Mayne Pharma's R&D expense in 2007.

The inclusion of the Mayne Pharma results accounted for a portion of the increase in adjusted* Selling, General and Administrative (S,G&A) expense. In addition, the timing of expenses and increased selling expenses contributed to the adjusted* S,G&A results.

The increase in adjusted* income from operations as a percentage of net sales, or adjusted* operating margin, was driven by the higher adjusted* gross margin and reduced adjusted* R&D spending as a percentage of net sales. The increase was partially offset by higher adjusted* S,G&A results as a percentage of net sales.

Full-year 2007 Financial Highlights

The following table highlights net sales, net income and diluted earnings per share results for the full year ended Dec. 31:

In $ millions, GAAP Adjusted*

except per Twelve Months Ended Twelve Months Ended

share amounts Dec. 31, Dec. 31,

---------------- % ---------------- %

2007 2006 Change 2007 2006 Change

------ ------ ------ ------ ------ ------

Net Sales $3,436.2 $2,688.5 27.8% n/a n/a n/a

Net Income $136.8 $237.7 (42.5)% $350.9 $311.8 12.6%

Diluted EPS $0.85 $1.48 (42.6)% $2.19 $1.94 12.9%

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

Cash Flow

Cash flow from operations for the full-year 2007 was $551.1 million, up from $424.2 million in 2006.

Capital expenditures were $210.5 million for the full-year 2007, compared to $235.0 million for the same period in 2006. The decline is due to lower expenditures in 2007 related to the company's manufacturing optimization initiatives and to information technology requirements as the company completed the build-out of its independent system in 2006.

2008 Projections

Hospira expects net sales growth for 2008 to be approximately 6 to 8 percent.

The company projects that adjusted* diluted earnings per share for 2008 will be in the range of $2.45 to $2.55. The reconciliation between the projected adjusted* diluted earnings per share and GAAP diluted earnings per share follows:

Diluted earnings per share -- adjusted* $2.45 - $2.55

--------------

Estimated charges related to planned facilities

optimization initiatives (mid-point of an estimated

range of $0.07 to $0.09 per diluted share for 2008) ($0.08)

Estimated integration and other acquisition-related

expenses (mid-point of an estimated range of $0.07 to

$0.09 per diluted share for 2008) ($0.08)

Estimated $59 million for the amortization of intangibles

related to the Mayne Pharma acquisition ($0.24)

--------------

Diluted earnings per share -- GAAP $2.05 - $2.15

==============

The company projects that cash flow from operations in 2008 will be in the $575 million to $625 million range. The company also expects that depreciation and amortization, excluding amortization of intangibles related to the Mayne Pharma acquisition, will be between $185 million and $195 million. Capital expenditures are projected to be between $190 million and $210 million.

*Use of Non-GAAP Financial Measures

Non-GAAP financial measures used in this press release are reconciled to the most comparable measures calculated in accordance with GAAP in the schedules attached to this release. For more information regarding these non-GAAP financial measures, please see Hospira's Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.

Webcast

Hospira will hold a conference call for investors and media at 8 a.m. Central Time on Thursday, Feb. 28, 2008. A live webcast of the conference call will be available at http://www.hospirainvestor.com. Listeners should log on approximately 10 minutes in advance to ensure proper computer setup for receiving the webcast. A replay will be available on the Hospira Web site for 30 days following the call.

About Hospira

Hospira, Inc. is a global specialty pharmaceutical and medication delivery company dedicated to Advancing Wellness(TM). As the world leader in specialty generic injectable pharmaceuticals, Hospira offers one of the broadest portfolios of generic acute-care and oncology injectables, as well as integrated infusion therapy and medication management solutions. Through its products, Hospira helps improve the safety, cost and productivity of patient care. The company is headquartered in Lake Forest, Ill., and has more than 14,000 employees. Learn more at http://www.hospira.com.

Private Securities Litigation Reform Act of 1995 --

A Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections of certain measures of Hospira's results of operations, projections of certain charges and expenses, statements regarding the financial impact of the acquisition of Mayne Pharma, and other statements regarding Hospira's goals and strategy. Hospira cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Hospira's operations and may cause actual results to be materially different from expectations include the risks, uncertainties and factors discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Hospira's latest Annual Report on Form 10-K, filed with the Securities and Exchange Commission, which is incorporated by reference. Hospira undertakes no obligation to release publicly any revisions to forward-looking statements as the result of subsequent events or developments.

Hospira, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

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

Three Months Ended Twelve Months Ended

December 31, December 31,

------------------ % --------------------- %

2007 2006 Change 2007 2006 Change

-------- -------- ------- ---------- ---------- -------

Net sales $946,065 $706,470 33.9 % $3,436,238 $2,688,505 27.8 %

Cost of

products sold 607,460 456,137 33.2 % 2,262,315 1,749,262 29.3 %

-------- -------- ------- ---------- ---------- -------

Gross Profit 338,605 250,333 35.3 % 1,173,923 939,243 25.0 %

Research and

development 53,754 55,095 (2.4)% 201,232 161,621 24.5 %

Acquired

in-process

research and

development 3,187 10,000 (68.1)% 87,987 10,000 779.9 %

Selling,

general and

administrative 167,685 111,665 50.2 % 582,078 428,038 36.0 %

-------- -------- ------- ---------- ---------- -------

Income From

Operations 113,979 73,573 54.9 % 302,626 339,584 (10.9)%

Interest expense 31,976 8,025 298.5 % 134,517 31,024 333.6 %

Other income,

net (7,663) (3,743) 104.7 % (19,677) (16,137) 21.9 %

-------- -------- ------- ---------- ---------- -------

Income Before

Income Taxes 89,666 69,291 29.4 % 187,786 324,697 (42.2)%

Income tax

expense 13,609 21,890 (37.8)% 51,028 87,018 (41.4)%

-------- -------- ------- ---------- ---------- -------

Net Income $76,057 $47,401 60.5 % $136,758 $237,679 (42.5)%

======== ======== ======= ========== ========== =======

Earnings Per

Common Share:

Basic $0.48 $0.30 60.0 % $0.87 $1.51 (42.4)%

======== ======== ======= ========== ========== =======

Diluted $0.47 $0.30 56.7 % $0.85 $1.48 (42.6)%

======== ======== ======= ========== ========== =======

Weighted Average

Common Shares

Outstanding:

Basic 157,770 155,814 1.3 % 156,919 157,368 (0.3)%

======== ======== ======= ========== ========== =======

Diluted 160,282 157,629 1.7 % 160,164 160,424 (0.2)%

======== ======== ======= ========== ========== =======

Hospira, Inc.

Reconciliation of Condensed Consolidated Statements of Income

(Unaudited)

(dollars and shares in thousands, except per share amounts)

Three Months Ended December 31,

----------------------------------------------------------

2007 2006

---------------------------- ----------------------------

GAAP Adjustments Adjusted GAAP Adjustments Adjusted

-------- -------- -------- -------- -------- --------

Net sales $946,065 $ - $946,065 $706,470 $ - $706,470

Cost of

products sold 607,460 (25,087)A 582,373 456,137 (8,528)F 447,609

-------- -------- -------- -------- -------- --------

Gross Profit 338,605 25,087 363,692 250,333 8,528 258,861

Research and

development 53,754 (327)B 53,427 55,095 (528)G 54,567

Acquired

in-process

research and

development 3,187 (3,187)C - 10,000 (10,000)H -

Selling,

general and

administrative 167,685 (11,000)B 156,685 111,665 (5,448)G 106,217

-------- -------- -------- -------- -------- --------

Income From

Operations 113,979 39,601 153,580 73,573 24,504 98,077

Interest expense 31,976 1,425 D 33,401 8,025 - 8,025

Other income,

net (7,663) - (7,663) (3,743) - (3,743)

-------- -------- -------- -------- -------- --------

Income Before

Income Taxes 89,666 38,176 127,842 69,291 24,504 93,795

Income tax

expense 13,609 13,933 E 27,542 21,890 4,132 E 26,02
'/>"/>

SOURCE Hospira, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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