Hospira 10-Q 29 Jul 09 2009 Q2 Quarterly report Financial data

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Statement of Income
Net sales	956.9	901.6	1816.6	1790.3
Cost of products sold	610.7	566.4	1150.8	1138.1
Restructuring and impairment	55.9	6.3	65.3	9.3
Research and development	52.9	58	102.9	107.9
Acquired in-process research and development		0.5		0.5
Selling, general and administrative	146.3	152.7	291.8	305.1
Total operating cost and expenses	865.8	783.9	1610.8	1560.9
Income From Operations	91.1	117.7	205.8	229.4
Interest expense	28.2	28.2	55.1	59.6
Other expense (income), net	14.5		14.2	-4.1
Income Before Income Taxes	48.4	89.5	136.5	173.9
Income tax expense (benefit)	22.9	20.4	-54.5	39.4
Net Income	25.5	69.1	$191	134.5
Earnings Per Common Share:
Basic	0.16	0.43	1.19	0.85
Diluted	0.16	0.43	1.18	0.83
Weighted Average Common Shares Outstanding:
Basic	160.5	159.1	160	158.9
Diluted	162.4	161.5	161.5	161.2

1_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Cash Flow From Operating Activities:
Net income	$191	134.5
Adjustments to reconcile net income to net cash from operating activities-
Depreciation	83.2	93.9
Amortization of intangible assets	30.7	34.4
Write-off of acquired in-process research and development		0.5
Stock-based compensation expense	22.7	24.5
Deferred income tax and other tax adjustments	-98.3	-4.6
Impairment and other asset charges	69.7
Net gains on sales of assets		-0.5
Changes in assets and liabilities-
Trade receivables	-2.8	-44.5
Inventories	-6.3	-51.2
Prepaid expenses and other assets	-11.4	13.5
Trade accounts payable	-32.8	9.8
Other liabilities	-18.2	-41.5
Other, net	8.5	13.8
Net Cash Provided by Operating Activities	236	182.6
Cash Flow From Investing Activities:
Capital expenditures (including instruments placed with or leased to customers)	-77.8	-86.7
Acquisitions, net of cash acquired, and payments for contingent consideration	-14.2	-20.4
Purchases of intangibles and other investments	-3.2	-42.3
Proceeds from sale of facilities		0.8
Purchases of marketable equity securities		-24.5
Net Cash Used in Investing Activities	-95.2	-173.1
Cash Flow From Financing Activities:
Issuance of long-term debt, net of fees paid	246.7
Repayment of long-term debt	-306.1	-85.1
Other borrowings, net	0.7	7
Excess tax benefit from stock-based compensation arrangements	0.2	1
Proceeds from stock options exercised	35.4	22.5
Net Cash Used in Financing Activities	-23.1	-54.6
Effect of exchange rate changes on cash and cash equivalents	7	5.4
Net change in cash and cash equivalents	124.7	-39.7
Cash and cash equivalents at beginning of period	483.8	241.1
Cash and cash equivalents at end of period	608.5	201.4
Cash Paid During the Period-
Interest	54.8	62.4
Income taxes, net of refunds	18.7	27.7

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (USD $)
In Millions	Jun. 30, 2009	Dec. 31, 2008
Current Assets:
Cash and cash equivalents	608.5	483.8
Trade receivables, less allowances of $7.7 in 2009 and $6.7 in 2008	594.4	583.4
Inventories	864.7	830.5
Deferred income taxes	191.7	172.2
Prepaid expenses and other current assets	48.5	35.7
Other receivables	50.5	43.7
Total Current Assets	2358.3	2149.3
Property and equipment, net	1183.2	1192.1
Intangible assets, net	399.7	404.4
Goodwill	1189.5	1167.4
Deferred income taxes	62.1	70.1
Investments	41.3	37.6
Other assets	54.8	53.2
Total Assets	5288.9	5074.1
Current Liabilities:
Short-term borrowings	402	338.3
Trade accounts payable	200.4	231.5
Salaries, wages and commissions	121.2	144.7
Deferred income taxes		1.5
Other accrued liabilities	340.7	331.5
Total Current Liabilities	1064.3	1047.5
Long-term debt	1705.8	1,834
Deferred income taxes	29.9	25.2
Post-retirement obligations	200.3	195.5
Other long-term liabilities	94.3	195.5
Commitments and Contingencies
Total Shareholders' Equity	2194.3	1776.4
Total Liabilities and Shareholders' Equity	5288.9	5074.1

Balance Sheet Parenthetical Dis

Balance Sheet Parenthetical Disclosures (USD $)
In Millions	Jun. 30, 2009	Dec. 31, 2008
Balance Sheets
Trade receivables allowances of $7.7 in 2009 and $6.7 in 2008	7.7	6.7

2_Condensed Consolidated Statem

Condensed Consolidated Statement of Changes In Stockholders Equity (USD $)
In Millions	Common Stock	Treasury Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Total
Balance at beginning of period, shares at Dec. 31, 2008	159.6
Balance at beginning of period at Dec. 31, 2008	1.7	-299.8	1234.2	1136.2	-295.9	1776.4
Net income				191		191
Other comprehensive income					166.3	166.3
Changes in shareholders' equity related to incentive stock programs			60.6			60.6
Changes in shareholders' equity related to incentive stock programs, shares	1.5
Balance at end of period at Jun. 30, 2009	1.7	-299.8	1294.8	1327.2	-129.6	2194.3
Balance and end of period, shares at Jun. 30, 2009	161.1
Balance at beginning of period at Mar. 31, 2009		-299.8
Balance at end of period at Jun. 30, 2009		-299.8

Basis of Presentation and Accou

Basis of Presentation and Accounting Policies
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Basis of Presentation and Accounting Policies	Note1 Basis of Presentation and Accounting Policies The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rulesand regulations of the Securities and Exchange Commission (SEC) for interim reporting and, therefore, do not include all information and footnote disclosures normally included in audited financial statements in conformity with accounting principles generally accepted in the United States (GAAP). However, in the opinion of management, all adjustments, consisting of normal recurring adjustments, unless otherwise noted herein, necessary to present fairly the results of operations, financial position and cash flows have been made. Events that occurred after June30, 2009, up until the filing with the SEC which occurred on July29, 2009 were considered in the preparation of these condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Hospira,Inc. (Hospira) Annual Report on Form10-K for the year ended December31, 2008. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year. Certain prior year amounts have been reclassified to conform to the current year presentation. Among other changes, during 2009 Hospira reclassified costs that were previously reported in Cost of products sold and Research and development to Restructuring and impairment, a separate operating costs and expenses line item. See Note 3 for additional details related to Restructuring and impairment. The reclassifications did not affect net income or shareholders equity. Recently Issued and Adoption of New Accounting Standards Effective July1, 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Standards (SFAS) No.168, The Hierarchy of Generally Accepted Accounting Principles (SFAS No.168). SFAS No.168 reduces the U.S. GAAP hierarchy to two levels, one that is authoritative and one that is not. The adoption of this pronouncement is not expected to have a material effect on Hospiras consolidated financial statements. Hospira adopted the provisions of SFAS No.165, Subsequent Events (SFAS No.165) for the interim period ending after June15, 2009. SFAS No.165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or available to be issued. There was no impact to Hospiras current condensed consolidated financial position, results of operations, or cash flows upon initial adoption of this statement. Hospira adopted the provisions of the FASB Staff Position No.FAS 107-1, Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1) for the interim period ending after March15, 2009. FSP 107-1 expands the fair value disclosures required for all financial instruments within the scope of SFAS No.107 to include interim periods. There was no impact to Hospiras current condensed consolidated financial position, results of operations or cash flo

Investments

Investments
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Investments	Note 2 Investments In April2008, Hospira purchased $24.5million of marketable equity securities and the market value declined by $16.6 million through June30, 2009. Hospira assessed during the three months ended June30, 2009 the decline in the market value to be other-than-temporary, primarily due to the duration and severity of the investments decline in market value and the near-term prospects for recovery to the original invested value. Accordingly, Hospira recognized a non-cash, impairment charge of $16.6 million in Other expense (income), net during the three and six months ended June30, 2009. The fair value of the investments may continue to be adversely impacted by the volatility in the global equity markets, length of time the investments market value is below the revised invested value, Hospiras ability and intent to remain invested and the prospects for recovery, among other factors.

Restructuring Actions and Asset

Restructuring Actions and Asset Impairments
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Restructuring Actions and Asset Impairments	Note 3 Restructuring Actions and Asset Impairments As part of its strategy to improve margins and cash flows, Hospira has taken a number of actions to reduce operating costs and optimize operations. The costs related to these actions consist primarily of severance and other employee benefits, accelerated depreciation resulting from the decreased useful lives of the buildings and certain equipment, impairments, other asset charges and exit costs. Project Fuel 2009 Actions. In March2009, Hospira announced details of a multi-stage restructuring and optimization plan (Project Fuel) which will occur over the next two years. Project Fuel includes the following activities: optimizing the product portfolio, evaluating non-strategic assets, and streamlining the organizational structure. Hospira expects to incur aggregate restructuring costs and other asset charges, over the next two years, related to these actions in the range of $100 million to $110 million on a pre-tax basis. During the three and six months ended June30, 2009 Hospira incurred, primarily in the Americas segment, pre-tax Restructuring costs of $4.4 million and $9.1 million, respectively. Inventory charges of $1.7 million related to product portfolio optimization, primarily impacting the Americas segment, are included in Cost of products sold during the three and six months ended June30, 2009. As part of the Project Fuel initiatives, in June2009, Hospira committed to dispose of certain non-strategic businesses and the underlying assets over the next twelve months, including Hospiras critical care business. The expected range of proceeds to be received from these divestitures will be less than the historical carrying value.These businesses have not been historically material to the consolidated financial statements. As a result of these commitments, non-cash, pre-tax impairment charges of $48.3 million were recognized in Restructuring and impairment and non-cash, pre-tax inventory charges of $3.1 million were recognized in Cost of products sold during the three months ended June30, 2009.The impairment charges reduced property and equipment for these businesses by $18.2 million, allocated goodwill by $7.6 million and intangible assets by $22.5 million impacting primarily the Americas segment. The assets held for sale include $26.0 million of long-lived assets and $28.2 million of other net assets, primarily inventory. The following summarizes the Project Fuel restructuring and asset impairment activity for 2009: Balance at Costs Non cash Balance at (dollars in millions) December31, 2008 Incurred Payments Items June30, 2009 Employee-related benefit costs $ $ 9.1 $ (4.1 ) $ $ 5.0 Impairment charges 48.3 (48.3 ) $ $ 57.4 $ (4.1 ) $ (48.3 ) $ 5.0 Facilities Optimization 2008 Actions. In April2008, Hospira announced a plan to exit manufacturing operations at its Morgan Hill, California plant over the next two to three years. Hospira expects to incur aggregate restructuring costs through 2011 related to this action in the range of $20 million to

Fair Value Measures

Fair Value Measures
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Fair Value Measures	Note 4 Fair Value Measures The following table summarizes the basis used to measure certain assets and liabilities at fair value, under the provisions of SFAS No.157 Fair Value Measurements, in the balance sheet: Fair Value Measurements at Reporting Date, Using: Description (dollars in millions) June30, 2009 Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Non-Financial Assets Gain/(Loss) Assets (Financial): Available-for-sale marketable equity securities $ 6.6 $ 6.6 $ $ Foreign currency forward exchange contracts 6.8 6.8 Liabilities: Foreign currency forward exchange contracts 2.4 2.4 Assets (Non-financial): Long-lived assets held for sale 26.0 26.0 $ (40.7 ) Goodwill $ $ $ $ $ (7.6 ) The fair value of the Level 1 assets is based on quoted market prices of the identical underlying security in an active market. The fair value of the Level 2 assets and liabilities is primarily based on market observable inputs to quoted market prices, benchmark yields and broker/dealer quotes. Level 3 inputs, as applicable, are unobservable inputs which reflect assumptions developed by management to measure assets and liabilities at fair value. Specific to the businesses and related assets held for sale, the fair value is based on a combination of projected discounted cash flows and market comparisons including several third-party nonbinding bids reflective of differing assumptions on the future prospects and management of these businesses. These non-financial assets are required to be measured at fair value on a non-recurring basis depending on the occurrence of commitments and triggering events defined under GAAP, among other factors. Hospira allocated a proportion of the applicable reporting units goodwill based on the relative fair value of the businesses that will be disposed of compared to the relative fair value of the reporting units retained operations. The retained reporting units goodwill was not impaired. Goodwill allocated to the businesses held for sale with a carrying amount of $7.6 million, was measured at fair value, resulting in an impairment charge of $7.6 million to Restructuring and impairment. See Note 3 for more information on the circumstances leading to the impairments.

Financial Instruments and Deriv

Financial Instruments and Derivatives
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Financial Instruments and Derivaties	Note5 Financial Instruments and Derivatives Hospira is exposed to market risk primarily due to changes in currency exchange rates and interest rates. The objective in managing these risks is to reduce volatility on earnings and cash flows. To reduce the risk, Hospira enters into certain derivative financial instruments, when available on a cost-effective basis, to hedge its underlying economic exposure. To manage currency exchange rate exposures, Hospira utilizes foreign currency forward exchange contracts not formally designated as cash flow or fair value hedges. To manage interest rate exposures, Hospira utilizes interest rate swap contracts comprised principally of fixed-to-floating rate interest rate swaps, which as designated are subject to fair-value hedge accounting treatment until termination, at which time the related gain or loss is deferred and amortized over the remaining term of the debt. The cash flows from the derivative financial instruments are reflected as operating activities in the condensed consolidated statement of cash flows. For a more detailed description of Hospiras financial instruments and derivatives and short-term borrowings and long-term debt, see Note 6 and Note 10, respectively, to Hospiras consolidated financial statements included in Hospiras Annual Report on Form10-K for the year ended December31, 2008. The following table summarizes Hospiras fair value of outstanding derivatives not designated as hedging instruments: (dollars in millions) Balance Sheet Location June30, 2009 December31, 2008 Foreign currency forward exchange contracts: Other receivables $ 6.8 $ Other liabilities 2.4 12.7 The following table summarizes the aggregate unrecognized gains (losses) on terminated interest rate swap contracts: (dollars in millions) Balance Sheet Location June30, 2009 December31, 2008 Interest rate swap contracts: Short-term borrowings $ 1.0 $ 2.1 Long-term debt 4.0 4.4 Accumulated other comprehensive loss (0.6 ) (1.1 ) The impact on earnings from derivatives not designated as hedging instruments, from interest rate swap contracts that qualified as fair-value hedges prior to termination and terminated interest rate swap contracts were as follows: Location of Gain (Loss) Recognized on Three Months Ended June30, Six Months Ended June30, (dollars in millions) Derivatives 2009 2008 2009 2008 Foreign currency forward exchange contracts Other expense (income), net $ 0.8 $ 4.3 $ 6.7 $ (4.1 ) Interest rate swap contracts - Fair-value Interest expense 0.2 0.9 Interest rate swap contracts - Terminated Interest expense 0.8 1.6 The carrying values of certain financial instruments, including primarily cash and cash equivalents, and accounts receivable, accounts payable and short-term borrowings, approximate their estimated fair values due to their short-term nature. The carrying value and estimated aggregate fair value, based primarily on

Stock Based Compensation

Stock Based Compensation
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Stock-Based Compensation	Note 6 Stock-Based Compensation Hospiras 2004 Long-Term Incentive Plan (Plan), as amended, provides for the grant of shares of stock options, stock appreciation rights, stock awards (restricted stock, restricted stock units, performance shares, performance units), and cash-based awards to employees and non-employee directors. In May2009, shareholders approved amendments primarily to extend the Plan by ten years to May14, 2019, and to increase the number of shares that may be granted during the life of the Plan by 13.0 million shares. Costs resulting from share-based payment transactions are recognized as compensation cost over the vesting period based on the fair value of the instrument on the date of grant. Stock-based compensation expense of $9.6 million and $10.1 million was recognized for the three months ended June30, 2009 and 2008, respectively. The related income tax benefit recognized was $3.3 million and $3.3 million, respectively. Stock-based compensation expense of $22.7 million and $24.5 million was recognized for the six months ended June30, 2009 and 2008, respectively, primarily resulting from stock option awards. The related income tax benefit recognized was $7.9 million and $8.7 million, respectively. In March2009, 3.5 million options were granted to certain employees for the 2009 annual stock option grant. These options were awarded at the fair market value at the time of grant, generally vest over three years, and have a seven-year term. The weighted average fair value using the Black-Scholes option-pricing model, and the corresponding weighted average assumptions are as follows: Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Volatility 30.2 % 28.0 % 30.2 % 28.0 % Expected life (years) 4.0 3.4 4.5 4.5 Risk-free interest rate 2.0 % 2.7 % 1.8 % 2.3 % Dividend yield 0.0 % 0.0 % 0.0 % 0.0 % Fair value per stock option $ 9.84 $ 9.36 $ 6.35 $ 11.73 In March2009, 515,206 performance share awards were granted to key members of management. The performance share awards vest at the end of the three-year performance cycle. The 2009 performance share award is based on a formula that measures performance using relative total shareholder return over the three-year performance cycle compared to an industry peer group. Based on the actual performance, at interim periods, and at the end of the performance cycle, the number of performance share awards earned, which can range between 0% and 200% of the target awards granted, will be satisfied with Hospira common stock. The weighted average fair value using the Monte Carlo simulation model and the corresponding weighted average assumptions for the Marchperformance share award grants are as follows: 2009 2008 Volatility 37.2 % 27.9 % Risk-free interest rate 1.2 % 2.0 % Dividend yield 0.0 % 0.0 % Fair value per performance share $ 24.98 $ 62.39 As of June30, 2009, there was $55.4 million of

Post Retirement Benefits

Post Retirement Benefits
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Post-Retirement Benefits	Note7 Post-Retirement Benefits Retirement plans consist of defined benefit and legislated obligations such as employee severance indemnity plans (pension plans), post-retirement medical and dental plans (medical and dental plans), and defined contribution plans. Plans cover certain employees both in and outside of the U.S. Net cost recognized for the pension plans and medical and dental plans for the three and six months ended June30, is as follows: Pension Plans Three Months Ended June30, Six Months Ended June30, (dollars in millions) 2009 2008 2009 2008 Service cost for benefits earned during the year $ 0.3 $ 0.5 $ 0.6 $ 1.0 Interest cost on projected benefit obligations 6.5 6.2 13.0 12.4 Expected return on plans assets (6.9 ) (7.2 ) (13.9 ) (14.4 ) Net amortization 0.9 0.9 1.8 1.7 Net cost $ 0.8 $ 0.4 $ 1.5 $ 0.7 Medical and Dental Plans Three Months Ended June30, Six Months Ended June30, (dollars in millions) 2009 2008 2009 2008 Service cost for benefits earned during the year $ 0.1 $ 0.1 $ 0.1 $ 0.2 Interest cost on projected benefit obligations 0.8 1.0 1.6 1.9 Net amortization 0.1 0.3 0.3 0.6 Net cost $ 1.0 $ 1.4 $ 2.0 $ 2.7 Based on current Federal laws, regulations and applicable guidance issued in 2009, Hospira is not required to make any contributions and does not have a current plan to make any discretionary contributions to its pension plans for the remainder of 2009. While Hospiras funding policy requires contributions to our defined benefit plans equal to the amounts necessary to, at a minimum, satisfy the funding requirements as prescribed by Federal laws and regulations, Hospira does make discretionary contributions when management deems it is prudent to do so. Certain Hospira employees participate in the Hospira 401(k)Retirement Savings Plan. Hospiras contributions to this defined contribution plan for the three months ended June30, 2009 and 2008 were $8.9 million and $9.6 million, respectively. For the six months ended June30, 2009 and 2008, contributions were $18.3 million and $18.7 million, respectively.

Income Taxes

Income Taxes
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Income Taxes	Note 8 Income Taxes Taxes on income reflect the estimated annual effective rates, excluding the effect of significant unusual items. The effective tax rates are less than the statutory U.S. federal income tax rate principally due to the benefit of tax exemptions, of varying durations, in several non-U.S. taxing jurisdictions. In the three and six months ended June30, 2009, the effective tax rates were impacted by the establishment of a valuation allowance on certain deferred tax assets associated with the impairment of certain non-strategic assets, impairment of non-deductible goodwill, as well as the impairment of marketable equity securities without the availability of a statutory tax benefit. See Note 2 and Note 3 for more information on the circumstances leading to the impairments. During the six months ended June30, 2009, the Internal Revenue Service (IRS) audit of Hospiras 2004 and 2005 tax returns was concluded and the years were effectively settled. The outcome of the audit settlement is a reduction in the gross unrecognized tax benefits for both the audit years settled and resultant impact on tax years 2006 through 2008 in aggregate totaling $100.7 million, of which $91.9 million is recognized in the results for the six months ended June30, 2009 as a discrete income tax benefit. The remaining amounts represent net changes to current taxes payable and deferred tax accounts. This outcome includes interest and state tax impacts. Hospira remains open to tax examination for post-May1, 2004 periods in all major tax-paying jurisdictions, including Australia, Canada, Ireland, Italy, United Kingdom, and for years 2006 forward for the United States.

Earnings per Share

Earnings per Share
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Earnings per Share	Note 9 Earnings per Share Basic earnings per share are computed by dividing net income by the number of weighted average common shares outstanding during the reporting period. Diluted earnings per share are calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period. The following table shows the effect of stock-based awards on the weighted average number of shares outstanding used in calculating diluted earnings per share: Three Months Ended June30, Six Months Ended June30, (shares in millions) 2009 2008 2009 2008 Weighted average basic common shares outstanding 160.5 159.1 160.0 158.9 Incremental shares outstanding related to stock-based awards 1.9 2.4 1.5 2.3 Weighted average dilutive common shares outstanding 162.4 161.5 161.5 161.2 The number of outstanding options to purchase Hospira stock for which the exercise price of the options exceeded the average stock price was 6.8 million and 9.7 million for the three and six months ended June, 2009, respectively, and 5.4 million and 5.5 million for the three and six months ended June30, 2008, respectively. Accordingly, these options are excluded from the diluted earnings per share calculation for these periods.

Supplemental Financial Informat

Supplemental Financial Information
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Supplemental Financial Information	Note 10 Supplemental Financial Information Inventories consist of the following: June30, December31, (dollars in millions) 2009 2008 Finished products $ 520.5 $ 510.1 Work in process 128.8 130.6 Materials 215.4 189.8 Total inventories $ 864.7 $ 830.5 Property and equipment, net consists of the following: June30, December31, (dollars in millions) 2009 2008 Property and equipment, at cost $ 2,524.1 $ 2,540.5 Accumulated depreciation (1,340.9 ) (1,348.4 ) Total property and equipment, net $ 1,183.2 $ 1,192.1 Other long-term liabilities consist of the following: June30, December31, (dollars in millions) 2009 2008 Unrecognized tax benefits, penalties and interest(1) $ 73.6 $ 174.9 All other 20.7 20.6 Total other long-term liabilities $ 94.3 $ 195.5 (1) Reflects conclusion and effective settlement of the IRS audit of Hospiras 2004 and 2005 tax returns during the six months ended June30, 2009.

Goodwill and Intangible Assets,

Goodwill and Intangible Assets, Net
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Goodwill and Intangible Assets, Net	Note 11 Goodwill and Intangible Assets, Net The following summarizes goodwill and intangible assets, net activity: Currency Balance at Translation Effect Balance at (dollars in millions) December31, 2008 Acquisitions Amortization Impairment and Other June30, 2009 Goodwill $ 1,167.4 $ $ $ (7.6 ) $ 29.7 $ 1,189.5 Intangible assets, net 404.4 0.1 (30.7 ) (22.5 ) 48.4 399.7 See Note 3 for more information on the circumstances leading to the impairments, and Note 4 for fair value considerations. Intangible assets have definite lives and are amortized on a straight-line basis over their estimated useful lives (2 to 11 years, weighted average 10 years). Intangible asset amortization expense was $16.0 million and $17.5 million for the three months ended June 30, 2009 and 2008, respectively. Intangible asset amortization expense was $30.7 million and $34.4 million for the six months ended June 30, 2009 and 2008, respectively. Intangible asset amortization for each of the five succeeding fiscal years is estimated at $27 million for the remainder of 2009, $54 million for 2010, $52 million for 2011, $41 million for 2012, and $39 million for 2013. Additionally, intangible assets, net consist of the following: June30, 2009 December31, 2008 (dollars in millions) Gross Carrying Amount Accumulated Amortization Net Intangible Assets Gross Carrying Amount Accumulated Amortization Net Intangible Assets Product rights $ 492.9 $ (123.0 ) $ 369.9 $ 464.3 $ (92.0 ) $ 372.3 Customer relationships 31.2 (10.3 ) 20.9 28.1 (7.5 ) 20.6 Technology 13.7 (4.8 ) 8.9 15.1 (3.6 ) 11.5 $ 537.8 $ (138.1 ) $ 399.7 $ 507.5 $ (103.1 ) $ 404.4

Short-term Borrowings and Long-

Short-term Borrowings and Long-term Debt
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Short-term Borrowings and Long-term Debt	Note12 Short-term Borrowings and Long-term Debt For a more detailed description of Hospiras short-term borrowings and long-term debt, see Note 10 to Hospiras consolidated financial statements included in Hospiras Annual Report on Form10-K for the year ended December31, 2008. In January2009, the remaining $5.0million in principal outstanding as of December31, 2008, under the $500.0million three-year term loan facility due March2010, was paid. Beginning in March2009, the $375.0 million principal amount of floating rate notes are classified as short-term borrowings as they mature in March2010. In May2009, Hospira issued $250.0 million aggregate principal amount of 6.40% notes which are due May15, 2015, with interest due semi-annually, for general corporate purposes. This issuance contains covenants consistent with current borrowings. In June2009, Hospira repaid in full the $300.0 million aggregate principal amount of 4.95% notes upon maturity. Hospira has a five-year $375.0 million unsecured revolving credit facility (the Revolver) expiring in December2010. The Revolver is available for working capital and other requirements. As of June30, 2009, Hospira had no amounts outstanding under the Revolver. Certain borrowing agreements contain covenants that require compliance with, among other restrictions, a maximum leverage ratio and a minimum interest coverage ratio. As of June30, 2009, Hospira was in compliance with all applicable covenants.

Litigation

Litigation
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Litigation	Note13 Litigation Hospira is involved in various claims and legal proceedings, as well as product liability claims and proceedings related to Hospiras business, including in some instances when Hospira operated as part of Abbott Laboratories (Abbott). Various state and federal agencies, including the U.S. Department of Justice and various state attorneys general, are investigating or have lawsuits pending against a number of pharmaceutical companies, including Abbott, for allegedly engaging in improper marketing and pricing practices with respect to certain Medicare and Medicaid reimbursable products, including practices relating to average wholesale price (AWP).These are civil investigations that are seeking to identify the practices and determine whether those practices violated any laws, including federal and state false claims acts, or constituted fraud in connection with the Medicare and/or Medicaid reimbursement paid to third parties.In addition, Abbott is a defendant in a number of lawsuits on behalf of individuals or entities, including healthcare insurers and other third-party payors, that allege generally that Abbott and numerous other pharmaceutical companies reported false or misleading pricing information in connection with federal, state and private reimbursement for certain drugs.Some of the products involved in these investigations and lawsuits are Hospira products. There may be additional investigations or lawsuits, or additional claims in the existing investigations or lawsuits, initiated with respect to these matters in the future.Hospira cannot be certain that it will not be named as a subject or defendant in these investigations or lawsuits. Abbott will indemnify Hospira for liabilities associated with AWP investigations and lawsuits, if any, only to the extent that they are of the same nature as the lawsuits and investigations that existed against Abbott as of the spin-off date and relate to the sale of Hospira products prior to the spin-off. Hospira will assume any other losses that may result from these investigations and lawsuits related to Hospiras products, including any losses associated with post-spin-off activities. These investigations and lawsuits could result in changes to Hospiras business practices or pricing policies, civil or criminal monetary damages, penalties or fines, imprisonment and/or exclusion of Hospira products from participation in federal and state healthcare programs, including Medicare, Medicaid and Veterans Administration health programs, any of which could have a material adverse effect on its business, profitability and financial condition. Hospira has been named as a defendant in a lawsuit alleging generally that the spin-off of Hospira from Abbott resulted in a mass termination of employees so as to interfere with the future attainment of benefits in violation of the Employee Retirement Income Security Act of 1974 (ERISA).The lawsuit was filed on November8, 2004 in the United States District Court for the Northern District of Illinois, and is captioned:Myla Nauman, Jane Roller and Michael Loughery v. Abbott Laboratories and Hospira,Inc. Plaintiffs generally seek reinstate

Shareholders Equity

Shareholders Equity
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Shareholders' Equity	Note14 Shareholders Equity Common Stock Hospira is authorized to issue 400.0million shares of common stock, par value $0.01 per share, and 50.0million shares of preferred stock, par value $0.01 per share. As of June30, 2009 and December31, 2008, 168.7 million and 167.2 million common shares were issued and 161.1 million and 159.6million common shares were outstanding, respectively. Treasury Stock Hospira has repurchased 7.6 million shares for $299.8 million in the aggregate under the 2006 board authorization, all of which were purchased during 2006. Hospira does not expect to repurchase any shares in 2009 under this program.

Comprehensive Income and Accumu

Comprehensive Income and Accumulated Other Comprehensive Loss
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Comprehensive Income and Accumulated Other Comprehensive Loss, net of tax	Note 15 Comprehensive Income and Accumulated Other Comprehensive Loss, net of tax Comprehensive income, net of taxes consists, of the following: Three Months Ended June30, Six Months Ended June30, (dollars in millions) 2009 2008 2009 2008 Foreign currency translation adjustments, net of taxes of $0.0 $ 174.8 $ 47.3 $ 147.5 $ 105.9 Pension liability adjustments, net of taxes $(0.4) million and $(0.4) million for the three months ended June30, 2009 and 2008, respectively, and $(0.8) million and $(1.1) million for the six months ended June30, 2009 and 2008, respectively 0.9 0.7 1.5 1.9 Marketable Equity Securities: Unrealized income (losses) on marketable equity securities, net of taxes $0.0 million and $1.6 million for the three months ended June 30, 2009 and 2008, respectively, and $0.0 million and $1.6 million for the six months ended June30, 2009 and 2008, respectively $ 0.2 $ (6.2 ) $ 0.2 $ (6.2 ) Reclassification for other-than-temporary impairment charge included in net income 16.6 16.6 16.8 (6.2 ) 16.8 (6.2 ) Reclassification for losses on terminated interest rate hedges, net of taxes $(0.1) million and $0.0 million for the three months ended June 30, 2009 and 2008, respectively, and $(0.3) million and $0.0 million for the six months ended June30, 2009 and 2008, respectively, included in net income 0.2 0.5 0.1 Other Comprehensive Income 192.7 41.8 166.3 101.7 Net Income 25.5 69.1 191.0 134.5 Comprehensive Income $ 218.2 $ 110.9 $ 357.3 $ 236.2 Accumulated other comprehensive loss, net of taxes, consists of the following: June30, December31, (dollars in millions) 2009 2008 Cumulative foreign currency translation adjustments, net of taxes of $0.0 $ (30.4 ) $ (177.9 ) Cumulative retirement plans unrealized losses, net of taxes $63.1 million and $63.9 million, respectively (98.6 ) (100.1 ) Cumulative unrealized losses on marketable equity securities, net of taxes of $0.0 (16.8 ) Cumulative losses on terminated interest rate hedges, net of taxes $0.4 million and $0.7 million, respectively (0.6 ) (1.1 ) Accumulated Other Comprehensive Loss $ (129.6 ) $ (295.9 )

Segment Information

Segment Information
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Segment Information	Note 16 Segment Information Hospira conducts operations worldwide and is managed in three reportable segments: Americas, EMEA and APAC. The Americas segment includes the United States, Canada and Latin America; the EMEA segment includes Europe, the Middle East and Africa, while the APAC segment includes Asia, Japan and Australia. In all segments, Hospira sells a broad line of products, including specialty injectable pharmaceuticals, other pharmaceuticals, medication management systems and other devices. Specialty Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables. Other Pharmaceuticals include large volume I.V. solutions, nutritionals and contract manufacturing services. Medication Management Systems include infusion pumps, related software, services and administration sets. Other Devices include gravity administration sets, critical care products and other device products. Hospiras underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting. For internal management reporting, intersegment transfers of inventory are recorded at standard cost and are not a measure of segment income from operations. The costs of certain corporate functions, stock-based compensation, interest expense, and other expense (income), net that benefit the entire organization are not allocated. The following segment information has been prepared in accordance with the internal accounting policies of Hospira, as described above. Reportable segment information: The table below presents information about Hospiras reportable segments: Three Months Ended June30, Net Sales Income (Loss) from Operations (dollars in millions) 2009 2008 2009 2008 Americas $ 751.7 $ 677.2 $ 123.2 $ 138.6 EMEA 138.4 156.6 1.2 1.8 APAC 66.8 67.8 (2.8 ) 5.1 Total reportable segments $ 956.9 $ 901.6 121.6 145.5 Corporate functions (20.9 ) (17.7 ) Stock-based compensation (9.6 ) (10.1 ) Income from operations 91.1 117.7 Interest expense and other expense (income), net (42.7 ) (28.2 ) Income before income taxes $ 48.4 $ 89.5 Six Months Ended June30, Net Sales Income from Operations (dollars in millions) 2009 2008 2009 2008 Americas $ 1,436.4 $ 1,351.4 $ 258.2 $ 274.9 EMEA 259.6 309.4 11.3 6.3 APAC 120.6 129.5 0.4 7.2 Total reportable segments $ 1,816.6 $ 1,790.3 269.9 288.4 Corporate functions (41.4 ) (34.5 ) Stock-based compensation (22.7 ) (24.5 ) Income from operations 205.8 229.4 Interest expense and other expense (income), net (69.3 ) (55.5 ) Income before income taxes $ 136.5 $ 173.9 Goodwill June30, December31, (dollars in millions) 2009 20

Subsequent Events

Subsequent Events
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Subsequent Events	Note 17 Subsequent Events In early July2009, Hospira announced an agreement to sell its critical care business including commercial rights and assets for approximately $35.0 million in cash as part of the Project Fuel initiatives further described in Note 3.

Document and Entity Information

Document and Entity Information (USD $)
In Millions, except Share data	6 Months Ended Jun. 30, 2009	Jul. 24, 2009	Jun. 30, 2008
Document and Entity Information
Entity Registrant Name	HOSPIRA INC
Entity Central Index Key	0001274057
Document Type	10-Q
Document Period End Date	2009-06-30
Amendment Flag	false
Amendment Description
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$6,394
Entity Common Stock, Shares Outstanding		161,086,797