HOSPIRA INC (HSP) - 10-Q Quarterly SEC Filing for the Quarter En...
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`http://www.stockpup.com/companies/HSP/10-Q.html
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D. C. 20549
`FORM 10-Q
`QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
`OF 1934
`
`For the quarterly period ended June 30, 2015
`OR
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
`OF 1934
`
`x
`
`¨
`
`For the transition period from to
`Commission File No. 1-31946
`HOSPIRA, INC.
`(Exact name of registrant as specified in its charter)
`
`Delaware
`(State or other jurisdiction
`of incorporation or organization)
`
`
`
`
`
`20-0504497
`(I.R.S. Employer
`Identification No.)
`
` 275 North Field Drive
`Lake Forest, Illinois 60045
`(Address of principal executive offices, including zip code)
`(224) 212-2000
`(Registrant's telephone number, including area code)
`Indicate by check mark whether the registrant: (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of l934
`during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
`requirements for the past 90 days. Yes x No ¨
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file
`required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
`period that the registrant was required to submit and post such files). Yes x No ¨
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
`See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
`
`Large accelerated filer x
`
`Non-accelerated filer o
`(Do not check if a smaller reporting company)
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
`As of July 27, 2015, Registrant had outstanding 172,934,361 shares of common stock, par value $0.01 per share.
`
`Accelerated filer o
`
`Smaller reporting company o
`
`
`
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`
`
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`
`
`Petition for Inter Partes Review of US 8,648,106
`Amneal Pharmaceuticals LLC – Exhibit 1037 – Page i
`
`

`
`HOSPIRA INC (HSP) - 10-Q Quarterly SEC Filing for the Quarter En...
`
`http://www.stockpup.com/companies/HSP/10-Q.html
`
`Hospira, Inc.
`
`Quarterly Report on Form 10-Q
`
`Index
`
`Part I — Financial Information
`
`
`Financial Statements
`
`Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) — Three and Six Months Ended June 30,
`2015 and June 30, 2014
`
`Condensed Consolidated Statements of Cash Flows (Unaudited) — Six Months Ended June 30, 2015 and June 30, 2014
`
`Condensed Consolidated Balance Sheets (Unaudited) — June 30, 2015 and December 31, 2014
`
`Condensed Consolidated Statement of Changes in Shareholders' Equity (Unaudited) — Six Months Ended June 30, 2015
`
`Notes to Condensed Consolidated Financial Statements (Unaudited)
`
`Management's Discussion and Analysis of Financial Condition and Results of Operations
`
`Quantitative and Qualitative Disclosures About Market Risk
`
`Controls and Procedures
`
`
`Part II — Other Information
`
`
`Legal Proceedings
`
`Risk Factors
`
`Unregistered Sales of Equity Securities and Use of Proceeds
`
`Defaults Upon Senior Securities
`
`Mine Safety Disclosures
`
`Other Information
`
`Exhibits
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`2
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`6
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`7
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`8
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`9
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`10
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`26
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`42
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`43
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`44
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`44
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`44
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`45
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`45
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`45
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`45
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`Item 1.
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`Item 2.
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`Item 3.
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`Item 4.
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`Item 1.
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`Item 1A.
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`Item 2.
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`Item 3.
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`Item 4.
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`Item 5.
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`Item 6.
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`Petition for Inter Partes Review of US 8,648,106
`Amneal Pharmaceuticals LLC – Exhibit 1037 – Page ii
`
`

`
`HOSPIRA INC (HSP) - l0-Q Quarterly SEC Filing for the Quarter
`
`http://www.stockpup.com/companies/HSP/10-Q.htrnl
`
`Table of Contents
`
`Pfibrmancc Sham Awards
`
`Noper£mmanceshareawardsweregrantedindiesixmondisendedJIme30,2015.Forpriorgiantgtheweightedaverageyantdatefiirvalueusingthe
`Monte Carlo simulation model and the corresponding weighted average assumptions were as follows:
`Six Months Ended Jllt
`30.
`2011
`
`Expected volatility
`Risk-free interest rfie
`
`Expected dividend yield
`Fair value per performance share
`
`3
`
`30.8%
`0.6%
`
`0.0%
`54.55
`
`Rmtricmd Stock and Unit:
`
`Duringthesixmonthsendedlune 30, 2015, 0.8millionrestrictedstockandunitsweregrantedtocertainemployeesandnon—employeedirectorsprimarily
`aspartofthe2015 annualgiant Hoqainissuesmsuictedstockandmitsthmgenaaflywstmappmxunatelyeqinlamountsonthefirst,secondandthird
`anniversariesofthegrantdate. Theweightedaveragegrantdatefauvalueofresuictedstockmdmitsgrantedforthesixnnnthsuidedlrmew,2015 and
`2014 was $87.51 and $42.96perrestricted award, respectively.
`
`Note 24 — Commitments and Contingencies
`
`1-Iospira is involved in various claims and legal proceedings, as well as product liability daims, regulatory matters and proceedings relatedto 1-1ospira's
`business, including in some instances when Hoqrira operated as part ofAbbott Laboratories.
`
`Prncodax" Matters
`
`I-Iospira is currently involved in two lawsuits relating to the ability of Eurohealth International Sarl and West—Ward Pharmacaitical Corp. (collectively
`"Eurohealth") to market generic forms ofHospira's Precedexn‘ (dexmedetomidine hydrochloride), a proprietary sedation agent. The two cases, No.
`14-cv-00487 (filed April 18, 2014) and No. 14—cv-01008 (filed August 1, 2014), are both pending in U.S. District Court for the District ofDelaware and are
`based on Eurohealtlfs ANDAs filed with the FDA for generic versions of P'recedex"", one ofwhich is apremix product. Hospira seeks ajudgment of
`infringement based on the claims ofU.S. Patent No. 6,716,867, injunctive reliefand costs. Eurohealth International Sarl purchased the assets of Ben Venue
`Laboratories, Inc. d/b/a Bedford Laboratories. West-Ward Pharmaceutical Corp. is Eurohealth's agent in the U.S.
`
`On August 18, 2014, the FDA allowed a carved—out label for generic competitors of Precedex‘“‘. Immediately following tint decision, Mylan Institutional,
`LLC and Par Sterile Producs, LLC launched generic versions of Precedexn‘ concentrate. On August 19, 2014, Hospira initiated litigation over the FDA's
`action; whidr was settled on October 28, 2014.
`
`haddiumm&emefimElympmudumunms,Hoqairamtaeddmmgmexcondqnrtuof2015 intioconfidentialsettlementagreementsregarding
`Precedex"" patent-related litigation with Sun Pharmaceutical Industries, Inc. and GlandPharma Ltd., in April 2015, Akorrg Inc, in May 2015, and Actavis
`US Holding LLC andAcmvis LLC, in May 2015.
`
`1-1ospiraalsohasreceiveda"Parag1aphIV" noticefiomAmmdPhamxaifimkmhwdmpaunsumchtedwifl1Hospua'sprunkPremdaWmod1m.
`Hospirahas 45 days fromthedatethenoticewasreeeivedtoinitiatealawsuit alleging infiingementofthe variouspatentsincludedinthenotice. Sucha
`lawsuit would resultin a 30 month stay of approval Earn the FDA ofAmneal's proposed generic product.
`
`StacflwldcrLitigation
`
`1-IospiraandmembersofisBoardofDirectorsarenamedasdefendmtsmfivechssacfionhwmntsfiledmtheDdawueCmmofChancuyalkging
`breachesoffiduciarydutyinconnectionwithtlreMergerAgreanentPfizerandMagerSubareaIsonamedasdefa1dants.ThehwsIuts,whichseekto
`enjointheproposedtransaction, allegegmaaHyflutflIeMaguAgeemmtresultedfimnmmfikproeessmdfaflswmaxinuuvaluforliospira
`stockholders. T11elawsuitswerefiledbyfl|efoflowmgnamedplamfifi,onbehalfofflremselvesandallotherssimilarlysituaterkRobertJ.CaseyI[,
`Samuel Montini, Charleszimmerman, Jason Chenand Patricia Takach.
`
`24
`
`Petition for Inter Partes Review of US 8,648,106
`Amneal Pharmaceuticals LLc — Exhibit 1037 — Page 24
`
`

`
`HOSPIRA INC (HSP) - l0-Q Quarterly SEC Filing for the Quarter
`
`http://www.stockpup.com/companies/HSP/10-Q.ht1nl
`
`Table of Contents
`
`Regulatory Matters
`
`Hospira'sbusinessesaresubjecttoregulatory inspectionsbyregiilatoryaiitlioritiesacrosstheglolie. Suchregulatory inspections mayleadtoobservations
`(commonly referred to as Form 483 observations in the U.S.), untitled letters, warning letters or similar correspondence, voluntary or involu.ntary product
`recalls, conmt decrees, injunctions to halt manufacture and distribution ofproducts, seizures ofviolative products, import and export bans or restrictions,
`monetary sanctions, delays inproduct approvalsorclearances, civilpenaltios, criminalprosecution and otherrestrictions onoperations.
`
`I-Iospirahasreoeivedwarninglett7ersfi'orntheFDA relatedtomattersaffectingits pharmaceuticalmanufacturing l'acilityinMulgrave,V1ct7oria, Australia,
`pharmaceutical anddevice manufacturing ficilities inClaytzonandRockyMount, North Carolina, its device manufacturing facility inLaAurorade
`I-Ieredia,CostaRica,ikphxmxarficdmamificnnmgficflitymmmgamikomihdiaimdevieeqiulnysystansandgovernanceinLakeForest,Illinois
`anditspharmace11ticalman11.facturingfidlityinI.iscate,Italy.TheCompmyhasrespondedfi1fl}gandmafimdymmneLmfl1esewanmglettus.Bylenu
`datedApril16,201S,theFDAadvisedHospirathatithadeompleteditsevaluationoftheCon1pany'scorrediveactionsinresponsetotl1eApril20l0
`warning letter relatingtol-Iospira'sRockyMountandClayton, North Carolina, pharmaceutical manuficturing facilities.
`
`Themmediafimplansmrespmsemfliewamngldtusmvolvecmnmiunentsbyflospnamenhanceitsqualitysystem,products,facilities,employee
`training, qiialityprocessesandprooedriregandtaechnology. Whilefiospira continues implementing its temediationplans,thepl.ansaresubjecttoupdateand
`revisionbasedonissuesencolmteredduringtheremediationprooess,Monfinfl1ermtencfionwifl1fl1eFDAorofl1erreg1datorybodies_HospnacannoL
`however, giveanyassurancesastotheexpectzeddateofresolutionofthemattersidentifiedinthewarningletters.
`
`Environmental Marta:
`
`India's National Green Tribunal ("NGT") and the Maharashtra Polhition Control Board ("M1’CB") are actively reviewing various industrial facilities in tlie
`vieinityofAurangabad, India to determinewhetherthose facilities have contributedtoalleged groundwaterand soil contamination inthe area 0nJuly I5,
`2015, tI1eNGT issuedan orderdirecting Hospiralndia, asthe ownerofamanufacturing faci1ityinAurangabad, andthe unrelatedowners ofother ficilities,
`todepositinescrowanamountuptoapp1oximately$2.0 million each. Adepositbyacompanywouldbeapphedmanyreqiuredcostsofrernediationif
`that company is determined to have responsibility for tl1e alleged contamination. Subsequent to the NGT order, MPCB ordered the immediate closure of
`Hospira India’s Aurangabad facility; however, based on Hospira India's application, the NGT stayed the closure order until at least August 24, 2015, when
`afurtherhearingisscheduled TheNGTalsored1medfl1eescrowdepositfmHos;nnIndiatoappmximately$0.9
`I-Iospiracontinuestoevaluate its
`response with local counsel, local environmental consultants and local governmental consultants. A prolonged closure ofthe Aurangabad facility would
`alfect production at that facility, as well as production at Hospira India's Irungattukottag India facility, and could have a material adverse effect on
`Hospira’s results of operations.
`
`Litigation Exporum Evaluation
`
`Hospira's litigation exposure, including product liability claims, is evaluated each reporting period. Hospira's accruals, which are not significant at June 30,
`2015 andDecember 31, 2014, arethebestestimateofloss. Baseduponinformationthatiscuirently available, managementbelieves thatthe likelihoodofa
`matuial loss in excess ofrecognized amounts is remote.
`
`Additionallegalproceedingsmayoecurthatmayresultinachangeinflreestimatedaccrualsrecogiizedbyflospira. Itisnot feasibletopredictdieoutcome
`ofsuchproceedingswhhcaumtyanddierecanbemassiuanceflratflieniflfimate dispositionwillnotbaveamaterialadverseefl'ectonHoq)ira'sfinar1cial
`position, cash flows orresults of operations.
`
`Note 25 — Segment Information
`
`I-Iospira conducts operations worldwide and is managed in three reportable segments: Americas, EMEA and APAC. The America reportable segment
`includes three operating segments, die U.S., Canada and Latin America; the EMIM reportable segment includes one operating segment, Europe, the Middle
`Eastar1dAfiica; andthe APACreportable segmentincludestwo operating segments, Asia andlapan andAustraIiaandNewZealand Inallsegments,
`Hospira sells a broad line ofproduct, including Specialty Injectable Pharmaceuticals, Medication Managemmt and Odin’ Pharmaceuticals. Specialty
`Injectable Pharmaceuticals iuchide generic injectables, proprietary specialty injectables and, in certain markets, biosimilars. Medication Management
`includes infusion pumps, related soliware and services, dedicated
`sets, gravity
`sets and other device products. Oflier
`Pharmaceuticals include large volume I.V. solutions, nutritionals and contract marmfacturing.
`
`Hospira's underlying accounting records are maintained on a legal—er1tity basis for government and public reporting requirements. Segment disclosures are
`on a performance basis consistent with internal managemart reporting. For intanal management reporting, intersegment transfers of inventory are
`recognized at standard cost and are not a measure ofseynent income from operations. The costs ofcertain corporate functions, stock-based compensatiom
`Intei'estexpenseand0fl1erincome,nett11atbenefittheentire organintionarenotallo('atedThefollowing segment informationhasbeenpreparedin
`accordance with the internal accounting policies ofl-Iospira as described in "PartII, Item 8. Financial Statements and Supplernenhry Data,Note1" in
`Hospira's 2014 Form 10-K.
`
`Reportable segment information:
`
`The table below presents information about Hospira's reportable segments for the three months ended June 30:
`
`3
`
`3
`
`(dolkrs II liilrols)
`Americas
`
`EMEA
`APAC
`
`Total reportable segments
`Corporate functions
`Stock—based compensation
`Income From Operations
`Intuest eqiense and Other income, net
`
`I"°°"‘° B°f°'° I"°°"‘° Tm‘
`
`Net Sales
`
`2015
`
`201-1
`
`Income from Operations
`2015
`2014
`
`964 4
`
`3
`
`913.2
`
`3
`
`273 0
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`3
`
`129.1
`90.1
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`132.7
`89 9
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`1,183.6
`
`s
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`1,135.8
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`(19 7)
`6 9
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`250.2
`(26.6)
`(15.0)
`218.6
`(12.6)
`
`136 6
`
`(11 7)
`12 2
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`137.1
`(19.9)
`(17.7)
`99.5
`(18.4)
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`8” ‘evil of us 8,648,106
`-1-L' ' mo 3
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`Amneal Pharmaceuticals LLC — Exhibit 1037 — Page 25