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 8,455,527
`Amneal Pharmaceuticals LLC – Exhibit 1037 – Page 24
`
`

`

`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.
`
`Petition for Inter Partes Review of US 8,455,527
`Amneal Pharmaceuticals LLC – Exhibit 1037 – Page 25
`
`

`

`HOSPIRA INC (HSP)- 10-Q Quarterly SEC Filing for the Quarter En...
`
`http://www.stockpup.com/companies/HSP/10-Q.html
`
`Table of Contents
`
`Performance Share Awards
`
`No performance share awards were granted in the six months ended June 30, 2015. For prior grants, the weighted average grant date fair value using the
`Monte Carlo simulation model and the corresponding weighted average assumptions were as follows:
`Six Months Ended June
`30,
`2014
`
`Expected volatility
`Risk-free interest rate
`
`Expected dividend yield
`Fair value per performance share
`
`$
`
`30.8%
`0.6%
`
`0.0%
`54.55
`
`Restricted Stock and Units
`
`Dumningthe six months ended June 30, 2015, 0.8 million restricted stock and units were granted to certain employees and non-employee directors primarily
`as part of the 2015 annual grant. Hospira issues restricted stock and units that generally vest in approximately equal amounts on the first, second and third
`anniversaries ofthe grant date. The weighted average grant date fair value ofrestricted stock and units granted for the six months ended June 30, 2015 and
`2014 was $87.51 and $42.96 per restricted award, respectively.
`
`Note 24 — Commitments and Contingencies
`
`Hospira is involved in various claims and legal proceedings, as well as product liability claims, regulatory matters and proceedings related to Hospira's
`business, including in some instances when Hospira operated as part ofAbbott Laboratories.
`
`Precedex™ Matters
`
`Hospira is currently involved in two lawsuits relating to the ability of Eurohealth Intemational Sarl and West-Ward Pharmaceutical Corp.(collectively
`"Eurohealth") to market generic forms ofHospira's Precedex™ (dexmedetomidine hydrochloride), a proprietary sedation agent. The two cases, No.
`14-cv-00487(filed Apml 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 Eurohealth's ANDAs filed with the FDA for generic versions of Precedex™, one ofwhich is a premix product. Hospira seeks ajudgment of
`infringement based on the claims ofU.S. Patent No. 6,716,867, injunctive reliefand costs. Eurohealth Intemational 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 that decision, Mylan Institutional,
`LLC and Par Sterile Products, LLC launched generic versions of Precedex™ concentrate. On August 19, 2014, Hospira initiated litigation over the FDA's
`action, which was settled on October 28, 2014.
`
`In addition to the previously reported settlements, Hospira entered during the second quarter of 2015 into confidential settlement agreements regarding
`Precedex™ patent-related litigation with Sun Pharmaceutical Industries, Inc. and Gland Pharma Ltd., in April 2015, Akom, Inc., in May 2015, and Actavis
`US Holding LLC and Actavis LLC, in May 2015.
`
`Hospira also has received a "Paragraph IV" notice from Amneal Pharmaceuticals related to patents associated with Hospira's premix Precedex™ product.
`Hospira has 45 days from the date the notice was received to initiate a lawsuit alleging infringementofthe various patents included in the notice. Such a
`lawsuit would result in a 30 month stay of approval from the FDA ofAmneal's proposed generic product.
`
`StockholderLitigation
`
`Hospira and members ofits Board ofDirectors are named as defendants in five class action lawsuits filed in the Delaware Court ofChancery alleging
`breaches offiduciary duty in connection with the Merger Agreement. Pfizer and Merger Sub are also named as defendants. The lawsuits, which seek to
`enjoin the proposed transaction, allege generally that the Merger Agreementresulted from an unfair process and fails to maximize value for Hospira
`stockholders. The lawsuits were filed by the following named plaintiffs, on behalf ofthemselves andall others similarly situated: Robert J. Casey I,
`Samuel Montini, Charles Zimmerman, Jason Chen and Patricia Takach.
`
`24
`
`Petition for Inter Partes Review of US 8,455,527
`Amneal Pharmaceuticals LLC — Exhibit 1037 — Page 26
`
`

`

`HOSPIRA INC (HSP)- 10-Q Quarterly SEC Filing for the Quarter En...
`
`http://www.stockpup.com/companies/HSP/10-Q.html
`
`Table of Contents
`
`Regulatory Matters
`
`Hospira's businesses are subject to regulatory inspections by regulatory authorities across the globe. Such regulatory inspections maylead to observations
`(commonly referred to as Form 483 observations in the U.S.), untitled letters, wamingletters or similar correspondence, voluntary or involuntary product
`recalls, consent decrees, injunctions to halt manufacture and distribution ofproducts, seizures ofviolative products, import and export bans or restrictions,
`monetary sanctions, delays in product approvals or clearances, civil penalties, criminal prosecution and other restrictions on operations.
`
`Hospira has received warning letters from the FDArelated to matters affecting its pharmaceutical manufacturing facility in Mulgrave, Victoria, Australia,
`pharmaceutical and device manufacturing facilities in Clayton and Rocky Mount, North Carolina, its device manufacturing facility in La Aurora de
`Heredia, Costa Rica, its pharmaceutical manufacturing facility in Irungattukottai, India, its device quality systems and govemmance in Lake Forest, Illinois
`and its pharmaceutical manufacturingfacility in Liscate, Italy. The Company has responded fully, and in a timely manner, to these warning letters. By letter
`dated April 16, 2015, the FDA advised Hospira that it had completed its evaluation ofthe Company'scorrective actions in response to the April 2010
`warningletter relating to Hospira's Rocky Mount and Clayton, North Carolina, pharmaceutical manufacturing facilities.
`
`The remediation plans in response to the warningletters involve commitments by Hospira to enhance its quality system, products, facilities, employee
`training, quality processes and procedures, and technology. While Hospira continues implementing its remediation plans, the plans are subject to update and
`revision based on issues encountered during the remediation process, or on further interaction with the FDA or other regulatory bodies. Hospira cannot,
`however, give any assurances as to the expected date ofresolution ofthe matters identified in the waming letters.
`
`Environmental Matters
`
`India’s National Green Tribunal ("NGT") and the Maharashtra Pollution Control Board ("MPCB")are actively reviewing various industrial facilities in the
`vicinity of Aurangabad, India, to determine whether those facilities have contributed to alleged groundwater and soil contamination in the area. On July 15,
`2015, the NGTissued an order directing Hospira India, as the owner ofa manufacturingfacility in Aurangabad, and the unrelated owners of other facilities,
`to deposit in escrow an amount up to approximately $2.0 million each. A deposit by a company would be applied to any required costs ofremediation if
`that companyis determined to have responsibility for the 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
`a further hearing is scheduled. The NGTalso reduced the escrow deposit for Hospira India to approximately $0.9 million. Hospira continues to evaluate its
`response with local counsel, local environmental consultants and local governmental consultants. A prolonged closure ofthe Aurangabad facility would
`affect production at that facility, as well as production at Hospira India’s Irungattukottai, India facility, and could have a material adverse effect on
`Hospira’s results of operations.
`
`Litigation Exposure Evaluation
`
`Hospira's litigation exposure, including product liability claims, is evaluated each reporting period. Hospira's accruals, which are notsignificantat June 30,
`2015 and December 31, 2014.are the best estimate of loss. Based upon information that is currently available, management believes that the likelihood ofa
`material loss in excess ofrecognized amounts is remote.
`
`Additional legal proceedings may occur that may result in a changein the estimated accruals recognized by Hospira.It is not feasible to predict the outcome
`of such proceedings with certainty and there can be no assurance that their ultimate disposition will not have a material adverse effect on Hospira's financial
`position, cash flows or results of operations.
`
`Note 25 — Segment Information
`
`Hospira conducts operations worldwide and is managed in three reportable segments: Americas, EMEA and APAC. The Americas reportable segment
`includes three operating segments, the U.S., Canada and Latin America; the EMEA reportable segment includes one operating segment, Europe, the Middle
`East and Africa; and the APACreportable segment includes two operating segments, Asia and Japan and Australia and New Zealand. In all segments,
`Hospira sells a broad line ofproducts, including Specialty Injectable Pharmaceuticals, Medication Management and Other Pharmaceuticals. Specialty
`Injectable Pharmaceuticals include generic injectables, proprietary specialty injectables and, in certain markets, biosimilars. Medication Management
`includes infusion pumps,related software and services, dedicated administration sets, gravity administration sets and other device products. Other
`Pharmaceuticals include large volume I.V. solutions, nutritionals and contract manufacturing.
`
`Hospira's underlying accounting records are maintained on a legal-entity basis for government and public reporting requirements. Segmentdisclosures are
`on a performance basis consistent with internal managementreporting. For internal managementreporting, intersegmenttransfers of inventory are
`recognized at standard cost and are not a measure of segment income from operations. The costs ofcertain corporate functions, stock-based compensation,
`Interest expense and Other income,net that benefit the entire organization are not allocated. The following segment information has been prepared in
`accordance with the internal accounting policies ofHospira, as described in "Part II, Item 8. Financial Statements and Supplementary Data, Note 1" 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:
`
`(dollars in millions)
`Americas
`
`EMEA
`APAC
`
`Total reportable segments
`Corporate functions
`Stock-based compensation
`Income From Operations
`
`Interest expense andOtherincome, net
`
`Income Before Income Taxes
`
`$
`
`$
`
`Net Sales
`
`2015
`
`2014
`
`Income From Operations
`2015
`2014
`
`9644
`
`§$
`
`913.2
`
`$
`
`273.0
`
`$
`
`129.1
`90.1
`
`1,183.6
`
`$
`
`132.7
`89.9
`
`1,135.8
`
`(19.7)
`69
`
`260.2
`(26.6)
`(15.0)
`218.6
`
`136.6
`
`(11.7)
`12.2
`
`137.1
`(19.9)
`(17.7)
`99.5
`
`12.6)6) oo
`206.0
`$
`—Petition-torinterPartes-Review of US 8,455,527
`Amneal Pharmaceuticals LLC — Exhibit 1037 — Page 27
`
`