Item 2.05 Costs Associated with Exit or Disposal
Activities

On April 24, 2008, Hospira announced a plan to exit its manufacturing operations at its Morgan Hill, California plant and transfer most of the operations to other Hospira locations or other third parties over the next two to three years. The relatively higher costs of manufacturing in the impacted facility prompted this action. Some product support and manufacturing positions will remain in Morgan Hill.

Hospira estimates that the plan will result in pre-tax charges to its earnings in the range of approximately $29 million to $35 million, which are expected to be recorded over the next three years, beginning in the second quarter of 2008. Of these charges, approximately $24 million to $30 million will be cash related. The cash related charges do not include capital expenditures related to establishing capacity in any new locations or the eventual proceeds from the sale of the existing facility in Morgan Hill.

Estimates of the total pre-tax charges Hospira expects to incur for each major type of cost associated with the plan are: (i) $18 million to $22 million for employee-related costs, including costs for severance, retention and other assistance; (ii) $6 million to $8 million for other cash costs associated with the plan; and (iii) approximately $5 million in other non-cash charges, including accelerated depreciation of plant assets. The annual savings associated with these actions are expected to reach approximately $15 million after-tax beginning in 2011.

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