ST JUDE MEDICAL INC Form 10-Q Quarterly Report Filed 2016...

Business AddressONE ST JUDE MEDICALDRIVEST PAUL MN 551176517562000

Mailing AddressONE ST JUDE MEDICALDRIVEST PAUL MN 55117

SECURITIES AND EXCHANGE COMMISSION

FORM 10-QQuarterly report pursuant to sections 13 or 15(d)

Filing Date: 2016-08-03 | Period of Report: 2016-07-02SEC Accession No. 0000203077-16-000020

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FILERST JUDE MEDICAL INCCIK:203077| IRS No.: 411276891 | State of Incorp.:MN | Fiscal Year End: 1231Type: 10-Q | Act: 34 | File No.: 001-12441 | Film No.: 161804179SIC: 3845 Electromedical & electrotherapeutic apparatus

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Table of Contents

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Qx QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 2, 2016 OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______.

Commission File Number: 1-12441

ST. JUDE MEDICAL, INC.(Exact name of registrant as specified in its charter)

Minnesota 41-1276891(State or other jurisdiction (I.R.S. Employer

of incorporation or organization) Identification No.)

One St. Jude Medical Drive, St. Paul, Minnesota 55117(Address of principal executive offices, including zip code)

(651) 756-2000(Registrant’s telephone number, including area code)

Not Applicable(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements forthe past 90 days. x Yes ¨ 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 during thepreceding 12 months (or for such shorter period that the registrant was required to submit and post such files).x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company) 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 x No

The number of shares of common stock, par value $0.10 per share, outstanding on July 29, 2016 was 284,929,332.



Table of Contents

TABLE OF CONTENTS

ITEM DESCRIPTION PAGEPART I – FINANCIAL INFORMATION

1. Financial StatementsCondensed Consolidated Statements of Earnings 1Condensed Consolidated Statements of Comprehensive Income 2Condensed Consolidated Balance Sheets 3Condensed Consolidated Statements of Cash Flows 4

Note 1 – Basis of Presentation 5Note 2 – Debt 7Note 3 – Commitments and Contingencies 8Note 4 – Special Charges 10Note 5 – Net Earnings Per Share 13Note 6 – Accumulated Other Comprehensive Income (Loss) and Supplemental Equity Information 13Note 7 – Income Taxes 16Note 8 – Fair Value Measurements 17Note 9 – Derivative Financial Instruments 21Note 10 – Business Combinations 25Note 11 – Abbott Transaction 26

2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27Overview 27Results of Operations 28Liquidity and Capital Resources 35New Accounting Pronouncements 37Critical Accounting Policies and Estimates 37Cautionary Statements 38

3. Quantitative and Qualitative Disclosures About Market Risk 394. Controls and Procedures 39

PART II – OTHER INFORMATION

1. Legal Proceedings 401A. Risk Factors 40

2. Unregistered Sales of Equity Securities and Use of Proceeds 403. Defaults Upon Senior Securities 404. Mine Safety Disclosures 405. Other Information 406. Exhibits 41

Signature 42Index to Exhibits 43



Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ST. JUDE MEDICAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share amounts)(Unaudited)

Three Months Ended Six Months EndedJuly 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015

Net sales $ 1,562 $ 1,410 $ 3,010 $ 2,755Cost of sales:

Cost of sales before special charges 490 419 974 812Special charges 6 5 9 7

Total cost of sales 496 424 983 819Gross profit 1,066 986 2,027 1,936

Selling, general and administrative expense 502 447 993 877Research and development expense 192 171 380 338Amortization of intangible assets 46 24 92 48Special charges 13 30 21 34

Operating profit 313 314 541 639Interest income — — (1) (1)Interest expense 40 20 80 41Other (income) expense 3 — 56 (3)

Other expense, net 43 20 135 37Earnings before income taxes and noncontrollinginterest 270 294 406 602Income tax expense 32 12 73 64Net earnings before noncontrolling interest 238 282 333 538Less: Net loss attributable to noncontrolling interest — (8) — (14)Net earnings attributable to St. Jude Medical, Inc. $ 238 $ 290 $ 333 $ 552

Net earnings per share attributable to St. JudeMedical, Inc.:

Basic $ 0.84 $ 1.03 $ 1.17 $ 1.96Diluted $ 0.83 $ 1.02 $ 1.16 $ 1.93

Cash dividends declared per share: $ 0.31 $ 0.29 $ 0.62 $ 0.58Weighted average shares outstanding:

Basic 284.3 281.1 283.9 282.0Diluted 288.3 285.5 287.3 286.3

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.



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ST. JUDE MEDICAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)(Unaudited)


Net earnings before noncontrolling interest $ 238 $ 282 $ 333 $ 538Other comprehensive income (loss), net of tax

Unrealized gain (loss) on available-for-salesecurities, net of tax (expense) benefit $-, $1,$- and $1, respectively 1 (4) 1 (3)Unrealized gain (loss) on derivative financialinstruments, net of tax (expense) benefit of $1,$2, $16 and ($3), respectively (4) (17) (34) 12Foreign currency translation adjustment (17) 30 31 (97)

Other comprehensive income (loss), net of tax (20) 9 (2) (88)Total comprehensive income beforenoncontrolling interest 218 291 331 450Total comprehensive loss attributable tononcontrolling interest — (8) — (14)Total comprehensive income attributable to St.Jude Medical, Inc. $ 218 $ 299 $ 331 $ 464


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ST. JUDE MEDICAL, INC.CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value and share amounts)(Unaudited)

July 2, 2016 January 2, 2016ASSETSCurrent AssetsCash and cash equivalents $ 398 $ 667Accounts receivable, less allowance for doubtful accounts of $46 at both July2, 2016 and January 2, 2016 1,330 1,237

Finished goods 563 609Work in process 105 102Raw materials 236 198

Inventories 904 909Other current assets 295 269

Total current assets 2,927 3,082Property, plant and equipment, at cost 2,888 2,767Less: Accumulated depreciation (1,562) (1,447)

Net property, plant and equipment 1,326 1,320Goodwill 5,670 5,651Intangible assets, net 2,146 2,226Other assets 589 621TOTAL ASSETS $ 12,658 $ 12,900LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent LiabilitiesCurrent debt obligations $ 660 $ 1,163Accounts payable 242 201Income taxes payable — 201Other current liabilities 811 901

Total current liabilities 1,713 2,466Long-term debt 5,431 5,229Other liabilities 1,233 1,163

Total liabilities 8,377 8,858Commitments and Contingencies (Note 3) — —Shareholders’ EquityPreferred stock ($1.00 par value; 25,000,000 shares authorized; noneoutstanding) — —Common stock ($0.10 par value; 500,000,000 shares authorized; 284,596,998and 283,450,374 shares issued and outstanding at July 2, 2016 and January 2,2016, respectively) 28 28Additional paid-in capital 232 148Retained earnings 4,368 4,211Accumulated other comprehensive income (loss) (347) (345)Total shareholders’ equity 4,281 4,042TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 12,658 $ 12,900




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ST. JUDE MEDICAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)(Unaudited)

Six Months Ended July 2, 2016 July 4, 2015OPERATING ACTIVITIESNet earnings before noncontrolling interest $ 333 $ 538Adjustments to reconcile net earnings before noncontrolling interest to net cashfrom operating activities:

Depreciation of property, plant and equipment 116 108Amortization of intangible assets 92 48Stock-based compensation 60 37Deferred income taxes (29) (17)Other, net 104 (67)Changes in operating assets and liabilities, net of business combinations:

Accounts receivable (63) (87)Inventories (18) (53)Other current and noncurrent assets (53) (11)Accounts payable and accrued expenses 43 (35)Income taxes payable (122) (20)

Net cash provided by operating activities 463 441INVESTING ACTIVITIESPurchases of property, plant and equipment (114) (80)Business combination payments, net of cash acquired (11) —Proceeds from sale of investments — 8Other investing activities, net (4) (4)Net cash used in investing activities (129) (76)FINANCING ACTIVITIESProceeds from exercise of stock options and stock issued, net 22 89Excess tax benefits from stock issued under employee stock plans 3 14Common stock repurchased, including related costs — (500)Dividends paid (170) (158)Issuances (payments) of commercial paper borrowings, net (117) 460Proceeds from debt 500 175Payments of debt (726) (750)Purchase of shares from noncontrolling interest — (173)Payment of contingent consideration (125) —Other financing activities, net — (15)Net cash provided by (used in) financing activities (613) (858)Effect of currency exchange rate changes on cash and cash equivalents 10 (39)Net increase (decrease) in cash and cash equivalents (269) (532)Cash and cash equivalents at beginning of period 667 1,442Cash and cash equivalents at end of period $ 398 $ 910




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ST. JUDE MEDICAL, INC.NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

Principles of Consolidation: The accompanying unaudited Condensed Consolidated Financial Statements of St. JudeMedical, Inc. (St. Jude Medical or the Company) have been prepared in accordance with accounting principles generallyaccepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 ofRegulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principlesgenerally accepted in the United States (U.S. generally accepted accounting principles) for complete financial statements.In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments)considered necessary for a fair statement of the Company’s consolidated results of operations, financial position and cashflows. The Condensed Consolidated Balance Sheet at January 2, 2016 was derived from audited annual financialstatements, but does not contain all of the footnote disclosures from the annual financial statements. Operating results forany interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of theCompany’s financial statements in conformity with U.S. generally accepted accounting principles requires management tomake estimates and assumptions that affect the reported amounts in the financial statements and footnotes. Actual resultscould differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’sconsolidated financial statements and footnotes included in its Current Report on Form 8-K filed with the SEC on June 7,2016 for the fiscal year ended January 2, 2016.

The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-ownedsubsidiaries, and other entities for which St. Jude Medical has a controlling financial interest.

Effective January 1, 2016, the Company's Board of Directors appointed a new President and Chief Executive Officer whomthe Company has determined to be its Chief Operating Decision Maker. During the first quarter of 2016, the Companychanged its sales reporting to closely align with how it manages the business in five key areas: Traditional Cardiac RhythmManagement, Heart Failure, Atrial Fibrillation, Cardiovascular and Neuromodulation. The Company continues to operate asa single operating segment.

Reclassifications: Certain prior period amounts have been reclassified to conform to current year presentation.

Fiscal Year: We utilize a 52/53-week fiscal year ending on the Saturday nearest December 31st. Each of the three-and sixmonth periods ended July 2, 2016 and July 4, 2015 included 13 weeks and 26 weeks, respectively.

New Accounting Pronouncements: The following table provides a description of recent accounting pronouncementsadopted and those standards not yet adopted with potential for a material impact on the Company's financial statements ordisclosures.

Standard DescriptionRequired adoptiontiming and approach

Impact of adoption or othersignificant matters

Standards recently adopted

Accounting StandardsUpdate (ASU) No.2015-02, Consolidation(Topic 810): Amendmentsto the ConsolidationAnalysis

The standard affects both thevariable interest entity and votinginterest entity consolidationmodels.

Annual and interimperiods beginning afterDecember 15, 2015,with either retrospectiveor modifiedretrospectiveapplication permitted.Early adoption ispermitted.

The Company adopted this ASUin the quarter ended April 2,2016, using the modifiedretrospective method. Theadoption did not have a materialimpact on the Company'sresults of operations or financialposition.

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ASU No. 2015-05,Intangibles--Goodwill andOther--Internal-UseSoftware (Subtopic350-40): Customer’sAccounting for Fees Paidin a Cloud ComputingArrangement

The standard provides guidanceto customers about how toaccount for cloud computingarrangements when sucharrangements include softwarelicenses.

Annual and interimperiods beginning afterDecember 15, 2015,with either prospectiveor retrospectiveapplication permitted.Early adoption waspermitted.

The Company adopted this ASUin the quarter ended April 2,2016, using the prospectivemethod. The adoption did nothave a material impact on theCompany's results of operationsor financial position.

ASU No. 2015-11,Inventory (Topic 330):Simplifying theMeasurement of Inventory

The standard requires thatinventory within the scope of theguidance be measured at thelower of cost or net realizablevalue.

Annual and interimperiods beginning afterDecember 15, 2016,with prospectiveapplication required.Early adoption ispermitted.

The Company adopted this ASUin the quarter ended April 2,2016. The adoption did not havea material impact on theCompany's results of operationsor financial position.

Standards not yet adopted

ASU No. 2014-09,Revenue from Contractswith Customers (Topic606)

The standard requires an entity torecognize revenue to depict thetransfer of promised goods orservices to customers in anamount that reflects theconsideration to which the entityexpects to be entitled inexchange for those goods orservices. The guidance willsupersede the current revenuerecognition requirements.

Refer to ASU No.2015-14 regarding theadoption timing. Eitherretrospective ormodified retrospectiveapplication is permitted.

The Company plans to adoptthis ASU for interim and annualperiods beginning afterDecember 15, 2017. TheCompany is evaluating itsapproach to the adoption andthe potential impact to its resultsof operations and financialposition.

ASU No. 2015-14,Revenue from Contractswith Customers (Topic606): Deferral of theEffective Date

The standard defers the effectivedate of ASU No. 2014-09 toannual and interim periodsbeginning after December 15,2017. Early adoption is permittedonly as of annual and interimreporting periods beginning afterDecember 15, 2016.

Not applicable. Not applicable.

ASU No. 2016-01,Financial Instruments-Overall (Subtopic 825-10):Recognition andMeasurement of FinancialAssets and FinancialLiabilities

Among other things, the standardrequires certain equityinvestments to be measured atfair value with changes in fairvalue recognized in net income,simplifies the impairmentassessment of equity investmentswithout readily determinable fairvalues, and eliminates certaindisclosure requirements.

Annual and interimperiods beginning afterDecember 15,2017. Early adoption ofcertain guidance ispermitted.

The Company is evaluating thetiming of adoption and thepotential impact to its results ofoperations and financialposition.

ASU No. 2016-02, Leases(Topic 842)

Among other things, the standardrequires recognition of a right-of-use asset and a lease liability,initially measured at the presentvalue of the lease payments, in

Annual and interimperiods beginning afterDecember 15, 2018,with modifiedretrospective

The Company is evaluating thetiming of adoption and thepotential impact to its results ofoperations and financialposition.



the statement of financial positionfor virtually all leases where weare the lessee.

application required.Early adoption ispermitted.

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ASU No. 2016-09,Compensation--StockCompensation (Topic718): Improvements toEmployee Share-BasedPayment Accounting

The areas for simplification in thisstandard involve several aspectsof the accounting for share-basedpayment transactions, includingincome tax consequences,classification of awards as eitherequity or liabilities andclassification on the statement ofcash flows.

Annual and interimperiods beginning afterDecember 15, 2016,with certain aspectsrequiring modifiedretrospective transition,retrospectiveapplication, and/orprospective application.Early adoption ispermitted if all aspectsare adoptedsimultaneously.

The Company is evaluating thetiming of adoption and thepotential impact to its results ofoperations, financial positionand cash flows.

ASU No. 2016-10,Revenue from Contractswith Customers (Topic606): IdentifyingPerformance Obligationsand Licensing

Among other things, the standardclarifies the principle fordetermining whether a good orservice is “separately identifiable”from other promises in thecontract and, therefore, should beaccounted for separately. It alsoclarifies that entities are notrequired to identify promisedgoods or services that areimmaterial in the context of thecontract.

Refer to ASU No.2015-14 regarding theadoption timing. Eitherretrospective ormodified retrospectiveapplication is permitted.

The Company plans to adoptthis ASU for interim and annualperiods beginning afterDecember 15, 2017. TheCompany is evaluating itsapproach to the adoption andthe potential impact to its resultsof operations and financialposition.

NOTE 2 – DEBT

The carrying value of the Company’s debt, including debt issuance costs, discounts or premiums consisted of the following(in millions):

July 2, 2016 January 2, 2016Term Loan Due 2020 $ 2,368 $ 2,0932016 Senior Notes — 5002018 Senior Notes 497 4962020 Senior Notes 496 4962023 Senior Notes 892 8922025 Senior Notes 494 4942043 Senior Notes 690 689Yen-denominated Senior Notes Due 2017 79 68Yen-denominated Senior Notes Due 2020 124 106Yen-denominated credit facilities 64 54Commercial paper borrowings 387 504Total debt 6,091 6,392Less: current debt obligations 660 1,163Long-term debt $ 5,431 $ 5,229



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Contractual maturities of the Company's debt for the next five fiscal years and thereafter, excluding any debt issuancecosts, discounts or premiums, as of July 2, 2016 were as follows (in millions):

Remainderof 2016 2017 2018 2019 2020

After2020

Future minimum principal payments $ 453 $ 272 $ 598 $ 227 $ 2,478 $ 2,100

During the first six months of 2016, the Company repaid its $500 million principal amount of 5-year, 2.500% unsecuredsenior notes due 2016, made net commercial paper payments of $117 million and drew the remaining $500 million of its 5-year, $2.6 billion term loan due 2020 (Term Loan Due 2020) to refinance existing indebtedness and for general corporatepurposes. The Company also made quarterly principal payments totaling $59 million for the six months ended July 2, 2016and prepaid an additional $167 million on its Term Loan Due 2020. Additionally, the Company's yen-denominated creditfacility that expired in March 2016 for 3.25 billion Japanese Yen (the equivalent of $32 million as of July 2, 2016) wasautomatically extended for a one-year period bearing interest at Yen LIBOR plus 0.250%, and the Company's yen-denominated credit facility that expired in June 2016 for 3.25 billion Japanese Yen (the equivalent of $32 million as ofJuly 2, 2016) was automatically extended for a one-year period bearing interest at Yen LIBOR plus 0.270%.

NOTE 3 – COMMITMENTS AND CONTINGENCIES

Securities and Other Shareholder Litigation

December 2012 Securities Litigation: On December 7, 2012, a putative securities class action lawsuit was filed in federaldistrict court in Minnesota against the Company and an officer (collectively, the defendants) for alleged violations of thefederal securities laws, on behalf of all purchasers of the publicly traded securities of the defendants between October 17,2012 and November 20, 2012. The complaint, which sought unspecified damages and other relief as well as attorneys'fees, challenges the Company’s disclosures concerning its high voltage cardiac rhythm lead products during the purportedclass period. On December 10, 2012, a second putative securities class action lawsuit was filed in federal district court inMinnesota against the Company and certain officers for alleged violations of the federal securities laws, on behalf of allpurchasers of the publicly traded securities of the Company between October 19, 2011 and November 20, 2012. Thesecond complaint alleged similar claims and sought similar relief. In March 2013, the Court consolidated the two cases andappointed a lead counsel and lead plaintiff. A consolidated amended complaint was served and filed in June 2013, allegingfalse or misleading representations made during the class period extending from February 5, 2010 through November 7,2012. In September 2013, the defendants filed a motion to dismiss the consolidated amended complaint. On March 10,2014, the Court ruled on the motion to dismiss, denying the motion in part and granting the motion in part. On October 7,2014, the lead plaintiff filed a second amended complaint. Like the original consolidated amended complaint, the plaintiffsdid not assert any specific amount of compensation in the second amended complaint. The Court granted class certificationon December 22, 2015. On May 24, 2016, the parties agreed to resolve the case, pending notification to class membersand subject to court approval. Under the settlement, the Company agreed to make a payment of $39.25 million to resolveall of the class claims and recorded a charge of that amount during the second quarter of 2016. On July 13, 2016, the Courtissued an order preliminarily approving the settlement. Concurrent with the recording of the loss, the Company alsorecognized probable insurance recoveries of $39.25 million.

Abbott Merger Lawsuits: On May 2, 2016, a shareholder of the Company filed a purported class action lawsuit in RamseyCounty, Minnesota, captioned Silverman v. St. Jude Medical, Inc., et al., 62-CV-16-2872 alleging that the Company'sdirectors breached their fiduciary duties in connection with the proposed merger contemplated by the Company and AbbottLaboratories (Abbott) (the Proposed Transaction). On May 26, 2016, a second action entitled Larkin v. Starks, et al.,62-CV-16-3367, was filed in the same court alleging substantially similar claims. On July 5, 2016, plaintiffs in the twoactions jointly filed an Amended Shareholder class and Derivative Action Complaint (the Amended Complaint). Plaintiffs’Amended Complaint asserts that the Company’s directors breached their fiduciary duties by conducting a flawed saleprocess, failing to maximize shareholder value, and publishing false or misleading disclosure materials relating to theProposed Transaction, and that the Abbott defendants aided and abetted those breaches. The Amended Complaint assertsdirect and/or derivative claims for breach of fiduciary duty, corporate waste and abuse of control under Minnesota Statute§ 302A.467. Plaintiffs seek, among other things, to enjoin the Proposed Transaction and an order directing defendants toaccount to plaintiffs for all damages allegedly suffered by the putative class and damages allegedly incurred by theCompany in connection with the Proposed Transaction. On June 30, 2016, a shareholder of the Company filed a purported



class action lawsuit in the United States District Court for the District of Minnesota, captioned Rosenfeld v. St. Jude Medical,Inc., et al.,

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16-cv-02275-WMW-FLN, alleging that the Company and its directors violated Section 14(a) of the Securities Exchange Actof 1934, SEC Rule 14a-9, and Minnesota Statute §§ 80A.68 and 80A.76, and that the Company’s directors violated Section20(a) of the Exchange Act, by filing a Form S-4 with the SEC that contained false or misleading statements regarding theProposed Transaction. Plaintiff seeks, among other things, to enjoin the Proposed Transaction or, if consummated, an orderrescinding it or awarding actual and punitive damages to Plaintiff and the putative class.

The Company and its directors intend to vigorously defend against the allegations in these actions involving the Abbottmerger. The Company believes that a material loss is remote. Refer to Note 11 for a discussion of the ProposedTransaction.

Regulatory Matters

The U.S. Food and Drug Administration (FDA) inspected the Company’s manufacturing facility in Atlanta, Georgia, wherethe Company manufactures its CardioMEMS™ HF system, at various times between June 8 to June 26, 2015. On July 6,2015, the FDA issued a Form 483 identifying certain observed non-conformity with current Good Manufacturing Practice atthe facility. Following the receipt of the Form 483, the Company provided written responses to the FDA detailing proposedcorrective actions and immediately initiated efforts to address the FDA’s observations of non-conformity. The Companysubsequently received a warning letter dated September 30, 2015 from the FDA relating to these non-conformities. Sincethe completion of the FDA inspection, the Company has provided and will continue to provide the FDA with regular updates.The Company has fully-integrated this former CardioMEMS standalone facility into St. Jude Medical's quality systems.During July 2016, the FDA conducted a follow-up inspection at the Atlanta facility. On July 28, 2016, the FDA issued a Form483 identifying additional observed non-conformities with current Good Manufacturing Practice at the facility. The Companywill continue to work to remediate these observations. The warning letter is specific to the Atlanta facility and does notimpact any of the Company’s other manufacturing facilities. The warning letter does not identify any specific concernsregarding the performance of, or indicate the need for any field or other action regarding, the CardioMEMS™HF systemproduct or any other St. Jude Medical product. The Company will continue manufacturing and shipping product from theAtlanta facility, and customer orders are not expected to be impacted while the Company works to resolve the FDA’sconcerns. The Company takes these matters seriously, will respond timely and fully to the FDA’s requests, and believes thatthe FDA’s concerns will be resolved without a material impact on the Company’s financial results.

Product Warranties

The Company offers a warranty on various products, the most significant of which relate to tachycardia implantablecardioverter defibrillator (ICD) and pacemaker systems. The Company estimates the costs it expects to incur under itswarranties and records a liability for such costs at the time the product is sold. Factors that affect the Company's warrantyliability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. TheCompany regularly assesses the adequacy of its warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s product warranty liability during the three and six months ended July 2, 2016 and July 4, 2015were as follows (in millions):


Balance at beginning of period $ 26 $ 32 $ 31 $ 35Warranty expense (benefit) recognized 2 (2) 1 (4)Warranty credits issued (3) (1) (7) (2)Balance at end of period $ 25 $ 29 $ 25 $ 29

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NOTE 4 – SPECIAL CHARGES

The Company recognizes certain transactions and events as special charges in its Condensed Consolidated FinancialStatements. These charges (such as restructuring charges, impairment charges, certain legal settlements or product fieldaction costs and litigation costs) result from facts and circumstances that vary in frequency and impact on the Company'sresults of operations.

2016 Initiatives

During the fourth quarter of 2015, the Company initiated restructuring activities to drive cross-functional synergies (the 2016Initiatives). The 2016 Initiatives include enhancing focus on programs that will strengthen its strategic objectives, drivingproductivity enhancements and incurring costs to fully integrate its recent acquisitions. During 2015, the Company incurredcharges of $34 million primarily related to severance and other termination benefits.

During the first quarter of 2016, the Company incurred additional charges of $24 million related to severance and othertermination benefits, contract termination costs and fixed asset write-offs, primarily associated with the closure of legacyThoratec Corporation (Thoratec) facilities as the Company continues to integrate the acquisition.

During the second quarter of 2016, the Company incurred additional charges of $12 million related to severance and othertermination benefits, distributor contract terminations and other Thoratec-related contract terminations. The Companycurrently expects to incur approximately $20 million to $25 million during the remainder of 2016 to complete the plan, butmay incur additional charges in future periods.

A summary of the activity related to the 2016 Initiatives accrual is as follows (in millions):

EmployeeTermination

CostsInventoryCharges

FixedAsset

Charges

OtherRestructuring

Costs TotalBalance at January 3, 2015 $ — $ — $ — $ — $ —Cost of sales special charges 9 1 1 1 12Special charges 22 — — — 22Non-cash charges used — (1) (1) — (2)Cash payments (2) — — (1) (3)Balance at January 2, 2016 29 — — — 29Cost of sales special charges — 2 1 1 4Special charges 11 — 4 5 20Non-cash charges used — (2) (5) — (7)Cash payments (32) — — (5) (37)Balance at April 2, 2016 8 — — 1 9Cost of sales special charges — — — 2 2Special charges 6 — — 4 10Cash payments (6) — — (4) (10)Balance at July 2, 2016 $ 8 $ — $ — $ 3 $ 11

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Manufacturing and Supply Chain Optimization Plan

During 2014, the Company initiated the Manufacturing and Supply Chain Optimization Plan to leverage economies of scale,streamline distribution methods, drive process improvements through global synergies, balance plant utilization levels,centralize certain vendor relationships and reduce overall costs. During 2015, the Company incurred charges of $78 millionprimarily related to severance and other termination benefits, contract termination costs and fixed asset write-offs. Thesecosts included charges associated with the elimination of certain operational, quality and hardware development activities ata research and development facility, continued exit costs related to a facility closure in the United States and softwaredevelopment assets no longer expected to be utilized.

During the first and second quarters of 2016, the Company incurred additional charges of $1 million and $2 million,respectively, primarily related to continued exit costs associated with a facility closure in the United States. Material chargesare not expected in future periods as the Manufacturing and Supply Chain Optimization Plan is now complete.

A summary of the activity related to the Manufacturing and Supply Chain Optimization Plan accrual is as follows (inmillions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalance at January 3, 2015 $ 14 $ — $ — $ 6 $ 20Cost of sales special charges 4 3 15 7 29Special charges 20 — — 29 49Non-cash charges used — (3) (15) — (18)Cash payments (27) — — (35) (62)Balance at January 2, 2016 11 — — 6 17Cost of sales special charges — — — 1 1Cash payments (3) — — (6) (9)Balance at April 2, 2016 8 — — 1 9Cost of sales special charges — — — 1 1Special charges — — — 1 1Cash payments (3) — — (2) (5)Balance at July 2, 2016 $ 5 $ — $ — $ 1 $ 6

2012 Business Realignment Plan

During 2012, the Company realigned its product divisions into two new operating divisions: the Implantable ElectronicSystems Division (combining its legacy Cardiac Rhythm Management and Neuromodulation product divisions) and theCardiovascular and Ablation Technologies Division (combining its legacy Cardiovascular and Atrial Fibrillation productdivisions). In addition, the Company centralized certain support functions, including information technology, humanresources, legal, business development and certain marketing functions. The organizational changes have been part of acomprehensive plan to accelerate the Company's growth, reduce costs, leverage economies of scale and increaseinvestment in product development. During 2014, the Company announced additional organizational changes including thecombination of its Implantable Electronic Systems Division and Cardiovascular and Ablation Technologies Division,resulting in an integrated research and development (R&D) organization and a consolidation of manufacturing and supplychain operations worldwide.

During 2015, the Company incurred additional charges of $14 million primarily related to severance and other terminationbenefits and other restructuring costs, including contract termination costs, asset relocation expenses and other exit costspredominately associated with the facility closure in Europe.



During the first quarter of 2016, the Company reassessed the remaining accrual balance and determined that some of thepreviously recorded accrual balances were no longer necessary. No additional charges are expected in future periods asthe 2012 Business Realignment Plan is now complete.

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A summary of the activity related to the 2012 Business Realignment Plan accrual is as follows (in millions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalance at January 3, 2015 $ 26 $ — $ — $ 12 $ 38Cost of sales special charges 2 3 — — 5Special charges 2 — 2 5 9Non-cash charges used — (3) (2) — (5)Cash payments (25) — — (10) (35)Foreign exchange rate impact (2) — — — (2)Balance at January 2, 2016 3 — — 7 10Cost of sales special charges — (1) — (1) (2)Non-cash charges used — 1 — — 1Balance at April 2, 2016 3 — — 6 9Cash payments (1) — — — (1)Balance at July 2, 2016 $ 2 $ — $ — $ 6 $ 8

Other Special Charges

Legal settlements: During the first quarter of 2016, the Company recognized $19 million of legal settlement gains related totwo separate legal cases. These gains were partially offset by a $2 million contingent loss related to a litigation matter thatthe Company now believes is probable and estimable.

During the second quarter of 2016, the Company recognized a $39.25 million legal settlement loss related to the December2012 Securities Litigation. Concurrent with the recording of the loss, the Company also recognized probable insurancerecoveries of $39.25 million (see Note 3). The Company also recognized a $2 million legal settlement gain related to aseparate legal case during the second quarter of 2016.

During the first quarter of 2015, the Company recognized $10 million in insurance recoveries as a special benefit inconnection with the March 2010 Securities Class Action Litigation.

Product field action costs and litigation costs: During both the first and second quarters of 2016, the Company recognizedapproximately $3 million of litigation charges for expected future probable and estimable legal costs associated withoutstanding legal matters related to the Company's product field actions. During the first and second quarters of 2015, theCompany recognized approximately $5 million and $3 million, respectively, of litigation charges for expected future probableand estimable legal costs associated with outstanding legal matters related to the Company's product field actions. Chargesin excess of the amounts accrued are reasonably possible and depend on a number of factors, such as the type of claimsreceived and the cost to defend.

During the second quarter of 2016, the Company initiated an advisory letter to physicians for patients implanted with certainICD devices that were identified as having a potential therapy anomaly resulting in a lack of necessary treatment. As aresult, the Company recognized charges of $5 million to cost of sales special charges primarily for estimated scrappedinventory and warranty costs. Partially offsetting these charges, the Company recognized a $2 million benefit during thesecond quarter of 2016 to cost of sales special charges for salvaged inventory components related to an advisory actioninitiated in 2014. Additionally, the Company recognized a $2 million benefit in both the first and second quarters of 2015 tocost of sales special charges, for salvaged inventory components related to the same advisory action initiated in 2014.

Other restructuring-related charges: The Company also recognized other restructuring-related charges of $2 million and $1million during the first and second quarters of 2016, respectively.

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NOTE 5 – NET EARNINGS PER SHARE

The table below sets forth the computation of basic and diluted net earnings per share attributable to St. Jude Medical, Inc.(in millions, except per share amounts):


Numerator:Net earnings attributable to St. Jude Medical, Inc. $ 238 $ 290 $ 333 $ 552

Denominator:Basic weighted average shares outstanding 284.3 281.1 283.9 282.0

Dilution associated with stock-based compensationplans 4.0 4.4 3.4 4.3

Diluted weighted average shares outstanding 288.3 285.5 287.3 286.3Basic net earnings per share attributable to St. JudeMedical, Inc. $ 0.84 $ 1.03 $ 1.17 $ 1.96Diluted net earnings per share attributable to St. JudeMedical, Inc. $ 0.83 $ 1.02 $ 1.16 $ 1.93

Anti-dilutive shares of common stock excluded from dilutednet earnings per share attributable to St. Jude Medical,Inc. 3.8 2.6 6.1 3.4

NOTE 6 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) AND SUPPLEMENTAL EQUITYINFORMATION

The tables below present the changes in each component of accumulated other comprehensive income, net of tax,including other comprehensive income and reclassifications out of accumulated other comprehensive income into netearnings for the three and six months ended July 2, 2016 and July 4, 2015, respectively (in millions):

UnrealizedGain (Loss) On Unrealized Foreign AccumulatedAvailable-for- Gain (Loss) On Currency Other

For the three months endedJuly 2, 2016

saleSecurities

DerivativeInstruments

translationadjustment

ComprehensiveIncome (Loss)

Accumulated other comprehensiveincome (loss) as of April 2, 2016 $ 3 $ (19) $ (311) $ (327)Other comprehensive income (loss)before reclassifications 1 (4) (17) (20)Amounts reclassified to net earningsfrom accumulated other comprehensiveincome — — — —Other comprehensive income (loss) 1 (4) (17) (20)Accumulated other comprehensiveincome (loss) as of July 2, 2016 $ 4 $ (23) $ (328) $ (347)

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For the six months endedJuly 2, 2016

saleSecurities




Accumulated other comprehensive income(loss) as of January 2, 2016 $ 3 $ 11 $ (359) $ (345)Other comprehensive income (loss) beforereclassifications 1 (30) 31 2Amounts reclassified to net earnings fromaccumulated other comprehensive income — (4) — (4)Other comprehensive income (loss) 1 (34) 31 (2)Accumulated other comprehensive income(loss) as of July 2, 2016 $ 4 $ (23) $ (328) $ (347)


For the three months endedJuly 4, 2015

saleSecurities




Accumulated other comprehensive income(loss) as of April 4, 2015 $ 16 $ 32 $ (318) $ (270)Other comprehensive income (loss) beforereclassifications (2) (13) 30 15Amounts reclassified to net earnings fromaccumulated other comprehensive income (2) (4) — (6)Other comprehensive income (loss) (4) (17) 30 9Accumulated other comprehensive income(loss) as of July 4, 2015 $ 12 $ 15 $ (288) $ (261)


For the six months endedJuly 4, 2015

saleSecurities




Accumulated other comprehensive income(loss) as of January 3, 2015 $ 15 $ 3 $ (191) $ (173)Other comprehensive income (loss) beforereclassifications 1 16 (97) (80)Amounts reclassified to net earnings fromaccumulated other comprehensive income (4) (4) — (8)Other comprehensive income (loss) (3) 12 (97) (88)Accumulated other comprehensive income(loss) as of July 4, 2015 $ 12 $ 15 $ (288) $ (261)



Income taxes are not provided for foreign translation related to permanent investments in international subsidiaries.Reclassification adjustments are made to avoid double counting items in comprehensive income that are also recorded aspart of net earnings.

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The following table provides details about reclassifications out of accumulated other comprehensive income and the lineitems impacted in the Company's Condensed Consolidated Statements of Earnings during the three and six months endedJuly 2, 2016 and July 4, 2015, respectively (in millions):

Details about Amount reclassified from accumulated other comprehensive incomeaccumulated other Three Months Ended Six Months Endedcomprehensiveincome components July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015

Statements of EarningsClassification

Unrealized (gain) loss on available-for-sale securities:(Gain) loss on sale ofavailable-for-salesecurities $ — $ (3) $ — $ (7) Other (income) expense

Tax effect — 1 — 3 Income tax expense

Net of tax $ — $ (2) $ — $ (4)

Unrealized (gain) loss on derivative financial instruments:(Gain) lossrecognized onderivative financialinstruments $ — $ (4) $ (6) $ (4) Cost of sales

Tax effect — — 2 — Income tax expense

Net of tax $ — $ (4) $ (4) $ (4)

The Company's realized (gains) and losses on its available-for-sales securities and derivative financial instruments arecomputed using the specific identification method.

Supplemental Equity Information

On May 4, 2016, the Company's Board of Directors authorized a cash dividend of $0.31 per share which was paid on July29, 2016 to shareholders of record as of June 30, 2016.

On January 13, 2015, the Company authorized a share repurchase program of up to $500 million of its outstandingcommon stock. The Company began repurchasing shares on January 30, 2015. From January 30, 2015 through March 2,2015, the Company repurchased approximately 7.5 million shares for $500 million at an average repurchase price of$66.96 per share.

In June 2013, the Company made an equity investment of $40 million in Spinal Modulation, a privately-held company that isfocused on the development of an intraspinal neuromodulation therapy that delivers spinal cord stimulation targeting thedorsal root ganglion to manage chronic pain. The investment agreement resulted in a 19% voting equity interest andprovided the Company with the exclusive right, but not the obligation, to acquire Spinal Modulation. Additionally, inconnection with the investment and contingent acquisition agreement, the Company also entered into an exclusiveinternational distribution agreement, and obtained significant decision-making rights over Spinal Modulation's operationsand economic performance. Accordingly, effective June 7, 2013, the Company determined that Spinal Modulation was avariable interest entity for which St. Jude Medical was the primary beneficiary with the financial condition and results ofoperations of Spinal Modulation included in St. Jude Medical's Condensed Consolidated Financial Statements.

During the second quarter of 2015, the Company exercised its exclusive option and paid $173 million to Spinal Modulation’sshareholders to acquire the remaining 81% ownership interest in the company that it did not previously own and accrued$155 million of contingent consideration (see Note 8). The $173 million paid in the second quarter of 2015 was classified asa financing activity in the Condensed Consolidated Statement of Cash Flows. As the Company retained its controllinginterest, the payment for the shares and the accrual for contingent consideration resulted in a decrease in shareholders'equity before noncontrolling interest of $297 million and a decrease in noncontrolling interest of $33 million in St. Jude



Medical's Condensed Consolidated Balance Sheets. Spinal Modulation's results of operations continue to be included in theCompany's Condensed Consolidated Financial Statements.

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The supplemental equity schedules below present changes in the Company's noncontrolling interest and total shareholders'equity for the three and six months ended July 2, 2016 and July 4, 2015, respectively (in millions):

TotalShareholders'

EquityBefore Total

Noncontrolling Noncontrolling Shareholders'For the six months ended July 2, 2016 Interest Interest EquityBalance at January 2, 2016 $ 4,042 $ — $ 4,042Net earnings 333 — 333Other comprehensive income (loss) (2) — (2)Cash dividends declared (176) — (176)Stock-based compensation 60 — 60Common stock issued under employee stock plans and other,net 22 — 22Tax benefit from stock plans 2 — 2Balance at July 2, 2016 $ 4,281 $ — $ 4,281

TotalShareholders'

EquityBefore Total

Noncontrolling Noncontrolling Shareholders'For the six months ended July 4, 2015 Interest Interest EquityBalance at January 3, 2015 $ 4,199 $ 45 $ 4,244Net earnings 552 (14) 538Other comprehensive income (loss) (88) — (88)Cash dividends declared (163) — (163)Repurchases of common stock (500) — (500)Stock-based compensation 35 2 37Common stock issued under employee stock plans and other,net 89 — 89Tax benefit from stock plans 14 — 14Additions (purchases) of noncontrolling ownership interests (297) (33) (330)Balance at July 4, 2015 $ 3,841 $ — $ 3,841

NOTE 7 – INCOME TAXES

As of July 2, 2016, the Company had $405 million accrued for uncertain tax positions, all of which would affect theCompany’s effective tax rate if recognized. Additionally, the Company had $56 million accrued for gross interest andpenalties as of July 2, 2016. At January 2, 2016, the liability for uncertain tax positions was $338 million and the accrual forgross interest and penalties was $58 million.



The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. TheCompany has substantially concluded all material U.S. federal, state, foreign and local income tax matters for all tax yearsthrough 2004. In April 2015, the U.S. Internal Revenue Service (IRS) completed an audit of the Company’s 2010 and 2011tax returns and proposed adjustments in an audit report. In February 2014, the IRS completed an audit of the Company’s2008 and 2009 tax returns and also proposed adjustments in an audit report.

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The Company's effective income tax rate was 11.9% and 4.1% for the second quarter of 2016 and 2015, respectively, and18.0% and 10.6% for the six months ended during 2016 and 2015, respectively. The Company’s effective income tax ratediffers from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state andlocal taxes and foreign taxes that are different than the U.S. federal statutory rate. In addition, the effective tax rate can beimpacted each period by discrete income tax factors and events. During the three months ended July 2, 2016, specialcharges, acquisition-related costs and discrete income tax items favorably impacted the effective income tax rate by 1.5percentage points. During the six months ended July 2, 2016, special charges, acquisition-related costs, other-than-temporary impairments and discrete income tax items unfavorably impacted the effective income tax rate by 5.1 percentagepoints. Special charges, acquisition-related costs and discrete income tax items recognized during the second quarter andfirst six months of 2015 favorably impacted the effective rate by 13.2 percentage points and 6.5 percentage points,respectively.

During the first quarter of 2016, the European Commission concluded that decisions by the tax authorities in Belgiumregarding corporate income taxes paid under certain excess profit rulings, including the ruling previously granted to one ofthe Company’s subsidiaries, did not comply with European Union rules on state aid. Based on the applicability of thisconclusion to the Company's 2009 through 2014 tax returns in Belgium, the Company recorded a liability of 46 millionEuros including interest during the first quarter of 2016 to reserve for this uncertain tax position. During the second quarterof 2016, the Company revised the estimated liability to 43 million Euros ($48 million as of July 2, 2016) including interest.

NOTE 8 – FAIR VALUE MEASUREMENTS

The fair value measurement standard applies to certain financial assets and liabilities that are measured at fair value on arecurring basis (each reporting period) and certain financial assets and liabilities that are measured at fair value on anonrecurring basis. The Company also maintains other financial instruments that approximate their fair value due to theirshort maturities, and include such instruments as its cash and cash equivalents, accounts receivable, accounts payable,accrued liabilities and current and long-term debt obligations.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The Company's financial assets and liabilities that are measured at fair value on a recurring basis include money-marketsecurities, available-for-sale marketable securities, trading marketable securities, derivative instruments and contingentconsideration liabilities. The Company does not have any material nonfinancial assets or liabilities that are measured at fairvalue on a recurring basis. A summary of the valuation methodologies used for the respective financial assets and liabilitiesmeasured at fair value on a recurring basis is as follows:

Money-market securities: The Company’s money-market securities include funds that are traded in active markets and arerecorded at fair value based upon the quoted market prices. The Company classifies these securities as level 1.

Available-for-sale securities: The Company’s available-for-sale securities include publicly-traded equity securities that aretraded in active markets and are recorded at fair value based upon the closing stock prices. The Company classifies thesesecurities as level 1.

The following table summarizes the components of the balance of the Company’s available-for-sale securities at July 2,2016 and January 2, 2016 (in millions):

July 2, 2016 January 2, 2016Adjusted cost $ 5 $ 5Gross unrealized gains 6 6Gross unrealized losses — (1)Fair value $ 11 $ 10



Trading securities: The Company’s trading securities include publicly-traded mutual funds that are traded in active marketsand are recorded at fair value based upon quoted market prices of the net asset values of the funds. The Companyclassifies these securities as level 1.

Derivative instruments: Fair values for the Company’s derivative financial instruments are based on quoted market prices ofcomparable instruments, if available, or more commonly on standard pricing models that use readily observable marketparameters from industry standard data providers as their basis. These models reflect

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contractual terms of the derivatives, including period to maturity and market-based parameters such as foreign currencyexchange rates. They do not contain a high level of subjectivity as the techniques used in the models do not requiresignificant judgment and inputs are readily observable from actively quoted markets. The Company classifies theseinstruments as level 2 (see Note 9).

Contingent consideration liabilities: The fair value of the Company's contingent liabilities is initially measured based on theconsideration expected to be transferred (probability-weighted), discounted back to present value. The discount rate used isdetermined at the time of measurement in accordance with accepted valuation methods. The Company measures theliability on a recurring basis using Level 3 inputs including regulatory approval timing, projected revenues or cash flows,growth rates, discount rates, probabilities of payment and projected payment dates. Projected revenues are based on theCompany's most recent internal operating budgets and long-term strategic plans. Changes to any of the inputs may resultin significantly higher or lower fair value measurements.

A summary of assets and liabilities measured at fair value on a recurring basis at July 2, 2016 and January 2, 2016 is asfollows (in millions):

Balance SheetClassification July 2, 2016

QuotedPrices

In ActiveMarkets(Level 1)

SignificantOther

ObservableInputs

(Level 2)

SignificantUnobservable

Inputs(Level 3)

AssetsMoney-market securities Cash and cash

equivalents $ 52 $ 52 $ — $ —Available-for-sale

securitiesOther current assets

11 11 — —Foreign currency forward

contractsOther current assets

4 — 4 —Trading securities Other assets 312 312 — —Foreign currency forward

contractsOther assets

1 — 1 —Total assets $ 380 $ 375 $ 5 $ —

LiabilitiesForeign currency forwardcontracts Other current liabilities $ 34 $ — $ 34 $ —Contingent consideration Other liabilities 31 — — 31Foreign currency forwardcontracts

Other liabilities5 — 5 —

Total liabilities $ 70 $ — $ 39 $ 31

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Balance SheetClassification

January 2,2016

QuotedPrices

In ActiveMarkets(Level 1)

SignificantOther

ObservableInputs

(Level 2)


Inputs(Level 3)

AssetsMoney-market securities Cash and cash

equivalents $ 273 $ 273 $ — $ —Available-for-sale

securitiesOther current assets

10 10 — —Foreign currency forwardcontracts

Other current assets14 — 14 —

Trading securities Other assets 302 302 — —Foreign currency forwardcontracts Other assets 2 — 2 —

Total assets $ 601 $ 585 $ 16 $ —

LiabilitiesContingent consideration Other current liabilities $ 118 $ — $ — $ 118Foreign currency forwardcontracts

Other current liabilities6 — 6 —

Contingent consideration Other liabilities 33 — — 33Foreign currency forwardcontracts

Other liabilities3 — 3 —

Total liabilities $ 160 $ — $ 9 $ 151

The recurring Level 3 fair value measurements of the Company's contingent consideration liabilities include the followingsignificant unobservable inputs (in millions):

Contingent ConsiderationLiabilities

Fair Value as ofJuly 2, 2016 Valuation Technique Unobservable Input Value or Range

Spinal Modulation revenue-based milestones and earn-outs $ 2

Monte CarloSimulation Discount Rates 0.6% - 15.5%

Expected RevenueVolatility 25.0%

Projected Years ofPayments 2017, 2018

Nanostim, Inc. (Nanostim)revenue-based milestones 2

Probability WeightedDiscounted Cash Flow Discount Rate 5.0%

Probability of Payments 10.0%Projected Years of

Payments 2017, 2018

Assumed from Thoratecregulatory-based andrevenue-based milestones 27

Probability WeightedDiscounted Cash Flow Discount Rate 4.4%



Probabilities of Payments —% - 90.0%Projected Years of

Payments 2018 - 2022

Total contingentconsideration liabilities $ 31

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Additionally, the following table provides a reconciliation of the beginning and ending balances of the Company's recurringLevel 3 fair value measurements (in millions):

NanostimSpinal

Modulation

Assumedfrom

Thoratec TotalBalance as of January 3, 2015 $ 50 $ — $ — $ 50Initial fair value measurement of contingent consideration — 155 — 155Liabilities assumed from Thoratec acquisition — — 33 33Change in fair value of contingent consideration (48) (33) (6) (87)Balance as of January 2, 2016 2 122 27 151Change in fair value of contingent consideration — 8 1 9Transfer out of Level 3 fair value measurement due tocontractual settlement — (124) — (124)Balance as of April 2, 2016 2 6 28 36Change in fair value of contingent consideration — (4) (1) (5)Balance as of July 2, 2016 $ 2 $ 2 $ 27 $ 31

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Disclosures are required for certain assets and liabilities that are measured at fair value but are recognized and disclosed atfair value on a nonrecurring basis in periods subsequent to initial recognition. For St. Jude Medical, such measurements offair value primarily relate to long-lived assets, goodwill, indefinite-lived intangible assets and cost method investments.

Other than the items discussed below, there were no other material impairments that were measured at fair value on anonrecurring basis for the three and six months ended July 2, 2016 or July 4, 2015.

Long-lived assets: During the first quarter of 2016, the Company recognized $5 million of fixed asset write-offs primarilyassociated with projects abandoned as the Company continues to integrate its recent acquisitions. Additionally, during thefirst quarter of 2015, the Company recognized $1 million of fixed asset write-offs primarily related to projects abandonedunder the realigned structure. Typically the Company measures these assets using independent appraisals, market modelsand discounted cash flow models. However, as these fixed assets had no alternative future use and therefore no discretefuture cash flows, the assets were fully impaired.

Cost method investments: The Company also holds investments in equity securities that are accounted for as cost methodinvestments, which are classified as other assets and measured at fair value on a nonrecurring basis. The carrying value ofthese investments was $59 million and $80 million as of July 2, 2016 and January 2, 2016, respectively. During the firstquarter of 2016, the Company concluded that adverse regulatory rulings and subsequent operational decisions made by anentity in which the Company had strategic debt and equity investments had an adverse impact on the fair values of thoseinvestments. As a result, the Company recognized other-than-temporary impairments of approximately $50 million in other(income) expense in the Condensed Consolidated Statements of Earnings to fully write-down its cost method equityinvestment and convertible debt investment. The fair value of the Company’s remaining cost method investments was notestimated during the three and six months ended July 2, 2016 since there were no other identified events or changes incircumstances that may have had a significant adverse effect on the fair value of these investments.

Fair Value Measurements of Other Financial Instruments

The aggregate fair value of the Company’s fixed-rate senior notes at July 2, 2016 (measured using quoted prices in activemarkets) was $3,470 million compared to the aggregate carrying value of $3,272 million (inclusive of unamortized debtdiscounts). The fair value of the Company’s variable-rate debt obligations at July 2, 2016 approximated its aggregate$2,819 million carrying value due to the variable interest rate and short-term nature of these instruments. The Companyalso had $346 million and $393 million of cash equivalents invested in short-term deposits and interest and non-interest



bearing bank accounts at July 2, 2016 and January 2, 2016, respectively, the cost basis of which approximated the fairvalue.

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NOTE 9 – DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses foreign currency forward contracts, interest rate swaps and interest rate contracts to manage risksgenerally associated with foreign exchange rate and interest rate fluctuations. The information that follows explains thevarious types of derivatives financial instruments and how they impacted the Company's financial position andperformance.

Cash Flow HedgesForeign exchange forward contracts: During 2015, the Company began to enter into foreign exchange forward contracts tohedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactionsare designated as cash flow hedges. The Company hedges its exposure to the variability in future cash flows of forecastedtransactions for periods of up to 24 months. The dollar equivalent gross notional amount of the Company’s foreignexchange forward contracts designated as cash flow hedges at July 2, 2016 was approximately $1.0 billion. Hedgeineffectiveness recognized in earnings on cash flow hedges during the three and six months ended July 2, 2016 and July 4,2015 was not material.

As of July 2, 2016, the Company had a balance of $27 million associated with the after-tax net unrealized loss positionrelated to foreign currency forward contracts recorded in accumulated other comprehensive income. Based on exchangerates as of July 2, 2016, the Company expects to reclassify net losses of approximately $19 million after-tax to earningsover the next 12 months contemporaneously with the earnings effects of the related forecasted transactions (with theimpact offset by cash flows from the underlying hedged items).

The following table provides the (gains) losses related to derivative instruments designated as cash flow hedges for thethree and six months ended July 2, 2016 and July 4, 2015, including the location in the Condensed ConsolidatedStatements of Earnings and the Condensed Consolidated Statements of Comprehensive Income (in millions):

Pre-tax (Gain) Loss Recognized Ineffective Portion ofPre-tax (Gain) Loss in Earnings on Effective Portion (Gain) Loss on Derivative

Recognized in Other of Derivative as a Result of and Amount Excluded fromThree Comprehensive Reclassification from Effectiveness Testingmonths Income on Effective Accumulated Other Recognizedended Portion of Derivative Comprehensive Income in EarningsJuly 2, 2016 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeign currencyforward contracts $ 5 $ — Cost of sales $ — Cost of sales


Recognized in Other of Derivative as a Result of and Amount Excluded fromSix Comprehensive Reclassification from Effectiveness Testingmonths Income on Effective Accumulated Other Recognizedended Portion of Derivative Comprehensive Income in EarningsJuly 2, 2016 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationships



Foreign currencyforward contracts $ 44 $ (6) Cost of sales $ — Cost of sales

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Recognized in Other of Derivative as a Result of and Amount Excluded fromThree Comprehensive Reclassification from Effectiveness Testingmonths Income on Effective Accumulated Other Recognizedended Portion of Derivative Comprehensive Income in EarningsJuly 4, 2015 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeign currencyforward contracts $ 15 $ (4) Cost of sales $ — Cost of sales


Recognized in Other of Derivative as a Result of and Amount Excluded fromSix Comprehensive Reclassification from Effectiveness Testingmonths Income on Effective Accumulated Other Recognizedended Portion of Derivative Comprehensive Income in EarningsJuly 4, 2015 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeign currencyforward contracts $ (19) $ (4) Cost of sales $ — Cost of sales

Reclassifications from accumulated other comprehensive income into earnings include accumulated (gains) losses ondedesignated hedges at the time earnings are impacted.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include dedesignated foreign currency forward contracts and foreigncurrency forward contracts that the Company utilizes to economically hedge the foreign currency impact of assets andliabilities denominated in nonfunctional currencies. The dollar equivalent gross notional amount of these forward contractsnot designated as hedging instruments totaled approximately $0.2 billion as of July 2, 2016. The fair value of theCompany's outstanding contracts was not material as of July 2, 2016 and January 2, 2016.

The following table provides the (gains) losses related to derivative instruments not designated as hedging instruments,including the location in the Condensed Consolidated Statements of Earnings (in millions):

Derivatives Not (Gain) Loss on Derivatives (Gain) Loss on DerivativesDesignated as Recognized in Earnings Recognized in EarningsHedging Three Months Ended Six Months EndedInstruments July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 LocationForeign currencyforward contracts $ (2) $ 1 $ 1 $ (8) Other (income) expense



The net (gains) losses were almost entirely offset by corresponding net (losses) gains on the foreign currency exposuresbeing managed.

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Location and Fair Value Amount of Derivative Instruments

The following table summarizes the fair value of the Company’s derivative instruments and their locations in the CondensedConsolidated Balance Sheets as of July 2, 2016 and January 2, 2016 (in millions):

Fair Value of Derivative Instruments July 2, 2016 January 2, 2016 LocationDerivatives Designated as Hedging InstrumentsForeign currency forward contracts $ 4 $ 14 Other current assets

1 2 Other assets

(34) (6) Other current liabilities

(5) (3) Other liabilities

Derivatives Not Designated as Hedging InstrumentsForeign currency forward contracts — — Other current assets

— — Other current liabilities

Total $ (34) $ 7

Additional information with respect to the fair values of the Company's derivative instruments is included in Note 8.

Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments

As of July 2, 2016, St. Jude Medical, Inc. had International Swaps and Derivatives Association agreements with fourapplicable banks and financial institutions that contain netting provisions.

The following tables provide information as though the Company had elected to offset the asset and liability balances ofderivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by theterms of the netting arrangements with each of the counterparties as of July 2, 2016 and January 2, 2016, respectively (inmillions):

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Gross Amounts not Offset in theCondensed Consolidated Balance

Sheet that are Subject to Master NettingAgreements

Gross Amount ofEligible Offsetting

Gross Amount of RecognizedDerivative Assets Derivative LiabilitiesPresented in the Presented in the Net

Condensed Condensed Cash Amount ofConsolidated Consolidated Collateral Derivative

Derivatives as of July 2, 2016 Balance Sheet Balance Sheet Received AssetsDerivatives subject to master nettingagreements $ 3 $ 2 $ — $ 1Derivatives not subject to masternetting agreements 2 2Total $ 5 $ 2 $ — $ 3



Gross Amount ofGross Amount of Eligible Offsetting

Derivative RecognizedLiabilities Derivative Assets

Presented in the Presented in the NetCondensed Condensed Cash Amount of

Consolidated Consolidated Collateral DerivativeDerivatives as of July 2, 2016 Balance Sheet Balance Sheet Pledged LiabilitiesDerivatives subject to master nettingagreements $ 22 $ 2 $ — $ 20Derivatives not subject to masternetting agreements 17 17Total $ 39 $ 2 $ — $ 37

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Gross Amount ofEligible Offsetting

Gross Amount of RecognizedDerivative Assets Derivative LiabilitiesPresented in the Presented in the Net


Derivatives as of January 2, 2016 Balance Sheet Balance Sheet Received AssetsDerivatives subject to master nettingagreements $ 3 $ 1 $ — $ 2Derivatives not subject to masternetting agreements 13 13Total $ 16 $ 1 $ — $ 15



Gross Amount ofGross Amount of Eligible Offsetting


Presented in the Presented in the NetCondensed Condensed Cash Amount of

Consolidated Consolidated Collateral DerivativeDerivatives as of January 2, 2016 Balance Sheet Balance Sheet Pledged LiabilitiesDerivatives subject to master nettingagreements $ 1 $ 1 $ — $ —Derivatives not subject to masternetting agreements 8 8Total $ 9 1 $ — $ 8

For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end ofthe reporting period. Derivatives not subject to master netting agreements are not eligible for net presentation. As of bothJuly 2, 2016 and January 2, 2016, no cash collateral had been received or pledged related to these derivative instruments.

NOTE 10 – BUSINESS COMBINATIONS

Fiscal Year 2016

Middle East distributor: In February 2016, the Company acquired certain assets and assumed certain liabilities of a medicaldevice distributor in the Middle East for $19 million of total purchase consideration. The transaction was accounted for as apurchase business combination. The purchase price allocation, which includes customer relationship intangible assets of $7



million and goodwill of $5 million, is considered preliminary, largely with respect to certain tax-related assets and liabilities.During the second quarter of 2016, the Company did not recognize material adjustments to provisional amounts.

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Fiscal Year 2015

Thoratec: The Company continues to evaluate information about facts and circumstances that existed as of the dateThoratec was acquired. As such, the purchase price allocation is considered preliminary, largely with respect to certain tax-related assets and liabilities and legal contingencies. During the first six months of 2016, the Company did not recognizematerial adjustments to provisional amounts.

NOTE 11 - ABBOTT TRANSACTION

On April 27, 2016, the Company and Abbott entered into an agreement and plan of merger (the “Merger Agreement”).Under the Merger Agreement generally each outstanding share of the Company’s common stock will be converted into theright to receive (x) $46.75 in cash, without interest thereon, and (y) 0.8708 of a validly issued, fully paid and non-assessablecommon share of Abbott (such ratio as may be adjusted pursuant to the Merger Agreement), less any applicablewithholding taxes.

Completion of the merger is subject to customary closing conditions, including (i) adoption of the Merger Agreement by theaffirmative vote of the holders of a majority of all outstanding Company common shares, (ii) effectiveness of theRegistration Statement on Form S-4 to be filed with the Securities and Exchange Commission by Abbott in connection withthe registration of the Abbott common shares to be issued in the merger, (iii) the expiration of the waiting period applicableunder the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), and receipt of other specifiedantitrust approvals, (iv) subject to specified materiality thresholds, the accuracy of the representations and warranties of theother party, (v) the other party having performed in all material respects all of its obligations under the Merger Agreement,(vi) the absence of a material adverse effect, as defined in the Merger Agreement, on the other party, and (vii) the receipt byeach party of opinions to the effect that the transaction will be treated as a reorganization for U.S. federal income taxpurposes.

On July 11, 2016, the Company and Abbott each received a request for additional information (the Second Request) fromthe United States Federal Trade Commission (FTC) pursuant to the HSR Act, in connection with Abbott’s pendingacquisition of the Company. The effect of the Second Request is to extend the waiting period imposed by the HSR Act until30 days after Abbott and the Company have substantially complied with the request, unless that period is extendedvoluntarily by the parties or terminated sooner by the FTC.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

OVERVIEW

Our business is focused on the development, manufacture and distribution of cardiovascular medical devices for the globalcardiac rhythm management, cardiovascular and atrial fibrillation therapy areas, and interventional pain therapy andneurostimulation devices for the management of chronic pain and movement disorders. In the first quarter of 2016, wechanged our sales reporting to closely align with how we manage the business in five key product categories:

1) Traditional Cardiac Rhythm Management (single and dual chamber tachycardia implantable cardioverterdefibrillator (ICD) and bradycardia pacemaker (pacemaker) devices);

2) Heart Failure (HF) (cardiac resynchronization therapy (CRT) defibrillator (CRT-D) and pacemaker (CRT-P)devices, ventricular assist devices and heart failure monitoring devices);

3) Cardiovascular (vascular closure products, heart valve replacement and repair products, pressure measurementguidewires, optical coherence tomography (OCT) imaging products and fractional flow reserve (FFR) technology,structural heart defect devices, vascular plugs and percutaneous heart pumps);

4) Atrial Fibrillation (AF) (electrophysiology (EP) introducers and catheters, advanced cardiac mapping, navigationand recording systems, ablation systems and left atrial appendage occlusion); and

5) Neuromodulation (spinal cord stimulation and radiofrequency ablation to treat chronic pain and deep brainstimulation to treat movement disorders).

Prior period amounts have been reclassified to conform to the current period's presentation. References to “St. JudeMedical,” “St. Jude,” “the Company,” “we,” “us” and “our” are to St. Jude Medical, Inc. and its subsidiaries.

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read inconjunction with the MD&A included in our Current Report on Form 8-K filed with the SEC on June 7, 2016 for the fiscalyear ended January 2, 2016 for important background including industry-wide and general economic factors affecting ourbusiness and our key business drivers.

Recent Developments

Net sales for the second quarter and first six months of 2016 increased 11% and 9%, respectively, compared to the sameprior year periods. Foreign currency translation negatively impacted our 2016 second quarter and first six months net salesby $6 million and $48 million, respectively, compared to the same periods in 2015. Our increase in net sales during thesecond quarter and first six months of 2016 compared to the same prior year periods was driven by the following key areas:

• We benefited from incremental net sales associated with our HF ventricular assist devices, acquired through ouracquisition of Thoratec Corporation (Thoratec) during the fourth quarter of 2015.

• We experienced incremental net sales from our recent launch of the Proclaim™ Elite Spinal Cord StimulationSystem (U.S. Food and Drug Administration (FDA) approval in November 2015).

• We continued to benefit from increased EP catheter ablation procedures, led by incremental net sales associatedwith our FlexAbility™ ablation catheter (FDA approval in January 2015) and our TactiCath® irrigated ablationcatheter. Additionally, we benefited from increased net sales volumes related to our AF introducers, our intracardiacechocardiography imaging (ICE) product offerings, our AF diagnostic devices and our advanced cardiac mappingsystems.

• We also benefited from increased transcatheter aortic valve replacement (TAVR) procedures and net sales volumeincreases related to our OCT imaging products and FFR technology, particularly in Europe.



In addition to the unfavorable foreign currency translation, we have also experienced partially offsetting net sales declinesduring the second quarter and first six months of 2016 compared to the same prior year period in our traditional pacemakerand ICD devices, our CRT-D devices, our CardioMEMS™ HF System and our mechanical heart valves. Refer to theResults of Operations section for a more detailed discussion on our net sales.

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Diluted net earnings per share attributable to St. Jude Medical, Inc. for the second quarter and first six months of 2016 were$0.83 and $1.16, respectively, driven by the revenue impacts described above and the following key items which resulted innet after-tax charges of $0.13 and $0.60 per diluted share during the second quarter and first six months of 2016,respectively:

• We recognized after-tax acquisition-related costs, including contingent consideration fair value adjustments, of$0.06 and $0.21 per diluted share during the second quarter and first six months of 2016, respectively.

• We recognized after-tax restructuring charges of $0.04 and $0.10 per diluted share during the second quarter andfirst six months of 2016, respectively.

• We recognized unfavorable income tax adjustments of $0.02 and $0.20 per diluted share during the second quarterand first six months, respectively.

• We recognized after-tax investment impairment charges of $0.11 per diluted share during the first six of 2016.• We recognized after-tax net benefits related to litigation matters of $0.04 per diluted share during the first six

months of 2016.• We recognized after-tax product field action costs and litigation costs of $0.01 and $0.02 per diluted share during

the second quarter and first six months of 2016, respectively.

Refer to the Results of Operations section for a more detailed discussion of these charges.

Significant cash flow activity during the first six months of 2016 included the following key items:

• We generated $463 million of cash flows from operating activities.• We repaid $500 million principal amount of our 5-year, 2.500% unsecured senior notes (2016 Senior Notes), made

net commercial paper payments of $117 million and drew the remaining $500 million of our 5-year, $2.6 billion termloan due 2020 (Term Loan Due 2020). We also made payments of $226 million on our Term Loan Due 2020.

• We returned $170 million to shareholders in the form of dividends during the first six months of 2016.• We paid $125 million to settle the contingent consideration liability associated with the Spinal Modulation

regulatory-based milestone.

On April 27, 2016, St. Jude Medical and Abbott Laboratories (Abbott) entered into an agreement and plan of merger (theMerger Agreement) (see Note 11 to the Condensed Consolidated Financial Statements).

RESULTS OF OPERATIONS

Net sales

While we manage our operations globally and believe our product category sales are the most relevant measure of revenueperformance, we also utilize geographic area revenue data as a secondary performance measure.

The following table presents net sales to external customers for our five key product categories (in millions):

Three Months Ended Six Months EndedJuly 2,2016

July 4,2015

%Change

July 2,2016

July 4,2015

%Change

Traditional Cardiac Rhythm Management $ 395 $ 430 (8.2)% $ 761 $ 838 (9.2)%Heart Failure 384 260 47.5 % 758 511 48.1 %Cardiovascular 319 316 1.1 % 620 618 0.4 %Atrial Fibrillation 324 286 13.2 % 615 562 9.3 %Neuromodulation 140 118 18.8 % 256 226 13.5 %

Net sales $ 1,562 $ 1,410 10.8 % $ 3,010 $ 2,755 9.2 %

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The following table presents net sales by significant geographic area based on customer location (in millions):

Three Months Ended Six Months Ended

July 2, 2016 July 4, 2015%

Change July 2, 2016 July 4, 2015%

ChangeUnited States $ 795 $ 712 11.5% $ 1,571 $ 1,393 12.7 %Europe 401 352 14.0% 757 695 9.0 %Japan 131 116 13.0% 250 233 7.5 %Other foreign countries 235 230 2.3% 432 434 (0.5)%

Net sales $ 1,562 $ 1,410 10.8% $ 3,010 $ 2,755 9.2 %

Our net sales are impacted by multiple factors, the most significant of which are often impacts of acquisitions and foreigncurrency translation. Operational sales changes include organic volume and selling price impacts. These impacts for thesecond quarter and first six months of 2016 compared to the same prior year periods were as follows:

Three Months EndedJuly 2, 2016% Change

Six Months Ended July2, 2016

% ChangeOperational 0.7 % 0.3 %Acquisitions 10.5 % 10.6 %Translation (0.4)% (1.7)%

Net sales change 10.8 % 9.2 %

During the second quarter and first six months of 2016, incremental net sales of our ventricular assist devices, acquiredthrough our acquisition of Thoratec in October 2015, favorably impacted all geographies. Additionally, the U.S. continued tobenefit from incremental net sales associated with our recent launch of the Proclaim™ Elite Spinal Cord Stimulation System(FDA approval in November 2015), increased EP catheter ablation procedures and other net sales volume increasesassociated with our AF introducers, ICE product offerings and AF diagnostic devices. During the second quarter and first sixmonths of 2016, Europe's net sales also benefited from increased TAVR procedures and net sales volume increasesassociated with our OCT imaging products and FFR technology, AF introducers and our recent launch of the Proclaim™Elite Spinal Cord Stimulation System. Partially offsetting these net sales benefits, we experienced unfavorable foreigncurrency translation impacts primarily due to the U.S. Dollar strengthening against certain currencies in South Americaduring the second quarter and first six months of 2016 and as a result of the U.S. Dollar strengthening against the Euroduring the first six months of 2016 compared to the same periods in 2015. Additionally, we have continued to experience anet sales decline, predominately in the U.S, in our traditional ICD and pacemaker devices as well as our CRT-D devicesdriven by competitive pressures from third party magnetic resonance imaging (MRI) compatible devices during the secondquarter and first six months of 2016 compared to the same prior year periods. Our CardioMEMS™ HF System alsoexperienced net sales declines, primarily in the U.S., during the second quarter and first six months of 2016 compared tothe same periods in 2015 due to the reimbursement challenges faced by our customers. We continue to work through thenational coverage determination process to expand access for patients currently not covered, and we are observing datafrom hospitals publishing their experiences with the CardioMEMS™ HF System to demonstrate improved patient outcomesand reduction in healthcare costs.

The foreign currency translation impacts to net sales are not necessarily indicative of the net earnings impact of foreigncurrency translation due to partially offsetting foreign currency translation impacts on cost of sales, operating expenses andour hedging program.

The net sales fluctuations for the second quarter and first six months of 2016 compared to the same prior year period arefurther discussed by our five key product categories.

Traditional Cardiac Rhythm Management: We continued to experience net sales declines in our ICD and pacemakerdevices during the second quarter and first six months of 2016 compared to the same prior year periods, primarily driven bycompetitive pressures from third party MRI compatible devices, predominately in the U.S, including overall average selling



price declines due to a market preference for such devices. Foreign currency translation also unfavorably impacted ourTraditional Cardiac Rhythm Management net sales by $4 million (1

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percentage point) and $18 million (2 percentage points) during the second quarter and first six months of 2016,respectively, compared to the same periods in 2015.

Heart Failure: The increase in HF net sales during the second quarter and first six months of 2016 compared to the sameprior year periods is primarily due to incremental net sales associated with our ventricular assist devices, acquired throughour Thoratec acquisition. Partially offsetting the net sales increases, we continued to experience net sales declines in ourCRT-D devices primarily driven by competitive pressures from third party MRI compatible devices, predominately in theU.S, including overall average selling price declines due to a market preference for such devices. We also experienced netsales declines in our CardioMEMS™ HF System during the second quarter and first six months of 2016 compared to thesame prior year periods due to the reimbursement challenges faced by our customers. Foreign currency translationimpacting net sales was relatively flat during the second quarter of 2016 compared to the second quarter of 2015 andunfavorably impacted the first six months 2016 Heart Failure net sales by $6 million (2 percentage points) compared to thesame prior year period.

Cardiovascular: During the second quarter and first six months of 2016, we experienced net sales volume increasesassociated with our TAVR products and OCT imaging products and FFR technology. Foreign currency translation impactingnet sales was relatively flat during the second quarter of 2016 compared to the same prior year period and unfavorablyimpacted our first six months 2016 Cardiovascular net sales by $12 million (2 percentage points) compared to the sameperiod in 2015. Additionally, we continued to experience a net sales decline in our mechanical heart valves due to a marketpreference for TAVR products during the second quarter and first six months of 2016 compared to the same prior yearperiods.

Atrial Fibrillation: AF continued to benefit from increased EP catheter ablation procedures and increased net sales volumesrelated to our ICE product offerings, advanced cardiac mapping systems and our AF introducers and diagnostic devicesduring the second quarter and first six months of 2016 compared to the same prior year periods. Our EP catheter ablationnet sales continued to benefit from incremental net sales associated with our FlexAbility™ ablation catheter (FDA approvalin January 2015) and our TactiCath® irrigated ablation catheter during the second quarter and first six months of 2016compared to the same prior year periods. We also experienced increased net sales volumes associated with our ICEproduct offerings and our Ensite NavX™ navigation and visualization technology during the second quarter and first sixmonths of 2016 compared to the same periods in 2015. Additionally, net sales volume increases were also driven by ourAgilis™ NxT steerable introducer, Swartz™ guiding introducer and our diagnostic catheters during the second quarter andfirst six months of 2016 compared to the same prior year periods. Foreign current translation impacting net sales wasrelatively flat during the second quarter of 2016 compared to the second quarter of 2015 and unfavorably impacted the firstsix months 2016 AF net sales by $8 million (1 percentage point) compared to the same prior year period.

Neuromodulation: The primary increase in Neuromodulation net sales during the second quarter and first six months of2016 was the result of incremental net sales associated with our recent launch of the Proclaim™ Elite Spinal CordStimulation System (FDA approval in November 2015) compared to the same prior year periods. Foreign currencytranslation impacting net sales was relatively flat during the second quarter of 2016 compared to the second quarter of 2015and unfavorably impacted the first six months 2016 Neuromodulation net sales by $4 million (2 percentage points)compared to the same prior year period.

Gross profit


(in millions)July 2,2016

July 4,2015 Change

July 2,2016

July 4,2015 Change

Gross profit $ 1,066 $ 986 8.1 % $ 2,027 $ 1,936 4.7 %Percentage of net sales 68.2% 69.9% (1.7) pts. 67.3% 70.3% (3.0) pts.

Our gross profit percentage (or gross margin) was unfavorably impacted by foreign currency translation during the secondquarter and first six months of 2016 by approximately 0.8 percentage points and 1.1 percentage points, respectively,compared to the same periods in 2015. In 2015, we began to enter into foreign exchange forward contracts to hedgeagainst the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. Our hedging program hasmoderately mitigated periodic fluctuations. Additionally, inventory acquired in our Thoratec acquisition was recorded at fairvalue, which closely approximates normal selling prices. This resulted in higher cost of sales for Thoratec products sold in



the second quarter and first six months of 2016, which negatively impacted our second quarter and first six months 2016gross margins by approximately 0.6 percentage points and

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1.4 percentage points, respectively. We also experienced additional negative gross margin impact during the secondquarter and first six months of 2016 compared to the same prior year periods as a result of unfavorable average sellingprice impacts and geographic sales mix, primarily driven by competitive pressures from third party MRI compatiblepacemaker, CRT-D and ICD devices.

Special charges negatively impacted our gross margins during the second quarter and first six months of 2016 byapproximately 0.3 percentage points. Special charges negatively impacted our gross margins during the second quarterand first six months of 2015 by approximately 0.4 percentage points and 0.2 percentage points, respectively.

Our gross margins for the second quarter and first six months of 2016 were also negatively impacted by 0.7 percentagepoints and 0.9 percentage points, respectively, of excise taxes assessed on the sale of our products. During the secondquarter and first six months of 2015, our gross margins were negatively impacted by 1.4 percentage points of excise taxesassessed on the sale of our products. We expect the unfavorable impact of excise taxes on our gross margins to be lowerin 2016 and 2017 compared to 2015 due to the H.R. 2029 law passed in December 2015 which temporarily suspends theU.S. medical device excise tax. The temporary suspension has no impact on the Puerto Rico excise tax.

Selling, general and administrative (SG&A) expense



July 4,2015 Change

July 2,2016

July 4,2015 Change

Selling, general andadministrative expense $ 502 $ 447 12.3% $ 993 $ 877 13.2%Percentage of net sales 32.1% 31.7% 0.4 pts. 33.0% 31.8% 1.2 pts.

The increase in our SG&A expense during the second quarter and first six months of 2016 was primarily driven by netacquisition-related costs, including stock-based compensation expense for Thoratec-related replacement equity awards,transaction and integration costs, and contingent consideration fair value adjustments, of $15 million (0.9 percentagepoints) and $48 million (1.6 percentage points), respectively. Our second quarter and first six months of 2015 SG&Aexpense was favorably impacted by net acquisition-related benefits of $10 million (0.7 percentage points) and $32 million(1.1 percentage points), respectively, primarily due to a decrease in the fair value of the Nanostim, Inc. contingentconsideration liability to reflect a change in the expected timing and probability of future revenue milestone achievements.The partially offsetting benefit during the second quarter and first six months of 2016 was primarily the result of our costsavings initiatives, including benefits associated with our restructuring activities.

Research and development (R&D) expense



July 4,2015 Change

July 2,2016

July 4,2015 Change

Research and developmentexpense $ 192 $ 171 12.3% $ 380 $ 338 12.4%Percentage of net sales 12.3% 12.1% 0.2 pts. 12.6% 12.3% 0.3 pts.

Our R&D expense as a percent of net sales has remained relatively consistent, reflecting our commitment to fund growththrough cost effective innovation. Our investment in R&D reflects our commitment to fund long-term growth opportunitieswhile balancing short-term results. Our global R&D activities primarily include research, development, clinical andregulatory efforts. These efforts are primarily focused on product innovation that we anticipate will ultimately improve patientoutcomes, reduce overall healthcare costs and provide economic value to our customers while providing the best possibletechnology available. We will continue to assess our R&D programs in future periods as we focus on the development ofnew products and the improvement to existing products. Our most significant clinical trials as of July 2, 2016 aresummarized as follows:

• Portico Re-sheathable Transcatheter Aortic Valve System U.S. Investigational Device Exemption (IDE) Trial: Theobjective of this clinical trial is to evaluate the safety and effectiveness of the Portico Transcatheter Heart Valve andDelivery Systems (Portico) via transfemoral and alternative delivery



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methods. The clinical study will analyze the high risk cohort and extreme risk cohort together against acommercially available control for the primary safety and effectiveness endpoints.

• Thoratec Corporation MOMENTUM 3, Multi-center Study of MagLev Technology in Patients Undergoingmechanical circulatory support (MCS) Therapy with HeartMate 3™ (HM3) IDE Clinical Study Protocol: Theobjective of this clinical study is to evaluate the safety and effectiveness of the HM3 Left Ventricular Assist System(LVAS) by demonstrating non-inferiority to the HeartMate 2™ LVAS when used for the treatment of advanced,refractory, left ventricular HF. The HM3 LVAS is intended to provide hemodynamic support in patients withadvanced, refractory left ventricular HF, either for short term support, such as a bridge to cardiac transplantation ormyocardial recovery, or as long term support, such as destination therapy. The HM3 is intended for use inside oroutside the hospital.

• Thoratec Corporation HeartMate PHP™ Coronary InterventionS in HIgh-Risk PatiEnts Using a Novel PercutaneousLeft Ventricular Support Device (SHIELD II) study protocol: The HeartMate PHP™ System is a temporary (less than6 hour procedure) ventricular assist device indicated for use during high risk percutaneous coronary interventions(PCI) performed in elective or urgent, hemodynamically stable patients with severe coronary artery disease anddepressed left ventricular ejection fraction. The trial objective is to assess the safety and efficacy of the HeartMatePHP™ in supporting patients with severe symptomatic coronary artery disease with diminished but stablecardiovascular function, who are undergoing elective or urgent high risk PCI but are not candidates for coronaryartery bypass graft surgery. The trial is designed as a prospective, randomized, multi-center, open-label non-inferiority trial in the U.S. comparing HeartMate PHP™ to Abiomed® Impella® 2.5 percutaneous cardiac supportsystem.

Amortization of intangible assets



July 4,2015 Change

July 2,2016

July 4,2015 Change

Amortization of intangible assets $ 46 $ 24 91.7% $ 92 $ 48 91.7%

The primary increase in our intangible asset amortization expense during the second quarter and first six months of 2016compared to the same prior year periods was driven by our acquisition of Thoratec in October 2015. Additionally, wereceived FDA approval of the Axium™ Neurostimulator System in February 2016 and reclassified the related acquired in-process research and development from an indefinite-lived intangible asset to a purchased technology definite-livedintangible asset and began amortization.

Special charges

We recognize certain transactions and events as special charges in our Condensed Consolidated Financial Statements.These charges (such as restructuring charges, impairment charges, certain legal settlements or product field action costsand litigation costs) result from facts and circumstances that vary in frequency and impact on our results of operations.Generally, special charges are reflected in the Condensed Consolidated Statements of Earnings within our operatingexpenses in a separate line item, special charges. However, based on the nature of the charge, when certain specialcharges impact the calculation of gross profit, they are reflected in the line item cost of sales special charges within theCondensed Consolidated Statements of Earnings. The most common special charges impacting the cost of sales specialcharge line item relate to manufacturing activities. Refer to Note 4 to the Condensed Consolidated Financial Statements fora detailed discussion of our special charges.

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The following table provides additional detail about our special charges and related income statement classification withinour Condensed Consolidated Statements of Earnings (in millions):

Three Months Ended Three Months EndedJuly 2, 2016 July 4, 2015

Type of Special Charge

Cost ofSales

SpecialCharges

SpecialCharges

TotalSpecialCharges

Cost ofSales

SpecialCharges

SpecialCharges

TotalSpecialCharges

Restructuring activities

2016 Initiatives $ 2 $ 10 $ 12 $ — $ — $ —Manufacturing and Supply ChainOptimization Plan 1 1 2 6 21 272012 Business Realignment Plan — — — 3 6 9Other restructuring-related charges — 1 1 — — —

Legal settlements — (2) (2) — — —Product field action costs and litigationcosts 3 3 6 (4) 3 (1)

Total special charges $ 6 $ 13 $ 19 $ 5 $ 30 $ 35

Six Months Ended Six Months EndedJuly 2, 2016 July 4, 2015

Type of Special Charge

Cost ofSales

SpecialCharges

SpecialCharges

TotalSpecialCharges

Cost ofSales

SpecialCharges

SpecialCharges

TotalSpecialCharges

Restructuring activities

2016 Initiatives $ 6 $ 30 $ 36 $ — $ — $ —Manufacturing and Supply ChainOptimization Plan 2 1 3 8 27 352012 Business Realignment Plan (2) — (2) 5 9 14Other restructuring-related charges — 3 3 — — —

Legal settlements — (19) (19) — (10) (10)Product field action costs and litigationcosts 3 6 9 (6) 8 2

Total special charges $ 9 $ 21 $ 30 $ 7 $ 34 $ 41

The 2012 Business Realignment Plan was precipitated by our strategic decision to begin merging four product divisions(legacy Cardiac Rhythm Management, Neuromodulation, Cardiovascular and Atrial Fibrillation divisions) into one integratedoperating segment. Upon changing our internal reporting structures in the third quarter of 2014 to align with the new globalorganization, we initiated the Manufacturing and Supply Chain Optimization Plan. The objectives of this plan were driven byopportunities we identified as a result of the enhanced visibility we had into our newly consolidated manufacturing andsupply chain operations. As a net result of these related plans, we have closed certain of our facilities and consolidatedtheir activities into other facilities, we have made changes to our product distribution methods in certain geographies andwe now manage our operations with a single, global focus that is tailored, where necessary, for local requirements.

As we refined our long-term forecasts, including the integration of Thoratec into our business, we began to make decisionsregarding the programs and initiatives we will prioritize to strengthen our strategic focus (the 2016 Initiatives). These



decisions are being made in alignment with how we manage the business in five key areas. We plan to use some of thecost savings from these actions to reinvest in our growth drivers.

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Other expense, net



July 4,2015

July 2,2016

July 4,2015

Interest income $ — $ — $ (1) $ (1)Interest expense 40 20 80 41Other (income) expense 3 — 56 (3)

Other expense, net $ 43 $ 20 $ 135 $ 37

Interest income: Our interest income is dependent on our outstanding cash balances and applicable interest rates.

Interest expense: Our interest expense increased during the second quarter and first six months of 2016 compared to thesame prior year periods as a result of higher average debt balances primarily issued to finance our Thoratec acquisition.See Note 2 of our Condensed Consolidated Financial Statements for further information on our debt.

Other (income) expense: Generally, our other (income) expense includes foreign currency transaction gains and losses,realized available-for-sale security gains and losses and gains and losses on derivative instruments not designated ashedging instruments. During the first six months of 2016, we concluded that adverse regulatory rulings and subsequentoperational decisions made by an entity in which we had strategic debt and equity investments had an adverse impact onthe fair values of those investments. As a result, we recognized other-than-temporary impairments of approximately $50million to fully write-down our cost method equity investment and convertible debt investment. During the second quarterand first six months of 2016 we also recognized a $2 million gain and a $1 million loss, respectively, associated with ourderivative instruments not designated as hedging instruments. During the second quarter and first six months of 2015 werecognized a $1 million loss and an $8 million gain, respectively, related to our derivative instruments not designated ashedging instruments. Additionally, we recognized $3 million and $7 million of realized gains associated with the sale of ouravailable-for-sale securities during the second quarter and first six months of 2015, respectively. See Notes 6 and 9 of theCondensed Consolidated Financial Statements for further information on our gains and losses impacting other (income)expense.

Income taxes

Three Months Ended Six Months Ended(as a percent of earnings before income taxes and noncontrollinginterest)

July 2,2016

July 4,2015

July 2,2016

July 4,2015

Effective tax rate 11.9% 4.1% 18.0% 10.6%

The changes in the effective income tax rates from the second quarter and first six months of 2016 compared to the sameprior year periods were primarily a result of the tax impact of special charges, acquisition-related costs, other-than-temporary impairments, discrete income tax items and changes in the mix of income before income taxes between U.S.and foreign countries. Refer to Note 7 of the Condensed Consolidated Financial Statements for additional information.

Net loss attributable to noncontrolling interest



July 4,2015

July 2,2016

July 4,2015

Net loss attributable to noncontrolling interest $ — $ (8) $ — $ (14)

Net loss attributable to noncontrolling interest represents the elimination of the losses attributable to non-St. Jude Medical,Inc. ownership interests in St. Jude Medical, Inc. consolidated entities. The changes in the net loss attributable tononcontrolling interest are largely related to the differing periods during which there were non-St. Jude Medical, Inc.ownership interests in Spinal Modulation.



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LIQUIDITY AND CAPITAL RESOURCES

We believe that our existing cash balances, future cash generated from operations and available borrowing capacity underour 5-year, $1.5 billion revolving, unsecured committed credit facility (Credit Facility Expiring 2020) and our commercialpaper program will be sufficient to fund our operating needs, working capital requirements, R&D opportunities, capitalexpenditures, debt service requirements, share repurchases and shareholder dividends over the next 12 months and in theforeseeable future thereafter.

We believe that our earnings, cash flows and balance sheet position will permit us to obtain additional debt financing orequity capital should suitable investment and growth opportunities arise. We monitor capital markets regularly and mayraise additional capital when market conditions or interest rate environments are favorable.

As of July 2, 2016, substantially all of our cash and cash equivalents were held by our non-U.S. subsidiaries. A portion ofthese foreign cash balances are associated with earnings that are permanently reinvested and which we plan to use tosupport our continued growth plans outside the United States through funding of operations and other investment andgrowth opportunities. The majority of these funds are only available for use by our U.S. operations if they are repatriatedinto the United States. The funds repatriated would be subject to additional U.S. taxes upon repatriation; however, it is notpracticable to estimate the amount of additional U.S. tax liabilities we would incur. We currently have no plans to repatriatethese funds held by our non-U.S. subsidiaries.

Certain of our debt outstanding and available borrowings contain operating and financial covenants. Specifically, the CreditFacility Expiring 2020 and the Term Loan Due 2020 require that we have a leverage ratio (defined as the ratio ofindebtedness to EBITDA (net earnings before interest expense, income taxes, depreciation, amortization and certainincome and expenses)) not exceeding 4.0 to 1.0 for the fiscal quarters of 2016 and 3.5 to 1.0 thereafter. Additionally, our1.580% Yen Denominated Senior Notes Due 2017 and our 2.040% Yen Denominated Senior Notes Due 2020 (Yen Notes)required a ratio of total debt to total capitalization not exceeding 65% through the second fiscal quarter of 2016, reducing to60% thereafter. Under the Credit Facility Expiring 2020, Term Loan Due 2020, senior notes and Yen Notes, we also havecertain limitations on how we conduct our business, including limitations on dividends, additional liens or indebtedness andlimitations on certain acquisitions, mergers, investments and dispositions of assets. We were in compliance with all of ourdebt covenants as of July 2, 2016. For further information on our debt obligations outstanding at July 2, 2016, refer to Note2 to the Condensed Consolidated Financial Statements.

Pursuant to the Merger Agreement with Abbott, we are limited in our ability to incur any new indebtedness for borrowedmoney or issue or sell any new debt securities in the capital markets during the period from the signing of the MergerAgreement through the close of the merger.

As of July 2, 2016, our credit ratings were as follows:

• Moody’s Investors Service rated our senior unsecured debt and other long-term debt at Baa2 with negative watchand rated our short-term debt at Prime-2 with negative watch;

• Standard and Poor’s Ratings Services rated our long-term foreign and local issuer debt at A- with negative watchand rated our short-term foreign and local issuer debt at A2 with negative watch;

• Fitch Ratings rated our senior unsecured debt and other long-term debt at A- with negative watch and our short-term debt at F2 with negative watch.

We do not expect our credit ratings to have a significant impact on our liquidity or future flexibility to access additionalfunding.

Agency ratings are subject to change, and there can be no assurance that a ratings agency will continue to provide ratingsand/or maintain its current ratings. A security rating is not a recommendation to buy, sell or hold securities, and may besubject to revision or withdrawal at any time by the rating agency, and each rating should be evaluated independently ofany other rating. Agency ratings are based on a number of factors, which include financial strength, business and financialrisk, as well as transparency with rating agencies and timeliness of financial reporting.



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A summary of our cash flows from operating, investing and financing activities is provided in the following table (in millions):

Six Months EndedJuly 2, 2016 July 4, 2015

Net cash provided by (used in):Operating activities $ 463 $ 441Investing activities (129) (76)Financing activities (613) (858)

Effect of currency exchange rate changes on cash and cash equivalents 10 (39)Net increase (decrease) in cash and cash equivalents $ (269) $ (532)

Operating Cash Flows

Operating cash flows can fluctuate significantly from period to period due to payment timing differences of working capitalaccounts such as accounts receivable, inventories, accounts payable, accrued liabilities and income taxes payable. Duringthe first six months of 2016, our operating cash flows were negatively impacted due to higher tax payments made primarilyassociated with certain tax audits.

We use two primary measures that focus on accounts receivable and inventory – days sales outstanding (DSO) and daysinventory on hand (DIOH). We use DSO as a measure that places emphasis on how quickly we collect our accountsreceivable balances from customers. We use DIOH, which can also be expressed as a measure of the estimated number ofdays of cost of sales on hand, as a measure that places emphasis on how efficiently we are managing our inventory levels.These measures may not be computed the same as similarly titled measures used by other companies. As of July 2, 2016and January 2, 2016, our DSO and DIOH were as follows:

Measure Defined Calculation July 2, 2016 January 2, 2016DSO Ending net accounts receivable divided by average daily sales for the

most recently completed quarter 77 78DIOH Ending net inventory divided by average daily cost of sales for the

most recently completed six months 167 179

Our DSO at July 2, 2016 remained consistent with our DSO at January 2, 2016. Our July 2, 2016 DIOH decreased by fivedays as a result of inventory acquired through our acquisition of Thoratec and the related cost of sales during the sixmonths ended July 2, 2016. Additionally, special charges recognized in cost of sales during the six months ended July 2,2016 reduced our DIOH by approximately two days. Our January 2, 2016 DIOH increased by 10 days as a result ofinventory acquired through our acquisition of Thoratec with only 13 weeks of Thoratec cost of sales activity based on ourOctober 8, 2015 acquisition date. Partially offsetting the 10 day increase to our January 2, 2016 DIOH, special chargesrecognized in cost of sales in the last half of 2015 reduced our DIOH by six days.

Investing Cash Flows

Our purchases of property, plant and equipment totaled $114 million and $80 million during the first six months of 2016 and2015, respectively, primarily reflecting our continued investment in our product growth platforms currently in place. We alsoacquired certain assets and assumed certain liabilities of a medical device distributor in the Middle East during the first sixmonths of 2016.

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Financing Cash Flows

Our financing cash flows can fluctuate significantly depending upon our liquidity needs, the extent of our common stockrepurchases and the amount of stock option exercises. A summary of our financing cash flows is provided in the followingtable (in millions):

Six Months EndedJuly 2, 2016 July 4, 2015

Stock issued under employee stock plans, including tax benefit $ 25 $ 103Common stock repurchases — (500)Dividends paid (170) (158)Debt borrowings (payments), net (343) (115)Purchase of shares from noncontrolling interest — (173)Payment of contingent consideration (125) —Other, net — (15)Net cash provided by (used in) financing activities $ (613) $ (858)

During the first six months of 2016, we repaid $500 million principal amount of our 2016 Senior Notes, made netcommercial paper payments of $117 million and drew the remaining $500 million of our Term Loan Due 2020 to refinanceexisting indebtedness and for general corporate purposes. We also made quarterly principal payments totaling $59 millionand prepaid an additional $167 million on our Term Loan Due 2020. Additionally, we paid $125 million to settle thecontingent consideration liability associated with the Spinal Modulation regulatory-based milestone.

During the first six months of 2015, we repaid our 2-year, $500 million unsecured term loan due June 2015 and our364-day, $250 million unsecured term loan due August 2015, acquired the remaining ownership interest in SpinalModulation and repurchased approximately 7.5 million shares of our common stock.

Generally, our common stock repurchases are funded from cash generated from operations and issuances of commercialpaper. Changes in our common stock repurchases can vary from year to year based on our Board of Directors'authorization limits and other financing objectives.

We have increased our dividends every year since 2011. On August 3, 2016 our Board of Directors authorized a cashdividend of $0.31 per share payable on October 28, 2016 to shareholders of record as of September 30, 2016. We expectto continue to pay quarterly cash dividends in the foreseeable future, subject to Board approval and the Merger Agreementwith Abbott.

NEW ACCOUNTING PRONOUNCEMENTS

Information regarding new accounting pronouncements is included in Note 1 to the Condensed Consolidated FinancialStatements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates from the information provided in PartII, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our CurrentReport on Form 8-K filed with the SEC on June 7, 2016 for the fiscal year ended January 2, 2016.

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CAUTIONARY STATEMENTS

In this Quarterly Report on Form 10-Q and in other written or oral statements made from time to time, we have included andmay include statements that constitute “forward-looking statements” with respect to the financial condition, results ofoperations, plans, objectives, new products, future performance and business of St. Jude Medical, Inc. and its subsidiaries.Statements preceded by, followed by or that include words such as “may,” “will,” “expect,” “anticipate,” “continue,”“estimate,” “forecast,” “project,” “believe” or similar expressions are intended to identify some of the forward-lookingstatements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with thisstatement, for purposes of complying with the safe harbor provisions of that Act. These forward-looking statements involverisks and uncertainties. By identifying these statements for you in this manner, we are alerting you to the possibility thatactual results may differ, possibly materially, from the results indicated by these forward-looking statements. We undertakeno obligation to update any forward-looking statements. Actual results may differ materially from those contemplated by theforward-looking statements due to, among other factors, the risks and uncertainties discussed in the sections entitled Off-Balance Sheet Arrangements and Contractual Obligations in Part II, Item 7, Management’s Discussion and Analysis ofFinancial Condition and Results of Operations of our Current Report on Form 8-K filed with the SEC on June 7, 2016 for thefiscal year ended January 2, 2016, in the section entitled Market Risk in Part II, Item 7A, Quantitative and QualitativeDisclosures About Market Risk of our Annual Report on Form 10-K for the fiscal year ended January 2, 2016 (2015 Form10-K) and in the section entitled Risk Factors in Part I, Item 1A in our 2015 Form 10-K and in the section entitled RiskFactors in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended April 2, 2016 as well as the variousfactors described below. Since it is not possible to foresee all such factors, you should not consider these factors to be acomplete list of all risks or uncertainties. We believe the most significant factors that could affect our future operations andresults are set forth in the following list.

1. Competition, including product introductions by competitors that have advanced technology, better features orlower pricing.

2. Consolidation and other healthcare industry changes leading to demands for price concessions and/orlimitations on, or the elimination of, our ability to sell in significant market segments.

3. Changes in laws, regulations or administrative practices affecting government regulation of our products, suchas FDA regulations, including those that decrease the probability or increase the time and/or expense ofobtaining approval for products or impose additional burdens on the manufacture and sale of medical devices.

4. Governmental legislation, including the Patient Protection and Affordable Care Act and the Health Care andEducation Reconciliation Act, and/or regulation that significantly impacts the healthcare system in the UnitedStates or in international markets and that results in lower reimbursement for procedures using our products ordenies coverage for such procedures, reduces medical procedure volumes or otherwise adversely affects ourbusiness and results of operations, including the imposition of any medical device excise tax.

5. Any changes to the U.S. Medicare or Medicaid systems or international reimbursement systems thatsignificantly reduces reimbursement for procedures using our medical devices or denies coverage for suchprocedures, as well as adverse decisions relating to our products by administrators of such systems oncoverage or reimbursement issues.

6. Adverse developments in investigations and governmental proceedings.7. Changes in accounting rules or tax laws that adversely affect our results of operations, financial position or cash

flows.8. Risks associated with our substantial international operations, including economic and political instability,

currency fluctuations, changes in customs, tariffs and other trade restrictions and compliance with foreign laws.9. Disruptions in the financial markets or changes in economic conditions, including interest rates, inflation rates

and exchange rates, that adversely impact the availability and cost of credit and customer purchasing andpayment patterns, including the collectability of customer accounts receivable.

10. Our inability to realize the expected benefits from our restructuring initiatives and continuous improvementefforts and the negative unintended consequences such activity could have.

11. Our inability to maintain, protect and enhance our information and manufacturing systems and our products thatincorporate information technology or to develop new systems and products as well as risks to the privacy and



security of customer, patient, third-party payor, employee, supplier or company information from continuallyevolving cybersecurity threats.

12. Inability to successfully integrate the businesses that we have acquired in recent years, including our recentacquisition of Thoratec, and that we plan to acquire.

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13. The substantial additional indebtedness we incurred to finance the Thoratec acquisition, which may decreaseour business flexibility and increase our borrowing costs.

14. A reduction in the number of procedures using our devices caused by cost-containment pressures, publicationof adverse study results, initiation of investigations of our customers related to our devices or the developmentof or preferences for alternative technologies or therapies.

15. Safety, performance or efficacy concerns about our products, many of which are expected to be implanted formany years, some of which may lead to recalls and/or advisories with the attendant expenses and decliningsales.

16. Failure to successfully complete, or unfavorable data from, clinical trials for our products or new indications forour products and/or failure to successfully develop markets for such new indications.

17. Assertion, acquisition or grant of key patents by or to others that have the effect of excluding us from marketsegments or requiring us to pay royalties.

18. Declining industry-wide sales caused by product quality issues or recalls or advisories by us or our competitorsthat result in loss of physician and/or patient confidence in the safety, performance or efficacy of sophisticatedmedical devices in general and/or the types of medical devices recalled in particular.

19. Adverse developments in litigation, including product liability litigation, patent or other intellectual propertylitigation, qui tam litigation or shareholder litigation.

20. The loss of, or price increases by, suppliers of key components, some of which are sole-sourced.21. Regulatory actions arising from concern over Bovine Spongiform Encephalopathy, sometimes referred to as

“mad cow disease,” that have the effect of limiting our ability to market products using bovine collagen, such asAngio-Seal™, or products using bovine pericardial material, such as our Biocor®, Epic™, Trifecta™ andPortico™ tissue heart valves or that impose added costs on the procurement of bovine collagen or bovinepericardial material.

22. Conditions imposed in resolving, or any inability to timely resolve, any regulatory issues raised by the FDA,including Form 483 observations or warning letters, as well as risks generally associated with our health, safetyand environmental regulatory compliance and quality systems.

23. Our ability to fund future product liability losses related to claims made subsequent to becoming self-insured.24. Severe weather or other natural disasters that can adversely impact customer purchasing patterns and/or

patient implant procedures or cause damage to the facilities of our critical suppliers or one or more of ourfacilities, such as an earthquake affecting our facilities in California, Puerto Rico and Costa Rica or a hurricaneaffecting our facilities in Puerto Rico and Malaysia.

25. The effect of our pending acquisition by Abbott on us and the fact that the Merger Agreement is subject toclosing conditions, many of which are outside our control.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For further information on market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Riskin our 2015 Form 10-K. There have been no material changes in information that would have been provided in the contextof Item 3 from the end of the preceding year through July 2, 2016.

Item 4. CONTROLS AND PROCEDURES

As of July 2, 2016, the Company carried out an evaluation, under the supervision and with the participation of theCompany’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities ExchangeAct of 1934 (the Exchange Act)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officerconcluded that the Company’s disclosure controls and procedures were effective as of July 2, 2016.



There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under theExchange Act) during the second quarter of 2016 that have materially affected, or are reasonably likely to materially affect,the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Our significant legal proceedings are discussed in Note 3 to the Condensed Consolidated Financial Statements in thisQuarterly Report on Form 10-Q, are incorporated herein by reference and should be considered an integral part of Part IIItem 1, "Legal Proceedings."

Item 1A. RISK FACTORSThere has been no material change in the risk factors set forth in Part I, Item 1A, Risk Factors in our 2015 Form 10-K and inPart II, Item 1A , Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended April 2, 2016.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSNo matters require disclosure.

Item 3. DEFAULTS UPON SENIOR SECURITIESNo matters require disclosure.

Item 4. MINE SAFETY DISCLOSURESNo matters require disclosure.

Item 5. OTHER INFORMATIONNo matters require disclosure.

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Item 6. EXHIBITS

ExhibitNo. Description

2.1 Agreement and Plan of Merger, dated as of April 27, 2016, by and among St. Jude Medical, Inc., AbbottLaboratories, Vault Merger Sub, Inc. and Vault Merger Sub, LLC is incorporated by reference to Exhibit 2.1to St. Jude Medical’s Current Report on Form 8-K filed on April 28, 2016.

3.1 Amendments to the Bylaws of St. Jude Medical, Inc., effective as of April 27, 2016, are incorporated byreference to Exhibit 3.2 to St. Jude Medical’s Current Report on Form 8-K filed on April 28, 2016.

10.1 Form of First Amendment to Severance Agreement between St. Jude Medical, Inc. and executive officershired on or after December 10, 2012.

10.2 Form of Second Amendment to Severance Agreement between St. Jude Medical, Inc. and executiveofficers hired prior to December 10, 2012.

12 Computation of Ratio of Earnings to Fixed Charges.

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 Financial statements from the quarterly report on Form 10-Q of St. Jude Medical, Inc. for the quarter endedJuly 2, 2016, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) theCondensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated BalanceSheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to the CondensedConsolidated Financial Statements.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to besigned on its behalf by the undersigned thereunto duly authorized.

ST. JUDE MEDICAL, INC.

August 3, 2016 /s/ DONALD J. ZURBAYDATE DONALD J. ZURBAY

Vice President, Financeand Chief Financial Officer(Duly Authorized Officer andPrincipal Financial andAccounting Officer)

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INDEX TO EXHIBITS

ExhibitNo. Description

2.1 Agreement and Plan of Merger, dated as of April 27, 2016, by and among St. Jude Medical, Inc., AbbottLaboratories, Vault Merger Sub, Inc. and Vault Merger Sub, LLC is incorporated by reference to Exhibit 2.1to St. Jude Medical’s Current Report on Form 8-K filed on April 28, 2016.

3.1 Amendments to the Bylaws of St. Jude Medical, Inc., effective as of April 27, 2016, are incorporated byreference to Exhibit 3.2 to St. Jude Medical’s Current Report on Form 8-K filed on April 28, 2016.

10.1 Form of First Amendment to Severance Agreement between St. Jude Medical, Inc. and executive officershired on or after December 10, 2012. #

10.2 Form of Second Amendment to Severance Agreement between St. Jude Medical, Inc. and executiveofficers hired prior to December 10, 2012. #

12 Computation of Ratio of Earnings to Fixed Charges. #

31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. #

31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. #

32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. #

32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. #

101 Financial statements from the quarterly report on Form 10-Q of St. Jude Medical, Inc. for the quarter endedJuly 2, 2016, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) theCondensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated BalanceSheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to the CondensedConsolidated Financial Statements.

# Filed as an exhibit to this Quarterly Report on Form 10-Q.

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EXHIBIT 10.1

AMENDMENT TO SEVERANCE AGREEMENT

This Amendment (the “Amendment”) is made as of the 31st day of May, 2016, between St. Jude Medical, Inc., aMinnesota corporation, with its principal offices at One St. Jude Medical Drive, St. Paul, Minnesota 55117 (the “Company”)and ________________ (“Executive”), and amends that certain Severance Agreement, dated________________, betweenExecutive and the Company (the “Change in Control Severance Agreement”).

WITNESSETH THAT:

WHEREAS, the Change in Control Severance Agreement provides severance protection to Executive under certaincircumstances solely in connection with a change in control;

WHEREAS, the Change in Control Severance Agreement does not provide for parachute tax gross-up payments;

WHEREAS, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AbbottLaboratories (“Parent”), Vault Merger Sub, Inc., a wholly owned subsidiary of Parent (“Merger Sub 1”) and Vault MergerSub, LLC, a wholly owned subsidiary of Parent (“Merger Sub 2” and, together with Merger Sub 1, the “Merger Subs”) thatprovides for, among other things, the merger of Merger Sub 1 with and into the Company (the “First Merger”), with theCompany surviving the First Merger and, promptly following the First Merger, the merger of the Company with and intoMerger Sub 2 (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub 2 surviving suchSecond Merger; and

WHEREAS, in consideration for (i) the retention of Executive during the period through at least the closing of theFirst Merger and (ii) Executive’s obligations to the Company pursuant to any agreement to refrain from performing servicespursuant to an agreement containing a covenant not to compete or similar covenant, including the NoncompetitionAgreement between the Company and Executive dated as of _____________ (the “Noncompetition Agreement”), theCompany deems it advisable and in the best interests of the Company and its shareholders to provide additional protectionand indemnification to Executive against potential excise taxes under Section 4999 of the Internal Revenue Code of 1986,as amended (the “Code”) in the event the First Merger is consummated.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are herebyacknowledged, the Company and Executive agree as follows:

1. The words “Anything to the contrary notwithstanding” in the first sentence of Section 4(ii) are hereby deletedand replaced with the following:

(ii) “Except as provided in Section 4(iii),”

2. A new Section 4(iii) to the Change in Control Severance Agreement is hereby added to read in full as follows:

(iii)(a) In the event that any payment or benefit received or to be received by Executive either in connection

with (x) the First Merger or (y) the termination of Executive’s employment during the term of Executive’s Change inControl Severance Agreement following the consummation of the First Merger (whether payable pursuant to theterms of the Change in Control Severance Agreement or any other plan, contract, agreement, program orarrangement with the Company, Parent or with any person constituting a member of an “affiliated group” as definedin Section 280G(d)(5) of the Code with the Company or Parent (collectively, the “Total Payments”)) would besubject to the excise tax imposed by Section 4999 of the Code, or any successor provision thereto, or any interest,penalties or additions to tax with respect to such excise tax (such excise tax, together with any such interest,penalties or additions to tax, are collectively referred to as the “Excise Tax”), then Executive shall be entitled to



receive from the Company (or any successor) an additional cash payment (a “Gross-Up Payment”) which, subjectto Section 14 of the Change



in Control Severance Agreement, shall be paid within thirty (30) business days of such determination in an amountsuch that after payment by Executive of all taxes (including any interest, penalties or additions to tax imposed withrespect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains anamount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. All determinationsrequired to be made in connection with the foregoing, including whether a Gross-Up Payment is required and theamount of such Gross-Up Payment, shall be made by the independent accounting firm retained by the Companyimmediately prior to the time that the proposed transaction with Parent is consummated (the “Accounting Firm”),which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) businessdays of Executive’s termination of employment, or such earlier time as is requested by the Company;

(b) if the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish theCompany with an opinion that the Company has substantial authority not to report any Excise Tax on Executive’sForm W-2 or other applicable tax reporting form and shall furnish Executive with an opinion that Executive hassubstantial authority not to report any Excise Tax on Executive’s federal income tax return;

(c) any uncertainty in the application of Section 4999 of the Code, or any successor provision thereto, atthe time of the initial determination by the Accounting Firm hereunder shall be resolved in favor of Executive;

(d) if, notwithstanding the initial determination of the Accounting Firm, Executive is required to make apayment of any Excise Tax, the Accounting Firm shall determine the amount of the underpayment of any Gross-UpPayment that has occurred, and any such underpayment shall be promptly paid by the Company to or for thebenefit of Executive;

(e) if, notwithstanding the initial determination of the Accounting Firm, it is discovered that anoverpayment of any Gross-Up Payment has been made to Executive, (x) the Company shall deliver to Executive awritten request for repayment (accompanied by updated detailed supporting calculations prepared by theAccounting Firm), (y) Executive shall refund the Company the amount of any overpayment, and (z) if Executive hasnot repaid such overpayment to the Company within a reasonable period of time following the receipt by Executiveof the Company’s written request, the Company will take commercially reasonable steps to recover from Executivethe amount of any overpayment that the Accounting Firm determines has occurred in connection with the foregoing;

(f) Executive shall cooperate with the Company in good faith in valuing, and the Accounting Firm shalltake into account the value of, services provided or to be provided by Executive, including without limitation,Executive’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenantbefore, on or after the date of a change in ownership or control of the Company (within the meaning of Q&A-2(b) ofthe final regulations under Section 280G of the Code), including pursuant to the Noncompete Agreement, such thatpayments in respect of such services may be considered reasonable compensation within the meaning of Q&A-9and Q&A-40 to Q&A-44 of the final regulations under Section 280G of the Code and/or exempt from the definitionof the term “parachute payment” within the meaning of Q&A-2(a) of the final regulations under Section 280G of theCode in accordance with Q&A-5(a) of the final regulations under Section 280G of the Code; and

(g) any good faith determination by the Accounting Firm as to the amount of any Gross-UpPayment, including the amount of any Underpayment or Overpayment, shall be binding upon the Company andExecutive.

(h) The payments or benefits provided pursuant to this Amendment are governed by and subject to all ofthe terms and conditions of the remaining provisions of the Change in Control Severance Agreement to the extentnot in direct conflict with this Amendment, including, without limitation, those listed below. For avoidance of doubt,nothing in this Amendment shall limit, abridge, amend, modify or otherwise affect Executive’s Change in ControlSeverance Agreement in a manner that is adverse to Executive.

(A) Any payment not made to Executive when due hereunder shall thereafter, until paid in full,bear interest at the rate of interest equal to the reference rate announced from time to



time by Wells Fargo Bank Minnesota, National Association, plus two percent, with such interest to be paidto Executive upon demand or monthly in the absence of a demand;

(B) Executive shall not be required to mitigate the amount of any payment provided for in thisAmendment by seeking other employment or otherwise. The amount of any payment or benefit provided inthis Amendment shall not be reduced by any other payment received by Executive from any source; and

(C) The Company will require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise to all or substantially all of the business and/or assets of the Company), byagreement in form and substance satisfactory to Executive, to expressly assume and agree to performunder this Amendment in the same manner and to the same extent that the Company would be required toperform it if no such succession had taken place.

(i) Executive shall not be eligible for the foregoing benefits if Executive has voluntarily resigned or beenterminated for “cause” prior to the closing of the First Merger.

3. The existing Sections 4(iii) and 4(iv) are renumbered to 4(iv) and 4(v), respectively.

4. Except as expressly provided herein, all other terms of the Change in Control Severance Agreement areunchanged by this Amendment and remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed in its name by a dulyauthorized officer, and Executive has hereunto set his or her hand, all as of the date first written above.


ByIts

EXECUTIVE

_____________________________________



EXHIBIT 10.2

SECOND AMENDMENT TO SEVERANCE AGREEMENT

This Amendment (the “Amendment”) is made as of the 31st day of May, 2016, between St. Jude Medical, Inc., aMinnesota corporation, with its principal offices at One St. Jude Medical Drive, St. Paul, Minnesota 55117 (the “Company”)and _____________ (“Executive”), and amends that certain Severance Agreement, dated_____________, betweenExecutive and the Company, as amended by the First Amendment to Severance Agreement, dated_____________, (the“First Amendment” and collectively, the “Change in Control Severance Agreement”).

WITNESSETH THAT:

WHEREAS, the Change in Control Severance Agreement provides severance protection to Executive under certaincircumstances solely in connection with a change in control;

WHEREAS, The First Amendment eliminated Executive’s right to parachute tax gross-up payments;

WHEREAS, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AbbottLaboratories (“Parent”), Vault Merger Sub, Inc., a wholly owned subsidiary of Parent (“Merger Sub 1”) and Vault MergerSub, LLC, a wholly owned subsidiary of Parent (“Merger Sub 2” and, together with Merger Sub 1, the “Merger Subs”) thatprovides for, among other things, the merger of Merger Sub 1 with and into the Company (the “First Merger”), with theCompany surviving the First Merger and, promptly following the First Merger, the merger of the Company with and intoMerger Sub 2 (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub 2 surviving suchSecond Merger; and

WHEREAS, in consideration for (i) the retention of Executive during the period through at least the closing of theFirst Merger and (ii) Executive’s obligations to the Company pursuant to any agreement to refrain from performing servicespursuant to an agreement containing a covenant not to compete or similar covenant, including the NoncompetitionAgreement between the Company and Executive dated as of _____________ (the “Noncompetition Agreement”), theCompany deems it advisable and in the best interests of the Company and its shareholders to provide additional protectionand indemnification to Executive against potential excise taxes under Section 4999 of the Internal Revenue Code of 1986,as amended (the “Code”) in the event the First Merger is consummated.

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are herebyacknowledged, the Company and Executive agree as follows:

1. The words “Anything to the contrary notwithstanding” in the first sentence of Section 4(ii) are hereby deletedand replaced with the following:

(ii) “Except as provided in Section 4(iii),”

2. A new Section 4(iii) to the Change in Control Severance Agreement is hereby added to read in full as follows:

(iii)(a) In the event that any payment or benefit received or to be received by Executive either in connection

with (x) the First Merger or (y) the termination of Executive’s employment during the term of Executive’s Change inControl Severance Agreement following the consummation of the First Merger (whether payable pursuant to theterms of the Change in Control Severance Agreement or any other plan, contract, agreement, program orarrangement with the Company, Parent or with any person constituting a member of an “affiliated group” as definedin Section 280G(d)(5) of the Code with the Company or Parent (collectively, the “Total Payments”)) would besubject to the excise tax imposed by Section 4999 of the Code, or any successor provision thereto, or any interest,penalties or additions to tax with respect to such excise tax (such excise tax, together with any such interest,



penalties or additions to tax, are collectively referred to as the “Excise Tax”), then Executive shall be entitled toreceive from the Company (or any



successor) an additional cash payment (a “Gross-Up Payment”) which, subject to Section 14 of the Change inControl Severance Agreement, shall be paid within thirty (30) business days of such determination in an amountsuch that after payment by Executive of all taxes (including any interest, penalties or additions to tax imposed withrespect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains anamount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. All determinationsrequired to be made in connection with the foregoing, including whether a Gross-Up Payment is required and theamount of such Gross-Up Payment, shall be made by the independent accounting firm retained by the Companyimmediately prior to the time that the proposed transaction with Parent is consummated (the “Accounting Firm”),which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) businessdays of Executive’s termination of employment, or such earlier time as is requested by the Company;

(b) if the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish theCompany with an opinion that the Company has substantial authority not to report any Excise Tax on Executive’sForm W-2 or other applicable tax reporting form and shall furnish Executive with an opinion that Executive hassubstantial authority not to report any Excise Tax on Executive’s federal income tax return;

(c) any uncertainty in the application of Section 4999 of the Code, or any successor provision thereto, atthe time of the initial determination by the Accounting Firm hereunder shall be resolved in favor of Executive;

(d) if, notwithstanding the initial determination of the Accounting Firm, Executive is required to make apayment of any Excise Tax, the Accounting Firm shall determine the amount of the underpayment of any Gross-UpPayment that has occurred, and any such underpayment shall be promptly paid by the Company to or for thebenefit of Executive;

(e) if, notwithstanding the initial determination of the Accounting Firm, it is discovered that anoverpayment of any Gross-Up Payment has been made to Executive, (x) the Company shall deliver to Executive awritten request for repayment (accompanied by updated detailed supporting calculations prepared by theAccounting Firm), (y) Executive shall refund the Company the amount of any overpayment, and (z) if Executive hasnot repaid such overpayment to the Company within a reasonable period of time following the receipt by Executiveof the Company’s written request, the Company will take commercially reasonable steps to recover from Executivethe amount of any overpayment that the Accounting Firm determines has occurred in connection with the foregoing;

(f) Executive shall cooperate with the Company in good faith in valuing, and the Accounting Firm shalltake into account the value of, services provided or to be provided by Executive, including without limitation,Executive’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenantbefore, on or after the date of a change in ownership or control of the Company (within the meaning of Q&A-2(b) ofthe final regulations under Section 280G of the Code), including pursuant to the Noncompete Agreement, such thatpayments in respect of such services may be considered reasonable compensation within the meaning of Q&A-9and Q&A-40 to Q&A-44 of the final regulations under Section 280G of the Code and/or exempt from the definitionof the term “parachute payment” within the meaning of Q&A-2(a) of the final regulations under Section 280G of theCode in accordance with Q&A-5(a) of the final regulations under Section 280G of the Code; and

(g) any good faith determination by the Accounting Firm as to the amount of any Gross-UpPayment, including the amount of any Underpayment or Overpayment, shall be binding upon the Company andExecutive.

(h) The payments or benefits provided pursuant to this Amendment are governed by and subject to all ofthe terms and conditions of the remaining provisions of the Change in Control Severance Agreement to the extentnot in direct conflict with this Amendment, including, without limitation, those listed below. For avoidance of doubt,nothing in this Amendment shall limit, abridge, amend, modify or otherwise affect Executive’s Change in ControlSeverance Agreement in a manner that is adverse to Executive.

(A) Any payment not made to Executive when due hereunder shall thereafter, until paid in full,bear interest at the rate of interest equal to the reference rate announced from time to



time by Wells Fargo Bank Minnesota, National Association, plus two percent, with such interest to be paidto Executive upon demand or monthly in the absence of a demand;

(B) Executive shall not be required to mitigate the amount of any payment provided for in thisAmendment by seeking other employment or otherwise. The amount of any payment or benefit provided inthis Amendment shall not be reduced by any other payment received by Executive from any source; and

(C) The Company will require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise to all or substantially all of the business and/or assets of the Company), byagreement in form and substance satisfactory to Executive, to expressly assume and agree to performunder this Amendment in the same manner and to the same extent that the Company would be required toperform it if no such succession had taken place.

(i) Executive shall not be eligible for the foregoing benefits if Executive has voluntarily resigned or beenterminated for “cause” prior to the closing of the First Merger.

3. The existing Sections 4(iii) and 4(iv) are renumbered to 4(iv) and 4(v), respectively.

4. Except as expressly provided herein, all other terms of the Change in Control Severance Agreement areunchanged by this Amendment and remain in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed in its name by a dulyauthorized officer, and Executive has hereunto set his or her hand, all as of the date first written above.


ByIts

EXECUTIVE

_____________________________________



EXHIBIT 12

ST. JUDE MEDICAL, INC.COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(amounts in millions of dollars)

Six Months Ended FISCAL YEARJuly 2, 2016 2015 2014 2013 2012 2011

EARNINGSEarnings before income taxes andnoncontrolling interest $ 406 $ 928 $ 1,068 $ 784 $ 1,005 $ 1,019Plus fixed charges:

Interest expense (1) 80 103 85 81 73 70Rent interest factor (2) 8 15 17 12 15 15

TOTAL FIXED CHARGES 88 118 102 93 88 85EARNINGS BEFORE INCOMETAXES AND FIXED CHARGES $ 494 $ 1,046 $ 1,170 $ 877 $ 1,093 $ 1,104RATIO OF EARNINGS TO FIXEDCHARGES 5.6 8.9 11.5 9.4 12.4 13.0

(1) Interest expense consists of interest on indebtedness and amortization of debt issuance costs but excludes intereston liabilities for uncertain tax positions.

(2) Approximately one-third of rental expense is deemed representative of the interest factor.



EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002

I, Michael T. Rousseau, certify that:

1. I have reviewed this quarterly report on Form 10-Q of St. Jude Medical, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant, includingits consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurredduring the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of anannual report) that has materially affected, or is reasonably likely to materially affect, the registrant'sinternal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant's auditors and the audit committee of the registrant's board ofdirectors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant's internal control over financial reporting.



Date: August 3, 2016

/s/ MICHAEL T. ROUSSEAUMichael T. RousseauPresident and Chief Executive Officer



EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002

I, Donald J. Zurbay, certify that:

1. I have reviewed this quarterly report on Form 10-Q of St. Jude Medical, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant, includingits consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurredduring the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of anannual report) that has materially affected, or is reasonably likely to materially affect, the registrant'sinternal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant's auditors and the audit committee of the registrant's board ofdirectors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant's internal control over financial reporting.



Date: August 3, 2016

/s/ DONALD J. ZURBAYDonald J. ZurbayVice President, Finance and Chief FinancialOfficer



EXHIBIT 32.1

CERTIFICATION PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of St. Jude Medical, Inc. (the Company) on Form 10-Q for the period ended July 2,2016 as filed with the Securities and Exchange Commission (the Report), I, Michael T. Rousseau, Chief Executive Officer ofthe Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company.

/s/ MICHAEL T. ROUSSEAUMichael T. RousseauPresident and Chief Executive OfficerAugust 3, 2016



EXHIBIT 32.2

CERTIFICATION PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of St. Jude Medical, Inc. (the Company) on Form 10-Q for the period ended July 2,2016 as filed with the Securities and Exchange Commission (the Report), I, Donald J. Zurbay, Chief Financial Officer of theCompany, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company.

/s/ DONALD J. ZURBAYDonald J. ZurbayVice President, Finance andChief Financial OfficerAugust 3, 2016



6 Months EndedDocument And EntityInformation - shares Jul. 02, 2016 Jul. 29, 2016

Document And Entity Information [Abstract]Document Type 10-QAmendment Flag falseDocument Period End Date Jul. 02, 2016Document Fiscal Year Focus 2016Document Fiscal Period Focus Q2Entity Registrant Name ST JUDE MEDICAL INCEntity Central Index Key 0000203077Current Fiscal Year End Date --12-31Entity Filer Category Large Accelerated FilerEntity Common Stock, Shares Outstanding 284,929,332



3 Months Ended 6 Months EndedCondensed ConsolidatedStatements Of Earnings -

USD ($)shares in Millions, $ in

Millions

Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

Income Statement [Abstract]Net sales $ 1,562 $ 1,410 $ 3,010 $ 2,755Cost of sales:Cost of sales before special charges 490 419 974 812Special charges 6 5 9 7Total cost of sales 496 424 983 819Gross profit 1,066 986 2,027 1,936Selling, general and administrative expense 502 447 993 877Research and development expense 192 171 380 338Amortization of intangible assets 46 24 92 48Special charges 13 30 21 34Operating profit 313 314 541 639Interest income 0 0 (1) (1)Interest expense 40 20 80 41Other (income) expense 3 0 56 (3)Other expense, net 43 20 135 37Earnings before income taxes and noncontrolling interest 270 294 406 602Income tax expense 32 12 73 64Net earnings before noncontrolling interest 238 282 333 538Less: Net loss attributable to noncontrolling interest 0 (8) 0 (14)Net earnings attributable to St. Jude Medical, Inc. $ 238 $ 290 $ 333 $ 552Net earnings per share attributable to St. Jude Medical,Inc.:Basic (USD per share) $ 0.84 $ 1.03 $ 1.17 $ 1.96Diluted (USD per share) 0.83 1.02 1.16 1.93Cash dividends declared per share (USD per share) $ 0.31 $ 0.29 $ 0.62 $ 0.58Weighted average shares outstanding:Basic (in shares) 284.3 281.1 283.9 282.0Diluted (in shares) 288.3 285.5 287.3 286.3



3 MonthsEnded

6 MonthsEnded

Condensed ConsolidatedStatements Of

Comprehensive Income -USD ($)

$ in Millions

Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

Statement of Comprehensive Income [Abstract]Net earnings before noncontrolling interest $ 238 $ 282 $ 333 $ 538Other comprehensive income (loss), net of taxUnrealized gain (loss) on available-for-sale securities, net of tax (expense)benefit $-, $1, $- and $1, respectively 1 (4) 1 (3)

Unrealized gain (loss) on derivative financial instruments, net of tax(expense) benefit of $1, $2, $16 and ($3), respectively (4) (17) (34) 12

Foreign currency translation adjustment (17) 30 31 (97)Other comprehensive income (loss), net of tax (20) 9 (2) (88)Total comprehensive income before noncontrolling interest 218 291 331 450Total comprehensive loss attributable to noncontrolling interest 0 (8) 0 (14)Total comprehensive income attributable to St. Jude Medical, Inc. $ 218 $ 299 $ 331 $ 464



3 MonthsEnded

6 MonthsEnded

Condensed ConsolidatedStatements of

Comprehensive Income(Parenthetical) - USD ($)

$ in Millions

Jul.02,

2016

Jul.04,

2015

Jul.02,

2016

Jul.04,

2015Statement of Comprehensive Income [Abstract]Tax (expense) benefit on related to increase (decrease) in accumulated gain (loss)from unrealized gain (loss) on available-for-sale securities $ 0 $ 1 $ 0 $ 1

Tax (expense) benefit on related to increase (decrease) in accumulated gain (loss)from derivative instruments designated and qualifying as the effective portion of cashflow hedges

$ 1 $ 2 $ 16 $ (3)



Condensed ConsolidatedBalance Sheets - USD ($)

$ in Millions

Jul.02,

2016

Jan.02,

2016ASSETSCash and cash equivalents $ 398 $ 667Accounts receivable, less allowance for doubtful accounts of $46 at both July 2, 2016 andJanuary 2, 2016 1,330 1,237

Finished goods 563 609Work in process 105 102Raw materials 236 198Inventories 904 909Other current assets 295 269Total current assets 2,927 3,082Property, plant and equipment, at cost 2,888 2,767Less: Accumulated depreciation (1,562) (1,447)Net property, plant and equipment 1,326 1,320Goodwill 5,670 5,651Intangible assets, net 2,146 2,226Other assets 589 621TOTAL ASSETS 12,658 12,900LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent debt obligations 660 1,163Accounts payable 242 201Income taxes payable 0 201Other current liabilities 811 901Total current liabilities 1,713 2,466Long-term debt 5,431 5,229Other liabilities 1,233 1,163Total liabilities 8,377 8,858Commitments and Contingencies 0 0Shareholders’ EquityPreferred stock ($1.00 par value; 25,000,000 shares authorized; none outstanding) 0 0Common stock ($0.10 par value; 500,000,000 shares authorized; 284,596,998 and 283,450,374shares issued and outstanding at July 2, 2016 and January 2, 2016, respectively) 28 28

Additional paid-in capital 232 148Retained earnings 4,368 4,211Accumulated other comprehensive income (loss) (347) (345)Total shareholders’ equity 4,281 4,042TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $

12,658$12,900



Condensed ConsolidatedBalance Sheets

(Parenthetical) - USD ($)$ in Millions

Jul. 02, 2016 Jan. 02, 2016

Statement of Financial Position [Abstract]Accounts receivable allowance for doubtful accounts $ 46 $ 46Preferred stock, par value (USD per share) $ 1 $ 1Preferred stock, shares authorized 25,000,000 25,000,000Preferred stock, shares outstanding 0 0Common stock, par value (USD per share) $ 0.1 $ 0.1Common stock, shares authorized 500,000,000 500,000,000Common stock, shares issued 284,596,998 283,450,374Common stock, shares outstanding 284,596,998 283,450,374



6 Months EndedCondensed ConsolidatedStatements Of Cash Flows -

USD ($)$ in Millions

Jul. 02,2016

Jul. 04,2015

OPERATING ACTIVITIESNet earnings before noncontrolling interest $ 333 $ 538Adjustments to reconcile net earnings before noncontrolling interest to net cash fromoperating activities:Depreciation of property, plant and equipment 116 108Amortization of intangible assets 92 48Stock-based compensation 60 37Deferred income taxes (29) (17)Other, net 104 (67)Changes in operating assets and liabilities, net of business combinations:Accounts receivable (63) (87)Inventories (18) (53)Other current and noncurrent assets (53) (11)Accounts payable and accrued expenses 43 (35)Income taxes payable (122) (20)Net cash provided by operating activities 463 441INVESTING ACTIVITIESPurchases of property, plant and equipment (114) (80)Business combination payments, net of cash acquired (11) 0Proceeds from sale of investments 0 8Other investing activities, net (4) (4)Net cash used in investing activities (129) (76)FINANCING ACTIVITIESProceeds from exercise of stock options and stock issued, net 22 89Excess tax benefits from stock issued under employee stock plans 3 14Common stock repurchased, including related costs 0 (500)Dividends paid (170) (158)Issuances (payments) of commercial paper borrowings, net (117) 460Proceeds from debt 500 175Payments of debt (726) (750)Purchase of shares from noncontrolling interest 0 (173)Payment of contingent consideration (125) 0Other financing activities, net 0 (15)Net cash provided by (used in) financing activities (613) (858)Effect of currency exchange rate changes on cash and cash equivalents 10 (39)Net increase (decrease) in cash and cash equivalents (269) (532)Cash and cash equivalents at beginning of period 667 1,442Cash and cash equivalents at end of period $ 398 $ 910



6 Months EndedBasis Of Presentation Jul. 02, 2016Organization, Consolidationand Presentation ofFinancial Statements[Abstract]Basis Of Presentation BASIS OF PRESENTATION

Principles of Consolidation: The accompanying unaudited Condensed ConsolidatedFinancial Statements of St. Jude Medical, Inc. (St. Jude Medical or the Company) havebeen prepared in accordance with accounting principles generally accepted in the UnitedStates for interim financial information and with the instructions to Form 10-Q and Rule10-01 of Regulation S-X. Accordingly, they do not include all of the information andfootnotes required by accounting principles generally accepted in the United States (U.S.generally accepted accounting principles) for complete financial statements. In theopinion of management, these statements include all adjustments (consisting of normalrecurring adjustments) considered necessary for a fair statement of the Company’sconsolidated results of operations, financial position and cash flows. The CondensedConsolidated Balance Sheet at January 2, 2016 was derived from audited annualfinancial statements, but does not contain all of the footnote disclosures from the annualfinancial statements. Operating results for any interim period are not necessarilyindicative of the results that may be expected for the full year. Preparation of theCompany’s financial statements in conformity with U.S. generally accepted accountingprinciples requires management to make estimates and assumptions that affect thereported amounts in the financial statements and footnotes. Actual results could differfrom those estimates. This Quarterly Report on Form 10-Q should be read in conjunctionwith the Company’s consolidated financial statements and footnotes included in itsCurrent Report on Form 8-K filed with the SEC on June 7, 2016 for the fiscal year endedJanuary 2, 2016.

The unaudited Condensed Consolidated Financial Statements include the accounts ofthe Company and its wholly-owned subsidiaries, and other entities for which St. JudeMedical has a controlling financial interest.

Effective January 1, 2016, the Company's Board of Directors appointed a new Presidentand Chief Executive Officer whom the Company has determined to be its ChiefOperating Decision Maker. During the first quarter of 2016, the Company changed itssales reporting to closely align with how it manages the business in five key areas:Traditional Cardiac Rhythm Management, Heart Failure, Atrial Fibrillation,Cardiovascular and Neuromodulation. The Company continues to operate as a singleoperating segment.

Reclassifications: Certain prior period amounts have been reclassified to conform tocurrent year presentation.

Fiscal Year: We utilize a 52/53-week fiscal year ending on the Saturday nearestDecember 31st. Each of the three-and six month periods ended July 2, 2016 and July 4,2015 included 13 weeks and 26 weeks, respectively.

New Accounting Pronouncements: The following table provides a description of recentaccounting pronouncements adopted and those standards not yet adopted with potentialfor a material impact on the Company's financial statements or disclosures.



Standard Description

Requiredadoptiontiming andapproach

Impact of adoptionor other significantmatters


AccountingStandards Update(ASU) No.2015-02,Consolidation(Topic 810):Amendments tothe ConsolidationAnalysis

The standard affectsboth the variableinterest entity andvoting interest entityconsolidation models.

Annual andinterim periodsbeginning afterDecember 15,2015, with eitherretrospective ormodifiedretrospectiveapplicationpermitted. Earlyadoption ispermitted.

The Companyadopted this ASU inthe quarter endedApril 2, 2016, usingthe modifiedretrospective method.The adoption did nothave a material impacton the Company'sresults of operationsor financial position.

ASU No. 2015-05,Intangibles--Goodwill andOther--Internal-Use Software(Subtopic 350-40):Customer’sAccounting forFees Paid in aCloud ComputingArrangement

The standard providesguidance to customersabout how to accountfor cloud computingarrangements whensuch arrangementsinclude softwarelicenses.

Annual andinterim periodsbeginning afterDecember 15,2015, with eitherprospective orretrospectiveapplicationpermitted. Earlyadoption waspermitted.

The Companyadopted this ASU inthe quarter endedApril 2, 2016, usingthe prospectivemethod. The adoptiondid not have a materialimpact on theCompany's results ofoperations or financialposition.

ASU No. 2015-11,Inventory (Topic330): Simplifyingthe Measurementof Inventory

The standard requiresthat inventory within thescope of the guidancebe measured at thelower of cost or netrealizable value.

Annual andinterim periodsbeginning afterDecember 15,2016, withprospectiveapplicationrequired. Earlyadoption ispermitted.

The Companyadopted this ASU inthe quarter endedApril 2, 2016. Theadoption did not havea material impact onthe Company's resultsof operations orfinancial position.


ASU No. 2014-09,Revenue fromContracts withCustomers (Topic606)

The standard requiresan entity to recognizerevenue to depict thetransfer of promisedgoods or services tocustomers in anamount that reflects theconsideration to whichthe entity expects to beentitled in exchange forthose goods orservices. The guidancewill supersede thecurrent revenue

Refer to ASUNo. 2015-14regarding theadoption timing.Eitherretrospective ormodifiedretrospectiveapplication ispermitted.

The Company plans toadopt this ASU forinterim and annualperiods beginningafter December 15,2017. The Company isevaluating itsapproach to theadoption and thepotential impact to itsresults of operationsand financial position.



recognitionrequirements.

ASU No. 2015-14,Revenue fromContracts withCustomers (Topic606): Deferral ofthe Effective Date

The standard defersthe effective date ofASU No. 2014-09 toannual and interimperiods beginning afterDecember 15, 2017.Early adoption ispermitted only as ofannual and interimreporting periodsbeginning afterDecember 15, 2016.


ASU No. 2016-01,FinancialInstruments-Overall (Subtopic825-10):Recognition andMeasurement ofFinancial Assetsand FinancialLiabilities

Among other things,the standard requirescertain equityinvestments to bemeasured at fair valuewith changes in fairvalue recognized in netincome, simplifies theimpairmentassessment of equityinvestments withoutreadily determinablefair values, andeliminates certaindisclosurerequirements.

Annual andinterim periodsbeginning afterDecember 15,2017. Earlyadoption ofcertain guidanceis permitted.

The Company isevaluating the timingof adoption and thepotential impact to itsresults of operationsand financial position.

ASU No. 2016-02,Leases (Topic842)

Among other things,the standard requiresrecognition of a right-of-use asset and alease liability, initiallymeasured at thepresent value of thelease payments, in thestatement of financialposition for virtually allleases where we arethe lessee.

Annual andinterim periodsbeginning afterDecember 15,2018, withmodifiedretrospectiveapplicationrequired. Earlyadoption ispermitted.


ASU No. 2016-09,Compensation--StockCompensation(Topic 718):Improvements toEmployee Share-Based PaymentAccounting

The areas forsimplification in thisstandard involveseveral aspects of theaccounting for share-based paymenttransactions, includingincome taxconsequences,

Annual andinterim periodsbeginning afterDecember 15,2016, withcertain aspectsrequiringmodifiedretrospective

The Company isevaluating the timingof adoption and thepotential impact to itsresults of operations,financial position andcash flows.



classification of awardsas either equity orliabilities andclassification on thestatement of cashflows.

transition,retrospectiveapplication, and/or prospectiveapplication.Early adoption ispermitted if allaspects areadoptedsimultaneously.

ASU No. 2016-10,Revenue fromContracts withCustomers (Topic606): IdentifyingPerformanceObligations andLicensing

Among other things,the standard clarifiesthe principle fordetermining whether agood or service is“separately identifiable”from other promises inthe contract and,therefore, should beaccounted forseparately. It alsoclarifies that entities arenot required to identifypromised goods orservices that areimmaterial in thecontext of the contract.





6 Months EndedDebt Jul. 02, 2016Debt Disclosure [Abstract]Debt DEBT

The carrying value of the Company’s debt, including debt issuance costs, discounts orpremiums consisted of the following (in millions):


Contractual maturities of the Company's debt for the next five fiscal years and thereafter,excluding any debt issuance costs, discounts or premiums, as of July 2, 2016 were asfollows (in millions):

Remainderof 2016 2017 2018 2019 2020

After2020

Future minimum principalpayments $ 453 $ 272 $ 598 $ 227 $2,478 $2,100

During the first six months of 2016, the Company repaid its $500 million principal amountof 5-year, 2.500% unsecured senior notes due 2016, made net commercial paperpayments of $117 million and drew the remaining $500 million of its 5-year, $2.6 billionterm loan due 2020 (Term Loan Due 2020) to refinance existing indebtedness and forgeneral corporate purposes. The Company also made quarterly principal paymentstotaling $59 million for the six months ended July 2, 2016 and prepaid an additional $167million on its Term Loan Due 2020. Additionally, the Company's yen-denominated creditfacility that expired in March 2016 for 3.25 billion Japanese Yen (the equivalent of $32million as of July 2, 2016) was automatically extended for a one-year period bearinginterest at Yen LIBOR plus 0.250%, and the Company's yen-denominated credit facilitythat expired in June 2016 for 3.25 billion Japanese Yen (the equivalent of $32 million asof July 2, 2016) was automatically extended for a one-year period bearing interest at YenLIBOR plus 0.270%.



6 Months EndedCommitments AndContingencies Jul. 02, 2016

Commitments andContingencies Disclosure[Abstract]Commitments AndContingencies

COMMITMENTS AND CONTINGENCIES

Securities and Other Shareholder Litigation

December 2012 Securities Litigation: On December 7, 2012, a putative securities classaction lawsuit was filed in federal district court in Minnesota against the Company and anofficer (collectively, the defendants) for alleged violations of the federal securities laws,on behalf of all purchasers of the publicly traded securities of the defendants betweenOctober 17, 2012 and November 20, 2012. The complaint, which sought unspecifieddamages and other relief as well as attorneys' fees, challenges the Company’sdisclosures concerning its high voltage cardiac rhythm lead products during thepurported class period. On December 10, 2012, a second putative securities class actionlawsuit was filed in federal district court in Minnesota against the Company and certainofficers for alleged violations of the federal securities laws, on behalf of all purchasers ofthe publicly traded securities of the Company between October 19, 2011 and November20, 2012. The second complaint alleged similar claims and sought similar relief. InMarch 2013, the Court consolidated the two cases and appointed a lead counsel andlead plaintiff. A consolidated amended complaint was served and filed in June 2013,alleging false or misleading representations made during the class period extending fromFebruary 5, 2010 through November 7, 2012. In September 2013, the defendants filed amotion to dismiss the consolidated amended complaint. On March 10, 2014, the Courtruled on the motion to dismiss, denying the motion in part and granting the motion inpart. On October 7, 2014, the lead plaintiff filed a second amended complaint. Like theoriginal consolidated amended complaint, the plaintiffs did not assert any specificamount of compensation in the second amended complaint. The Court granted classcertification on December 22, 2015. On May 24, 2016, the parties agreed to resolve thecase, pending notification to class members and subject to court approval. Under thesettlement, the Company agreed to make a payment of $39.25 million to resolve all ofthe class claims and recorded a charge of that amount during the second quarter of2016. On July 13, 2016, the Court issued an order preliminarily approving thesettlement. Concurrent with the recording of the loss, the Company also recognizedprobable insurance recoveries of $39.25 million.

Abbott Merger Lawsuits: On May 2, 2016, a shareholder of the Company filed apurported class action lawsuit in Ramsey County, Minnesota, captioned Silverman v. St.Jude Medical, Inc., et al., 62-CV-16-2872 alleging that the Company's directorsbreached their fiduciary duties in connection with the proposed merger contemplated bythe Company and Abbott Laboratories (Abbott) (the Proposed Transaction). On May 26,2016, a second action entitled Larkin v. Starks, et al., 62-CV-16-3367, was filed in thesame court alleging substantially similar claims. On July 5, 2016, plaintiffs in the twoactions jointly filed an Amended Shareholder class and Derivative Action Complaint (theAmended Complaint). Plaintiffs’ Amended Complaint asserts that the Company’sdirectors breached their fiduciary duties by conducting a flawed sale process, failing tomaximize shareholder value, and publishing false or misleading disclosure materialsrelating to the Proposed Transaction, and that the Abbott defendants aided and abettedthose breaches. The Amended Complaint asserts direct and/or derivative claims forbreach of fiduciary duty, corporate waste and abuse of control under Minnesota Statute§ 302A.467. Plaintiffs seek, among other things, to enjoin the Proposed Transaction andan order directing defendants to account to plaintiffs for all damages allegedly sufferedby the putative class and damages allegedly incurred by the Company in connectionwith the Proposed Transaction. On June 30, 2016, a shareholder of the Company filed a



purported class action lawsuit in the United States District Court for the District ofMinnesota, captioned Rosenfeld v. St. Jude Medical, Inc., et al., 16-cv-02275-WMW-FLN, alleging that the Company and its directors violated Section 14(a) of the SecuritiesExchange Act of 1934, SEC Rule 14a-9, and Minnesota Statute §§ 80A.68 and 80A.76,and that the Company’s directors violated Section 20(a) of the Exchange Act, by filing aForm S-4 with the SEC that contained false or misleading statements regarding theProposed Transaction. Plaintiff seeks, among other things, to enjoin the ProposedTransaction or, if consummated, an order rescinding it or awarding actual and punitivedamages to Plaintiff and the putative class.

The Company and its directors intend to vigorously defend against the allegations inthese actions involving the Abbott merger. The Company believes that a material loss isremote. Refer to Note 11 for a discussion of the Proposed Transaction.

Regulatory Matters

The U.S. Food and Drug Administration (FDA) inspected the Company’s manufacturingfacility in Atlanta, Georgia, where the Company manufactures its CardioMEMS™ HFsystem, at various times between June 8 to June 26, 2015. On July 6, 2015, the FDAissued a Form 483 identifying certain observed non-conformity with current GoodManufacturing Practice at the facility. Following the receipt of the Form 483, theCompany provided written responses to the FDA detailing proposed corrective actionsand immediately initiated efforts to address the FDA’s observations of non-conformity.The Company subsequently received a warning letter dated September 30, 2015 fromthe FDA relating to these non-conformities. Since the completion of the FDA inspection,the Company has provided and will continue to provide the FDA with regular updates.The Company has fully-integrated this former CardioMEMS standalone facility into St.Jude Medical's quality systems. During July 2016, the FDA conducted a follow-upinspection at the Atlanta facility. On July 28, 2016, the FDA issued a Form 483identifying additional observed non-conformities with current Good ManufacturingPractice at the facility. The Company will continue to work to remediate theseobservations. The warning letter is specific to the Atlanta facility and does not impact anyof the Company’s other manufacturing facilities. The warning letter does not identify anyspecific concerns regarding the performance of, or indicate the need for any field orother action regarding, the CardioMEMS™HF system product or any other St. JudeMedical product. The Company will continue manufacturing and shipping product fromthe Atlanta facility, and customer orders are not expected to be impacted while theCompany works to resolve the FDA’s concerns. The Company takes these mattersseriously, will respond timely and fully to the FDA’s requests, and believes that the FDA’sconcerns will be resolved without a material impact on the Company’s financial results.

Product Warranties

The Company offers a warranty on various products, the most significant of which relateto tachycardia implantable cardioverter defibrillator (ICD) and pacemaker systems. TheCompany estimates the costs it expects to incur under its warranties and records aliability for such costs at the time the product is sold. Factors that affect the Company'swarranty liability include the number of units sold, historical and anticipated rates ofwarranty claims and cost per claim. The Company regularly assesses the adequacy ofits warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s product warranty liability during the three and six monthsended July 2, 2016 and July 4, 2015 were as follows (in millions):

Three Months Ended Six Months EndedJuly 2,2016 July 4, 2015

July 2,2016 July 4, 2015

Balance at beginning of period $ 26 $ 32 $ 31 $ 35



Warranty expense (benefit)recognized 2 (2) 1 (4)Warranty credits issued (3) (1) (7) (2)Balance at end of period $ 25 $ 29 $ 25 $ 29



6 Months EndedSpecial Charges Jul. 02, 2016Special Charges [Abstract]Special Charges SPECIAL CHARGES

The Company recognizes certain transactions and events as special charges in itsCondensed Consolidated Financial Statements. These charges (such as restructuringcharges, impairment charges, certain legal settlements or product field action costs andlitigation costs) result from facts and circumstances that vary in frequency and impact onthe Company's results of operations.

2016 Initiatives

During the fourth quarter of 2015, the Company initiated restructuring activities to drivecross-functional synergies (the 2016 Initiatives). The 2016 Initiatives include enhancingfocus on programs that will strengthen its strategic objectives, driving productivityenhancements and incurring costs to fully integrate its recent acquisitions. During 2015,the Company incurred charges of $34 million primarily related to severance and othertermination benefits.

During the first quarter of 2016, the Company incurred additional charges of $24 millionrelated to severance and other termination benefits, contract termination costs and fixedasset write-offs, primarily associated with the closure of legacy Thoratec Corporation(Thoratec) facilities as the Company continues to integrate the acquisition.

During the second quarter of 2016, the Company incurred additional charges of $12million related to severance and other termination benefits, distributor contractterminations and other Thoratec-related contract terminations. The Company currentlyexpects to incur approximately $20 million to $25 million during the remainder of 2016 tocomplete the plan, but may incur additional charges in future periods.

A summary of the activity related to the 2016 Initiatives accrual is as follows (in millions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalance at January3, 2015 $ — $ — $ — $ — $ —Cost of salesspecial charges 9 1 1 1 12Special charges 22 — — — 22Non-cash chargesused — (1) (1) — (2)Cash payments (2) — — (1) (3)Balance at January2, 2016 29 — — — 29Cost of salesspecial charges — 2 1 1 4Special charges 11 — 4 5 20Non-cash chargesused — (2) (5) — (7)Cash payments (32) — — (5) (37)



Balance at April 2,2016 8 — — 1 9Cost of salesspecial charges — — — 2 2Special charges 6 — — 4 10Cash payments (6) — — (4) (10)Balance at July 2,2016 $ 8 $ — $ — $ 3 $ 11

Manufacturing and Supply Chain Optimization Plan

During 2014, the Company initiated the Manufacturing and Supply Chain OptimizationPlan to leverage economies of scale, streamline distribution methods, drive processimprovements through global synergies, balance plant utilization levels, centralizecertain vendor relationships and reduce overall costs. During 2015, the Companyincurred charges of $78 million primarily related to severance and other terminationbenefits, contract termination costs and fixed asset write-offs. These costs includedcharges associated with the elimination of certain operational, quality and hardwaredevelopment activities at a research and development facility, continued exit costsrelated to a facility closure in the United States and software development assets nolonger expected to be utilized.

During the first and second quarters of 2016, the Company incurred additional chargesof $1 million and $2 million, respectively, primarily related to continued exit costsassociated with a facility closure in the United States. Material charges are not expectedin future periods as the Manufacturing and Supply Chain Optimization Plan is nowcomplete.

A summary of the activity related to the Manufacturing and Supply Chain OptimizationPlan accrual is as follows (in millions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalance at January3, 2015 $ 14 $ — $ — $ 6 $ 20Cost of salesspecial charges 4 3 15 7 29Special charges 20 — — 29 49Non-cash chargesused — (3) (15) — (18)Cash payments (27) — — (35) (62)Balance at January2, 2016 11 — — 6 17Cost of salesspecial charges — — — 1 1Cash payments (3) — — (6) (9)Balance at April 2,2016 8 — — 1 9Cost of salesspecial charges — — — 1 1Special charges — — — 1 1



Cash payments (3) — — (2) (5)Balance at July 2,2016 $ 5 $ — $ — $ 1 $ 6

2012 Business Realignment Plan

During 2012, the Company realigned its product divisions into two new operatingdivisions: the Implantable Electronic Systems Division (combining its legacy CardiacRhythm Management and Neuromodulation product divisions) and the Cardiovascularand Ablation Technologies Division (combining its legacy Cardiovascular and AtrialFibrillation product divisions). In addition, the Company centralized certain supportfunctions, including information technology, human resources, legal, businessdevelopment and certain marketing functions. The organizational changes have beenpart of a comprehensive plan to accelerate the Company's growth, reduce costs,leverage economies of scale and increase investment in product development. During2014, the Company announced additional organizational changes including thecombination of its Implantable Electronic Systems Division and Cardiovascular andAblation Technologies Division, resulting in an integrated research and development(R&D) organization and a consolidation of manufacturing and supply chain operationsworldwide.

During 2015, the Company incurred additional charges of $14 million primarily related toseverance and other termination benefits and other restructuring costs, includingcontract termination costs, asset relocation expenses and other exit costs predominatelyassociated with the facility closure in Europe.

During the first quarter of 2016, the Company reassessed the remaining accrual balanceand determined that some of the previously recorded accrual balances were no longernecessary. No additional charges are expected in future periods as the 2012 BusinessRealignment Plan is now complete.

A summary of the activity related to the 2012 Business Realignment Plan accrual is asfollows (in millions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalance at January3, 2015 $ 26 $ — $ — $ 12 $ 38Cost of salesspecial charges 2 3 — — 5Special charges 2 — 2 5 9Non-cash chargesused — (3) (2) — (5)Cash payments (25) — — (10) (35)Foreign exchangerate impact (2) — — — (2)Balance at January2, 2016 3 — — 7 10Cost of salesspecial charges — (1) — (1) (2)Non-cash chargesused — 1 — — 1



Balance at April 2,2016 3 — — 6 9Cash payments (1) — — — (1)Balance at July 2,2016 $ 2 $ — $ — $ 6 $ 8

Other Special Charges

Legal settlements: During the first quarter of 2016, the Company recognized $19 millionof legal settlement gains related to two separate legal cases. These gains were partiallyoffset by a $2 million contingent loss related to a litigation matter that the Company nowbelieves is probable and estimable.

During the second quarter of 2016, the Company recognized a $39.25 million legalsettlement loss related to the December 2012 Securities Litigation. Concurrent with therecording of the loss, the Company also recognized probable insurance recoveries of$39.25 million (see Note 3). The Company also recognized a $2 million legal settlementgain related to a separate legal case during the second quarter of 2016.

During the first quarter of 2015, the Company recognized $10 million in insurancerecoveries as a special benefit in connection with the March 2010 Securities ClassAction Litigation.

Product field action costs and litigation costs: During both the first and second quartersof 2016, the Company recognized approximately $3 million of litigation charges forexpected future probable and estimable legal costs associated with outstanding legalmatters related to the Company's product field actions. During the first and secondquarters of 2015, the Company recognized approximately $5 million and $3 million,respectively, of litigation charges for expected future probable and estimable legal costsassociated with outstanding legal matters related to the Company's product field actions.Charges in excess of the amounts accrued are reasonably possible and depend on anumber of factors, such as the type of claims received and the cost to defend.

During the second quarter of 2016, the Company initiated an advisory letter tophysicians for patients implanted with certain ICD devices that were identified as havinga potential therapy anomaly resulting in a lack of necessary treatment. As a result, theCompany recognized charges of $5 million to cost of sales special charges primarily forestimated scrapped inventory and warranty costs. Partially offsetting these charges, theCompany recognized a $2 million benefit during the second quarter of 2016 to cost ofsales special charges for salvaged inventory components related to an advisory actioninitiated in 2014. Additionally, the Company recognized a $2 million benefit in both thefirst and second quarters of 2015 to cost of sales special charges, for salvaged inventorycomponents related to the same advisory action initiated in 2014.

Other restructuring-related charges: The Company also recognized other restructuring-related charges of $2 million and $1 million during the first and second quarters of 2016,respectively.



6 Months EndedNet Earnings Per Share Jul. 02, 2016Earnings Per Share[Abstract]Net Earnings Per Share NET EARNINGS PER SHARE

The table below sets forth the computation of basic and diluted net earnings per shareattributable to St. Jude Medical, Inc. (in millions, except per share amounts):


July 4,2015

July 2,2016

July 4,2015

Numerator:Net earnings attributable to St. JudeMedical, Inc. $ 238 $ 290 $ 333 $ 552

Denominator:Basic weighted average sharesoutstanding 284.3 281.1 283.9 282.0

Dilution associated with stock-basedcompensation plans 4.0 4.4 3.4 4.3

Diluted weighted average sharesoutstanding 288.3 285.5 287.3 286.3

Basic net earnings per share attributableto St. Jude Medical, Inc. $ 0.84 $ 1.03 $ 1.17 $ 1.96Diluted net earnings per shareattributable to St. Jude Medical, Inc. $ 0.83 $ 1.02 $ 1.16 $ 1.93

Anti-dilutive shares of common stockexcluded from diluted net earnings pershare attributable to St. Jude Medical,Inc. 3.8 2.6 6.1 3.4



6 Months EndedAccumulated OtherComprehensive Income

(Loss) and SupplementalEquity Information

Jul. 02, 2016

Accumulated OtherComprehensive Income(Loss), Net of Tax [Abstract]Accumulated OtherComprehensive Income (Loss)and Supplemental EquityInformation

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ANDSUPPLEMENTAL EQUITY INFORMATION

The tables below present the changes in each component of accumulated othercomprehensive income, net of tax, including other comprehensive income andreclassifications out of accumulated other comprehensive income into net earnings forthe three and six months ended July 2, 2016 and July 4, 2015, respectively (in millions):

UnrealizedGain (Loss)

On Unrealized Foreign AccumulatedAvailable-

for-Gain (Loss)

On Currency OtherFor the three monthsendedJuly 2, 2016

saleSecurities




Accumulated othercomprehensive income(loss) as of April 2, 2016 $ 3 $ (19) $ (311) $ (327)Other comprehensiveincome (loss) beforereclassifications 1 (4) (17) (20)Amounts reclassified tonet earnings fromaccumulated othercomprehensive income — — — —Other comprehensiveincome (loss) 1 (4) (17) (20)Accumulated othercomprehensive income(loss) as of July 2, 2016 $ 4 $ (23) $ (328) $ (347)

UnrealizedGain

(Loss) On Unrealized Foreign AccumulatedAvailable-

for-Gain (Loss)

On Currency OtherFor the six months endedJuly 2, 2016

saleSecurities




Accumulated othercomprehensive income(loss) as of January 2, 2016 $ 3 $ 11 $ (359) $ (345)



Other comprehensiveincome (loss) beforereclassifications 1 (30) 31 2Amounts reclassified to netearnings from accumulatedother comprehensiveincome — (4) — (4)Other comprehensiveincome (loss) 1 (34) 31 (2)Accumulated othercomprehensive income(loss) as of July 2, 2016 $ 4 $ (23) $ (328) $ (347)



for-Gain (Loss)


saleSecurities




Accumulated othercomprehensive income(loss) as of April 4, 2015 $ 16 $ 32 $ (318) $ (270)Other comprehensiveincome (loss) beforereclassifications (2) (13) 30 15Amounts reclassified to netearnings from accumulatedother comprehensiveincome (2) (4) — (6)Other comprehensiveincome (loss) (4) (17) 30 9Accumulated othercomprehensive income(loss) as of July 4, 2015 $ 12 $ 15 $ (288) $ (261)



for-Gain (Loss)


saleSecurities




Accumulated othercomprehensive income(loss) as of January 3, 2015 $ 15 $ 3 $ (191) $ (173)Other comprehensiveincome (loss) beforereclassifications 1 16 (97) (80)



Amounts reclassified to netearnings from accumulatedother comprehensiveincome (4) (4) — (8)Other comprehensiveincome (loss) (3) 12 (97) (88)Accumulated othercomprehensive income(loss) as of July 4, 2015 $ 12 $ 15 $ (288) $ (261)

Income taxes are not provided for foreign translation related to permanent investmentsin international subsidiaries. Reclassification adjustments are made to avoid doublecounting items in comprehensive income that are also recorded as part of net earnings.The following table provides details about reclassifications out of accumulated othercomprehensive income and the line items impacted in the Company's CondensedConsolidated Statements of Earnings during the three and six months ended July 2,2016 and July 4, 2015, respectively (in millions):

Details aboutAmount reclassified from accumulated other comprehensive

incomeaccumulatedother

Three MonthsEnded Six Months Ended

comprehensiveincomecomponents

July 2,2016

July 4,2015

July 2,2016

July 4,2015


Unrealized (gain) loss on available-for-salesecurities:(Gain) loss onsale ofavailable-for-sale securities $ — $ (3) $ — $ (7) Other (income) expense

Tax effect — 1 — 3 Income tax expense

Net of tax $ — $ (2) $ — $ (4)

Unrealized (gain) loss on derivative financialinstruments:(Gain) lossrecognized onderivativefinancialinstruments $ — $ (4) $ (6) $ (4) Cost of sales


Net of tax $ — $ (4) $ (4) $ (4)

The Company's realized (gains) and losses on its available-for-sales securities andderivative financial instruments are computed using the specific identification method.

Supplemental Equity Information



On May 4, 2016, the Company's Board of Directors authorized a cash dividend of $0.31per share which was paid on July 29, 2016 to shareholders of record as of June 30,2016.

On January 13, 2015, the Company authorized a share repurchase program of up to$500 million of its outstanding common stock. The Company began repurchasing shareson January 30, 2015. From January 30, 2015 through March 2, 2015, the Companyrepurchased approximately 7.5 million shares for $500 million at an average repurchaseprice of $66.96 per share.

In June 2013, the Company made an equity investment of $40 million in SpinalModulation, a privately-held company that is focused on the development of anintraspinal neuromodulation therapy that delivers spinal cord stimulation targeting thedorsal root ganglion to manage chronic pain. The investment agreement resulted in a19% voting equity interest and provided the Company with the exclusive right, but notthe obligation, to acquire Spinal Modulation. Additionally, in connection with theinvestment and contingent acquisition agreement, the Company also entered into anexclusive international distribution agreement, and obtained significant decision-makingrights over Spinal Modulation's operations and economic performance. Accordingly,effective June 7, 2013, the Company determined that Spinal Modulation was a variableinterest entity for which St. Jude Medical was the primary beneficiary with the financialcondition and results of operations of Spinal Modulation included in St. Jude Medical'sCondensed Consolidated Financial Statements.

During the second quarter of 2015, the Company exercised its exclusive option and paid$173 million to Spinal Modulation’s shareholders to acquire the remaining 81%ownership interest in the company that it did not previously own and accrued $155million of contingent consideration (see Note 8). The $173 million paid in the secondquarter of 2015 was classified as a financing activity in the Condensed ConsolidatedStatement of Cash Flows. As the Company retained its controlling interest, the paymentfor the shares and the accrual for contingent consideration resulted in a decrease inshareholders' equity before noncontrolling interest of $297 million and a decrease innoncontrolling interest of $33 million in St. Jude Medical's Condensed ConsolidatedBalance Sheets. Spinal Modulation's results of operations continue to be included in theCompany's Condensed Consolidated Financial Statements.

The supplemental equity schedules below present changes in the Company'snoncontrolling interest and total shareholders' equity for the three and six months endedJuly 2, 2016 and July 4, 2015, respectively (in millions):

TotalShareholders'

EquityBefore Total

Noncontrolling Noncontrolling Shareholders'For the six months ended July 2,2016 Interest Interest EquityBalance at January 2, 2016 $ 4,042 $ — $ 4,042Net earnings 333 — 333Other comprehensive income (loss) (2) — (2)Cash dividends declared (176) — (176)Stock-based compensation 60 — 60Common stock issued underemployee stock plans and other, net 22 — 22Tax benefit from stock plans 2 — 2



Balance at July 2, 2016 $ 4,281 $ — $ 4,281

TotalShareholders'

EquityBefore Total

Noncontrolling Noncontrolling Shareholders'For the six months ended July 4,2015 Interest Interest EquityBalance at January 3, 2015 $ 4,199 $ 45 $ 4,244Net earnings 552 (14) 538Other comprehensive income (loss) (88) — (88)Cash dividends declared (163) — (163)Repurchases of common stock (500) — (500)Stock-based compensation 35 2 37Common stock issued underemployee stock plans and other, net 89 — 89Tax benefit from stock plans 14 — 14Additions (purchases) ofnoncontrolling ownership interests (297) (33) (330)Balance at July 4, 2015 $ 3,841 $ — $ 3,841



6 Months EndedIncome Taxes Jul. 02, 2016Income Tax Disclosure[Abstract]Income Taxes INCOME TAXES

As of July 2, 2016, the Company had $405 million accrued for uncertain tax positions, allof which would affect the Company’s effective tax rate if recognized. Additionally, theCompany had $56 million accrued for gross interest and penalties as of July 2, 2016. AtJanuary 2, 2016, the liability for uncertain tax positions was $338 million and the accrualfor gross interest and penalties was $58 million.

The Company is subject to U.S. federal income tax as well as income tax of multiplestate and foreign jurisdictions. The Company has substantially concluded all materialU.S. federal, state, foreign and local income tax matters for all tax years through 2004. InApril 2015, the U.S. Internal Revenue Service (IRS) completed an audit of theCompany’s 2010 and 2011 tax returns and proposed adjustments in an audit report. InFebruary 2014, the IRS completed an audit of the Company’s 2008 and 2009 tax returnsand also proposed adjustments in an audit report.

The Company's effective income tax rate was 11.9% and 4.1% for the second quarter of2016 and 2015, respectively, and 18.0% and 10.6% for the six months ended during2016 and 2015, respectively. The Company’s effective income tax rate differs from theU.S. federal statutory rate each year due to certain operations that are subject to taxincentives, state and local taxes and foreign taxes that are different than the U.S. federalstatutory rate. In addition, the effective tax rate can be impacted each period by discreteincome tax factors and events. During the three months ended July 2, 2016, specialcharges, acquisition-related costs and discrete income tax items favorably impacted theeffective income tax rate by 1.5 percentage points. During the six months ended July 2,2016, special charges, acquisition-related costs, other-than-temporary impairments anddiscrete income tax items unfavorably impacted the effective income tax rate by 5.1percentage points. Special charges, acquisition-related costs and discrete income taxitems recognized during the second quarter and first six months of 2015 favorablyimpacted the effective rate by 13.2 percentage points and 6.5 percentage points,respectively.

During the first quarter of 2016, the European Commission concluded that decisions bythe tax authorities in Belgium regarding corporate income taxes paid under certainexcess profit rulings, including the ruling previously granted to one of the Company’ssubsidiaries, did not comply with European Union rules on state aid. Based on theapplicability of this conclusion to the Company's 2009 through 2014 tax returns inBelgium, the Company recorded a liability of 46 million Euros including interest duringthe first quarter of 2016 to reserve for this uncertain tax position. During the secondquarter of 2016, the Company revised the estimated liability to 43 million Euros ($48million as of July 2, 2016) including interest.



6 Months EndedFair Value Measurements Jul. 02, 2016Fair Value Disclosures[Abstract]Fair Value Measurements FAIR VALUE MEASUREMENTS

The fair value measurement standard applies to certain financial assets and liabilitiesthat are measured at fair value on a recurring basis (each reporting period) and certainfinancial assets and liabilities that are measured at fair value on a nonrecurring basis.The Company also maintains other financial instruments that approximate their fair valuedue to their short maturities, and include such instruments as its cash and cashequivalents, accounts receivable, accounts payable, accrued liabilities and current andlong-term debt obligations.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The Company's financial assets and liabilities that are measured at fair value on arecurring basis include money-market securities, available-for-sale marketablesecurities, trading marketable securities, derivative instruments and contingentconsideration liabilities. The Company does not have any material nonfinancial assets orliabilities that are measured at fair value on a recurring basis. A summary of thevaluation methodologies used for the respective financial assets and liabilities measuredat fair value on a recurring basis is as follows:

Money-market securities: The Company’s money-market securities include funds thatare traded in active markets and are recorded at fair value based upon the quotedmarket prices. The Company classifies these securities as level 1.

Available-for-sale securities: The Company’s available-for-sale securities includepublicly-traded equity securities that are traded in active markets and are recorded at fairvalue based upon the closing stock prices. The Company classifies these securities aslevel 1.

The following table summarizes the components of the balance of the Company’savailable-for-sale securities at July 2, 2016 and January 2, 2016 (in millions):

July 2, 2016January 2,

2016Adjusted cost $ 5 $ 5Gross unrealized gains 6 6Gross unrealized losses — (1)Fair value $ 11 $ 10

Trading securities: The Company’s trading securities include publicly-traded mutualfunds that are traded in active markets and are recorded at fair value based upon quotedmarket prices of the net asset values of the funds. The Company classifies thesesecurities as level 1.

Derivative instruments: Fair values for the Company’s derivative financial instrumentsare based on quoted market prices of comparable instruments, if available, or morecommonly on standard pricing models that use readily observable market parametersfrom industry standard data providers as their basis. These models reflect contractualterms of the derivatives, including period to maturity and market-based parameters suchas foreign currency exchange rates. They do not contain a high level of subjectivity as



the techniques used in the models do not require significant judgment and inputs arereadily observable from actively quoted markets. The Company classifies theseinstruments as level 2 (see Note 9).

Contingent consideration liabilities: The fair value of the Company's contingent liabilitiesis initially measured based on the consideration expected to be transferred (probability-weighted), discounted back to present value. The discount rate used is determined atthe time of measurement in accordance with accepted valuation methods. The Companymeasures the liability on a recurring basis using Level 3 inputs including regulatoryapproval timing, projected revenues or cash flows, growth rates, discount rates,probabilities of payment and projected payment dates. Projected revenues are based onthe Company's most recent internal operating budgets and long-term strategic plans.Changes to any of the inputs may result in significantly higher or lower fair valuemeasurements.

A summary of assets and liabilities measured at fair value on a recurring basis at July 2,2016 and January 2, 2016 is as follows (in millions):

BalanceSheet

ClassificationJuly 2,2016

QuotedPrices

InActive

Markets(Level 1)

SignificantOther

ObservableInputs

(Level 2)


Inputs(Level 3)

AssetsMoney-market

securitiesCash andcashequivalents $ 52 $ 52 $ — $ —

Available-for-sale

securities

Other currentassets

11 11 — —Foreign

currency forwardcontracts

Other currentassets

4 — 4 —Trading

securitiesOther assets

312 312 — —Foreign


Other assets

1 — 1 —Total assets $ 380 $ 375 $ 5 $ —

LiabilitiesForeigncurrencyforwardcontracts

Other currentliabilities $ 34 $ — $ 34 $ —

Contingentconsideration

Otherliabilities 31 — — 31

Foreigncurrencyforwardcontracts

Otherliabilities

5 — 5 —Total liabilities $ 70 $ — $ 39 $ 31



BalanceSheet

ClassificationJanuary 2,

2016

QuotedPrices

InActive

Markets(Level 1)

SignificantOther

ObservableInputs

(Level 2)


Inputs(Level 3)

AssetsMoney-marketsecurities

Cash andcashequivalents $ 273 $ 273 $ — $ —

Available-for-sale

securities

Other currentassets

10 10 — —Foreigncurrencyforwardcontracts

Other currentassets

14 — 14 —Tradingsecurities

Other assets302 302 — —

Foreigncurrencyforwardcontracts Other assets 2 — 2 —

Total assets $ 601 $ 585 $ 16 $ —

LiabilitiesContingentconsideration

Other currentliabilities $ 118 $ — $ — $ 118


Other currentliabilities

6 — 6 —Contingentconsideration



Otherliabilities

3 — 3 —Totalliabilities $ 160 $ — $ 9 $ 151

The recurring Level 3 fair value measurements of the Company's contingentconsideration liabilities include the following significant unobservable inputs (in millions):

ContingentConsiderationLiabilities

Fair Valueas of July 2,

2016ValuationTechnique

UnobservableInput

Value orRange

Spinal Modulationrevenue-basedmilestones andearn-outs $ 2




Expected RevenueVolatility 25.0%


Nanostim, Inc.(Nanostim)revenue-basedmilestones 2

ProbabilityWeighted

DiscountedCash Flow

Discount Rate 5.0%

Probability ofPayments 10.0%


Assumed fromThoratecregulatory-basedand revenue-based milestones 27

ProbabilityWeighted

DiscountedCash Flow

Discount Rate 4.4%

Probabilities ofPayments —% - 90.0%

Projected Years ofPayments 2018 - 2022

Total contingentconsiderationliabilities $ 31

Additionally, the following table provides a reconciliation of the beginning and endingbalances of the Company's recurring Level 3 fair value measurements (in millions):

NanostimSpinal

Modulation

Assumedfrom

Thoratec TotalBalance as of January 3, 2015 $ 50 $ — $ — $ 50Initial fair value measurement ofcontingent consideration — 155 — 155Liabilities assumed from Thoratecacquisition — — 33 33Change in fair value of contingentconsideration (48) (33) (6) (87)Balance as of January 2, 2016 2 122 27 151Change in fair value of contingentconsideration — 8 1 9Transfer out of Level 3 fair valuemeasurement due to contractualsettlement — (124) — (124)Balance as of April 2, 2016 2 6 28 36Change in fair value of contingentconsideration — (4) (1) (5)Balance as of July 2, 2016 $ 2 $ 2 $ 27 $ 31



Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Disclosures are required for certain assets and liabilities that are measured at fair valuebut are recognized and disclosed at fair value on a nonrecurring basis in periodssubsequent to initial recognition. For St. Jude Medical, such measurements of fair valueprimarily relate to long-lived assets, goodwill, indefinite-lived intangible assets and costmethod investments.

Other than the items discussed below, there were no other material impairments thatwere measured at fair value on a nonrecurring basis for the three and six months endedJuly 2, 2016 or July 4, 2015.

Long-lived assets: During the first quarter of 2016, the Company recognized $5 million offixed asset write-offs primarily associated with projects abandoned as the Companycontinues to integrate its recent acquisitions. Additionally, during the first quarter of 2015,the Company recognized $1 million of fixed asset write-offs primarily related to projectsabandoned under the realigned structure. Typically the Company measures these assetsusing independent appraisals, market models and discounted cash flow models.However, as these fixed assets had no alternative future use and therefore no discretefuture cash flows, the assets were fully impaired.

Cost method investments: The Company also holds investments in equity securities thatare accounted for as cost method investments, which are classified as other assets andmeasured at fair value on a nonrecurring basis. The carrying value of these investmentswas $59 million and $80 million as of July 2, 2016 and January 2, 2016, respectively.During the first quarter of 2016, the Company concluded that adverse regulatory rulingsand subsequent operational decisions made by an entity in which the Company hadstrategic debt and equity investments had an adverse impact on the fair values of thoseinvestments. As a result, the Company recognized other-than-temporary impairments ofapproximately $50 million in other (income) expense in the Condensed ConsolidatedStatements of Earnings to fully write-down its cost method equity investment andconvertible debt investment. The fair value of the Company’s remaining cost methodinvestments was not estimated during the three and six months ended July 2, 2016since there were no other identified events or changes in circumstances that may havehad a significant adverse effect on the fair value of these investments.

Fair Value Measurements of Other Financial Instruments

The aggregate fair value of the Company’s fixed-rate senior notes at July 2, 2016(measured using quoted prices in active markets) was $3,470 million compared to theaggregate carrying value of $3,272 million (inclusive of unamortized debt discounts). Thefair value of the Company’s variable-rate debt obligations at July 2, 2016 approximatedits aggregate $2,819 million carrying value due to the variable interest rate and short-term nature of these instruments. The Company also had $346 million and $393 millionof cash equivalents invested in short-term deposits and interest and non-interest bearingbank accounts at July 2, 2016 and January 2, 2016, respectively, the cost basis of whichapproximated the fair value.



6 Months EndedDerivative FinancialInstruments Jul. 02, 2016

Derivative Instruments andHedging ActivitiesDisclosure [Abstract]Derivative FinancialInstruments

DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses foreign currency forward contracts, interest rate swaps and interestrate contracts to manage risks generally associated with foreign exchange rate andinterest rate fluctuations. The information that follows explains the various types ofderivatives financial instruments and how they impacted the Company's financialposition and performance.

Cash Flow HedgesForeign exchange forward contracts: During 2015, the Company began to enter intoforeign exchange forward contracts to hedge against the effect of exchange ratefluctuations on cash flows denominated in foreign currencies. These transactions aredesignated as cash flow hedges. The Company hedges its exposure to the variability infuture cash flows of forecasted transactions for periods of up to 24 months. The dollarequivalent gross notional amount of the Company’s foreign exchange forward contractsdesignated as cash flow hedges at July 2, 2016 was approximately $1.0 billion. Hedgeineffectiveness recognized in earnings on cash flow hedges during the three and sixmonths ended July 2, 2016 and July 4, 2015 was not material.

As of July 2, 2016, the Company had a balance of $27 million associated with the after-tax net unrealized loss position related to foreign currency forward contracts recorded inaccumulated other comprehensive income. Based on exchange rates as of July 2, 2016,the Company expects to reclassify net losses of approximately $19 million after-tax toearnings over the next 12 months contemporaneously with the earnings effects of therelated forecasted transactions (with the impact offset by cash flows from the underlyinghedged items).

The following table provides the (gains) losses related to derivative instrumentsdesignated as cash flow hedges for the three and six months ended July 2, 2016 andJuly 4, 2015, including the location in the Condensed Consolidated Statements ofEarnings and the Condensed Consolidated Statements of Comprehensive Income (inmillions):

Pre-tax (Gain) LossRecognized Ineffective Portion of

Pre-tax (Gain)Loss

in Earnings on EffectivePortion

(Gain) Loss onDerivative

Recognized inOther

of Derivative as a Resultof

and Amount Excludedfrom

Three Comprehensive Reclassification from Effectiveness Testing

monthsIncome onEffective Accumulated Other Recognized

endedPortion ofDerivative Comprehensive Income in Earnings

July 2, 2016 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationships



Foreigncurrencyforwardcontracts $ 5 $ — Cost of sales $ —

Cost ofsales


Pre-tax (Gain)Loss



Recognized inOther



Six Comprehensive Reclassification from Effectiveness Testing



July 2, 2016 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeigncurrencyforwardcontracts $ 44 $ (6) Cost of sales $ —

Cost ofsales


Pre-tax (Gain)Loss



Recognized inOther

of Derivative as aResult of






Cost ofsales




Pre-tax (Gain)Loss



Recognized inOther






July 4, 2015 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeigncurrencyforwardcontracts $ (19) $ (4) Cost of sales $ —

Cost ofsales

Reclassifications from accumulated other comprehensive income into earnings includeaccumulated (gains) losses on dedesignated hedges at the time earnings are impacted.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include dedesignated foreigncurrency forward contracts and foreign currency forward contracts that the Companyutilizes to economically hedge the foreign currency impact of assets and liabilitiesdenominated in nonfunctional currencies. The dollar equivalent gross notional amount ofthese forward contracts not designated as hedging instruments totaled approximately$0.2 billion as of July 2, 2016. The fair value of the Company's outstanding contractswas not material as of July 2, 2016 and January 2, 2016.

The following table provides the (gains) losses related to derivative instruments notdesignated as hedging instruments, including the location in the CondensedConsolidated Statements of Earnings (in millions):

Derivatives Not(Gain) Loss on

Derivatives(Gain) Loss on

Derivatives

Designated as Recognized in EarningsRecognized in

EarningsHedging Three Months Ended Six Months Ended

InstrumentsJuly 2,2016 July 4, 2015

July 2,2016

July 4,2015 Location

Foreign currencyforwardcontracts $ (2) $ 1 $ 1 $ (8)

Other (income)expense

The net (gains) losses were almost entirely offset by corresponding net (losses) gains onthe foreign currency exposures being managed.

Location and Fair Value Amount of Derivative Instruments



The following table summarizes the fair value of the Company’s derivative instrumentsand their locations in the Condensed Consolidated Balance Sheets as of July 2, 2016and January 2, 2016 (in millions):

Fair Value of Derivative InstrumentsJuly 2,2016

January 2,2016 Location

Derivatives Designated as HedgingInstruments

Foreign currency forward contracts $ 4 $ 14Other currentassets

1 2 Other assets

(34) (6)Other currentliabilities


Derivatives Not Designated asHedging Instruments

Foreign currency forward contracts — —Other currentassets

— —Other currentliabilities

Total $ (34) $ 7

Additional information with respect to the fair values of the Company's derivativeinstruments is included in Note 8.

Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments

As of July 2, 2016, St. Jude Medical, Inc. had International Swaps and DerivativesAssociation agreements with four applicable banks and financial institutions that containnetting provisions.

The following tables provide information as though the Company had elected to offsetthe asset and liability balances of derivative instruments, netted in accordance withvarious criteria in the event of default or termination as stipulated by the terms of thenetting arrangements with each of the counterparties as of July 2, 2016 and January 2,2016, respectively (in millions):

Gross Amounts not Offset inthe Condensed Consolidated

Balance Sheet that areSubject to Master Netting

AgreementsGross Amount ofEligible Offsetting

Gross Amountof Recognized

DerivativeAssets

DerivativeLiabilities

Presented inthe Presented in the Net




Derivatives as of July 2,2016 Balance Sheet Balance Sheet Received AssetsDerivatives subject tomaster nettingagreements $ 3 $ 2 $ — $ 1Derivatives not subject tomaster nettingagreements 2 2Total $ 5 $ 2 $ — $ 3



AgreementsGross Amount of

Gross Amountof Eligible Offsetting




Derivatives as of July 2,2016 Balance Sheet Balance Sheet Pledged LiabilitiesDerivatives subject tomaster nettingagreements $ 22 $ 2 $ — $ 20Derivatives not subject tomaster nettingagreements 17 17Total $ 39 $ 2 $ — $ 37





DerivativeAssets






Derivatives as ofJanuary 2, 2016 Balance Sheet Balance Sheet Received AssetsDerivatives subject tomaster nettingagreements $ 3 $ 1 $ — $ 2Derivatives not subject tomaster nettingagreements 13 13Total $ 16 $ 1 $ — $ 15








Derivatives as ofJanuary 2, 2016 Balance Sheet Balance Sheet Pledged LiabilitiesDerivatives subject tomaster nettingagreements $ 1 $ 1 $ — $ —Derivatives not subject tomaster nettingagreements 8 8Total $ 9 1 $ — $ 8

For each counterparty, if netted, the Company would offset the asset and liabilitybalances of all derivatives at the end of the reporting period. Derivatives not subject tomaster netting agreements are not eligible for net presentation. As of both July 2, 2016and January 2, 2016, no cash collateral had been received or pledged related to thesederivative instruments.



6 Months EndedBusiness Combinations Jul. 02, 2016Business Combinations[Abstract]Business Combination BUSINESS COMBINATIONS

Fiscal Year 2016

Middle East distributor: In February 2016, the Company acquired certain assets andassumed certain liabilities of a medical device distributor in the Middle East for $19million of total purchase consideration. The transaction was accounted for as a purchasebusiness combination. The purchase price allocation, which includes customerrelationship intangible assets of $7 million and goodwill of $5 million, is consideredpreliminary, largely with respect to certain tax-related assets and liabilities. During thesecond quarter of 2016, the Company did not recognize material adjustments toprovisional amounts.

Fiscal Year 2015

Thoratec: The Company continues to evaluate information about facts andcircumstances that existed as of the date Thoratec was acquired. As such, the purchaseprice allocation is considered preliminary, largely with respect to certain tax-relatedassets and liabilities and legal contingencies. During the first six months of 2016, theCompany did not recognize material adjustments to provisional amounts.



6 Months EndedAbbott Transaction Jul. 02, 2016Subsequent Events[Abstract]Abbott Transaction ABBOTT TRANSACTION

On April 27, 2016, the Company and Abbott entered into an agreement and plan ofmerger (the “Merger Agreement”). Under the Merger Agreement generally eachoutstanding share of the Company’s common stock will be converted into the right toreceive (x) $46.75 in cash, without interest thereon, and (y) 0.8708 of a validly issued,fully paid and non-assessable common share of Abbott (such ratio as may be adjustedpursuant to the Merger Agreement), less any applicable withholding taxes.

Completion of the merger is subject to customary closing conditions, including(i) adoption of the Merger Agreement by the affirmative vote of the holders of a majorityof all outstanding Company common shares, (ii) effectiveness of the RegistrationStatement on Form S-4 to be filed with the Securities and Exchange Commission byAbbott in connection with the registration of the Abbott common shares to be issued inthe merger, (iii) the expiration of the waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), and receipt of otherspecified antitrust approvals, (iv) subject to specified materiality thresholds, the accuracyof the representations and warranties of the other party, (v) the other party havingperformed in all material respects all of its obligations under the Merger Agreement,(vi) the absence of a material adverse effect, as defined in the Merger Agreement, onthe other party, and (vii) the receipt by each party of opinions to the effect that thetransaction will be treated as a reorganization for U.S. federal income tax purposes.

On July 11, 2016, the Company and Abbott each received a request for additionalinformation (the Second Request) from the United States Federal Trade Commission(FTC) pursuant to the HSR Act, in connection with Abbott’s pending acquisition of theCompany. The effect of the Second Request is to extend the waiting period imposed bythe HSR Act until 30 days after Abbott and the Company have substantially compliedwith the request, unless that period is extended voluntarily by the parties or terminatedsooner by the FTC.



6 Months EndedBasis Of Presentation(Policies) Jul. 02, 2016

Organization, Consolidationand Presentation ofFinancial Statements[Abstract]New AccountingPronouncements, Policy



















ASU No. 2014-09,Revenue from

The standard requiresan entity to recognize

Refer to ASUNo. 2015-14

The Company plans toadopt this ASU for



Contracts withCustomers (Topic606)

revenue to depict thetransfer of promisedgoods or services tocustomers in anamount that reflects theconsideration to whichthe entity expects to beentitled in exchange forthose goods orservices. The guidancewill supersede thecurrent revenuerecognitionrequirements.

regarding theadoption timing.Eitherretrospective ormodifiedretrospectiveapplication ispermitted.

interim and annualperiods beginningafter December 15,2017. The Company isevaluating itsapproach to theadoption and thepotential impact to itsresults of operationsand financial position.









Among other things,the standard requiresrecognition of a right-of-use asset and alease liability, initiallymeasured at thepresent value of thelease payments, in thestatement of financialposition for virtually all





leases where we arethe lessee.


The areas forsimplification in thisstandard involveseveral aspects of theaccounting for share-based paymenttransactions, includingincome taxconsequences,classification of awardsas either equity orliabilities andclassification on thestatement of cashflows.

Annual andinterim periodsbeginning afterDecember 15,2016, withcertain aspectsrequiringmodifiedretrospectivetransition,retrospectiveapplication, and/or prospectiveapplication.Early adoption ispermitted if allaspects areadoptedsimultaneously.








6 Months EndedBasis Of Presentation(Tables) Jul. 02, 2016

Organization, Consolidationand Presentation ofFinancial Statements[Abstract]Schedule of New AccountingPronouncements



















ASU No. 2014-09,Revenue from

The standard requiresan entity to recognize

Refer to ASUNo. 2015-14

The Company plans toadopt this ASU for



Contracts withCustomers (Topic606)

revenue to depict thetransfer of promisedgoods or services tocustomers in anamount that reflects theconsideration to whichthe entity expects to beentitled in exchange forthose goods orservices. The guidancewill supersede thecurrent revenuerecognitionrequirements.

regarding theadoption timing.Eitherretrospective ormodifiedretrospectiveapplication ispermitted.

interim and annualperiods beginningafter December 15,2017. The Company isevaluating itsapproach to theadoption and thepotential impact to itsresults of operationsand financial position.









Among other things,the standard requiresrecognition of a right-of-use asset and alease liability, initiallymeasured at thepresent value of thelease payments, in thestatement of financialposition for virtually all





leases where we arethe lessee.


The areas forsimplification in thisstandard involveseveral aspects of theaccounting for share-based paymenttransactions, includingincome taxconsequences,classification of awardsas either equity orliabilities andclassification on thestatement of cashflows.

Annual andinterim periodsbeginning afterDecember 15,2016, withcertain aspectsrequiringmodifiedretrospectivetransition,retrospectiveapplication, and/or prospectiveapplication.Early adoption ispermitted if allaspects areadoptedsimultaneously.








6 Months EndedDebt (Tables) Jul. 02, 2016Debt Disclosure [Abstract]Schedule of Long-Term Debt The carrying value of the Company’s debt, including debt issuance costs, discounts or

premiums consisted of the following (in millions):


Schedule of Maturities ofLong-term Debt

Contractual maturities of the Company's debt for the next five fiscal years and thereafter,excluding any debt issuance costs, discounts or premiums, as of July 2, 2016 were asfollows (in millions):

Remainderof 2016 2017 2018 2019 2020

After2020

Future minimum principalpayments $ 453 $ 272 $ 598 $ 227 $2,478 $2,100



6 Months EndedCommitments AndContingencies (Tables) Jul. 02, 2016

Commitments andContingencies Disclosure[Abstract]Schedule Of Product WarrantyLiability

Changes in the Company’s product warranty liability during the three and six monthsended July 2, 2016 and July 4, 2015 were as follows (in millions):


July 4,2015

July 2,2016

July 4,2015

Balance at beginning of period $ 26 $ 32 $ 31 $ 35Warranty expense (benefit)recognized 2 (2) 1 (4)Warranty credits issued (3) (1) (7) (2)Balance at end of period $ 25 $ 29 $ 25 $ 29



6 Months EndedSpecial Charges (Tables) Jul. 02, 20162016 InitiativesRestructuring Cost and ReserveSummary Of Activity Related To SpecialCharge Restructuring Accrual

A summary of the activity related to the 2016 Initiatives accrual is as follows(in millions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalanceatJanuary3, 2015 $ — $ — $ — $ — $ —Cost ofsalesspecialcharges 9 1 1 1 12Specialcharges 22 — — — 22Non-cashchargesused — (1) (1) — (2)Cashpayments (2) — — (1) (3)BalanceatJanuary2, 2016 29 — — — 29Cost ofsalesspecialcharges — 2 1 1 4Specialcharges 11 — 4 5 20Non-cashchargesused — (2) (5) — (7)Cashpayments (32) — — (5) (37)Balanceat April 2,2016 8 — — 1 9Cost ofsalesspecialcharges — — — 2 2Specialcharges 6 — — 4 10Cashpayments (6) — — (4) (10)



Balanceat July 2,2016 $ 8 $ — $ — $ 3 $ 11

Manufacturing and Supply ChainOptimization PlanRestructuring Cost and ReserveSummary Of Activity Related To SpecialCharge Restructuring Accrual

A summary of the activity related to the Manufacturing and Supply ChainOptimization Plan accrual is as follows (in millions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalanceatJanuary3, 2015 $ 14 $ — $ — $ 6 $ 20Cost ofsalesspecialcharges 4 3 15 7 29Specialcharges 20 — — 29 49Non-cashchargesused — (3) (15) — (18)Cashpayments (27) — — (35) (62)BalanceatJanuary2, 2016 11 — — 6 17Cost ofsalesspecialcharges — — — 1 1Cashpayments (3) — — (6) (9)Balanceat April 2,2016 8 — — 1 9Cost ofsalesspecialcharges — — — 1 1Specialcharges — — — 1 1Cashpayments (3) — — (2) (5)Balanceat July 2,2016 $ 5 $ — $ — $ 1 $ 6



2012 Business Realignment RestructuringPlanRestructuring Cost and ReserveSummary Of Activity Related To SpecialCharge Restructuring Accrual

A summary of the activity related to the 2012 Business Realignment Planaccrual is as follows (in millions):

EmployeeTermination


FixedAsset

Charges

OtherRestructuring

Costs TotalBalance atJanuary 3,2015 $ 26 $ — $ — $ 12 $ 38Cost ofsalesspecialcharges 2 3 — — 5Specialcharges 2 — 2 5 9Non-cashchargesused — (3) (2) — (5)Cashpayments (25) — — (10) (35)Foreignexchangerateimpact (2) — — — (2)Balance atJanuary 2,2016 3 — — 7 10Cost ofsalesspecialcharges — (1) — (1) (2)Non-cashchargesused — 1 — — 1Balance atApril 2,2016 3 — — 6 9Cashpayments (1) — — — (1)Balance atJuly 2,2016 $ 2 $ — $ — $ 6 $ 8



6 Months EndedNet Earnings Per Share(Tables) Jul. 02, 2016

Earnings Per Share [Abstract]Schedule Of Computation OfBasic And Diluted Net EarningsPer Share

The table below sets forth the computation of basic and diluted net earnings pershare attributable to St. Jude Medical, Inc. (in millions, except per share amounts):


July 2,2016

July 4,2015

July 2,2016

July 4,2015

Numerator:Net earnings attributable to St. JudeMedical, Inc. $ 238 $ 290 $ 333 $ 552

Denominator:Basic weighted average sharesoutstanding 284.3 281.1 283.9 282.0

Dilution associated with stock-based compensation plans 4.0 4.4 3.4 4.3

Diluted weighted average sharesoutstanding 288.3 285.5 287.3 286.3

Basic net earnings per shareattributable to St. Jude Medical, Inc. $ 0.84 $ 1.03 $ 1.17 $ 1.96Diluted net earnings per shareattributable to St. Jude Medical, Inc. $ 0.83 $ 1.02 $ 1.16 $ 1.93

Anti-dilutive shares of common stockexcluded from diluted net earnings pershare attributable to St. Jude Medical,Inc. 3.8 2.6 6.1 3.4



6 Months EndedAccumulated OtherComprehensive Income

(Loss) and SupplementalEquity Information (Tables)

Jul. 02, 2016

Accumulated OtherComprehensive Income(Loss), Net of Tax [Abstract]Schedule of AccumulatedOther Comprehensive Income(Loss)




for-Gain (Loss)


saleSecurities








for-Gain (Loss)


saleSecurities







UnrealizedGain

(Loss) On Unrealized Foreign AccumulatedAvailable-

for-Gain (Loss)


saleSecurities




Accumulated othercomprehensive income(loss) as of January 2, 2016 $ 3 $ 11 $ (359) $ (345)Other comprehensiveincome (loss) beforereclassifications 1 (30) 31 2Amounts reclassified to netearnings from accumulatedother comprehensiveincome — (4) — (4)Other comprehensiveincome (loss) 1 (34) 31 (2)Accumulated othercomprehensive income(loss) as of July 2, 2016 $ 4 $ (23) $ (328) $ (347)



for-Gain (Loss)


saleSecurities




Accumulated othercomprehensive income(loss) as of April 4, 2015 $ 16 $ 32 $ (318) $ (270)



Other comprehensiveincome (loss) beforereclassifications (2) (13) 30 15Amounts reclassified to netearnings from accumulatedother comprehensiveincome (2) (4) — (6)Other comprehensiveincome (loss) (4) (17) 30 9Accumulated othercomprehensive income(loss) as of July 4, 2015 $ 12 $ 15 $ (288) $ (261)



for-Gain (Loss)


saleSecurities




Accumulated othercomprehensive income(loss) as of January 3, 2015 $ 15 $ 3 $ (191) $ (173)Other comprehensiveincome (loss) beforereclassifications 1 16 (97) (80)Amounts reclassified to netearnings from accumulatedother comprehensiveincome (4) (4) — (8)Other comprehensiveincome (loss) (3) 12 (97) (88)Accumulated othercomprehensive income(loss) as of July 4, 2015 $ 12 $ 15 $ (288) $ (261)

Reclassification out ofAccumulated OtherComprehensive Income

The following table provides details about reclassifications out of accumulated othercomprehensive income and the line items impacted in the Company's CondensedConsolidated Statements of Earnings during the three and six months ended July 2,2016 and July 4, 2015, respectively (in millions):

Details aboutAmount reclassified from accumulated other comprehensive

incomeaccumulatedother


comprehensiveincomecomponents

July 2,2016

July 4,2015

July 2,2016

July 4,2015


Unrealized (gain) loss on available-for-salesecurities:(Gain) loss onsale of $ — $ (3) $ — $ (7) Other (income) expense



available-for-sale securitiesTax effect — 1 — 3 Income tax expense

Net of tax $ — $ (2) $ — $ (4)

Unrealized (gain) loss on derivative financialinstruments:(Gain) lossrecognized onderivativefinancialinstruments $ — $ (4) $ (6) $ (4) Cost of sales


Net of tax $ — $ (4) $ (4) $ (4)

Schedule of NoncontrollingInterest

The supplemental equity schedules below present changes in the Company'snoncontrolling interest and total shareholders' equity for the three and six months endedJuly 2, 2016 and July 4, 2015, respectively (in millions):

TotalShareholders'

EquityBefore Total

Noncontrolling Noncontrolling Shareholders'For the six months ended July 2,2016 Interest Interest EquityBalance at January 2, 2016 $ 4,042 $ — $ 4,042Net earnings 333 — 333Other comprehensive income (loss) (2) — (2)Cash dividends declared (176) — (176)Stock-based compensation 60 — 60Common stock issued underemployee stock plans and other, net 22 — 22Tax benefit from stock plans 2 — 2Balance at July 2, 2016 $ 4,281 $ — $ 4,281

TotalShareholders'

EquityBefore Total

Noncontrolling Noncontrolling Shareholders'For the six months ended July 4,2015 Interest Interest EquityBalance at January 3, 2015 $ 4,199 $ 45 $ 4,244Net earnings 552 (14) 538Other comprehensive income (loss) (88) — (88)Cash dividends declared (163) — (163)Repurchases of common stock (500) — (500)Stock-based compensation 35 2 37



Common stock issued underemployee stock plans and other, net 89 — 89Tax benefit from stock plans 14 — 14Additions (purchases) ofnoncontrolling ownership interests (297) (33) (330)Balance at July 4, 2015 $ 3,841 $ — $ 3,841



6 Months EndedFair Value Measurements(Tables) Jul. 02, 2016

Fair Value Disclosures[Abstract]Summary Of Components OfAvailable-For-Sale Securities

The following table summarizes the components of the balance of the Company’savailable-for-sale securities at July 2, 2016 and January 2, 2016 (in millions):

July 2, 2016January 2,

2016Adjusted cost $ 5 $ 5Gross unrealized gains 6 6Gross unrealized losses — (1)Fair value $ 11 $ 10

Summary Of Financial Assetsand Liabilities Measured AtFair Value On A RecurringBasis

A summary of assets and liabilities measured at fair value on a recurring basis at July 2,2016 and January 2, 2016 is as follows (in millions):

BalanceSheet

ClassificationJuly 2,2016

QuotedPrices

InActive

Markets(Level 1)

SignificantOther

ObservableInputs

(Level 2)


Inputs(Level 3)

AssetsMoney-market

securitiesCash andcashequivalents $ 52 $ 52 $ — $ —

Available-for-sale

securities

Other currentassets

11 11 — —Foreign


Other currentassets

4 — 4 —Trading

securitiesOther assets

312 312 — —Foreign


Other assets

1 — 1 —Total assets $ 380 $ 375 $ 5 $ —

LiabilitiesForeigncurrencyforwardcontracts

Other currentliabilities $ 34 $ — $ 34 $ —

Contingentconsideration


Foreigncurrency

Otherliabilities 5 — 5 —



forwardcontractsTotal liabilities $ 70 $ — $ 39 $ 31

BalanceSheet

ClassificationJanuary 2,

2016

QuotedPrices

InActive

Markets(Level 1)

SignificantOther

ObservableInputs

(Level 2)


Inputs(Level 3)

AssetsMoney-marketsecurities

Cash andcashequivalents $ 273 $ 273 $ — $ —

Available-for-sale

securities

Other currentassets

10 10 — —Foreigncurrencyforwardcontracts

Other currentassets

14 — 14 —Tradingsecurities

Other assets302 302 — —

Foreigncurrencyforwardcontracts Other assets 2 — 2 —

Total assets $ 601 $ 585 $ 16 $ —

LiabilitiesContingentconsideration

Other currentliabilities $ 118 $ — $ — $ 118


Other currentliabilities

6 — 6 —Contingentconsideration



Otherliabilities

3 — 3 —Totalliabilities $ 160 $ — $ 9 $ 151

Summary of Level 3 FairValue Measurements ofContingent ConsiderationLiability

The recurring Level 3 fair value measurements of the Company's contingentconsideration liabilities include the following significant unobservable inputs (in millions):

ContingentConsiderationLiabilities

Fair Valueas of July 2,

2016ValuationTechnique

UnobservableInput

Value orRange



Spinal Modulationrevenue-basedmilestones andearn-outs $ 2


ExpectedRevenue Volatility 25.0%


Nanostim, Inc.(Nanostim)revenue-basedmilestones 2

ProbabilityWeighted

DiscountedCash Flow

Discount Rate 5.0%

Probability ofPayments 10.0%


Assumed fromThoratecregulatory-basedand revenue-based milestones 27

ProbabilityWeighted

DiscountedCash Flow

Discount Rate 4.4%

Probabilities ofPayments —% - 90.0%

Projected Years ofPayments 2018 - 2022

Total contingentconsiderationliabilities $ 31

Unobservable InputReconciliation of ContingentConsideration Liability

Additionally, the following table provides a reconciliation of the beginning and endingbalances of the Company's recurring Level 3 fair value measurements (in millions):

NanostimSpinal

Modulation

Assumedfrom

Thoratec TotalBalance as of January 3, 2015 $ 50 $ — $ — $ 50Initial fair value measurement ofcontingent consideration — 155 — 155Liabilities assumed from Thoratecacquisition — — 33 33Change in fair value of contingentconsideration (48) (33) (6) (87)Balance as of January 2, 2016 2 122 27 151Change in fair value of contingentconsideration — 8 1 9Transfer out of Level 3 fair valuemeasurement due to contractualsettlement — (124) — (124)Balance as of April 2, 2016 2 6 28 36Change in fair value of contingentconsideration — (4) (1) (5)



Balance as of July 2, 2016 $ 2 $ 2 $ 27 $ 31



6 Months EndedDerivative FinancialInstruments (Tables) Jul. 02, 2016

Derivative Instruments andHedging ActivitiesDisclosure [Abstract]Summary of DerivativeInstruments (Gain) Loss

The following table provides the (gains) losses related to derivative instrumentsdesignated as cash flow hedges for the three and six months ended July 2, 2016 andJuly 4, 2015, including the location in the Condensed Consolidated Statements ofEarnings and the Condensed Consolidated Statements of Comprehensive Income (inmillions):


Pre-tax (Gain)Loss



Recognized inOther






July 2, 2016 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeigncurrencyforwardcontracts $ 5 $ — Cost of sales $ —

Cost ofsales


Pre-tax (Gain)Loss



Recognized inOther






July 2, 2016 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeigncurrency $ 44 $ (6) Cost of sales $ —

Cost ofsales



forwardcontracts


Pre-tax (Gain)Loss



Recognized inOther







Cost ofsales


Pre-tax (Gain)Loss



Recognized inOther






July 4, 2015 Amount Amount Location Amount LocationDerivatives inCash FlowHedgingRelationshipsForeigncurrencyforwardcontracts $ (19) $ (4) Cost of sales $ —

Cost ofsales

Derivative Instruments, Gain(Loss), Not Designated asHedging Instrument

The following table provides the (gains) losses related to derivative instruments notdesignated as hedging instruments, including the location in the CondensedConsolidated Statements of Earnings (in millions):



Derivatives Not(Gain) Loss on

Derivatives(Gain) Loss on

Derivatives

Designated as Recognized in EarningsRecognized in

EarningsHedging Three Months Ended Six Months Ended

InstrumentsJuly 2,2016 July 4, 2015

July 2,2016

July 4,2015 Location

Foreign currencyforwardcontracts $ (2) $ 1 $ 1 $ (8)

Other (income)expense

Schedule of Fair Value ofDerivative Instruments inStatement of FinancialPosition

The following table summarizes the fair value of the Company’s derivative instrumentsand their locations in the Condensed Consolidated Balance Sheets as of July 2, 2016and January 2, 2016 (in millions):

Fair Value of Derivative InstrumentsJuly 2,2016

January 2,2016 Location

Derivatives Designated as HedgingInstruments

Foreign currency forward contracts $ 4 $ 14Other currentassets

1 2 Other assets

(34) (6)Other currentliabilities


Derivatives Not Designated asHedging Instruments

Foreign currency forward contracts — —Other currentassets

— —Other currentliabilities

Total $ (34) $ 7

Schedule of OffsettingDerivative Assets

The following tables provide information as though the Company had elected to offsetthe asset and liability balances of derivative instruments, netted in accordance withvarious criteria in the event of default or termination as stipulated by the terms of thenetting arrangements with each of the counterparties as of July 2, 2016 and January 2,2016, respectively (in millions):





DerivativeAssets



Condensed Condensed Cash Amount of



Consolidated Consolidated Collateral DerivativeDerivatives as of July 2,2016 Balance Sheet Balance Sheet Received AssetsDerivatives subject tomaster nettingagreements $ 3 $ 2 $ — $ 1Derivatives not subject tomaster nettingagreements 2 2Total $ 5 $ 2 $ — $ 3








Derivatives as of July 2,2016 Balance Sheet Balance Sheet Pledged LiabilitiesDerivatives subject tomaster nettingagreements $ 22 $ 2 $ — $ 20Derivatives not subject tomaster nettingagreements 17 17Total $ 39 $ 2 $ — $ 37





DerivativeAssets



Condensed Condensed Cash Amount of



Consolidated Consolidated Collateral DerivativeDerivatives as ofJanuary 2, 2016 Balance Sheet Balance Sheet Received AssetsDerivatives subject tomaster nettingagreements $ 3 $ 1 $ — $ 2Derivatives not subject tomaster nettingagreements 13 13Total $ 16 $ 1 $ — $ 15








Derivatives as ofJanuary 2, 2016 Balance Sheet Balance Sheet Pledged LiabilitiesDerivatives subject tomaster nettingagreements $ 1 $ 1 $ — $ —Derivatives not subject tomaster nettingagreements 8 8Total $ 9 1 $ — $ 8



6 Months EndedBasis Of Presentation(Details) Jul. 02, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]Number of principal product categories 5



Debt - Schedule Of Long-Term Debt (Details) - USD

($)$ in Millions

Jul. 02, 2016 Jan. 02, 2016

Debt InstrumentTotal debt $ 6,091 $ 6,392Less: current debt obligations 660 1,163Long-term debt 5,431 5,229Term Loan Due 2020 | Loans PayableDebt InstrumentTotal debt 2,368 2,0932016 Senior Notes | Senior NotesDebt InstrumentTotal debt 0 5002018 Senior Notes | Senior NotesDebt InstrumentTotal debt 497 4962020 Senior Notes | Senior NotesDebt InstrumentTotal debt 496 4962023 Senior Notes | Senior NotesDebt InstrumentTotal debt 892 8922025 Senior Notes | Senior NotesDebt InstrumentTotal debt 494 4942043 Senior Notes | Senior NotesDebt InstrumentTotal debt 690 689Yen-denominated Senior Notes Due 2017 | Senior NotesDebt InstrumentTotal debt 79 68Yen-denominated Senior Notes Due 2020 | Senior NotesDebt InstrumentTotal debt 124 106Yen-denominated credit facilities | Line of CreditDebt InstrumentTotal debt 64 54Commercial paper borrowings | Commercial PaperDebt InstrumentTotal debt $ 387 $ 504



Debt - Schedule ofMaturities of Long-term

Debt (Details)$ in Millions

Jul. 02, 2016USD ($)

Debt Disclosure [Abstract]Remainder of 2016 $ 4532017 2722018 5982019 2272020 2,478After 2020 $ 2,100



Debt (Details) - 6 monthsended Jul. 02, 2016

¥ in MillionsUSD ($) JPY (¥) USD ($)

Debt InstrumentRepayments of commercial paper $ 117,000,0002016 Senior Notes | Senior NotesDebt InstrumentFace amount of debt $ 500,000,000Debt instrument term 5 yearsStated percentage 2.50% 2.50%Term loan due August 2020 | Loans PayableDebt InstrumentFace amount of debt $ 2,600,000,000.0Debt instrument term 5 yearsRemaining borrowing capacity 500,000,000Principal payment $ 59,000,000Prepaid amount of debt $ 167,000,000Yen Denominated Credit Facilities, Due in March 2017 | Line of CreditDebt InstrumentLine of credit ¥ 3,250 32,000,000Extension period 1 yearBasis spread on variable rate 0.25%Yen Denominated Credit Facilities, Due in June 2017 | Line of CreditDebt InstrumentLine of credit ¥ 3,250 $ 32,000,000Extension period 1 yearBasis spread on variable rate 0.27%



1 MonthsEnded

3 MonthsEndedCommitments And

Contingencies (Details)$ in Thousands

Jul. 13,2016

USD ($)

Jul. 05,2016case

Mar. 31, 2013case

Jul. 02, 2016USD ($)

December 2012 Securities LitigationLoss Contingencies [Line Items]Number of cases consolidated | case 2Litigation settlement amount $ 39,250Insurance recoveries amount $ 39,250Subsequent Event | December 2012 SecuritiesLitigationLoss Contingencies [Line Items]Insurance recoveries amount $ 39,250Subsequent Event | Abbott Merger LawsuitsLoss Contingencies [Line Items]Number of cases consolidated | case 2



3 Months Ended 6 Months EndedCommitments AndContingencies - Schedule OfProduct Warranty Liability

(Details) - USD ($)$ in Millions

Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

Movement in Standard Product Warranty Accrual [RollForward]Balance at beginning of period $ 26 $ 32 $ 31 $ 35Warranty expense (benefit) recognized 2 (2) 1 (4)Warranty credits issued (3) (1) (7) (2)Balance at end of period $ 25 $ 29 $ 25 $ 29



3 Months Ended 12 MonthsEnded

Special Charges (Details)$ in Thousands

Jul. 02,2016USD($)

Apr. 02,2016

USD ($)settlement

Jan.02,

2016USD($)

Jul. 04,2015USD($)

Apr.04,

2015USD($)

Jan.02,

2016USD($)

Dec.29,

2012division

Purchased In-Process Research AndDevelopment (IPR&D) And Special ChargesLitigation settlement gains (losses) $ 19,000Number of legal settlements | settlement 2Loss (benefit) contingency in period $ 2,000Restructuring-related costs $ 1,000 2,000Field Action Costs | Operating ExpensePurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesLitigation charges 3,000 3,000 $ 3,000 $ 5,000Field Action Costs, Scrapped Inventory andWarranty Costs | Cost of salesPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesLoss (benefit) contingency in period 5,000Field Action Costs, Salvaged Inventory | Cost ofsalesPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesLoss (benefit) contingency in period (2,000) $

(2,000) (2,000)

December 2012 Securities LitigationPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesLitigation settlement gains (losses) (39,250)Insurance recoveries amount 39,250Separate Legal Case During Second Quarter of2016Purchased In-Process Research AndDevelopment (IPR&D) And Special ChargesLitigation settlement gains (losses) 2,000March 2010 Securities Class ActionPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesInsurance recoveries $

10,0002016 Initiatives



Purchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 12,000 24,000 $

34,0002016 Initiatives | Operating ExpensePurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 10,000 20,000 $

22,0002016 Initiatives | Cost of salesPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 2,000 4,000 12,000Manufacturing and Supply Chain OptimizationPlanPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 2,000 1,000 78,000Manufacturing and Supply Chain OptimizationPlan | Operating ExpensePurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 1,000 49,000Manufacturing and Supply Chain OptimizationPlan | Cost of salesPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 1,000 1,000 29,0002012 Business Realignment Restructuring PlanPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 14,000Number of operating divisions | division 22012 Business Realignment Restructuring Plan |Operating ExpensePurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges 9,0002012 Business Realignment Restructuring Plan |Cost of salesPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesSpecial charges $ (2,000) $ 5,000Minimum | 2016 InitiativesPurchased In-Process Research AndDevelopment (IPR&D) And Special Charges



Expected cost remaining 20,000Maximum | 2016 InitiativesPurchased In-Process Research AndDevelopment (IPR&D) And Special ChargesExpected cost remaining $

25,000




Special Charges - SummaryOf Activity Related To

Special ChargeRestructuring Accrual

(Details) - USD ($)$ in Millions

Jul. 02,2016

Apr. 02,2016

Jan. 02,2016

Apr. 04,2015

Jan. 02,2016

2016 InitiativesRestructuring Reserve [Roll Forward]Balance at beginning $ 9 $ 29 $ 0 $ 0Special charges, total 12 24 $ 34Non-cash charges used (7) (2)Cash payments (10) (37) (3)Balance at ending 11 9 29 292016 Initiatives | Employee Termination CostsRestructuring Reserve [Roll Forward]Balance at beginning 8 29 0 0Non-cash charges used 0 0Cash payments (6) (32) (2)Balance at ending 8 8 29 292016 Initiatives | Inventory ChargesRestructuring Reserve [Roll Forward]Balance at beginning 0 0 0 0Non-cash charges used (2) (1)Cash payments 0 0 0Balance at ending 0 0 0 02016 Initiatives | Fixed Asset ChargesRestructuring Reserve [Roll Forward]Balance at beginning 0 0 0 0Special charges, fixed asset charges 5Non-cash charges used (5) (1)Cash payments 0 0 0Balance at ending 0 0 0 02016 Initiatives | Other Restructuring CostsRestructuring Reserve [Roll Forward]Balance at beginning 1 0 0 0Non-cash charges used 0 0Cash payments (4) (5) (1)Balance at ending 3 1 0 02016 Initiatives | Cost of salesRestructuring Reserve [Roll Forward]Special charges, total 2 4 122016 Initiatives | Cost of sales | Employee Termination CostsRestructuring Reserve [Roll Forward]Special charges, employee terminations costs 0 0 9



2016 Initiatives | Cost of sales | Inventory ChargesRestructuring Reserve [Roll Forward]Special charges, inventory charges 0 2 12016 Initiatives | Cost of sales | Fixed Asset ChargesRestructuring Reserve [Roll Forward]Special charges, fixed asset charges 0 1 12016 Initiatives | Cost of sales | Other Restructuring CostsRestructuring Reserve [Roll Forward]Special charges, other restructuring costs 2 1 12016 Initiatives | Operating ExpenseRestructuring Reserve [Roll Forward]Special charges, total 10 20 222016 Initiatives | Operating Expense | Employee TerminationCostsRestructuring Reserve [Roll Forward]Special charges, employee terminations costs 6 11 222016 Initiatives | Operating Expense | Inventory ChargesRestructuring Reserve [Roll Forward]Special charges, inventory charges 0 0 02016 Initiatives | Operating Expense | Fixed Asset ChargesRestructuring Reserve [Roll Forward]Special charges, fixed asset charges 0 4 02016 Initiatives | Operating Expense | Other Restructuring CostsRestructuring Reserve [Roll Forward]Special charges, other restructuring costs 4 5 0Manufacturing and Supply Chain Optimization PlanRestructuring Reserve [Roll Forward]Balance at beginning 9 17 20 20Special charges, total 2 1 78Non-cash charges used (18)Cash payments (5) (9) (62)Balance at ending 6 9 17 17Manufacturing and Supply Chain Optimization Plan | EmployeeTermination CostsRestructuring Reserve [Roll Forward]Balance at beginning 8 11 14 14Non-cash charges used 0Cash payments (3) (3) (27)Balance at ending 5 8 11 11Manufacturing and Supply Chain Optimization Plan | InventoryChargesRestructuring Reserve [Roll Forward]Balance at beginning 0 0 0 0Non-cash charges used (3)



Cash payments 0 0 0Balance at ending 0 0 0 0Manufacturing and Supply Chain Optimization Plan | FixedAsset ChargesRestructuring Reserve [Roll Forward]Balance at beginning 0 0 0 0Non-cash charges used (15)Cash payments 0 0 0Balance at ending 0 0 0 0Manufacturing and Supply Chain Optimization Plan | OtherRestructuring CostsRestructuring Reserve [Roll Forward]Balance at beginning 1 6 6 6Non-cash charges used 0Cash payments (2) (6) (35)Balance at ending 1 1 6 6Manufacturing and Supply Chain Optimization Plan | Cost ofsalesRestructuring Reserve [Roll Forward]Special charges, total 1 1 29Manufacturing and Supply Chain Optimization Plan | Cost ofsales | Employee Termination CostsRestructuring Reserve [Roll Forward]Special charges, employee terminations costs 0 0 4Manufacturing and Supply Chain Optimization Plan | Cost ofsales | Inventory ChargesRestructuring Reserve [Roll Forward]Special charges, inventory charges 0 0 3Manufacturing and Supply Chain Optimization Plan | Cost ofsales | Fixed Asset ChargesRestructuring Reserve [Roll Forward]Special charges, fixed asset charges 0 0 15Manufacturing and Supply Chain Optimization Plan | Cost ofsales | Other Restructuring CostsRestructuring Reserve [Roll Forward]Special charges, other restructuring costs 1 1 7Manufacturing and Supply Chain Optimization Plan | OperatingExpenseRestructuring Reserve [Roll Forward]Special charges, total 1 49Manufacturing and Supply Chain Optimization Plan | OperatingExpense | Employee Termination CostsRestructuring Reserve [Roll Forward]Special charges, employee terminations costs 0 20



Manufacturing and Supply Chain Optimization Plan | OperatingExpense | Inventory ChargesRestructuring Reserve [Roll Forward]Special charges, inventory charges 0 0Manufacturing and Supply Chain Optimization Plan | OperatingExpense | Fixed Asset ChargesRestructuring Reserve [Roll Forward]Special charges, fixed asset charges 0 0Manufacturing and Supply Chain Optimization Plan | OperatingExpense | Other Restructuring CostsRestructuring Reserve [Roll Forward]Special charges, other restructuring costs 1 292012 Business Realignment Restructuring PlanRestructuring Reserve [Roll Forward]Balance at beginning 9 10 38 38Special charges, total 14Non-cash charges used 1 (5)Cash payments (1) (35)Foreign exchange rate impact (2)Balance at ending 8 9 10 102012 Business Realignment Restructuring Plan | EmployeeTermination CostsRestructuring Reserve [Roll Forward]Balance at beginning 3 3 26 26Non-cash charges used 0 0Cash payments (1) (25)Foreign exchange rate impact (2)Balance at ending 2 3 3 32012 Business Realignment Restructuring Plan | InventoryChargesRestructuring Reserve [Roll Forward]Balance at beginning 0 0 0 0Non-cash charges used 1 (3)Cash payments 0 0Foreign exchange rate impact 0Balance at ending 0 0 0 02012 Business Realignment Restructuring Plan | Fixed AssetChargesRestructuring Reserve [Roll Forward]Balance at beginning 0 0 0 0Special charges, fixed asset charges 1Non-cash charges used 0 (2)Cash payments 0 0Foreign exchange rate impact 0Balance at ending 0 0 0 0



2012 Business Realignment Restructuring Plan | OtherRestructuring CostsRestructuring Reserve [Roll Forward]Balance at beginning 6 7 $ 12 12Non-cash charges used 0 0Cash payments 0 (10)Foreign exchange rate impact 0Balance at ending $ 6 6 $ 7 72012 Business Realignment Restructuring Plan | Cost of salesRestructuring Reserve [Roll Forward]Special charges, total (2) 52012 Business Realignment Restructuring Plan | Cost of sales |Employee Termination CostsRestructuring Reserve [Roll Forward]Special charges, employee terminations costs 0 22012 Business Realignment Restructuring Plan | Cost of sales |Inventory ChargesRestructuring Reserve [Roll Forward]Special charges, inventory charges (1) 32012 Business Realignment Restructuring Plan | Cost of sales |Fixed Asset ChargesRestructuring Reserve [Roll Forward]Special charges, fixed asset charges 0 02012 Business Realignment Restructuring Plan | Cost of sales |Other Restructuring CostsRestructuring Reserve [Roll Forward]Special charges, other restructuring costs $ (1) 02012 Business Realignment Restructuring Plan | OperatingExpenseRestructuring Reserve [Roll Forward]Special charges, total 92012 Business Realignment Restructuring Plan | OperatingExpense | Employee Termination CostsRestructuring Reserve [Roll Forward]Special charges, employee terminations costs 22012 Business Realignment Restructuring Plan | OperatingExpense | Inventory ChargesRestructuring Reserve [Roll Forward]Special charges, inventory charges 02012 Business Realignment Restructuring Plan | OperatingExpense | Fixed Asset ChargesRestructuring Reserve [Roll Forward]Special charges, fixed asset charges 22012 Business Realignment Restructuring Plan | OperatingExpense | Other Restructuring Costs



Restructuring Reserve [Roll Forward]Special charges, other restructuring costs $ 5



3 MonthsEnded

6 MonthsEnded

Net Earnings Per Share -Schedule of Computation of

Basic and Diluted NetEarnings Per Share (Details)

- USD ($)$ / shares in Units, shares in

Millions, $ in Millions

Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

Earnings Per Share [Abstract]Net earnings attributable to St. Jude Medical, Inc. $ 238 $ 290 $ 333 $ 552Basic weighted average shares outstanding 284.3 281.1 283.9 282.0Dilution associated with stock-based compensation plans 4.0 4.4 3.4 4.3Diluted weighted average shares outstanding 288.3 285.5 287.3 286.3Basic net earnings per share attributable to St. Jude Medical, Inc. (USD pershare) $ 0.84 $ 1.03 $ 1.17 $ 1.96

Diluted net earnings per share attributable to St. Jude Medical, Inc. (USD pershare) $ 0.83 $ 1.02 $ 1.16 $ 1.93

Anti-dilutive shares of common stock excluded from diluted net earnings pershare attributable to St. Jude Medical, Inc. (in shares) 3.8 2.6 6.1 3.4



3 Months Ended 6 Months EndedAccumulated OtherComprehensive Income

(Loss) and SupplementalEquity Information-

Schedule of AccumulatedOther Comprehensive

Income (Loss) (Details) -USD ($)

$ in Millions

Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

AOCI Attributable to Parent, Net of Tax [Roll Forward]Beginning Balance $ 4,042 $ 4,244Other comprehensive income (loss), net of tax $ (20) $ 9 (2) (88)Ending Balance 4,281 3,841 4,281 3,841Accumulated Other Comprehensive Income (Loss)AOCI Attributable to Parent, Net of Tax [Roll Forward]Beginning Balance (327) (270) (345) (173)Other comprehensive income (loss) before reclassifications (20) 15 2 (80)Amounts reclassified to net earnings from accumulated othercomprehensive income 0 (6) (4) (8)

Other comprehensive income (loss), net of tax (20) 9 (2) (88)Ending Balance (347) (261) (347) (261)Unrealized gain (loss) on available-for-sale securitiesAOCI Attributable to Parent, Net of Tax [Roll Forward]Beginning Balance 3 16 3 15Other comprehensive income (loss) before reclassifications 1 (2) 1 1Amounts reclassified to net earnings from accumulated othercomprehensive income 0 (2) 0 (4)

Other comprehensive income (loss), net of tax 1 (4) 1 (3)Ending Balance 4 12 4 12Unrealized gain (loss) on derivative instrumentsAOCI Attributable to Parent, Net of Tax [Roll Forward]Beginning Balance (19) 32 11 3Other comprehensive income (loss) before reclassifications (4) (13) (30) 16Amounts reclassified to net earnings from accumulated othercomprehensive income 0 (4) (4) (4)

Other comprehensive income (loss), net of tax (4) (17) (34) 12Ending Balance (23) 15 (23) 15Foreign currency translation adjustmentAOCI Attributable to Parent, Net of Tax [Roll Forward]Beginning Balance (311) (318) (359) (191)Other comprehensive income (loss) before reclassifications (17) 30 31 (97)Amounts reclassified to net earnings from accumulated othercomprehensive income 0 0 0 0

Other comprehensive income (loss), net of tax (17) 30 31 (97)



Ending Balance $ (328) $ (288) $ (328) $ (288)



3 MonthsEnded

6 MonthsEnded

Accumulated OtherComprehensive Income

(Loss) and SupplementalEquity Information -

Schedule of Reclassificationout of Accumulated Other

Comprehensive Income(Details) - USD ($)

$ in Millions

Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

Reclassification Adjustment out of Accumulated Other ComprehensiveIncome [Line Items]Other (income) expense $ 3 $ 0 $ 56 $ (3)Cost of sales (496) (424) (983) (819)Income tax expense 32 12 73 64Net earnings attributable to St. Jude Medical, Inc. (238) (290) (333) (552)Unrealized gain (loss) on available-for-sale securities | Reclassification out ofAccumulated Other Comprehensive IncomeReclassification Adjustment out of Accumulated Other ComprehensiveIncome [Line Items]Other (income) expense 0 (3) 0 (7)Income tax expense 0 1 0 3Net earnings attributable to St. Jude Medical, Inc. 0 (2) 0 (4)Unrealized gain (loss) on derivative instruments | Reclassification out ofAccumulated Other Comprehensive IncomeReclassification Adjustment out of Accumulated Other ComprehensiveIncome [Line Items]Cost of sales 0 (4) (6) (4)Income tax expense 0 0 2 0Net earnings attributable to St. Jude Medical, Inc. $ 0 $ (4) $ (4) $ (4)



1 MonthsEnded 3 Months Ended 6 Months EndedAccumulated Other

Comprehensive Income(Loss) and Supplemental

Equity Information (Details)- USD ($)

$ / shares in Units, shares inMillions

May04,

2016

Mar. 02,2015

Jul.02,

2016Jul. 04, 2015

Jul.02,

2016

Jul. 04,2015

Jan. 13,2015

Jun. 07,2013

Accumulated OtherComprehensive Income(Loss), Net of Tax [Abstract]Cash dividends declared pershare (USD per share)

$0.31

$0.31 $ 0.29 $

0.62 $ 0.58

Authorized amount $500,000,000

Shares repurchased, shares 7.5Shares repurchased, value $

500,000,000$500,000,000

Average repurchase price(USD per share) $ 66.96

Business Combination,Separately RecognizedTransactions [Line Items]Additions (purchases) ofnoncontrolling ownershipinterests

$330,000,000

Spinal ModulationBusiness Combination,Separately RecognizedTransactions [Line Items]Equity investment $

40,000,000Voting equity interest 19.00%Additions (purchases) ofnoncontrolling ownershipinterests

$173,000,000

Ownership percentage bynoncontrolling owners 81.00% 81.00%

Contingent consideration $155,000,000

$155,000,000

Increase (decrease) instockholders' equity (297,000,000)

Increase (decrease) innoncontrolling interest

$(33,000,000)



1 MonthsEnded 3 Months Ended 6 Months EndedAccumulated Other

Comprehensive Income(Loss) and Supplemental

Equity Information-Supplemental Equity

Schedule (Details) - USD ($)$ in Millions

Mar. 02, 2015 Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

Increase (Decrease) in Stockholders' Equity [RollForward]Beginning Balance $ 4,042 $ 4,244Net earnings $ 238 $ 282 333 538Other comprehensive income (loss) (20) 9 (2) (88)Cash dividends declared (176) (163)Repurchases of common stock $ (500) (500)Stock-based compensation 60 37Common stock issued under employee stock plansand other, net 22 89

Tax benefit from stock plans 2 14Additions (purchases) of noncontrolling ownershipinterests (330)

Ending Balance 4,281 3,841 4,281 3,841Shareholders' Equity Before Noncontrolling InterestIncrease (Decrease) in Stockholders' Equity [RollForward]Beginning Balance 4,042 4,199Net earnings 333 552Other comprehensive income (loss) (2) (88)Cash dividends declared (176) (163)Repurchases of common stock (500)Stock-based compensation 60 35Common stock issued under employee stock plansand other, net 22 89


Ending Balance 4,281 3,841 4,281 3,841Noncontrolling InterestIncrease (Decrease) in Stockholders' Equity [RollForward]Beginning Balance 0 45Net earnings 0 (14)Other comprehensive income (loss) 0 0Cash dividends declared 0 0Repurchases of common stock 0Stock-based compensation 0 2



Common stock issued under employee stock plansand other, net 0 0


Ending Balance $ 0 $ 0 $ 0 $ 0



3 MonthsEnded

6 MonthsEnded

Income Taxes (Details)€ in Millions, $ in Millions

Jul.02,

2016USD($)

Jul.04,

2015

Jul. 02,2016USD($)

Jul.04,

2015

Jul.02,

2016EUR(€)

Apr.02,

2016EUR(€)

Jan.02,

2016USD($)

Income Tax Disclosure [Abstract]Unrecognized tax benefits $ 405 $ 405 $ 338Accrued interest and penalties $ 56 $ 56 $ 58Effective income tax rate reconciliation, percent 11.90% 4.10% 18.00% 10.60%Special charges, acquisition-related costs, adjustments tocontingent consideration liabilities and discrete tax items 1.50% 13.20%(5.10%) 6.50%

Liability for uncertain tax positions $ 48 $ 48 € 43 € 46



Fair Value Measurements -Summary Of Components

Of Available-For-SaleSecurities (Details) - USD ($)

$ in Millions

Jul. 02, 2016 Jan. 02, 2016

Fair Value Disclosures [Abstract]Adjusted cost $ 5 $ 5Gross unrealized gains 6 6Gross unrealized losses 0 (1)Fair value $ 11 $ 10



Fair Value Measurements -Summary of Financial Assets

Measured at Fair Value,Recurring Basis (Details) -

USD ($)$ in Millions

Jul. 02,2016

Jan. 02,2016

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Available-for-sale securities $ 11 $ 10RecurringFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Total assets 380 601Total liabilities 70 160Recurring | Cash and cash equivalentsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Money-market securities 52 273Recurring | Other current assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Available-for-sale securities 11 10Derivative assets, foreign currency forward contracts 4 14Recurring | Other assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Derivative assets, foreign currency forward contracts 1 2Trading securities 312 302Recurring | Other current liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Contingent consideration 118Derivative liabilities, foreign currency forward contracts 34 6Recurring | Other liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Contingent consideration 31 33Derivative liabilities, foreign currency forward contracts 5 3Recurring | Quoted Prices In Active Markets (Level 1)Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Total assets 375 585Total liabilities 0 0Recurring | Quoted Prices In Active Markets (Level 1) | Cash and cash equivalents



Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Money-market securities 52 273Recurring | Quoted Prices In Active Markets (Level 1) | Other current assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Available-for-sale securities 11 10Derivative assets, foreign currency forward contracts 0 0Recurring | Quoted Prices In Active Markets (Level 1) | Other assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Derivative assets, foreign currency forward contracts 0 0Trading securities 312 302Recurring | Quoted Prices In Active Markets (Level 1) | Other current liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Contingent consideration 0Derivative liabilities, foreign currency forward contracts 0 0Recurring | Quoted Prices In Active Markets (Level 1) | Other liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Contingent consideration 0 0Derivative liabilities, foreign currency forward contracts 0 0Recurring | Significant Other Observable Inputs (Level 2)Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Total assets 5 16Total liabilities 39 9Recurring | Significant Other Observable Inputs (Level 2) | Cash and cash equivalentsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Money-market securities 0 0Recurring | Significant Other Observable Inputs (Level 2) | Other current assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Available-for-sale securities 0 0Derivative assets, foreign currency forward contracts 4 14Recurring | Significant Other Observable Inputs (Level 2) | Other assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Derivative assets, foreign currency forward contracts 1 2Trading securities 0 0Recurring | Significant Other Observable Inputs (Level 2) | Other current liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]



Contingent consideration 0Derivative liabilities, foreign currency forward contracts 34 6Recurring | Significant Other Observable Inputs (Level 2) | Other liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Contingent consideration 0 0Derivative liabilities, foreign currency forward contracts 5 3Recurring | Significant Unobservable Inputs (Level 3)Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Total assets 0 0Total liabilities 31 151Recurring | Significant Unobservable Inputs (Level 3) | Cash and cash equivalentsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Money-market securities 0 0Recurring | Significant Unobservable Inputs (Level 3) | Other current assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Available-for-sale securities 0 0Derivative assets, foreign currency forward contracts 0 0Recurring | Significant Unobservable Inputs (Level 3) | Other assetsFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Derivative assets, foreign currency forward contracts 0 0Trading securities 0 0Recurring | Significant Unobservable Inputs (Level 3) | Other current liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Contingent consideration 118Derivative liabilities, foreign currency forward contracts 0 0Recurring | Significant Unobservable Inputs (Level 3) | Other liabilitiesFair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis[Line Items]Contingent consideration 31 33Derivative liabilities, foreign currency forward contracts $ 0 $ 0



6 MonthsEnded

Fair Value Measurements -Summary of Level 3 FairValue Measurements of

Contingent Consideration(Details) - Fair Value, Inputs,

Level 3 - USD ($)$ in Millions

Jul. 02,2016

Apr. 02,2016

Jan. 02,2016

Jan. 03,2015

Contingent Consideration LiabilitiesFair Value Inputs, Assets, Quantitative Information [LineItems]Contingent Consideration Liabilities $ 31 $ 36 $ 151 $ 50Spinal Modulation | Contingent Consideration LiabilitiesFair Value Inputs, Assets, Quantitative Information [LineItems]Contingent Consideration Liabilities $ 2 6 122 0Spinal Modulation | Monte Carlo SimulationFair Value Inputs, Assets, Quantitative Information [LineItems]Expected revenue volatility 25.00%Spinal Modulation | Monte Carlo Simulation | MinimumFair Value Inputs, Assets, Quantitative Information [LineItems]Discount Rate 0.60%Spinal Modulation | Monte Carlo Simulation | MaximumFair Value Inputs, Assets, Quantitative Information [LineItems]Discount Rate 15.50%Spinal Modulation | Monte Carlo Simulation | ContingentConsideration LiabilitiesFair Value Inputs, Assets, Quantitative Information [LineItems]Contingent Consideration Liabilities $ 2Nanostim | Contingent Consideration LiabilitiesFair Value Inputs, Assets, Quantitative Information [LineItems]Contingent Consideration Liabilities $ 2 2 2 50Nanostim | Probability Weighted Discounted Cash FlowFair Value Inputs, Assets, Quantitative Information [LineItems]Discount Rate 5.00%Probability of Payments 10.00%Nanostim | Probability Weighted Discounted Cash Flow |Contingent Consideration LiabilitiesFair Value Inputs, Assets, Quantitative Information [LineItems]



Contingent Consideration Liabilities $ 2Thoratec | Contingent Consideration LiabilitiesFair Value Inputs, Assets, Quantitative Information [LineItems]Contingent Consideration Liabilities $ 27 $ 28 $ 27 $ 0Thoratec | Probability Weighted Discounted Cash FlowFair Value Inputs, Assets, Quantitative Information [LineItems]Discount Rate 4.40%Thoratec | Probability Weighted Discounted Cash Flow | MinimumFair Value Inputs, Assets, Quantitative Information [LineItems]Probability of Payments 0.00%Thoratec | Probability Weighted Discounted Cash Flow | MaximumFair Value Inputs, Assets, Quantitative Information [LineItems]Probability of Payments 90.00%Thoratec | Probability Weighted Discounted Cash Flow | ContingentConsideration LiabilitiesFair Value Inputs, Assets, Quantitative Information [LineItems]Contingent Consideration Liabilities $ 27




Fair Value Measurements -Unobservable Input

Reconciliation of ContingentConsideration Liability

(Details) - Fair Value, Inputs,Level 3 - Contingent

Consideration Liabilities -USD ($)

$ in Millions

Jul. 02,2016

Apr. 02,2016 Jan. 02, 2016

Contingent Consideration Liability [Roll Forward]Beginning balance $ 36 $ 151 $ 50Initial fair value measurement of contingent consideration 155Liabilities assumed from Thoratec acquisition 33Change in fair value of contingent consideration (5) 9 (87)Transfer out of Level 3 fair value measurement due to contractualsettlement (124)

Ending balance 31 36 151NanostimContingent Consideration Liability [Roll Forward]Beginning balance 2 2 50Initial fair value measurement of contingent consideration 0Liabilities assumed from Thoratec acquisition 0Change in fair value of contingent consideration 0 0 (48)Transfer out of Level 3 fair value measurement due to contractualsettlement 0

Ending balance 2 2 2Spinal ModulationContingent Consideration Liability [Roll Forward]Beginning balance 6 122 0Initial fair value measurement of contingent consideration 155Liabilities assumed from Thoratec acquisition 0Change in fair value of contingent consideration (4) 8 (33)Transfer out of Level 3 fair value measurement due to contractualsettlement (124)

Ending balance 2 6 122ThoratecContingent Consideration Liability [Roll Forward]Beginning balance 28 27 0Initial fair value measurement of contingent consideration 0Liabilities assumed from Thoratec acquisition 33Change in fair value of contingent consideration (1) 1 (6)Transfer out of Level 3 fair value measurement due to contractualsettlement 0

Ending balance $ 27 $ 28 $ 27



3 Months EndedFair Value Measurements(Details) - USD ($)

$ in MillionsApr. 02,

2016Apr. 04,

2015Jul. 02,

2016Jan. 02,

2016Fair Value Inputs, Liabilities, Quantitative InformationCost method investments $ 59 $ 80Fixed rate debt obligations fair value disclosure 3,470Fixed rate debt obligations carrying value 3,272Other debt carrying value 2,819Cash equivalents at carrying value excluding money marketsecurities $ 346 $ 393

Other (income) expenseFair Value Inputs, Liabilities, Quantitative InformationOther-than-temporary impairments $ 50Fixed Asset Charges | 2016 InitiativesFair Value Inputs, Liabilities, Quantitative InformationFixed asset charges $ 5Fixed Asset Charges | 2012 Business RealignmentRestructuring PlanFair Value Inputs, Liabilities, Quantitative InformationFixed asset charges $ 1



6 MonthsEndedDerivative Financial

Instruments (Details)$ in Millions

Jul. 02, 2016USD ($)

bankDerivatives, Fair Value [Line Items]After-tax net unrealized loss related to foreign currency forward contracts recorded in accumulatedother comprehensive income $ 27

Unrealized losses expected to be reclassed to earnings over the next 12 months $ 19Number of applicable banks and financial institutions that contain netting provisions | bank 4Foreign currency forward contracts | Designated as Hedging Instrument | Cash Flow HedgingDerivatives, Fair Value [Line Items]Maximum length of time hedged in cash flow hedge 24 monthsGross notional amount of derivative $ 1,000Foreign currency forward contracts | Not Designated as Hedging InstrumentDerivatives, Fair Value [Line Items]Gross notional amount of derivative $ 200



3 MonthsEnded

6 MonthsEnded

Derivative FinancialInstruments Summary ofDerivative Instruments(Gain) Loss (Details) -

Foreign currency forwardcontracts - Designated as

Hedging Instrument - CashFlow Hedging - USD ($)

$ in Millions

Jul.02,

2016

Jul.04,

2015

Jul.02,

2016

Jul.04,

2015

Derivative Instruments, (Gain) Loss [Line Items]Pre-tax (gain) loss recognized in other comprehensive income on effective portionof derivative $ 5 $ 15 $ 44 $ (19)

Cost of salesDerivative Instruments, (Gain) Loss [Line Items]Pre-tax (Gain) Loss Recognized in Earnings on Effective Portion of Derivative as aResult of Reclassification from Accumulated Other Comprehensive Income 0 (4) (6) (4)

Ineffective Portion of (Gain) Loss on Derivative and Excluded from EffectivenessTesting Recognized in Earnings $ 0 $ 0 $ 0 $ 0



3 Months Ended 6 Months EndedDerivative FinancialInstruments Summary ofDerivative Instruments

(Gain) Loss, Not Designatedas Hedging (Details) - USD

($)$ in Millions

Jul. 02,2016

Jul. 04,2015

Jul. 02,2016

Jul. 04,2015

Foreign currency forward contracts | Other (income) expense | NotDesignated as Hedging InstrumentDerivative Instruments, (Gain) Loss [Line Items](Gain) Loss on Derivatives Recognized in Earnings $ (2) $ 1 $ 1 $ (8)



Derivative FinancialInstruments Schedule of Fair

Value of DerivativeInstruments (Details) - USD

($)$ in Millions

Jul. 02,2016

Jan. 02,2016

Derivatives, Fair Value [Line Items]Derivative asset $ 3 $ 3Derivative liability (22) (1)Foreign currency forward contractsDerivatives, Fair Value [Line Items]Total (34) 7Foreign currency forward contracts | Designated as Hedging Instrument | Other currentassetsDerivatives, Fair Value [Line Items]Derivative asset 4 14Foreign currency forward contracts | Designated as Hedging Instrument | Other assetsDerivatives, Fair Value [Line Items]Derivative asset 1 2Foreign currency forward contracts | Designated as Hedging Instrument | Other currentliabilitiesDerivatives, Fair Value [Line Items]Derivative liability (34) (6)Foreign currency forward contracts | Designated as Hedging Instrument | OtherliabilitiesDerivatives, Fair Value [Line Items]Derivative liability (5) (3)Foreign currency forward contracts | Not Designated as Hedging Instrument | Othercurrent assetsDerivatives, Fair Value [Line Items]Derivative asset 0 0Foreign currency forward contracts | Not Designated as Hedging Instrument | Othercurrent liabilitiesDerivatives, Fair Value [Line Items]Derivative liability $ 0 $ 0



Derivative FinancialInstruments Schedule of

Offsetting Derivative Assets(Details) - USD ($)

$ in Millions

Jul. 02, 2016 Jan. 02, 2016

AssetsGross amount of derivatives subject to master netting agreements $ 3 $ 3Gross amount of eligible offsetting recognized derivative liabilities 2 1Gross amount of derivatives not subject to master netting agreements 2 13Gross amount of derivatives 5 16Gross amount of cash collateral received not offset 0 0Net amount of derivatives 1 2Total 3 15LiabilitiesGross amount of derivatives subject to master netting agreements 22 1Gross amount of eligible offsetting recognized derivative assets 2 1Gross amount of derivatives not subject to master netting agreements 17 8Gross amount of derivatives 39 9Cash collateral pledged 0 0Net amount of derivatives 20 0Total $ 37 $ 8



1 Months EndedBusiness Combinations(Details) - USD ($)

$ in Millions Feb. 29, 2016 Jul. 02, 2016 Jan. 02, 2016

Business Acquisition [Line Items]Goodwill $ 5,670 $ 5,651Middle East distributorBusiness Acquisition [Line Items]Total purchase consideration $ 19Goodwill 5Customer relationship | Middle East distributorBusiness Acquisition [Line Items]Intangible assets from business combination $ 7



Abbott Transaction (Details) Jul. 11, 2016Apr. 27, 2016$ / shares

Subsequent Event [Line Items]Business acquisition, share price $ 46.75Business acquisition, share ratio 0.8708Subsequent EventSubsequent Event [Line Items]Business acquisition, extended waiting period 30 days



ST JUDE MEDICAL INC Form 10-Q Quarterly Report Filed 2016...

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