St. Jude Medical (STJ) 8-K Results of Operations and Financial Condition

Exhibit 99.1

St. Jude Medical, Inc.

Global Headquarters

One St. Jude Medical Drive

St. Paul, MN 55117-9913 USA

Tel   651 756 2000

sjm.com

News Release

MEDIA CONTACT:	INVESTOR CONTACT:
Candace Steele Flippin	J.C. Weigelt
csflippin@sjm.com	jweigelt@sjm.com
Tel 651 756 3029	Tel 651 756 4347

St. Jude Medical Reports Second Quarter 2016 Results

ST. PAUL, Minn. — July 20, 2016 — St. Jude Medical, Inc. (NYSE: STJ), a global medical device company, today reported sales and net earnings for the second quarter ended July 2, 2016.

Second quarter 2016 highlights:

·Net sales of $1.562 billion increased 11 percent as reported, or 2 percent on a comparable constant currency basis.

·International sales increased 10 percent as reported, or 7 percent on a comparable constant currency basis where a full portfolio of products is available.

·Neuromodulation sales increased 19 percent as reported, or 20 percent on a constant currency basis driven by the most comprehensive product portfolio on the market.

·Atrial fibrillation sales increased 13 percent as reported and on a constant currency basis driven by strong growth across the product portfolio.

·Diluted earnings per share of $0.83 decreased 19 percent as reported. Adjusted earnings per share of $1.06 increased 7 percent on a constant currency basis.

·Announced a definitive agreement on April 28 to be acquired by Abbott under which St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock per share.

Second Quarter 2016 Sales

The company reported net sales of $1.562 billion in the second quarter of 2016, an 11 percent increase compared to net sales of $1.410 billion in the second quarter of 2015. On a comparable constant currency basis, net sales increased by approximately 2 percent compared to the second quarter of 2015.

Commenting on the company’s financial results, St. Jude Medical President and Chief Executive Officer Michael T. Rousseau said, “We continued to build momentum during the second quarter by bringing innovative products to our global markets. The strong performance in international sales gives us confidence that where we have a full portfolio, we can deliver top-tier growth. One of the major highlights of our quarter was the announcement of our pending merger with Abbott. We continue to be confident and excited about the potential of our combined organization and the powerful impact we can have on delivering industry leading innovation to physicians and patients around the world.”

As previously announced, St. Jude Medical has changed its sales reporting to more closely align with how the company manages the business in five key areas: atrial fibrillation, heart failure, neuromodulation, cardiovascular and traditional cardiac rhythm management. For additional information please see the Form 8-K provided by the company on January 13, 2016.

Atrial Fibrillation (AF)

AF product sales for the second quarter totaled $324 million, a 13 percent increase both on a reported and constant currency basis compared to the prior year quarter. Second quarter results were driven by strong global TactiCath™ and FlexAbility™ ablation catheter sales.

Heart Failure (HF)

HF product sales, which include cardiac resynchronization therapy (CRT) products, HeartMate™ ventricular assist devices and the CardioMEMS™ HF System, totaled $384 million for the second quarter, a 48 percent increase compared to the prior year quarter, primarily due to incremental net sales associated with ventricular assist devices, acquired through our Thoratec acquisition. On a comparable constant currency basis, HF product sales decreased 1 percent compared to the prior year quarter. Second quarter results reflect strong global growth in ventricular assist devices, offset by the impact of U.S. CRM sales weakness on our CRT products.

Neuromodulation

St. Jude Medical sales of neuromodulation products were $140 million in the second quarter of 2016, a 19 percent increase on a reported basis and a 20 percent increase on a constant currency basis compared to the prior year quarter. Neuromodulation growth was driven by the St. Jude Medical Burst technology offering in international markets, U.S. launch of the Axium™ system as well as the introduction of the Infinity™ DBS system and directional lead in Europe.

Cardiovascular

Total cardiovascular sales were $319 million for the second quarter of 2016, an increase of 1 percent compared to the prior year quarter. On a constant currency basis, cardiovascular sales increased 2 percent compared to the prior year quarter. Cardiovascular growth was driven by the continued strength of the Portico™ Transcatheter Aortic Valve Implantation System in Europe and our PCI optimization strategy, which includes products such as OPTIS™ optical coherence tomography products and PressureWire™ fractional flow reserve technology.

Traditional Cardiac Rhythm Management (CRM)

Total CRM sales, which include single and dual chamber implantable cardioverter defibrillator (ICD) and pacemaker products, were $395 million for the second quarter of 2016, an 8 percent decline compared with the second quarter of 2015. After adjusting for the impact of foreign currency, traditional CRM sales decreased 7 percent. Global results continue to be impacted by lower sales in the United States, partially offset by continued adoption of our MRI conditional product portfolio in countries where they are offered.

Second Quarter Earnings Results

In the second quarter the company recognized net after-tax charges of $67 million, or $0.23 per diluted share, primarily related to amortization of intangible assets and acquisition-related costs. Including these items, reported net earnings for the second quarter of 2016 were $238 million or $0.83 per share, compared with reported net earnings for the second quarter of 2015 of $290 million or $1.02 per share. Excluding these items, adjusted net earnings for the second quarter of 2016 were $305 million or $1.06 per share, compared with adjusted net earnings for the second quarter of 2015 of $293 million or $1.03

per share. A reconciliation of the company’s non-GAAP adjusted results to the company’s GAAP reported results is provided in the schedules at the end of the press release.

Third Quarter and Full-Year 2016 Sales and Earnings Guidance

Due to the planned merger with Abbott, St. Jude Medical is withdrawing financial guidance for the fiscal year 2016.

Conference Call / Webcast

St. Jude Medical’s second quarter earnings call can be heard live via webcast today beginning at 7 a.m. CDT via the St. Jude Medical Investor Relations website (investors.sjm.com). Approximately one hour following the call (and archived for 90 days), a replay will be available on the Investor Events and Presentations webpage in the Investor Relations section of the St. Jude Medical website.

St. Jude Medical will also be tweeting live during the call on our Investor Relations Twitter account, @StJudeMedicalIR.

About St. Jude Medical

St. Jude Medical is a leading global medical device manufacturer and is dedicated to transforming the treatment of some of the world’s most expensive epidemic diseases. The company does this by developing cost-effective medical technologies that save and improve lives of patients around the world. Headquartered in St. Paul, Minn., St. Jude Medical has five major areas of focus that include atrial fibrillation, heart failure, neuromodulation, cardiovascular and traditional cardiac rhythm management. For more information, please visit sjm.com or follow us on Twitter @StJudeMedicalIR.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include the expectations, plans and prospects for the company, including potential clinical successes, reimbursement strategies, anticipated regulatory approvals and future product launches, and projected revenues, margins, earnings and market shares. The statements made by the company are based upon management’s current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include market conditions and other factors beyond the company’s control and the risk factors and other cautionary statements described in the company’s filings with the SEC, including those described in the Risk Factors and Cautionary Statements sections of the company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016 and Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2016. The company does not intend to update these statements and undertakes no duty to any person to provide any such update under any circumstance.

Summary of 2Q16 Sales and Reconciliation to Constant Currency Sales Growth

(in millions)

(unaudited)

	2Q16 Sales	2Q15 Sales	Reported % Change vs. 2Q15	Constant Currency % Change vs. 2Q15	Reported $ Change vs. 2Q15	Constant Currency $ Change vs. 2Q15	Foreign Currency Impact
Total Sales	$1,562	$1,410	11%	11%	$152	$158	-$6
Total International Sales	$767	$697	10%	11%
Total U.S. Sales	$795	$713	12%
Worldwide Atrial Fibrillation	$324	$286	13%	13%	$38	$37	$1
International Atrial Fibrillation	$189	$166	14%	13%
U.S. Atrial Fibrillation	$135	$120	13%
Worldwide Heart Failure	$384	$260	48%	48%	$124	$125	-$1
International Heart Failure	$128	$89	44%	45%
U.S. Heart Failure	$256	$171	49%
Worldwide Neuromodulation	$140	$118	19%	20%	$22	$23	-$1
International Neuromodulation	$43	$36	19%	22%
U.S. Neuromodulation	$97	$82	19%
Worldwide Cardiovascular Disease	$319	$316	1%	2%	$3	$4	-$1
International Cardiovascular Disease	$198	$194	2%	3%
U.S. Cardiovascular Disease	$121	$122	-1%
WorldwideTraditionalCardiacRhythmManagement	$395	$430	-8%	-7%	-$35	-$31	-$4
International Traditional Cardiac Rhythm Management	$209	$212	-2%	0%
U.S. Traditional Cardiac Rhythm Management	$186	$218	-15%

Note: Percentage changes are based on actual, non-rounded amounts and may not recalculate precisely.

Summary of 2Q16 Sales and Reconciliation to Comparable Constant Currency Sales Growth

(in millions)

(unaudited)

	2Q16 Sales	2Q15 Comparable Sales	Comparable Constant Currency % Change vs. 2Q15	Comparable Constant Currency $ Change vs. 2Q15	Foreign Currency Impact
Total Sales	$1,562	$1,539	2%	$29	-$6
Total International Sales	$767	$722	7%
Total U.S. Sales	$795	$817	-3%
Worldwide Atrial Fibrillation	$324	$286	13%	$37	$1
International Atrial Fibrillation	$189	$166	13%
U.S. Atrial Fibrillation	$135	$120	13%
Worldwide Heart Failure	$384	$389	-1%	-$4	-$1
International Heart Failure	$128	$114	14%
U.S. Heart Failure	$256	$275	-7%
Worldwide Neuromodulation	$140	$118	20%	$23	-$1
International Neuromodulation	$43	$36	22%
U.S. Neuromodulation	$97	$82	19%
Worldwide Cardiovascular Disease	$319	$316	2%	$4	-$1
International Cardiovascular Disease	$198	$194	3%
U.S. Cardiovascular Disease	$121	$122	-1%
Worldwide Traditional Cardiac Rhythm Management	$395	$430	-7%	-$31	-$4
International Traditional Cardiac Rhythm Management	$209	$212	0%
U.S. Traditional Cardiac Rhythm Management	$186	$218	-15%
Total Thoratec Pre-Acquisition Sales	$0	$129
International Thoratec Pre-Acquisition Sales	$0	$25
U.S. Thoratec Pre-Acquisition Sales	$0	$104
Total Sales As Reported	$1,562	$1,410	11%	$158	-$6
Total International Sales As Reported	$767	$697	11%
Total U.S. Sales As Reported	$795	$713

Note: Dollar amounts and percentage changes are based on actual, non-rounded amounts and may not add or recalculate precisely.

St. Jude Medical, Inc.

Condensed Consolidated Balance Sheets

(in millions)

(Unaudited)

	July 2, 2016	January 2, 2016
Cash and cash equivalents	$398	$667
Accounts receivable, net	1,330	1,237
Inventories	904	909
Other current assets	295	269
Property, plant & equipment, net	1,326	1,320
Goodwill	5,670	5,651
Intangible assets, net	2,146	2,226
Other assets	589	621
Total assets	$12,658	$12,900
Current debt obligations	$660	$1,163
Other current liabilities	1,053	1,303
Long-term debt	5,431	5,229
Long-term other liabilities	1,233	1,163
Total shareholders’ equity	4,281	4,042
Total liabilities & shareholders’ equity	$12,658	$12,900

St. Jude Medical, Inc.

Condensed Consolidated Statements of Earnings

(in millions, except per share amounts)

(Unaudited)

	Three Months Ended			Six Months Ended
	July 2, 2016	July 4, 2015		July 2, 2016	July 4, 2015
Net sales	$1,562	$1,410		$3,010	$2,755
Cost of sales:
Cost of sales before special charges	490	419		974	812
Special charges	6	5		9	7
Total cost of sales	496	424		983	819
Gross profit	1,066	986		2,027	1,936
Selling, general & administrative expense	502	447		993	877
Research & development expense	192	171		380	338
Amortization of intangible assets	46	24		92	48
Special charges	13	30		21	34
Operating profit	313	314		541	639
Other expense, net	43	20		135	37
Earnings before income taxes and noncontrolling interest	270	294		406	602
Income taxes	32	12		73	64
Net earnings before noncontrolling interest	238	282		333	538
Net loss attributable to noncontrolling interest	—	(8	)	—	(14	)
Net earnings attributable to St. Jude Medical, Inc.	$238	$290		$333	$552
Diluted net earnings per share attributable to St. Jude Medical, Inc.	$0.83	$1.02		$1.16	$1.93
Adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. (Non-GAAP) (1)	$1.06	$1.03		$1.96	$1.95
Cash dividends declared per share	$0.31	$0.29		$0.62	$0.58
Weighted average shares outstanding- diluted	288.3	285.5		287.3	286.3

(1)  See accompanying reconciliation tables.

Non-GAAP Financial Measures Reconciliations (Unaudited)

	Three Months Ended July 2, 2016
(in millions, except per share amounts)	Earnings before noncontrolling interest and income taxes			Income taxes			Effective tax rate		Net earnings before noncontrolling interest			Net loss attributable to noncontrolling interest		Net earnings attributable to St. Jude Medical, Inc.			Diluted net earnings per share attributable to St. Jude Medical, Inc.			Diluted EPS growth rate
As reported (GAAP)	$	270		$	32		11.9	%	$	238		$	—	$	238		$	0.83		-19	%
Restructuring activities	15			5					10			—		10			0.03
Acquisition-related costs	25			6					19			—		19			0.07
Product field action costs and litigation costs	6			2					4			—		4			0.01
Legal settlements	(2		)	(1		)			(1		)	—		(1		)	(0.00		)
Amortization of intangible assets	46			16					30			—		30			0.10
Income tax adjustments	—			(5		)			5			—		5			0.02
As adjusted (Non-GAAP)	$	360		$	55		15.3	%	$	305		$	—	$	305		$	1.06		3	%
Unfavorable foreign currency impact vs. 2015																	0.04
Constant currency as adjusted (non-GAAP)																	$	1.10		7	%

	Restructuring activities		Acquisition-related costs		Product field action costs and litigation costs		Legal settlements			Total
Cost of sales before special charges	$	—	$	10	$	—	$	—		$	10
Special charges (cost of sales)	3		—		3		—			6
Selling, general & administrative expense	—		15		—		—			15
Special charges (operating expenses)	12		—		3		(2		)	13
	$	15	$	25	$	6	$	(2	)	$	44

	Three Months Ended July 4, 2015
(in millions, except per share amounts)	Earnings before noncontrolling interest and income taxes			Income taxes			Effective tax rate		Net earnings before noncontrolling interest			Net loss attributable to noncontrolling interest			Net earnings attributable to St. Jude Medical, Inc.			Diluted net earnings per share attributable to St. Jude Medical, Inc.
As reported (GAAP)	$	294		$	12		4.1	%	$	282		$	(8	)	$	290		$	1.02
Restructuring activities	36			11					25			—			25			0.09
Acquisition-related costs	(10		)	1					(11		)	4			(15		)	(0.05		)
Product field action costs and litigation costs	(1		)	—					(1		)	—			(1		)	0.00
Amortization of intangible assets	24			7					17			—			17			0.06
Income tax adjustments	—			29					(29		)	—			(29		)	(0.10		)
R&D credit	—			(6		)			6			—			6			0.02
As adjusted (Non-GAAP)	$	343		$	54		15.7	%	$	289		$	(4	)	$	293		$	1.03

	Restructuring activities		Acquisition-related costs			Product field action costs and litigation costs			Total
Special charges (cost of sales)	$	9	$	—		$	(4	)	$	5
Selling, general & administrative expense	—		(11		)	—			(11		)
Research & development expense	—		1			—			1
Special charges (operating expenses)	27		—			3			30
	$	36	$	(10	)	$	(1	)	$	25

	Six Months Ended July 2, 2016
(in millions, except per share amounts)	Earnings before noncontrolling interest and income taxes			Income taxes			Effective tax rate		Net earnings before noncontrolling interest			Net loss attributable to noncontrolling interest		Net earnings attributable to St. Jude Medical, Inc.			Diluted net earnings per share attributable to St. Jude Medical, Inc.			Diluted EPS growth rate
As reported (GAAP)	$	406		$	73		18.0	%	$	333		$	—	$	333		$	1.16		-40	%
Restructuring activities	40			14					26			—		26			0.09
Acquisition-related costs	89			26					63			—		63			0.22
Product field action costs and litigation costs	9			3					6			—		6			0.02
Legal settlements	(19		)	(6		)			(13		)	—		(13		)	(0.05		)
Strategic investment impairments	51			19					32			—		32			0.11
Amortization of intangible assets	92			32					60			—		60			0.21
Income tax adjustments	—			(57		)			57			—		57			0.20
As adjusted (Non-GAAP)	$	668		$	104		15.6	%	$	564		$	—	$	564		$	1.96		1	%
Unfavorable foreign currency impact vs. 2015																	0.15
Constant currency as adjusted (non-GAAP)																	$	2.11		8	%

	Restructuring activities		Acquisition-related costs		Product field action costs and litigation costs		Legal settlements			Strategic investment impairments		Total
Cost of sales before special charges	$	—	$	41	$	—	$	—		$	—	$	41
Special charges (cost of sales)	6		—		3		—			—		9
Selling, general & administrative expense	—		48		—		—			—		48
Special charges (operating expenses)	34		—		6		(19		)	—		21
Other expense, net	—				—		—			51		51
	$	40	$	89	$	9	$	(19	)	$	51	$	170

	Six Months Ended July 4, 2015
(in millions, except per share amounts)	Earnings before noncontrolling interest and income taxes			Income taxes			Effective tax rate		Net earnings before noncontrolling interest			Net loss attributable to noncontrolling interest			Net earnings attributable to St. Jude Medical, Inc.			Diluted net earnings per share attributable to St. Jude Medical, Inc.
As reported (GAAP)	$	602		$	64		10.6	%	$	538		$	(14	)	$	552		$	1.93
Restructuring activities	49			14					35			—			35			0.12
Acquisition-related costs	(32		)	2					(34		)	4			(38		)	(0.13		)
Product field action costs and litigation costs	2			1					1			—			1			0.00
Legal settlements	(10		)	(4		)			(6		)	—			(6		)	(0.02		)
Amortization of intangible assets	48			15					33			—			33			0.12
Income tax adjustments	—			29					(29		)	—			(29		)	(0.10		)
R&D credit	—			(11		)			11			—			11			0.04
As adjusted (Non-GAAP)	$	659		$	110		16.7	%	$	549		$	(10	)	$	559		$	1.95

	Restructuring activities		Acquisition-related costs			Product field action costs and litigation costs			Legal settlements			Total
Special charges (cost of sales)	$	13	$	—		$	(6	)	$	—		$	7
Selling, general & administrative expense	—		(33		)	—			—			(33		)
Research & development expense	—		1			—			—			1
Special charges (operating expenses)	36		—			8			(10		)	34
	$	49	$	(32	)	$	2		$	(10	)	$	9

The sum of the components may not equal the total due to rounding and quantities of shares outstanding in different periods.

Tax rates vary and are applied based on the item’s nature and tax jurisdiction where it is incurred.

Non-GAAP Financial Measures

The company provides the following non-GAAP financial measures that St. Jude Medical management believes are pertinent to ongoing business performance. St. Jude Medical management uses these non-GAAP financial measures to forecast and evaluate the operational performance of the company as well as to compare results of current periods to prior periods on a consolidated basis.

·Adjusted earnings before noncontrolling interest and income taxes

·Adjusted income taxes and adjusted effective tax rate

·Adjusted net earnings before noncontrolling interest

·Adjusted net loss attributable to noncontrolling interest

·Adjusted net earnings attributable to St. Jude Medical, Inc.

·Adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. and adjusted diluted EPS growth rate

·Adjusted constant currency diluted net earnings per share attributable to St. Jude Medical, Inc. and adjusted constant currency diluted EPS growth rate

The adjustments made to GAAP financial measures result from facts and circumstances that vary in frequency and impact on the company’s results of operations. The following is an explanation of each of the adjustments that management excludes in calculating its non-GAAP measures.

Restructuring activities — These amounts represent severance costs and other termination benefits, inventory write-offs primarily associated with discontinued product lines, fixed asset write-offs related to assets no longer expected to be utilized, other restructuring costs and restructuring-related costs.

Acquisition-related costs — These amounts consist of contingent consideration fair value adjustments, acquired inventory step-up amortization, other transaction costs, integration costs, financing commitment fees and stock-based compensation expense for accelerated and replacement equity awards.

Product field action costs and litigation costs — These amounts primarily relate to inventory write-off and disposal costs, additional warranty and patient monitoring costs, and estimated legal costs for outstanding legal matters associated with product field actions.

Legal settlements — These amounts consist of losses that are probable and reasonably estimable, gains related to favorable resolutions of litigation matters and probable insurance recoveries.

Strategic investment impairments — These amounts consist of other-than-temporary impairments of certain strategic investments in debt and equity securities.

Amortization of intangible assets — These amounts represent the non-cash amortization expenses St. Jude Medical recognized for definite-lived intangible assets.

Income tax adjustments — These amounts represent tax effects related to significant unusual or infrequent items not attributable to current-year ordinary income, such as settlement of tax positions and discrete tax adjustments to uncertain tax positions, and certain other tax adjustments.

R&D credit — These amounts represent the impact of the federal research and development tax credit to present comparative periods assuming that the tax credit had been applicable in all periods presented.

Foreign currency impact — These amounts represent the impact to net sales and adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. after translating net sales and the consolidated statement of earnings at comparable prior period foreign currency exchange rates.

The company provides comparable constant currency sales growth because St. Jude Medical management believes that in order to understand the company’s short-term and long-term financial trends, investors may wish to consider the impact of the Thoratec acquisition and foreign currency translation on net sales. St. Jude Medical management uses comparable constant currency sales growth to forecast and evaluate the operational performance of the company as well as to compare sales of current periods to prior periods.

In calculating comparable constant currency sales growth in its non-GAAP measures, the company a) excludes the impact to net sales after translating net sales at prior period foreign currency exchange rates and b) includes Thoratec sales amounts for periods prior to St. Jude Medical’s acquisition of Thoratec. Comparable constant currency sales amounts have not been adjusted to eliminate historical product sales between St. Jude Medical and Thoratec because management believes that such adjustments are not material.

The company also provides constant currency sales growth and constant currency adjusted EPS growth because St. Jude Medical management believes that in order to understand the company’s short-term and long-term financial trends, investors may wish to consider the impact of foreign currency translation on net sales and adjusted EPS. St. Jude Medical management uses constant currency sales growth and constant currency adjusted EPS growth to forecast and evaluate the operational performance of the company as well as to compare sales and adjusted EPS of current periods to prior periods.

Non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.