x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2016 OR |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______. |
Minnesota | 41-1276891 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) |
Large accelerated filer x | Accelerated filer ¨ | |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
ITEM | DESCRIPTION | PAGE | ||
Item 1. | FINANCIAL STATEMENTS |
Three Months Ended | |||||||
April 2, 2016 | April 4, 2015 | ||||||
Net sales | $ | 1,448 | $ | 1,345 | |||
Cost of sales: | |||||||
Cost of sales before special charges | 484 | 393 | |||||
Special charges | 3 | 2 | |||||
Total cost of sales | 487 | 395 | |||||
Gross profit | 961 | 950 | |||||
Selling, general and administrative expense | 491 | 430 | |||||
Research and development expense | 188 | 167 | |||||
Amortization of intangible assets | 46 | 24 | |||||
Special charges | 8 | 4 | |||||
Operating profit | 228 | 325 | |||||
Interest income | (1 | ) | (1 | ) | |||
Interest expense | 40 | 21 | |||||
Other (income) expense | 53 | (3 | ) | ||||
Other expense, net | 92 | 17 | |||||
Earnings before income taxes and noncontrolling interest | 136 | 308 | |||||
Income tax expense | 41 | 52 | |||||
Net earnings before noncontrolling interest | 95 | 256 | |||||
Less: Net loss attributable to noncontrolling interest | — | (6 | ) | ||||
Net earnings attributable to St. Jude Medical, Inc. | $ | 95 | $ | 262 | |||
Net earnings per share attributable to St. Jude Medical, Inc.: | |||||||
Basic | $ | 0.33 | $ | 0.93 | |||
Diluted | $ | 0.33 | $ | 0.91 | |||
Cash dividends declared per share: | $ | 0.31 | $ | 0.29 | |||
Weighted average shares outstanding: | |||||||
Basic | 283.5 | 283.0 | |||||
Diluted | 286.4 | 287.1 |
Three Months Ended | |||||||
April 2, 2016 | April 4, 2015 | ||||||
Net earnings before noncontrolling interest | $ | 95 | $ | 256 | |||
Other comprehensive income (loss), net of tax | |||||||
Unrealized gain (loss) on available-for-sale securities, net of tax (expense) benefit of ($1) | — | 1 | |||||
Unrealized gain (loss) on derivative financial instruments, net of tax (expense) benefit of $15 and ($5), respectively | (30 | ) | 29 | ||||
Foreign currency translation adjustment | 48 | (127 | ) | ||||
Other comprehensive income (loss), net of tax | 18 | (97 | ) | ||||
Total comprehensive income before noncontrolling interest | 113 | 159 | |||||
Total comprehensive loss attributable to noncontrolling interest | — | (6 | ) | ||||
Total comprehensive income attributable to St. Jude Medical, Inc. | $ | 113 | $ | 165 |
April 2, 2016 | January 2, 2016 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 325 | $ | 667 | |||
Accounts receivable, less allowance for doubtful accounts of $46 at April 2, 2016 and January 2, 2016 | 1,260 | 1,237 | |||||
Finished goods | 566 | 609 | |||||
Work in process | 116 | 102 | |||||
Raw materials | 249 | 198 | |||||
Inventories | 931 | 909 | |||||
Other current assets | 287 | 269 | |||||
Total current assets | 2,803 | 3,082 | |||||
Property, plant and equipment, at cost | 2,823 | 2,767 | |||||
Less: Accumulated depreciation | (1,499 | ) | (1,447 | ) | |||
Net property, plant and equipment | 1,324 | 1,320 | |||||
Goodwill | 5,676 | 5,651 | |||||
Intangible assets, net | 2,188 | 2,226 | |||||
Other assets | 561 | 621 | |||||
TOTAL ASSETS | $ | 12,552 | $ | 12,900 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current Liabilities | |||||||
Current debt obligations | $ | 467 | $ | 1,163 | |||
Accounts payable | 288 | 201 | |||||
Income taxes payable | — | 201 | |||||
Other current liabilities | 875 | 901 | |||||
Total current liabilities | 1,630 | 2,466 | |||||
Long-term debt | 5,591 | 5,229 | |||||
Other liabilities | 1,232 | 1,163 | |||||
Total liabilities | 8,453 | 8,858 | |||||
Commitments and Contingencies (Note 3) | — | — | |||||
Shareholders’ Equity | |||||||
Preferred stock ($1.00 par value; 25,000,000 shares authorized; none outstanding) | — | — | |||||
Common stock ($0.10 par value; 500,000,000 shares authorized; 283,873,898 and 283,450,374 shares issued and outstanding at April 2, 2016 and January 2, 2016, respectively) | 28 | 28 | |||||
Additional paid-in capital | 180 | 148 | |||||
Retained earnings | 4,218 | 4,211 | |||||
Accumulated other comprehensive income (loss) | (327 | ) | (345 | ) | |||
Total shareholders’ equity | 4,099 | 4,042 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 12,552 | $ | 12,900 |
Three Months Ended | April 2, 2016 | April 4, 2015 | |||||
OPERATING ACTIVITIES | |||||||
Net earnings before noncontrolling interest | $ | 95 | $ | 256 | |||
Adjustments to reconcile net earnings before noncontrolling interest to net cash from operating activities: | |||||||
Depreciation of property, plant and equipment | 57 | 54 | |||||
Amortization of intangible assets | 46 | 24 | |||||
Stock-based compensation | 33 | 17 | |||||
Deferred income taxes | (1 | ) | (13 | ) | |||
Other, net | 95 | (32 | ) | ||||
Changes in operating assets and liabilities, net of business combinations: | |||||||
Accounts receivable | 3 | (47 | ) | ||||
Inventories | (36 | ) | (46 | ) | |||
Other current and noncurrent assets | (45 | ) | 2 | ||||
Accounts payable and accrued expenses | 170 | (6 | ) | ||||
Income taxes payable | (267 | ) | 25 | ||||
Net cash provided by operating activities | 150 | 234 | |||||
INVESTING ACTIVITIES | |||||||
Purchases of property, plant and equipment | (61 | ) | (33 | ) | |||
Business combination payments, net of cash acquired | (9 | ) | — | ||||
Other investing activities, net | (1 | ) | (1 | ) | |||
Net cash used in investing activities | (71 | ) | (34 | ) | |||
FINANCING ACTIVITIES | |||||||
Proceeds from exercise of stock options and stock issued, net | (1 | ) | 38 | ||||
Excess tax benefits from stock issued under employee stock plans | 1 | 5 | |||||
Common stock repurchased, including related costs | — | (500 | ) | ||||
Dividends paid | (82 | ) | (77 | ) | |||
Issuances (payments) of commercial paper borrowings, net | (225 | ) | 390 | ||||
Proceeds from debt | 500 | — | |||||
Payments of debt | (626 | ) | (750 | ) | |||
Other financing activities, net | 2 | (6 | ) | ||||
Net cash provided by (used in) financing activities | (431 | ) | (900 | ) | |||
Effect of currency exchange rate changes on cash and cash equivalents | 10 | (47 | ) | ||||
Net increase (decrease) in cash and cash equivalents | (342 | ) | (747 | ) | |||
Cash and cash equivalents at beginning of period | 667 | 1,442 | |||||
Cash and cash equivalents at end of period | $ | 325 | $ | 695 |
Standard | Description | Required adoption timing and approach | Impact of adoption or other significant matters | |||
Standards recently adopted | ||||||
Accounting Standards Update (ASU) No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis | The standard affects both the variable interest entity and voting interest entity consolidation models. | Annual and interim periods beginning after December 15, 2015, with either retrospective or modified retrospective application permitted. Early adoption is permitted. | The Company adopted this ASU in the quarter ended April 2, 2016, using the modified retrospective method. The adoption did not have a material impact on the Company's results of operations or financial position. | |||
ASU No. 2015-05, Intangibles--Goodwill and Other--Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement | The standard provides guidance to customers about how to account for cloud computing arrangements when such arrangements include software licenses. | Annual and interim periods beginning after December 15, 2015, with either prospective or retrospective application permitted. Early adoption is permitted. | The Company adopted this ASU in the quarter ended April 2, 2016, using the prospective method. The adoption did not have a material impact on the Company's results of operations or financial position. | |||
ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory | The standard requires that inventory within the scope of the guidance be measured at the lower of cost or net realizable value. | Annual and interim periods beginning after December 15, 2016, with prospective application required. Early adoption is permitted. | The Company adopted this ASU in the quarter ended April 2, 2016. The adoption did not have a material impact on the Company's results of operations or financial position. | |||
ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes | The standard requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. | Annual and interim periods beginning after December 15, 2016, with either prospective or retrospective application permitted. Early adoption is permitted. | The Company adopted this ASU as of April 2, 2016 using retrospective application. Refer to Note 7 for a discussion of the impact on the Company's previously reported financial position. The adoption of this standard did not impact the Company's results of operations. | |||
Standards not yet adopted | ||||||
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) | The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance will supersede the current revenue recognition requirements. | Refer to ASU No. 2015-14 regarding the adoption timing. Either retrospective or modified retrospective application is permitted. | The Company plans to adopt this ASU for interim and annual periods beginning after December 15, 2017. The Company is evaluating its approach to the adoption and the potential impact to its results of operations and financial position. | |||
ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date | The standard defers the effective date of ASU No. 2014-09 to annual and interim periods beginning after December 15, 2017. Early adoption is permitted only as of annual and interim reporting periods beginning after December 15, 2016. | Not applicable. | Not applicable. | |||
ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities | Among other things, the standard requires certain equity investments to be measured at fair value with changes in fair value recognized in net income, simplifies the impairment assessment of equity investments without readily determinable fair values, and eliminates certain disclosure requirements. | Annual and interim periods beginning after December 15, 2017. Early adoption of certain guidance is permitted. | The Company is evaluating the timing of adoption and the potential impact to its results of operations and financial position. | |||
ASU No. 2016-02, Leases (Topic 842) | Among other things, the standard requires recognition of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position for virtually all leases where we are the lessee. | Annual and interim periods beginning after December 15, 2018, with modified retrospective application required. Early adoption is permitted. | The Company is evaluating the timing of adoption and the potential impact to its results of operations and financial position. | |||
ASU No. 2016-09, Compensation--Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting | The areas for simplification in this standard involve several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. | Annual and interim periods beginning after December 15, 2016, with certain aspects requiring modified retrospective transition, retrospective application, and/or prospective application. Early adoption is permitted if all aspects are adopted simultaneously. | The Company is evaluating the timing of adoption and the potential impact to its results of operations, financial position and cash flows. | |||
ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing | Among other things, the standard clarifies the principle for determining whether a good or service is “separately identifiable” from other promises in the contract and, therefore, should be accounted for separately. It also clarifies that entities are not required to identify promised goods or services that are immaterial in the context of the contract. | Refer to ASU No. 2015-14 regarding the adoption timing. Either retrospective or modified retrospective application is permitted. | The Company plans to adopt this ASU for interim and annual periods beginning after December 15, 2017. The Company is evaluating its approach to the adoption and the potential impact to its results of operations and financial position. |
April 2, 2016 | January 2, 2016 | ||||||
Term Loan Due 2020 | $ | 2,468 | $ | 2,093 | |||
2016 Senior Notes | — | 500 | |||||
2018 Senior Notes | 497 | 496 | |||||
2020 Senior Notes | 496 | 496 | |||||
2023 Senior Notes | 892 | 892 | |||||
2025 Senior Notes | 494 | 494 | |||||
2043 Senior Notes | 689 | 689 | |||||
Yen-denominated Senior Notes Due 2017 | 72 | 68 | |||||
Yen-denominated Senior Notes Due 2020 | 113 | 106 | |||||
Yen-denominated credit facilities | 58 | 54 | |||||
Commercial paper borrowings | 279 | 504 | |||||
Total debt | 6,058 | 6,392 | |||||
Less: current debt obligations | 467 | 1,163 | |||||
Long-term debt | $ | 5,591 | $ | 5,229 |
Remainder of 2016 | 2017 | 2018 | 2019 | 2020 | After 2020 | |||||||||||||
Future minimum principal payments | $ | 406 | $ | 231 | $ | 598 | $ | 260 | $ | 2,501 | $ | 2,100 |
Three Months Ended | |||||||
April 2, 2016 | April 4, 2015 | ||||||
Balance at beginning of period | $ | 31 | $ | 35 | |||
Warranty expense (benefit) recognized | (1 | ) | (2 | ) | |||
Warranty credits issued | (4 | ) | (1 | ) | |||
Balance at end of period | $ | 26 | $ | 32 |
Employee Termination Costs | Inventory Charges | Fixed Asset Charges | Other Restructuring Costs | Total | |||||||||||||||
Balance at January 3, 2015 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Cost of sales special charges | 9 | 1 | 1 | 1 | 12 | ||||||||||||||
Special charges | 22 | — | — | — | 22 | ||||||||||||||
Non-cash charges used | — | (1 | ) | (1 | ) | — | (2 | ) | |||||||||||
Cash payments | (2 | ) | — | — | (1 | ) | (3 | ) | |||||||||||
Balance at January 2, 2016 | 29 | — | — | — | 29 | ||||||||||||||
Cost of sales special charges | — | 2 | 1 | 1 | 4 | ||||||||||||||
Special charges | 11 | — | 4 | 5 | 20 | ||||||||||||||
Non-cash charges used | — | (2 | ) | (5 | ) | — | (7 | ) | |||||||||||
Cash payments | (32 | ) | — | — | (5 | ) | (37 | ) | |||||||||||
Balance at April 2, 2016 | $ | 8 | $ | — | $ | — | $ | 1 | $ | 9 |
Employee Termination Costs | Inventory Charges | Fixed Asset Charges | Other Restructuring Costs | Total | |||||||||||||||
Balance at January 3, 2015 | $ | 14 | $ | — | $ | — | $ | 6 | $ | 20 | |||||||||
Cost of sales special charges | 4 | 3 | 15 | 7 | 29 | ||||||||||||||
Special charges | 20 | — | — | 29 | 49 | ||||||||||||||
Non-cash charges used | — | (3 | ) | (15 | ) | — | (18 | ) | |||||||||||
Cash payments | (27 | ) | — | — | (35 | ) | (62 | ) | |||||||||||
Balance at January 2, 2016 | 11 | — | — | 6 | 17 | ||||||||||||||
Cost of sales special charges | — | — | — | 1 | 1 | ||||||||||||||
Cash payments | (3 | ) | — | — | (6 | ) | (9 | ) | |||||||||||
Balance at April 2, 2016 | $ | 8 | $ | — | $ | — | $ | 1 | $ | 9 |
Employee Termination Costs | Inventory Charges | Fixed Asset Charges | Other Restructuring Costs | Total | |||||||||||||||
Balance at January 3, 2015 | $ | 26 | $ | — | $ | — | $ | 12 | $ | 38 | |||||||||
Cost of sales special charges | 2 | 3 | — | — | 5 | ||||||||||||||
Special charges | 2 | — | 2 | 5 | 9 | ||||||||||||||
Non-cash charges used | — | (3 | ) | (2 | ) | — | (5 | ) | |||||||||||
Cash payments | (25 | ) | — | — | (10 | ) | (35 | ) | |||||||||||
Foreign exchange rate impact | (2 | ) | — | — | — | (2 | ) | ||||||||||||
Balance at January 2, 2016 | 3 | — | — | 7 | 10 | ||||||||||||||
Cost of sales special charges | — | (1 | ) | — | (1 | ) | (2 | ) | |||||||||||
Non-cash charges used | — | 1 | — | — | 1 | ||||||||||||||
Balance at April 2, 2016 | $ | 3 | $ | — | $ | — | $ | 6 | $ | 9 |
Three Months Ended | |||||||
April 2, 2016 | April 4, 2015 | ||||||
Numerator: | |||||||
Net earnings attributable to St. Jude Medical, Inc. | $ | 95 | $ | 262 | |||
Denominator: | |||||||
Basic weighted average shares outstanding | 283.5 | 283.0 | |||||
Dilution associated with stock-based compensation plans | 2.9 | 4.1 | |||||
Diluted weighted average shares outstanding | 286.4 | 287.1 | |||||
Basic net earnings per share attributable to St. Jude Medical, Inc. | $ | 0.33 | $ | 0.93 | |||
Diluted net earnings per share attributable to St. Jude Medical, Inc. | $ | 0.33 | $ | 0.91 | |||
Anti-dilutive shares of common stock excluded from diluted net earnings per share attributable to St. Jude Medical, Inc. | 8.4 | 4.1 |
Unrealized | ||||||||||||
Gain (Loss) On | Unrealized | Foreign | Accumulated | |||||||||
Available-for- | Gain (Loss) On | Currency | Other | |||||||||
For the three months ended April 2, 2016 | sale Securities | Derivative Instruments | translation adjustment | Comprehensive Income (Loss) | ||||||||
Accumulated other comprehensive income (loss) as of January 2, 2016 | $ | 3 | $ | 11 | $ | (359 | ) | $ | (345 | ) | ||
Other comprehensive income (loss) before reclassifications | — | (26 | ) | 48 | 22 | |||||||
Amounts reclassified to net earnings from accumulated other comprehensive income | — | (4 | ) | — | (4 | ) | ||||||
Other comprehensive income (loss) | — | (30 | ) | 48 | 18 | |||||||
Accumulated other comprehensive income (loss) as of April 2, 2016 | $ | 3 | $ | (19 | ) | $ | (311 | ) | $ | (327 | ) |
Unrealized | ||||||||||||
Gain (Loss) On | Unrealized | Foreign | Accumulated | |||||||||
Available-for- | Gain (Loss) On | Currency | Other | |||||||||
For the three months ended April 4, 2015 | sale Securities | Derivative Instruments | translation adjustment | Comprehensive Income (Loss) | ||||||||
Accumulated other comprehensive income (loss) as of January 3, 2015 | $ | 15 | $ | 3 | $ | (191 | ) | $ | (173 | ) | ||
Other comprehensive income (loss) before reclassifications | 3 | 29 | (127 | ) | (95 | ) | ||||||
Amounts reclassified to net earnings from accumulated other comprehensive income | (2 | ) | — | — | (2 | ) | ||||||
Other comprehensive income (loss) | 1 | 29 | (127 | ) | (97 | ) | ||||||
Accumulated other comprehensive income (loss) as of April 4, 2015 | $ | 16 | $ | 32 | $ | (318 | ) | $ | (270 | ) |
Amount reclassified from accumulated other comprehensive income | |||||||
Three Months Ended | |||||||
Details about accumulated other comprehensive income components | April 2, 2016 | April 4, 2015 | Statements of Earnings Classification | ||||
Unrealized (gain) loss on available-for-sale securities: | |||||||
(Gain) loss on sale of available-for-sale securities | $ | — | $ | (4 | ) | Other (income) expense | |
Tax effect | — | 2 | Income tax expense | ||||
Net of tax | $ | — | $ | (2 | ) | ||
Unrealized (gain) loss on derivative financial instruments: | |||||||
(Gain) loss recognized on derivative financial instruments | $ | (6 | ) | $ | — | Cost of sales | |
Tax effect | 2 | — | Income tax expense | ||||
Net of tax | $ | (4 | ) | $ | — |
Total | |||||||||
Shareholders' | |||||||||
Equity | |||||||||
Before | Total | ||||||||
Noncontrolling | Noncontrolling | Shareholders' | |||||||
For the three months ended April 2, 2016 | Interest | Interest | Equity | ||||||
Balance at January 2, 2016 | $ | 4,042 | $ | — | $ | 4,042 | |||
Net earnings | 95 | — | 95 | ||||||
Other comprehensive income (loss) | 18 | — | 18 | ||||||
Cash dividends declared | (88 | ) | — | (88 | ) | ||||
Stock-based compensation | 33 | — | 33 | ||||||
Tax shortfall from stock plans | (1 | ) | — | (1 | ) | ||||
Balance at April 2, 2016 | $ | 4,099 | $ | — | $ | 4,099 |
Total | |||||||||
Shareholders' | |||||||||
Equity | |||||||||
Before | Total | ||||||||
Noncontrolling | Noncontrolling | Shareholders' | |||||||
For the three months ended April 4, 2015 | Interest | Interest | Equity | ||||||
Balance at January 3, 2015 | $ | 4,199 | $ | 45 | $ | 4,244 | |||
Net earnings | 262 | (6 | ) | 256 | |||||
Other comprehensive income (loss) | (97 | ) | — | (97 | ) | ||||
Cash dividends declared | (81 | ) | — | (81 | ) | ||||
Repurchases of common stock | (500 | ) | — | (500 | ) | ||||
Stock-based compensation | 17 | — | 17 | ||||||
Common stock issued under employee stock plans and other, net | 38 | — | 38 | ||||||
Tax benefit from stock plans | 5 | — | 5 | ||||||
Balance at April 4, 2015 | $ | 3,843 | $ | 39 | $ | 3,882 |
January 2, 2016 | ||||||||||
Previously | ||||||||||
Reported | Impact | As Adopted | ||||||||
Deferred income taxes (within Other current assets) | $ | 264 | $ | (264 | ) | $ | — | |||
Other current assets (excluding Deferred income taxes) | 188 | 81 | 269 | |||||||
Deferred income taxes (within Other assets) | 132 | 19 | 151 | |||||||
Other current liabilities | (517 | ) | 7 | (510 | ) | |||||
Deferred income taxes (within Other liabilities) | (738 | ) | 157 | (581 | ) |
April 2, 2016 | January 2, 2016 | ||||||
Adjusted cost | $ | 4 | $ | 5 | |||
Gross unrealized gains | 5 | 6 | |||||
Gross unrealized losses | — | (1 | ) | ||||
Fair value | $ | 9 | $ | 10 |
Balance Sheet Classification | April 2, 2016 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets | ||||||||||||||||
Money-market securities | Cash and cash equivalents | $ | 55 | $ | 55 | $ | — | $ | — | |||||||
Available-for-sale securities | Other current assets | 9 | 9 | — | — | |||||||||||
Trading securities | Other assets | 294 | 294 | — | — | |||||||||||
Total assets | $ | 358 | $ | 358 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Foreign currency forward contracts | Other current liabilities | $ | 28 | $ | — | $ | 28 | $ | — | |||||||
Contingent consideration | Other liabilities | 36 | — | — | 36 | |||||||||||
Foreign currency forward contracts | Other liabilities | 8 | — | 8 | — | |||||||||||
Total liabilities | $ | 72 | $ | — | $ | 36 | $ | 36 |
Balance Sheet Classification | January 2, 2016 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets | ||||||||||||||||
Money-market securities | Cash and cash equivalents | $ | 273 | $ | 273 | $ | — | $ | — | |||||||
Available-for-sale securities | Other current assets | 10 | 10 | — | — | |||||||||||
Foreign currency forward contracts | Other current assets | 14 | — | 14 | — | |||||||||||
Trading securities | Other assets | 302 | 302 | — | — | |||||||||||
Foreign currency forward contracts | Other assets | 2 | — | 2 | — | |||||||||||
Total assets | $ | 601 | $ | 585 | $ | 16 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Contingent consideration | Other current liabilities | $ | 118 | $ | — | $ | — | $ | 118 | |||||||
Foreign currency forward contracts | Other current liabilities | 6 | — | 6 | — | |||||||||||
Contingent consideration | Other liabilities | 33 | — | — | 33 | |||||||||||
Foreign currency forward contracts | Other liabilities | 3 | — | 3 | — | |||||||||||
Total liabilities | $ | 160 | $ | — | $ | 9 | $ | 151 |
Contingent Consideration Liabilities | Fair Value as of April 2, 2016 | Valuation Technique | Unobservable Input | Value or Range | ||||||
Spinal Modulation revenue-based milestones and earn-outs | $ | 6 | Monte Carlo Simulation | Discount Rates | 0.9% | - | 16.0% | |||
Expected Revenue Volatility | 25.0% | |||||||||
Projected Years of Payments | 2017, 2018 | |||||||||
Nanostim, Inc. (Nanostim) revenue-based milestones | 2 | Probability Weighted Discounted Cash Flow | Discount Rate | 5.0% | ||||||
Probability of Payments | 10.0% | |||||||||
Projected Years of Payments | 2017, 2018 | |||||||||
Assumed from Thoratec regulatory-based and revenue-based milestones | 28 | Probability Weighted Discounted Cash Flow | Discount Rate | 4.9% | ||||||
Probabilities of Payments | —% | - | 90.0% | |||||||
Projected Years of Payments | 2017 | - | 2020 | |||||||
Total contingent consideration liabilities | $ | 36 |
Nanostim | Spinal Modulation | Assumed from Thoratec | Total | |||||||||
Balance as of January 3, 2015 | $ | 50 | $ | — | $ | — | $ | 50 | ||||
Initial fair value measurement of contingent consideration | — | 155 | — | 155 | ||||||||
Liabilities assumed from Thoratec acquisition | — | — | 33 | 33 | ||||||||
Change in fair value of contingent consideration | (48 | ) | (33 | ) | (6 | ) | (87 | ) | ||||
Balance as of January 2, 2016 | 2 | 122 | 27 | 151 | ||||||||
Change in fair value of contingent consideration | — | 8 | 1 | 9 | ||||||||
Transfer out of Level 3 fair value measurement due to contractual settlement | — | (124 | ) | — | (124 | ) | ||||||
Balance as of April 2, 2016 | $ | 2 | $ | 6 | $ | 28 | $ | 36 |
Pre-tax (Gain) Loss Recognized | Ineffective Portion of | ||||||||||||
Pre-tax (Gain) Loss | in Earnings on Effective Portion | (Gain) Loss on Derivative | |||||||||||
Recognized in Other | of Derivative as a Result of | and Amount Excluded from | |||||||||||
Three | Comprehensive | Reclassification from | Effectiveness Testing | ||||||||||
months | Income on Effective | Accumulated Other | Recognized | ||||||||||
ended | Portion of Derivative | Comprehensive Income | in Earnings | ||||||||||
April 2, 2016 | Amount | Amount | Location | Amount | Location | ||||||||
Derivatives in Cash Flow Hedging Relationships | |||||||||||||
Foreign currency forward contracts | $ | 39 | $ | (6 | ) | Cost of sales | $ | — | Cost of sales | ||||
Pre-tax (Gain) Loss Recognized | Ineffective Portion of | ||||||||||||
Pre-tax (Gain) Loss | in Earnings on Effective Portion | (Gain) Loss on Derivative | |||||||||||
Recognized in Other | of Derivative as a Result of | and Amount Excluded from | |||||||||||
Three | Comprehensive | Reclassification from | Effectiveness Testing | ||||||||||
months | Income on Effective | Accumulated Other | Recognized | ||||||||||
ended | Portion of Derivative | Comprehensive Income | in Earnings | ||||||||||
April 4, 2015 | Amount | Amount | Location | Amount | Location | ||||||||
Derivatives in Cash Flow Hedging Relationships | |||||||||||||
Foreign currency forward contracts | $ | (34 | ) | $ | — | Cost of sales | $ | — | Cost of sales |
(Gain) Loss on Derivatives | ||||||||
Recognized in Earnings | ||||||||
Three Months Ended | ||||||||
Derivatives Not Designated as Hedging Instruments | April 2, 2016 | April 4, 2015 | Location | |||||
Foreign currency forward contracts | $ | 3 | $ | (9 | ) | Other (income) expense |
Fair Value of Derivative Instruments | April 2, 2016 | January 2, 2016 | Location | ||||
Derivatives Designated as Hedging Instruments | |||||||
Foreign currency forward contracts | $ | — | $ | 14 | Other current assets | ||
— | 2 | Other assets | |||||
(28 | ) | (6 | ) | Other current liabilities | |||
(8 | ) | (3 | ) | Other liabilities | |||
Derivatives Not Designated as Hedging Instruments | |||||||
Foreign currency forward contracts | — | — | Other current assets | ||||
— | — | Other current liabilities | |||||
Total | $ | (36 | ) | $ | 7 |
Gross Amounts not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
Gross Amount of | |||||||||||||
Eligible Offsetting | |||||||||||||
Gross Amount of | Recognized | ||||||||||||
Derivative Assets | Derivative Liabilities | ||||||||||||
Presented in the | Presented in the | Net | |||||||||||
Condensed | Condensed | Cash | Amount of | ||||||||||
Consolidated | Consolidated | Collateral | Derivative | ||||||||||
Derivatives as of April 2, 2016 | Balance Sheet | Balance Sheet | Received | Assets | |||||||||
Derivatives subject to master netting agreements | $ | — | $ | — | $ | — | $ | — | |||||
Derivatives not subject to master netting agreements | — | — | |||||||||||
Total | $ | — | $ | — | $ | — | $ | — | |||||
Gross Amounts not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
Gross Amount of | |||||||||||||
Gross Amount of | Eligible Offsetting | ||||||||||||
Derivative | Recognized | ||||||||||||
Liabilities | Derivative Assets | ||||||||||||
Presented in the | Presented in the | Net | |||||||||||
Condensed | Condensed | Cash | Amount of | ||||||||||
Consolidated | Consolidated | Collateral | Derivative | ||||||||||
Derivatives as of April 2, 2016 | Balance Sheet | Balance Sheet | Pledged | Liabilities | |||||||||
Derivatives subject to master netting agreements | $ | 19 | $ | — | $ | — | $ | 19 | |||||
Derivatives not subject to master netting agreements | 17 | 17 | |||||||||||
Total | $ | 36 | $ | — | $ | — | $ | 36 |
Gross Amounts not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
Gross Amount of | |||||||||||||
Eligible Offsetting | |||||||||||||
Gross Amount of | Recognized | ||||||||||||
Derivative Assets | Derivative Liabilities | ||||||||||||
Presented in the | Presented in the | Net | |||||||||||
Condensed | Condensed | Cash | Amount of | ||||||||||
Consolidated | Consolidated | Collateral | Derivative | ||||||||||
Derivatives as of January 2, 2016 | Balance Sheet | Balance Sheet | Received | Assets | |||||||||
Derivatives subject to master netting agreements | $ | 3 | $ | 1 | $ | — | $ | 2 | |||||
Derivatives not subject to master netting agreements | 13 | 13 | |||||||||||
Total | $ | 16 | $ | 1 | $ | — | $ | 15 | |||||
Gross Amounts not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
Gross Amount of | |||||||||||||
Gross Amount of | Eligible Offsetting | ||||||||||||
Derivative | Recognized | ||||||||||||
Liabilities | Derivative Assets | ||||||||||||
Presented in the | Presented in the | Net | |||||||||||
Condensed | Condensed | Cash | Amount of | ||||||||||
Consolidated | Consolidated | Collateral | Derivative | ||||||||||
Derivatives as of January 2, 2016 | Balance Sheet | Balance Sheet | Pledged | Liabilities | |||||||||
Derivatives subject to master netting agreements | $ | 1 | $ | 1 | $ | — | $ | — | |||||
Derivatives not subject to master netting agreements | 8 | 8 | |||||||||||
Total | $ | 9 | 1 | $ | — | $ | 8 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | We benefited from incremental net sales associated with our HF ventricular assist devices, acquired through our acquisition 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 Stimulation System (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 associated with our FlexAbility™ ablation catheter (FDA approval in January 2015) and continued market penetration of our TactiCath® irrigated ablation catheter. Additionally, we continued to benefit from increased net sales volumes related to our intracardiac echocardiography imaging product offerings. |
• | We also benefited from increased transcatheter aortic valve replacement (TAVR) procedures and net sales volume increases related to our OCT imaging products and FFR technology, particularly in Europe. |
• | We recognized discrete income tax charges of $0.18 per diluted share related to adjustments to uncertain tax positions. |
• | We recognized after-tax acquisition-related costs, including contingent consideration fair value adjustments, of $0.15 per diluted share. |
• | We recognized after-tax investment impairment charges of $0.11 per diluted share. |
• | We recognized after-tax special charges of $0.06 per diluted share related to restructuring activities. |
• | We recognized an after-tax net special benefit of $0.04 per diluted share primarily related to legal settlements. |
• | We recognized after-tax special charges of $0.01 per diluted share related to product field action costs and litigation costs. |
• | We generated $150 million of cash flows from operating activities. |
• | We repaid our $500 million principal amount of 5-year, 2.500% unsecured senior notes (2016 Senior Notes), made net commercial paper payments of $225 million and drew the remaining $500 million of our 5-year, $2.6 billion term loan due 2020 (Term Loan Due 2020). We also made our first quarterly principal payment of $26 million and prepaid an additional $100 million on our Term Loan Due 2020. |
• | We returned $82 million to shareholders in the form of dividends during the first quarter of 2016. |
Three Months Ended | ||||||||||
April 2, 2016 | April 4, 2015 | % Change | ||||||||
Heart Failure | $ | 374 | $ | 251 | 48.8 | % | ||||
Traditional Cardiac Rhythm Management | 366 | 408 | (10.2 | )% | ||||||
Cardiovascular | 301 | 302 | (0.3 | )% | ||||||
Atrial Fibrillation | 291 | 276 | 5.3 | % | ||||||
Neuromodulation | 116 | 108 | 7.6 | % | ||||||
Net sales | $ | 1,448 | $ | 1,345 | 7.6 | % |
Three Months Ended | ||||||||||
April 2, 2016 | April 4, 2015 | % Change | ||||||||
United States | $ | 776 | $ | 681 | 13.9 | % | ||||
Europe | 356 | 343 | 3.8 | % | ||||||
Japan | 119 | 117 | 1.9 | % | ||||||
Other foreign countries | 197 | 204 | (3.6 | )% | ||||||
Net sales | $ | 1,448 | $ | 1,345 | 7.6 | % |
Three Months Ended April 2, 2016 % Change | ||
Operational | 0.1 | % |
Acquisitions | 10.6 | % |
Translation | (3.1 | )% |
Net sales change | 7.6 | % |
Gross profit | |||||||||||
Three Months Ended | |||||||||||
(in millions) | April 2, 2016 | April 4, 2015 | Change | ||||||||
Gross profit | $ | 961 | $ | 950 | 1.2 | % | |||||
Percentage of net sales | 66.4 | % | 70.6 | % | (4.2 | ) | pts. |
Selling, general and administrative (SG&A) expense | |||||||||||
Three Months Ended | |||||||||||
(in millions) | April 2, 2016 | April 4, 2015 | Change | ||||||||
Selling, general and administrative expense | $ | 491 | $ | 430 | 14.2 | % | |||||
Percentage of net sales | 33.9 | % | 32.0 | % | 1.9 | pts. |
Research and development (R&D) expense | |||||||||||
Three Months Ended | |||||||||||
(in millions) | April 2, 2016 | April 4, 2015 | Change | ||||||||
Research and development expense | $ | 188 | $ | 167 | 12.6 | % | |||||
Percentage of net sales | 13.0 | % | 12.4 | % | 0.6 | pts. |
• | Portico Re-sheathable Transcatheter Aortic Valve System U.S. Investigational Device Exemption (IDE) Trial: The objective of this clinical trial is to evaluate the safety and effectiveness of the Portico Transcatheter Heart Valve and Delivery Systems (Portico) via transfemoral and alternative delivery methods. The clinical study will analyze the high risk cohort and extreme risk cohort together against a commercially available control for the primary safety and effectiveness endpoints. |
• | Thoratec Corporation MOMENTUM 3, Multi-center Study of MagLev Technology in Patients Undergoing mechanical circulatory support (MCS) Therapy with HeartMate 3™ (HM3) IDE Clinical Study Protocol: The objective 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™ (HMII) LVAS when used for the treatment of advanced, refractory, left ventricular HF. The HM3 LVAS is intended to provide hemodynamic support in patients with advanced, refractory left ventricular HF, either for short term support, such as a bridge to cardiac transplantation or myocardial recovery, or as long term support, such as destination therapy. The HM3 is intended for use inside or outside the hospital. |
• | Thoratec Corporation HeartMate PHP™ Coronary InterventionS in HIgh-Risk PatiEnts Using a Novel Percutaneous Left Ventricular Support Device (SHIELD II) study protocol: The HeartMate PHP™ System is a temporary (less than 6 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 and depressed left ventricular ejection fraction. The trial objective is to assess the safety and efficacy of the HeartMate PHP™ in supporting patients with severe symptomatic coronary artery disease with diminished but stable cardiovascular function, who are undergoing elective or urgent high risk PCI but are not candidates for coronary artery 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 support system. |
Amortization of intangible assets | |||||||||||
Three Months Ended | |||||||||||
(in millions) | April 2, 2016 | April 4, 2015 | Change | ||||||||
Amortization of intangible assets | $ | 46 | $ | 24 | 91.7 | % |
Special charges |
Three Months Ended | Three Months Ended | |||||||||||||||||||
April 2, 2016 | April 4, 2015 | |||||||||||||||||||
Type of Special Charge | Cost of Sales Special Charges | Special Charges | Total Special Charges | Cost of Sales Special Charges | Special Charges | Total Special Charges | ||||||||||||||
Restructuring activities | ||||||||||||||||||||
2016 Initiatives | $ | 4 | $ | 20 | $ | 24 | $ | — | $ | — | $ | — | ||||||||
Manufacturing and Supply Chain Optimization Plan | 1 | — | 1 | 2 | 6 | 8 | ||||||||||||||
2012 Business Realignment Plan | (2 | ) | — | (2 | ) | 2 | 3 | 5 | ||||||||||||
Other restructuring-related charges | — | 2 | 2 | — | — | — | ||||||||||||||
Legal settlements | — | (17 | ) | (17 | ) | — | (10 | ) | (10 | ) | ||||||||||
Product field action costs and litigation costs | — | 3 | 3 | (2 | ) | 5 | 3 | |||||||||||||
Total special charges | $ | 3 | $ | 8 | $ | 11 | $ | 2 | $ | 4 | $ | 6 |
Other expense, net | |||||||
Three Months Ended | |||||||
(in millions) | April 2, 2016 | April 4, 2015 | |||||
Interest income | $ | (1 | ) | $ | (1 | ) | |
Interest expense | 40 | 21 | |||||
Other (income) expense | 53 | (3 | ) | ||||
Other expense, net | $ | 92 | $ | 17 |
Three Months Ended | |||||
(as a percent of earnings before income taxes and noncontrolling interest) | April 2, 2016 | April 4, 2015 | |||
Effective tax rate | 30.1 | % | 16.9 | % |
Three Months Ended | |||||||
(in millions) | April 2, 2016 | April 4, 2015 | |||||
Net loss attributable to noncontrolling interest | $ | — | $ | (6 | ) |
Three Months Ended | |||||||
April 2, 2016 | April 4, 2015 | ||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 150 | $ | 234 | |||
Investing activities | (71 | ) | (34 | ) | |||
Financing activities | (431 | ) | (900 | ) | |||
Effect of currency exchange rate changes on cash and cash equivalents | 10 | (47 | ) | ||||
Net increase (decrease) in cash and cash equivalents | $ | (342 | ) | $ | (747 | ) |
Three Months Ended | |||||||
April 2, 2016 | April 4, 2015 | ||||||
Stock issued under employee stock plans, including tax benefit | $ | — | $ | 43 | |||
Common stock repurchases | — | (500 | ) | ||||
Dividends paid | (82 | ) | (77 | ) | |||
Debt borrowings, net | (351 | ) | (360 | ) | |||
Other, net | 2 | (6 | ) | ||||
Net cash used in financing activities | $ | (431 | ) | $ | (900 | ) |
1. | Competition, including product introductions by competitors that have advanced technology, better features or lower pricing. | |
2. | Consolidation and other healthcare industry changes leading to demands for price concessions and/or limitations 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, such as FDA regulations, including those that decrease the probability or increase the time and/or expense of obtaining 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 and Education Reconciliation Act, and/or regulation that significantly impacts the healthcare system in the United States or in international markets and that results in lower reimbursement for procedures using our products or denies coverage for such procedures, reduces medical procedure volumes or otherwise adversely affects our business 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 that significantly reduces reimbursement for procedures using our medical devices or denies coverage for such procedures, as well as adverse decisions relating to our products by administrators of such systems on coverage 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 and payment patterns, including the collectability of customer accounts receivable. | |
10. | Our inability to realize the expected benefits from our restructuring initiatives and continuous improvement efforts 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 that incorporate 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 continually evolving cybersecurity threats. | |
12. | Inability to successfully integrate the businesses that we have acquired in recent years, including our recent acquisition of Thoratec, and that we plan to acquire. | |
13. | The substantial additional indebtedness we incurred to finance the Thoratec acquisition, which may decrease our business flexibility and increase our borrowing costs. | |
14. | A reduction in the number of procedures using our devices caused by cost-containment pressures, publication of adverse study results, initiation of investigations of our customers related to our devices or the development of or preferences for alternative technologies or therapies. | |
15. | Safety, performance or efficacy concerns about our products, many of which are expected to be implanted for many years, some of which may lead to recalls and/or advisories with the attendant expenses and declining sales. | |
16. | Failure to successfully complete, or unfavorable data from, clinical trials for our products or new indications for our 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 market segments or requiring us to pay royalties. | |
18. | Declining industry-wide sales caused by product quality issues or recalls or advisories by us or our competitors that result in loss of physician and/or patient confidence in the safety, performance or efficacy of sophisticated medical 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 property litigation, 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 as Angio-Seal™, or products using bovine pericardial material, such as our Biocor®, Epic™, Trifecta™ and Portico™ tissue heart valves or that impose added costs on the procurement of bovine collagen or bovine pericardial 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, safety and 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 our facilities, such as an earthquake affecting our facilities in California, Puerto Rico and Costa Rica or a hurricane affecting 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 to closing conditions, many of which are outside our control. |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. | CONTROLS AND PROCEDURES |
Item 1. | LEGAL PROCEEDINGS |
• | Various conditions to the closing of the merger may not be satisfied or waived; |
• | Lawsuits have been filed against us challenging the merger, and an adverse ruling may delay the merger or prevent it from being completed; |
• | The merger may not be consummated, which among other things may cause our share price to decline to the extent that the current price of our common stock reflects an assumption that the merger will be completed; |
• | The failure to consummate the merger may result in negative publicity and a negative impression of us in the investment community; |
• | Required regulatory approvals from governmental entities may delay the merger; |
• | The Merger Agreement may be terminated in circumstances that would require us to pay Abbott a termination fee of $685 million; |
• | Our ability to attract, recruit, retain and motivate current and prospective employees may be adversely affected; |
• | The attention of our employees and management may be diverted due to activities related to the merger; |
• | Disruptions from the merger, whether or not it is completed, may harm our relationships with our employees, customers, distributors, suppliers or other business partners, and may result in a loss of or a substantial decrease in purchases by our customers; and |
• | The Merger Agreement restricts us from engaging in certain actions without Abbott's approval, which could prevent us from pursuing certain business opportunities outside the ordinary course of business that arise prior to the closing of the merger. |
Item 6. | EXHIBITS |
Exhibit | ||
No. | Description | |
10.1 | Form of Restricted Stock Award Agreement and related Restricted Stock Award Certificate for restricted stock granted under the St. Jude Medical, Inc. 2007 Stock Incentive Plan. | |
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 ended April 2, 2016, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial Statements. |
ST. JUDE MEDICAL, INC. | ||||
May 4, 2016 | /s/ DONALD J. ZURBAY | |||
DATE | DONALD J. ZURBAY | |||
Vice President, Finance | ||||
and Chief Financial Officer | ||||
(Duly Authorized Officer and | ||||
Principal Financial and | ||||
Accounting Officer) |
Exhibit | ||
No. | Description | |
10.1 | Form of Restricted Stock Award Agreement and related Restricted Stock Award Certificate for restricted stock granted under the St. Jude Medical, Inc. 2007 Stock Incentive Plan. # | |
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 ended April 2, 2016, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial Statements. |
# Filed as an exhibit to this Quarterly Report on Form 10-Q. |
By: | |
Name: | |
Title: |
Three Months Ended | FISCAL YEAR | |||||||||||||||||||||||
April 2, 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
EARNINGS | ||||||||||||||||||||||||
Earnings before income taxes and noncontrolling interest | $ | 136 | $ | 928 | $ | 1,068 | $ | 784 | $ | 1,005 | $ | 1,019 | ||||||||||||
Plus fixed charges: | ||||||||||||||||||||||||
Interest expense (1) | 40 | 103 | 85 | 81 | 73 | 70 | ||||||||||||||||||
Rent interest factor (2) | 4 | 15 | 17 | 12 | 15 | 15 | ||||||||||||||||||
TOTAL FIXED CHARGES | 44 | 118 | 102 | 93 | 88 | 85 | ||||||||||||||||||
EARNINGS BEFORE INCOME TAXES AND FIXED CHARGES | $ | 180 | $ | 1,046 | $ | 1,170 | $ | 877 | $ | 1,093 | $ | 1,104 | ||||||||||||
RATIO OF EARNINGS TO FIXED CHARGES | 4.1 | 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 interest on liabilities for uncertain tax positions. |
(2) | Approximately one-third of rental expense is deemed representative of the interest factor. |
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 a material fact necessary to make the statements made, in light of the circumstances under which such statements were 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, fairly present 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 controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (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 to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the 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 occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial 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 significant role in the registrant's internal control over financial reporting. |
Date: May 4, 2016 | |
/s/ MICHAEL T. ROUSSEAU | |
Michael T. Rousseau | |
President and Chief Executive Officer |
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 a material fact necessary to make the statements made, in light of the circumstances under which such statements were 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, fairly present 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 controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (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 to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the 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 occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial 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 significant role in the registrant's internal control over financial reporting. |
Date: May 4, 2016 | |
/s/ DONALD J. ZURBAY | |
Donald J. Zurbay | |
Vice President, Finance and Chief Financial Officer |
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 of operations of the Company. |
/s/ MICHAEL T. ROUSSEAU | ||
Michael T. Rousseau | ||
President and Chief Executive Officer | ||
May 4, 2016 |
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 of operations of the Company. |
/s/ DONALD J. ZURBAY | ||
Donald J. Zurbay | ||
Vice President, Finance and | ||
Chief Financial Officer | ||
May 4, 2016 |
Document And Entity Information - shares |
3 Months Ended | |
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Apr. 02, 2016 |
Apr. 29, 2016 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Apr. 02, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | ST JUDE MEDICAL INC | |
Entity Central Index Key | 0000203077 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 284,277,432 |
Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | |
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Apr. 02, 2016 |
Apr. 04, 2015 |
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Statement of Comprehensive Income [Abstract] | ||
Net earnings before noncontrolling interest | $ 95 | $ 256 |
Other comprehensive income (loss), net of tax | ||
Unrealized gain (loss) on available-for-sale securities, net of tax (expense) benefit of ($1) | 0 | 1 |
Unrealized gain (loss) on derivative financial instruments, net of tax (expense) benefit of $15 and ($5), respectively | (30) | 29 |
Foreign currency translation adjustment | 48 | (127) |
Other comprehensive income (loss), net of tax | 18 | (97) |
Total comprehensive income before noncontrolling interest | 113 | 159 |
Total comprehensive loss attributable to noncontrolling interest | 0 | (6) |
Total comprehensive income attributable to St. Jude Medical, Inc. | $ 113 | $ 165 |
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
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Apr. 02, 2016 |
Apr. 04, 2015 |
|
Statement 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) |
Tax (expense) benefit on related to increase (decrease) in accumulated gain (loss) from derivative instruments designated and qualifying as the effective portion of cash flow hedges | $ 15 | $ (5) |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Apr. 02, 2016 |
Jan. 02, 2016 |
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Statement of Financial Position [Abstract] | ||
Accounts receivable allowance for doubtful accounts | $ 46 | $ 46 |
Preferred stock, par value (USD per share) | $ 1 | $ 1 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (USD per share) | $ 0.1 | $ 0.1 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 283,873,898 | 283,450,374 |
Common stock, shares outstanding | 283,873,898 | 283,450,374 |
Basis Of Presentation |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis Of Presentation | BASIS OF PRESENTATION Principles of Consolidation: The accompanying unaudited Condensed Consolidated Financial Statements of St. Jude Medical, Inc. (St. Jude Medical or the Company) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally 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 cash flows. The Condensed Consolidated Balance Sheet at January 2, 2016 was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and footnotes. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended January 2, 2016. The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, 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 whom the Company has determined to be its Chief Operating Decision Maker. During the first quarter of 2016, the Company changed its sales reporting to closely align with how it manages the business in five key areas: Heart Failure, Traditional Cardiac Rhythm Management, Cardiovascular, Atrial Fibrillation and Neuromodulation. The Company continues to operate as a 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-month periods ended April 2, 2016 and April 4, 2015 included 13 weeks. New Accounting Pronouncements: The following table provides a description of recent accounting pronouncements adopted and those standards not yet adopted with potential for a material impact on the Company's financial statements or disclosures.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | DEBT The carrying value of the Company’s debt, including debt issuance costs, discounts or premiums 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 April 2, 2016 were as follows (in millions):
During the first quarter of 2016, the Company repaid its $500 million principal amount of 5-year, 2.500% unsecured senior notes due 2016, made net commercial paper payments of $225 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 corporate purposes. The Company also made its first quarterly principal payment of $26 million and prepaid an additional $100 million on its Term Loan Due 2020. Additionally, the Company's yen-denominated credit facility that expired in March 2016 for 3.25 billion Japanese Yen (the equivalent of $29 million as of April 2, 2016) was automatically extended for a one-year period bearing interest at Yen LIBOR plus 0.250%. |
Commitments And Contingencies |
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Commitments And Contingencies | COMMITMENTS AND CONTINGENCIES Product Liability Litigation Riata® Litigation: The Company is financially responsible for legal costs incurred in the continued defense of the product liability claims relating to Riata® and Riata ST silicone defibrillation leads, including any potential settlements, judgments and other legal defense costs. The Company believes that a material loss in excess of the accrued amount is remote. Securities and Other Shareholder Litigation December 2012 Securities Litigation: On December 7, 2012, a putative securities class action lawsuit was filed in federal district court in Minnesota against the Company and an officer (collectively, the defendants) for alleged violations of the federal 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 purported class period. On December 10, 2012, a second putative securities class action lawsuit was filed in federal district court in Minnesota against the Company and certain officers for alleged violations of the federal securities laws, on behalf of all purchasers of the publicly traded securities of the Company between October 19, 2011 and November 20, 2012. The second complaint alleged similar claims and sought similar relief. In March 2013, the Court consolidated the two cases and appointed a lead counsel and lead plaintiff. A consolidated amended complaint was served and filed in June 2013, alleging false 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 plaintiffs did not assert any specific amount of compensation in the second amended complaint. The Court granted class certification on December 22, 2015. Fact discovery closed December 18, 2015, and the deadline for filing and scheduling dispositive motions is July 14, 2016. The case is expected to be ready for trial in February 2017. The Company intends to continue to vigorously defend against the claims asserted in this matter. The Company has not recorded an expense related to any potential damages in connection with the December 2012 Securities Litigation because any potential loss is not probable or reasonably estimable. Because, based on the Company’s historical experience, the amount ultimately paid, if any, often does not bear any relationship to the amount claimed, the Company cannot reasonably estimate a loss or range of loss, if any, that may result from these matters. Regulatory Matters The U.S. Food and Drug Administration (FDA) inspected the Company’s manufacturing facility in Atlanta, Georgia, where the 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 at the facility. Following the receipt of the Form 483, the Company provided written responses to the FDA detailing proposed corrective actions and immediately initiated efforts to address the FDA’s observations of non-conformity. The Company subsequently received a warning letter dated September 30, 2015 from the FDA relating to these non-conformities. The warning letter is specific to the Atlanta facility and does not impact any of the Company’s other manufacturing facilities. The warning letter does not identify any specific concerns regarding the performance of, or indicate the need for any field or other action regarding, the CardioMEMS™HF system product or any other St. Jude Medical product and acknowledges the actions already taken by the Company to address the observations. Since the completion of the FDA inspection, the Company has provided and will continue to provide the FDA with regular monthly updates. The Company has completed all necessary actions to remediate the FDA’s observations for the Atlanta facility and has fully integrated this former CardioMEMS stand-alone facility into St. Jude Medical’s quality systems. As of December 2015, the Atlanta FDA district office has been notified that all actions have been completed and the Company is now in a waiting period until the next FDA inspection, expected during the summer of 2016. The Company will continue manufacturing and shipping product from the Atlanta facility, and customer orders are not expected to be impacted while the Company works to resolve the FDA’s concerns. The Company takes these matters seriously, will respond timely and fully to the FDA’s requests, and believes that the FDA’s concerns have been 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 implantable cardioverter defibrillator (ICD) and pacemaker systems. The Company estimates the costs it expects to incur under its warranties and records a liability for such costs at the time the product is sold. Factors that affect the Company's warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company 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 months ended April 2, 2016 and April 4, 2015 were as follows (in millions):
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Special Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Charges | SPECIAL CHARGES The Company recognizes certain transactions and events as special charges in its Condensed Consolidated Financial Statements. These charges (such as restructuring charges, impairment charges, certain legal settlements or product field action costs and litigation costs) result from facts and circumstances that vary in frequency and impact on the Company's results of operations. 2016 Initiatives During the fourth quarter of 2015, the Company initiated restructuring activities to drive cross-functional synergies (the 2016 Initiatives). The 2016 Initiatives include enhancing focus on programs that will strengthen its strategic objectives, driving productivity enhancements and incurring costs to fully integrate its recent acquisitions. During 2015, the Company incurred charges 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 other termination benefits, contract termination costs and fixed asset write-offs, primarily associated with the closure of legacy Thoratec Corporation (Thoratec) facilities as the Company continues to integrate the acquisition. The Company currently expects to incur approximately $30 million to $35 million during the remainder of 2016 to complete 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):
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 million primarily related to severance and other termination benefits, contract termination costs and fixed asset write-offs. These costs included charges associated with the elimination of certain operational, quality and hardware development activities at a research and development facility, continued exit costs related to a facility closure in the United States and software development assets no longer expected to be utilized. During the first quarter of 2016, the Company incurred additional charges of $1 million primarily related to continued exit costs associated with a facility closure in the United States. Material charges are 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 (in millions):
2012 Business Realignment Plan During 2012, the Company realigned its product divisions into two new operating divisions: the Implantable Electronic Systems Division (combining its legacy Cardiac Rhythm Management and Neuromodulation product divisions) and the Cardiovascular and Ablation Technologies Division (combining its legacy Cardiovascular and Atrial Fibrillation product divisions). In addition, the Company centralized certain support functions, including information technology, human resources, legal, business development and certain marketing functions. The organizational changes have been part of a comprehensive plan to accelerate the Company's growth, reduce costs, leverage economies of scale and increase investment in product development. During 2014, the Company announced additional organizational changes including the combination 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 supply chain operations worldwide. During 2015, the Company incurred additional charges of $14 million primarily related to severance and other termination benefits and other restructuring costs, including contract termination costs, asset relocation expenses and other exit costs predominately 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 the previously recorded accrual balances were no longer necessary. No additional charges are expected in future periods as the 2012 Business Realignment Plan is now complete. A summary of the activity related to the 2012 Business Realignment Plan accrual is as follows (in millions):
Other Special Charges Legal settlements: During the first quarter of 2016, the Company recognized $19 million of legal settlement gains related to two separate legal cases. These gains were partially offset by a $2 million contingent loss related to a litigation matter that the Company now believes is probable and estimable. During the first quarter of 2015, the Company recognized $10 million in insurance recoveries as a special benefit in connection with the March 2010 Securities Class Action Litigation. Product field action costs and litigation costs: During the first quarter of 2016 and 2015, the Company recognized approximately $3 million and $5 million, respectively, of litigation charges for expected future probable and estimable legal costs associated 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 a number of factors, such as the type of claims received and the cost to defend. Partially offsetting the first quarter 2015 special charge, the Company recognized a $2 million benefit in cost of sales special charges for salvaged inventory components related to an advisory action initiated in 2014. Other restructuring-related charges: The Company also recognized other restructuring-related charges of $2 million during the first quarter of 2016. |
Net Earnings Per Share |
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Net Earnings Per Share | 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):
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Accumulated Other Comprehensive Income (Loss) and Supplemental Equity Information |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) and Supplemental Equity Information | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) AND SUPPLEMENTAL EQUITY INFORMATION 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 net earnings for the three months ended April 2, 2016 and April 4, 2015, respectively (in millions):
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 as part of net earnings. The following table provides details about reclassifications out of accumulated other comprehensive income and the line items impacted in the Company's Condensed Consolidated Statements of Earnings during the three months ended April 2, 2016 and April 4, 2015, respectively (in millions):
The Company's realized (gains) and losses on its available-for-sales securities and derivative financial instruments are computed using the specific identification method. Supplemental Equity Information On February 19, 2016, the Company's Board of Directors authorized a cash dividend of $0.31 per share which was paid on April 29, 2016 to shareholders of record as of March 31, 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 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. The supplemental equity schedules below present changes in the Company's noncontrolling interest and total shareholders' equity for the three months ended April 2, 2016 and April 4, 2015, respectively (in millions):
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Income Taxes |
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Apr. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | INCOME TAXES As of April 2, 2016, the Company had $400 million accrued for uncertain tax positions, all of which would affect the Company’s effective tax rate if recognized. Additionally, the Company had $63 million accrued for gross interest and penalties as of April 2, 2016. At January 2, 2016, the liability for uncertain tax positions was $338 million and the accrual for gross 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. The Company has substantially concluded all material U.S. federal, state, foreign and local income tax matters for all tax years through 2004. In April 2015, the U.S. Internal Revenue Service (IRS) completed an audit of the Company’s 2010 and 2011 tax returns and proposed adjustments in an audit report. In February 2014, the IRS completed an audit of the Company’s 2008 and 2009 tax returns and also proposed adjustments in an audit report. The Company's effective income tax rate was 30.1% and 16.9% for the first quarter of 2016 and 2015, respectively. The Company’s effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes and foreign taxes that are different than the U.S. federal statutory rate. In addition, the effective tax rate can be impacted each period by discrete income tax factors and events. During the three months ended April 2, 2016, special charges, acquisition-related costs, other-than-temporary impairments and discrete income tax items unfavorably impacted the effective rate by 18.0 percentage points. During the first quarter of 2016, the European Commission concluded that decisions by the tax authorities in Belgium regarding corporate income taxes paid under certain excess profit rulings, including the ruling previously granted to one of the Company’s subsidiaries, did not comply with European Union rules on state aid. Based on the applicability of this conclusion to the Company's 2009 through 2014 tax returns in Belgium, the Company recorded a liability of 45 million Euros ($52 million as of April 2, 2016) including interest during the first quarter of 2016 to reserve for this uncertain tax position. As discussed in Note 1, the Company adopted ASU No. 2015-17 in light of the process simplification provided by the ASU. As a result, the January 2, 2016 balances of deferred tax assets and deferred tax liabilities previously reported were impacted as follows (in millions):
In conjunction with the adoption of this ASU, the Company reclassified $81 million of remaining other current tax assets to other current assets to conform to the 2016 presentation. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS The fair value measurement standard applies to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period) and certain financial assets and liabilities that are measured at fair value on a nonrecurring basis. The Company also maintains other financial instruments that approximate their fair value due to their short 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-market securities, available-for-sale marketable securities, trading marketable securities, derivative instruments and contingent consideration liabilities. The Company does not have any material nonfinancial assets or liabilities that are measured at fair value on a recurring basis. A summary of the valuation methodologies used for the respective financial assets and liabilities measured 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 are recorded 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 are traded in active markets and are recorded at fair value based upon the closing stock prices. The Company classifies these securities as level 1. The following table summarizes the components of the balance of the Company’s available-for-sale securities at April 2, 2016 and January 2, 2016 (in millions):
Trading securities: The Company’s trading securities include publicly-traded mutual funds that are traded in active markets and are recorded at fair value based upon quoted market prices of the net asset values of the funds. The Company classifies these securities as level 1. Derivative instruments: Fair values for the Company’s derivative financial instruments are based on quoted market prices of comparable instruments, if available, or more commonly on standard pricing models that use readily observable market parameters from industry standard data providers as their basis. These models reflect contractual terms of the derivatives, including period to maturity and market-based parameters such as 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 are readily observable from actively quoted markets. The Company classifies these instruments as level 2 (see Note 9). Contingent consideration liabilities: The fair value of the Company's contingent liabilities is initially measured based on the consideration expected to be transferred (probability-weighted), discounted back to present value. The discount rate used is determined at the time of measurement in accordance with accepted valuation methods. The Company measures the liability 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 the 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 value measurements. A summary of assets and liabilities measured at fair value on a recurring basis at April 2, 2016 and January 2, 2016 is as follows (in millions):
The recurring Level 3 fair value measurements of the Company's contingent consideration liabilities include the following significant unobservable inputs (in millions):
Additionally, the following table provides a reconciliation of the beginning and ending balances of the Company's recurring Level 3 fair value measurements (in millions):
In April 2016, the Company paid $124 million to settle the contingent consideration liability associated with the Spinal Modulation regulatory-based milestone. 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 at fair value on a nonrecurring basis in periods subsequent to initial recognition. For St. Jude Medical, such measurements of fair value primarily relate to long-lived assets, goodwill, indefinite-lived intangible assets and cost method investments. Other than the long-lived asset impairment discussed as follows, there were no other material impairments that were measured at fair value on a nonrecurring basis for the three months ended April 2, 2016 or April 4, 2015. Long-lived assets: During the first quarter of 2016, the Company recognized $5 million of fixed asset write-offs primarily associated with projects abandoned as the Company continues 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 projects abandoned under the realigned structure. Typically the Company measures these assets using independent appraisals, market models and discounted cash flow models. However, as these fixed assets had no alternative future use and therefore no discrete future cash flows, the assets were fully impaired. Cost method investments: The Company also holds investments in equity securities that are accounted for as cost method investments, which are classified as other assets and measured at fair value on a nonrecurring basis. The carrying value of these investments was $59 million and $80 million as of April 2, 2016 and January 2, 2016, respectively. During the first quarter of 2016, the Company concluded that adverse regulatory rulings and subsequent operational decisions made by an entity in which the Company had strategic debt and equity investments had an adverse impact on the fair values of those investments. 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 equity investment and convertible debt investment. The fair value of the Company’s remaining cost method investments was not estimated during the first quarter of 2016 since there were no identified events or changes in circumstances 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 April 2, 2016 (measured using quoted prices in active markets) was $3,402 million compared to the aggregate carrying value of $3,253 million (inclusive of unamortized debt discounts). The fair value of the Company’s variable-rate debt obligations at April 2, 2016 approximated its aggregate $2,805 million carrying value due to the variable interest rate and short-term nature of these instruments. The Company also had $270 million and $393 million of cash equivalents invested in short-term deposits and interest and non-interest bearing bank accounts at April 2, 2016 and January 2, 2016, respectively, the cost basis of which approximated the fair value. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | DERIVATIVE FINANCIAL INSTRUMENTS The Company uses foreign currency forward contracts, interest rate swaps and interest rate contracts to manage risks generally associated with foreign exchange rate and interest rate fluctuations. The information that follows explains the various types of derivatives financial instruments and how they impacted the Company's financial position and performance. Cash Flow Hedges Foreign exchange forward contracts: During 2015, the Company began to enter into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The Company hedges its exposure to the variability in future cash flows of forecasted transactions for periods of up to 24 months. The dollar equivalent gross notional amount of the Company’s foreign exchange forward contracts designated as cash flow hedges at April 2, 2016 was approximately $970 million. Hedge ineffectiveness recognized in earnings on cash flow hedges during the three months ended April 2, 2016 and April 4, 2015 was not material. As of April 2, 2016, the Company had a balance of $23 million associated with the after-tax net unrealized loss position related to foreign currency forward contracts recorded in accumulated other comprehensive income. Based on exchange rates as of April 2, 2016, the Company expects to reclassify net losses of approximately $14 million after-tax to earnings over the next 12 months contemporaneously with the earnings effects of the related forecasted transactions (with the impact 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, including the location in the Condensed Consolidated Statements of Earnings and the Condensed Consolidated Statements of Comprehensive Income (in millions):
Reclassifications from accumulated other comprehensive income into earnings include accumulated (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 foreign currency forward contracts and foreign currency forward contracts that the Company utilizes to economically hedge the foreign currency impact of assets and liabilities denominated in nonfunctional currencies. The dollar equivalent gross notional amount of these forward contracts not designated as hedging instruments totaled $204 million as of April 2, 2016. The fair value of the Company's outstanding contracts was not material as of April 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):
The net (gains) losses were almost entirely offset by corresponding net (losses) gains on the 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 instruments and their locations in the Condensed Consolidated Balance Sheets as of April 2, 2016 and January 2, 2016 (in millions):
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 April 2, 2016, St. Jude Medical, Inc. had International Swaps and Derivatives Association agreements with four applicable 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 of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of the netting arrangements with each of the counterparties as of April 2, 2016 and January 2, 2016, respectively (in millions):
For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period. Derivatives not subject to master netting agreements are not eligible for net presentation. As of both April 2, 2016 and January 2, 2016, no cash collateral had been received or pledged related to these derivative instruments. |
Business Combinations |
3 Months Ended |
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Apr. 02, 2016 | |
Business Combinations [Abstract] | |
Business Combination | BUSINESS COMBINATIONS Fiscal Year 2016 Middle East distributor: In February 2016, the Company acquired certain assets and assumed certain liabilities of a medical device distributor in the Middle East for $19 million of total purchase consideration. The transaction was accounted for as a purchase 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. Fiscal Year 2015 Thoratec: The Company continues to evaluate information about facts and circumstances that existed as of the date Thoratec 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 quarter of 2016, the Company did not recognize adjustments to provisional amounts. |
Abbott Transaction |
3 Months Ended |
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Apr. 02, 2016 | |
Subsequent Events [Abstract] | |
Abbott Transaction | ABBOTT TRANSACTION On April 27, 2016, the Company and Abbott Laboratories (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 the right to receive (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 adjusted pursuant 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 majority of all outstanding Company common shares, (ii) effectiveness of the Registration Statement on Form S-4 to be filed with the Securities and Exchange Commission by Abbott in connection with the registration of the Abbott common shares to be issued in the merger, (iii) the expiration of the waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and receipt of other specified antitrust approvals, (iv) subject to specified materiality thresholds, the accuracy of the representations and warranties of the other 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) and the receipt by each party of opinions to the effect that the transaction will be treated as a reorganization for U.S. federal income tax purposes. On May 2, 2016, a shareholder of the Company filed a purported class action lawsuit in Ramsey County, Minnesota, captioned Silverman v. St. Jude Medical, Inc., et al., 62-CV-16-2872. The lawsuit alleges that the Company's directors breached their fiduciary duties in connection with the transactions contemplated by the Merger Agreement (the “Proposed Transaction”) and that the Abbott defendants aided and abetted those breaches. The lawsuit seeks, among other things, to enjoin the Proposed Transaction and an order directing defendants to account to plaintiffs for all damages allegedly suffered by the proposed class. The Company and its directors intend to vigorously defend against the allegations in the complaint. |
Basis Of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Accounting Pronouncements, Policy | New Accounting Pronouncements: The following table provides a description of recent accounting pronouncements adopted and those standards not yet adopted with potential for a material impact on the Company's financial statements or disclosures.
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Debt (Tables) |
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Apr. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt 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):
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Schedule of Maturities of Long-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 April 2, 2016 were as follows (in millions):
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Basis Of Presentation (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements | New Accounting Pronouncements: The following table provides a description of recent accounting pronouncements adopted and those standards not yet adopted with potential for a material impact on the Company's financial statements or disclosures.
As discussed in Note 1, the Company adopted ASU No. 2015-17 in light of the process simplification provided by the ASU. As a result, the January 2, 2016 balances of deferred tax assets and deferred tax liabilities previously reported were impacted as follows (in millions):
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Commitments And Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Product Warranty Liability | Changes in the Company’s product warranty liability during the three months ended April 2, 2016 and April 4, 2015 were as follows (in millions):
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Special Charges (Tables) |
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2016 Initiatives | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Activity Related To Special Charge Restructuring Accrual | A summary of the activity related to the 2016 Initiatives accrual is as follows (in millions):
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Manufacturing and Supply Chain Optimization Plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Activity Related To Special Charge Restructuring Accrual | A summary of the activity related to the Manufacturing and Supply Chain Optimization Plan accrual is as follows (in millions):
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2012 Business Realignment Restructuring Plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Activity Related To Special Charge Restructuring Accrual | A summary of the activity related to the 2012 Business Realignment Plan accrual is as follows (in millions):
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Net Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Computation Of Basic And Diluted 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):
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Accumulated Other Comprehensive Income (Loss) and Supplemental Equity Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | 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 net earnings for the three months ended April 2, 2016 and April 4, 2015, respectively (in millions):
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Reclassification out of Accumulated Other Comprehensive Income | The following table provides details about reclassifications out of accumulated other comprehensive income and the line items impacted in the Company's Condensed Consolidated Statements of Earnings during the three months ended April 2, 2016 and April 4, 2015, respectively (in millions):
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Schedule of Noncontrolling Interest | The supplemental equity schedules below present changes in the Company's noncontrolling interest and total shareholders' equity for the three months ended April 2, 2016 and April 4, 2015, respectively (in millions):
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Income Taxes (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 02, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of ASU Updates and Tax Impacts | New Accounting Pronouncements: The following table provides a description of recent accounting pronouncements adopted and those standards not yet adopted with potential for a material impact on the Company's financial statements or disclosures.
As discussed in Note 1, the Company adopted ASU No. 2015-17 in light of the process simplification provided by the ASU. As a result, the January 2, 2016 balances of deferred tax assets and deferred tax liabilities previously reported were impacted as follows (in millions):
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Fair Value Measurements (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 02, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Components Of Available-For-Sale Securities | The following table summarizes the components of the balance of the Company’s available-for-sale securities at April 2, 2016 and January 2, 2016 (in millions):
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Summary Of Financial Assets and Liabilities Measured At Fair Value On A Recurring Basis | A summary of assets and liabilities measured at fair value on a recurring basis at April 2, 2016 and January 2, 2016 is as follows (in millions):
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Summary of Level 3 Fair Value Measurements of Contingent Consideration Liability | The recurring Level 3 fair value measurements of the Company's contingent consideration liabilities include the following significant unobservable inputs (in millions):
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Unobservable Input Reconciliation of Contingent Consideration Liability | Additionally, the following table provides a reconciliation of the beginning and ending balances of the Company's recurring Level 3 fair value measurements (in millions):
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Derivative Financial Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Derivative Instruments (Gain) Loss | The following table provides the (gains) losses related to derivative instruments designated as cash flow hedges, including the location in the Condensed Consolidated Statements of Earnings and the Condensed Consolidated Statements of Comprehensive Income (in millions):
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Derivative Instruments, Gain (Loss), Not Designated as Hedging Instrument | 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):
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Schedule of Fair Value of Derivative Instruments in Statement of Financial Position | The following table summarizes the fair value of the Company’s derivative instruments and their locations in the Condensed Consolidated Balance Sheets as of April 2, 2016 and January 2, 2016 (in millions):
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Schedule of Offsetting Derivative Assets | The following tables provide information as though the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of the netting arrangements with each of the counterparties as of April 2, 2016 and January 2, 2016, respectively (in millions):
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Basis Of Presentation (Details) |
3 Months Ended |
---|---|
Apr. 02, 2016
catergory
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of principal product categories | 5 |
Debt - Schedule of Maturities of Long-term Debt (Details) $ in Millions |
Apr. 02, 2016
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
Remainder of 2016 | $ 406 |
2017 | 231 |
2018 | 598 |
2019 | 260 |
2020 | 2,501 |
After 2020 | $ 2,100 |
Debt (Details) - 3 months ended Apr. 02, 2016 ¥ in Millions |
USD ($) |
JPY (¥) |
USD ($) |
---|---|---|---|
Debt Instrument | |||
Repayments of commercial paper | $ 225,000,000 | ||
2016 Senior Notes | Senior Notes | |||
Debt Instrument | |||
Face amount of debt | $ 500,000,000 | ||
Debt instrument term | 5 years | ||
Stated percentage | 2.50% | 2.50% | |
Term loan due August 2020 | Loans Payable | |||
Debt Instrument | |||
Face amount of debt | $ 2,600,000,000.0 | ||
Debt instrument term | 5 years | ||
Remaining borrowing capacity | 500,000,000 | ||
Principal payment | $ 26,000,000 | ||
Prepaid amount of debt | $ 100,000,000 | ||
Yen Denominated Credit Facilities, Renewed through March 2016 | Line of Credit | |||
Debt Instrument | |||
Line of credit | ¥ 3,250 | $ 29,000,000 | |
Extension period | 1 year | ||
Basis spread on variable rate | 0.25% | ||
Yen Denominated Credit Facilities, Renewed through March 2016 | Line of Credit | Japan, Yen | |||
Debt Instrument | |||
Description of variable rate basis | Yen LIBOR |
Commitments And Contingencies (Details) |
1 Months Ended |
---|---|
Mar. 31, 2013
case
| |
December 2012 Securities Litigation | |
Loss Contingencies [Line Items] | |
Number of cases consolidated | 2 |
Commitments And Contingencies - Schedule Of Product Warranty Liability (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 02, 2016 |
Apr. 04, 2015 |
|
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance at beginning of period | $ 31 | $ 35 |
Warranty expense (benefit) recognized | (1) | (2) |
Warranty credits issued | (4) | (1) |
Balance at end of period | $ 26 | $ 32 |
Net Earnings Per Share - Schedule of Computation of Basic and Diluted Net Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 02, 2016 |
Apr. 04, 2015 |
|
Earnings Per Share [Abstract] | ||
Net earnings attributable to St. Jude Medical, Inc. | $ 95 | $ 262 |
Basic weighted average shares outstanding | 283.5 | 283.0 |
Dilution associated with stock-based compensation plans | 2.9 | 4.1 |
Diluted weighted average shares outstanding | 286.4 | 287.1 |
Basic net earnings per share attributable to St. Jude Medical, Inc. (USD per share) | $ 0.33 | $ 0.93 |
Diluted net earnings per share attributable to St. Jude Medical, Inc. (USD per share) | $ 0.33 | $ 0.91 |
Anti-dilutive shares of common stock excluded from diluted net earnings per share attributable to St. Jude Medical, Inc. (in shares) | 8.4 | 4.1 |
Accumulated Other Comprehensive Income (Loss) and Supplemental Equity Information (Details) - USD ($) $ / shares in Units, shares in Millions |
1 Months Ended | 3 Months Ended | |||
---|---|---|---|---|---|
Feb. 19, 2016 |
Mar. 02, 2015 |
Apr. 02, 2016 |
Apr. 04, 2015 |
Jan. 13, 2015 |
|
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||
Cash dividends declared per share (USD per share) | $ 0.31 | $ 0.31 | $ 0.29 | ||
Authorized amount | $ 500,000,000 | ||||
Shares repurchased, shares | 7.5 | ||||
Shares repurchased, value | $ 500,000,000 | $ 500,000,000 | |||
Average repurchase price (USD per share) | $ 66.96 |
Income Taxes (Details) € in Millions, $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Apr. 02, 2016
EUR (€)
|
Apr. 04, 2015 |
Apr. 02, 2016
USD ($)
|
Jan. 02, 2016
USD ($)
|
|
Income Tax Disclosure [Abstract] | ||||
Unrecognized tax benefits | $ 400 | $ 338 | ||
Accrued interest and penalties | 63 | $ 58 | ||
Effective income tax rate reconciliation, percent | 30.10% | 16.90% | ||
Special charges, acquisition-related costs, adjustments to contingent consideration liabilities and discrete tax items | 18.00% | |||
Liability for uncertain tax positions | € 45 | $ 52 |
Fair Value Measurements - Summary Of Components Of Available-For-Sale Securities (Details) - USD ($) $ in Millions |
Apr. 02, 2016 |
Jan. 02, 2016 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Adjusted cost | $ 4 | $ 5 |
Gross unrealized gains | 5 | 6 |
Gross unrealized losses | 0 | (1) |
Fair value | $ 9 | $ 10 |
Derivative Financial Instruments Summary of Derivative Instruments (Gain) Loss (Details) - Foreign currency forward contracts - Designated as Hedging Instrument - Cash Flow Hedging - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 02, 2016 |
Apr. 04, 2015 |
|
Derivative Instruments, (Gain) Loss [Line Items] | ||
Pre-tax (gain) loss recognized in other comprehensive income on effective portion of derivative | $ 39 | $ (34) |
Cost of sales | ||
Derivative Instruments, (Gain) Loss [Line Items] | ||
Pre-tax (Gain) Loss Recognized in Earnings on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Income | (6) | 0 |
Ineffective Portion of (Gain) Loss on Derivative and Excluded from Effectiveness Testing Recognized in Earnings | $ 0 | $ 0 |
Derivative Financial Instruments Summary of Derivative Instruments (Gain) Loss, Not Designated as Hedging (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 02, 2016 |
Apr. 04, 2015 |
|
Foreign currency forward contracts | Other (income) expense | Not Designated as Hedging Instrument | ||
Derivative Instruments, (Gain) Loss [Line Items] | ||
(Gain) Loss on Derivatives Recognized in Earnings | $ 3 | $ (9) |
Derivative Financial Instruments Schedule of Offsetting Derivative Assets (Details) - USD ($) $ in Millions |
Apr. 02, 2016 |
Jan. 02, 2016 |
---|---|---|
Assets | ||
Gross amount of derivatives subject to master netting agreements | $ 0 | $ 3 |
Gross amount of eligible offsetting recognized derivative liabilities | 0 | 1 |
Gross amount of derivatives not subject to master netting agreements | 0 | 13 |
Gross amount of derivatives | 0 | 16 |
Gross amount of cash collateral received not offset | 0 | 0 |
Net amount of derivatives | 0 | 2 |
Total | 0 | 15 |
Liabilities | ||
Gross amount of derivatives subject to master netting agreements | 19 | 1 |
Gross amount of eligible offsetting recognized derivative assets | 0 | 1 |
Gross amount of derivatives not subject to master netting agreements | 17 | 8 |
Gross amount of derivatives | 36 | 9 |
Cash collateral pledged | 0 | 0 |
Net amount of derivatives | 19 | 0 |
Total | $ 36 | $ 8 |
Business Combinations (Details) - USD ($) $ in Millions |
1 Months Ended | ||
---|---|---|---|
Feb. 29, 2016 |
Apr. 02, 2016 |
Jan. 02, 2016 |
|
Business Acquisition [Line Items] | |||
Goodwill | $ 5,676 | $ 5,651 | |
Middle East distributor | |||
Business Acquisition [Line Items] | |||
Total purchase consideration | $ 19 | ||
Goodwill | 5 | ||
Customer relationship | Middle East distributor | |||
Business Acquisition [Line Items] | |||
Intangible assets from business combination | $ 7 |
Abbott Transaction (Details) - Subsequent Event |
Apr. 27, 2016
$ / shares
|
---|---|
Subsequent Event [Line Items] | |
Business acquisition, share price | $ 46.75 |
Business acquisition, share ratio | 0.8708 |
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