BAX 10-K & 10-Q changes, risk factors and insider trading

In addition to the other information in this Annual Report on Form 10-K, stockholders or prospective investors should carefully consider the following risk factors for a description of the principal risks that we face. If any of the events described below occurs, our business, results of operations, financial condition, cash flows, future growth prospectsprospects, andreputation or stock price could suffer. Further, other unknown or unpredictable factors could also have materialsignificant adverse effects on our future results.

Risks Relating to Our Business and Financial Performance and Our Common Stock

•Global economic conditions, including inflation and supply chain disruptions,inflation, have adversely affected, and could continue to adversely affect, our operations.

•Changes in foreign currency exchange rates and interest rates have had, and may in the future have, an adverse effect on our results of operations, financial condition, cash flowsflows, and liquidity.

•Future material impairments in the value of our goodwill, intangible assetsassets, and other long-lived assets,assets would negatively affect our operating results.

•IfWe wemay arebe unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price or if we experience other manufacturing, sterilization, supply or distribution difficulties, our business, results of operations, financial condition and cash flows may be adversely affected.price.

•BreachesWe may experience breaches and breakdowns affecting our information technology systems or protected information, including from obsolescence, cyber security breaches and data leakage, could have a material adverse effect on us.leakage.

•If reimbursement or other payment for our current or future products is reduced or modified in the United StatesU.S. or in foreign countriescountries, or there are changes to policies with respect to pricing, taxationtaxation, or rebates, our business could suffer.

•Our Amended and Restated By-LawsBylaws could limit our stockholders’ ability to choose their preferred judicial forum for disputes with us or our directors, officers, or employees.

Risks RelatingRelated to Our Financial Performance and Our Common Stock

Baxter International Inc. is a global medical technology with approximately 38,00037,500 employees worldwide who are engaged in the development, manufacture and sale of a broad range of products, digital health solutions and therapies used by hospitals, nursing homes, rehabilitation centers, ambulatory surgery centers, doctors’ offices and patients at home under physician supervision. Our global footprint and the critical nature of our products and services, which are sold in over 100 countries as of December 31, 2024, after giving effect to the Kidney Care sale,2025, play a key role in expanding access to healthcare in emerging and developed countries.

On August 12, 2024, we entered into an Equity Purchase Agreement (EPA ) with certain affiliates of Carlyle Group Inc. (Carlyle) to sell our Kidney Care business, which will be known as Vantive.business. That business, which is now known as Vantive Health LLC (Vantive) is comprised of our former Kidney Care segment, provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies.segment. On January 31, 2025, we completed the sale of our Kidney Care business to Carlyle for an aggregate purchase price of $3.80 billion in cash, subject to certain closing cash, working capital and debt adjustments. After giving effect to certain adjustments, we received approximately $3.71 billion pre-tax cash proceeds at closing of the transaction with the net after tax proceeds currentlyof estimatedapproximately $3.3 billion, prior to begiving approximately $3.4 billion, subjecteffects to certain post-closing adjustments. As of FebruaryDecember 21,31, 2025, we repaid $3.13$3.81 billion of short- and long-termlegacy indebtedness in 2025 (which repayment does not include $2.00 billion of indebtedness repaid with proceeds from a new notes offering) primarily with the net after-tax cash proceeds from the sale of our Kidney Care business, and we expect to use substantially all of the remaining net after-tax proceeds to continue to repay indebtedness through the second quarter of 2025.business.

We have incurred and expect to incur additional dis-synergies following our sale of our Kidney Care business due to the reduced size of our company and, as a result, we have begun to undertake certain restructuring actions (and will need tointend undertake additional actions) to help ensure that our cost structure is appropriate to support our remaining businesses.

Implementation of New Operating Model and Resulting Segment Change In the third quarter of 2023, we completed the implementation of a new operating model intended to simplify and streamline our operations and better align our manufacturing and supply chain to our commercial activities. Under this operating model, our business is currently comprised of three reportable segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals.Pharmaceuticals Our(each segmentsdiscussed were changed during the third quarter of 2023 to align with our new operating model.below).

On September 29, 2023, we completed the sale of our BioPharma Solutions (BPS) business and received cash proceeds of $3.96 billion from that transaction. The results of operations and cash flows of our BPS business, including the $2.88 billion pre-tax gain ($2.59 billion net of tax) from the sale of that business and the related cash proceeds received, are reported as discontinued operations in the accompanying consolidated financial statements. We used substantially all of the after-tax proceeds from this transaction to repay certain of our debt obligations, including $514 million of commercial paper borrowings and $2.28 billion of long-term debt that we repaid during the fourth quarter of 2023, as well as €750 million of senior notes that we repaid during the second quarter of 2024.

Our global net sales totaled $10.64$11.24 billion in 2024,2025, an increase of 3%6% over 20232024 on a reported basis and 3% on aan constantoperational currencysales basis. International sales totaled $4.79$5.12 billion in 2024,2025, an increase of 5%7% compared to 20232024 on a reported basis and 6%5% on aan constantoperational currencysales basis. Sales in the United States totaled $5.85$6.12 billion in 2024,2025, an increase of 1%5% compared to 2023.2024 on a reported basis and 1% on an operational basis. Refer to the Net Sales discussion in the Results of Operations section below for more information related to changes in net sales on aan constantoperational currencysales basis.

While we have faced and may continue to face operational and global macroeconomic challenges, our financial position remains strong, with operating cash flows from continuing operations totaling $819$951 million in 2024.2025. We have continued to execute on our disciplined capital allocation framework, as discussed in the "Business Strategy" section in Item 1. Business of this Annual Report on Form 10-K, which is designed to optimize stockholder value creation through reinvestment in oura businesses, dividendsmanner and share repurchases, as well as acquisitions and other business development initiatives and debt repayments,timing consistent with our previously stated commitment to achieve our net leverage targets.

Capital expenditures totaled $446$513 million in 20242025 as we continued to invest across our businesses to support future growth, including additional investments in support of new and existing product capacity expansions. Our investments in capital expenditures in 20242025 were focused on projects that are structured to improve production efficiency, enhance our quality systems and optimize manufacturing capabilities to support our business growth.

Supply ConstraintsConstraints, Tariffs and Global Economic Conditions

TheOver the past few years, the existence of high inflation rates in the United States and in many of the countries where we conduct business has resulted in, and may in the future result in, higher interest rates, shipping costs, labor costs, and other costs and expenses. Additionally, adverse changes in foreign currency exchange rates have increased, and could continue to increase, our costs of sourcing certain raw materials in some jurisdictions. We have experienced and mayare likely in the future to experience inflationary and other increases in manufacturing costs and operating expenses (including as a result of the aforementioned tariffs) and weare maylimited notin beour ableability to pass these cost increases on to our customers in a timely manner or at all,all due to the longer term nature of our customer contracts and arrangements, which could have a material adverse impact on our profitability and results of operations. Inflation and general macroeconomic factors have caused certain of our customers to reduce or delay orders for our products and services and could cause them to do so in the future, which could have a material adverse impact on our sales and results of operations.

As a medical products company, our operations and many of the products manufactured or sold by us are subject to extensive regulation by numerous government agencies, both within and outside the United States. These regulations (as described in Item 1, Government Regulation, of this Annual Report on Form 10-K) require that we obtain specific approval from FDA or the applicable non-U.S. regulatory authorities before we can market and sell most of our products in a particular country. Failure to obtain or maintain those approvals orapprovals, clearances (including temporary importation authorizations), licenses or other marketing authorizations could have a material adverse impact on our business (including with respect to our ability to compete in the product markets in which we currently operate). Furthermore, FDA in the United States, the EMAEuropean Medicines Agency in the Europe Union, the Medicines & Healthcare products Regulatory Agency in the United Kingdom, Health Canada in Canada, the China Food and MHRADrug in Europe, the NMPAAdministration in China, and other government agencies, inside and outside of the United States, administer requirements covering the testing, safety, effectiveness, manufacturing, labeling, promotion and advertising, pricing, distribution, and post-market surveillance of our products. Our failure to comply with these requirements have subjected us to and may in the future subject us to various actions,actions. includingThese have included, or may in the future include, warning letters, product recalls or seizures, import restrictions, monetary sanctions, injunctions to halt the manufacture andor distribution of products, civil or criminal sanctions, costly litigation, refusal of a government to grant approvalslicenses or licenses,other marketing authorizations, or restrictions on our operations or withdrawal of existing approvals and licenses, and may have a material adverse impact on our results of operations.operations (including on our ability to launch new products and demand for those products). For more information on compliance actions taken by us, refer to the discussion under the caption entitled “Certain Regulatory Matters” herein.

Our presentation of percentage changes in net sales at operational sales growth excludes the impact of the Kidney Care Manufacturing and Supply Agreement (Kidney Care MSA) sales not reflected in reportable segments, reflects the previously announced exit of IV solutions in China in our Infusion Therapies & Technologies division, in our Medical Products & Therapies reportable segment, and is calculated at constant currency rates,rates. whichConstant iscurrency rates are computed using current period local currency sales at the prior period’speriod's foreign exchange rates,rates. Operational sales growth is a non-GAAP financial measure. ThisThe measure provides information about growth (or declines) in our net sales as if the Kidney Care MSA and the exit of IV solutions in China had no impact on our sales and foreign currency exchange rates had not changed between the prior period and the current period. We believe that the non-GAAP measure of percent change in net sales at constantoperational currency rates,growth, when used in conjunction with the U.S. GAAP measure of percent change in net sales at actual currency rates, may provide a more complete understanding and facilitate a fuller analysis of our results of operations, particularly in evaluating performance from one period to another.

3 Percent change in net sales at constantoperational currencysales ratesgrowth is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

1 Percent change in net sales at constantoperational currencysales ratesgrowth is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

Advanced Surgery net sales increased 5%9% for the year ended December 31, 2024,2025, as compared to the prior year period, driven by growth in hemostats and sealants and was primarily attributable to increased sales volume.volume globally. Foreign currency exchange rates adverselyfavorably impacted net sales by 1% for the year ended December 31, 2024,2025, as compared to the prior year period.

Our Healthcare Systems & Technologies segment includes sales of our connected care solutions and collaboration tools, including smart bed systems, patient monitoring systems and diagnostic technologies, respiratory health devices and advanced equipment for the surgical space, including surgicaloperating videoroom integration technologies, precision positioning devices and other accessories.

1 Percent change in net sales at constantoperational currencysales ratesgrowth is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

Front Line Care net sales increased 6%2% for the year ended December 31, 2023,2025, as compared to the prior year period, primarily driven by increasedgrowth demand forin our cardiology products,products patientpartially monitoringoffset systemsby anda physicalstrategic assessmentproduct tools.exit Performance in the current year benefited from backlog reductions due to improved availability of component parts used in certain ofwithin our products.respiratory health products business.

1 Percent change in net sales at constantoperational currencysales ratesgrowth is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

Injectables and Anesthesia net sales increaseddecreased 2% for the year ended December 31, 2024,2025, as compared to the prior year period, primarily due to growth in our U.S. specialty injectable products, driven by strongpricing salescompetition volumeand lower demand in ourspecialty core portfolio and recent product launches,injectables, partially offset by declinesgrowth forin inhaled anesthetics.anesthesia Foreignin currencycertain exchangeinternational rates adversely impacted net sales by 1% for the year ended December 31, 2024, as compared to the prior year period.markets.

Drug Compounding net sales increased 10% for the year ended December 31, 2023,2025, as compared to the prior year period, driven by improved product mix and increased demand for our international pharmacy compounding services.offerings. Foreign currency exchange rates adverselyfavorably impacted net sales by 2%1% for the year ended December 31, 2023,2025, as compared to the prior year period.

During the years ended December 31, 2024, 20232025 and 2022,2024, we earned $67 million, $87$381 million and $177$67 million, respectively, of revenues that were not attributable to our reportable segments. In the current and prior year periods,period, Other sales primarily represent revenue recognized under the Kidney Care MSA, entered into upon the sale of our Kidney Care business in January 2025, and to a lesser extent, revenues earned by certain of our manufacturing facilities from contract manufacturing activities. The years ended December 31, 2023 and 2022 also included royalty income under a business development arrangement. The decrease in Other sales for the year ended December 31, 2024 as compared toIn the prior year periodperiod, reflectsOther lowersales primarily represented revenues earned by certain of our manufacturing facilities from contract manufacturing volume. The decrease for the year ended December 31, 2023 as compared to the prior year period was primarily driven by lower contract manufacturing volume and, to a lessor extent, termination of the royalty arrangement following our acquisition of the rights to the underlying product.activities.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2025 (2025 Annual Report) for management’s discussion and analysis of our financial condition and results of operations. The following is management’s discussion and analysis of our financial condition and results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025.

On January 31, 2025, we completed the sale of our former Kidney Care segmentbusiness (which is now known as Vantive Health LLC (Vantive)) to certain affiliates of Carlyle Group Inc. (Carlyle) and ultimately received approximately $3.2 billion of after-tax cash proceeds that were used to repay short- and long-term legacy indebtedness in 2025.

Additionally,In the second quarter of 2026, we continueimplemented toa evolve ournew operating model to better align decision-making, cost structure, and commercial execution across our businesses. As part of this work, we continue to focus on increasing efficiencies through increased automation and digitization (including through our thoughtful exploration of artificial intelligence initiatives). Beginning in October 2025, we launched Baxter Growth and Performance system, our high performance business system grounded in continuous improvement and management by objectives.

During 2025, we initiated voluntary corrections for the Novum LVP. The U.S. Food and Drug Administration (FDA) classified these voluntary corrections as Class I recalls. We have implemented certain corrections related to the recalls,recalls and arehave developingidentified additional corrections relatedto toaddress these recalls, some of which may require regulatory clearance or approval.approval, and are in the early stages of verification testing. In July 2025, we elected to temporarily stop distributing and installing the Novum LVP in the U.S. and Canada, except in the case of medical necessity. The timing of the release of the shipshipment and installation hold remains uncertain. As a result, we expect no meaningful sales of Novum LVP while these holds are in effect. Our Spectrum IQ large volume pump remains available as an alternative option for customers with Novum LVPs. In 2025, we recorded estimates for sales reductions, for returns or exchanges of Novum LVP, and certain other charges, including estimates of reserves for remediation costs and inventory and contract asset write-downs associated with these Novum LVP corrections. We regularly review these estimates (including those associated with any future additional corrections and customer returns or exchanges), which may be subject to additional change in the future. In the first quarter of 2026, we adjusted certain estimates associated with these Novum LVP corrections that were not material to our condensed consolidated financial statements.statements; no such adjustments were recorded in the second quarter of 2026.

We have experienced challenges to our global supply chain, including, as a result of adverse impacts from significant weather events like Hurricane Helene and other global macroeconomic and geopolitical events,events (including the ongoing conflict in Iran), which have had a negative impact on our results of operations and may do so in the future. In addition, announcements regarding changes in U.S. trade policies and practices, including the implementation of global tariffs and proposed further tariffs (including potential medical device and pharmaceutical tariffs), the Supreme Court's decision to invalidate tariffs levied under the International Emergency Economic Powers Act,Act (IEEPA), and responses from other jurisdictions, have significantly affected financial markets and economic conditions. While inIn the second quarter of 20262026, we submittedrecorded refundtariff requestsrefunds of approximately $75 million to costs of goods sold in our condensed consolidated statements of income (loss) (which is inclusive of $65 million in prepaid expenses and other current assets) for thoseprobable tariffreceipt of amounts eligible for refund in the first phaseand second phases of the process and expect to submit additional refund requests in future phases subject to further rulings by the Court of International Trade,Trade. While uncertainty remains surrounding the economic impact of the global tariffs and the timing and quantum of any additional amounts we may ultimately recover on ourcurrent or future refund claims, and therefore, we havedo not recorded an assetexpect for tariffany refundsadditional inamounts to be material to our condensed consolidated financial statements as of March 31, 2026.statements. We currently expect that our results will continue to be adversely impacted by Section 122 duties and recently announced Section 301 tariffs that werehave been imposed following the judicial review of certain tariffs. Additionally, continued global macroeconomic uncertainty, including in trade policies and practices, elevated tariffs and operational and policy changes in the governments of the U.S. and other countries and other geopolitical events or conflicts (including the ongoing conflict in Iran and the potential for escalation of this and other conflicts), could contribute to further market volatility, deteriorating or prolonged weakened economic conditions and decreased hospital capital spending levels. We continue to closely monitor these developing situations and the estimated impact on our business, results of operations, financial condition and cash flows.

Over the past few years, the existence of high inflation rates in the United States and in many of the countries where we conduct business has resulted in, and may in the future result in, higher interest rates, shipping costs, labor costs, and other costs and expenses. Additionally, adverse changes in foreign currency exchange rates have increased, and could continue to increase, our costs of sourcing certain raw materials in some jurisdictions. We have experienced and are likely in the future to continue to experience inflationary and other increases in manufacturing costs and operating expenses (including as a result of the aforementioned tariffs and conflicts) and are limited in our ability to pass these cost increases on to our customers in a timely manner or at all due to the longer term nature of our customer contracts and arrangements, which could have a material adverse impact on our profitability and results of operations. Inflation and general macroeconomic factors have caused certain of our customers to reduce or delay orders for our products and services and could cause them to do so in the future, which could have a material adverse impact on our sales and results of operations.

For further discussion, please refer to Item 1A, Risk Factors in our 2025 Annual Report on Form 10-K for the fiscal year ended December 31, 2025.Report.

Our presentation of percentage changes in net sales at organic sales growth excludes the impact of the Kidney Care Manufacturing and Supply Agreement (Kidney Care MSA) sales not reflected in reportable segments, impacts associated with business acquisitions or divestitures, and is calculated at constant currency rates. Constant currency rates are computed using current period local currency sales at the prior period’s foreign exchange rates. Organic sales growth is a non-GAAP financial measure. This measure provides information about growth (or declines) in our net sales as if the Kidney Care MSA had no impact on our sales and foreign currency exchange rates had not changed between the prior period and the current period. We believe that the non-GAAP measure of percent change in net sales at organic sales growth, when used in conjunction with the U.S. GAAP measure of percent change in net sales at actual rates, may provide a more complete understanding and facilitate a fuller analysis of our results of operations, particularly in evaluating performance from one period to another.

Net income (loss) attributable to Baxter stockholders for the three months ended MarchJune 31,30, 2026 was $(15)$126 million, or $(0.03)$0.24 per diluted share, compared to $126$91 million, or $0.25$0.18 per diluted share for the three months ended MarchJune 31,30, 2025. For the three months ended MarchJune 31,30, 2026, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $205$155 million, or $0.40$0.30 per diluted share. For the three months ended MarchJune 31,30, 2025, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $194$185 million, or $0.37$0.36 per diluted share.

Net income (loss) fromattributable continuingto operationsBaxter stockholders for the threesix months ended MarchJune 31,30, 2026 was $(17)$111 million, or $(0.03)$0.21 per diluted share, compared to $64$217 million, or $0.13$0.42 per diluted share for the threesix months ended MarchJune 31,30, 2025. Net income (loss) from continuing operations forFor the threesix months ended MarchJune 31,30, 20262026, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $205$360 million, or $0.39$0.70 per diluted share. Net income (loss) from continuing operations forFor the threesix months ended MarchJune 31,30, 20252025, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $221$379 million, or $0.42$0.74 per diluted share.

In the firstsecond quarter of 2026, the Kidney Care MSA sales favorablyadversely impacted sales growth by 1%.1% Additionally,and inforeign exchange rates favorably impacted net sales growth by 1%, compared to the prior year period due to the strengthening of the U.S. Dollar relative to the Australian Dollar, Euro, Colombian Peso and Brazilian Real. In the first quartersix months of 2026, the foreign currency rates favorably impacted net sales growth by 3%,2%, compared to the prior year period due to the strengthening of the U.S. Dollar relative to the Euro, Australian Dollar, British PoundPound, Brazilian Real, Colombian Peso, and the Canadian Dollar.

Our Medical Products & Therapies segment includes sales of our sterile intravenous (IV) solutions, infusion systems, administration sets, parenteral nutrition therapies andtherapies, surgical hemostat, sealant,sealant and adhesion prevention products.products, specialty injectable pharmaceuticals, inhaled anesthesia, drug compounding and sales of products and services provided directly through certain of our manufacturing facilities.

Medical ProductProducts & Therapies segment net sales increased 2%7% in the second quarter and increased 5% in the first quartersix months of 2026, as compared to the prior year period.periods.

Infusion Therapies & TechnologiesPlatforms net sales decreasedincreased 1%6% in the second quarter and increased 4% in the first six months of 2026, as compared to the prior year periods. The increase in the second quarter was driven by increased demand for our international pharmacy compounding offerings and a weak prior year comparison in the U.S. IV solutions business, during which we experienced lower sales due to distributor destocking and fluid conservation practices embedded with clinical practice changes. These increases were partially offset by a sales decline in our Injectables portfolio due to ongoing supply constraints in the U.S. and international markets and softness in certain premix products. Sales volumes were further impacted by lower volumes of our Novum LVP due to the continued shipment and implementation hold. Foreign exchange rates favorably impacted sales growth by 2% for the second quarter of 2026, as compared to the prior year period. TheSales declineperformance in the first quartersix wasmonths primarilyof 2026 reflected increased demand for our international pharmacy compounding offerings, partially offset by lower sales in our injectables portfolio due to ongoing supply constraints in the U.S. and international markets and softness in certain premix products, as well as lower volumes of our Novum LVP pumpdue sales as a result ofto the voluntarycontinued shipment and implementation hold. Sales volumes were further impacted by a strong prior year comparison in U.S. IV solutions businesses, during which we experienced strong sales due to a one-time distributor build following Hurricane Helene. Foreign exchange rates favorably impacted sales growth by 4%3% for the first quartersix months of 2026, as compared to the prior year period. As previously discussed in "Factors Affecting our Results of Operations", we elected to temporarily stop distributing and installing the Novum LVP in the U.S. and Canada, except in the case of medical necessity. As a result, we expect no meaningful sales of Novum LVP while these holds are in effect. Our Spectrum IQ large volume pump remains available as an alternative option for customers with Novum LVPs.

Advanced Surgery net sales increased 12% in the second quarter and increased 13% in the first quartersix months of 2026, as compared to the prior year period.periods. Sales performance was primarily driven by growth in hemostats and sealants and was primarily attributable to increased sales volume globally. Foreign currency exchange rates favorably impacted sales growth by 3%2% forin the first quartersix months of 2026, as compared to the prior year period.

Healthcare Systems & Technologies segment net sales wereincreased flat4% in the second quarter and increased 2% in the first quartersix months of 2026, as compared to the prior year period.periods.

Care & Connectivity Solutions net sales increased 2%6% in the second quarter and increased 4% in the first quartersix months of 2026, as compared to the prior year period.periods. Sales performance was primarily driven by increased volume associated with increasedexecution capitalagainst spendingthe byorder customersbacklog in the U.S. for patient support systems, offset by lower installations in our care communications portfolio.systems. Foreign currency exchange rates favorably impacted sales growth by 2%1% for the second quarter and the first quartersix months of 2026, as compared to the prior year period.periods.

Front Line Care net sales decreasedincreased 3%2% in the second quarter and were flat in the first quartersix months of 2026, as compared to the prior year period.periods. The declineincrease in the firstsecond quarter was primarily impacted by continued momentum within patient monitoring systems and the timing of ordersorders, andpartially theoffset impact ofby planned global portfolioproduct exits. Sales performance in the first six months was driven by increased demand across our respiratory health products, confirm cardiology products and patient monitoring systems, offset by planned global product exits. Foreign currency exchange rates favorably impacted sales growth by 1% for the first quartersix months of 2026, as compared to the prior year period.

Other sales, which represent sales not allocated to a reportable segment, include sales to Vantive, pursuant to the Kidney Care MSA. During the three months ended MarchJune 31,30, 2026 and 2025, we earned $90$83 million and $78$98 million, and $159 million and $161 million for the six months ended June 30, 2026 and 2025, respectively, of revenues that were not attributable to our reportable segments. The increasedecrease in Other sales for the threesecond quarter and six months ended MarchJune 31,30, 2026 as compared to the prior year periodperiods reflectsis thedriven impactby ofreduced volumes under the Kidney Care MSA entered into upon the sale of our Kidney Care business in January 2025.MSA.

The following table provides a summary of our special items from continuing operations and the related impact by line item on our results for the three and six months ended MarchJune 31,30, 2026 and 2025.

1Our results for the firstsecond quarter of 2026 and 2025 included business optimization charges of $68$7 million and $45$17 million, respectively. Our results for the first six months of 2026 and 2025 included business optimization charges of $75 million and $62 million, respectively. These restructuring and business optimization costs in 2026 and 2025 included costs primarily related to initiatives to reduce our cost structure following the sale of our former Kidney Care segment.business. Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for further information regarding these charges and related liabilities.

2Our results for the firstsecond quarter of 2026 and 2025 included $4 million and $5 million, respectively, and for the first six months of 2026 and 2025 included $8 million and $10 million, respectively, of incremental costs to comply with the European Union's medical device regulations for previously registered products, which primarily consist of contractor costs and other direct third-party costs. We consider the adoption of these regulations to be a significant one-time regulatory change and believe that the costs of initial compliance for previously registered products over the implementation period are not indicative of our core operating results.

3Our results for the first quartersix months of 2026 included a benefit of $12 million related to a revised estimate of warranty and remediation activities from field corrective actions across our infusion pump category initially recorded in 2025. Our results for the second quarter and first quartersix months of 2025 included charges of $6$23 million and $29 million, respectively, related to an estimate of warranty and remediation activities from field corrective actions on certain of our infusion pumps and a revised estimate of warranty and remediation activities arising from a field corrective action on certain of our infusion pumps initially recorded in 2022.

4Our results in the second quarter and the first quartersix months of 2026 included charges of $11$23 million and $34 million, respectively, primarily related to business transformation costs which include expenses incurred in connection with discrete, newlyrecently launched enterprise‑wide initiatives to modernize and simplify systems, redesign operating models, and enhance process efficiency and digital capabilities. These costs are distinct from restructuring‑related charges (which are included in footnote 1 above as Business Optimization items) and are excluded to provide investors with greater comparability of underlying operating performance.

5Our results in the firstsecond quarter of 2026 and 2025 included charges of $3 million and $98$17 million, respectively, and for the first six months of 2026 and 2025 included $6 million and $115 million, respectively, related to damages caused by Hurricane Helene which consisted of remediation, air freight and other costs.

6Our results in the first quartersix months of 2025 included charges of $11 million related to matters involving alleged injury from environmental exposure.

7Our results for the second quarter and first quartersix months of 2025 included $6$5 million and $11 million, respectively, of integration costs which primarily reflected third party consulting costs related to the ongoing integration of Hill-Rom Holdings, Inc. (Hillrom). In the first six months of 2025 those costs also included the recognition of a non-cash impairment of properly,property, plant and equipment related to integration activities.

8Our results for the firstsecond quarter of 2026 and 2025 included $11$22 million and $13$14 million, respectively, and for the first six months of 2026 and 2025 included $33 million and $27 million, respectively of separation-related costs primarily reflecting costs of external advisors supporting our activities related to the sale of our former Kidney Care segment.business.

9Our results in the first quartersix months of 2026 and 2025 included $5 million and $9 million, respectively, related to losses from non-cash impairment write-downs of investments.

10Our results in the second quarter of 2026 included a $3 million income tax benefit related to the settlement of certain income tax audits and adjustments to our valuation allowance on U.S. deferred tax assets, partially offset by the application of intraperiod tax allocation to our adjusted results in an interim period. Our results in the second quarter of 2025 included $4 million of income tax expense resulting from the application of an intraperiod tax allocation to our adjusted results in an interim period. Our results in the first quartersix months of 2026 included $26$23 million of income tax expense primarily related to an increase in interest related to uncertain tax positions and differences arising from the use of a forecasted effective tax rate to compute income tax expense during the quarter.period, partially offset by the settlement of certain income tax audits. Our results in the first quartersix months of 2025,2025 included $43$39 million of income tax benefit primarily driven by an entity classification election that we made for U.S. tax purposes, which resulted in a capital loss.

Our gross margin ratio was 33.0%34.9% and 32.8%35.3% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 3.83.7 and 9.05.4 percentage points on the gross margin ratio for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Our gross margin ratio was 34.0% and 34.1% for the first six months ended June 30, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 3.7 and 7.2 percentage points on the gross margin ratio for the first six months ended June 30, 2026 and 2025, respectively.

Excluding the impact of special items, the gross margin ratio decreased by 5.02.1 and 3.6 percentage points in the firstsecond quarter and first six months of 20262026, respectively, compared to the prior year period.periods. The lower gross margins were primarily driven by increased manufacturing and supply costs, tariffsincluding an updated estimate of indirect costs previously recorded in SG&A now capitalized into inventory after the separation of our former Kidney Care business, and product mix.mix, partially offset by IEEPA tariff refunds recorded in the second quarter of 2026.

Our SG&A expenses ratio was 27.0%24.8% and 26.8%25.6% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 4.3 and 3.62.9 percentage points on the SG&A expenses ratio for the three months ended MarchJune 31,30, 2026 and 2025. Our SG&A expenses ratio was 25.8% and 26.1% for the first six months ended June 30, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 3.5 and 3.2 percentage points on the SG&A expenses ratio for the first six months ended June 30, 2026 and 2025, respectively.

Excluding the impact of special items, the SG&A expenses ratio decreased by 0.50.8 and 0.6 percentage points in the firstsecond quarter and first six months of 20262026, respectively, compared to the prior year period.periods. The decrease primarily reflects lower headcount, partially offset by annual compensation increases.

Our R&D expenses ratio was 5.1%4.4% and 5.3%4.8% for each of the three months ended MarchJune 31,30, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 0.2 percentage points on the R&D expenses ratio for the three months ended June 30, 2026 and no impact on the R&D expenses ratio for the three months ended June 30, 2025. Our R&D expenses ratio was 4.7% and 5.0% for the first six months ended June 30, 2026 and 2025. The special items identified earlier in this section had an unfavorable impact of approximately 0.50.3 percentage points on the R&D expenses ratio for the threefirst six months ended MarchJune 31,30, 2026 and no impact on the R&D expenses ratio for the threefirst six months ended MarchJune 31,30, 2025.

Excluding the impact of special items, the R&D expenses ratio decreased by 0.70.6 percentage points in the firstsecond quarter and first six months of 20262026, compared to the prior year periodperiods. The decrease is primarily due to phasing of R&D spend which is expected to be consistentflat on a full year basis.

For the threesix months ended MarchJune 31,30, 2026, $58 million of the restructuring charges, consisting of employee termination costs, were related to initiatives to reduce our cost structure following the sale of our Kidney Care segment.business.

We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, ofthat approximatelyare $2not millionmaterial to our condensed consolidated financial statements, through the completion of certain initiatives that are currently underway. We continue to pursue cost savings initiatives, including those intended to mitigate a portion of the dis-synergies that arose as a result of the sale of our Kidney Care business, and to the extent further cost savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods. Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our business optimization programs.

Other operating income, net was $42$49 million and $40$52 million in the firstsecond quarter of 2026 and 2025, respectively, and these$91 million and $92 million for first six months ended June 30, 2026 and 2025, respectively. These amounts were primarily related to the income recognized under the Kidney Care TSA entered into upon the sale of the Kidney Care business in January 2025.

Interest expense, net was $66$64 million and $64$58 million in the firstsecond quarter of 2026 and 2025, respectively, and $130 million and $122 million for first six months ended June 30, 2026 and 2025, respectively. The slight increase in the second quarter and first six months of 2026 was driven by higher interest expense on senior notes issued in the fourth quarter of 2025 partially offset by debt repayments in the first threesix months of 2025.

Our effective income tax rate was 15% and 8% for the three months ended June 30, 2026 and 2025, respectively, and 22% and (43)% for the first six months ended June 30, 2026 and 2025, respectively. Our effective income tax rate can differ from the 21% U.S. federal statutory rate due to a number of factors, including foreign rate differences, tax incentives, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances, increases or decreases in liabilities for uncertain tax positions, and excess tax benefits or shortfalls on stock compensation awards.

For the three months ended MarchJune 31,30, 2026, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by ourglobal nearearnings break-evenmix, pre-taxpartially resultsoffset andby increases to our valuation allowance on U.S. deferred tax assets.assets The quarter also reflects income tax recorded related toand tax shortfalls on stock compensation awards.

For the threefirst six months ended MarchJune 31,30, 2025,2026, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by global earnings mix, partially offset by increases to our nearvaluation break-evenallowance pre-taxon incomeU.S. deferred tax assets and a tax benefitshortfalls drivenon bystock ancompensation entity classification election that we made for U.S. tax purposes, which resulted in a capital loss.awards.

WeIn arethe currentlyfirst underquarter examinationof by2026, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Service (IRS) for examination related to transfer pricing matters related to transactions with our manufacturing operations in Costa Rica and Puerto Rico for the 2019 and 2020 tax years. DuringIn the quarter,second quarter of 2026, we receivedsettled athe Noticeexamination of Proposed Adjustment (NOPA) fromby the IRS coveringrelated theto 2019these andmatters 2020for taxamounts years that ismaterially consistent with our existing and previously disclosed uncertain tax position reserves. WeThe didpreviously disclosed uncertain tax position reserves for tax years 2021 through 2025 were not recordadjusted furtheras reservesa in connection with the NOPA, other than interest that may be owed upon conclusionresult of the audit.aforementioned IRS settlement for 2019 and 2020 tax years. While we believe that our transfer pricing positions are well documented and properly supported, and adequate amounts have been reserved to account for any adjustments that may ultimately result from this examination, the matter remains open for resolution. Additionally, if the IRS were to assert we owe additional taxes and prevailsprevail in this assertion, such outcome could have a material impact on our financial position, results of operations, and cash flows.

During 2025, because of a cumulative history of operating losses in the U.S., we recorded a valuation allowance against our U.S. deferred tax assets, including certain federal and state tax attributes such as foreign tax credits. Although we expect to remain in a U.S. valuation allowance position for at least the next 12 months, we also anticipate future changes in the amount of the valuation allowance including during 2026, which could be material, due to operational activity and movement in our routine deferred tax assets and liabilities.

The Organization of Economic Co-operation and Development (OECD) reached agreement among over 140 countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. During the quarter,first quarter of 2026, the OECD published administrative guidance proposing a Side-by-Side safe harbor, which may reduce the impact of Pillar Two for U.S. headquartered multinational corporations. We will monitor the implementation of the Side-by-Side safe harbor by individual jurisdictions, however we do not expect the impact of Pillar Two to be material in any case.