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

For the six months ended June 27, 2026, our financial results were as follows:

•We generated net sales of $15.0 billion, net income of $0.4 billion, and Adjusted EBITDA of $1.8 billion, representing a net income margin of 2.5% and an Adjusted EBITDA Margin of 12.2%.

•During that period, Medline Brand segment net sales and Segment Adjusted EBITDA were $7.0 billion and $1.8 billion, respectively, which represented 46.6% of total net sales and 82.4% of Segment Adjusted EBITDA, respectively. Supply Chain Solutions segment net sales and Segment Adjusted EBITDA were $8.0 billion and $0.4 billion, respectively, which represented 53.4% of total net sales and 17.6% of Segment Adjusted EBITDA, respectively.

We have pursued, and may continue to pursue, tariff mitigation measures, including exclusions, refunds, preferential trade agreements, and other duty recovery mechanisms. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the President to impose tariffs. Following that decision, U.S. Customs and Border Protection (“CBP”) established an expedited administrative process through its Consolidated Administration and Processing of Entries (“CAPE”) portal to refund IEEPA duties that had already been paid.

We expect total IEEPA refund claims, across all eligible mechanisms, to be approximately $507 million, including amounts already submitted via CAPE. As of June 27, 2026, CBP had accepted approximately $332 million in total refunds we have submitted, and actions to recover the remaining expected amounts are ongoing. We evaluate recoveries of IEEPA tariffs in accordance with applicable gain contingency guidance and recognize such recoveries when they are received or realizable. As of June 27, 2026, of the accepted claims, we had received approximately $53 million in refunds. Accordingly, we recorded a receivable of approximately $279 million within Other current assets related to the remaining accepted refund claims as of June 27, 2026. As of the date of this Quarterly Report, we received refunds for the majority of the receivable balance. Interest associated with refunded IEEPA tariffs is recognized in the period in which it is received or realizable. We expect to remit a portion of the tariff refunds to customers. As of June 27, 2026, we recorded approximately $89 million within Accrued expenses and other current liabilities for the total amount estimated to be remitted to customers in connection with total tariff refund claims expected.

During the three and six months ended June 27, 2026, we recognized approximately $332 million as a reduction of Cost of goods sold related to tariff refunds received or accepted, approximately $89 million as a reduction of Net sales related to accrued customer repayments associated with tariff refunds, and approximately $14 million of interest income in Interest expense, net. These amounts were recorded entirely within the Medline Brand segment.

The ultimate amount and timing of the IEEPA tariff refunds not yet received are subject to eligibility requirements, regulatory review, administrative processing, and other limitations.

Tracy, California Distribution Center

On June 11, 2026, a fire destroyed our distribution center in Tracy, California. All employees were safely evacuated. We have estimated incurred losses of $336 million, which consist of $204 million related to inventory losses, $116 million related to fixed asset losses, and $16 million other expenses, for the three and six months ended June 27, 2026. These losses were recorded in Other operating expenses. As of June 27, 2026, discussions with our insurers are ongoing, and, as such, no insurance recoveries have been recorded. Following the fire, we entered into lease agreements for two distribution centers in Northern California totaling more than 1.6 million square feet, including a facility in Tracy, California for near-term occupancy and a facility in Stockton, California expected to be available for use in January 2027. These facilities are expected to help support service to healthcare providers and customers in Northern California following the fire. We may incur additional losses and costs in future periods associated with the fire and its related impacts. We expect to recognize insurance recoveries in future periods as the applicable recognition criteria are met. The timing and amount of any additional losses, costs, or insurance recoveries remain uncertain. See Note 1—Nature of Business and Significant Accounting Policies to our unaudited condensed consolidated financial statements included under Part I, “Item 1—Financial Statements” of this Quarterly Report for additional information.

FDA Matters

As of June 27, 2026, we have received three warning letters from the FDA, which have not been resolved. These warning letters relate to compliance with the Quality Management System Regulation and the current Good Manufacturing Practice (cGMP) regulations and were sent following inspections of Medline’s Northfield, Illinois facility and our manufacturing facilities in Glens Falls, New York and Waukegan, Illinois. We are working with the FDA to resolve the observations in the warning letters and FDA Forms 483 the Company has received. We have committed to taking additional remediation actions and made investments in Medline’s Quality organization, which we expect to result in increased costs in the second half of fiscal year 2026. While we believe our remediation efforts appropriately address the FDA’s observations and strengthen our Quality practices, no assurances can be given regarding further action by the FDA or that the corrective actions we have proposed and taken will be adequate. Any failure to adequately address the observations made by the FDA may result in regulatory actions initiated by the FDA with limited or no further notice, which may include the adverse consequences described in Part I, “Item 1A—Risk Factors—Risks Related to Regulation and Legal Proceedings—We are subject to extensive and complex laws and governmental regulations and any adverse regulatory action may materially adversely affect our business, results of operations, and financial condition both inside and outside the United States.” of our 2025 Form 10-K. While we currently believe these warning letters are not reasonably likely to materially adversely affect our business, results of operations, or financial condition, the outcomes of such matters are inherently unpredictable and subject to significant uncertainties, and if any of our assumptions change or prove to have been incorrect or there are any further adverse developments, our business, results of operations, and/or financial condition could be materially adversely affected.

On March 10, 2026, we completed an underwritten public offering of an aggregate of 86,250,000 shares of Class A common stock (including 11,250,000 shares of Class A common stock issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) sold by a wholly owned subsidiary of Abu Dhabi Investment Authority and certain affiliates of our Sponsors (collectively, the “March 2026 Selling Stockholders”) at a public offering price of $41.00 per share, for aggregate gross proceeds of approximately $3.5 billion to the Selling Stockholders (the “March 2026 Resale Offering”). This transaction resulted in the issuance of 33,963,901 shares of Class A common stock in connection with the exchange of Common Units by the March 2026 Selling Stockholders for the six months ended June 27, 2026. The exchange reduced the ownership of noncontrolling interest in Medline Holdings by approximately 3% and will increase the net income attributable to the Company in a proportionate amount. We did not sell any shares in this March 2026 Resale Offering and did not receive any of the proceeds from the sale of the shares of Class A common stock in this March 2026 Resale Offering. We paid the offering expenses associated with the sale of the shares by the March 2026 Selling Stockholders, net of the underwriting discounts and commissions.

In connection with the Reorganization and the IPO, we also entered into a tax receivable agreement (“TRA”) with certain pre-IPO owners. See “—Liquidity and Capital Resources—Tax Receivable Agreement” for additional information. Further, in connection with the Reorganization and the IPO, we also entered into an exchange agreement with the Continuing Unitholders so that they may (subject to the terms of the exchange agreement) exchange their Common Units (including Common Units issued upon conversion of vested Incentive Units) for shares of Class A common stock of Medline Inc. on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications, whereupon an equivalent number of shares of Class B common stock held by each such Continuing Unitholder will be automatically transferred to us and cancelled and retired upon any such exchange.

The diagram below depicts our current organizational structure:

Note: Certain intermediate holding companies have been omitted from the structure chart.

(1) Each share of our Class A common stock and Class B common stock entitles its holder to one vote on all matters to be voted on by the stockholders generally.

Results of Operations for the three months ended June 27, 2026 compared to the three months ended June 28, 2025

Other Operating Expenses

Other Operating Expenses for the three months ended June 27, 2026 increased $334 million to $348 million, compared to $14 million for the respective period in 2025, primarily driven by the impact due to fire at the distribution center in Tracy, California.

Other Loss, net

Other loss, net for the three months ended June 27, 2026 increased to $42 million, whereas no material Other loss, net was recorded in the respective period in 2025. The increase was primarily due to expense associated with the debt refinancing in May 2026.

Results of Operations for the six months ended June 27, 2026 compared to the six months ended June 28, 2025

Net Sales

Net sales for the six months ended June 27, 2026 increased $1,507 million, or 11.1%, to $15,037 million, compared to $13,530 million for the respective period in 2025, primarily driven by organic growth with foreign currency exchange rates having an immaterial impact on net sales. Organic net sales growth was substantially all related to increased volumes with pricing having an immaterial impact.

Net sales for the U.S. business for the six months ended June 27, 2026 increased $1,416 million, or 11.2%, to $14,009 million, compared to $12,593 million for the respective period in 2025, primarily due to volume growth in Prime Vendor net sales, which for the six months ended June 27, 2026 increased $1,461 million, or 16.8%, to $10,139 million, compared to $8,678 million for the respective period in 2025. The growth was partially offset by $89 million customer repayments associated with tariff refunds.

Net sales for the U.S. acute care business, which includes both Prime Vendor and non-Prime Vendor customers, increased $1,244 million, or 13.4%, to $10,532 million, compared to $9,288 million for the respective period in 2025, primarily driven by volume growth, partially offset by $48 million customer repayments associated with tariff refunds. Net sales for the U.S. non-acute care business increased $172 million, or 5.2%, to $3,477 million, compared to $3,305 million for the respective period in 2025, primarily driven by volume growth, partially offset by $41 million customer repayments associated with tariff refunds.

Net sales for the International business for the six months ended June 27, 2026 increased $91 million, or 9.7%, to $1,028 million, compared to $937 million for the respective period in 2025, primarily driven by volume growth and favorable foreign currency exchange rates.

Cost of Goods Sold and Gross Profit

Cost of goods sold for the six months ended June 27, 2026 increased $1,180 million, or 12.0%, to $10,981 million, compared to $9,801 million for the respective period in 2025, primarily driven by the growth in net sales and higher import costs due to tariffs, partially offset by tariff refunds. Gross profit as a percentage of sales decreased from 27.6% for the six months ended June 28, 2025 to 27.0% for the six months ended June 27, 2026, primarily driven by higher import costs due to tariffs, partially offset by net tariff refunds.

Selling, General, and Administrative Expenses

SG&A expenses for the six months ended June 27, 2026 increased $380 million, or 17.7%, to $2,523 million, compared to $2,143 million for the respective period in 2025, primarily due to $248 million of higher compensation and benefit expenses related to investments in headcount, inclusive of $33 million of one-time employee bonuses related to the IPO, which are subject to an ongoing service requirement, and $51 million related to higher distribution expense, including outbound freight. The prior year also included $43 million related to the favorable settlement of an intellectual property dispute, partially offset by $32 million of credit loss expense related to certain customer receivables, neither of which recurred in 2026.

Other Operating Expenses

Other Operating Expenses for the six months ended June 27, 2026 increased $341 million to $363 million, compared to $22 million for the respective period in 2025, primarily driven by the impact due to fire at the distribution center in Tracy, California.

Interest Expense, net

Interest expense, net for the six months ended June 27, 2026 decreased $178 million, or 41.1%, to $255 million, compared to $433 million for the respective period in 2025, primarily driven by 2025 repayment of term loan facilities with IPO proceeds and lower interest rates.

Other Loss, net