BAXTER INTERNATIONAL INC

Previous wording

Refer to our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 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 June 30, 2025 and 2024.

Current wording

Refer to our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 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 nine months ended September 30, 2025 and 2024.

Previous wording

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. That business, which is now known as Vantive Health LLC (Vantive) is comprised of our former Kidney Care segment and provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies. 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 closing adjustments, we received approximately $3.71 billion pre-tax cash proceeds at closing of the transaction with the net after tax proceeds of approximately $3.3 billion, subject to certain post-closing adjustments. As of June 30, 2025, we repaid $3.81 billion of short- and long-term indebtedness primarily with the net after-tax cash proceeds from the sale of our Kidney Care business.

Current wording

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. That business, which is now known as Vantive Health LLC (Vantive) is comprised of our former Kidney Care segment and provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies. 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 closing adjustments, we received approximately $3.71 billion pre-tax cash proceeds at closing of the transaction with the net after tax proceeds of approximately $3.3 billion, prior to giving effects to certain post-closing adjustments. In the third quarter of 2025, the purchase price was reduced by $99 million for final closing cash, working capital and other post-closing adjustments in accordance with the terms of the EPA, and we expect to make a payment in such amount to Carlyle in the fourth quarter of 2025. As of September 30, 2025, we repaid $3.81 billion of short- and long-term indebtedness primarily with the net after-tax cash proceeds from the sale of our Kidney Care business.

Previous wording

We expect to incur 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 intend to undertake additional actions) to help ensure our cost structuring is appropriate to support our remaining business.

Current wording

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 intend to undertake additional actions) to help ensure our cost structuring is appropriate to support our remaining business.

Previous wording

In the third quarter of 2023, we completed the implementation of an 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. Our segments were changed during the third quarter of 2023 to align with our operating model.

Current wording

In the third quarter of 2023, we completed the implementation of an 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 (each as discussed below).

Previous wording

In September 2024, Hurricane Helene, which brought significant rain and extensive flooding to Western North Carolina, caused damage to certain of our assets at our North Cove facility in Marion, North Carolina and disrupted operations at that facility. While we continue to increase allocation levels across key impacted product groups, the facility was fully operational by the end of the first quarter of 2025. In response to Hurricane Helene and the related supply disruption, certain customers have enacted fluid conservation practices which have resulted in, and are currently expected to continue to result in, reduced demand in our intravenous (IV) solutions business. See Note 1 in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Current wording

In September 2024, Hurricane Helene, which brought significant rain and extensive flooding to Western North Carolina, caused damage to certain of our assets at our North Cove facility in Marion, North Carolina and disrupted operations at that facility. The facility was fully operational by the end of the first quarter of 2025. In response to Hurricane Helene and the related supply disruption, certain customers have enacted fluid conservation practices which have resulted in, and are currently expected to continue to result in, reduced demand in our intravenous (IV) solutions business. See Note 1 in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Previous wording

On April 24, 2025, we initiated a voluntary correction for the Novum IQ Large Volume pump (Novum LVP) due to the potential for under-infusion with Novum LVP when the pump is in "standby mode" for an extended period of time. On May 20, 2025, the U.S. Food and Drug Administration (FDA) classified this voluntary correction as a Class I recall. In July 2025, we initiated voluntary corrections for the Novum LVP due to the potential for under-infusion when the pump is directed to deliver a bolus infusion or significantly increase the rate of infusion after it has been running at a lower infusion rate and the potential for over- and under-infusion related to set misloading, as well as certain software anomalies. We are in the process of developing and preparing to implement corrections related to these recalls. In July 2025, we elected to temporarily stop distributing Novum LVP in the U.S. and Canada, except in the case of medical necessity, pending our review of the process for implementing corrections and interim mitigations. We have recorded a reserve for the potential obligation related to Novum LVP in the second quarter that is not material to our financial results. However, these estimates may change and could become material in the future.

Current wording

On April 24, 2025, we initiated a voluntary correction for the Novum LVP due to the potential for under-infusion when the pump is in "standby mode" for an extended period of time. On May 20, 2025, the U.S. Food and Drug Administration (FDA) classified this voluntary correction as a Class I recall. In July 2025, we initiated voluntary corrections for the Novum LVP due to the potential for under-infusion when the pump is directed to deliver a bolus infusion or significantly increase the rate of infusion after it has been running at a lower infusion rate and the potential for over- and under-infusion related to set misloading, as well as certain software anomalies. In August 2025, the FDA classified these additional voluntary corrections as Class I recalls. We have implemented certain corrections related to the recalls and are developing additional corrections related to these recalls, some of which will require regulatory approval). 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. While the timing of this continued ship and installation hold remains uncertain, we currently expect it to be in place beyond 2025. Additionally, while we expect no additional sales of Novum LVP while these holds are in effect, our Spectrum IQ large volume pump is generally available as an alternative option for customers with Novum LVPs. We have recorded a reserve for remediation costs associated with these initial Novum LVP corrections in the second quarter that is not material to our financial results. However, these estimates may be subject to change and these and other additional costs (including those associated with any additional corrections) could become material in the future. Additionally, while returns and exchanges of Novum LVP made to date are not material for our financial results, future returns or exchanges (including related costs) could have a material impact on our results in the future.

Previous wording

We have experienced challenges to our global supply chain (some of which have been significant), including, as a result of adverse impacts from significant weather events like Hurricane Helene, as well as adverse impacts as result of other global macroeconomic and geopolitical events. These challenges may have a negative impact on our results of operations 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 pharmaceutical tariffs), and responses from other jurisdictions, have significantly affected financial markets and economic conditions. While we are in the process of implementing select tariff offsets for 2025 and working to identify additional mitigation opportunities in 2025 and beyond, we currently expect that our results will be adversely affected by these events (including as a result of any failure to achieve the anticipated benefits of related offsets). Additionally, continued global macroeconomic uncertainty, including in trade policies and practices, elevated tariffs and in operational and policy changes in the governments of the U.S. and other countries, could contribute to further market volatility, deteriorating or prolonged weakened economic conditions and decreased hospital capital spending levels, all of which could adversely affect our business, results of operations or financial condition. Sole source supplier relationships may limit our ability to respond to these tariffs with alternative or lower cost raw materials or component parts.

Current wording

We have experienced challenges to our global supply chain (some of which have been significant), including, as a result of adverse impacts from significant weather events like Hurricane Helene, as well as adverse impacts as result of other global macroeconomic and geopolitical events, 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 pharmaceutical tariffs), and responses from other jurisdictions, have significantly affected financial markets and economic conditions. While we are in the process of implementing select tariff offsets and working to identify additional mitigation opportunities, our results have been adversely affected by these events and we expect for our results to continue to be negatively affected by 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 (including a prolonged U.S. federal government shutdown), could contribute to further market volatility, deteriorating or prolonged weakened economic conditions and decreased hospital capital spending levels, all of which could adversely affect our business, results of operations or financial condition. Sole source supplier relationships may limit our ability to respond to these tariffs with alternative or lower cost raw materials or component parts.

Previous wording

Our results of operations are also affected by macroeconomic conditions and levels of business confidence. The aforementioned tariffs and any retaliatory countermeasures, operational and policy changes in the governments of the U.S. and other countries, the war in Ukraine, the conflict in the Middle East, other geopolitical events, including U.S. military strikes on Iran (and the potential for escalation of these and other conflicts), and recent political changes to trade policies, have increased the levels of economic and political uncertainty and we continue to closely monitor the developing situations and the estimated impact on our business, results of operations, financial condition and cash flows. While we have substantially completed our wind down efforts related to our business in Russia, a significant escalation or expansion of economic disruption or the current scope of the war in Ukraine could have an adverse effect on our operations (including our supply chain) in the region.

Current wording

Our results of operations are also affected by macroeconomic conditions and levels of business confidence. The aforementioned tariffs and any retaliatory countermeasures, operational and policy changes in the governments of the U.S. and other countries, the war in Ukraine, the conflict in the Middle East, other geopolitical events (and the potential for escalation of these and other conflicts), and recent political changes to trade policies, have increased the levels of economic and political uncertainty and we continue to closely monitor the developing situations and the estimated impact on our business, results of operations, financial condition and cash flows. While we have substantially completed our wind down efforts related to our business in Russia, a significant escalation or expansion of economic disruption or the current scope of the war in Ukraine could have an adverse effect on our operations (including our supply chain) in the region.

Previous wording

The existence of high inflation rates in the United States and in many of the countries where we conduct business has resulted in, and is likely in the future to 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 experience inflationary increases in manufacturing costs and operating expenses (including as a result of the aforementioned tariffs) 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.

Current wording

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 experience inflationary and other increases in manufacturing costs and operating expenses (including as a result of the aforementioned tariffs) 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.

Previous wording

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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2024) require that we obtain specific approval from the FDA or 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, 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 European Medicines Agency in Europe, the China Food and Drug Administration in China, Health Canada 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. These have included, or may in the future include, warning letters, product recalls or seizures, import bans, adverse regulatory site inspection reports, voluntary or official action indicated classifications, monetary sanctions, injunctions to halt the manufacture or distribution of products, civil or criminal sanctions (which may include corporate integrity agreements or consent decrees), costly litigation, refusal of a government to grant or the government withdrawal approvals, clearances, licenses or 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 (including on our ability to launch new products and demand for those products).

Current wording

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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2024) 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, 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 European Medicines Agency in Europe, the China Food and Drug Administration in China, Health Canada 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. These have included, or may in the future include, warning letters, product recalls or seizures, import bans, adverse regulatory site inspection reports, voluntary or official action indicated classifications, monetary sanctions, injunctions to halt the manufacture or distribution of products, civil or criminal sanctions (which may include corporate integrity agreements or consent decrees), costly litigation, refusal of a government to grant or the government withdrawal approvals, clearances, licenses or 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 (including on our ability to launch new products and demand for those products).

Previous wording

Our presentation of percentage changes in net sales at operational sales growth excludes the impact of the Kidney Care MSA sales not reflected in reportable segments, reflects the 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. Constant currency rates are computed using current period local currency sales at the prior period’s foreign exchange rates. Operational 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 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 operational 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.

Current wording

Our presentation of percentage changes in net sales at operational sales growth excludes the impact of the 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. Constant currency rates are computed using current period local currency sales at the prior period’s foreign exchange rates. Operational 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 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 operational 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.

Previous wording

Net income (loss) attributable to Baxter stockholders for the three months ended June 30, 2025 was $91 million, or $0.18 per diluted share, compared to $(314) million, or $(0.61) per diluted share for the three months ended June 30, 2024. For the three months ended June 30, 2025, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $185 million, or $0.36 per diluted share. For the three months ended June 30, 2024, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $659 million, or $1.29 per diluted share.

Current wording

Net income (loss) attributable to Baxter stockholders for the three months ended September 30, 2025 was $(46) million, or $(0.09) per diluted share, compared to $140 million, or $0.27 per diluted share for the three months ended September 30, 2024. For the three months ended September 30, 2025, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $401 million, or $0.78 per diluted share. For the three months ended September 30, 2024, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $271 million, or $0.53 per diluted share.

Previous wording

Net income (loss) attributable to Baxter stockholders for the six months ended June 30, 2025 was $217 million, or $0.42 per diluted share, compared to $(277) million, or $(0.54) per diluted share for the six months ended June 30, 2024. For the six months ended June 30, 2025, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $379 million, or $0.74 per diluted share. For the six months ended June 30, 2024, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $953 million, or $1.87 per diluted share.

Current wording

Net income (loss) attributable to Baxter stockholders for the nine months ended September 30, 2025 was $171 million, or $0.33 per diluted share, compared to $(137) million, or $(0.27) per diluted share for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $780 million, or $1.52 per diluted share. For the nine months ended September 30, 2024, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $1.22 billion, or $2.40 per diluted share.

Previous wording

Net income (loss) from continuing operations for the three months ended June 30, 2025 was $122 million, or $0.24 per diluted share, compared to $95 million, or $0.19 per diluted share for the three months ended June 30, 2024. Net income (loss) from continuing operations for the three months ended June 30, 2025 included special items that adversely impacted net income (loss) by $182 million, or $0.35 per diluted share. Net income (loss) from continuing operations for the three months ended June 30, 2024 included special items that adversely impacted net income (loss) by $139 million, or $0.27 per diluted share.

Current wording

Net income (loss) from continuing operations for the three months ended September 30, 2025 was $(51) million, or $(0.10) per diluted share, compared to $61 million, or $0.12 per diluted share for the three months ended September 30, 2024. Net income (loss) from continuing operations for the three months ended September 30, 2025 included special items that adversely impacted net income (loss) by $404 million, or $0.79 per diluted share. Net income (loss) from continuing operations for the three months ended September 30, 2024 included special items that adversely impacted net income (loss) by $191 million, or $0.37 per diluted share.

Previous wording

Net income (loss) from continuing operations for the six months ended June 30, 2025 was $186 million, or $0.36 per diluted share, compared to $101 million, or $0.20 per diluted share for the six months ended June 30, 2024. Net income (loss) from continuing operations for the six months ended June 30, 2025 included special items that adversely impacted net income (loss) by $403 million, or $0.79 per diluted share. Net income (loss) from continuing operations for the six months ended June 30, 2024 included special items that adversely impacted net income (loss) by $316 million, or $0.62 per diluted share.

Current wording

Net income (loss) from continuing operations for the nine months ended September 30, 2025 was $135 million, or $0.26 per diluted share, compared to $162 million, or $0.32 per diluted share for the nine months ended September 30, 2024. Net income (loss) from continuing operations for the nine months ended September 30, 2025 included special items that adversely impacted net income (loss) by $807 million, or $1.57 per diluted share. Net income (loss) from continuing operations for the nine months ended September 30, 2024 included special items that adversely impacted net income (loss) by $507 million, or $0.99 per diluted share.

Previous wording

In the second quarter of 2025, the Kidney Care MSA sales favorably impacted sales growth by 4% and the previously announced exit of IV solutions in China adversely impacted sales by 1%. In the first six months of 2025, the Kidney Care MSA sales favorably impacted sales growth by 3% and the exit of IV solutions in China adversely impacted net sales by 1%.

Current wording

In the third quarter of 2025, the Kidney Care MSA sales favorably impacted sales growth by 3% and the previously announced exit of IV solutions in China adversely impacted sales by 1%. Additionally, in the third quarter of 2025, foreign currency rates favorably impacted net sales growth by 1%. In the first nine months of 2025, the Kidney Care MSA sales favorably impacted sales growth by 3%. The exit of IV solutions in China and foreign currency rates were not meaningful.

Previous wording

Medical Product & Therapies segment net sales were flat in the second quarter and increased 1% in the first six months of 2025, as compared to the prior year periods.

Current wording

Medical Product & Therapies segment net sales decreased 1% in the third quarter and were flat in the first nine months of 2025, as compared to the prior year periods.

Previous wording

Infusion Therapies & Technologies net sales decreased 2% in the second quarter and were flat in the first six months of 2025, as compared to the prior year periods. The decline in the second quarter of 2025 primarily reflected reduced U.S. demand in our IV Solutions business as hospital customers continued IV fluid conservation practices originally instituted in response to Hurricane Helene. Sales volumes were further impacted by destocking of inventory at our customers and within our distributor channel. Volume declines in the second quarter were partially offset by price increases and the release of rebate accruals. The previously announced exit of IV solutions in China adversely impacted sales growth by 2% and foreign exchange rates favorably impacted sales growth by 1% for the second quarter of 2025, as compared to the prior year period. Sales performance in the first six months of 2025 reflected growth in Infusion Systems as a result of increased U.S. sales for our infusion pump portfolio. Nutrition sales in the first six months reflected price increases globally and growth in the U.S. driven by the clearance of back orders and some distributor stock replenishment. These increases were offset by reduced U.S. demand in our IV Solutions business as hospital customers continued the aforementioned fluid conservation practices and destocking of inventory at our customers within our distributor channel. IV price increases globally offset the volume decreases in the first six months of 2025. The previously announced exit of IV solutions in China adversely impacted sales growth by 2% and foreign exchange rates adversely impacted sales growth by 1% for the first six months of 2025, as compared to the prior year period. We expect some hospital customers to continue a level of conservation during 2025 with the impact currently expect to lessen over the course of the year. As previously discussed in "Factors Affecting our Results of Operations", we elected to temporarily stop distributing Novum LVP in the U.S. and Canada, except in the case of medical necessity, pending our review of the process for implementing corrections and interim mitigations related to the recent voluntary corrections. As a result, we expect reduced sales of Novum LVP while these holds are in effect.

Current wording

Infusion Therapies & Technologies net sales decreased 4% in the third quarter and decreased 1% in the first nine months of 2025, as compared to the prior year periods. The decline in the third quarter of 2025 was primarily the lower Novum LVP pump sales as a result of the shipment hold. Sales volumes were further impacted by reduced U.S. demand in our IV Solutions business as hospital customers continued IV fluid conservation practices originally instituted in response to Hurricane Helene. Volume declines in the third quarter were partially offset by price increases and one-time pricing benefits. The previously announced exit of IV solutions in China adversely impacted sales growth by 1% and foreign exchange rates favorably impacted sales growth by 1% for the third quarter of 2025, as compared to the prior year period. Sales performance in the first nine months of 2025 declined, primarily due to lower demand in our IV Solutions business in the U.S. as customers continued the aforementioned fluid conservation practices. This decline was partially offset by one-time pricing benefits and price increases in certain products globally. The previously announced exit of IV solutions in China adversely impacted sales growth by 1% for the first nine months of 2025, as compared to the prior year period. We expect some hospital customers to continue a level of conservation through the remainder of 2025 and potentially beyond with the impact expected to lessen over time. 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. Although the timing of this continued ship and installation hold remains uncertain, we currently expect it to be in place beyond 2025. As a result, we expect no additional sales of Novum LVP while these holds are in effect, however our Spectrum IQ large volume pump is generally available as an alternative option for customers with Novum LVPs. Additionally, while returns and exchanges of Novum LVP made to date are not material for our financial results, future returns or exchanges could have a material impact on our financial results in the future.

Previous wording

Advanced Surgery net sales increased 7% in the second quarter and increased 4% in the first six months of 2025, as compared to the prior year period. 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 2% for the second quarter and adversely impacted sales growth by 1% for the first six months of 2025, as compared to the prior year periods.

Current wording

Advanced Surgery net sales increased 13% in the third quarter and increased 7% in the first nine months of 2025, as compared to the prior year period. 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 2% for the third quarter of 2025, as compared to the prior year period.

Previous wording

Healthcare Systems & Technologies segment net sales increased 3% in the second quarter and increased 4% in the first six months of 2025, as compared to the prior year periods.

Current wording

Healthcare Systems & Technologies segment net sales increased 3% in the third quarter and increased 4% in the first nine months of 2025, as compared to the prior year periods.

Previous wording

Care & Connectivity Solutions net sales increased 5% in the second quarter and increased 6% in the first six months of 2025, as compared to the prior year periods. Sales performance was primarily driven by increased volume associated with increased capital spending in the U.S., as compared to the prior year periods, as well as higher installations of our care communications products. Foreign currency exchange rates favorably impacted sales growth by 1% for the second quarter and the first six months of 2025, as compared to the prior year periods.

Current wording

Care & Connectivity Solutions net sales increased 4% in the third quarter and increased 5% in the first nine months of 2025, as compared to the prior year periods. Sales performance was primarily driven by increased volume associated with increased capital spending by customers in the U.S., as compared to the prior year periods, as well as higher installations of our care communications products. Foreign currency exchange rates favorably impacted sales growth by 1% for the third quarter and the first nine months of 2025, as compared to the prior year periods.

Previous wording

Front Line Care net sales decreased 1% in the second quarter and increased 2% in the first six months of 2025, as compared to the prior year periods. Sales performance in the second quarter was primarily driven by phasing of demand in our patient monitoring systems as well as lower billings and a strategic product exit within our respiratory health products, partially offset by increased demand in our cardiology products. The growth in the first six months was primarily driven by increased demand across our cardiology products and patient monitoring systems, partially offset by lower billings and a strategic product exit within our respiratory health products.

Current wording

Front Line Care net sales increased 1% in the third quarter and increased 2% in the first nine months of 2025, as compared to the prior year periods. Sales performance in both periods was primarily driven by growth in our cardiology products partially offset by a strategic product exit within our respiratory health products business.

Previous wording

Drug Compounding net sales increased 7% in the second quarter and increased 3% in the first six months of 2025, as compared to the prior year periods. Sales performance in the current year periods was driven by improved product mix and increased demand for our international pharmacy compounding offerings. Foreign currency exchange rates adversely impacted sales growth by 1% for the first six months of 2025, as compared to the prior year period.

Current wording

Drug Compounding net sales increased 12% in the third quarter and increased 6% in the first nine months of 2025, as compared to the prior year periods. Sales performance in the current year periods was driven by improved product mix and increased demand for our international pharmacy compounding offerings. Foreign currency exchange rates favorably impacted sales growth by 1% for the third quarter of 2025, as compared to the prior year period.

Previous wording

During the three months ended June 30, 2025 and 2024, we earned $111 million and $22 million, and $189 million and $38 million for the six months ended June 30, 2025 and 2024, respectively, of revenues that were not attributable to our reportable segments. In the current year periods, Other sales primarily represented revenue recognized under the Kidney Care MSA and to a lesser extent, revenues earned by certain of our manufacturing facilities from contract manufacturing activities. In the prior year periods, Other sales primarily represented revenues earned by certain of our manufacturing facilities from contract manufacturing activities. The increase in Other sales for the second quarter and six months ended June 30, 2025 as compared to the prior year periods reflects the impact of the Kidney Care MSA entered into upon the sale of our Kidney Care business in January 2025.

Current wording

During the three months ended September 30, 2025 and 2024, we earned $101 million and $17 million, and $290 million and $55 million for the nine months ended September 30, 2025 and 2024, respectively, of revenues that were not attributable to our reportable segments. In the current year periods, Other sales primarily represented revenue recognized under the Kidney Care MSA and to a lesser extent, revenues earned by certain of our manufacturing facilities from contract manufacturing activities. In the prior year periods, Other sales primarily represented revenues earned by certain of our manufacturing facilities from contract manufacturing activities. The increase in Other sales for the third quarter and nine months ended September 30, 2025 as compared to the prior year periods reflects the impact of the Kidney Care MSA entered into upon the sale of our Kidney Care business in January 2025.

Previous wording

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 June 30, 2025 and 2024.

Current wording

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 nine months ended September 30, 2025 and 2024.

Previous wording

1 Our results for second quarter of 2025 and 2024 included business optimization charges of $17 million and $9 million, respectively. Our results for the first six months of 2025 and 2024 included business optimization charges of $62 million and $31 million, respectively. These restructuring and business optimization costs in the second quarter and first six months of 2025 included costs primarily related to our initiatives to reduce our cost structure following the sale of our former Kidney Care segment. These restructuring and business optimization costs in the second quarter and first half of 2024 included costs related to 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 and third-party costs incurred to support the transformation of certain general and administrative functions. Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for further information regarding these charges and related liabilities.

Current wording

1 Our results for third quarter of 2025 and 2024 included business optimization charges of $38 million and $18 million, respectively. Our results for the first nine months of 2025 and 2024 included business optimization charges of $100 million and $49 million, respectively. These restructuring and business optimization charges in the third quarter and first nine months of 2025 included costs primarily related to our initiatives to reduce our cost structure following the sale of our former Kidney Care segment and the exit of a product line at one of our manufacturing facilities. These restructuring and business optimization costs in the third quarter and first nine months of 2024 included costs related to 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 and initiatives within our Healthcare Systems & Technologies segment. Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for further information regarding these charges and related liabilities.

Previous wording

2 Our results for the second quarter of 2025 and 2024 included $5 million and $6 million, respectively, and for the first six months of 2025 and 2024 included $11 million, of integration costs which primarily reflected third party consulting costs related to our ongoing integration of Hill-Rom Holdings, Inc. (Hillrom). In the first six months of 2025 those costs also included the recognition of a noncash impairment of properly, plant and equipment related to integration activities.

Current wording

2 Our results for the third quarter of 2025 and 2024 included $8 million and $5 million, respectively, and for the first nine months of 2025 and 2024 included $19 million and $16 million, respectively, of integration costs which primarily reflected third party consulting costs related to our ongoing integration of Hill-Rom Holdings, Inc. (Hillrom). In the first nine months of 2025, those costs also included the recognition of a noncash impairment of properly, plant and equipment related to integration activities.

Previous wording

3 Our results for the second quarter of 2025 and 2024 included $5 million and $9 million, respectively, and for the first six months of 2025 and 2024 included $10 million and $16 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.

Current wording

3 Our results for the third quarter of 2025 and 2024 included $5 million and $9 million, respectively, and for the first nine months of 2025 and 2024 included $15 million and $25 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.

Previous wording

4 Our results for the second quarter and the first six months of 2025 included $14 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.

Current wording

4 Our results for the third quarter and the first nine months of 2025 included $13 million and $40 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.

Previous wording

5 Our results for the second quarter and first six months of 2025 included charges of $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.

Current wording

5 Our results for the third quarter and first nine months of 2025 included charges of $32 million and $61 million, respectively, related to estimates of warranty and remediation activities from field corrective actions across our infusion pump category 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. Our results for the third quarter and first nine months of 2024 included charges of $3 million related to a revised estimate of warranty and remediation activities arising from a field corrective action on certain of our infusion pumps initially recorded in 2022.

Previous wording

6 Our results in the second quarter and first six months of 2025 included pre-tax charges of $17 million and $115 million, respectively, related to damages caused by Hurricane Helene. This amount consisted of remediation, air freight and other costs. Refer to Note 1 in Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

6 Our results in the third quarter and first nine months of 2025 included pre-tax charges of $8 million and $123 million, respectively, related to damages caused by Hurricane Helene. This amount consisted of remediation, air freight and other costs. Our results in the third quarter and first nine months of 2024 included net charges of $25 million related to Hurricane Helene. This amount consisted of $44 million related to the write-off of damaged inventory and fixed assets, partially offset by a $19 million benefit related to insurance recoveries as a result of those asset write-offs. Refer to Note 1 in Item 1 of this Quarterly Report on Form 10-Q for further information.

Previous wording

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

Current wording

7 Our results in the first nine months of 2025 included charges of $11 million related to matters involving alleged injury from environmental exposure. Our results in the third quarter and first nine months of 2024 included charges of $17 million related to environmental reserves for remediation actions associated with historic operations at certain of our facilities.

Previous wording

8 Our results in first six months of 2025 included $9 million of losses from a noncash impairment write-down in an equity method investment.

Current wording

8 Our results in first nine months of 2025 included $9 million of losses from a noncash impairment write-down in an equity method investment.

Previous wording

Our gross margin ratio was 35.3% and 38.3% for the three months ended June 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 5.4 and 4.1 percentage points on the gross margin ratio for the three months ended June 30, 2025 and 2024, respectively. Our gross margin ratio was 34.1% and 38.4% for the six months ended June 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 7.2 and 4.5 percentage points on the gross margin ratio for the six months ended June 30, 2025 and 2024, respectively. Refer to the Special Items caption above for additional detail.

Current wording

Our gross margin ratio was 33.5% and 38.3% for the three months ended September 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 5.9 and 5.4 percentage points on the gross margin ratio for the three months ended September 30, 2025 and 2024, respectively. Our gross margin ratio was 33.9% and 38.4% for the nine months ended September 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 6.7 and 4.8 percentage points on the gross margin ratio for the nine months ended September 30, 2025 and 2024, respectively. Refer to the Special Items caption above for additional detail.

Previous wording

Excluding the impact of special items, the gross margin ratio decreased by 1.7 and 1.6 percentage points in the second quarter and first six months of 2025, respectively, compared to the prior year periods. The lower gross margins were driven primarily by the impact of the Kidney Care MSA and unfavorable manufacturing variances, partially offset by initiatives to reduce our manufacturing and supply chain costs.

Current wording

Excluding the impact of special items, the gross margin ratio decreased by 4.3 and 2.6 percentage points in the third quarter and first nine months of 2025, respectively, compared to the prior year periods. The lower gross margins were driven primarily by the impact of the Kidney Care MSA, product mix and unfavorable manufacturing variances, partially offset by initiatives to reduce our manufacturing and supply chain costs.

Previous wording

Our SG&A expenses ratio was 25.6% and 26.8% for the three months ended June 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 2.9 and 2.4 percentage points on the SG&A expenses ratio for the three months ended June 30, 2025 and 2024, respectively. Our SG&A expenses ratio was 26.1% and 28.0% for the six months ended June 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 3.2 and 2.7 percentage points on the SG&A expenses ratio for the six months ended June 30, 2025 and 2024, respectively.

Current wording

Our SG&A expenses ratio was 25.0% and 27.9% for the three months ended September 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 2.8 and 3.3 percentage points on the SG&A expenses ratio for the three months ended September 30, 2025 and 2024, respectively. Our SG&A expenses ratio was 25.7% and 28.0% for the nine months ended September 30, 2025 and 2024, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 3.0 and 2.9 percentage points on the SG&A expenses ratio for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

Excluding the impact of special items, the SG&A expenses ratio decreased by 1.7 and 2.4 percentage points in the second quarter and first six months of 2025, respectively, compared to the prior year periods. The decrease primarily reflects an updated estimate of indirect costs previously recorded in SG&A now capitalized into inventory after the separation of our Kidney Care business.

Current wording

Excluding the impact of special items, the SG&A expenses ratio decreased by 2.4 percentage points in the third quarter and first nine months of 2025 compared to the prior year periods. The decrease primarily reflects an updated estimate of indirect costs previously recorded in SG&A now capitalized into inventory after the separation of our Kidney Care business and lower accruals under our annual employee incentive compensation plans.

Previous wording

Our R&D expenses ratio was 4.8% for each of the three months ended June 30, 2025 and 2024. The special items identified earlier in this section had no impact on the R&D expenses ratio for each of the three months ended June 30, 2025 and 2024. Our R&D expenses ratio was 5.0% and 4.8% for the six months ended June 30, 2025 and 2024, respectively. The special items identified earlier in this section had no impact on the R&D expenses ratio for each of the six months ended June 30, 2025 and 2024.

Current wording

Our R&D expenses ratio was 4.2% and 4.8% for each of the three months ended September 30, 2025 and 2024. The special items identified earlier in this section had an unfavorable impact of 0.1 percentage points and no impact on the R&D expenses ratio for each of the three months ended September 30, 2025 and 2024, respectively. Our R&D expenses ratio was 4.7% and 4.8% for the nine months ended September 30, 2025 and 2024, respectively. The special items identified earlier in this section had no impact on the R&D expenses ratio for each of the nine months ended September 30, 2025 and 2024.

Previous wording

For the three and six months ended June 30, 2025, $6 million and $31 million, respectively, 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.

Current wording

For the three and nine months ended September 30, 2025, $10 million and $41 million, respectively, 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. For the three months ended September 30, 2025, $21 million of the restructuring charges reflected in the table above, consisting of $8 million of asset impairments, $8 million of contract termination and other costs, and $5 million of employee termination costs, were related to the exit of a product line at one of our manufacturing facilities. For the nine months ended September 30, 2025, $24 million of the restructuring charges reflected in the table above, consisting of $11 million of asset impairments, $8 million of contract termination and other costs, and $5 million of employee termination costs, were related to the exit of a product line at one of our manufacturing facilities.

Previous wording

We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $3 million 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.

Current wording

We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $1 million 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.