BAXTER INTERNATIONAL INC

Previous wording

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 months ended March 31, 2026 and 2025.

Current wording

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 June 30, 2026 and 2025.

Previous wording

On January 31, 2025, we completed the sale of our former Kidney Care segment (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.

Current wording

On January 31, 2025, we completed the sale of our former Kidney Care business (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.

Previous wording

Additionally, we continue to evolve our 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.

Current wording

In the second quarter of 2026, we implemented a new 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.

Previous wording

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, and are developing additional corrections related to these recalls, some of which may require regulatory clearance or 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. The timing of the release of the ship 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.

Current wording

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 and have identified additional corrections to address these recalls, some of which may require regulatory clearance or 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 shipment 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; no such adjustments were recorded in the second quarter of 2026.

Previous wording

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, 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, and responses from other jurisdictions, have significantly affected financial markets and economic conditions. While in the second quarter of 2026 we submitted refund requests for those tariff amounts eligible for refund in the first phase of the process and expect to submit additional refund requests in future phases subject to further rulings by the Court of International Trade, uncertainty remains surrounding the economic impact of the global tariffs and the timing and quantum of any amounts we may ultimately recover on our refund claims, and therefore, we have not recorded an asset for tariff refunds in our condensed consolidated financial statements as of March 31, 2026. We currently expect that our results will continue to be adversely impacted by Section 122 duties that were 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 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.

Current wording

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 (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 (IEEPA), and responses from other jurisdictions, have significantly affected financial markets and economic conditions. In the second quarter of 2026, we recorded tariff refunds 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 probable receipt of amounts eligible for refund in the first and 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. While uncertainty remains surrounding the timing of any additional amounts we may ultimately recover on current or future refund claims, we do not expect for any additional amounts to be material to our condensed consolidated financial statements. We currently expect that our results will continue to be adversely impacted by Section 122 duties and recently announced Section 301 tariffs that have 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.

Previous 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.

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 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.

Previous wording

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

Current wording

For further discussion, please refer to Item 1A, Risk Factors in our 2025 Annual Report.

Previous wording

Our presentation of percentage changes in net sales at organic sales growth excludes the impact of the 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.

Current wording

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.

Previous wording

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

Current wording

Net income (loss) attributable to Baxter stockholders for the three months ended June 30, 2026 was $126 million, or $0.24 per diluted share, compared to $91 million, or $0.18 per diluted share for the three months ended June 30, 2025. For the three months ended June 30, 2026, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $155 million, or $0.30 per diluted share. 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.

Previous wording

Net income (loss) from continuing operations for the three months ended March 31, 2026 was $(17) million, or $(0.03) per diluted share, compared to $64 million, or $0.13 per diluted share for the three months ended March 31, 2025. Net income (loss) from continuing operations for the three months ended March 31, 2026 included special items that adversely impacted net income (loss) by $205 million, or $0.39 per diluted share. Net income (loss) from continuing operations for the three months ended March 31, 2025 included special items that adversely impacted net income (loss) by $221 million, or $0.42 per diluted share.

Current wording

Net income (loss) from continuing operations for the three months ended June 30, 2026 was $135 million, or $0.26 per diluted share, compared to $122 million, or $0.24 per diluted share for the three months ended June 30, 2025. Net income (loss) from continuing operations for the three months ended June 30, 2026 included special items that adversely impacted net income (loss) by $155 million, or $0.30 per diluted share. 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.

Previous wording

In the first quarter of 2026, the Kidney Care MSA sales favorably impacted sales growth by 1%. Additionally, in the first quarter of 2026, foreign currency rates favorably impacted net sales growth by 3%, compared to the prior year period due to the strengthening of the U.S. Dollar relative to the Euro, Australian Dollar, British Pound and the Canadian Dollar.

Current wording

In the second quarter of 2026, the Kidney Care MSA sales adversely impacted sales growth by 1% and foreign 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 six months of 2026, the foreign currency rates favorably impacted net sales growth by 2%, compared to the prior year period due to the strengthening of the U.S. Dollar relative to the Euro, Australian Dollar, British Pound, Brazilian Real, Colombian Peso, and Canadian Dollar.

Previous wording

Our Medical Products & Therapies segment includes sales of our sterile IV solutions, infusion systems, administration sets, parenteral nutrition therapies and surgical hemostat, sealant, and adhesion prevention products.

Current wording

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

Previous wording

Pharmaceuticals segment net sales increased 7% in the first quarter of 2026, as compared to the prior year period.

Current wording

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

Previous wording

Infusion Therapies & Technologies net sales decreased 1% in the first quarter of 2026, as compared to the prior year period. The decline in the first quarter was primarily due to lower Novum LVP pump sales as a result of the voluntary 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% for the first quarter 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.

Current wording

Infusion Therapies & Platforms net sales increased 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. Sales performance in the first six months of 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 due to the continued shipment and implementation hold. Foreign exchange rates favorably impacted sales growth by 3% for the first six 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.

Previous wording

Advanced Surgery net sales increased 13% in the first quarter of 2026, 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 3% for the first quarter of 2026, as compared to the prior year period.

Current wording

Advanced Surgery net sales increased 12% in the second quarter and increased 13% in the first six months of 2026, as compared to the prior year 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 2% in the first six months of 2026, as compared to the prior year period.

Previous wording

Care & Connectivity Solutions net sales increased 2% in the first quarter of 2026, as compared to the prior year period. Sales performance was primarily driven by increased volume associated with increased capital spending by customers in the U.S. for patient support systems, offset by lower installations in our care communications portfolio. Foreign currency exchange rates favorably impacted sales growth by 2% for the first quarter of 2026, as compared to the prior year period.

Current wording

Care & Connectivity Solutions net sales increased 6% in the second quarter and increased 4% in the first six months of 2026, as compared to the prior year periods. Sales performance was primarily driven by increased volume associated with execution against the order backlog in the U.S. for patient support systems. Foreign currency exchange rates favorably impacted sales growth by 1% for the second quarter and the first six months of 2026, as compared to the prior year periods.

Previous wording

Front Line Care net sales decreased 3% in the first quarter of 2026, as compared to the prior year period. The decline in the first quarter was primarily impacted by the timing of orders and the impact of planned global portfolio exits. Foreign currency exchange rates favorably impacted sales growth by 1% for the first quarter of 2026, as compared to the prior year period.

Current wording

Front Line Care net sales increased 2% in the second quarter and were flat in the first six months of 2026, as compared to the prior year periods. The increase in the second quarter was primarily impacted by continued momentum within patient monitoring systems and the timing of orders, partially offset by planned global product 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% the first six months of 2026, as compared to the prior year period.

Previous wording

During the three months ended March 31, 2026 and 2025, we earned $90 million and $78 million, respectively, of revenues that were not attributable to our reportable segments. The increase in Other sales for the three months ended March 31, 2026 as compared to the prior year period reflects the impact of the Kidney Care MSA entered into upon the sale of our Kidney Care business in January 2025.

Current wording

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 June 30, 2026 and 2025, we earned $83 million and $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 decrease in Other sales for the second quarter and six months ended June 30, 2026 as compared to the prior year periods is driven by reduced volumes under the Kidney Care MSA.

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 months ended March 31, 2026 and 2025.

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 six months ended June 30, 2026 and 2025.

Previous wording

1 Our results for the first quarter of 2026 and 2025 included business optimization charges of $68 million and $45 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. 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 the second quarter of 2026 and 2025 included business optimization charges of $7 million and $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 primarily related to initiatives to reduce our cost structure following the sale of our former Kidney Care 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.

Previous wording

2 Our results for the first quarter of 2026 and 2025 included $4 million and $5 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

2 Our results for the second 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.

Previous wording

3 Our results for the first quarter 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 first quarter of 2025 included charges of $6 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.

Current wording

3 Our results for the first six 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 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.

Previous wording

4 Our results in the first quarter of 2026 included charges of $11 million related to business transformation costs which include expenses incurred in connection with discrete, newly 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.

Current wording

4 Our results in the second quarter and the first six months of 2026 included charges of $23 million and $34 million, respectively, primarily related to business transformation costs which include expenses incurred in connection with discrete, recently 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.

Previous wording

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

Current wording

5 Our results in the second quarter of 2026 and 2025 included charges of $3 million and $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.

Previous wording

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

Current wording

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

Previous wording

7 Our results for the first quarter of 2025 included $6 million of integration costs which primarily reflected the recognition of a non-cash impairment of properly, plant and equipment related to integration activities.

Current wording

7 Our results for the second quarter and first six months of 2025 included $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 property, plant and equipment related to integration activities.

Previous wording

8 Our results for the first quarter of 2026 and 2025 included $11 million and $13 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

8 Our results for the second quarter of 2026 and 2025 included $22 million and $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 business.

Previous wording

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

Current wording

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

Previous wording

10 Our results in the first quarter of 2026 included $26 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. Our results in the first quarter of 2025, included $43 million of income tax benefit driven by an entity classification election that we made for U.S. tax purposes, which resulted in a capital loss.

Current wording

10 Our 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 six months of 2026 included $23 million of income tax expense primarily related to differences arising from the use of a forecasted effective tax rate to compute income tax expense during the period, partially offset by the settlement of certain income tax audits. Our results in the first six months of 2025 included $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.

Previous wording

Our gross margin ratio was 33.0% and 32.8% for the three months ended March 31, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 3.8 and 9.0 percentage points on the gross margin ratio for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Our gross margin ratio was 34.9% and 35.3% for the three 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 5.4 percentage points on the gross margin ratio for the three months ended June 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.

Previous wording

Excluding the impact of special items, the gross margin ratio decreased by 5.0 percentage points in the first quarter of 2026 compared to the prior year period. The lower gross margins were primarily driven by increased manufacturing and supply costs, tariffs and product mix.

Current wording

Excluding the impact of special items, the gross margin ratio decreased by 2.1 and 3.6 percentage points in the second quarter and first six months of 2026, respectively, compared to the prior year periods. The lower gross margins were primarily driven by increased manufacturing and supply costs, including 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, partially offset by IEEPA tariff refunds recorded in the second quarter of 2026.

Previous wording

Our SG&A expenses ratio was 27.0% and 26.8% for the three months ended March 31, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 4.3 and 3.6 percentage points on the SG&A expenses ratio for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Our SG&A expenses ratio was 24.8% and 25.6% for the three months ended June 30, 2026 and 2025, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 2.9 percentage points on the SG&A expenses ratio for the three months ended June 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.

Previous wording

Excluding the impact of special items, the SG&A expenses ratio decreased by 0.5 percentage points in the first quarter of 2026 compared to the prior year period. The decrease primarily reflects lower headcount, partially offset by annual compensation increases.

Current wording

Excluding the impact of special items, the SG&A expenses ratio decreased by 0.8 and 0.6 percentage points in the second quarter and first six months of 2026, respectively, compared to the prior year periods. The decrease primarily reflects lower headcount, partially offset by annual compensation increases.

Previous wording

R&D expenses ratio for the three months ended March 31, 2026 and no impact on the R&D expenses ratio for the three months ended March 31, 2025.

Current wording

Our R&D expenses ratio was 4.4% and 4.8% for the three months ended June 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 0.3 percentage points on the R&D expenses ratio for the first six months ended June 30, 2026 and no impact on the R&D expenses ratio for the first six months ended June 30, 2025.

Previous wording

Excluding the impact of special items, the R&D expenses ratio decreased by 0.7 percentage points in the first quarter of 2026 compared to the prior year period primarily due to phasing of R&D spend which is expected to be consistent on a full year basis.

Current wording

Excluding the impact of special items, the R&D expenses ratio decreased by 0.6 percentage points in the second quarter and first six months of 2026, compared to the prior year periods. The decrease is primarily due to phasing of R&D spend which is expected to be flat on a full year basis.

Previous wording

For the three months ended March 31, 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.

Current wording

For the six months ended June 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 business.

Previous wording

We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $2 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, that are not material 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.

Previous wording

Other operating income, net was $42 million and $40 million in the first quarter of 2026 and 2025, respectively, and 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.

Current wording

Other operating income, net was $49 million and $52 million in the second quarter of 2026 and 2025, respectively, and $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.

Previous wording

Interest expense, net was $66 million and $64 million in the first quarter of 2026 and 2025, respectively. The slight increase in 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 three months of 2025.

Current wording

Interest expense, net was $64 million and $58 million in the second quarter of 2026 and 2025, respectively, and $130 million and $122 million for first six months ended June 30, 2026 and 2025, respectively. The 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 six months of 2025.

Previous wording

Other (income) expense, net was expense of $6 and income of $3 million in the first quarter of 2026 and 2025, respectively. In the current year period, the decrease in other (income) expense, net was primarily driven pension and other postretirement benefits and foreign exchange losses.

Current wording

Other (income) expense, net was income of $5 million and zero in the second quarter of 2026 and 2025, respectively. In the current year period, other income, net was primarily driven by pension and other postretirement benefits. In the prior year period, other (income) expense, net was primarily driven by pension and other postretirement benefits, offset by foreign exchange losses. Other (income) expense, net was expense of $1 million and income of $3 million for the first six months ended June 30, 2026 and 2025, respectively. In the current year period, other expense, net was primarily driven by losses from investments and foreign exchange losses, offset by pension and other postretirement benefits. In the prior year period, other income, net was primarily driven by pension and other postretirement benefits, partially offset by foreign currency losses and losses from a noncash impairment write-down in an equity method investment.