What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-12 · 262 added, 341 removed, 195 unchanged (76% of the section changed)

1 unchanged sentence

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, 2024 and 2023.

The following is management’s discussion and analysis of our financial condition and results of operations for the three months ended March 31, 2025 and 2024.

RECENT STRATEGIC ACTIONS

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As part of that review process, we identified and evaluated a range of potential strategic actions, including opportunities for sales and other separation transactions.

In January 2023, following the completion of that review, we announced a number of planned strategic actions, as discussed below, which are intended to enhance our operational effectiveness, accelerate innovation and drive additional stockholder value.

Pending Sale of Kidney Care Business

In January 2023, following the completion of that review, we announced a number of planned strategic actions, as discussed below, which were intended to enhance our operational effectiveness, accelerate innovation and drive additional stockholder value.

We completed the last of these strategic actions on January 31, 2025 in connection with the sale of our Kidney Care business.

Sale of Kidney Care Business

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 for an aggregate purchase price of $3.80 billion.

After giving effect to certain closing adjustments, we currently expect to receive approximately $3.50 billion in cash with net after-tax proceeds currently estimated to be in the range of $3.15 billion to $3.25 billion.

The transaction is currently expected to close in late 2024 or early 2025, subject to the receipt of customary regulatory approvals and satisfaction of other closing conditions.

We determined that our Kidney Care business met the criteria to be classified as held-for-sale in August 2024, and we also concluded that it met the conditions to be reported as a discontinued operation at that time.

Accordingly, our Kidney Care business is reported in discontinued operations in the accompanying condensed consolidated financial statements, and our prior period results have been adjusted to reflect discontinued operations presentation.

Since the initial announcement of the proposed separation of our Kidney Care business (which is now structured as a pending sale), we have incurred significant separation-related costs, which are reflected in discontinued operations, that have adversely impacted our earnings and cash flows.

We expect to continue to incur significant separation costs, which will continue to adversely impact our earnings and cash flows, in connection with the pending sale transaction.

Additionally, upon completion of the pending sale transaction, we expect to incur some amount of dis-synergies due to the reduced size of our company and, as a result, we will need to undertake various actions, including cost savings initiatives, to help ensure that our cost structure is appropriate to support our remaining businesses.

There can be no guarantees that the pending sale of our Kidney Care business or our proposed cost savings initiatives will be completed in the manner or over the timeframe described above, or at all, or that they will achieve their intended results.

Implementation of New Operating Model and Resulting Segment Change

In the third quarter of 2023, we completed the implementation of a new operating model intended to simplify and streamline our operations and better align our manufacturing and supply chain to our commercial activities.

Under this new operating model, our business is currently comprised of four segments:

Medical Products and Therapies, Healthcare Systems and Technologies, Pharmaceuticals, and Kidney Care (which we are planning to divest through the pending sale and accordingly, the results are reported in discontinued operations as discussed in Note 1 in Item 1 of this Quarterly Report on Form 10-Q).

Our segments were changed during the third quarter of 2023 to align with our new operating model.

See Note 16 in Item 1 of this Quarterly Report on Form 10-Q for additional information.

As discussed above, we have entered into the EPA to sell our Kidney Care business in a transaction that is currently expected to close in late 2024 or early 2025, subject to the receipt of customary regulatory approvals and satisfaction of other closing conditions.

(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 March 31, 2025, we repaid $3.13 billion of short- and long-term indebtedness primarily with the net after-tax cash proceeds from the sale of our Kidney Care business, and we expect to use substantially all of the remaining net after-tax proceeds to continue to repay indebtedness through the second quarter of 2025.

The financial position, results of operations and cash flows of our Kidney Care business, including our gain from the sale of that business and the related cash proceeds received, are reported as discontinued operations in the accompanying condensed consolidated financial statements, and our prior period results have been adjusted to reflect discontinued operations.

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

See Notes 2 and 5 of this Quarterly Report on Form 10-Q for additional information.

Implementation of Operating Model and Resulting Segment Change

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.

The 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.

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

The Pharmaceuticals segment includes sales of specialty injectable pharmaceuticals, inhaled anesthetics and drug compounding services.

Other sales not allocated to a segment primarily includes sales to Vantive, pursuant to the Manufacturing and Supply Agreement (Kidney Care MSA), and sales of products and services provided directly through certain of our manufacturing facilities.

For financial information about our segments, see Note 16 in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Sale of BioPharma Solutions (BPS) Business

On September 29, 2023, we completed the sale of our BioPharma Solutions (BPS) business and received cash proceeds of $3.96 billion from that transaction.

The results of operations and cash flows of our BPS business for the three and nine months ended September 30, 2023 are reported as discontinued operations in the accompanying condensed consolidated financial statements.

We used substantially all of the after-tax proceeds from this transaction

to repay certain of our debt obligations, including $514 million of commercial paper borrowings and $2.28 billion of long-term debt that we repaid during the fourth quarter of 2023, as well as €750 million of senior notes that we repaid during the second quarter of 2024.

See Note 2 in Item 1 of this Quarterly Report on Form 10-Q for additional information.

We used substantially all of the after-tax proceeds from this transaction to repay certain of our debt obligations, including $514 million of commercial paper borrowings and $2.28 billion of long-term debt that we repaid during the fourth quarter of 2023, as well as €750 million of senior notes that we repaid during the second quarter of 2024.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Hurricane Helene

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, N.C.

and disrupted operations at that facility.

We are actively working with customers, regulators and other stakeholders to manage inventory and minimize disruption to patient care as we work to fully restore our North Cove manufacturing operations.

Given the temporary disruptions to our facility as a result of the storm, we currently expect net sales in the fourth quarter to be negatively impacted by approximately $200 million, including an estimated $40 million to $50 million impact on Kidney Care sales and an estimated $150 million to $160 million impact on Medical Products & Therapies sales.

We also expect to incur an estimated $350 million to $400 million of charges in the fourth quarter primarily consisting of remediation costs, air freight (as we transfer product across our global network in the interest of increasing the availability of intravenous and peritoneal dialysis solutions for our customers while we work to fully remediate our North Cove facility) and other charges, which we expect to be partially offset by insurance recoveries.

Refer to Footnote 1 for further discussion of insurance recoveries related to Hurricane Helene.

Supply Constraints, Global Economic Conditions, and Regulatory Matters

In recent years, we have experienced significant challenges to our global supply chain, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and electromechanical devices), higher transportation costs, adverse impacts from significant weather events (including Hurricane Helene and the flooding of our North Cove facility), elevated inflation levels and interest rates, disruptions to certain ports of call and access to shipping ports around the world, the war in Ukraine, the conflict in the Middle East, tensions amongst China, Taiwan, and the U.S., and other geopolitical events.

While we have seen improvements in the availability of component parts and improved pricing in raw materials and on transportation costs, some of these challenges (including certain of those set forth above as we work to fully remediate our North Cove facility) are expected to have a negative impact on our results of operations in the future.

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.

See Note 1 in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Supply Constraints, Tariffs and Global Economic Conditions

We have experienced significant challenges to our global supply chain, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and electromechanical devices), higher transportation costs, adverse impacts from significant weather events (including Hurricane Helene, which resulted in the flooding of our North Cove facility), elevated inflation levels and interest rates, disruptions to certain ports of call and access to shipping ports around the world, the war in Ukraine, the conflict in the Middle East, and other geopolitical events.

While we have seen improvements in the availability of component parts and improved pricing in raw materials and on transportation costs, some of these challenges are expected to have a negative impact on our results of operations in the future.

In addition, recent 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 offsets for 2025 and working to identify additional mitigation opportunities in 2025 and beyond, we currently expect that our results will be adversely affected (including as a result of a failure to achieve the anticipated offsets or an inability to identify additional mitigating actions).

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.

Our results of operations are also affected by macroeconomic conditions and levels of business confidence.

The war in Ukraine, the conflict in the Middle East, tensions amongst China, Taiwan, and the U.S., and the sanctions and other measures being imposed in response to these conflicts (and the potential for escalation of these conflicts) have increased the levels of economic and political uncertainty and we continue to closely monitor the developing situations.

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.

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.

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 may in the future experience inflationary increases in manufacturing costs and operating expenses and we may not be able to pass these cost increases on to our customers in a timely manner or at all, which could have a material adverse impact on our profitability and results of operations.

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 may be 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.

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regulatory authorities before we can market and sell most of our products in a particular country.

Failure to obtain or maintain those approvals or clearances (including temporary importation 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, the FDA in the United States, the European Medicines Agency in Europe, the China Food and Drug Administration in China, and other government agencies, inside and outside of the United States, administer requirements covering the testing, safety, effectiveness, manufacturing, labeling, promotion and advertising, pricing, distribution, and post-market surveillance of our products.

Furthermore, FDA in the United States, the European Medicines Agency in Europe, the China Food and Drug Administration in China, and other government agencies, inside and outside of the United States, administer requirements covering the testing, safety, effectiveness, manufacturing, labeling, promotion and advertising, pricing, distribution, and post-market surveillance of our products.

Our failure to comply with these requirements may subject us to various actions, including warning letters, product recalls or seizures, monetary sanctions, injunctions to halt the manufacture and distribution of products, civil or criminal sanctions, refusal of a government to grant approvals or licenses, restrictions on operations or withdrawal of existing approvals and licenses, and may have a material adverse impact on our results of operations.

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NON-GAAP FINANCIAL MEASURES

Our presentation of percentage changes in net sales at constant currency rates, which is computed using current period local currency sales at the prior period’s foreign exchange rates, is a non-GAAP financial measure.

This measure provides information about growth (or declines) in our net sales as if 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 constant currency rates, when used in conjunction with the U.S.

GAAP measure of percent change in net sales at actual currency rates, may provide a more complete understanding and facilitate a fuller analysis of our results of operations, particularly in evaluating performance from one period to another.

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.

RESULTS OF OPERATIONS

Net income attributable to Baxter stockholders for the three months ended September 30, 2024 was $140 million, or $0.27 per diluted share compared to $2.51 billion, or $4.93 per diluted share for the three months ended September 30, 2023.

For the three months ended September 30, 2024, our results included special items that adversely impacted net income attributable to Baxter stockholders by $271 million, or $0.53 per diluted share.

For the three months ended September 30, 2023, our results included special items which increased net income attributable to Baxter stockholders by $2.09 billion, or $4.11 per diluted share.

Net income (loss) attributable to Baxter stockholders for the nine months ended September 30, 2024 as $(137) million, or $(0.27) per diluted share compared to $2.41 billion, or $4.76 per diluted share for the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, our results included special items that adversely impacted net income attributable to Baxter stockholders by $1.22 billion, or $2.40 per diluted share.

For the nine months ended September 30, 2023, our results included special items which increased net income attributable to Baxter stockholders by $1.36 billion, or $2.69 per diluted share.

Net income from continuing operations for the three months ended September 30, 2024 was $61 million, or $0.12 per diluted share compared to $37 million, or $0.07 per diluted share for the three months ended September 30, 2023.

Net income from continuing operations for the three months ended September 30, 2024 included special items that adversely impacted net income by $191 million, or $0.37 per diluted share.

Net income from continuing operations for the three months ended September 30, 2023 included special items that adversely impacted net income by $184 million, or $0.36 per diluted share.

Net income (loss) from continuing operations for the nine months ended September 30, 2024 was $162 million, or $0.32 per diluted share compared to $(38) million, or $(0.08) per diluted share for the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, our results included special items that adversely impacted net income (loss) from continuing operations by $507 million, or $0.99 per diluted share.

For the nine months ended September 30, 2023, our results included special items that impacted net income (loss) from continuing operations by $571 million, or $1.13 per diluted share.

Net income (loss) attributable to Baxter stockholders for the three months ended March 31, 2025 was $126 million, or $0.25 per diluted share, compared to $37 million, or $0.07 per diluted share for the three months ended March 31, 2024.

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.

For the three months ended March 31, 2024, our results included special items that adversely impacted net income (loss) attributable to Baxter stockholders by $294 million, or $0.58 per diluted share.

Net income (loss) from continuing operations for the three months ended March 31, 2025 was $64 million, or $0.13 per diluted share, compared to $6 million, or $0.01 per diluted share for the three months ended March 31, 2024.

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.

Net income (loss) from continuing operations for the three months ended March 31, 2024 included special items that adversely impacted net income (loss) by $177 million, or $0.35 per diluted share.

See the subsection entitled “Special Items” for information about special items for all periods presented.

CONSOLIDATED NET SALES

Three Months Ended September 30, Percent change

(in millions) 2024 2023 At actual

currency rates At constant currency rates 1

United States $ 1,500 $ 1,467 2 % 2 %

Emerging markets 2

347 353 (2) % 1 %

Rest of world 3

852 779 9 % 8 %

Total net sales $ 2,699 $ 2,599 4 % 4 %

Nine Months Ended September 30, Percent change

Three Months Ended March 31, Percent change

(in millions) 2025 2024 At actual

currency rates At constant currency rates 1

rates At operational sales growth 1

United States $ 1,490 $ 1,348 11 % 7 %

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Total net sales $ 2,625 $ 2,490 5 % 5 %

1 Percent change in net sales at constant currency rates is a non-GAAP financial measure.

1 Percent change in net sales at operational sales growth is a non-GAAP financial measure.

See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

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3 Rest of world includes sales from our operations in Western Europe, Canada, Japan, Australia, and New Zealand.

As set forth above, foreign currency had no impact on net sales during the three months ended September 30, 2024, compared to the prior year period, due to the strengthening of the U.S.

Dollar relative to the Turkish Lira, Mexican Peso, and Brazilian Real, offset by the weakening of the U.S.

Dollar relative to the Euro, British Pound, Australian Dollar and Chinese Renminbi.

Foreign currency had no impact on net sales during the nine months ended September 30, 2024, compared to the prior year period, due to the strengthening of the U.S.

Dollar relative to Turkish Lira, Japanese Yen, Chinese Renminbi, and Brazilian Real, offset by the weakening of the U.S.

Dollar relative to the Colombian Peso, British Pound, and Euro.

In the first quarter of 2025, the Kidney Care MSA sales favorably impacted sales growth by 3% and the exit of IV solutions in China adversely impacted sales by 1%.

Additionally, in the first quarter of 2025, foreign currency rates adversely impacted net sales growth by 2%, compared to the prior year period, due to the weakening of the U.S.

Dollar relative to the Euro, Australian Dollar, Canadian Dollar, Brazilian Real and the Mexican Peso.

NET SALES BY SEGMENT

Medical Products and Therapies

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

Three Months Ended September 30, Percent change

(in millions) 2024 2023 At actual

currency rates At constant currency rates 1

Infusion Therapies and Technologies

$ 1,070 $ 1,003 7 % 7 %

Advanced Surgery 272 255 7 % 7 %

Total Medical Product and Therapies net sales $ 1,342 $ 1,258 7 % 7 %

Nine Months Ended September 30, Percent change

Medical Products & Therapies

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.

Three Months Ended March 31, Percent change

(in millions) 2025 2024 At actual

currency rates At constant currency rates 1

rates At operational sales growth 1

Infusion Therapies and Technologies

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Advanced Surgery 268 263 2 % 4 %

Total Medical Product and Therapies net sales $ 3,893 $ 3,691 5 % 6 %

1 Percent change in net sales at constant currency rates is a non-GAAP financial measure.

Total Medical Product & Therapies net sales $ 1,262 $ 1,229 3 % 6 %

1 Percent change in net sales at operational sales growth is a non-GAAP financial measure.

See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

Medical Product and Therapies segment net sales increased 7% in the third quarter and increased 5% in the first nine months of 2024, as compared to the prior year periods.

Infusion Therapies and Technologies net sales increased 7% in the third quarter and increased 6% in the first nine months of 2024, as compared to the prior year periods.

Sales performance in the third quarter primarily reflected growth in Infusion Systems as a result of our Novum IQ large volume infusion and syringe pump sales in the U.S., and to a lesser extent, sales of IV solutions and nutrition product offerings, which collectively were attributable to both pricing initiatives and increased sales volume.

Advanced Surgery net sales increased 7% in the third quarter and increased 5% in the first nine months of 2024, as compared to the prior year periods.

Sales performance primarily reflected growth in hemostats and sealants and was primarily attributable to increased sales volume.

Foreign currency exchange rates adversely impacted sales growth by 1% for the first nine months of 2024, as compared to the prior year period.

Healthcare Systems and Technologies

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

Three Months Ended September 30, Percent change

(in millions) 2024 2023 At actual

currency rates At constant currency rates 1

Care and Connectivity Solutions $ 456 $ 443 3 % 3 %

Front Line Care 296 301 (2) % (2) %

Total Healthcare Systems and Technologies net sales $ 752 $ 744 1 % 1 %

Nine Months Ended September 30, Percent change

Medical Product and Therapies segment net sales increased 3% in the first quarter of 2025, as compared to the prior year period.

Infusion Therapies and Technologies net sales increased 3% in the first quarter of 2025, as compared to the prior year period.

Sales performance in the first quarter of 2025 primarily reflected growth in Infusion Systems as a result of increased U.S.

sales for our infusion pump portfolio.

Growth in our IV Solutions business was the result of price increases globally, but also benefited from the build back of distributor inventory in the U.S.

following the flooding at our North Cove facility in Marion, North Carolina caused by Hurricane Helene in September 2024.

The distributor build was offset by reduced U.S.

demand as hospital customers continued fluid conservation efforts during the first quarter of 2025 originally instituted in response to Hurricane Helene.

We expect some hospital customers to continue a level of conservation during 2025 with the impact waning over the course of the year as product allocations are lifted.

Nutrition sales in the quarter reflected price increases globally and growth in the U.S.

driven by the clearance of back orders and some distributor stock replenishment.

The previously announced exit of IV solutions in China adversely impacted sales growth by 1% and foreign currency exchange rates adversely impacted sales growth by 2%, as compared to the prior year period.

Advanced Surgery net sales increased 2% in the first quarter 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 outside the U.S..

Foreign currency exchange rates adversely impacted sales growth by 2%, as compared to the prior year period.

Healthcare Systems & Technologies

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

Three Months Ended March 31, Percent change

(in millions) 2025 2024 At actual

currency rates At constant currency rates 1

rates At operational sales growth 1

Care and Connectivity Solutions $ 427 $ 402 6 % 7 %

Front Line Care 277 265 5 % 5 %

Total Healthcare Systems and Technologies net sales $ 2,167 $ 2,218 (2) % (3) %

1 Percent change in net sales at constant currency rates is a non-GAAP financial measure.

Total Healthcare Systems & Technologies net sales $ 704 $ 667 6 % 6 %

1 Percent change in net sales at operational sales growth is a non-GAAP financial measure.

See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

Healthcare Systems and Technologies segment net sales increased 1% in the third quarter and decreased 2% in the first nine months of 2024, as compared to the prior year periods.

Care and Connectivity Solutions net sales increased 3% in the third quarter and were flat in the first nine months of 2024, as compared to the prior year periods.

The growth in the third quarter was primarily driven by increased order volume associated with capital spending as compared to the prior year quarterly period, partially offset by declines in care communications products driven by the shifting of installations to future periods and lower sales outside of the U.S.

Front Line Care net sales decreased 2% in the third quarter and decreased 6% in the first nine months of 2024, as compared to the prior year periods.

The sales decline as compared to the prior year periods was primarily driven by a backlog reduction in the prior year period, as well as softer demand in the primary care market and lower government orders, partially offset by growth in our cardiology products.

Healthcare Systems & Technologies segment net sales increased 6% in the first quarter of 2025, as compared to the prior year period.

Care and Connectivity Solutions net sales increased 6% in the first quarter of 2025, as compared to the prior year period.

Sales performance was primarily driven by increased order volume associated with increased capital spending in the U.S., as compared to the prior year period, as well as higher installations of our care communications products.

These increases were partially offset by lower international sales.

Foreign currency exchange rates adversely impacted sales growth by 1%, as compared to the prior year period.

Front Line Care net sales increased 5% in the first quarter of 2025, as compared to the prior year period.

Sales performance was primarily driven by increased demand across a majority of our products including patient monitoring systems, cardiology products and physical assessment tools.

Pharmaceuticals

Our Pharmaceuticals segment includes sales of specialty injectable pharmaceuticals, inhaled anesthesia and drug compounding.

Three Months Ended September 30, Percent change

(in millions) 2024 2023 At actual

currency rates At constant currency rates 1

Injectables and Anesthesia

$ 321 $ 351 (9) % (9) %

Drug Compounding 267 229 17 % 14 %

Total Pharmaceuticals net sales $ 588 $ 580 1 % 1 %

Nine Months Ended September 30, Percent change

Three Months Ended March 31, Percent change

(in millions) 2025 2024 At actual

currency rates At constant currency rates 1

rates At operational sales growth 1

Injectables and Anesthesia

2 unchanged sentences

Total Pharmaceuticals net sales $ 581 $ 578 1 % 3 %

1 Percent change in net sales at constant currency rates is a non-GAAP financial measure.

1 Percent change in net sales at operational growth rates is a non-GAAP financial measure.

See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.

Pharmaceuticals segment net sales increased 1% in the third quarter and increased 7% in the first nine months of 2024, as compared to the prior year periods.

Injectables and Anesthesia net sales decreased 9% in the third quarter and were flat for the first nine months of 2024, as compared to the prior year periods.

The decrease in the third quarter was driven by the the timing of certain orders shifting to the fourth quarter, a delay of an anticipated new product launch, as well as supply constraints impacting international sales.

Despite the decrease in the third quarter, we believe the Injectables fundamentals and growth prospects remain strong driven largely driven by strength in both core products and recent new product launches in the U.S., partially offset by inhaled anesthesia products.

Foreign currency exchange rates adversely impacted sales growth by 1% for the first nine months of 2024, as compared to the prior year period.

Drug Compounding net sales increased 17% in the third quarter and for the first nine months of 2024, as compared to the prior year periods.

The increase in the current year periods was driven by increased demand for our international pharmacy compounding offerings due, in part, to customer capacity constraints that resulted in increased outsourcing of compounding activities.

Foreign currency exchange rates favorably impacted sales growth by 3% for the third quarter of 2024, as compared to the prior year period.

Other sales, which represent sales not attributable to our reportable segments, were $17 million for both the three months ended September 30, 2024 and 2023, and $55 million and $73 million for the nine months ended September 30, 2024 and 2023, respectively.

In the current and prior year periods, Other sales primarily represent revenues earned by certain of our manufacturing facilities from contract manufacturing activities.

The nine-month period ended September 30, 2023 also included royalty income under a business development arrangement.

The decrease in other sales for the nine months ended September 30, 2024 as compared to the prior year period primarily reflects lower contract manufacturing volume and, to a lesser extent, termination of the royalty arrangement following our acquisition of the rights to the underlying product.

Pharmaceuticals segment net sales increased 1% in the first quarter of 2025, as compared to the prior year period.

Injectables and Anesthesia net sales increased 2% in the first quarter of 2025, as compared to the prior year period.

Sales performance was primarily due to growth in our specialty injectable products, driven by strong sales volume in our core portfolio and recent product launches, partially offset by declines for inhaled anesthetics.

Foreign currency exchange rates adversely impacted sales growth by 2%, as compared to the prior year period.

Drug Compounding net sales decreased 2% in the first quarter of 2025, as compared to the prior year period.

Sales performance was driven by decreased demand for our international pharmacy compounding offerings due, in part, to the short-term outsourcing of compounding activities by select customers in the prior year which did not continue in the current year.

Foreign currency exchange rates adversely impacted sales growth by 4%, as compared to the prior year period.

During the three months ended March 31, 2025 and 2024, we earned $78 million and $16 million, respectively, of revenues that were not attributable to our reportable segments.

In the current year period, 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 period, Other sales primarily represented revenues earned by certain of our manufacturing facilities from contract manufacturing activities.

The increase in Other sales for the three months ended March 31, 2025 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.

COSTS AND EXPENSES

Special Items

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, 2024 and 2023.

Three Months Ended September 30, Nine Months Ended September 30,

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, 2025 and 2024.

Three Months Ended March 31,

(in millions) 2025 2024

1 unchanged sentence

Business optimization items 1

(2) — (8) (23)

Acquisition and integration items 2

— (1) (1) (1)

European medical devices regulation 3

(9) (12) (25) (32)

Product related items 5

Hurricane Helene costs 6

(25) — (25) —

Legal matters 7

Total Special Items $ (237) $ (119)

Impact on Gross Margin Ratio (5.4) pts (4.2) pts (4.8) pts (4.3) pts

Impact on Gross Margin Ratio (9.0) pts (4.8) pts

Selling, General and Administrative (SG&A) Expenses

2 unchanged sentences

Acquisition and integration items 2

Legal matters 6

Separation-related costs 4

Total Special Items $ 95 $ 73

Impact on SG&A Ratio 3.3 pts 4.2 pts 2.9 pts 4.1 pts

Impact on SG&A Ratio 3.6 pts 3.0 pts

Research and Development (R&D) Expenses

Business optimization items 1

$ — $ 4 $ — $ 10

Total Special Items $ 2 $ —

Impact on R&D Ratio (0.0) pts 0.1 pts (0.0) pts 0.1 pts

Other Operating Income, net

Acquisition and integration items 2

$ — $ — $ — $ (14)

Total Special Items $ — $ — $ — $ (14)

Impact on R&D Ratio (0.0) pts 0.0 pts

Other (Income) Expense, net

Investment impairments 8

$ — $ — $ — $ 10

Acquisition and integration items 2

Total Special Items $ 14 $ —

1 unchanged sentence

Tax matters 9

$ 11 $ 16 $ 45 $ 67

Tax effects of special items 10

(56) (54) (144) (154)

Total Special Items $ (127) $ (15)

Impact on Effective Tax Rate (5.8) pts 19.5 pts 10.0 pts 259.5 pts

1 Our results for third quarter of 2024 and 2023 included business optimization charges of $18 million and $48 million, respectively.

Our results for the first nine months of 2024 and 2023 included business optimization charges of $49 million and $167 million, respectively.

These restructuring and other business optimization costs included costs primarily related to our 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, third-party costs incurred to support the transformation of certain general and administrative functions, and rationalization of certain other manufacturing and distribution facilities.

Impact on Effective Tax Rate 2,215.9 pts 63.9 pts

1 Our results for first quarter of 2025 and 2024 included business optimization charges of $45 million and $22 million, respectively.

These restructuring and business optimization costs in 2025 included costs primarily related to its initiatives to reduce our cost structure following the

sale of our former Kidney Care segment.

These restructuring and business optimization costs in 2024 included costs primarily 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 to a lesser extent, 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.

2 Our results for the third quarter of 2024 and 2023 included $5 million and $2 million, respectively, and for both the first nine months of 2024 and 2023 included $16 million, of integration costs which primarily reflected third party consulting costs related to our integration of Hillrom.

In 2023, those costs were partially offset by a $14 million benefit in the first nine months related to changes in the estimated fair values of contingent consideration liabilities.

3 Our results for the third quarter of 2024 and 2023 included $9 million and $12 million, respectively, and for the first nine months of 2024 and 2023 included $25 million and $32 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 charge and believe that the costs of initial compliance for previously registered products over the implementation period are not indicative of our core operating results.

4 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.

5 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 a charge 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 expected as a result of those asset write-offs.

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

Our results for the first quarter of 2024 included $5 million of integration costs which primarily reflected third party consulting costs related to our integration of Hillrom.

3 Our results for the first quarter of 2025 and 2024 included $5 million and $7 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.

4 Our results for the first quarter of 2025 included $13 million of separation-related costs primarily reflecting costs of external advisors supporting our activities related to the separation of our Kidney Care segment.

5 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.

6 Our results in the first quarter of 2025 included pre-tax charges of $98 million 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.

6 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.

Our results in the third quarter and first nine months of 2023 included costs, including associated legal fees, of $13 million related to matters involving alleged violations of the False Claims Act related to a now-discontinued legacy Hillrom sales line and alleged injury from environmental exposure.

7 Our results in 2023 included $10 million of pre-tax losses from non-marketable investments in several early stage companies in the first nine months, consisting of $13 million of noncash impairment write-downs, partially offset by a $3 million gain from the sale of an investment.

8 Our results for the third quarter of 2024 included $11 million of income tax expense consisting of a $26 million valuation allowance recorded to reduce the carrying amount of a tax attribute carryforward in the U.S.

related to the pending sale of our Kidney Care segment, partially offset by application of the intraperiod tax allocation between continuing operations and discontinued operations.

Our results for the third quarter of 2023 included $16 million of income tax expense resulting from separation-related income tax costs associated with the sale of our BPS business.

Our results for the first nine months of 2024 included $45 million of income tax expense consisting of a $26 million valuation allowance recorded to reduce the carrying amount of a tax attribute carryforward in the U.S.

and internal reorganization transactions related to the pending sale of our Kidney Care segment.

Our results for the first nine months of 2023 included $67 million of income tax expense consisting of a $30 million valuation allowance recorded to reduce the carrying amount of a deferred tax asset for a tax basis step-up related to previously enacted Swiss tax reform legislation to reflect our current estimate of its recoverability and separation-related income tax costs associated with the sale of our BPS business.

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

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

9 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.

Our results in the first quarter of 2024 included $32 million of income tax expense driven by a change in its permanent reinvestment assertion resulting from internal reorganization transactions related to the sale of our Kidney Care segment.

10 This item reflects the income tax impact of the special items identified in this table.

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Gross Margin and Expense Ratios

Three Months Ended September 30,

2024 % of net sales 2023 % of net sales $ change % change

Gross margin $ 1,033 38.3 % $ 1,056 40.6 % $ (23) (2.2) %

SG&A $ 754 27.9 % $ 744 28.6 % $ 10 1.3 %

R&D $ 129 4.8 % $ 133 5.1 % $ (4) (3.0) %

Nine Months Ended September 30,

Three Months Ended March 31,

2025 % of net sales 2024 % of net sales $ change % change

2 unchanged sentences

R&D $ 140 5.3 % $ 120 4.8 % $ 20 16.7 %

Our gross margin ratio was 38.3% and 40.6% for the three months ended September 30, 2024 and 2023, respectively.

The special items identified earlier in this section had an unfavorable impact of approximately 5.4 and 4.2 percentage points on the gross margin ratio for the three months ended September 30, 2024 and 2023, respectively.

Our gross margin ratio was 38.4% and 40.0% for the nine months ended September 30, 2024 and 2023, respectively.

The special items identified earlier in this section had an unfavorable impact of approximately 4.8 and 4.3 percentage points on the gross margin ratio for the nine months ended September 30, 2024 and 2023, respectively.

Our gross margin ratio was 32.8% and 38.6% for the three months ended March 31, 2025 and 2024, respectively.

The special items identified earlier in this section had an unfavorable impact of approximately 9.0 and 4.8 percentage points on the gross margin ratio for the three months ended March 31, 2025 and 2024, respectively.

Refer to the Special Items caption above for additional detail.

Excluding the impact of special items, the gross margin ratio decreased by 1.1 percentage points in both the third quarter and first nine months of 2024, respectively, compared to the prior year periods.

The lower gross margins were driven by an unfavorable product mix, partially offset by initiatives to reduce our manufacturing and supply chain costs.

Our SG&A expenses ratio was 27.9% and 28.6% for the three months ended September 30, 2024 and 2023, respectively.

The special items identified earlier in this section had an unfavorable impact of approximately 3.3 and 4.2

percentage points on the SG&A expenses ratio for the three months ended September 30, 2024 and 2023, respectively.

Our SG&A expenses ratio was 28.0% and 29.7% for the nine months ended September 30, 2024 and 2023, respectively.

The special items identified earlier in this section had an unfavorable impact of approximately 2.9 and 4.1 percentage points on the SG&A expenses ratio for the nine months ended September 30, 2024 and 2023, respectively.

Excluding the impact of special items, the SG&A expenses ratio increased by 0.2 percentage points in the third quarter compared to the prior year period, due to higher corporate function costs and annual compensation increases, partially offset by lower accruals under our annual employee incentive compensation plans.

Excluding the impact of special items, the SG&A expenses ratio decreased 0.5 percentage points in first nine months of 2024 compared to the prior year period, due to lower accruals under our annual employee incentive compensation plans, partially offset by annual compensation increases.

Our R&D expenses ratio was 4.8% and 5.1% for the three months ended September 30, 2024 and 2023, respectively.

The special items identified earlier in this section had no impact and an unfavorable impact of 0.1 percentage points on the R&D expense ratio in the third quarter of 2024 and 2023, respectively.

The R&D expenses ratio was 4.8% and 5.1% for the nine months ended September 30, 2024 and 2023, respectively.

The special items identified earlier in this section had no impact and an unfavorable impact of 0.1 percentage points on the R&D expenses ratio for the nine months ended September 30, 2024 and 2023, respectively.

Excluding the impact of special items, the R&D expenses ratio decreased by 0.2 percentage points in both the third quarter and first nine months of 2024, compared to the prior year periods.

Excluding the impact of special items, the gross margin ratio decreased by 1.6% percentage points in the first quarter of 2025 compared to the prior year period.

The lower gross margins were driven primarily by the impact of the Kidney Care MSA and increased shipping costs, partially offset by initiatives to reduce our manufacturing and supply chain costs.

Our SG&A expenses ratio was 26.8% and 29.3% for the three months ended March 31, 2025 and 2024, respectively.

The special items identified earlier in this section had an unfavorable impact of approximately 3.6 and 3.0 percentage points on the SG&A expenses ratio for the three months ended March 31, 2025 and 2024, respectively.

Excluding the impact of special items, the SG&A expenses ratio decreased by 3.1 percentage points in the first quarter of 2025 compared to the prior year period.

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.

Our R&D expenses ratio was 5.3% and 4.8% for the three months ended March 31, 2025 and 2024, respectively.

The special items identified earlier in this section had no impact on the R&D expense ratio in the first quarter of 2025 and 2024.

The R&D expenses ratio increased by 0.5 percentage points in the first quarter of 2025, compared to the prior year period, primarily reflecting increased project-related expenditures.

Business Optimization Items

In recent years, we have undertaken actions to transform our cost structure and enhance operational efficiency.

These efforts have included restructuring the organization, optimizing our manufacturing footprint, R&D operations, and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions.

These efforts have included restructuring the organization into verticalized segments, optimizing our manufacturing footprint, R&D operations, and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions.

The related costs of these actions consisted primarily of employee termination costs, implementation costs, contract termination costs, and asset impairments.

For the three months ended months ended September 30, 2024, $7 million and $14 million of the restructuring charges, consisting of employee termination costs, related to business optimization initiatives within our Healthcare Systems and Technologies segment.

Additionally, for the nine months ended September 30, 2024, $7 million of the restructuring charges, consisting of employee termination costs, related to our recent implementation of a new operating model intended to simplify and streamline our operations.

For the three months ended March 31, 2025, $25 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.

We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $4 million through the completion of initiatives that are currently underway.

We continue to pursue cost savings initiatives and, to the extent further cost savings opportunities are identified (including after the completion of the pending sale of our Kidney Care business), we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

We continue to pursue cost savings initiatives, including those intended to mitigate a portion of the dis-synergies that arose as a result of the sale of our Kidney Care business, and to the extent further cost savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods.

Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our business optimization programs.

Other Operating Income, Net

Other operating income, net was $5 million for the three months ended September 30, 2024.

In the third quarter of 2024, this amount was comprised of income from transition services arrangements related to the divestiture of our BPS business.

Other operating income, net was $9 million and $14 million for the nine months ended September 30, 2024 and 2023, respectively.

In the first nine months of 2024, this amount was comprised of income from transition services arrangements related to the divestiture of our BPS business.

In the first nine months of 2023, this amount was comprised of gains from changes in the estimated fair value of contingent consideration arrangements.

Other operating income, net was $40 million and $3 million in the first quarter of 2025 and 2024, respectively.

In the first quarter of 2025, this amount was primarily related to the income recognized under the Kidney Care TSA entered into upon the sale of the Kidney Care business in January 2025.

Interest Expense, Net

Interest expense, net was $87 million and $127 million for the three months ended September 30, 2024 and 2023, respectively and $251 million and $367 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease in 2024 was driven by debt repayments in the fourth quarter of 2023 and, to a lesser extent, higher interest income due to a higher average cash balance and higher interest rates during the current year period.

Interest expense, net was $64 million and $78 million in the first quarter of 2025 and 2024, respectively.

The decrease in 2025 was driven by debt repayments in first quarter of 2025 and the fourth quarter of 2024.

Other (Income) Expense, net

Other (income) expense, net was income of $1 million and income of $12 million for the three months ended September 30, 2024 and 2023, respectively, and income of $34 million and expense of $15 million for the nine months ended September 30, 2024 and 2023, respectively.

In the current year periods, other income, net was primarily driven by pension and other postretirement benefits, partially offset by foreign exchange losses.

In the three months ended September 30, 2023 , other income, net was primarily driven by pension and other postretirement benefits.

In the nine months ended September 30, 2023, other expense, net was primarily driven by foreign exchange losses, non-marketable investment impairments and decreases in the fair value of marketable equity securities, partially offset by pension and postretirement benefits.

Our effective income tax rate was 11.6% and 42.2% in the third quarter of 2024 and 2023, respectively, and 30.2% and 281.0% for the first nine months of 2024 and 2023, respectively.

Our effective income tax rate can differ from the 21% U.S.

Other (income) expense, net was income of $3 million and $9 million in the first quarter of 2025 and 2024, respectively.

In the current and prior year periods, other income, net was primarily driven by pension and other postretirement benefits.

For the three months ended March 31, 2025 and 2024, our effective income tax rate differs significantly from the 21% U.S.

federal statutory rate due to a number of factors, including foreign rate differences, tax incentives, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances, increases or decreases in liabilities for uncertain tax positions, and excess tax benefits or shortfalls on stock compensation awards.

Our effective income tax rate during interim periods reflects our estimated annual effective tax rate and discrete items.

For the three months ended September 30, 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a favorable geographic earnings mix, the tax impacts of the write-off of damaged inventory and fixed assets at our North Cove facility caused by Hurricane Helene, and a change in our assertion on the reinvested foreign earnings related to the pending sale of our Kidney Care segment allocated to continuing operations, partially offset by a $26 million valuation allowance recorded to reduce the carrying amount of a tax attribute carryforward in the U.S.

related to the pending sale of our Kidney Care segment.

For the nine months ended September 30, 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a $26 million valuation allowance recorded to reduce the carrying amount of a tax attribute carryforward in the U.S.

related to the pending sale of our Kidney Care segment, an increase in a valuation allowance in a foreign jurisdiction resulting from changes in future projected income, an increase in income tax expense resulting from internal reorganization transactions related to the pending sale of our Kidney Care segment, and an increase in our liabilities for various uncertain tax positions, partially offset by a favorable geographic earnings mix.

For the three months ended September 30, 2023, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to an increase in the valuation allowance in a foreign jurisdiction resulting from changes in future projected income, partially offset by a favorable geographic earnings mix.

For the nine months ended September 30, 2023, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily attributable to a $30 million increase in the valuation allowance related to a deferred tax asset from a tax basis step-up that arose from previously enacted Swiss tax reform legislation, an increase in the valuation allowance in a foreign jurisdiction resulting from changes in future projected income, and excess tax shortfalls on stock compensation awards.

The Organization of Economic Co-operation and Development (OECD) and the G20 Inclusive Framework on Base Erosion and Profit Shifting (the Inclusive Framework) has put forth two proposals—Pillar One and Pillar Two—that (i) revise the existing profit allocation and nexus rules and (ii) ensure a minimal level of taxation, respectively.

On December 12, 2022, the EU member states agreed to implement the Inclusive Framework’s global corporate minimum tax rate of 15%, and various countries both within and outside the EU have enacted new laws implementing Pillar Two or have draft legislation proposed for adoption.

The OECD continues to release additional guidance on the two-pillar framework, with widespread implementation occurring in 2024.

We currently expect that the impact of the Pillar Two legislation on our income tax expense for the year ending December 31, 2024 will be approximately $10 million to $15 million.

We are continuing to evaluate the potential impacts of the Inclusive Framework for 2025 and future years, pending legislative adoption by individual countries, which could result in further adverse impacts on our income tax expense and cash flows.

For the three months ended March 31, 2025, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily driven by our near break-even pre-tax income and a tax benefit driven by an entity classification election that we made for U.S.

tax purposes, which resulted in a capital loss.

For the three months ended March 31, 2024, the difference between our effective income tax rate and the U.S.

federal statutory rate was primarily driven by income tax expense resulting from internal reorganization transactions related to the sale of our Kidney Care segment, an increase in a valuation allowance in a foreign jurisdiction resulting from changes in future projected income, and an increase in our liabilities for various uncertain tax positions.

The Organization of Economic Co-operation and Development (OECD) reached agreement among over 140 countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two.

We currently expect that the impact of the Pillar Two legislation on our income tax expense for the year ending December 31, 2025 is not expected to be material.

We will continue to evaluate the impact of legislative changes as additional guidance becomes available.

Discontinued Operations

In August 2024, we entered into a definitive agreement to sell our Kidney Care business and its results have been presented as discontinued operations for the three and nine months ended September 30, 2024 and 2023.

On September 29, 2023, we completed the sale of our BPS business and it's results have been presented as discontinued operations for the three and nine months ended September 30, 2023.

Income from discontinued operations, net of tax was $83 million in the third quarter of 2024, compared to $2.47 billion in the third quarter of 2023.

Income (loss) from discontinued operations, net of tax was $(290) million in the first nine months of 2024, compared to $2.46 billion in the first nine months of 2023.

The decreases were primarily driven by the $2.89 billion pre-tax gain from the sale of BPS ($2.60 billion net of tax).

On January 31, 2025, we completed the sale of our Kidney Care business and its results have been presented as discontinued operations for the three months ended March 31, 2025 and 2024.

Income from discontinued operations, net of tax was $62 million in the first quarter of 2025, compared to $33 million in the first quarter of 2024.The increase in the current year period was primarily driven by the $191 million pre-tax gain from the sale our Kidney Care business ($111 million net of tax).

Refer to Note 2 within Item 1 for additional information.

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The following is a summary of our operating income for our reportable segments.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2025 2024

Medical Products and Therapies $ 268 $ 245 $ 733 $ 706

Medical Products & Therapies $ 244 $ 227

% of Segment Net Sales 19.3 % 18.5 %

Healthcare Systems and Technologies 136 115 323 327

Healthcare Systems & Technologies 93 67

% of Segment Net Sales 13.2 % 10.0 %

1 unchanged sentence

% of Segment Net Sales 10.8 % 13.5 %

Other 2 6 15 19

Total 464 474 1,282 1,336

Total reportable segment operating income 400 372

Unallocated corporate costs (17) (69)

3 unchanged sentences

Acquisition and integration items (1) (5)

Separation-related costs (13) —

European Medical Devices Regulation (5) (7)

5 unchanged sentences

Loss from continuing operations before income taxes $ (3) $ 46

Medical Products and Therapies

Segment operating income was $268 million and $245 million for the third quarter of 2024 and 2023, respectively, and $733 million and $706 million for the first nine months of 2024 and 2023, respectively.

The increase in segment operating income in the third quarter and the nine months ended September 30, 2024 compared to the prior year periods was primarily driven by higher sales in the current year periods, partially offset by increased allocations of manufacturing and supply chain overheads, annual compensation increases, and higher corporate shared costs.

Healthcare Systems and Technologies

Segment operating income was $136 million and $115 million for the three months ended September 30, 2024 and 2023, respectively, and $323 million and $327 million for the nine months ended September 30, 2024 and 2023, respectively.

Segment operating income increased in the third quarter compared to the prior year period primarily due to increased gross profit and lower operating expenses from margin improvement initiatives and increased gross profit from higher sales of Care and Connectivity Solutions product offerings, partially offset by lower sales of our Front Line

Care product offerings.

Segment operating income decreased in the nine months ended September 30, 2024 compared to the prior year period primarily due to decreased gross profit from lower sales.

Medical Products & Therapies

Segment operating income was $244 million and $227 million in the first quarter of 2025 and 2024, respectively.

The increase in segment operating income in the first quarter compared to the prior year period was primarily driven by increased pricing, partially offset by increased manufacturing and supply costs and R&D investments.

Healthcare Systems & Technologies

Segment operating income was $93 million and $67 million in the first quarter of 2025 and 2024, respectively.

Segment operating income increased in the first quarter compared to the prior year period primarily due to increased gross profit from higher sales.

Pharmaceuticals

Segment operating income was $58 million and $108 million for the three months ended September 30, 2024 and 2023, respectively, and $211 million and $284 million for the nine months ended September 30, 2024 and 2023, respectively.

The decreases in segment operating income for these periods were driven by lower gross margin percentages, due to an unfavorable product mix in the third quarter and reflecting the increased cost of certain inventory manufactured by our former BPS business, which now includes a third-party mark-up following our divestiture of that business in September 2023, and increased operating expenses, including marketing-related costs in connection with recent product launches.

Other operating income, which represents operating income not attributable to our reportable segments, was $2 million and $6 million for the three months ended September 30, 2024 and 2023, respectively, and $15 million and $19 million for both the nine months ended September 30, 2024 and 2023, respectively.

In the current and prior year periods, other operating income primarily represents income from revenues earned by certain of our manufacturing facilities from contract manufacturing activities.

The prior year period also includes royalty income under a business development arrangement.

The decrease in the third quarter of 2024 as compared to the prior year periods reflects the termination of the royalty arrangement following our acquisition of the rights to the underlying product, partially offset by improved gross margins from contract manufacturing.

Segment operating income was $63 million and $78 million in the first quarter of 2025 and 2024, respectively.

Segment operating income decreased in the first quarter compared to the prior year period due to lower gross margin percentages, primarily driven by increased product costs, increased royalties due to commercial sales growth, and higher corporate shared costs post separation of our Kidney Care business.

Other operating income, which represents operating income not attributable to our reportable segments, was $9 million and $4 million in the first quarter of 2025 and 2024, respectively.

In the current year period, other operating income primarily represents income from revenues earned under the Kidney Care MSA.

In the prior year period, other operating income primarily represents income from revenues earned by certain of our manufacturing facilities from contract manufacturing activities.

The increase in the current year compared to the prior year period reflects the revenues earned under the Kidney Care MSA following the closing of the sale of the Kidney Care business on January 31, 2025.

Unallocated Corporate Costs

Under our new operating model, most global functional support costs, overhead costs and other shared costs that benefit our segments are allocated to those segments.

Under our operating model, most global functional support costs, overhead costs and other shared costs that benefit our segments are allocated to those segments.

Corporate costs that are not allocated to our segments, as well as any differences between actual corporate costs and the amounts allocated to our segments, are presented as unallocated corporate costs.

With the results of our Kidney Care segment reported in discontinued operations, corporate costs that had previously been allocated to the Kidney Care segment which will not convey with the Kidney Care segment in the pending sale, are now presented as unallocated corporate costs.

Additionally, intangible asset amortization and other special items are not allocated to our segments.

Prior to the implementation of our new operating model in the third quarter of 2023, more costs were maintained at corporate and were not allocated to our previous segments.

Certain of the costs that were previously maintained at corporate under our prior segment structure that are now allocated to our segments include manufacturing variances and centrally managed supply chain costs, certain R&D costs, product category support costs, stock compensation expense, and certain employee benefit plan costs.

LIQUIDITY AND CAPITAL RESOURCES

The following table is a summary of the statement of cash flows for the nine-month periods ended September 30, 2024 and 2023.

Nine Months Ended September 30,

The following table is a summary of the statement of cash flows for the three-month periods ended March 31, 2025 and 2024.

Three Months Ended March 31,

(in millions) 2025 2024

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Cash Flows from Operations - Continuing Operations

For the nine months ended September 30, 2024 and 2023, operating cash flows from continuing operations were $376 million and $792 million, respectively.

Operating cash flows from continuing operations in the current year period were unfavorably impacted, as compared to the prior year period, by higher annual payouts under our employee incentive compensation plans, which were determined based on our 2023 performance and the timing of accounts receivable collections and accounts payable payments.

For the three months ended March 31, 2025 cash used in operations from continuing operations were $99 million.

For the three months ended March 31, 2024, operating cash flows from continuing operations were $67 million.

Operating cash flows from continuing operations in the current year period were unfavorably impacted by accounts payable payments related to Hurricane Helene and the timing of accounts receivable collections.

Cash Flows from Investing Activities - Continuing Operations

For the nine months ended September 30, 2024, cash used in investing activities from continuing operations primarily included capital expenditures of $314 million, partially offset by $34 million of proceeds from sales of marketable securities.

For the nine months ended September 30, 2023 , cash used in investing activities from continuing operations primarily included capital expenditures of $340 million.

For the three months ended March 31, 2025, cash used in investing activities from continuing operations primarily included capital expenditures of $122 million.

For the three months ended March 31, 2024 , cash used in investing activities from continuing operations primarily included capital expenditures of $110 million.

Cash Flows from Financing Activities

For the nine months ended September 30, 2024, cash used in financing activities included debt repayments of $827 million and dividend payments of $443 million, partially offset by proceeds from stock issued under employee benefit plans of $63 million.

For the nine months ended September 30, 2023 , cash used for financing activities included dividend payments of $439 million and debt repayments of $353 million and a net increase in commercial paper borrowings of $214 million, partially offset by proceeds from stock issued under employee benefit plans of $86 million.

For the three months ended March 31, 2025, cash used in financing activities included debt repayments of $2.83 billion, a decrease in commercial paper borrowings of $300 million, and dividend payments of $87 million, partially offset by proceeds from stock issued under employee benefit plans of $10 million.

For the three months ended March 31, 2024 , cash used for financing activities included dividend payments of $147 million and debt repayments of $15 million, partially offset by proceeds from stock issued under employee benefit plans of $40 million.

As authorized by our Board of Directors, we repurchase our stock depending upon our cash flows, net debt levels and market conditions.

In July 2012, our Board of Directors authorized a share repurchase program and the related authorization was subsequently increased a number of times.

We did not repurchase any shares under this authority in the first nine months of 2024.

We had $1.30 billion remaining available under this authorization as of September 30, 2024.

We did not repurchase any shares under this authority in the first three months of 2025.

We had $1.30 billion remaining available under this authorization as of March 31, 2025.

Credit Facilities, Commercial Paper Program and Access to Capital and Credit Ratings

Credit Facilities and Commercial Paper Program

As of September 30, 2024 , we had a U.S.

dollar-denominated term loan credit facility, which had two tranches of term loans outstanding, a U.S.

As of March 31, 2025, we had a U.S.

Dollar-denominated term loan credit facility, which had one tranche of term loans outstanding, a U.S.

Dollar-denominated revolving credit facility and a Euro-denominated revolving credit facility.

As of September 30, 2024 , we had $130 million outstanding under one tranche of our U.S.

dollar-denominated term loan credit facility that matures in 2024 and $1.64 billion outstanding under the other tranche of our U.S.

As of March 31, 2025, we had $645 million outstanding under our U.S.

Dollar-denominated term loan credit facility that matures in 2026.

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The term loan credit facility contains various covenants, including a maximum net leverage ratio.

We have the option to prepay outstanding amounts under the term loan credit facility in whole or in part at any time.

As of September 30, 2024, our U.S.

In February 2025, we repaid $1.00 billion under this five-year term loan facility maturing in 2026.

As of March 31, 2025, our U.S.

Dollar-denominated revolving credit facility and Euro-denominated revolving credit facility had a maximum capacity of $2.00 billion and €200 million, respectively.

There were no borrowings outstanding under these credit facilities as of September 30, 2024 or December 31, 2023.

There were no borrowings outstanding under these credit facilities as of March 31, 2025 or December 31, 2024.

Our commercial paper borrowing arrangements require us to maintain undrawn borrowing capacity under our credit facilities for an amount at least equal to our outstanding commercial paper borrowings.

On July 17, 2024, we entered into a credit agreement in which a group of banks have committed to provide us senior unsecured term loans in an aggregate principal amount of up to $2.05 billion ("the bridge facility").

Borrowings under the bridge facility will be available in up to three drawings to fund (a) the refinancing of our 1.322% Senior Notes due November 29, 2024, our Floating Rate Notes due November 29, 2024, and certain borrowings under our existing term loan facility and (b) payment of certain U.S.

tax liabilities arising from internal reorganization transactions related to the pending sale of our Kidney Care business.

Borrowings under the bridge facility will bear interest at a rate based on our long-term debt ratings in effect from time to time and the interest rate on any borrowings outstanding beyond December 31, 2024 would increase by 0.25%.

Borrowings under the bridge facility were available in up to three drawings to fund (a) the refinancing of our 1.322% Senior Notes due November 29, 2024, our Floating Rate Notes due November 29, 2024, and certain borrowings under our existing term loan facility and (b) payment of certain U.S.

tax liabilities arising from internal reorganization transactions related to the sale of our Kidney Care business.

Borrowings under the bridge facility bore interest at a rate based on our long-term debt ratings in effect from time to time and the interest rate on any borrowings outstanding beyond December 31, 2024 would increase by 0.25%.

We will also incur a ticking fee on undrawn commitments at a rate based on our long-term debt ratings in effect from time to time.

The banks’ funding commitments under the bridge facility will terminate upon the earliest to occur of:

(i) our consummation of the debt repayments and tax payments described above without us having borrowed under the bridge facility, (ii) our election to terminate the commitments under the bridge facility, (iii) our receipt of net cash proceeds from certain transactions (including from the pending sale of our Kidney Care business), (iv) the occurrence of three drawings under the bridge facility, and (v) December 31, 2024.

Outstanding borrowings under the bridge facility will mature on the earlier of 364 days from the first funding date and November 24, 2025.

Additionally, we are required to use the net cash proceeds from certain transactions (including from the pending sale of our Kidney Care business) to repay any outstanding borrowings under the bridge facility.

The bridge facility contains financial and other covenants, including a net leverage covenant, and provides for

customary events of default.

There were no borrowings outstanding under this bridge facility as of September 30, 2024.

In the first quarter of 2024, we amended the credit agreements governing our U.S.

dollar-denominated term loan credit facility and revolving credit facility and the guaranty agreement with respect to our Euro-denominated revolving credit facility to increase the maximum net leverage ratio covenant for the six fiscal quarters ending June 30, 2024, September 30, 2024, December 31, 2024, March 31, 2025, June 30, 2025, and September 30, 2025.

The amendment further provides for the reduction of the capacity under our U.S dollar-denominated revolving credit facility from $2.50 billion to $2.00 billion on the earlier of September 30, 2024 or the date of the sale or spinoff of our Kidney Care business.

As of September 30, 2024, we were in compliance with the financial covenants in these agreements.

Based on our covenant calculations as of September 30, 2024, we had capacity to draw on the full amounts under our credit facilities.

The banks’ funding commitments under the bridge facility terminated on December 31, 2024.

Outstanding borrowings under the bridge facility were scheduled to mature on the earlier of 364 days from the first funding date and November 24, 2025.

Additionally, we are required to use the net cash proceeds from certain transactions (including from the sale of our Kidney Care business) to repay any outstanding borrowings under the bridge facility.

The bridge facility contains financial and other covenants, including a net leverage covenant, and provided for customary events of default.

There was $1.83 billion outstanding under this bridge facility as of December 31, 2024.

In January 2025, we used a portion of the approximately $3.3 billion of net after-tax proceeds from the sale of our Kidney Care business to repay the $1.83 billion outstanding under this bridge facility as of December 31.

2024, at which time it was terminated.

As of March 31, 2025, we were in compliance with the financial covenants in these agreements.

Based on our covenant calculations as of March 31, 2025, we had capacity to draw $2.04 billion under our credit facilities.

The non-performance of any financial institution supporting either of the credit facilities would reduce the maximum capacity of these facilities by the institution’s respective commitment.

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however, electing to do so would result in higher interest expense.

We had no commercial paper borrowings outstanding as of September 30, 2024.

We had no commercial paper borrowings outstanding as of March 31, 2025.

As of December 31, 2024 we had $300 million of commercial paper outstanding, which was repaid in full in the first quarter of 2025.

Access to Capital and Credit Ratings

We intend to fund short-term and long-term obligations as they mature through cash on hand, future cash flows from operations, and potentially by issuing debt, which could include commercial paper, bond issuances, or other financing arrangements, including the bridge facility.

We had $1.42 billion of cash and cash equivalents as of September 30, 2024, with adequate cash available to meet operating requirements in each jurisdiction in which we operate.

We intend to fund short-term and long-term obligations as they mature through cash on hand, including proceeds from the recently completed sale of our Kidney Care business, future cash flows from operations, or by issuing additional debt, which could include commercial paper.

We had $2.29 billion of cash and cash equivalents as of March 31, 2025, with adequate cash available to meet operating requirements in each jurisdiction in which we operate.

We invest our excess cash in money market and other funds and diversify the concentration of cash among different financial institutions.

As of September 30, 2024, we had approximately $12.94 billion of long-term debt and finance lease obligations, including current maturities, and no short-term debt.

We used substantially all of the remaining net after-tax cash proceeds from the BPS divestiture to repay indebtedness in the first half of 2024.

Subject to market conditions, we regularly evaluate opportunities with respect to our capital structure.

We intend to use the net after-tax proceeds from the pending sale of our Kidney Care business to repay certain of our debt obligations, consistent with our stated capital allocation priorities.

Prior to the pending sale of our Kidney Care business, we plan to bring back a portion of the cash related to our Kidney Care business after giving effect to any applicable taxes and which is currently classified in discontinued operations.

Our ability to generate cash flows from operations and issue debt on acceptable terms or at all could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers, deterioration in our key financial ratios or credit ratings, or other significantly unfavorable changes in market conditions.

However, we believe we have sufficient financial flexibility to issue debt, enter into other financing arrangements, and attract long-term capital on acceptable terms to support our growth objectives and reduce our post-Hillrom acquisition debt levels as we take actions consistent with our capital allocation priorities and strategic initiatives (including completion of the pending Kidney Care sale).

In January 2024, Fitch revised our senior debt credit rating from BBB to BBB-, our senior debt credit rating outlook from rating watch negative to stable and our short-term debt credit rating from F2 to F3.

In May 2024, our contract with Fitch expired.

In June 2024, Fitch affirmed and withdrew ratings and coverage on us.

As a result they no longer maintain ratings on our senior debt or our short-term debt.

There have been no changes to our investment grade credit ratings from Standard & Poor's and Moody's that we disclosed in our 2023 Annual Report.

As of March 31, 2025, we had approximately $10.07 billion of long-term debt and finance lease obligations, including current maturities, and short-term debt.

In the first quarter of 2025, we repaid $3.13 billion of short-and long-term indebtedness primarily with the net after-tax cash proceeds from the sale of our Kidney Care business, and we expect to use substantially all of the remaining net after-tax proceeds to continue to repay indebtedness through the second quarter of 2025.

Subject to market conditions, we regularly evaluate opportunities with respect to our capital structure (including with respect to the potential refinancing of our outstanding indebtedness).

Our ability to generate cash flows from operations, issue debt, including commercial paper, or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers, deterioration in our key financial ratios or credit ratings, or other significantly unfavorable changes in conditions.

However, we believe we have sufficient financial flexibility to issue debt, enter into other financing arrangements, and attract long-term capital on acceptable terms to support our growth objectives and reduce our debt levels as we take actions consistent with our capital allocation priorities.

There have been no changes to our investment grade credit ratings that we disclosed in our 2024 Annual Report.

CRITICAL ACCOUNTING POLICIES

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A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements in our 2024 Annual Report.

Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult or complex judgments by us, often employing the use of estimates

about the effects of matters that are inherently uncertain.

Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2024 Annual Report.

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Front Line Care Reporting Unit

In connection with our November 1, 2023 annual goodwill impairment tests, we determined that the fair value of the Front Line Care reporting unit within our Healthcare Systems and Technologies segment exceeded its carrying value by approximately 5%.

While no triggering events were identified during the nine months ended September 30, 2024, we are continuing to closely monitor the performance of this reporting unit, and if there is a significant adverse change in our outlook for this business in the future, a goodwill impairment could arise at that time.

As of September 30, 2024, the carrying amount of goodwill for our Front Line Care reporting unit was $2.42 billion.

There have been no significant changes in the application of our critical accounting policies during the first nine months of 2024.

In connection with our November 1, 2024 annual goodwill impairment tests, we recorded a goodwill impairment

related to our Front Line Care reporting unit within our Healthcare Systems & Technologies segment to reduce the carrying value of the reporting unit to its fair value.

While no triggering events were identified during the three months ended March 31, 2025, we are continuing to closely monitor the performance of this reporting unit (including in light of recent global macroeconomic conditions and capital spending patterns), and if there is a significant adverse change in our outlook for this business in the future, a goodwill impairment could arise at that time.

As of March 31, 2025, the carrying amount of goodwill for our Front Line Care reporting unit was $1.99 billion.

There have been no significant changes in the application of our critical accounting policies during the first three months of 2025.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about segment expenses on an annual and interim basis.

This standard is effective for our annual consolidated financial statements for the year ending December 31, 2024 and for interim periods beginning in 2025.

Upon adoption of this standard, we expect to disclose additional income statement information for our reportable segments.

Recently issued accounting standards not yet adopted

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of certain expenses on an interim and annual basis in the notes to the financial statements.

This standard is effective for annual

consolidated financial statements for the year ending December 31, 2027 and for interim periods beginning in 2028.

We are currently evaluating the impact of this new standard on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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Since the issuance of the 2017 Warning Letter, we have implemented corrective and preventive actions to address FDA's related observations, as well as other enhancements at the site.

We have fully responded to the 2023 Warning Letter, have implemented additional corrective and preventive actions, and continue to engage with FDA regarding the agency's observations.

In addition, since the issuance of the 2017 Warning Letter, we have

secured other sites in our manufacturing network and have launched and distribute select products from those sites in the U.S.

We have fully responded to the 2023 Warning Letter and have implemented additional corrective and preventive actions.

In addition, since the issuance of the 2017 Warning Letter, we have secured other sites in our manufacturing network and have launched and distribute select products from those sites in the U.S.

1 Available online at https://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm613538.htm

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Use of the words “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “affects,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of those words or other similar expressions may identify forward-looking statements, although not all forward-looking statements contain such words.

These forward-looking statements may include statements with respect to the pending sale of our Kidney Care business and other portfolio management activities we may undertake in the future, the costs, structure, and timing associated with strategic initiatives including the pending sale, the viability and accuracy of anticipated benefits of our strategic actions, our ability to successfully integrate acquisitions and complete divestitures, the expected growth rates for our segments, accounting estimates and assumptions (including with respect to goodwill and other intangible asset impairments), global economic conditions, severe storms and storm-related impacts, litigation-related matters, future regulatory filings (or the withdrawal or resubmission of any pending submissions) and our R&D pipeline (including anticipated product approvals or clearances), sales from new product offerings, credit exposure to foreign governments, the adequacy of cash flows and credit facilities, potential developments with respect to credit ratings, investment of foreign earnings, estimates of liabilities including those related to uncertain tax positions, contingent payments, future pension plan contributions, costs, discount rates and rates of return, our exposure to financial market volatility and foreign currency, interest rate and credit risks, our net interest expense, the impact of inflation on our business, the impact of competition, future sales growth, business development activities, cost saving initiatives, future capital and R&D expenditures, future debt issuances and refinancings, the adequacy of tax provisions and reserves, the effective income tax rate, and all other statements that do not relate to historical facts.

These forward-looking statements are based on certain assumptions and analyses made in light of our experience and perception of historical trends, current conditions, and expected future developments as well as other factors that we believe are appropriate in the circumstances.

While these statements represent our judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results.

While these statements represent our judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or

financial results.

Whether actual future results and developments will conform to expectations and predictions is subject to a number of risks and uncertainties, including the following factors, many of which are beyond our control:

• our ability to execute and complete strategic initiatives, asset dispositions, and other transactions, including the pending sale of our Kidney Care business, our plans to simplify our manufacturing footprint and the timing for such transactions, the ability of the parties to secure any required regulatory approvals or satisfy any applicable conditions, and our ability to realize the expected proceeds, consideration, and benefits of these transactions (including with respect to any post-sale arrangements or cost savings initiatives);

• failure to accurately forecast or achieve our short-and long-term financial performance and goals (including with respect to our strategic initiatives and other actions), market and category growth rates, and related impacts on our liquidity;

• our ability to finance and develop new products or enhancements on commercially acceptable terms or at all;

• product development risks, including satisfactory clinical performance and obtaining and maintaining required regulatory approvals (including as a result of evolving regulatory requirements or the withdrawal or resubmission of any pending applications), the ability to manufacture at appropriate scale, and the general unpredictability associated with the product development cycle;

• demand and market acceptance risks for, and competitive pressures related to, new and existing products, challenges with accurately predicting changing customer preferences and future expenditures and inventory

levels and with being able to monetize new and existing products and services (and to sustain any related price increases), the impact of those products on quality and patient safety concerns, and the need for ongoing training and support for our products;

• our ability to achieve the intended benefits of our strategic actions, including the sale of our Kidney Care business, business strategy and development activities and cost saving initiatives;

• our ability to successfully integrate acquisitions, including the acquisition of Hillrom, and the related impact on our organization structure, senior leadership, culture, functional alignment, outsourcing and other areas, our management of resulting related personnel capacity constraints and potential institutional knowledge loss, and our ability to achieve anticipated performance or financial targets and maintain our reputation following integration;

• our ability to execute on our capital allocation plans, including our debt repayment plans, the timing and amount of any dividends, share repurchases and divestiture proceeds (including those resulting from the pending Kidney Care sale);

• the impact of global economic conditions (including, among other things, inflation levels, interest rates, financial market volatility, banking crises, the potential for a recession, the war in Ukraine, the conflict in the Middle East (including recent attacks on merchant ships in the Red Sea), tensions amongst China, Taiwan, and the U.S.

and the potential for escalation of these conflicts, the related economic sanctions being imposed globally in response to the conflicts and potential trade wars and global public health crises, pandemics and epidemics, or the anticipation of any of the foregoing, on our operations and our employees, customers, suppliers, and foreign governments in countries in which we operate;

• the impact of physical effects of climate change, severe storms (including Hurricane Helene) and storm-related events, including our ability to import and distribute product from other facilities in connection with temporary importation authorizations, the reallocation of manufacturing capacity, the ability to receive necessary regulatory or other approvals required to reopen all or a portion of impacted facilities, the ability to resume production at our North Cove facility on the expected time frame or at all and physical, environmental or other obstacles identified during the course of remediation, including with respect to the availability of third party contractors and any equipment, transportation or other supplies needed to support the remediation efforts;

• inability to create additional production capacity in a timely manner or the occurrence of other manufacturing, sterilization, or supply difficulties, including as a result of natural disaster, war, terrorism, global public health crises and epidemics/pandemics, regulatory actions, or otherwise;

• the impact of global economic conditions (including, among other things, changes in tariffs, taxation, trade policies and treaties, sanctions, embargos, export control restrictions, the potential for a recession, supply chain disruptions, inflation levels and interest rates, financial market volatility, banking crises, the war in Ukraine, the conflict in the Middle East and other geopolitical events and the potential for escalation of these and other conflicts, the related economic sanctions being imposed globally in response to the conflicts and potential trade wars, global public health crises, pandemics and epidemics, or the anticipation of any of the foregoing, on our operations and our employees, customers, suppliers, and foreign governments in countries in which we operate) and our ability to identify actions to mitigate the impact of those conditions (or to realize the anticipated benefits of any such mitigating actions;

• the continuity, availability, and pricing of acceptable raw materials and component parts, our ability to pass some or all of these costs to our customers through price increases or otherwise, and the related continuity of our manufacturing, sterilization, supply and distribution and those of our suppliers;

• failure to accurately forecast or achieve our short-and long-term financial performance and goals, market and category growth rates, growth rates for our segments and related impacts on our liquidity;

• our ability to execute on our capital allocation plans, including our debt repayment plans, the timing and amount of any dividends, share repurchases and divestiture proceeds;

• downgrades to our credit ratings or ratings outlooks, or withdrawals by rating agencies from rating us and our indebtedness, and the related impact on our funding costs and liquidity;

• the impact of any goodwill, intangible asset, or other long-lived asset impairments on our operating results;

• regulatory agency inspections, product quality or patient safety issues leading to product recalls, withdrawals, labeling changes, launch delays, warning letters, import bans, denial of import certifications, sanctions, seizures, litigation, or declining sales, including the focus on evaluating product portfolios for the potential presence or formation of nitrosamines;

• future actions of, or failures to act or delays in acting by FDA, the European Medicines Agency, or any other regulatory body or government authority (including the SEC, DOJ, or the Attorney General of any state) that could delay, limit, or suspend product development, manufacturing, or sale, or result in seizures, recalls, injunctions, monetary sanctions, or criminal or civil liabilities;

• breaches, including by cyber-attack, data leakage, unauthorized access or theft, or failures of or vulnerabilities in, our information technology systems, or products;

• loss of key employees (including those involved with any key strategic actions), the occurrence of labor disruptions (including as a result of labor disagreements under bargaining agreements or national trade union agreements or disputes with works councils) or the inability to attract, develop, retain, and engage employees;

• fluctuations in foreign exchange and interest rates;

• the impact of any accounting estimates and assumptions, including with respect to goodwill, intangible asset, or other long-lived asset impairments on our operating results;

• our ability to finance and develop new products or services, or enhancements thereto, on commercially acceptable terms or at all;

• demand and market acceptance risks for, and competitive pressures (including pricing) related to, new and existing products and services, challenges and reputational risks associated with converting customers to new products and challenges with accurately predicting changing customer preferences and future expenditures and inventory levels and with being able to monetize new and existing products and services (and to sustain any related price increases), the impact of those products and services on quality and patient safety concerns, and the need for ongoing training and support for our products and services;

• future actions of, or failures to act or delays in acting by FDA, the European Medicines Agency, or any other regulatory body or government authority (including the SEC, DOJ, or the Attorney General of any state), or any product quality or patient safety issues that could delay, limit or suspend product development, manufacturing, or sale or otherwise lead to product recalls, withdrawals, labeling changes, launch delays, warning letters, import bans, denial of import certifications, sanctions, seizures, injunctions, monetary sanctions, criminal or civil liabilities or litigation;

• actions by tax authorities in connection with ongoing tax audits (including with respect to transfer pricing matters) and the outcome of pending or future litigation;

• failures with respect to our quality, compliance or ethics programs;

• our ability to attract, develop, retain and engage employees, including senior management, and the occurrence of labor disruptions (including as a result of labor disagreements under bargaining agreements or national trade union agreements or disputes with works councils);

• inability to create additional production capacity in a timely manner or the occurrence of other manufacturing, sterilization, or supply difficulties, including as a result of natural disaster or severe weather event (such as Hurricane Helene), war, terrorism, global public health crises and epidemics/pandemics, regulatory actions, or otherwise;

• future actions of third parties, including third-party payors and our customers and distributors (including GPOs and IDNs);

• changes to legislation and regulation and other governmental pressures in the United States and globally, including the cost of compliance and potential penalties for purported noncompliance thereof, including new or amended laws, rules, and regulations, as well as the impact of healthcare reform and its implementation, suspension, repeal, replacement, amendment, modification, and other similar actions undertaken by the United States or foreign governments, including with respect to pricing, reimbursement, taxation, and rebate policies;

• the outcome of pending or future litigation;

• the impact of competitive products and pricing, including generic competition, drug reimportation, and disruptive technologies;

• global regulatory, trade, and tax policies, including with respect to climate change and other sustainability matters;

• breaches and breakdowns affecting our information technology systems or protected information, including by cyber-attack, data leakage, unauthorized access or theft, or failures of or vulnerabilities in our information technology systems or products;

• ability to effectively develop, integrate or deploy artificial intelligence, machine learning and other emerging technologies into our products, services and operations in a manner that is compliant with existing and emerging regulations;

• the impact of physical effects of climate change, severe storms (including Hurricane Helene) and storm-related events;

• changes to legislation and regulation and other governmental pressures in the United States and globally, including the cost of compliance and potential penalties for purported noncompliance thereof, including new or amended laws, rules and regulations as well as the impact of healthcare reform and its implementation, suspension, repeal, replacement, amendment, modification and other similar actions undertaken by the United States or foreign governments, including with respect to pricing, reimbursement, taxation (including taxation of income, whether with respect to current or future tax reform) and rebate policies;

• ability to meet evolving and varied corporate responsibility expectations of our stakeholders, including compliance with new and emerging sustainability regulations;

• the ability to protect or enforce our patents or other proprietary rights (including trademarks, copyrights, trade secrets, and know-how) or where the patents of third parties prevent or restrict our manufacture, sale, or use of affected products or technology;

• fluctuations in foreign exchange and interest rates;

• any changes in law concerning the taxation of income (whether with respect to current or future tax reform);

• actions by tax authorities in connection with ongoing tax audits;

• other factors identified elsewhere in this report and other filings with the SEC, including those factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, all of which are available on our website.

Actual results may differ materially from those projected in the forward-looking statements, which are more fully discussed in our Annual Report on Form 10-K for the year ended December 31, 2023.

• other factors discussed elsewhere in this report and other filings with the SEC, including those factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, all of which are available on our website.

Actual results may differ materially from those projected in the forward-looking statements, which are more fully discussed in Item 1A.

Risk Factors and Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024.

These forward-looking statements are not exclusive and are in addition to other factors discussed elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis