Financial Analysis

"COMMITMENTS AND CONTINGENCIES We are involved in product liability, patent, commercial, employment and other legal matters that arise in the normal course of our business. We record a liability when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded. We regularly review legal contingencies to determine whether our accruals and related disclosures are adequate. The amount of ultimate loss may differ from these estimates and could have a material adverse effect on our results of operations and cash flows. As of June 30, 2026 and December 31, 2025, our total recorded reserves with respect to legal and environmental matters were $39 million and $47 million, respectively. We have established reserves for certain of the matters discussed below. While we believe that we have valid defenses in the matters set forth below, litigation is inherently uncertain, excessive verdicts do occur, and we may incur material judgments or enter into material settlements of claims. In addition to the matters described below, we remain subject to the risk of future administrative and legal actions. With respect to governmental and regulatory matters, these actions may lead to additional product recalls, …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

FINANCING ARRANGEMENTS Credit Facilities Our multicurrency revolver credit facility (which amended and restated our prior U.S. Dollar-denominated revolving credit facility and replaced our prior Euro-denominated revolving credit facility (Multicurrency Revolver)) has a maximum capacity of $2.20 billion and matures in 2030. Borrowings under the Multicurrency Revolver in U.S. dollars bear interest on the principal amount outstanding at either Term SOFR plus an applicable margin or a base rate plus an applicable margin. The Multicurrency Revolver contains various covenants, including a maximum net leverage ratio. Borrowings in Euros are subject to a sublimit of $300 million. We may, at our option, seek to increase the aggregate commitment under the Multicurrency Revolver by up to $1.10 billion, which would result in a maximum aggregate commitment of up to $3.30 billion. There were no borrowings outstanding under the Multicurrency Revolver as of June 30, 2026 or December 31, 2025. Our commercial paper borrowing arrangements require us to maintain undrawn borrowing capacity under our Multicurrency Revolver for an amount at least equal to our outstanding commercial paper borrowings. Based on our covenant calculations as of June 30, 2026, we had capacity to draw $1.41 billion under the Multicurrency Revolver. As of June 30, 2026, we were in compliance with the financial covenant in the Multicurrency Revolver. The non-performance of any financial institution supporting the Multicurre …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

FAIR VALUE MEASUREMENTS The following tables summarize our assets and liabilities that are measured at fair value on a recurring basis. Basis of fair value measurement (in millions) Balance as of June 30, 2026 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Foreign exchange contracts $ 1 $ $ 1 $ Available-for-sale debt securities 1 1 Marketable equity securities 9 9 Total $ 11 $ 9 $ 1 $ 1 Liabilities Foreign exchange contracts $ 3 $ $ 3 $ Contingent payments related to acquisitions 10 10 Indemnifications related to Kidney Care separation 1 43 43 Total $ 56 $ $ 3 $ 53 1 See Note 2 for additional information. Basis of fair value measurement (in millions) Balance as of December 31, 2025 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Available-for-sale debt securities 1 1 Marketable equity securities 15 15 Total $ 16 $ 15 $ $ 1 Liabilities Foreign exchange contracts $ 1 $ $ 1 $ Contingent payments related to acquisitions 7 7 Indemnifications related to Kidney Care separation 1 53 53 Total $ 61 $ $ 1 $ 60 1 See Note 2 for additional information. As of June 30, 2026 and December 31, 2025, cash and cash equivalents of $2.15 billion and $1.97 billion, respectively, included money market fund and other short-term funds of approximately $1.09 billion and $832 million, …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

GOODWILL AND OTHER INTANGIBLE ASSETS, NET Goodwill The following is a reconciliation of goodwill by segment. (in millions) Medical Products & Therapies Healthcare Systems & Technologies Pharmaceuticals Total Balance as of December 31, 2025 $ 1,265 $ 3,087 $ 577 $ 4,929 Reallocation of goodwill 569 (569) Currency translation (29) (6) (8) (43) Balance as of June 30, 2026 $ 1,805 $ 3,081 $ $ 4,886 Change in Reportable Segments As discussed in Note 16, in the second quarter of 2026, we implemented a new operating model to better align decision-making, cost structure, and execution across our businesses. Our business is now comprised of two reportable segments under this new operating model: Medical Products & Therapies and Healthcare Systems & Technologies. Previously, our reportable segments were comprised of three segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals. Our former Pharmaceuticals segment is now reported in our Medical Products & Therapies segment. As a result of this segment change, we reallocated the goodwill from our previous Pharmaceuticals segment to a reporting unit within our Medical Products & Therapies segment. We also performed goodwill impairment assessments of both the legacy reporting units and new reporting units of our segments before and after the segment change and did not identify any goodwill impairments. Other intangible assets, net The following is a summary of our other …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

INCOME TAXES Our effective income tax rate was 15% and 8% for the three months ended June 30, 2026 and 2025, respectively, and 22% and (43)% for the six months ended June 30, 2026 and 2025, respectively. Our effective income tax rate can differ from the 21% U.S. federal statutory rate due to a number of factors, including foreign rate differences, tax incentives, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances, increases or decreases in liabilities for uncertain tax positions, and excess tax benefits or shortfalls on stock compensation awards. For the three months ended June 30, 2026, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by global earnings mix, partially offset by increases to our valuation allowance on U.S. deferred tax assets and tax shortfalls on stock compensation awards. For the six months ended June 30, 2026, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by global earnings mix, partially offset by increases to our valuation allowance on U.S. deferred tax assets and tax shortfalls on stock compensation awards. For the three months ended June 30, 2025, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by our global earnings mix. For the six months ended June 30, 2025, the difference between our effective income tax rate and the U.S. fe …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

PENSION AND OTHER POSTRETIREMENT BENEFIT PROGRAMS The following is a summary of net periodic benefit cost relating to our pension and OPEB plans. Three Months Ended June 30, Six Months Ended June 30, (in millions) 2026 2025 2026 2025 Pension benefits Service cost $ 2 $ 3 $ 5 $ 6 Interest cost 33 34 64 68 Expected return on plan assets (43) (44) (85) (88) Amortization of net losses and prior service costs 3 1 6 2 Net periodic pension cost (benefit) $ (5) $ (6) $ (10) $ (12) OPEB Interest cost $ 2 $ 2 $ 3 $ 4 Amortization of net loss and prior service credit (1) (4) (1) (8) Net periodic OPEB cost (income) $ 1 $ (2) $ 2 $ (4)

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BUSINESS OPTIMIZATION CHARGES We are continuing to undertake actions to transform our cost structure and enhance operational efficiency. In recent years, these efforts have included restructuring the organization into verticalized segments, optimizing the manufacturing footprint, research and development (R&D) operations and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions, some of which are still ongoing. We currently expect to incur additional pre-tax cash costs, primarily related to the implementation of business optimization programs, that are not material to our condensed consolidated financial statements, through the completion of certain initiatives that are currently underway. We continue to pursue cost savings initiatives, including those intended to mitigate a portion of the dis-synergies that arose as a result of the sale of our Kidney Care business, and we expect to incur additional restructuring charges and costs in future periods to implement business optimization programs. For segment reporting, business optimization charges are unallocated expenses. During the three and six months ended June 30, 2026 and 2025, we recorded the following charges related to business optimization programs. Three Months Ended June 30, Six Months Ended June 30, (in millions) 2026 2025 2026 2025 Restructuring charges $ 2 $ 14 $ 63 $ 58 Costs to implement business optimization programs 1 5 3 12 4 Total busines …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

REVENUES Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the contract. A contracts transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Some of our contracts have multiple performance obligations. For contracts with multiple performance obligations, we allocate the contracts transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. Our global payment terms are typically between 30 to 90 days. Our primary customers are hospitals, healthcare distribution companies, and government agencies that purchase healthcare products on behalf of providers. Most of our performance obligations are satisfied at a point in time. This includes sales of our broad portfolio of essential healthcare products across our business segments. We earn revenues from sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition therapies; inhaled anesthetics; generic injectable pharmaceuticals; surgical hemostat and sealant products; smart bed systems; patient monitoring and diagnostic technologies; respiratory health devices; and advanced equipment for the surgical space. F …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

SEGMENT INFORMATION In the second quarter of 2026, as part of our new operating model to better align decision-making, cost structure, and execution across our businesses, we have changed our reportable segments to reflect the way our chief operating decision maker (CODM), who has been identified as our President and Chief Executive Officer, allocates resources and assesses our performance. Starting in the second quarter of 2026, our business is now comprised of two reportable segments under this new operating model: Medical Products & Therapies and Healthcare Systems & Technologies. Previously, our business was comprised of three segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals. Our former Pharmaceuticals segment is now reported within the Infusion Therapies & Platforms division of the Medical Products & Therapies segment. Additionally, sales of products and services provided directly through certain of our manufacturing facilities related to Infusion Therapies & Platforms that were previously reported in Other are now reported in our Infusion Therapies & Platforms division of the Medical Products & Therapies segment. In addition, we updated our approach to our corporate cost allocations. Certain shared corporate expenses will now remain unallocated, rather than being fully allocated to the segments (as they had been previously). Prior period segment disclosures have been recast to reflect the …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing