10-K – 2026-02-25 – mdln-20251231.htm

For the year ended December 31, 2024, net cash used in investing activities primarily relates to payments for acquisitions of business and assets of $1,136 million and net capital expenditures of $354 million.
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Cash Flows used in Financing Activities

For the year ended December 31, 2025, net cash provided by financing activities was primarily driven by net proceeds from the issuance of Class A common stock sold in our IPO of $7,048 million, offset by $4,092 million net repayment of long-term borrowings, $1,970 million used to purchase or redeem an equivalent aggregate number of shares of Class A common stock and Common Units from certain pre-IPO owners, and distributions to pre-IPO partners of $518 million.

For the year ended December 31, 2024, net cash used in financing activities primarily relates to a $1,210 million payment of additional tax distributions to certain partners to catch up on a pro-rata basis tax distribution previously paid to pre-IPO partners, distributions to pre-IPO partners of $308 million, and $63 million net repayment of long-term borrowings.

Indebtedness

The long-term borrowings and the effective interest rates, are summarized as follows:

December 31, 2025
Maturity dates by fiscal year Amount
 (In millions)
Average effective interest rate
Long-term borrowings
Unsecured debt
Fixed 2029 $ 2,500  5.61  %
Total unsecured debt 2,500 
Secured debt
Fixed 2029 6,000  4.79  %

Variable 2026 - 2030 $ 4,255  7.10  %
Total secured debt $ 10,255 
Total debt 12,755 
Less: amounts due within one year $ (76)
Total other (1)
$ (195)
Total Long-term borrowings $ 12,484 

(1) Includes $41 million of embedded derivative related to the Dollar Term Loans and deferred financing costs.

Senior Secured and Unsecured Notes

During 2021, we issued senior secured notes with a principal amount of $4,500 million, at a fixed rate of 3.875% and maturity date of April 1, 2029 and senior unsecured notes with a principal amount of $2,500 million at a fixed rate of 5.250% with a maturity date of October 1, 2029.

During 2024, we issued senior secured notes with a principal amount of $1,500 million at a fixed rate of 6.250% and a maturity date of April 1, 2029.

Interest on all aforementioned secured and unsecured notes (collectively, the “Senior Notes”) is payable in cash on a semi-annual basis, with payments made in arrears on April 1 and October 1 of each calendar year.

Term Loan Facilities

During 2021, we borrowed $7,270 million under a senior secured term loan facility (the “Dollar Term Loans”), in addition to €435 million under a separate euro-denominated senior secured term loan facility (the “Euro Term Loans”), both established under a credit agreement (the “Credit Agreement”). The Credit Agreement permits us, at any time, subject to customary conditions, to request incremental term loans or incremental revolving credit commitments in an aggregate principal amount of up to (a) the greater of (1) $2,375 million and (2) an amount equal to 100% of our trailing consolidated EBITDA (as defined in the Credit Agreement) for the most recently ended period of four consecutive fiscal quarters for which financial statements are internally available, on a pro forma basis plus (b) certain additional amounts based on satisfaction of a certain consolidated first lien net leverage ratio and subject to certain other customary conditions.

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During 2024, the Credit Agreement underwent three separate amendments. These amendments resulted in an increase of $520 million in the principal amount of the Dollar Term Loans, as well as an increase of €185 million in the aggregate principal amount of the Euro Term Loans. In addition, pursuant to the amendments, the applicable interest rate margins were lowered, resulting in a variable interest rate of Secured Overnight Financing Rate (“SOFR”) plus a spread of 2.25% for the Dollar Term Loans, and a variable interest rate of EURO Interbank offer Rate plus an applicable spread ranging from 2.25% to 2.75% based on certain of our debt ratios for the Euro Term Loans.

On July 31, 2025, the Credit Agreement was amended to reduce the margin spread and to extend the maturity of certain obligations. Upon the amendment, all of the Dollar Term Loans are subject to a margin spread of SOFR plus 2.00%. The principal amount of the outstanding Dollar Term Loans equal to $4,074 million will mature on October 21, 2028, which remained unchanged, while an aggregate principal amount of the outstanding Dollar Term Loans equal to $3,500 million will mature on October 23, 2030, extended from the original maturity date.

On December 18, 2025, we used a portion of the proceeds from the IPO to prepay a portion of the Dollar Term Loans with a maturity date of October 21, 2028 in the amount of $3,281 million and all of the outstanding principal of the Euro Term Loans, equivalent to $730 million. Per the terms of the Credit Agreement, the completion of the IPO also triggered a reduction in variable interest rate of 0.25%, resulting in a variable interest rate of SOFR plus 1.75% for the remaining Dollar Term Loans.

In connection with Credit Agreement amendments and the debt prepayments, the Company paid debt modification expenses of $6 and $24 for the years ended December 31, 2025 and 2024, respectively. The Company also incurred debt extinguishment losses of $58 and $32 for writing off unamortized issuing discounts and deferred financing costs associated with the debts repaid, for the years ended December 31, 2025 and 2024, respectively. These costs were included in Other (expense) income, net on the Consolidated Statements of Comprehensive Income.

The Dollar Term Loans require quarterly amortization payments of 0.25% of the amended principal due at each calendar quarter-end. These amortization payments were $76 million and $50 million for the years ended December 31, 2025 and 2024, respectively. The Euro Term Loans did not have any mandatory amortization payments.

Revolving Credit Facilities

During 2021, certain lenders have provided us with commitments under a $1,000 million senior secured revolving credit facility under the Credit Agreement (the “Revolving Credit Facility,” together with the Dollar Term Loans, the “Senior Secured Credit Facilities”).

The amendment to the Credit Agreement in 2024 extended the maturity date of the Revolving Credit Facility from October 21, 2026 to July 8, 2029 (subject to a springing maturity 91 days inside of the maturity date of all secured and unsecured notes and term loan facilities) and did not change the maximum borrowing capacity of $1,000 million or any other terms.

On March 28, 2025, we amended the Credit Agreement to permit letter of credit issuers to issue letters of credit in excess of their respective letter of credit commitments and to obligate the other lenders under our Revolving Credit Facility to participate in such letters of credit, subject to other customary limitations.

As of December 31, 2025 and 2024, the Revolving Credit Facility had several financial institutions as lenders for a maximum borrowing capacity of $1,000 million. The Revolving Credit Facility accrues commitment fees in respect of unfunded commitments thereunder. Letters of credit issued under the Revolving Credit Facility reduce availability under the Revolving Credit Facility dollar-for-dollar. As of December 31, 2025 and 2024, availability under the Revolving Credit Facility was $947 million and $951 million, respectively, after taking into account outstanding letters of credit of $53 million and $49 million, respectively. We borrowed and repaid $179 million and $166 million under the Revolving Credit Facility during the years ended December 31, 2025 and 2024, respectively, which resulted in no amounts outstanding as of December 31, 2025 or 2024.

Borrowings under the Revolving Credit Facility may be repaid and borrowed again, partially or wholly at any time, from time to time, as elected by us and interest is typically paid on a monthly or quarterly basis, depending on the interest period elected.
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Financial Covenant

Our springing financial covenant in the Credit Agreement and other ratios related to incurrence-based covenants (measured only upon the taking of certain actions, including the incurrence of additional indebtedness) under the Credit Agreement and the indentures governing our outstanding senior secured and unsecured notes are calculated in part based on financial measures similar to Adjusted EBITDA presented herein, which financial measures are determined at the Medline Borrower, LP (a fully-owned subsidiary of Medline Holdings) level and adjust for certain additional items such as contribution from acquisitions and the run-rate impact of signed contracts, cost savings and customer losses. These incremental adjustments, as calculated pursuant to such agreements, provide us with a net benefit to Adjusted EBITDA for ratio calculation purposes of $230 million and $197 million for the years ended December 31, 2025 and 2024, respectively. The springing financial covenant in the Credit Agreement requires compliance with a maximum ratio of consolidated first lien net indebtedness to Consolidated EBITDA (as defined in the Credit Agreement) of 8.3x and is applicable solely to the Revolving Credit Facility, which ratio is tested on the last day of any fiscal quarter only if the aggregate principal amount of borrowings (excluding outstanding letters of credit (whether or not cash collateralized)) under the Revolving Credit Facility exceeds 35% of the greater of (a) the total amount of commitments under the Revolving Credit Facility on such day and (b) $1,000 million. While the springing financial covenant was not subject to testing as of December 31, 2025 as we did not have any outstanding borrowings under the Revolving Credit Facility at such time, our ratio of consolidated first lien net indebtedness to consolidated EBITDA as of the last day of any applicable fiscal quarter has not exceeded the maximum ratio permitted under the springing financial covenant. The failure to satisfy this ratio would impact our ability to borrow amounts committed under our Revolving Credit Facility which could have a material impact on our liquidity.

Cash Flow Hedges of Interest Rate Risk

We use interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements. We primarily use interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above t he strike rate on the contract in exchange for a premium. As of December 31, 2025, we held interest rate swaps with a notional value of $1,000 million and interest rate caps with a notional value of $2,000 million, both with a maturity date of December 2026.

Tax Receivable Agreement

In connection with the Reorganization, we entered into a tax receivable agreement with certain of our pre-IPO owners that provides for the payment by Medline to such pre-IPO owners of 90% of certain tax benefits, if any, that Medline actually realizes, or is deemed to realize (calculated using certain assumptions), as a result of (i) our allocable share of existing tax basis in Medline Holdings’ assets acquired in the IPO, (ii) increases in our allocable share of existing tax basis and tax basis adjustments to the tangible and intangible assets of Medline Holdings as a result of sales or exchanges of Common Units (including Common Units issued upon conversion of vested Incentive Units) in connection with or after the IPO, (iii) our utilization of certain tax attributes (including any existing tax basis) of the Blocker Companies, which we acquired in connection with the IPO, and (iv) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. Sales or exchanges of Common Units by Unitholders to Medline are expected to result in increases in the tax basis of the assets of Medline Holdings. The existing tax basis, increases in existing tax basis, and the tax basis adjustments generated over time may increase (for tax purposes) depreciation and amortization deductions available to us and, therefore, may reduce the amount of tax that we would otherwise be required to pay in the future. Changes in the estimate of expected tax benefits Medline would realize and the amount payable under the tax receivable agreement as a result of changes in tax rates will be reflected in our Consolidated Statements of Comprehensive Income. As of December 31, 2025, we had recorded a tax receivable agreement liability of $3,542 million.
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We expect that the payments that we make under the tax receivable agreement will be substantial. Assuming: (i) a price of $42.00 per share of our Class A common stock, which was the closing price on December 31, 2025; (ii) a constant corporate tax rate of 25.7%; (iii) we had sufficient taxable income to fully utilize the tax benefits; and (iv) no material changes in tax law, if the Unitholders had exchanged all of the Common Units that they held on December 31, 2025, and assuming all Incentive Units had been converted to Common Units and subsequently exchanged for shares of Class A common stock at a price of $42.00 per share of Class A common stock as of such date, we would, as a result of such hypothetical exchange, have recorded an additional tax receivable agreement liability of approximately $7,458 million, generally payable over a 15-year period. We intend to fund the required payments under the tax receivable agreement from our pro rata share of distributions from Medline Holdings. Our ability to achieve benefits from existing tax basis, tax basis adjustments, or other tax attributes, and the payments to be made under the tax receivable agreement, will depend upon a number of factors, including the timing and amount of our future income.

See Part I, “Item 1A—Risk Factors—Risks Related to Our Organizational Structure—Our tax receivable agreement confers benefits upon certain of our pre-IPO owners”, “—In certain cases, payments under the tax receivable agreement may significantly exceed the actual benefits Medline Inc. realizes in respect of the tax attributes subject to the tax receivable agreement,” and “—In certain cases, payments under the tax receivable agreement may significantly exceed the actual benefits Medline Inc. realizes in respect of the tax attributes subject to the tax receivable agreement,” Note 11—Tax Receivable Agreement, and Note 19—Related Party to our consolidated financial statements included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report.

Contractual Obligations

The following table summarizes the approximate principal contractual obligations as of December 31, 2025:

Total Current Noncurrent

Long-term borrowings $ 12,755  $ 76  $ 12,679 
Interest on borrowings (1)
2,536  643  1,893 
Operating lease obligations (2)
903  92  811 
Unconditional purchase obligations (3)
849  172  677 
Pension obligations 72  5  67 
Total contractual obligations $ 17,115  $ 988  $ 16,127 

(1) Interest payments on debt obligations are calculated for future periods using interest rates in effect as of December 31, 2025. Certain of these projected interest payments may differ in the future based on changes in reference rate index for variable debt or other factors or events. The projected interest payments only pertain to obligations and agreements outstanding at December 31, 2025. See Note 7—Credit Agreements and Borrowings to our audited consolidated financial statements included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report for additional information.

(2) We have operating leases for corporate offices, manufacturing and distribution facilities, vehicles, and equipment. Our leases have remaining terms ranging from less th an 12 m onths to appro ximately 14 years, some of which may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option. As of December 31, 2025, our right-of-use assets related to operating leases were $432 million and our current and non-current operating lease liabilities were $66 million and $386 million, respectively. Also includes our future lease payments for executed operating lease agreements related to office spaces that have not yet commenced.

(3) Includes our significant contractual unconditional purchase obligations. These commitments do not exceed our projected requirements and are in the normal course of business. Examples include firm commitments for goods and service contracts.

Additionally, we have the contractual obligations under the tax receivable agreement to make payments to applicable pre-IPO owners of 90% of certain tax benefits, which are not reflected in the table set forth above. For further discussion of the tax receivable agreement, see Part II, “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Tax Receivable Agreement.”

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Off Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, of a magnitude that we believe could have a material impact on our financial condition or liquidity. See our audited Consolidated Financial Statements and related notes included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with U.S. GAAP, which often require us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales, expenses, and related disclosures. Our estimates are based on historical experience, current conditions, and various other assumptions that we believe to be reasonable under the circumstances. We evaluate our critical estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

The critical accounting estimates, assumptions, and judgments that we believe to have the most significant impact on our consolidated financial statements are described below. This discussion is provided to supplement the descriptions of our accounting policies contained in Note 1—Nature of Business and Significant Accounting Policies to our audited consolidated financial statements included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report.

Revenue Recognition

Our net sales are generated principally from the sale of products. The amount of net sales recognized is adjusted for variable consideration, including sales rebates, distributor chargebacks, return allowances, scrap allowances, and other rights, which may require significant judgment in determining the amounts by which to reduce net sales. Our estimate of variable consideration and ultimate determination of the estimated amounts to include in the transaction price are based upon the contractual terms between us and our customers, products subject to a rebate, the lag between the sale and the payment of the rebate, and historical rebate payment trends. We estimate these amounts at the point net sales is recognized based on the expected value to be provided to the customer and reduces net sales accordingly. Our estimate of variable consideration and ultimate determination of the estimated amounts to include in the transaction price is based primarily on assessments of anticipated performance and historical information that is reasonably available to us. We have not made any material adjustments to our variable consideration estimates historically and in all periods presented.

Allowances for Refunds and Credit Losses

We maintain an allowance for doubtful accounts for estimated losses in the collection of amounts owed by customers. The allowance for credit losses reflects the best estimate of future losses over the contractual life of outstanding accounts receivable and is determined on the basis of historical experience, specific allowances for known troubled accounts, other currently available information including customer’s financial condition, and both current and forecasted economic conditions. Changes in these factors, among others, may lead to adjustments in our allowance for credit losses. The calculation of the required allowance requires significant judgment by management. If the financial condition of our customers worsens, or economic conditions change, we may be required to make changes to our allowance for credit losses.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined primarily by the LIFO cost method. For certain foreign subsidiaries, cost is determined using the first-in, first-out method. A LIFO charge is recognized when the net effect of price increases on products held in inventory exceeds the impact of price declines, including the effect of products that have lost market exclusivity. A LIFO credit is recognized when the net effect of price declines exceeds the impact of price increases on products held in inventory. On a periodic basis, we also write down inventories that are considered to be excess and obsolete. Our evaluation is based on historical and forecasted sales trends. Rebates received from vendors relating to the purchase or distribution of inventory are considered product discounts and are accounted for as reductions in the cost of inventory.
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Impairment of Goodwill and Indefinite-Lived Intangible Assets

We make certain estimates and judgments in impairment assessments of goodwill and indefinite-lived intangible assets. For the qualitative review, we consider the weight of evidence and significance of all identified events and circumstances and most relevant drivers of fair value, both positive and negative, in determining whether it is more likely than not that impairment has occurred.

To perform a quantitative review for goodwill, we first estimate the fair value of our reporting unit. We consider all generally accepted valuation approaches to value a business or an entity, and rely on approach(es) that are deemed most suitable to estimate value as of the measurement date. We have generally used a combination of the market approach and the income approach. Under the market approach, we estimate fair value by comparing the reporting unit to similar businesses, or guideline companies whose securities are actively traded in public markets and select market multiple(s) deemed appropriate, and apply the selected multiple(s) to the reporting unit’s financial metric. Under the income approach, we use a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate that is commensurate with the risk inherent within the reporting unit. The fair value is then estimated as a weighted average of the values indicated by the valuation approaches relied upon.

To perform a quantitative review for indefinite-lived intangible assets, we utilize the relief-from-royalty method for indefinite-lived trade names. The relief-from-royalty method assumes trade names have value to the extent their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate, and the weighted average cost of capital. If the net book values of the assets exceed fair value, an impairment charge will be recognized in an amount equal to that excess.

The annual impairment testing performed did not indicate any impairment of goodwill or indefinite-lived intangible assets for the years ended December 31, 2025 and 2024. For further information on the impairment test of goodwill or indefinite-lived intangible assets, see Note 1—Nature of Business and Significant Accounting Policies to our audited consolidated financial statements included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report.

Business Combination

We account for business combinations using the acquisition method of accounting, whereby the identifiable assets and liabilities of the acquired business, including contingent consideration, as well as any noncontrolling interest in the acquired business, are recorded at their estimated fair values as of the date that we obtain control of the acquired business. Any purchase consideration in excess of the estimated fair values of the net assets acquired is recorded as goodwill. Significant estimates may be used to determine the fair value of assets acquired and liabilities assumed. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows and discount rates. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisitions, as additional information about conditions existing at the acquisition date becomes available.
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Tax Receivable Agreement

As detailed in Note 11—Tax Receivable Agreement to our audited consolidated financial statements included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report, we are party to a tax receivable agreement which provides for the payment by Medline Inc. to applicable pre-IPO owners of 90% of certain tax benefits, if any, that Medline Inc. actually realizes, or is deemed to realize, as a result of (i) Medline Inc.’s allocable share of existing tax basis in Medline Holdings’ assets acquired in the IPO, (ii) increases in Medline Inc.’s allocable share of existing tax basis and tax basis adjustments to the tangible and intangible assets of Medline Holdings as a result of sales or exchanges of Common Units (including Common Units issued upon conversion of vested Incentive Units) in connection with or after the IPO, (iii) Medline Inc.’s utilization of certain tax attributes (including any existing tax basis) of the Blocker Companies, which Medline Inc. acquired in connection with the Reorganization, and (iv) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement.

As of December 31, 2025, we have recognized a tax receivable agreement liability of $3,542 million for amounts due under the tax receivable agreement. The liability is determined based on the timing and amount of aggregate payments due under the tax receivable agreement, considering the income tax rates then applicable and the timing and terms of purchases or exchanges of Common Units (including the price of shares of Class A common stock at the time of any such purchase or exchange and the extent to which such transactions result in tax basis adjustments).If we do not generate sufficient taxable income in the aggregate over the term of the tax receivable agreement to utilize the tax benefits, then we are not required to make the related tax receivable agreement payments. Therefore, we would only recognize a liability for tax receivable agreement payments if we determine it is probable that we will generate sufficient future taxable income over the term of the tax receivable agreement to utilize the related tax benefits.

Deferred Income Taxes

In connection with the Reorganization and IPO, Medline Inc. acquired equity interest in Medline Holdings, the flow-through entity for U.S. federal tax purposes, and recognized a deferred tax liability for the difference between the U.S. GAAP financial reporting basis and the tax basis of our investment in Medline Holdings. In addition, we acquired certain tax attributes, including net operating loss and credit carryforwards, as well as interest expense carryforwards, and have recognized deferred tax assets relating to these amounts. A deferred tax asset was also recognized for the future tax benefits from tax receivable agreement payments.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period in which the enactment date occurs.

We are required to evaluate the realizability of our deferred tax assets by assessing the likelihood that our deferred tax assets will be recovered based on all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. When we determine that it is more likely than not that all or a portion of a deferred tax asset will not be realized, we record a valuation allowance against our deferred tax assets. Estimating future taxable income is inherently uncertain and requires judgment. As of December 31, 2025, we have recorded an immaterial valuation allowance against our deferred tax assets.

For further information on deferred income taxes and provision for income taxes, see Note 12—Income Taxes to our audited consolidated financial statements included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report.

Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted

For a discussion of recently adopted accounting standards and recently issued accounting standards not yet adopted, please see Note 1—Nature of Business and Significant Accounting Policies to our audited consolidated financial statements included under Part II, “Item 8—Financial Statements and Supplementary Data” of this Annual Report..

Item 7A - Quantitative and Qualitative Disclosures About Market Risk

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We are exposed to market risks in the ordinary course of our business from adverse changes in foreign currency exchange rates and interest rates.

Foreign Currency Exchange Rate Risks

We have international sales, including in Canada, certain countries in the EU, Japan, Australia, the United Kingdom, and certain countries in Latin America, among others, all of which have a different currency exposure than the U.S. dollar. We have a natural, partial operational hedge in some of these geographies where local manufacturing and assembly have been established for strategic purposes. However, we have exposure to the Mexican peso related to more significant manufacturing operations in Mexico. We also incur expenses in U.S. dollars, and currencies of the other countries in which we have operations.

While we rarely hedge against foreign currency risk via derivative instruments, we monitor the movements of these currencies and actively engage in regional vendor load balancing to minimize foreign exchange risk. Our results of operations are subject to changes in foreign exchange rates due to the translation of our results to U.S. dollars, as well. A 10% appreciation/depreciation in the Mexican peso against the U.S. dollar would have increased or decreased our expenses incurred and paid in the Mexican peso by a pproximately $35 million in the year ended December 31, 2025.

Interest Rate Risk

As of December 31, 2025, we had approximately $12,755 million of gross outstanding indebtedness including $4,255 million of borrowings at variable interest rates before considering deferred financing costs and embedded derivatives of $195 million. The borrowings under the Senior Secured Credit Facilities accrue interest at variable interest rates and thus are subject to interest rate risk.

Borrowings under the Dollar Term Loans Facility bear interest at a floating rate per annum, based on the SOFR plus an applicable spread. As of December 31, 2025, we had $4,255 million outstanding under the Dollar Term Loans Facility, bearing interest at variable rates. Each change of 25 basis point in interest rates would result in a net change of $5.5 million in annual interest expense on term loan borrowing after considering hedging instruments.

Borrowings under the Revolving Credit Facility bear interest at various rates per annum, all of which float with relevant rate indices, i.e., SOFR. As of December 31, 2025, we do not have borrowings outstanding under the Revolving Credit Facility. Although we do not have any borrowings outstanding under our Revolving Credit Facility as of December 31, 2025, had the Revolving Credit Facility been fully drawn, each change of 25 basis point in interest rates would result in a $2.5 million change in annual interest expense on such outstanding borrowings under the Revolving Credit Facility.

We have entered into interest rate swaps and interest rate caps to manage interest rate risk on our outstanding term debts. Interest rate swaps and interest rate caps allow us to effectively convert floating-rate payments into fixed-rate payments. Interest expenses on term debts are partially offset by the corresponding losses and gains on the related hedging instruments. The effective interest rate for USD denominated variable rate borrowings would change to 5.9% from 7.1% for the year ended December 31, 2025, after consideration of the related hedging instruments.
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Item 8 - Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Review Report of Independent Registered Public Accounting Firm (PCAOB ID- 42 )
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Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024
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Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025, December 31, 2024 and December 31, 2023
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Consolidated Statements of S tockholders ’ Equity, Mezzanine Equity and Partners’ Capital for the Years Ended December 31, 2025, December 31, 2024 and December 31, 2023
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Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, December 31, 2024 and December 31, 2023
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Notes to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Medline Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Medline Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of comprehensive income, stockholders’ equity, mezzanine equity and partners’ capital and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Accrued customer rebates

Description of the Matter As disclosed in Note 1 to the consolidated financial statements under the caption “Revenue Recognition”, the Company’s product sales to customers are adjusted for variable consideration, including customer rebates, which are estimated at the point revenue is recognized. The Company’s estimate of customer rebates is based upon the contractual rebate terms between the Company and its customers, products subject to a rebate, the lag between the sale and the payment of the rebate, and historical rebate payment trends. At December 31, 2025, the Company had $406 million in customer rebates and distributor chargebacks, of which a large portion relates to customer rebates.
Auditing the customer rebates liability was challenging due to the significant volume of transactions and data related to product gross sales, customer rebate rates, as well as historical rebate payments, that are used in determining the accrual balance.

 

How We Addressed the Matter in Our Audit To test the Company’s customer rebate liability, our audit procedures included, among others, testing the completeness and accuracy of the underlying data used in the estimate, including, but not limited to, gross sales transactions, customer rebate rates, and historical rebate payments. We assessed the reasonableness of the data by corroborating payments to customer contracts and recalculated the variable consideration recognized based upon gross sales subject to the rebate and the executed rate per the customer contract and evaluated any differences. We recalculated the total variable consideration on gross sales and the related accrual based upon the historical rebates as a percentage of gross sales and an independently calculated lag between rebate recognition and settlement. We evaluated the change in the accrued liability by performing inquiries and analytical procedures considering changes in contractual rebate rates, expected lag, and gross sales performance. We also tested subsequent settlements of customer rebates to assess the impact to the accrual at the balance sheet date and compared that to the Company’s estimate.

Tax receivable agreement liability

Description of the Matter As disclosed in Note 1 and Note 11 to the consolidated financial statements under the captions “Tax Receivable Agreement”, in connection with the Company’s initial public offering (IPO), the Company entered into the Tax Receivable Agreement (TRA) with certain pre-IPO owners. The TRA provides for the payment by the Company to such pre-IPO owners of 90% of certain tax benefits, if any, that the Company actually realizes, or is deemed to realize. Management calculates the TRA liability by determining the tax basis subject to the TRA and applying an assumed income tax rate to the basis differences to calculate the tax benefits. As of December 31, 2025, the Company has a liability due to the pre-IPO owners under the TRA of $3,542 million.
Auditing the initial TRA liability was challenging due to the complexity of management’s determination of tax basis used as an input to the TRA liability, specifically: (i) Medline Inc.’s allocable share of existing tax basis in Medline Holdings’ assets acquired in the IPO and (ii) increases in Medline Inc.’s allocable share of existing tax basis and tax basis adjustments to the tangible and intangible assets of Medline Holdings as a result of sales or exchanges of Common Units in connection with or after the IPO.
    

                                 82

How We Addressed the Matter in Our Audit To test the TRA liability, our audit procedures included inquiring of management and its external tax specialists, reviewing the tax receivable agreement to obtain an understanding of the TRA, and comparing the calculation to the TRA for consistency. With the support of income tax specialists, our testing included, among others, performing procedures to validate the existence, completeness, and accuracy of the underlying tax basis used in the calculation of the TRA liability, developing an independent calculation of the tax basis and comparing the independent calculation to management’s calculation to evaluate the reasonableness of the tax basis, and assessing management’s application of the tax laws.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2022.

Chicago, Illinois

February 25, 2026

                                 83

MEDLINE INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)
As of December 31, 2025 As of December 31, 2024
ASSETS
Current assets
Cash and cash equivalents $ 1,939   $ 199  
Trade accounts receivable, net of allowance for credit losses of $ 152 and $ 108 as of December 31, 2025 and 2024, respectively
3,533   3,219  
Inventories 4,769   4,456  
Other current assets 438   398  
Total current assets 10,679   8,272  

Property, plant, and equipment, net 4,778   4,595  
Other non-current assets
Goodwill 8,079   8,065  
Intangible assets, net 13,893   14,559  
Deferred tax assets 583   —  
Other long-term assets 472   487  
Total other non-current assets 23,027   23,111  
Total assets $ 38,484   $ 35,978  
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY / PARTNERS’ CAPITAL
Current liabilities
Current portion of long-term borrowings and other short-term borrowings $ 77   $ 78  
Accounts payable 961   869  
Accrued expenses and other current liabilities 1,452   1,493  

Total current liabilities 2,490   2,440  

Non-current liabilities
Long-term borrowings, less current portion 12,484   16,416  
Tax receivable agreement liability 3,542   —  
Other long-term liabilities 682   598  
Total non-current liabilities 16,708   17,014  
Total liabilities $ 19,198   $ 19,454  
Commitments and contingencies

Mezzanine equity
$ —   $ 366  
Stockholders’ equity / partners’ capital

Class A common stock, par value $ 0.0001 per share; 50,000 shares authorized; 812 and no shares issued and outstanding as of December 31, 2025 and 2024, respectively
—   — 
Class B common stock, par value $ 0.0001 per share; 50,000 shares authorized; 502 and no shares issued and outstanding as of December 31, 2025 and 2024, respectively
—   — 
Preferred stock, par value $ 0.0001 ; 5,000 shares authorized; no shares issued and outstanding
—   — 
Additional paid-in capital 10,717   — 
Accumulated deficit
( 7 ) — 
Partners’ capital
—  16,147  
Accumulated other comprehensive income 27   11  
Total Medline Inc. stockholders’ equity / partners’ capital
10,737   16,158  
Noncontrolling interests 8,549   — 
Total stockholders’ equity / partners’ capital
19,286   16,158  
Total liabilities, stockholders’ equity and mezzanine equity / partners’ capital
$ 38,484   $ 35,978  

See notes to consolidated financial statements.

84

MEDLINE INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended

(in millions, except per share earnings) December 31, 2025 December 31, 2024 December 31, 2023
Net sales $ 28,432   $ 25,507   $ 23,231  

Cost of goods sold 20,914   18,531   17,346  
Gross profit 7,518   6,976   5,885  

Operating expense
Selling, general and administrative expenses 4,524   4,108   3,867  
Amortization of intangible assets 704   685   662  
Other operating expenses 78   37   106  
Total operating expense 5,306   4,830   4,635  
Operating income 2,212   2,146   1,250  

Other expense
Interest expense, net ( 812 ) ( 864 ) ( 976 )
Other (expense) income, net ( 64 ) ( 43 ) 1  
Foreign exchange (loss) gain, net ( 88 ) 7   ( 11 )
Total other expense ( 964 ) ( 900 ) ( 986 )
Income before income taxes 1,248   1,246   264  

Provision for income taxes 91   46   30  
Net income 1,157   1,200   234  

Net loss attributable to noncontrolling interests ( 2 ) —  — 
Net income attributable to Medline Inc.
$ 1,159   $ —  $ — 

Net loss per share attributable to Medline Inc. (1)

Basic and diluted
$ ( 0.01 ) N/A
N/A

Weighted average number of Class A common shares outstanding (1)

Basic and diluted
810   N/A N/A

Other comprehensive income (loss), net of tax
Retirement plan, net of tax $ ( 8 ) $ —   $ ( 2 )
Net unrealized loss on derivative instruments ( 89 ) ( 88 ) ( 115 )
Currency translation adjustment 129   ( 89 ) 43  
Total other comprehensive income (loss), net of tax 32   ( 177 ) ( 74 )
Total comprehensive income
1,189   1,023   160  

Comprehensive loss attributable to noncontrolling interests ( 2 ) —   —  
Comprehensive income attributable to Medline Inc.
$ 1,191   $ 1,023   $ 160  

(1) Represents net loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from December 17, 2025, the date after the SEC declared effective the Company's Registration Statement on S-1 filed in connection with its IPO, through December 31, 2025, the period following the reorganization transactions and initial public offering. See Note 1—Nature of Business and Significant Accounting Policies and Note 18—Net Income (Loss) Per Share.

See notes to consolidated financial statements.

85

MEDLINE INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, MEZZANINE EQUITY AND PARTNERS' CAPITAL

Year ended December 31, 2025
Mezzanine Equity Partners’ Capital (1)
Class A Common Stock
Class B Common Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income
Noncontrolling Interests
Total Stockholders’ Equity / Partners’ Capital

(in millions) Amount Amount Shares Amount Shares Amount
Balance, January 1, 2025 $ 366   $ 16,147   —   $ —   —   $ —   $ —   $ —   $ 11   $ —   $ 16,158  
Net income prior to reorganization transactions 13   1,153   — —  —  —  —  —  —  —  1,153  
Other comprehensive income prior to reorganization transactions —  — —  —  —  —  —  31   —  31  
Distributions to partners prior to reorganization transactions ( 8 ) ( 510 ) — —  —  —  —  —  —  —  ( 510 )
Reclass from liability-classified units prior to reorganization transactions —  10   — —  —  —  —  —  —  —  10  
Units repurchased prior to reorganization transactions ( 4 ) ( 29 ) — —  —  —  —  —  —  —  ( 29 )
Stock-based compensation prior to reorganization transactions —  59   — —  —  —  —  —  —  —  59  
Balance, December 16, 2025 $ 367   $ 16,830   —   $ —   —   $ —   $ —   $ —   $ 42   $ —   $ 16,872  
Effect of the reorganization transactions ( 367 ) ( 16,830 ) 609 —  527   —  8,007   —  ( 16 ) 9,206   367  
Issuance of Class A common stock, net of costs
—  —  248 —  —  —  7,008   —  —  —  7,008  

Purchases of Class A common stock and redemptions of common units from pre-IPO owners —  —  ( 45 ) —  ( 25 ) —  ( 1,323 ) —  —  ( 647 ) ( 1,970 )
Exchange of common units for Class A common stock —  —  — —  —  —  10   —  —  ( 10 ) —  
Tax receivable agreement
—  —  — —  —  —  ( 3,542 ) —  —  —  ( 3,542 )

Recognition of deferred tax assets from equity transactions
553   —  553  
Net loss subsequent to reorganization transactions —  —  — —  —  —  —  ( 7 ) —  ( 2 ) ( 9 )
Other comprehensive income subsequent to reorganization transactions —  —  — —  —  —  —  —  1   —  1  
Stock-based compensation subsequent to reorganization transactions —  —  — —  —  —  4   —  —  2   6  
Balance, December 31, 2025 $ —   $ —   812   $ —   502   $ —   $ 10,717   $ ( 7 ) $ 27   $ 8,549   $ 19,286  

(1) Reflects Partners’ Capital, net of Accumulated other comprehensive income.

See notes to consolidated financial statements.

86

MEDLINE INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, MEZZANINE EQUITY AND PARTNERS' CAPITAL                                                 

Year ended December 31, 2024
Mezzanine Equity Partners' Capital
Class A Stock-based Compensation Total Mezzanine Equity Class A Class B Class B CUPI Accumulated Other Comprehensive Income
Total Partners’ Capital

(in millions)
Units Amount Units Amount Amount Units Amount Units Amount Units Amount
Balance, January 1, 2024 128 $ 178   82 $ 55   $ 233   16,723 $ 16,422   754 $ 108   23 $ 26   $ 188   $ 16,744  
Net income — 10 — 27 37 — 1,104 — 35 — 24 — 1,163
Other comprehensive loss — — — — — — — — — — — ( 177 ) ( 177 )
Reclass from liability-classified units — — — — — — — 68 9 — — — 9
Units repurchased — — ( 5 ) ( 2 ) ( 2 ) — — ( 44 ) ( 18 ) — — — ( 18 )
Stock-based compensation — — 29 — — — — ( 57 ) 53 — — — 53
Adjustment of puttable common units to redemption value — 58 — — 58 — ( 58 ) — — — — — ( 58 )
Adjustment of stock-based compensation to redemption value — — — 57 57 — ( 57 ) — — — — — ( 57 )
Distribution to partners — ( 9 ) — ( 8 ) ( 17 ) — ( 1,435 ) — ( 64 ) — ( 2 ) — ( 1,501 )
Balance, December 31, 2024 128 $ 237   106 $ 129   $ 366   16,723 $ 15,976   721 $ 123   23 $ 48   $ 11   $ 16,158  

Year ended December 31, 2023
Mezzanine Equity Partners' Capital
Class A Stock-based Compensation Total Mezzanine Equity Class A Class B Class B CUPI Accumulated Other Comprehensive Income
Total Partners’ Capital

(in millions)
Units Amount Units Amount Amount Units Amount Units Amount Units Amount
Balance, January 1, 2023 128 $ 138   48 $ 18   $ 156   16,723 $ 16,290   680 $ 54   32 $ 15   $ 262   $ 16,621  
Net income — — — — — — 234 — — — — — 234
Other comprehensive loss — — — — — — — — — — — ( 74 ) ( 74 )
Capital contribution — — — — — — 84 — — — — — 84
Stock-based compensation — — 34 — — — 5 74 54 ( 9 ) 11 — 70
Adjustment of puttable common units to redemption value — 40 — — 40 — ( 40 ) — — — — — ( 40 )
Adjustment of stock-based compensation to redemption value — — — 37 37 — ( 37 ) — — — — — ( 37 )
Distribution to partners — — — — — — ( 114 ) — — — — — ( 114 )
Balance, December 31, 2023 128 $ 178   82 $ 55   $ 233   16,723 $ 16,422   754 $ 108   23 $ 26   $ 188   $ 16,744  

See notes to consolidated financial statements.

87

MEDLINE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended
(in millions) December 31, 2025 December 31, 2024 December 31, 2023
Cash flows from operating activities
Net income $ 1,157   $ 1,200   $ 234  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,011   977   951  
Stock-based compensation expense 76   61   78  
Amortization of deferred financing costs 59   57   80  
Embedded derivative on debt ( 41 ) —   —  

Credit losses 54   63   8  

Unrealized foreign exchange loss (gain), net 68   ( 10 ) 3  
Amortization of inventory step-up —   25   90  
Loss on extinguishment of debt 58   32   —  
Non-cash lease expense 72   61   47  
Other non-cash adjustments 13   ( 22 ) ( 5 )
Changes in assets and liabilities, net of acquisitions:
Trade accounts receivable ( 355 ) ( 256 ) ( 153 )
Inventories ( 264 ) ( 545 ) 444  
Other assets ( 126 ) 46   ( 92 )
Accounts payable 73   106   136  
Accrued expenses and other current liabilities ( 92 ) 62   ( 112 )
Other liabilities ( 19 ) ( 88 ) ( 24 )
Net cash provided by operating activities 1,744   1,769   1,685  
Cash flows from investing activities
Purchases of property and equipment, net ( 447 ) ( 354 ) ( 275 )

Acquisitions of businesses, net of cash acquired 6   ( 1,126 ) ( 16 )
Cash paid for asset acquisitions ( 33 ) ( 10 ) ( 10 )
Other investing activities —   ( 3 ) ( 11 )
Net cash used in investing activities ( 474 ) ( 1,493 ) ( 312 )
Cash flows from financing activities
Proceeds from issuance of Class A common stock in initial public offering, net of underwriting discounts and commissions 7,048   —   —  
Purchase of Class A common stock and redemptions of Common Units from Pre-IPO owners ( 1,970 ) —   —  
Payment for offering costs ( 36 ) —   —  
Proceeds from long-term borrowings 7,569   15,932   —  
Repayment for long-term borrowings ( 11,661 ) ( 15,995 ) ( 77 )
Repayments under lines of credit ( 179 ) ( 166 ) —  
Proceeds from lines of credit 179   166   —  
Payment for debt issuance cost —   ( 12 ) —  
Payment towards Class B unit repurchases ( 33 ) ( 20 ) —  
Distributions to partners ( 518 ) ( 1,518 ) ( 114 )

Net cash provided by (used in) financing activities 399   ( 1,613 ) ( 191 )
Effect of exchange rate changes on cash and cash equivalents and restricted cash 23   2   4  
Net change in cash and cash equivalents and restricted cash 1,692   ( 1,335 ) 1,186  
Cash, cash equivalents and restricted cash, beginning of year 250   1,585   399  
Cash, cash equivalents and restricted cash, end of year $ 1,942   $ 250   $ 1,585  

See notes to consolidated financial statements.

88

MEDLINE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Year ended
(in millions) December 31, 2025 December 31, 2024 December 31, 2023
Supplemental disclosure of cash flow information:
Cash payments for interest on borrowings $ 944   $ 1,022   $ 1,126  
Cash received from interest rate hedging activities 89   170   170  
Cash payments for income taxes, net 62   101   52  
Operating cash flows paid for operating leases 109   84   56  
Right-of-use operating lease assets obtained in exchange for lease obligations 115   143   145  
Non-cash purchases of property, plant and equipment 58   50   25  
Recognition of tax receivable agreement liability 3,542   —   —  
Recognition of deferred tax assets from equity transactions 553   —   —  
Non-cash capital contribution —   —   84  

The following table provides reconciliation of cash, cash equivalents and restricted cash shown above to the amounts reported within the Consolidated Balance Sheets as of December 31, 2025 and 2024:

Year ended
(in millions) December 31, 2025 December 31, 2024
Cash and cash equivalents $ 1,939   $ 199  
Restricted cash included in other current assets 3   51  
Cash, cash equivalents and restricted cash $ 1,942   $ 250  

See notes to consolidated financial statements.

89

MEDLINE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Medline Inc., a Delaware corporation formed on November 6, 2024, is a holding company, and its material assets are its equity interests held directly or indirectly through wholly owned subsidiaries in Medline Holdings, LP (“Medline Holdings”), and its subsidiaries (together, the “Company” or “Medline”). The Company is a medical-surgical products and supply chain company, serving healthcare providers across the continuum of care. Its customers are primarily composed of hospitals, nursing homes and other health care providers located in the United States of America, Canada, Europe, Asia-Pacific (which includes Southeast Asia, Japan and Australia), Latin America (which includes Mexico), the Middle East and Africa.

Initial Public Offering

On December 16, 2025, the Securities and Exchange Commission declared effective the Company’s Registration Statement on Form S-1 filed in connection with its initial public offering (the “IPO”). The Company’s Class A common stock started trading on The Nasdaq Global Select Market on December 17, 2025. On December 18, 2025, the Company completed the IPO of its Class A common stock in which the Company issued and sold 248,439,654 shares of Class A common stock (including shares issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) for cash consideration of $ 29.00 per share. The IPO generated net proceeds of approximately $ 7,048 million after deducting underwriting discounts and commissions of approximately $ 157 million, but before deducting offering expenses of approximately $ 40 million. The Company used the proceeds (net of underwriting discounts and commissions) from the issuance of 179,000,000 shares ( $ 5,078 million) in the IPO to purchase an equivalent number of newly issued Common Units from Medline Holdings, which Medline Holdings has in turn used $ 731 million of which to repay in full all outstanding Euro Term Loans (as defined herein) and $ 3,292 million of which to repay a portion of the outstanding USD Term Loans (as defined herein) which matures in 2028. The Company will use the remaining net proceed for general corporate purposes and to bear all of the expenses of the IPO. The Company has used the proceeds (net of underwriting discounts and commissions) from the issuance of 37,034,482 shares ( $ 1,051 million) and the issuance of 32,405,172 shares ( $ 919 million) pursuant to the exercise in full by the underwriters of their option to purchase additional shares in the IPO to purchase or redeem an equivalent aggregate number of shares of Class A common stock and Common Units from certain pre-IPO owners.

Reorganization

On December 16, 2025, prior to the completion of the IPO, the Company executed several reorganization transactions (the “Reorganization”) and amended and restated Limited Partnership Agreement of Medline Holdings (the “LP Agreement”), resulting in the following:

• Medline Inc. became the general partner of Medline Holdings with 100 % of the voting power and control of Medline Holdings.
• All outstanding Class A units and Class B catch-up profits interests units (“CUPIs”) of Medline Holdings were either (1) reclassified into Common Units, a new class of partnership interest of Medline Holdings, or (2) directly or indirectly exchanged for vested shares of Class A common stock and restricted stock units (“RSUs”) of Medline Inc. The holders of Common Units were also allocated shares of Class B common stock of Medline Inc. on a one -for-one basis with the number of their Common Units.
• All outstanding Class B units of Medline Holdings were either (1) reclassified into Incentive Units, a new class of partnership interest of Medline Holdings, or (2) directly or indirectly exchanged for vested shares of Class A common stock of Medline Inc., in the case of vested Class B units, and restricted stock awards (“RSAs”), RSUs, and options of Medline Inc., in the case of unvested Class B units.
• Holders of Incentive Units (“Incentive Unitholders”) have the right to exchange their vested Incentive Units for Common Units at the exchange rate defined by the amended LP Agreement.
90

MEDLINE INC.

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

• Recognition of noncontrolling interests due to the pre-IPO owners retaining an economic interest in Medline Holdings related to Common Units and Incentive Units.
After the Reorganization, Medline Inc.’s sole material asset is a controlling equity interest in Medline Holdings. As the general partner of Medline Holdings, Medline Inc. now operates and controls all of the business and affairs of Medline Holdings, and has the obligation to absorb losses and receive benefits from Medline Holdings and, through Medline Holdings and its subsidiaries, operate the business. The Reorganization have been accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements of Medline Inc. recognize the assets and liabilities received in the Reorganization at their historical carrying amounts, as presented in the historical financial statements of Medline Holdings. Medline Inc. consolidates Medline Holdings on its consolidated financial statements and records a noncontrolling interest.

Basis of Presentation and Consolidation

The consolidated financial statements and accompanying notes are prepared in accordance with United States generally accepted accounting principles (“GAAP”). The results of businesses acquired or disposed of are included in the consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively. All adjustments, in the opinion of management, necessary to a fair statement of the results for the annual periods presented have been made.

The consolidated financial statements include the financial statements of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. All intercompany transactions and balances have been eliminated. A noncontrolling interest in a consolidated subsidiary represents the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. Noncontrolling interests are presented as a separate component of equity in the Consolidated Balance Sheets and the presentation of net income (loss) is modified to present earnings and other comprehensive income (loss) attributed to controlling and noncontrolling interests.

The Company reclassified certain prior period amounts in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows to conform to the current year’s presentation. The changes relate to the inclusion of an immaterial financial statement line item within another line item for presentation purposes. The change did not have an impact on the Company’s financial condition, operating results, or cash flows.

Fiscal Periods

The Company’s fiscal year begins on January 1 and ends on December 31. The fiscal quarters are based on a four-four-five-week calendar with periods ending on the Saturday of the last week in the quarter, with the exception of December 31, which is always the fiscal year end date.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, allowance for credit losses, inventory valuation reserves, fair value of financial instruments, impairment of long-lived assets and goodwill, tax receivable agreement, deferred tax valuations, depreciation and amortization, actuarial assumptions, and fair value allocations related to business combinations. Actual results could differ from those estimates.
91

MEDLINE INC.

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with an original maturity of 90 days or less to be cash equivalents. Due to the short-term nature of these instruments, the carrying values approximate the fair market value. The Company presents its cash and cash equivalents under the liability extinguishment approach and, as a result, classifies its book overdrafts independent of deposit accounts as current liabilities. Of the cash held on deposit, essentially all of the cash balances were in excess of amounts insured by the Federal Deposit Insurance Corporation or other foreign provided bank insurance. The Company performs periodic evaluations of these institutions for relative credit standing and has not experienced any losses as a result of its cash concentration. Restricted cash represents cash balances restricted as to withdrawal or use and are included in Other current assets on the Consolidated Balance Sheets. As of December 31, 2025, restricted cash was not material. As of December 31, 2024, restricted cash includes $ 47 million held in an escrow account related to settlement for ethylene oxide sterilization (“EtO”) litigation. See Note 13—Commitments and Contingencies for additional information on EtO related claims and litigation.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined primarily by the last-in, first-out (“LIFO”) method. The LIFO method presumes that the most recent inventory purchases are the first items sold and the inventory cost under LIFO approximates market. A LIFO charge is recognized when the net effect of price increases on products held in inventory exceeds the impact of price declines, including the effect of products that have lost market exclusivity. A LIFO credit is recognized when the net effect of price declines exceeds the impact of price increases on products held in inventory. The Company recognized increases in the LIFO reserve of $ 83 million, $ 53 million, and $ 61 million in the years ended December 31, 2025, 2024 and 2023, respectively, all within Cost of goods sold in the Consolidated Statements of Comprehensive Income. For certain foreign subsidiaries, cost is determined using the first-in, first-out (“FIFO”) method. The LIFO method was used to value approximately 89 % of the Company’s inventories for both December 31, 2025 and 2024. Estimated provisions are established for slow-moving and obsolete inventory based on historical and forecasted sales trends. Rebates received from vendors relating to the purchase or distribution of inventory are considered product discounts and are accounted for as a reduction in the cost of inventory and are recognized when the inventory is sold.

Accounts Receivable, Net of Allowance for Credit Losses

Accounts receivable are carried at amortized cost less an allowance for credit losses. Credit losses are determined utilizing a forward-looking model and are recognized in accordance with Accounting Standard Codification (“ASC”) 326 Financial Instruments - Credit Losses. The allowance for credit losses reflects the best estimate of future losses over the contractual life of outstanding accounts receivable and is determined on the basis of historical experience, specific allowances for known troubled accounts, other currently available information including customer’s financial condition, and both current and forecasted economic conditions. The Company charges interest on overdue receivables and evaluates the collection of this interest. Net interest on overdue receivables was not material as of December 31, 2025, 2024 and 2023. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The Company does not reduce customer rebates from accounts receivable as right of set-off does not exist, and therefore, they are classified separately under Accrued expenses and Other Current Liabilities . See Note 6—Accrued Expenses and Other Current Liabilities for additional information.

Concentrations of Credit Risk

The Company diversifies the concentration of its cash by maintaining deposits with a number of major banks and investing in money market funds. The Company has a primary customer base within the healthcare industry, which is subject to volatility. Generally, the Company does not require collateral from its customers. The Company performs regular credit evaluations of the Company’s customers’ financial conditions and maintains reserves for expected losses through the established allowance for credit losses .
92

MEDLINE INC.

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Research and Development Expenses

Research and development expenses are charged to earnings as incurred. Research and development costs for the years ended December 31, 2025, 2024 and 2023 were $ 80 million, $ 67 million and $ 60 million, respectively.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation and amortization, using straight-line method over estimated useful lives. Fully depreciated assets remain on the books until disposal, at which point, the costs and accumulated depreciation are removed, and any resulting gain or loss is recognized in net income. Maintenance and repairs are expensed as incurred, while significant renewals are capitalized. Leasehold improvements are amortized over the shorter of their useful life or lease term.

Asset Class
Useful Life

Buildings and Improvements - Owned 15 - 40 years

Building Improvements - Leased Shorter of 10 years/Remaining lease term

Land Improvements 15 years
Machinery and Equipment 3 - 20 years

Computer Software 3 years
Furniture and Fixtures 7 years
Auto and Trucks 5 - 7 years

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property, plant, and equipment, definite-lived intangible assets and right-of-use assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. An impairment loss would be recognized when the estimated undiscounted future cash flow from use of the asset and its eventual disposition is less than the carrying amount of that asset. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis if market value is not readily available or attainable. No material impairment was recorded for the year ended December 31, 2025.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed for a business combination.
The Company performs its annual goodwill impairment test in October and monitors for interim indicators of impairment on an ongoing basis. Goodwill is tested for impairment at the reporting unit level. When performing the annual goodwill impairment assessment, the Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test; otherwise, no further analysis is required.

The quantitative goodwill impairment test compares the estimated fair value of each reporting unit to its carrying value. If the carrying value of a reporting unit exceeds its estimated fair value, an impairment charge is recognized in an amount equal to that excess, limited to the total goodwill allocated to that reporting unit. If the estimated fair value of a reporting unit exceeds the carrying value, goodwill is not impaired. See Note 5—Goodwill and Intangible Assets for additional information about the Company’s impairment assessment.

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NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible Assets

Intangible assets are initially measured at fair value and consist of trade names, customer relationships and developed technology from acquisitions by the Company. The definite-lived intangible assets are amortized using the straight-line method over their estimated useful lives, which ranges from 2 - 21 years.

The Company performs its annual indefinite-lived assets impairment test in October and monitors for interim indicators of impairment on an ongoing basis. The impairment test for indefinite-lived intangibles involves first assessing qualitative factors to determine if it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. To perform the qualitative review, the Company uses estimates and significant judgments and considers the weight of evidence and significance of all identified events and circumstances and most relevant drivers of fair value in determining whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If management concludes that it is more likely than not that the fair value is less than its carrying amount, the Company conducts a quantitative impairment test; otherwise, no further analysis is required.

The quantitative test compares the estimated fair value of the indefinite-lived intangible asset to the respective asset’s carrying amount. If the carrying value of the indefinite-lived intangible exceeds its estimated fair value, an impairment charge is recognized in an amount equal to that excess. If the estimated fair value of the indefinite-lived intangible exceeds the carrying value, the asset is not impaired. See Note 5—Goodwill and Intangible Assets for additional information about the Company’s impairment assessment.

Leases

The Company enters into operating leases primarily for corporate offices, manufacturing and distribution facilities, vehicles and equipment. The Company determines if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identifiable asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

Operating lease right-of-use assets and corresponding operating lease liabilities are recognized in the Company’s Consolidated Balance Sheets at lease commencement date based on the present value of lease payments over the lease term. Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. Some lease arrangements include payments that are adjusted periodically based on actual charges incurred for common area maintenance, utilities, taxes and insurance, or changes in an index or rate referenced in the lease. The fixed portion of these payments is included in the measurement of right-of-use assets and lease liabilities at lease commencement, while the variable portion is recorded as variable lease expense. As most of the leases do not provide an implicit rate, the Company uses incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company’s lease agreements contain lease components and non-lease components. The Company elected the practical expedient to combine lease and non-lease components into one single lease component for all asset classes other than certain arrangements with embedded lease assets. For embedded lease assets, the Company accounts for the lease components and non-lease components separately. The Company, from time to time, subleases certain portions of real estate property, resulting in sublease income. The Company does not recognize lease liabilities or right-of-use assets for short-term leases with a term of less than 12 months.

The Company’s leases have remaining lease terms ranging from less than 12 months to approximately 14 years. The lease terms may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option.

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NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

As a lessor, the Company enters into operating leases primarily for corporate offices and distribution facilities. The contracts generally do not contain options to purchase the underlying assets. Other contractual terms, including options to shorten or extend the lease term, vary by contract. The contracts generally also include non-lease components such as utilities, maintenance, and other services, for which payments are variable and immaterial to the Company. For all asset classes, the Company elected the practical expedient to account for the lease and non-lease components as a single lease component under ASC 842, “Leases”. See Note 9—Leases for additional information on the Company’s leases.

Revenue Recognition

The Company’s revenues are generated principally from the sale of products. The majority of the sales transactions are supported by an underlying agreement or a formal purchase order. Revenue is recognized as performance obligations under the terms of the contract are satisfied, which generally occurs with the transfer of control. The Company transfers control and recognizes revenue when product is shipped to customers or when product arrives at destination, depending on the shipping term; customers have legal title to the product; and the Company has a right to payment for such product. Significant judgment is generally not required to determine the timing of satisfying the performance obligation. Revenue is measured as the amount of consideration the Company expects to receive in exchange for those products. Shipping and handling costs include all delivery expenses as well as all costs to prepare the product for shipment to the customer, which are treated as fulfillment costs and primarily included in Selling, general and administrative expenses. Since the Company typically invoices customers when performance obligations are satisfied, the Company does not have material contract assets or contract liabilities. The Company’s credit terms typically range from net 30 to 60 days from the invoice date and do not contain significant financing components that extend beyond one year of fulfillment of performance obligations. Sales taxes collected from customers and remitted to governmental authorities are excluded from revenues.
The Company generally warrants that its products will conform to pre-established specifications and that its products will be free from material defects for a limited time. The Company limits its warranty to the replacement of defective parts, or a refund or credit of the price of the defective product. The Company does not account for these warranties as separate performance obligations. Warranty claims are not material as a majority of the Company’s products are consumables.

Although products are generally sold at fixed prices, certain customers receive cash discounts, customer rebates, distributor chargebacks, return allowances, scrap allowances, and other rights, which are accounted for as variable consideration and may require significant judgment in determining the amounts by which to reduce revenue. Customer rebates typically represent the most significant component of variable consideration, with distributor chargebacks generally constituting the next largest category. The Company estimates these amounts at the point that revenue is recognized based on the expected value to be provided to the customer and reduces revenue accordingly. The amount of variable consideration recognized as revenue is limited to the amount for which it is probable that a significant reversal in revenue will not occur when the related uncertainty is resolved. The Company’s estimate of variable consideration and ultimate determination of the estimated amounts to include in the transaction price are based upon the contractual terms between the Company and its customers, products subject to a rebate, the lag between the sale and the payment of the rebate, and historical rebate payment trends.

See Note 20—Segment Information for disaggregation of net sales by product category, geography, and sales office as the Company believes that it best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors.

Cost of Goods Sold

The primary components of cost of goods sold include the cost of the product (net of purchase discounts, supplier rebates), direct and certain indirect labor, overhead cost, including depreciation and freight incurred to transport inventories from a supplier location or in between Company locations. Costs related to purchasing, receiving, inspections, warehousing, and other costs of the Company’s distribution network are included in Selling, general and administrative expenses.

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NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-based Compensation

The Company issues stock-based awards to employees that are generally in the form RSUs, restricted stock awards (“RSAs”), stock options, or incentive units. These awards are generally equity classified. Compensation cost for equity awards is measured at their grant-date fair value. The grant date fair value of RSUs and RSAs is based on the fair value of the Company’s underlying common stock. The grant date fair value of stock options is estimated using the Black-Scholes option pricing model, which requires management to make assumptions with respect to the fair value of the Company’s equity award on the grant date, including the expected term of the award, the expected volatility of the Company’s stock calculated based on a period of time generally commensurate with the expected term of the award, risk-free interest rates and expected dividend yields of the Company’s stock. Generally, RSUs, RSAs, incentive units, and stock options have graded vesting. For graded vesting awards with service only conditions, the Company recognizes expense using the straight-line attribution method over the requisite service period. Forfeitures are accounted for as they occur.

Additionally, stock-based compensation includes other stock-based awards, such as awards that include performance conditions and may be settled in restricted shares with time-based vesting. Awards with performance conditions are generally liability classified and remeasured at fair value through settlement. Upon settlement, these awards are reclassified as equity, and their fair value is finalized at the grant date.

See Note 17—Stock-based Compensation for a discussion of the Company’s stock-based compensation plans and awards.

Net Income (loss) per Share

Basic net income (loss) per share is computed by dividing net income (loss) attributable to the Company by the weighted average number of common stock outstanding during the period. Diluted net income (loss) per unit is computed by dividing net earnings or losses attributable to the Company by the weighted-average shares outstanding during the period after adjusting for the impact of securities that would have a dilutive effect on net income (loss) per share. The treasury stock method is applied to equity incentive plans, while the if-converted method is used for instruments with conversion features.

All net income prior to the IPO was entirely allocable to partners of Medline Holdings. As a result of the Reorganization and IPO, the Company’s capital structure before and after IPO are not comparable, and the presentation of net income per share for the periods prior to the IPO is not meaningful and not presented herein. See Note 18—Net Income per Share for additional information.

Income Taxes

The Company accounts for income taxes under the liability method in accordance with ASC 740, “Income Taxes”, and Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records any tax on Global Intangible Low-Taxed Income (“GILTI”) in the provision for income taxes in the year it is incurred.

The Company recognizes interest and penalties related to unrecognized tax benefits in interest and income tax expense, respectively. The Company had no amounts accrued for interest or penalties related to unrecognized tax benefits as of December 31, 2025 and 2024. The Company does not expect the total amount of unrecognized tax benefits to substantially change in the next 12 months.

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NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Tax Receivable Agreement

In connection with the IPO, the Company entered into a tax receivable agreement (“TRA”) with certain pre-IPO owners that provides for the payment by Medline Inc. to such pre-IPO owners of 90 % of certain tax benefits, if any, that Medline Inc. realizes, or is deemed to realize. The Company recognizes obligations arising under the TRA in accordance with ASC 450, “Contingencies”. Obligations under the TRA are accrued when it is probable that a liability has been incurred and its amount is estimable. Liabilities associated with the TRA are classified as either current or noncurrent based on the expected date of payment and are presented in the Consolidated Balance Sheets under the captions Accrued expenses and other current liabilities and Tax receivable agreement liability, respectively. The exchange of partnership interest will result in an increase in TRA liabilities with a corresponding adjustment to Additional paid-in capital. Subsequent remeasurement of the TRA liabilities is recognized in the Consolidated Statements of Comprehensive Income as a component of Other (expense) income, net. See Note 11—Tax Receivable Agreement for additional information.

Loss contingencies

The Company is subject to various legal actions that are ordinary course and incidental to the business, including contract disputes, employment, workers’ compensation, product liability, auto liability, regulatory and other matters. The Company maintains insurance coverage for employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency. When a loss is considered probable and reasonably estimable, the Company records a liability in the amount of the best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict, and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. The Company adjusts the recorded contingent liability from time to time based upon periodic assessment of the potential outcomes of the pending matters. See Note 13—Commitments and Contingencies for additional information.

Interest expense, net

Interest expense, net primarily consists of interest expense of the Company’s borrowings, net interest settlements of interest rate derivatives, amortization of deferred finance costs including original issue discounts on debt, reduced by interest income on bank deposits and liquid financial instruments, customer interest income and other interest income.

Defined Benefit Pension Plans

The Company uses appropriate actuarial methods and assumptions in accounting for its defined benefit pension plans. Actual results that differ from assumptions used are accumulated and amortized over future periods and, accordingly, generally affect recognized expense and the recorded obligation in future periods. Therefore, assumptions used to calculate benefit obligations as of the end of a fiscal year directly impact the expense to be recognized in future periods. Pension expense on the defined benefit plans is based on management’s assumptions and consists of the actuarially computed costs of pension benefits in respect of the current year’s service, expected return on plan assets, interest on pension obligations, amortization of net gains or losses, and amortization of prior service costs or credits. In addition, the Company is required to recognize as a component of Other comprehensive income (loss), net of tax the actuarial gains or losses and the prior service costs or credits that arise during the year but are not immediately recognized as components of net periodic benefit costs. The amortization of net gains or losses is based on a straight-line amortization of net gains or losses.
The Company accounts for its defined benefit pension plans in conformity with sections of ASC 715, “Compensation - Retirement Benefits”. This guidance requires an employer to recognize the funded status of its defined benefit pension plans as a net asset or liability in its statement of financial position, with an offsetting amount in Accumulated other comprehensive income (loss), net of tax and to recognize changes in that funded status in the year in which changes occur through comprehensive (loss) income.

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NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Translation of Financial Statements of Foreign Subsidiaries

The Company’s foreign subsidiaries typically use the local currency as their functional currency. The consolidated assets and liabilities of the foreign subsidiaries are translated at exchange rates in effect at the balance sheet date. Income statement activity with respect to the operations of these subsidiaries is converted at the average rate for the period. The effect of the foreign currency translation is recorded in Accumulated other comprehensive income (loss).

Derivative Financial Instruments

Derivative financial instruments are used primarily to manage interest rate and foreign currency exchange exposures, and are recorded at fair value in the Company’s Consolidated Balance Sheets.

The Company uses interest rate derivatives such as interest rate swaps and caps to add stability to interest expense and to manage its exposure to interest rate movements. The Company designates certain of its interest rate derivatives as hedging instruments in cash flow. A derivative qualifies for hedge accounting if, at inception, it is expected to be highly effective in offsetting the underlying hedged cash flows and the Company formally designates and documents the hedging relationship in accordance with ASC 815, “Derivatives and Hedging”. For derivatives designated and qualified as cash flow hedges of interest rate risk, the gain or loss from the fair value change of the derivative is recorded in Accumulated other comprehensive income (loss) and subsequently reclassified into Interest expense, net in the same period(s) during which the hedged transaction affects earnings. Gains and losses on the derivative instruments representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis through an amortization approach. The Company evaluates hedge effectiveness of the derivative instruments at inception and on an ongoing basis, and ineffective portions of the fair value change of the derivatives are recognized in earnings following the date when ineffectiveness was identified. Derivatives not designated as hedges are marked-to-market at the end of each reporting period with the fair value change included in earnings. See Note 15—Derivatives and Hedging Activities Risk Management for additional information.

Fair Value of Financial Instruments

The Company is required to estimate fair value using a three-tiered hierarchy, which prioritizes the inputs used in measuring fair value. Level 1 provides the most reliable measure of fair value; whereas, Level 3 generally requires significant management judgment. The three levels are defined as follows.
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, notes receivable and accounts payable, approximates fair value due to the short maturities of these instruments.

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NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Adopted Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated amounts by certain jurisdictions related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The Company has adopted this standard on a prospective basis in 2025. See Note 12—Income Taxes for additional information.

Recently Issued Accounting Standards Not Yet Adopted

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. ASU 2025-12 amends various areas of the ASC to (1) clarify, (2) correct errors, or (3) make minor improvements. The ASU intends to make the ASC easier to understand and apply in cases in which the original guidance may have been unclear. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted. Entities may adopt the guidance using a prospective or retrospective approach. The Company expects adoption of this ASU would not have a material impact on the consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (ASC 270): Narrow Scope Improvements. ASU 2025-11 clarifies existing interim disclosure requirements and the applicability of ASC 270 and does not expand or reduce interim disclosure requirements. The ASU also includes a disclosure principle that requires entities to disclose material events and changes occurring since the end of the most recent annual reporting period, which may be presented either on the face of the interim financial statements or in the accompanying notes. The ASU is effective for interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. Entities may adopt the guidance using a prospective or retrospective approach. The Company expects adoption of this ASU would not have a material impact on the interim consolidated financial statements.

In December 2025, the FASB issued ASU 2025-10, Government Grants (ASC 832): Accounting for Government Grants Received by Business Entities. ASU 2025-10 provides recognition, measurement, presentation, and disclosure requirements for government grants, including guidance for grants related to an asset and grants related to income. The amendments introduce two permitted approaches for asset-related grants: a deferred income approach or a cost accumulation approach. The amendments are effective for annual periods beginning after December 15, 2028, and interim periods within those annual periods. Early adoption is permitted. Entities may adopt the guidance using a prospective, retrospective, or modified transition approach. The Company is currently evaluating the impact of adopting this new standard on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (ASC 815) and Revenue from Contracts with Customers (ASC 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. ASU 2025-07 refines the scope of derivative accounting by excluding certain non-exchange-traded contracts with underlyings that are based on operations or activities specific to one of the parties to the contract. The scope exception does not apply to variables based on a market rate, market price, market index, the price, or performance of a financial asset or liability, contracts (or features) involving an issuer’s own equity or options on debt instruments. In addition, the amendments clarify that share-based noncash consideration received from a customer should be accounted for under the noncash consideration guidance in ASC 606. The amendments are effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted. Entities may adopt the guidance either prospectively or on a modified retrospective basis. The Company expects adoption of this ASU would not have a material impact on the consolidated financial statements.

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NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 updates the guidance for internal-use software by eliminating references to development stages and clarifying the criteria for capitalization. Under the new guidance, capitalization begins when (1) management authorizes and commits to funding the project and (2) it is probable that the project will be completed, and the software will be used as intended. The amendments are effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. Early adoption is permitted. Entities may adopt the guidance using a prospective, retrospective, or modified transition approach. The Company expects adoption of this ASU would not have a material impact on the consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 introduces a practical expedient allowing entities to assume current economic conditions, as of the balance sheet date, remain unchanged when estimating expected credit losses for current trade receivables and contract assets. The standard is effective for fiscal years beginning after December 15, 2025 on a prospective basis, and including interim periods, with early adoption permitted. The Company expects adoption of this ASU would not have a material impact on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard, later clarified by ASU No. 2025-01, requires public business entities to, among other things, 1) disclose disaggregated information about certain income statement line items into one or more of the natural expense categories such as purchases of inventory; employee compensation, depreciation, and intangible asset amortization, where such expenses are included; 2) present certain other expenses and gains or losses that must be disclosed under existing U.S. GAAP in tabular disclosure on an annual and, when applicable, interim basis; and 3) disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. Upon adoption, the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. The Company is currently evaluating the impact that this guidance will have on its disclosures.

NOTE 2 - ACQUISITIONS

Microtek

On August 1, 2024, the Company acquired all of the outstanding shares of the global surgical solutions business of Ecolab (the “Microtek” business) pursuant to a share purchase agreement for $ 905 million cash consideration. The primary purpose of the business combination was to expand the Medline Brand business (defined in Note 20—Segment Information ) by creating synergies based on Ecolab’s expertise in innovative sterile drape solutions for patients and operating room equipment, while also bolstering a capability for temperature management systems used in the operating room. This acquisition also creates an opportunity for the Company to add design and development capabilities to support original equipment manufacturer customers. With these new capabilities, the Company will be able to support cutting edge medical device companies to bring innovative solutions to healthcare customers. The Company will also use its existing platform to expand margins on acquired Microtek contracts.

The acquisition met the requirements to be considered a business combination under ASC 805, “Business Combinations” (“ASC 805”) and was accounted for using the acquisition method of accounting. Results of operations of this acquired business are included in the Company’s consolidated financial statements beginning from the date of acquisition. The Microtek acquisition contributed $ 127 million of net sales and an immaterial amount of net income for the year ended December 31, 2024. The Company has allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair market values at the acquisition date as required under ASC 805.
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NOTE 2 - ACQUISITIONS (Continued)

During the year ended December 31, 2025, the Company recorded measurement period adjustments as a result of additional facts and circumstances that existed as of the acquisition date. Total net adjustments of $ 4 million were offset by an increase in goodwill acquired from $ 418 million to $ 422 million. The adjustments primarily relate to updated valuations of Trade accounts receivable, Inventories, Other long-term assets and Other long-term liabilities as well as a reclassification of $ 11 million from Other long-term liabilities to Accrued expenses and other current liabilities. In addition, an adjustment which decreased Trade accounts receivable also reduced the purchase price by $ 6 million. These adjustments did not have a material impact on the Consolidated Statements of Comprehensive Income.

The Company has allocated the final purchase price to the assets acquired and the liabilities assumed based on their fair values as of August 1, 2024 as below:

(in millions)
Amount
Cash and cash equivalents $ 36  
Trade accounts receivable 40  
Other current assets 8  
Inventories 113  
Property, plant, and equipment 41  
Other long-term assets 17  
Intangible assets 336  
Accounts payable ( 39 )
Accrued expenses and other current liabilities ( 46 )
Other long-term liabilities ( 22 )
Income taxes payable ( 1 )
Total identifiable net assets 483  
Goodwill 422  
Net assets acquired, at fair value $ 905  

The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill. $ 427 million of the goodwill is estimated to be tax deductible over the amortizable period. Goodwill is comprised of expected synergies related to the combined operations, trade name, and customer relationships acquired in the business combination.

At the date of acquisition, the fair values for trade name and developed technology were determined using the relief from royalty method and the fair value of customer relationships was determined using the distributor method. The Company considers the fair value of the intangible assets to be Level 3 measurements due to the significant estimates and assumptions used by management in establishing the fair value which includes discount rates, revenue growth and royalty rates. The identifiable intangible assets acquired subject to amortization have a weighted average useful life of 11 years.

Below is a summary of the intangible assets acquired in the acquisition:

(in millions)
Amount Useful life
Trade Name $ 60   Indefinite
Developed Technology 186   10 years
Customer Relationships 90   12 years
Total $ 336  

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NOTE 2 - ACQUISITIONS (Continued)

The following unaudited pro forma results were prepared using the acquisition method of accounting and were based on the historical financial information of the Company and Microtek. In order to reflect the occurrence of the acquisition of January 1, 2023 as required, the unaudited pro forma financial information includes adjustments to reflect the incremental amortization expense to be incurred based on the fair value of the intangible assets acquired, incremental cost of sales related to the fair value adjustments on acquisition-date inventory, and the reclassification of acquisition-related costs incurred during the years ended December 31, 2024 and 2023. The pro forma results below are not necessarily indicative of the results that would have been if this acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future. The proforma result does not reflect any realization of cost savings or synergies associated with the acquisition.

Year ended
(in millions)
December 31, 2024 December 31, 2023

Net revenue $ 25,689   $ 23,588  
Net income 1,272   261  

For the year ended December 31, 2024, the Company incurred $ 25 million of incremental cost of sales from the fair value step-ups on acquired Microtek inventory that was sold in 2024. The Company also incurred $ 11 million of additional amortization expense from the fair values of identifiable intangible assets acquired. The unaudited pro forma combined financial information includes adjustments to reflect incremental amortization expense based on the fair values of the identifiable intangible assets acquired and some immaterial nonrecurring transaction expenses directly attributable to the acquisition.

Acquisition-related costs for Microtek were included in Selling, general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income as incurred during the years ended December 31, 2025 and 2024 were not material.

Sinclair Dental

On February 1, 2024, the Company, through its indirect wholly-owned subsidiary Medline Canada, Corporation, acquired all the outstanding shares of Sinclair Dental Co. Ltd. (“Sinclair Dental”) pursuant to the terms of a share purchase agreement in exchange for $ 195 million cash consideration. The primary purpose of the acquisition was to expand Medline Supply Chain Solutions business (defined in Note 20—Segment Information) by creating synergies based on Sinclair Dental’s expertise in dental equipment and supplies distribution and expand the Company’s product and service offerings. The Company will also use its existing platform to expand margins on acquired Sinclair Dental contracts. The acquisition met the requirements to be considered a business combination under ASC 805 and was accounted for using the acquisition method of accounting. Results of operations of this acquired business are included in the Company’s consolidated financial statements beginning from the date of acquisition. The Company has allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair market values at the acquisition date as required under ASC 805.
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NOTE 2 - ACQUISITIONS (Continued)

The Company has allocated the final purchase price to the assets acquired and the liabilities assumed based on their fair values as of February 1, 2024 as below:

(in millions)
Amount
Cash and cash equivalents $ 3  
Trade accounts receivable 29  
Other current assets 2  
Inventories 24  
Property, plant, and equipment 3  
Other long-term assets 6  
Intangible assets 93  
Accounts payable ( 8 )
Accrued expenses and other current liabilities ( 21 )
Other long-term liabilities ( 7 )
Income taxes payable ( 16 )
Total identifiable net assets 108  
Goodwill 87  
Net assets acquired, at fair value $ 195  

The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill and is not deductible for tax purposes. Goodwill is comprised of expected synergies for the combined operations, trade name, and customer relationships acquired in the business combination.

At the date of acquisition, the fair value for trade name was determined using the relief from royalty method and the fair value of customer relationships was determined using the excess earnings method. The Company considers the fair value of the intangible assets to be Level 3 measurements due to the significant estimates and assumptions used by management in establishing the fair value which includes discount rates, revenue growth and royalty rates. The intangible assets acquired subject to amortization have a weighted average useful life of 13 years. Below is a summary of the intangible assets acquired in the acquisition:

(in millions)
Amount Useful life
Trade name $ 19   7 years
Customer relationships 74   14 years
Total $ 93  

Acquisition-related costs for Sinclair Dental were included in Selling, general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income as incurred during the year ended December 31, 2024 and were not material.

United Medco

On January 4, 2024, the Company acquired 100 % of the shares of United Medco, LLC. United Medco, LLC is a national wholesaler and distributor of over-the-counter drugs, personal care, and daily living products to the managed care marketplace. Total purchase consideration of $ 53 million consisted of $ 33 million cash consideration and a contingent liability at a fair value of $ 20 million at closing. United Medco, LLC brought growth to the Company’s health plans business by augmenting the Company’s best-in-class distribution capabilities and expanding the Company’s supplemental benefits offerings. The Company gained access to United Medco, LLC’s valued customer base and further grew in the managed care space.
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MEDLINE INC.

NOTE 2 - ACQUISITIONS (Continued)

The acquisition met the requirements to be considered a business combination under ASC 805 and was accounted for using the acquisition method of accounting. Results of operations of this acquired business are included in the Company’s consolidated financial statements beginning as of the date of acquisition. The Company has allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair market values at the acquisition date as required under ASC 805.

The maximum payout amount under the contingent liability is $ 35 million. The actual payout amount is based on the defined metrics for fiscal year 2024 and 2025 and will be paid over two years . The Company recorded the contingent liability of $ 20 million on the acquisition date with $ 8 million as Other current liabilities and $ 12 million as Other long-term liabilities in the Company’s Consolidated Balance Sheets. At the date of acquisition, the fair value of contingent consideration liability was estimated using a Monte Carlo simulation model. The contingent liability will be remeasured to fair value at each reporting date until the liability is resolved, with changes in fair value being recognized within Other operating expenses in the Company’s Consolidated Statements of Comprehensive Income.

The Company has allocated the final purchase price to the assets acquired and the liabilities assumed based on their fair values as of January 4, 2024 as below:

(in millions)
Amount
Inventories $ 9  
Trade accounts receivable 5  
Property, plant, and equipment 2  
Other long-term assets 2  
Intangible assets 24  
Accounts Payable ( 10 )
Accrued expenses and other current liabilities ( 7 )
Other long-term liabilities ( 1 )
Total identifiable net assets 24  
Goodwill 29  
Net assets acquired, at fair value $ 53  

The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill and is fully deductible for tax purposes. Goodwill is comprised of expected synergies for the combined operations.

At the date of acquisition, the fair value for trade name was determined using the relief from royalty method and the fair value of customer relationships was determined using the excess earnings method. The Company considers the fair value of the intangible assets to be Level 3 measurements due to the significant estimates and assumptions used by management in establishing the fair value which includes discount rates, revenue growth and royalty rates. The intangible assets acquired subject to amortization have a weighted average useful life of 10 years. Below is a summary of the intangible assets acquired in the acquisition:

(in millions)
Amount Useful life
Trade name $ 2   2 years
Customer relationships 22   11 years
Total $ 24  

Acquisition-related costs for United Medco were included in Selling, general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income as incurred during the year ended December 31, 2024 and were not material.
104

MEDLINE INC.

NOTE 3 - INVENTORIES

Inventories consisted of the following as of:

(in millions)
December 31, 2025 December 31, 2024
Raw materials and work in process, net $ 748   $ 676  
Finished goods, net 4,021   3,780  
Inventories, net $ 4,769   $ 4,456  

If LIFO inventories had been valued on a current cost or FIFO basis, they would have been greater by $ 359 million and $ 276 million as of December 31, 2025 and 2024, respectively. The inventory reserve for obsolescence was $ 44 million and $ 35 million as of December 31, 2025 and 2024, respectively.

NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment, net consists of the following as of:

(in millions)
December 31, 2025 December 31, 2024
Machinery, equipment, and fixtures $ 1,399   $ 1,190  
Buildings and improvements 3,066   2,989  
Land and improvements 621   640  
Vehicles 301   287  
Construction in progress 466   316  
Leasehold improvements 60   11  
Computer software 26   23  
Total property, plant, and equipment 5,939   5,456  

Less: Accumulated depreciation and amortization ( 1,161 ) ( 861 )
Property, plant, and equipment, net $ 4,778   $ 4,595  

Depreciation expense related to property, plant, and equipment for the years ended December 31, 2025, 2024 and 2023 was $ 307 million, $ 292 million, and $ 289 million, respectively.

NOTE 5 - GOODWILL AND INTANGIBLE ASSETS

During 2024, the Company reorganized operations to align around its two primary reportable segments, Medline Brand and Supply Chain Solutions. Subsequent to the reorganization, each of the reportable segments also represents a single reporting unit. See Note 20—Segment Information for additional information.

In 2024, total goodwill of $ 8,070 million was allocated to the new reporting units based on their relative fair value with $ 6,716 million assigned to Medline Brand and $ 1,354 million assigned to Supply Chain Solutions. In conjunction with the change in reportable segments, the Company evaluated goodwill for impairment, both before and after the segment change and determined that the goodwill was not impaired.

105

MEDLINE INC.

NOTE 5 - GOODWILL AND INTANGIBLE ASSETS (Continued)

Changes in the carrying amount of Goodwill were as follows:

(in millions)
Medline Brand Supply Chain Solutions Total
Balance, December 31, 2023 $ 7,532
Acquisitions 538
Allocation to reporting segments $ 6,716 $ 1,354 $ 8,070
Currency translation adjustments ( 4 ) ( 1 ) ( 5 )
Balance, December 31, 2024 $ 6,712 $ 1,353 $ 8,065
Measurement period adjustments 4 — 4
Currency translation adjustments 8 2 10
Balance, December 31, 2025 $ 6,724 $ 1,355 $ 8,079

Identifiable intangible assets consist of the following as of:

December 31, 2025 December 31, 2024
(in millions)
Weighted Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Finite-lived intangible assets:
Customer relationships 15 $ 10,692   $ ( 2,364 ) $ 8,328   16 $ 10,679   $ ( 1,787 ) $ 8,892  
Trade names 5 25   ( 10 ) 15   6 24   ( 4 ) 20  
Developed technology 15 2,167   ( 447 ) 1,720   16 2,142   ( 325 ) 1,817  
Total finite-lived intangible assets $ 12,884   $ ( 2,821 ) $ 10,063   $ 12,845   $ ( 2,116 ) $ 10,729  
Indefinite-lived trade names $ 3,830   —  $ 3,830   $ 3,830   —  $ 3,830  
Intangible assets, net $ 16,714   $ ( 2,821 ) $ 13,893   $ 16,675   $ ( 2,116 ) $ 14,559  

The carrying amount of intangible assets, net as of December 31, 2025 includes the final fair values for customer relationships, trade names and developed technology assets. See Note 2—Acquisitions for additional information.

The annual impairment testing performed did not indicate any impairment of goodwill or intangible assets for the years ended December 31, 2025, 2024, and 2023.

Estimated amortization expense for the next five years and thereafter is as follows:

(in millions)
Total
2026 $ 704
2027 704
2028 704
2029 702
2030 701
Thereafter 6,548
$ 10,063

106

MEDLINE INC.

NOTE 6 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The elements of accrued expenses and other current liabilities are as follows as of:

(in millions)
December 31, 2025 December 31, 2024
Payroll $ 323   $ 330  
Customer rebates and distributor chargebacks 406   365  
Interest payable, net 144   163  
Indirect tax payable 87   83  
Lease liability 66   76  
Litigation accrual (EtO) —   174  
Income taxes payable 24   4  
Other 402   298  
Total accrued expenses and other current liabilities $ 1,452   $ 1,493  

NOTE 7 – CREDIT AGREEMENTS AND BORROWINGS

The Company’s current portion of long-term borrowings and other short-term borrowings consists of the following as of:

(in millions)
December 31, 2025 December 31, 2024
Current portion of long-term debt (1)
$ 76   $ 76  
Other short-term debt 1   2  
Total $ 77   $ 78  
(1) Consists of a portion of the secured Dollar Term Loans bearing variable interest rate.

The long-term borrowings and the effective interest rates are summarized as follows as of:

December 31, 2025 December 31, 2024
Maturity dates
by fiscal year Amount
(in millions)
Average effective interest rate Amount
(in millions)
Average effective interest rate
Long-term borrowings
Unsecured debt
Fixed 2029 $ 2,500   5.61   % $ 2,500   5.61   %
Total unsecured debt 2,500   2,500  
Secured debt
Fixed 2029 6,000   4.79   % 6,000   4.66   %
Variable (euro-denominated) (1)
— —   —   % 645   6.68   %
Variable 2026 - 2030 4,255   7.10   % 7,612   8.74   %
Total secured debt 10,255   14,257  
Total debt 12,755   16,757  
Less: amounts due within one year ( 76 ) ( 76 )
Total other (2)
( 195 ) ( 265 )
Total Long-term borrowings $ 12,484   $ 16,416  

(1) Includes exchange rate adjustments.
(2) Includes $ 41 million of embedded derivative related to the Dollar Term Loans and deferred financing costs.

107

MEDLINE INC.

NOTE 7 – CREDIT AGREEMENTS AND BORROWINGS (Continued)

Long-Term Debt
Senior Secured and Unsecured Notes

During 2021, the Company issued senior secured notes with a principal amount of $ 4,500 million, at a fixed rate of 3.875 % and maturity date of April 1, 2029 and senior unsecured notes with a principal amount of $ 2,500 million at a fixed rate of 5.250 % with a maturity date of October 1, 2029.

During 2024, the Company issued senior secured notes with a principal amount of $ 1,500 million at a fixed rate of 6.250 % and a maturity date of April 1, 2029.

Interest on all aforementioned senior secured and unsecured notes is payable in cash on a semi-annual basis, with payments made in arrears on April 1 and October 1 of each calendar year.

Term Loan Facilities

During 2021, the Company borrowed $ 7,270 million under a senior secured term loan facility (the “Dollar Term Loans”), in addition to € 435 million under a separate euro-denominated senior secured term loan facility (the “Euro Term Loans”), both established under a credit agreement (the “Credit Agreement”). The Credit Agreement permits the Company, at any time, subject to customary conditions, to request incremental term loans or incremental revolving credit commitments in an aggregate principal amount of up to (a) the greater of (1) $ 2,375 million and (2) an amount equal to 100 % of the Company’s trailing consolidated EBITDA (as defined in the Credit Agreement) for the most recently ended period of four consecutive fiscal quarters for which financial statements are internally available, on a pro forma basis plus (b) certain additional amounts based on satisfaction of a certain consolidated first lien net leverage ratio and subject to certain other customary conditions.

During 2024, the Credit Agreement underwent three separate amendments. These amendments resulted in an increase of $ 520 million in the principal amount of the Dollar Term Loans, as well as an increase of € 185 million in the aggregate principal amount of the Euro Term Loans. In addition, pursuant to the amendments, the applicable interest rate margins were lowered, resulting in a variable interest rate of Secured Overnight Financing Rate (“SOFR”) plus a spread of 2.25 % for the Dollar Term Loans, and a variable interest rate of EURO Interbank offer Rate plus an applicable spread ranging from 2.25 % to 2.75 % based on certain of the Company’s debt ratios for the Euro Term Loans.

On July 31, 2025, the Credit Agreement was amended to reduce the margin spread and to extend the maturity of certain obligations. Pursuant to the amendment, all of the Dollar Term Loans are subject to a margin spread of SOFR plus 2.00 %. The principal amount of the Dollar Term Loans equal to $ 4,074 million will mature on October 21, 2028, which remained unchanged, while the principal amount of the Dollar Term Loans equal to $ 3,500 million will mature on October 23, 2030, extended from the original maturity date.

On December 18, 2025, the Company used a portion of the proceeds from the IPO to prepay a portion of the Dollar Term Loans with a maturity date of October 21, 2028 in the amount of $ 3,281 million and all of the outstanding principal of the Euro Term Loans, equivalent to $ 730 million. Per the terms of the Credit Agreement, the completion of the IPO also triggered a reduction in variable interest rate of 0.25 %, resulting in a variable interest rate of SOFR plus 1.75 % for the remaining Dollar Term Loans.

In connection with Credit Agreement amendments and the debt prepayments, the Company paid debt modification expenses of $ 6 and $ 24 for the years ended December 31, 2025 and 2024, respectively. The Company also incurred debt extinguishment losses of $ 58 and $ 32 for writing off unamortized issuing discounts and deferred financing costs associated with the debts repaid, for the years ended December 31, 2025 and 2024, respectively. These costs were included in Other (expense) income, net on the Consolidated Statements of Comprehensive Income.

108

MEDLINE INC.

NOTE 7 – CREDIT AGREEMENTS AND BORROWINGS (Continued)

The Dollar Term Loans require quarterly amortization payments of 0.25 % of the amended principal due at each calendar quarter-end. These amortization payments were $ 76 million and $ 50 million for the years ended December 31, 2025 and 2024, respectively. The Euro Term Loans did not have any mandatory amortization payments.

The fair value of the Company’s long-term borrowings as of December 31, 2025 and 2024 was based on recent trades as reported by a third-party bond pricing service and summarized as follows. Due to the infrequency of trades, these inputs are considered to be Level 2 inputs.

(in millions)
December 31, 2025 December 31, 2024
Dollar Term Loans
$ 4,276   $ 7,660  
Euro Term Loans
—   647  
3.875 % fixed rate note
4,399   4,166  
5.250 % fixed rate note
2,516   2,411  
6.250 % fixed rate note
1,553   1,517  

The indentures contain certain affirmative and negative covenants, which require, among other provisions, delivery of the consolidated financial statements to the relevant note holders. Compliance with the covenants does not significantly impact the Company’s operations. As of December 31, 2025, the Company was in compliance with all the covenants under the Credit Agreement.

Future aggregate principal amounts over the next five years are as follows:

(in millions)
Annual Maturities
2026 $ 76  
2027 76  
2028 726  
2029 8,535  
2030 3,342  

$ 12,755  

Revolving Credit Facilities

During 2021, certain lenders provided the Company with commitments under a $ 1,000 million senior secured revolving credit facility under the Credit Agreement (the “Revolving Credit Facility”).

The amendment to the Credit Agreement in 2024 extended the maturity date of the Revolving Credit Facility from October 21, 2026 to July 8, 2029 (subject to a springing maturity 91 days inside of the maturity date of all secured and unsecured notes and term loan facilities) and did not change the maximum borrowing capacity of $ 1,000 million or any other terms.

On March 28, 2025, the Company amended the Credit Agreement to permit letter of credit issuers to issue letters of credit in excess of their respective letter of credit commitments and to obligate the other lenders under the Company’s Revolving Credit Facility to participate in such letters of credit, subject to other customary limitations.
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MEDLINE INC.

NOTE 7 – CREDIT AGREEMENTS AND BORROWINGS (Continued)

As of December 31, 2025 and 2024, the Revolving Credit Facility had several financial institutions as lenders for a maximum borrowing capacity of $ 1,000 million. The Revolving Credit Facility accrues commitment fees in respect of unfunded commitments thereunder. Letters of credit issued under the Revolving Credit Facility reduce availability under the Revolving Credit Facility dollar-for-dollar. As of December 31, 2025 and 2024, availability under the Revolving Credit Facility was $ 947 million and $ 951 million, respectively, after taking into account outstanding letters of credit of $ 53 million and $ 49 million, respectively. The Company borrowed and repaid $ 179 million and $ 166 million under the Revolving Credit Facility during the years ended December 31, 2025 and 2024, respectively, which resulted in no amounts outstanding as of December 31, 2025 or 2024.

Borrowings under the Revolving Credit Facility may be repaid and borrowed again, partially or wholly at any time, from time to time, as elected by the Company and interest is typically paid on a monthly or quarterly basis, depending on the interest period elected.

The Credit Agreement contains certain affirmative and negative covenants, which require, among other provisions, delivery of the consolidated financial statements to the relevant debt holders. As of December 31, 2025, the Company was in compliance with all covenants.

NOTE 8 - INTEREST EXPENSE, NET
The following table summarizes the components of Interest expense, net:

Year ended
(in millions)
December 31, 2025 December 31, 2024 December 31, 2023

Interest expense $ ( 945 ) $ ( 1,144 ) $ ( 1,213 )
Interest income 133   280   237  
Interest expense, net $ ( 812 ) $ ( 864 ) $ ( 976 )

NOTE 9 - LEASES
Lessee Activities

The following table summarizes the components of lease cost:

Year ended

(in millions)
December 31, 2025 December 31, 2024 December 31, 2023
Operating lease cost $ 106   $ 90   $ 67  
Variable lease cost 31   25   19  
Short-term lease cost 4   3   2  
Total lease cost $ 141   $ 118   $ 88  

Sublease income ( 12 ) ( 10 ) ( 7 )
Total lease cost, net $ 129   $ 108   $ 81  

Variable lease cost primarily includes payments for operating expenses, maintenance, electricity and property taxes.

The following table presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheets:

110

MEDLINE INC.

NOTE 9 - LEASES (Continued)

(in millions)
Consolidated Balance Sheets captions:
December 31, 2025 December 31, 2024
Operating leases:
Operating lease right-of-use assets Other long-term assets $ 432   $ 384  

Current portion of operating lease liabilities Accrued expenses and other current liabilities 66   76  
Long-term operating lease liabilities Other long-term liabilities 386   329  
Total operating lease liabilities $ 452   $ 405  

The Company’s operating leases have a weighted-average remaining lease term of 7 years for both December 31, 2025 and 2024. The weighted-average discount rate of the Company’s operating leases is 7 % and 8 % for December 31, 2025 and 2024, respectively.

Future lease annual operating lease payments under non-cancelable leases over the next five years and thereafter is as follows:

(in millions)
Total
2026 $ 92  
2027 85  
2028 77  
2029 66  
2030 56  
Thereafter 215  
Total future lease payments $ 591  

Less: Imputed interest ( 139 )
Present value of future lease payments $ 452  

As of December 31, 2025, the Company has executed operating lease agreements for warehouse distribution facilities that have not yet commenced. As such the total expected future lease payments of $ 312 million for these agreements are not reflected in the table above. These operating leases will commence after December 31, 2025 with lease terms of 12 years.

Lessor Activities

The following table summarizes the components of lease income recorded in Cost of goods sold and Selling, general and administrative expenses:

Year ended

(in millions)
December 31, 2025 December 31, 2024 December 31, 2023
Operating lease income $ 15   $ 13   $ 15  
Variable lease income 2   2   2  
Total lease income $ 17   $ 15   $ 17  

The variable lease income includes reimbursements for tenant improvements, property tax, services, utilities, and maintenance.
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MEDLINE INC.

NOTE 9 - LEASES (Continued)

Estimated maturities of operating lease receivables over the next five years and thereafter is as follows:

(in millions)
Total
2026 $ 13  
2027 10  
2028 8  
2029 7  
2030 7  
Thereafter 9  
Total future lease receivables $ 54  

Assets under operating leases are included in Property, plant, and equipment, net of the Company’s Consolidated Balance Sheets and consist of the following as of:

(in millions)
December 31, 2025 December 31, 2024
Buildings and improvements $ 92   $ 110  
Land and improvements 35   41  

Less: Accumulated depreciation ( 22 ) ( 23 )
Assets under operating leases, net $ 105   $ 128  

NOTE 10 - RETIREMENT PLANS

The Company has non-contributory defined benefit retirement plan obligations at several foreign subsidiaries. These plans cover certain employees, as defined, within those foreign jurisdictions. The Company uses December 31 as the measurement date of its defined benefit pension plans.
The following table sets forth the various plans’ unfunded status and amounts recognized in the Company’s Consolidated Balance Sheets:

(in millions)
December 31, 2025 December 31, 2024
Projected benefit obligation $ 61   $ 49  
Less: Fair value of plan assets ( 6 ) ( 6 )
Unfunded status $ 55   $ 43  

Amounts recognized in the Consolidated Balance Sheets are as below:

(in millions)
December 31, 2025 December 31, 2024

Accrued expenses and other current liabilities $ ( 6 ) $ ( 1 )
Other long-term liabilities ( 49 ) ( 42 )
Net liability recognized $ ( 55 ) $ ( 43 )

The following table presents information relating to unfunded status that have an accumulated benefit obligation in excess of plan assets:
(in millions)
December 31, 2025 December 31, 2024
Accumulated benefit obligation $ 47   $ 37  
Less: Fair value of plan assets ( 6 ) ( 6 )
Unfunded status $ 41   $ 31  

112

MEDLINE INC.

NOTE 10 - RETIREMENT PLANS (Continued)

The Company funds the minimum contribution required under the various statutory requirements of each foreign jurisdiction. Employer’s contribution to obligation and benefits paid by the employer under the plan were not material during the years ended December 31, 2025, 2024 and 2023.

The weighted-average assumptions are as follows:

December 31, 2025 December 31, 2024
Benefit
Obligation Net Periodic
Benefit Cost Benefit
Obligation Net Periodic
Benefit Cost
Weighted-average discount rate 7.41   % 7.00   % 7.00   % 6.28   %
Rate of compensation increase 4.49   % 4.35   % 4.35   % 4.34   %

Social Security increase rate 3.00   % 3.07   % 3.07   % 3.04   %
Pension increase rate (in payment) 0.51   % 0.47   % 0.47   % 0.58   %
Expected long term return on plan assets N/A 3.25   % N/A 3.45   %

Estimated benefit payments over the next five years and thereafter are as follows:

(in millions)
Total
2026 $ 5  
2027 6  
2028 6  
2029 6  
2030 7  
Thereafter 42  
$ 72  

Substantially all of the Company’s domestic employees are eligible to be enrolled in the company-sponsored contributory retirement savings plans, which include features under Section 401(k) of the Internal Revenue Code of 1986, and provide for matching and discretionary contributions by the Company.
The total expense for the employee retirement savings plan for the years ended December 31, 2025, 2024 and 2023 was $ 49 million, $ 43 million and $ 37 million, respectively, which were included in Selling, general and administrative expenses on the Consolidated Statements of Comprehensive Income.

NOTE 11 - TAX RECEIVABLE AGREEMENT

In connection with the IPO, the Company entered into a TRA with certain pre-IPO owners that provides for the payment by Medline Inc. to such pre-IPO owners of 90 % of certain tax benefits, if any, that Medline Inc. actually realizes, or is deemed to realize (calculated using certain assumptions), as a result of (i) Medline Inc.’s allocable share of existing tax basis in Medline Holdings’ assets acquired in the IPO, (ii) increases in Medline Inc.’s allocable share of existing tax basis and tax basis adjustments to the tangible and intangible assets of Medline Holdings as a result of sales or exchanges of Common Units (including Common Units issued upon conversion of vested Incentive Units) in connection with or after the IPO, (iii) Medline Inc.’s utilization of certain tax attributes (including any existing tax basis) of certain entities that are taxable as corporations for U.S. federal income tax purposes through which the pre-IPO owners held their interest in Medline Holdings prior to the IPO, which Medline Inc. acquired in connection with the IPO, and (iv) certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.
113

MEDLINE INC.

NOTE 11 - TAX RECEIVABLE AGREEMENT ( Continued)

Sales or exchanges of Common Units by their holders to Medline are expected to result in increases in the tax basis of the assets of Medline Holdings. The existing tax basis, increases in existing tax basis, and the tax basis adjustments generated over time may increase (for tax purpose) depreciation and amortization deductions available to Medline Inc. and, therefore, may reduce the amount of tax that Medline Inc. would otherwise be required to pay in the future. Actual tax benefits realized by Medline Inc. may differ from tax benefits calculated under the tax receivable agreement as a result of the use of certain assumptions in the TRA, including the use of an assumed weighted-average state and local income tax rate of 6 % (as adjusted to take into account the U.S. federal tax benefit of such taxes) to calculate the tax benefits. This payment obligation is an obligation of Medline Inc. and not of Medline Holdings. Changes in the estimate of expected tax benefits Medline would realize and the amount payable under the TRA as a result of changes in tax rates will be reflected in the Consolidated Statements of Comprehensive Income.
As of December 31, 2025, the Company recorded a TRA liability of $ 3,542 million, as a result of the Reorganization, the IPO and the exercise of the underwriters’ option to purchase additional shares , unchanged from the time of IPO. During the year ended December 31, 2025, the Company did not make any payment pursuant to the TRA or record a remeasurement adjustment.

NOTE 12 - INCOME TAXES
Income Before Income Tax Expense by Category

Income before taxes and equity in earnings of affiliates from continuing operations was as follows:

Year ended

(in millions)
December 31, 2025 December 31, 2024 December 31, 2023
United States $ 929   $ 952   $ 15  
International 319   294   249  
Income before provision for income taxes $ 1,248   $ 1,246   $ 264  

Income Tax Expense

Income tax expense for each reporting period consists of the following:

Year ended
(in millions)
December 31, 2025 December 31, 2024 December 31, 2023
Current income tax expense:
U.S. federal income tax expense $ 24   $ 6   $ —  
State income tax expense 4   6   7  
Foreign income tax expense in various foreign tax jurisdictions 83   58   46  
Total current 111   70   53  
Deferred income tax expense:
U.S. federal income tax expense 4   —   —  
State income tax expense —   —   —  
Foreign income tax expense in various foreign tax jurisdictions ( 24 ) ( 24 ) ( 23 )
Total deferred ( 20 ) ( 24 ) ( 23 )
Provision for income taxes $ 91   $ 46   $ 30  

114

MEDLINE INC.

NOTE 12 - INCOME TAXES (Continued)

Deferred Tax Assets and Liabilities

The following table presents the components of deferred tax assets and liabilities:

(in millions)
December 31, 2025 December 31, 2024
Deferred tax asset

Net operating loss and credit carryforwards $ 256   $ 2  
Interest expense carryforward 142   —  
Future tax benefits from TRA payments 310   —  
Pensions and other post-retirement benefits 14   13  
Accrued expenses 17   10  
Others 8   4  
Valuation allowance —   ( 1 )
Total deferred tax asset 747   28  

Deferred tax liability
Investment in partnership ( 157 ) —  
Intangibles ( 170 ) ( 183 )
Property, plant, and equipment ( 34 ) ( 37 )
Inventories —   ( 1 )
Others ( 2 ) ( 2 )
Total deferred tax liability ( 363 ) ( 223 )

Net deferred tax asset (liability) $ 384   $ ( 195 )

As of December 31, 2025, the Company had foreign net operating loss (“NOL”) carryforwards of $ 10 million. Out of this, $ 8 million of the foreign NOL carryforwards will expire between 2027 and 2035, and $ 2 million of the foreign NOL carryforwards have no expiration date.

As part of the IPO Reorganization, the Company acquired $ 911 million of U.S. NOL carryforwards. As of December 31, 2025, the Company had U.S. NOL carryforwards of $ 964 million which have no expiration date.

Realization of the NOL carryforwards depends on generating sufficient future earnings. An immaterial valuation allowance was recognized as of December 31, 2025 and 2024 to reduce the deferred tax assets associated with NOL carryforwards because the Company does not believe it is more likely than not that these assets will be fully realized prior to expiration.

The following table is a summary of changes in our deferred tax valuation allowance:

Year ended
(in millions)
December 31, 2025 December 31, 2024 December 31, 2023
Balance at the beginning of the period $ 1   $ —   $ —  
Charges to income tax expense ( 1 ) 1   —  
Balance at the end of the period $ —   $ 1   $ —  

The Company did not have any unrecognized tax benefits recorded on its Consolidated Balance Sheets as of December 31, 2025 and 2024.
115

MEDLINE INC.

NOTE 12 - INCOME TAXES (Continued)

Income Tax Expense Reconciliation

The Company has elected to prospectively adopt the guidance in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective tax rate in accordance with ASU 2023-09.

Year ended

(in millions)
December 31, 2025
Income tax expense at U.S. statutory rate $ 262   21.0   %
State and local tax effect, net of federal benefit (1)
4   0.4   %
Statutory income tax rate differential (2)
( 19 ) ( 1.5 ) %
Effects of changes in tax laws or rates enacted in the current period 2   0.1   %
Effects of cross-border tax laws (3)
2   0.2   %
Changes in valuation allowance ( 1 ) ( 0.1 ) %
Nontaxable or non deductible items
Impact of non-taxable partnership earnings ( 160 ) ( 12.8 ) %
Other 1   —   %
Income tax expense $ 91   7.3   %

(1) During the year ended December 31, 2025, state and local taxes in New York City and Tennessee comprised greater than 50% of the tax effect in this category.
(2) Includes the impact of the global minimum tax under Pillar Two.
(3) GILTI and Subpart F, net of Section 250 deduction and Foreign Tax Credits.

The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective tax rate prior to the adoption of ASU 2023-09.

Year ended

(in millions)
December 31, 2024 December 31, 2023
Income tax expense at U.S. statutory rate $ 262   $ 55  
Tax rate differential ( 211 ) ( 42 )
Tax holidays ( 2 ) ( 1 )
GILTI & Subpart F income 34   28  
Tax credits ( 32 ) ( 24 )
State tax effect 6   7  
Changes in NOL 1   1  
Nontaxable or non deductible items ( 12 ) 5  
Other —   1  
Income tax expense $ 46   $ 30  

The Company’s effective income tax rate can differ from the 21% U.S. federal statutory rate due to a number of factors, including the operating partnership, tax incentives, foreign rate differences, state income taxes, non-deductible expenses, and non-taxable income.
116

MEDLINE INC.

NOTE 12 - INCOME TAXES (Continued)

Cash paid, net of refunds received, for income taxes consisted of the following:

Year ended

(in millions)
December 31, 2025
Federal $ 12  
State 3  
Foreign
Canada
Federal 13  
Territories 2  
Mexico 15  
Netherlands 4  
Other 13  
Total $ 62  

Tax Holidays

The Company receives tax holidays as a result of Free Trade Zones in United Arab Emirates, Panama, and the Dominican Republic. The financial impact of the reductions as compared to the statutory tax rate is indicated in the income tax expense reconciliation table above.

Examinations of Tax Returns

The Company currently files income tax returns in the U.S. and all foreign jurisdictions in which it has entities, which are periodically under audit by federal, state, and foreign tax authorities. As of December 31, 2025, the Company had ongoing audits in the U.S. for tax year 2021 and in Canada, Germany, India, Italy, Vietnam, and other jurisdictions for the tax years 2014 through 2024 . While the final outcome of these matters is inherently uncertain, the Company does not believe that any of these pose a material risk to the consolidated financial statements. During 2025, the Company closed audits in the U.S., India, and Switzerland, with no material adjustments to the Company’s consolidated financial statements.

NOTE 13 - COMMITMENTS AND CONTINGENCIES
Legal Matters

The Company is subject to various legal actions that are ordinary course and incidental to the business, including contract disputes, employment, workers’ compensation, product liability, auto liability, regulatory and other matters. The Company maintains insurance coverage for employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency. The Company establishes reserves from time to time based upon periodic assessment of the potential outcomes of pending matters.

Starting in January 2019, the Company was named as a defendant in mass tort litigation in Cook County, Illinois involving claims by approximately 380 plaintiffs that allege personal injuries associated with the Company’s EtO activities in Lake County, Illinois. In October 2023, the Company agreed to settlement with all but 5 existing plaintiffs. The group settlement was finalized in March 2025 (the “EtO settlements”).

As of December 31, 2025, there was no outstanding liability related to the EtO settlements. As of December 31, 2024, the outstanding liability related to the EtO settlements was $ 174 million, which was reduced to $ 166 million in the first quarter of 2025. The reduction in the liability was recorded in Other operating expenses in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2025. In the second quarter of 2025, the Company made total cash payments of $ 166 million, of which $ 47 million was released from escrow deposited in 2024.
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NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)

As of December 31, 2025, there were no outstanding receivables with the primary insurance carriers for recovery of the EtO settlements. As of December 31, 2024, the Company carried receivables of $ 10 million related to agreements with the primary insurance carriers for recovery of the EtO settlements. The Company is actively pursuing litigation with its excess insurance carriers related to their obligations to reimburse the Company for substantially all remaining settlement payments in connection with the lawsuits described above. The Company has not recorded a receivable for expected recoveries of the remaining settlement payments from excess insurance carriers as of December 31, 2025.

In March 2025, the Company reached a legal settlement related to an intellectual property dispute with a third party and recorded gains of $ 43 million for the year ended December 31, 2025, in Selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income.

In May 2023, the Company received a letter from the San Joaquin County District Attorney's Office, in cooperation with certain other California District Attorneys, notifying the Company of an investigation into alleged violations with respect to the Company’s management and disposal of hazardous waste, medical waste and universal waste at its California facilities. On February 17, 2026, the Company met with the County Attorneys to discuss the matter. While the Company cannot predict the ultimate outcome of this matter, the potential for penalties or settlement costs is likely to exceed $ 300,000 . Although the Company does not believe that this matter will have a material adverse effect on the Company’s consolidated financial statements, the Company can provide no assurance as to the scope and outcome of this matter.

Based on current knowledge and the advice of legal counsel, management believes that the reserve as of December 31, 2025 for other pending matters considered probable of gain or loss contingencies is sufficient. In addition, management believes that other currently pending matters are not reasonably likely to result in a material loss, as payment of the amounts claimed is remote, the claims are insignificant, individually and in the aggregate, or the claims are expected to be adequately covered by insurance. The Company is of the opinion that, although the outcome of any such legal proceedings cannot be predicted with any certainty, the ultimate liability, if any, will not have a material adverse effect on the Company’s consolidated financial statements.

Unconditional purchase obligations

Unconditional purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances) and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum, or variable price provisions, and the approximate timing of the transaction. In the normal course of business, the Company enters into arrangements with vendors that supply goods or services. These arrangements can include unconditional purchase obligations and commitments. Payments made under the unconditional purchase obligations were $ 207 million, $ 274 million and $ 212 million for the years ended December 31, 2025, 2024 and 2023, respectively .

As of December 31, 2025, future payments related to commitments over the next five years and thereafter are as follows:

(in millions)
Total
2026 $ 172  
2027 162  
2028 169  
2029 172  
2030 115  
Thereafter 59  
$ 849  

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NOTE 14 - FAIR VALUE MEASUREMENTS

The following descriptions of the valuation methods and assumptions used by the Company to estimate the fair values of investments apply to all investments held directly by the Company:
Interest Rate Contracts

The Company uses interest rate swaps and interest rate caps to manage its interest rate risk. The valuation of these instruments is determined by using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatility.

The Company incorporates credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in certain fair value measurements. Although the Company has determined that the majority of the inputs used to value the derivatives utilize Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to the derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the derivatives held as of December 31, 2025 and 2024 were classified as Level 2 of the fair value hierarchy.
See Note 15—Derivatives and Hedging Activities Risk Management for additional information regarding interest rate contracts.

Acquisition-Related Contingent Consideration

The Company recorded payments related to acquisition-related contingent consideration that required fair value measurement every reporting period. The fair value of the contingent payments was determined using a Monte Carlo simulation model. The significant assumptions used in the Monte Carlo simulation include risk-free rate ( 4.62 %), revenue forecast, revenue discount rate ( 9.5 %), revenue volatility ( 13 %), estimated operational leverage and the Company’s credit spread ( 3 %), most of which are unobservable inputs. These significant unobservable inputs used in the determination of the fair value of the contingent payments classified as Level 3 have an inherent measurement of uncertainty that if changed, could result in higher or lower fair value measurements as of the reporting date. See Note 2—Acquisitions for additional information regarding the acquisition.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

December 31, 2025
Basis of fair value measurement
(in millions)
Quoted prices in active markets for identical assets (Level 1)
   Other observable inputs
  (Level 2) Significant unobservable inputs (Level 3) Carrying value
Financial assets
Derivative Assets
Interest rate contracts (hedge) $ —   $ 36   $ —   $ 36  

Total assets at fair value $ —   $ 36   $ —   $ 36  
Financial liabilities

Contingent consideration liability $ —   $ —   $ ( 29 ) $ ( 29 )
Total liabilities at fair value $ —   $ —   $ ( 29 ) $ ( 29 )

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NOTE 14 - FAIR VALUE MEASUREMENTS (Continued)

December 31, 2024
Basis of fair value measurement
(in millions)
Quoted prices in active markets for identical assets (Level 1)
   Other observable inputs
  (Level 2) Significant unobservable inputs (Level 3) Carrying value
Financial assets
Derivative Assets
Interest rate contracts (hedge) $ —   $ 127   $ —   $ 127  
Total assets at fair value $ —   $ 127   $ —   $ 127  
Financial liabilities
Contingent consideration liability $ —   $ —   $ ( 27 ) $ ( 27 )
Total liabilities at fair value $ —   $ —   $ ( 27 ) $ ( 27 )

Equity investments without readily determinable fair values, unless measured using the equity method of accounting, are measured at cost, less impairments. When applicable, the Company also adjusts the carrying values of such equity investments for observable prices in orderly transactions for an identical or similar investment of the same issuer. These investments are included in Other long-term assets in the Consolidated Balance Sheets and are immaterial.

NOTE 15 - DERIVATIVES AND HEDGING ACTIVITIES RISK MANAGEMENT

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, credit risk and foreign currency exchange risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates or foreign currency exchange rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings and acquisitions.
Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. The Company designates certain of its interest rate derivatives as hedging instruments in cash flow hedges. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for a premium. During the fiscal years 2025, 2024 and 2023, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

Amounts reported in Accumulated other comprehensive income (loss) related to derivatives will be reclassified to Interest expense, net, as interest payments are made on the Company’s variable-rate debt. The Company estimates that $ 34 million will be reclassified as a decrease to interest expense within one year after December 31, 2025.

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NOTE 15 - DERIVATIVES AND HEDGING ACTIVITIES RISK MANAGEMENT (Continued)

The notional amounts of outstanding interest rate derivatives are summarized as follows:

December 31, 2025 December 31, 2024
Currency
Notional amount
(in millions)
Maturity date Notional amount
(in millions)
Maturity date
Designated cash flow hedges
Interest rate swaps USD
1,000   Dec'2026 2,950   Nov'2025 to Dec'2026
Interest rate caps
USD
2,000   Dec'2026 2,500   Dec'2025 to Dec'2026

The Company entered into interest rate swaps with notional value of $ 1,450 million in 2023, which have matured on November 30, 2025. Additionally, the Company entered into interest rate caps with notional value of $ 1,000 million in 2023, which took effect on December 31, 2025 and mature on December 31, 2026. All the interest rate contracts are designated as hedges for accounting purposes.

Based on contractual terms, the notional amounts of interest rate swaps and interest rate caps each decreased in increments of $ 500 million on December 31, 2025 and 2024, respectively. The remaining notional amount is set to mature on December 31, 2026.

Gains and Losses on Hedging Instruments

The table below presents the effect of cash flow hedge accounting on Accumulated other comprehensive income (loss) for each reporting period:

Year ended

(in millions)
December 31, 2025 December 31, 2024 December 31, 2023
Gain (loss) recognized in AOCI Included in effectiveness testing Interest rate swaps $ 1   $ 49   $ 33  
Interest rate caps ( 1 ) 33 24
Excluded in effectiveness testing
Interest rate caps ( 3 ) ( 5 ) ( 10 )
( 3 ) 77 47

Gain (loss) reclassified from AOCI into earnings Included in effectiveness testing Interest rate swaps 52 100 78
Interest rate caps 42   75 101
Excluded in effectiveness testing
Interest rate caps ( 8 ) ( 10 ) ( 17 )
86   165 162
Total change in AOCI $ ( 89 ) $ ( 88 ) $ ( 115 )

The gain (loss) reclassed from AOCI into earnings is recorded to Interest expense, net in Consolidated Statements of Comprehensive Income.

Cash flows from derivatives designated as hedges are classified in the same line item as the cash flows of the hedged transaction within operating activities. Cash flows from undesignated derivatives are classified within investing activities.

Derivative Assets and Liabilities

The Company records both the designated interest rate derivatives and the undesignated derivatives at fair value in the Consolidated Balance Sheets. The respective assets and liabilities are generally classified as short-term or long-term based on the maturity dates of the derivatives.
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NOTE 15 - DERIVATIVES AND HEDGING ACTIVITIES RISK MANAGEMENT (Continued)

The table below summarizes the classification and fair value of the derivatives for each reporting period:

(in millions)

Designated cash flow hedges Location December 31, 2025 December 31, 2024
Interest rate swaps Other current assets $ 21   $ 46  
Other long-term assets —   25  

Interest rate caps Other current assets 15   33  
Other long-term assets —   23  
Total designated cash flow hedges
$ 36   $ 127  

NOTE 16 - STOCKHOLDERS’ EQUITY, MEZZANINE EQUITY AND PARTNERS’ CAPITAL

On December 18, 2025, the Company completed its IPO and executed the Reorganization that impacted its capital structure. See Note 1—Nature of Business and Significant Accounting Policies for additional information regarding the IPO and Reorganization.

Equity Structure Prior to IPO and Reorganization

Partners’ Capital

Prior to the Reorganization and the IPO, Medline Holdings had three classes of authorized units: Class A units, Class B CUPIs, and Class B units.

Voting rights

The holders of all three classes of units were limited partners and did not have voting rights (although certain limited partners had certain consent rights as set forth in the Medline Holdings GP, LLC’s Limited Liability Agreement (the “GP LLC Agreement”)). Medline Holdings GP, LLC was the general partner of Medline Holdings. Medline Holdings GP, LLC did not hold any units, and it was authorized to take any action and cause Medline Holdings to take any action, subject to the terms of LP Agreement and the GP LLC Agreement.

Distributions and liquidations

For both distributions (other than tax distributions) and liquidations, the Class A unit holders would receive 100 % of the distributions until the Class A unit holders had received cumulative distributions equal to $ 1.00 per Class A unit.

Second, except for Operating Distributions (as defined in the LP Agreement), 100 % of the remainder of the distributions following the distributions to the Class A unit holders would be distributed to the Class B CUPIs holders until the Class B CUPIs holders received cumulative distributions equal to the catch-up amount for such units ($ 1.00 per Class B CUPI unit).

Third, the remainder of the distributions would be distributed on a pro rata basis (based on the number of units held and subject to vesting and, with respect to Class B units, deemed unit prices) to the Class A unit holders, the Class B CUPIs holders, and the Class B unit holders, subject to the LP Agreement. Net income and net loss of Medline Holdings was allocated in a manner similar to the foregoing distributions pursuant to the GP LLC Agreement.

Other rights and privileges

The remaining rights and privileges of the holders of all three classes of units were identical.
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MEDLINE INC.

NOTE 16 - STOCKHOLDERS’ EQUITY, MEZZANINE EQUITY AND PARTNERS’ CAPITAL (Continued)

Class A - Mezzanine Equity

Class A units held by members of management (the “Class A Mezzanine Units”) included a put right that permitted the holders to redeem 50 % of their Class A units under conditions outside of the control of the Company. For the periods that management determined it was probable that the Class A Mezzanine Units would become redeemable, the Company had elected to carry the shares at the maximum redemption value, or fair value, in Mezzanine equity on the Consolidated Balance Sheets. During the fourth quarter of 2024, management determined that the redemption was no longer probable, and, therefore, no changes in redemption value were recorded, prospectively. The redemption rights terminated upon the IPO, and Class A Mezzanine Units were reclassed to permanent equity.

Stock-Based Compensation - Mezzanine Equity

Class B CUPIs and Class B units also included a put right that permitted holders to redeem 20 % of matured Class B units and 50 % of Class B CUPIs under conditions outside of the control of the Company. During the periods when redemption was probable, redeemable units were carried at redemption value, or current intrinsic value, in Mezzanine equity on the Consolidated Balance Sheets. During the fourth quarter of 2024, management determined that the redemption was no longer probable and, therefore, no changes in redemption value were recorded, prospectively. The redemption rights terminated upon the IPO, and the redeemable units were reclassed to permanent equity.

The following table summarizes the changes in the balances of mezzanine equity and partners’ capital for the period prior to Reorganization of January 1, 2025 thru December 16, 2025:

Year ended December 31, 2025

Mezzanine Equity Partners' Capital (1)

Class A Stock-based Compensation Total Mezzanine Equity Class A Class B Class B CUPI Total Partners’ Capital

(in millions) Units Amount Units Amount Amount Units Amount Units Amount Units Amount
Balance, January 1, 2025 128 $ 237   106 $ 129   $ 366   16,723 $ 15,976   721 $ 123   23 $ 48   $ 16,147  
Net income prior to reorganization transactions — 7 — 6 13 — 1,112 — 38 — 3 1,153

Distributions to partners prior to reorganization transactions — ( 4 ) — ( 4 ) ( 8 ) — ( 471 ) — ( 39 ) — — ( 510 )
Reclass from liability-classified units prior to reorganization transactions — — — — — — — 51 10 — — 10
Units repurchased prior to reorganization transactions — — ( 5 ) ( 4 ) ( 4 ) — — ( 44 ) ( 29 ) — — ( 29 )
Stock-based compensation prior to reorganization transactions — — — — — — — 6 59 — — 59
Balance, December 16, 2025
128 $ 240   101 $ 127   $ 367   16,723 $ 16,617   734 $ 162   23 $ 51   $ 16,830  

(1) Reflects Partners’ Capital, net of Accumulated other comprehensive income.

Equity Structure After IPO and Reorganization

The Company’s amended and restated certificate of incorporation authorizes three classes of ownership interests: 50,000,000,000 shares of Class A common stock, par value $ 0.0001 per share, 50,000,000,000 shares of Class B common stock, par value $ 0.0001 per share, and 5,000,000,000 shares of Preferred stock, par value $ 0.0001 per share.
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MEDLINE INC.

NOTE 16 - STOCKHOLDERS’ EQUITY, MEZZANINE EQUITY AND PARTNERS’ CAPITAL (Continued)

Class A Common Stock

Shares of Class A common stock have both voting and economic rights. Holders of Class A common stock are entitled to one vote for each share of Class A common stock held. Shares of Class A common stock are entitled to dividends and pro rata distribution of remaining available assets upon liquidation. Shares of Class A common stock do not have preemptive, subscription, redemption or conversion rights.

Class B Common Stock

Shares of Class B common stock have voting but no economic rights. Holders of Class B common stock are entitled to one vote for each share of Class B common stock held. Shares of Class B common stock do not have any right to receive dividends or distribution upon liquidation.

The shares of Class B common stock, together with the transfer of an identical number of Common Units, are convertible at the option of the holder into shares of Class A common stock on a one -for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. Upon conversion, the shares of Class B common stock will be automatically canceled and no longer outstanding.

Preferred Stock

The Company is authorized to issue, without the approval of its stockholders, one or more series of preferred stock. The Board may determine, with respect to any series of preferred stock, the powers, including voting powers, preferences and relative, participating, optional or other special rights.

Noncontrolling Interests

Noncontrolling interests represent Common Units and vested Incentive Units held by pre-IPO owners. These Common Units are not attributable to the controlling Class A common stock ownership of Medline Inc. The noncontrolling interests were accounted for as permanent equity on the Consolidated Balance Sheets. Net income is reduced by the portion of net income attributable to noncontrolling interests. The conversions into Class A common stock of Class B common stock and Common Units are considered equity transactions and will result in a change in ownership and reduce the amount recorded as noncontrolling interests and increase additional paid-in capital in the Company’s Consolidated Balance Sheets.

Accumulated other comprehensive income

The following tables summarize the change in the balance of Accumulated other comprehensive income (loss) by component and in total:

(in millions)
Unrealized gain (loss) on derivative instruments Currency translation adjustments Retirement plans, net of tax Accumulated other comprehensive income
Balance, January 1, 2025 $ 124   $ ( 114 ) $ 1   $ 11  
Other comprehensive income (loss) before reclassifications ( 3 ) 129   ( 8 ) 118  
Amount reclassified to earnings ( 86 ) —   —   ( 86 )
Net other comprehensive income (loss) ( 89 ) 129   ( 8 ) 32  
Less: Effect of the reorganization transactions 13   6   ( 3 ) 16  
Balance, December 31, 2025 $ 22   $ 9   $ ( 4 ) $ 27  

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NOTE 16 - STOCKHOLDERS’ EQUITY, MEZZANINE EQUITY AND PARTNERS’ CAPITAL (Continued)

(in millions)
Unrealized gain (loss) on derivative instruments Currency translation adjustments Retirement plans, net of tax Accumulated other comprehensive income
Balance, January 1, 2024 $ 212   $ ( 25 ) $ 1   $ 188  
Other comprehensive income (loss) before reclassifications 77   ( 89 ) —   ( 12 )
Amount reclassified to earnings ( 165 ) —   —   ( 165 )
Net other comprehensive loss ( 88 ) ( 89 ) —   ( 177 )
Balance, December 31, 2024 $ 124   $ ( 114 ) $ 1   $ 11  

(in millions)
Unrealized gain (loss) on derivative instruments Currency translation adjustments Retirement plans, net of tax Accumulated other comprehensive income
Balance, January 1, 2023 $ 327   $ ( 68 ) $ 3   $ 262  
Other comprehensive income (loss) before reclassifications
47   43   ( 2 ) 88  
Amount reclassified to earnings ( 162 ) —   —   ( 162 )
Net other comprehensive (loss) income ( 115 ) 43   ( 2 ) ( 74 )
Balance, December 31, 2023 $ 212   $ ( 25 ) $ 1   $ 188  

See Note 15—Derivatives and Hedging Activities Risk Management for additional information regarding hedging activity.

NOTE 17 - STOCK-BASED COMPENSATION
The Company records stock-based compensation expense as a component of Selling, general and administrative expenses and the following table reflects the stock-based compensation expense in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023.

(in millions) Year Ended

Classification
December 31, 2025 December 31, 2024 December 31, 2023

Equity-classified awards
$ 65   $ 53   $ 65  
Liability-classified awards
14   8   8  
Total
$ 79   $ 61   $ 73  

Equity-classified awards
Prior to IPO and Reorganization

Medline Holdings had two classes of incentive units, Class B units and Class B CUPIs (“Holdings Incentive Units”) that were granted to certain employees and vested upon satisfaction of one or multiple market, performance, and/or service conditions of each award. In accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”), all incentive units officially granted represent ownership interests and are classified as equity.

Participants in the Medline Industries, Inc. Managing Partner Program (“MPU”) were entitled to receive a liquidity event payout amount (the “Liquidity MPU Payout”) upon the change-of-control transaction in 2021. All MPU participants were granted the opportunity, pursuant to a reinvestment election agreement, to waive receipt of a portion of their Liquidity MPU Payout in exchange for Class B CUPIs. The Company recorded $ 217 million of compensation expense related to Liquidity MPU Payouts for the year ended December 31, 2023, as a component of Selling, general and administrative expenses, and no expense for the years ended December 31, 2025 and 2024.

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MEDLINE INC.

NOTE 17 - STOCK-BASED COMPENSATION (Continued)

All of the Holdings Incentive Units included a put right that permitted the holders to redeem certain units under conditions outside of the control of the Company. The redemption rights terminated upon the IPO, and the redeemable units were reclassed to permanent equity. See Note 16—Stockholders’ Equity, Mezzanine Equity and Partners’ Capital for additional information of the mezzanine equity.

All Class B CUPIs were vested by fiscal year 2023. Total fair value of Class B CUPI units vested during the year ended December 31, 2023 was $ 13 million. The Class B units were subject to a five-year vesting period, with 20 % of units vesting on each of the five anniversaries of the grant date. The weighted-average grant-date fair value of Class B units granted during the years ended December 31, 2024 and 2023 was $ 0.49 and $ 0.36 , respectively. Total fair value of Class B units vested during the years ended December 31, 2025, 2024, and 2023, were $ 50 million, $ 39 million, and $ 45 million, respectively. The following table summarizes the Class B Units activity during the year ended December 31, 2025:

Class B Units
Wtd. Avg. Grant Date Fair Value

Unvested as of December 31, 2024 429,007,732   $ 0.37  
Granted 62,943,267   $ 0.58  
Vested ( 144,877,004 ) $ 0.35  
Forfeited ( 4,562,775 ) $ 0.33  
Effect of the Reorganization and IPO ( 342,511,220 ) $ 0.39  
Outstanding as of December 31, 2025 —   $ —  

Fair Value of Holdings Incentive Units

The fair value of the Holdings Incentive Units is calculated using the Monte Carlo simulation in an option pricing framework, where the total equity value was evolved over a period from the grant date to the expected liquidity date. Prior to the IPO, in the absence of a public trading market, the Company exercised significant judgment and considered numerous objectives and subjective factors to determine the fair value of equity-based awards including:
• Relevant precedent transactions involving equity units;
• The Company’s operating and financial performance;
• Current business conditions and projections;
• The market performance of comparable publicly traded companies; and
• U.S. and global capital market conditions.

The following assumptions were made in the Monte Carlo simulation.

Expected Term: The expected term represents the period over which the Company anticipates equity-based awards to be outstanding as of the valuation date, which is the estimated period of time from the valuation date to exit in terms of a future liquidity event, such as an initial public offering of the Company’s shares.

Volatility: Expected volatility is a measure of the amount by which the equity value is expected to fluctuate. The Company estimates the expected volatility by assessing the equity volatility of guideline companies.

Risk-Free Interest Rate: The risk-free interest rate is estimated based on U.S. Treasury zero-coupon notes with terms consistent with the expected term of the awards.

Dividend Yield: The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero .
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NOTE 17 - STOCK-BASED COMPENSATION (Continued)

The following table provides the weighted-average inputs for expected term, volatility, risk-free interest rate, and dividend yield that were utilized by the Company in its Monte Carlo simulation for awards granted during 2021 through 2025:

Dividend yield —   %
Expected term (in years) 3.6 to 6.0

Risk-free interest rate 1.2 % to 4.6 %

Expected Volatility 35.0 % to 48.0 %

Post-IPO Incentive Plan and Awards

Omnibus Incentive Plan

In connection with the IPO, the Company adopted the Medline Inc. 2025 Omnibus Incentive Plan (the “Omnibus Plan”), which became effective on the date of the IPO. The Omnibus Plan provides for potential grants of the following awards: (i) stock options, (ii) stock appreciation rights, (iii) restricted stock awards; (iv) other stock-based awards, and (v) other cash-based awards. The Company initially reserved 60 million shares of Class A common stock for the issuance of awards under the Omnibus Plan. Starting in 2026, the number of shares available for issuance under the Omnibus Plan will be increased automatically on January 1 of each fiscal year, by a number of shares of the Company’s Class A common stock equal to the least of (i) 54 million shares of Class A common stock; (ii) 4 % of the total number of shares of Class A common stock outstanding on the last day of the immediately preceding fiscal year, and (iii) a lower number of shares as may be determined by the Board of Directors.

Reclassification of Holdings Incentive Units

In connection with the IPO and Reorganization, the Holdings Incentive Unit awards issued prior to the IPO were reclassified as follows:

Continuing Unitholders

The time-vesting Class B units held by certain pre-IPO holders of Class B units (the “Continuing Unitholders”) were reclassified into vested Incentive Units, in the case of vested Class B units, and unvested Incentive Units, in the case of unvested Class B units, in Medline Holdings. These Incentive Units retain the vesting attributes of the Class B units reclassified, including original service period vesting start date.

The performance-vesting Class B units were reclassified into unvested Incentive Units. At the IPO date, management concluded that the IPO caused the achievement of respective performance conditions to be probable. As such, the Company recorded $ 5 million compensation expense for the year ending December 31, 2025 and will record the remaining compensation expense through the end of respective service requisite periods.

The Class B CUPIs were reclassified to vested Common Units in Medline Holdings.

The fair value of Incentive Units was the same immediately prior to and after the reclassification; therefore, no incremental expense related to the reclassification was recorded.
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NOTE 17 - STOCK-BASED COMPENSATION (Continued)

Total fair value of Incentive Units vested during the year ended December 31, 2025 was $ 2 million. As of December 31, 2025, there was $ 49 million of unrecognized compensation cost related to Incentive Units, which is expected to be recognized on a graded or straight-line basis over a weighted-average period of 1.1 years. The following table summarizes the information about Class B units in Medline Holdings that were reclassified to Incentive Units in Medline Holdings:

Incentive Units
Wtd. Avg. Grant Date Fair Value

Effect of the Reorganization and IPO as of December 17, 2025
17,056,431   $ 6.45  
Granted —   $ —  
Vested ( 339,388 ) $ 5.16  
Forfeited ( 2,178,225 ) $ 5.80  
Unvested as of December 31, 2025
14,538,818   $ 5.86  

Exchanging Unitholders