A maker and distributor of medical supplies for hospitals, clinics, and labs, Medline sells hundreds of thousands of products under its own brands—surgical gear, gloves, wound care, and lab diagnostics—and also runs the logistics that keep other suppliers' products flowing to care facilities through its Prime Vendor model. Its roots trace to 1910, when A.L. Mills opened a Chicago factory sewing aprons for meatpackers before pivoting to surgical gowns; grandsons Jon and Jim Mills founded the modern company in 1966, naming it for the medical "line" of products. Today it delivers next-day to most U.S. customers through its own truck fleet.
A $336M distribution center fire loss drove net income down 58%, even as tariff refunds lifted gross margin to 28.8%.
A fire at the Tracy, California distribution center reshaped the quarter. rose 11.6% to $7.7 billion and widened to 28.8% as $332 million in tariff refunds more than offset higher import costs, but a $336 million fire loss pushed down 38.5% and down 58.3% to $139 million. The underlying business grew, but the fire loss and the timing of tariff refunds make the reported profit decline a poor measure of current performance.
Key takeaways
A fire at the Tracy, CA distribution center resulted in a $336 million loss recorded in Other Operating Expenses, the primary driver of the 38.5% decline in to $395 million.
rose 1.4 points to 28.8%, as $332 million in tariff refunds recorded as a reduction of cost of goods sold outweighed higher ongoing import tariff costs.
rose 11.6% to $7.7 billion, driven by volume growth in the U.S. business, partially offset by $89 million in customer tariff refund repayments.
Medline Brand rose 19.9% to $1.1 billion, driven by the tariff refunds, while Supply Chain Solutions segment Adjusted EBITDA was nearly flat at $204 million due to a lower-margin new customer mix.
for the first six months was $1.1 billion, with a $279 million tariff refund receivable increasing outflows; for the quarter rose 3.4% to $604 million.
The company refinanced debt during the quarter, issuing new notes and a $2.75 billion term loan due 2033, with at $12.5 billion.
What changed
The tariff-driven compression flagged in Q1 reversed sharply: gross margin rebounded to 28.8% in Q2 from 25.0% in Q1, though the improvement came from $332 million in one-time tariff refunds rather than an underlying cost recovery.
The estimated $200 million full-year tariff flagged in FY2025 was not updated, but $120 million of impact was recorded in Q1 alone and Q2's refunds suggest the net effect remains volatile and policy-dependent.
Medline Brand margin, which had been declining, recovered in Q2 as the segment's Adjusted EBITDA rose 19.9% to $1.1 billion, though this was driven by the tariff refunds rather than structural margin improvement.
What to watch
Whether the Tracy distribution center fire loss is fully captured in the $336 million charge or whether additional costs, insurance recoveries, or operational disruptions will appear in future periods.
The trajectory of excluding tariff refunds — the 28.8% reported figure includes a $332 million one-time benefit, and the underlying tariff impact on import costs remains.
The pace of cash conversion on the $279 million tariff refund receivable and any further policy changes that could create additional refunds or new costs.
Section summaries
Management's Discussion and Analysis
Medline Q2 FY2026 net sales rose 11.6% to $7.7B driven by volume growth, while net income fell 58.3% due to a $336M distribution center fire loss.
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Consolidated grew 11.6% to $7.7B, driven by volume growth in the U.S. Prime Vendor business, partially offset by $89M in customer tariff refund repayments.
improved to 28.8% from 27.7% due to $332M in tariff refunds recorded as a reduction of cost of goods sold, partially offset by higher import tariff costs.
recovered to $715 million in Q2 from $412 million in Q1, though the six-month total of $1.1 billion was still weighed down by a $279 million tariff refund receivable.
Whether the lower-margin customer mix in Supply Chain Solutions, which kept nearly flat despite 15% growth in Q1, persists as new implementations scale.
fell 38.5% to $395M, primarily due to a $336M loss from the Tracy, CA distribution center fire recorded in Other Operating Expenses.
Medline Brand rose 19.9% to $1.1B, driven by tariff refunds, while Supply Chain Solutions segment Adjusted EBITDA was nearly flat at $204M due to lower-margin new customer mix.
Net was $1.1B for the six months, with a $279M IEEPA tariff refund receivable increasing outflows.
The company refinanced debt, issuing new notes and a $2.75B term loan due 2033, and expects up to $600M in full-year .
From time to time, we are subject to claims and legal actions arising in the ordinary course of business. We intend to vigorously defend ourselves against our outstanding litigation and do not currently believe that the outcome of any such litigation will have a material adverse…
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From time to time, we are subject to claims and legal actions arising in the ordinary course of business. We intend to vigorously defend ourselves against our outstanding litigation and do not currently believe that the outcome of any such litigation will have a material adverse effect on our business, results of operations and financial condition.
In litigation, including those described herein, plaintiffs may seek various remedies, including, without limitation: declaratory and/or injunctive relief; compensatory or punitive damages; restitution, disgorgement, civil penalties, abatement, attorneys’ fees, costs, and/or other relief. Settlement demands may seek significant monetary and other remedies, or otherwise be on terms that we do not consider reasonable under the circumstances. In addition, awards against and settlements by our competitors or publicity associated with our current litigation could incentivize parties to bring additional claims against us.
See Note 9—Commitments and Contingencies to our unaudited condensed consolidated financial statements included under Part I, “Item 1—Financial Statements” of this Quarterly Report, which is incorporated by reference into this Item 1.
There have been no material changes for the period covered by this Quarterly Report to the risk factors disclosed in Part I, “Item 1A—Risk Factors” of our 2025 Form 10-K.
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There have been no material changes for the period covered by this Quarterly Report to the risk factors disclosed in Part I, “Item 1A—Risk Factors” of our 2025 Form 10-K.