Rockwell Automation 10-Q 2024-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended December 31, 2024

OR

For the Transition Period from _______ to _______

Commission file number 1-12383

Rockwell Automation, Inc.

(Exact name of registrant as specified in its charter)

+1 (414) 382-2000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

113,072,948 shares of registrant’s Common Stock were outstanding on December 31, 2024.

INDEX

PART I. FINANCIAL INFORMATION

ROCKWELL AUTOMATION, INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

(in millions, except per share amounts)

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in millions)

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Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Words such as “believe”, “estimate”, “project”, “plan”, “expect”, “anticipate”, “will”, “intend”, and other similar expressions may identify forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:

• macroeconomic factors, including inflation, global and regional business conditions (including adverse impacts in certain markets, such as Oil & Gas), commodity prices, currency exchange rates, the cyclical nature of our customers’ capital spending, and sovereign debt concerns;

• laws, regulations, and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, trade controls, cybersecurity, and climate change;

• our profitability and market competitiveness may be adversely impacted by changes in trade policies, including tariffs or other factors;

• the severity and duration of disruptions to our business due to natural disasters (including those as a result of climate change), pandemics, acts of war, strikes, terrorism, social unrest, or other causes;

• the availability and price of components and materials;

• the availability, effectiveness, and security of our information technology systems;

• our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our hardware and software products, solutions, and services;

• the successful execution of our cost productivity and margin expansion initiatives;

• our ability to attract, develop, and retain qualified employees;

• the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;

• the successful development of advanced technologies and demand for and market acceptance of new and existing hardware and software products;

• our ability to manage and mitigate the risks associated with our solutions and services businesses;

• competitive hardware and software products, solutions, and services, pricing pressures, and our ability to provide high quality products, solutions, and services;

• the availability and cost of capital;

• disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;

• intellectual property infringement claims by others and the ability to protect our intellectual property;

• the uncertainty of claims by taxing authorities in the various jurisdictions where we do business;

• the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions, and services we sell;

• our ability to manage costs related to employee retirement and health care benefits; and

• other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission (SEC) filings.

These forward-looking statements reflect our beliefs as of the date of filing this report. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. See Item 1A. Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2024, and Item 1A. Risk Factors, of this Quarterly Report on Form 10-Q for more information.

Non-GAAP Measures

The following discussion includes organic sales, total segment operating earnings and margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate, and free cash flow, which are non-GAAP measures. See Supplemental Sales Information for a reconciliation of reported sales to organic sales and a discussion of why we believe this non-GAAP measure is useful to investors. See Summary of Results of O****perations for a reconciliation of Income before income taxes to total segment operating earnings and margin and a discussion of why we believe these non-GAAP measures are useful to investors. See Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation for a reconciliation of Net income attributable to Rockwell Automation, diluted EPS, and effective tax rate to Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate, respectively, and a discussion of why we believe these non-GAAP measures are useful to investors. See Financial Condition for a reconciliation of Cash provided by operating activities to free cash flow and a discussion of why we believe this non-GAAP measure is useful to investors.

Overview

Rockwell Automation, Inc. is the world’s largest company dedicated to industrial automation and digital transformation. Overall demand for our hardware and software products, solutions, and services is driven by:

• investments in manufacturing, including new facilities or production lines, upgrades, modifications and expansions of existing facilities or production lines;

• investments in basic materials production capacity, which may be related to commodity pricing levels;

• our customers’ needs for faster time to market, agility to address evolving consumer preferences, operational productivity, asset management and reliability, and business resilience, including security and enterprise risk management;

• our customers’ needs to continuously improve quality, safety, and sustainability;

• industry factors that include our customers’ new product introductions, demand for our customers’ products or services, and the regulatory and competitive environments in which our customers operate;

• levels of global industrial production and capacity utilization;

• regional factors that include local political, social, regulatory, and economic circumstances; and

• the spending patterns of our customers due to their annual budgeting processes and their working schedules.

Long-term Strategy

As the world’s largest company dedicated to industrial automation and digital transformation, our strategy is to bring the Connected Enterprise® to life. We understand and simplify our customers’ complex production challenges and deliver the most valued solutions that combine technology and industry expertise. As a result, we make our customers more resilient, agile, and sustainable, creating more ways to win. We deliver value by helping our customers optimize production, build resilience, empower people, become more sustainable, and accelerate transformation.

Rockwell Automation stands at the intersection of the technological and societal trends that are shaping the future of industrial operations. We see converging megatrends including digitization and artificial intelligence, energy transition and sustainability, shifting demographics, and an increased need for resiliency.

Our long-term profitable growth framework outlines how we will deliver accelerated growth while we continue to transform our company to meet stakeholder expectations over the longer term:

• achieve faster secular growth in traditional markets due to customer needs for resiliency (including cybersecurity), agility, sustainability, and mitigating impacts of labor shortages;

• grow share and create new ways to win through technology differentiation, industry focus, go to market acceleration, expanded offerings and new markets;

• continue double-digit growth in annual recurring revenue;

• add 1% average annual growth from acquisitions; and

• deliver profitable growth within a disciplined financial framework.

U.S. Economic Trends

In the first quarter of 2025, sales in the U.S. accounted for over half of our total sales. The various indicators we use to gauge the direction and momentum of our served U.S. markets include:

• The Industrial Production (IP) Index, published by the Federal Reserve, which measures the real output of manufacturing, mining, and electric and gas utilities. The Manufacturing IP Index shown in the chart below is expressed as a percentage of real output in a base year, currently 2017.

• The Manufacturing Purchasing Managers’ Index (PMI), published by the Institute for Supply Management (ISM), which indicates the current and near-term state of manufacturing activity in the U.S. According to the ISM, a PMI measure above 50 indicates that the U.S. manufacturing economy is generally expanding while a measure below 50 indicates that it is generally contracting.

The table below depicts trends in these indicators since the quarter ended September 2023. These figures are as of February 10, 2025, and are subject to revision by the issuing organizations. The IP index has not significantly changed over the last six quarters. Manufacturing PMI results improved in the first quarter of 2025 but still remained below 50. December’s results indicated contraction for the ninth consecutive month and the twenty-fifth time in the last twenty-six months.

Inflation in the U.S. has also had an impact on our input costs and pricing. The Producer Price Index (PPI), published by the Bureau of Labor Statistics, measures the average change over time in the selling prices received by domestic producers for their output. PPI growth has remained in the low single digits during the first quarter, which is consistent with the prior four quarters. Producer prices continue to remain elevated, however, year over year increases remain decelerated from the surges in 2023 and 2022.

Non-U.S. Economic Trends

In the first quarter of 2025, sales to customers outside the U.S. accounted for less than half of our total sales. These customers include both indigenous companies and multinational companies with a global presence. In addition to the global factors previously mentioned in the Overview section, international demand, particularly in emerging markets, has historically been driven by the strength of the industrial economy in each region, investments in infrastructure, and expanding consumer markets. We use changes in key countries' gross domestic product (GDP), IP, and PMI as indicators of the growth opportunities in each region where we do business. Industrial output was mostly higher outside the U.S. in the first quarter of fiscal 2025 versus the fourth quarter of 2024. Manufacturing PMI readings outside the U.S in the largest countries where we do business had results reported below 50.

Outlook

We expect gradual sequential improvement in our sales and margins through 2025 as we continue to deliver on our cost reduction and margin expansion initiatives introduced in 2024. We expect approximately $250 million of year-over-year benefits from cost reduction and margin expansion actions in 2025 including continuing benefits from restructuring actions we initiated last year and benefits from reduced costs of direct and indirect purchases, increased manufacturing efficiency, and price actions.

We continue to evaluate the potential impact of announced changes and further potential changes in trade policies and tariffs with the objective of maintaining profitability under a variety of scenarios. In 2024 our direct imports into the United States from third parties and our own manufacturing facilities in Mexico, Canada, and China were approximately $350 million, $100 million, and $100 million, respectively. We have increased, and will further increase, prices in response to enacted tariffs to maintain profitability. Alternative sources of materials and manufacturing locations will be used to also mitigate the impact. We are not expecting tariffs to have a material impact on profitability for the full year.

Summary of Results of Operations

The following table reflects our sales and operating results (in millions, except per share amounts and percentages):

(1) See Note 16 in the Consolidated Financial Statements for the definition of segment operating earnings.

(2) Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We exclude purchase accounting depreciation and amortization, corporate and other, non-operating pension and postretirement benefit credit, change in fair value of investments, interest expense, net, and income tax provision because we do not consider these items to be directly related to the operating performance of our segments. We believe total segment operating earnings and total segment operating margin are useful to investors as measures of operating performance. We use these measures to monitor and evaluate the profitability of our operating segments. Our measures of total segment operating earnings and total segment operating margin may be different from measures used by other companies.

(3) Adjusted EPS is a non-GAAP earnings measure. See Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation for more information on this non-GAAP measure.

Three Months Ended December 31, 2024, Compared to Three Months Ended December 31, 2023

Sales

Sales decreased 8.4 percent year over year in the three months ended December 31, 2024. Organic sales decreased 7.6 percent year over year in the three months ended December 31, 2024. Currency translation decreased sales by 0.9 percent in the three months ended December 31, 2024. Acquisitions increased sales by 0.1 percent in the three months ended December 31, 2024. Pricing increased total company sales by approximately 1.0 percentage point year over year in the three months ended December 31, 2024, realized primarily in the Software & Control segment. Volume decreased total company sales by approximately 8.5 percentage points year over year in the three months ended December 31, 2024, driven by the Software & Control and Intelligent Devices segments, partially offset by the Lifecycle Services segment.

The table below presents our sales, attributed to the geographic regions based upon country of destination, and the percentage change from the same period a year ago (in millions, except percentages):

(1) Organic sales and organic sales growth exclude the effect of acquisitions, changes in currency exchange rates, and divestitures. See Supplemental Sales Information for information on these non-GAAP measures.

Corporate and Other

Corporate and other expenses were $38 million in the three months ended December 31, 2024, compared to $40 million in the three months ended December 31, 2023.

Income before Income Taxes

Income before income taxes was $213 million in the three months ended December 31, 2024, compared to $260 million in the three months ended December 31, 2023. The decrease in the three months ended December 31, 2024, was primarily due to lower segment operating earnings.

Total segment operating earnings decreased 9.8 percent year over year in the three months ended December 31, 2024, primarily due to lower sales volume partially offset by the benefits from cost reduction and margin expansion actions.

Income Taxes

The effective tax rate for the three months ended December 31, 2024, was 16.4 percent, compared to 18.1 percent for the three months ended December 31, 2023. Our adjusted effective tax rate for the three months ended December 31, 2024, was 17.5 percent, compared to 17.9 percent for the three months ended December 31, 2023. The decrease in both the effective tax rate and the adjusted effective tax rate was primarily due to favorable geographic mix of pre-tax income and higher discrete benefits recognized in the current year.

In October 2021, the Organization for Economic Cooperation and Development (OECD) and G20 Finance Ministers reached an agreement, known as Base Erosion and Profit Shifting (BEPS) Pillar Two, that, among other things, ensures that income earned in each jurisdiction that qualifying multinational enterprises operate in is subject to a minimum corporate income tax rate of at least 15%. Discussions related to the formal implementation and enactment of this agreement, including within the tax law of each member jurisdiction including the United States, are ongoing. Certain countries have enacted the Pillar Two framework, including Singapore, which is expected to result in the greatest impact to the Company. Enactment of this regulation in its current form would generally apply to the Company beginning in fiscal year 2026, resulting in an increase in our effective tax rate as well as in the amount of global corporate income tax paid.

Diluted EPS and Adjusted EPS

2025 first quarter Net income attributable to Rockwell Automation was $184 million or $1.61 per share, compared to $215 million or $1.86 per share in the first quarter of 2024. The decreases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to lower sales volume. 2025 first quarter adjusted EPS was $1.83, down 10 percent compared to $2.04 in the first quarter of 2024, primarily due to lower sales volume.

Intelligent Devices

Sales

Intelligent Devices sales decreased 13 percent year over year in the three months ended December 31, 2024. Organic sales decreased 12 percent year over year, and the effects of currency translation decreased sales by less than 1 percentage point year over year in the three months ended December 31, 2024. For the three months ended December 31, 2024, reported and organic sales decreased in all regions except Latin America.

Segment Operating Margin

Intelligent Devices segment operating earnings decreased 20 percent year over year in the three months ended December 31, 2024. Segment operating margin decreased to 14.9 percent in the three months ended December 31, 2024, from 16.2 percent in the same period a year ago, primarily due to lower sales volume, partially offset by the benefits from cost reduction and margin expansion actions.

Software & Control

Sales

Software & Control sales decreased 12 percent year over year in the three months ended December 31, 2024. Organic sales decreased 12 percent year over year, and the effects of currency translation decreased sales by less than 1 percentage point year over year in the three months ended December 31, 2024. For the three months ended December 31, 2024, reported sales decreased in all regions. Organic sales decreased in all regions except Latin America in the three months ended December 31, 2024.

Segment Operating Margin

Software & Control segment operating earnings decreased 12 percent year over year in the three months ended December 31, 2024. Segment operating margin increased to 25.1 percent in the three months ended December 31, 2024, from 25.0 percent in the same period a year ago, primarily due to the benefits from cost reduction and margin expansion actions and the positive impact of price realization exceeding input costs, mostly offset by lower sales volume.

Lifecycle Services

Sales

Lifecycle Services sales increased 5 percent year over year in the three months ended December 31, 2024. Organic sales increased 5 percent, and the effects of currency translation decreased sales by less than 1 percentage point year over year in the three months ended December 31, 2024. For the three months ended December 31, 2024, reported and organic sales increased in all regions.

Segment Operating Margin

Lifecycle Services segment operating earnings increased 24 percent year over year in the three months ended December 31, 2024. Segment operating margin increased to 12.5 percent in the three months ended December 31, 2024, from 10.6 percent in the same period a year ago, primarily due to the benefits from cost reduction and margin expansion actions and higher sales volume.

Supplemental Segment Information

Purchase accounting depreciation and amortization and non-operating pension and postretirement benefit credit are not allocated to our operating segments because these costs are excluded from our measurement of each segment's operating performance for internal purposes. If we were to allocate these costs, we would attribute them to each of our segments as follows (in millions):

Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation

Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate are non-GAAP earnings measures that exclude non-operating pension and postretirement benefit credit, purchase accounting depreciation and amortization attributable to Rockwell Automation, change in fair value of investments, and Net loss attributable to noncontrolling interests, including their respective tax effects. Non-operating pension and postretirement benefit credit is defined as all components of our net periodic pension and postretirement benefit cost except for service cost. See Note 10 in the Consolidated Financial Statements for more information on our net periodic pension and postretirement benefit cost.

We believe that Adjusted Income, Adjusted EPS, and Adjusted Effective Tax rate provide useful information to our investors about our operating performance and allow management and investors to compare our operating performance period over period. Adjusted EPS is also used as a financial measure of performance for our annual incentive compensation. Our measures of Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate may be different from measures used by other companies. These non-GAAP measures should not be considered a substitute for Net Income attributable to Rockwell Automation, diluted EPS, and effective tax rate.

The following are reconciliations of Net income attributable to Rockwell Automation, diluted EPS, and effective tax rate to Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate, respectively (in millions, except per share amounts and percentages):

Financial Condition

The following is a summary of our cash flows from operating, investing, and financing activities, as reflected in the Consolidated Statement of Cash Flows (in millions):

The following table summarizes free cash flow, which is a non-GAAP financial measure (in millions):

Our definition of free cash flow takes into consideration capital investments required to maintain the operations of our businesses and execute our strategy. Cash provided by operating activities adds back non-cash depreciation expense to earnings but does not reflect a charge for necessary capital expenditures. Our definition of free cash flow excludes the operating cash flows and capital expenditures related to our discontinued operations, if any. Operating, investing, and financing cash flows of our discontinued operations, if any, are presented separately in our Consolidated Statement of Cash Flows. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends, and share repurchases. We use free cash flow, as defined, as one measure to monitor and evaluate our performance, including as a financial measure for our annual incentive compensation. Our definition of free cash flow may be different from definitions used by other companies.

Cash provided by operating activities was $364 million for the three months ended December 31, 2024, compared to $33 million for the three months ended December 31, 2023. Free cash flow was $293 million for the three months ended December 31, 2024, compared to a net outflow of $35 million for the three months ended December 31, 2023. The year over year increases in cash provided by operating activities and free cash flow were primarily due no payout of incentive compensation in the first quarter of fiscal 2025 related to fiscal 2024 performance.

Our Short-term debt as of December 31, 2024, included commercial paper borrowings of $629 million, with a weighted average interest rate of 4.67 percent, and a weighted average maturity period of 33 days. Our Short-term debt as of September 30, 2024, included commercial paper borrowings of $657 million, with a weighted average interest rate of 5.14 percent, and a weighted average maturity period of 24 days. In December 2022, Sensia entered into an unsecured $75 million line of credit. As of December 31, 2024, and September 30, 2024, included in Short-term debt was $70 million borrowed against the line of credit with an interest rate of 5.34 percent and 6.17 percent, respectively. Also included in Short-term debt as of December 31, 2024, and September 30, 2024, was $42 million of interest-bearing loans from Schlumberger (SLB) to Sensia, due April 2025. Discussions with our joint venture partner are ongoing regarding the capital structure and financing of Sensia.

We repurchased approximately 0.4 million shares of our common stock under our share repurchase program in the first three months of 2025. The total cost of these shares was $99 million, of which $1 million was recorded in Accounts payable at December 31, 2024, related to shares that did not settle until January 2025. Excise tax of $1 million was paid during the three months ended December 31, 2024, related to our 2023 share repurchases. At September 30, 2024, there were no significant outstanding common stock share repurchases recorded in Accounts payable. We repurchased approximately 0.4 million shares of our common stock under our share repurchase program in the first three months of 2024. The total cost of these shares was $120 million, of which $1 million was recorded in Accounts payable at December 31, 2023, related to shares that did not settle until January 2024. Our decision to repurchase shares in the remainder of 2025 will depend on business conditions, free cash flow generation, other cash requirements, and stock price. On May 2, 2022, and September 11, 2024, the Board of Directors authorized us to expend an additional $1.0 billion to repurchase shares of our common stock. At December 31, 2024, we had approximately $1,247 million remaining for share repurchases under our existing board authorizations. See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, for additional information regarding share repurchases.

We expect future uses of cash to include working capital requirements, capital expenditures, dividends to shareowners, repurchases of common stock, repayments of debt, additional contributions to our retirement plans, and acquisitions of businesses and other inorganic investments. We expect to fund future uses of cash with a combination of existing cash balances, cash generated by operating activities, commercial paper borrowings, or new issuances of debt or other securities. In addition, we have access to unsecured credit facilities with various banks.

At December 31, 2024, the majority of our Cash and cash equivalents were held by non-U.S. subsidiaries. We use a global cash pooling arrangement to allocate capital resources among our entities. As a result of the broad changes to the U.S. international tax system under the Tax Act, the Company accounts for taxes on earnings of substantially all of its non-U.S. subsidiaries including both non-U.S. and U.S. taxes. The Company has concluded that earnings of a limited number of its non-U.S. subsidiaries are indefinitely reinvested.

In June 2022, we replaced our former $1.25 billion unsecured revolving credit facility with a new five-year $1.5 billion unsecured revolving credit facility, expiring in June 2027. This credit facility uses the secured overnight funding rate (SOFR) as the primary basis for determining interest payments. We can increase the aggregate amount of this credit facility by up to $750 million, subject to the consent of the banks in the credit facility. We did not borrow against this credit facility during the periods ended December 31, 2024, or September 30, 2024. Borrowings under this credit facility bear interest based on short-term money market rates in effect during the period the borrowings are outstanding. The terms of this credit facility contain covenants under which we agree to maintain an EBITDA-to-interest ratio of at least 3.0 to 1.0. The EBITDA-to-interest ratio is defined in the credit facility as the ratio of consolidated EBITDA (as defined in the facility) for the preceding four quarters to consolidated interest expense for the same period.

Among other uses, we can draw on our credit facility as a standby liquidity facility to repay our outstanding commercial paper as it matures. This access to funds to repay maturing commercial paper is an important factor in maintaining the short-term credit ratings set forth in the table below. Under our current policy with respect to these ratings, we expect to limit our other borrowings under our credit facility, if any, to amounts that would leave enough credit available under the facility so that we could borrow, if needed, to repay all of our then outstanding commercial paper as it matures.

Separate short-term unsecured credit facilities of approximately $245 million at December 31, 2024, were available to non-U.S. subsidiaries, of which, approximately $33 million was committed under letters of credit. Borrowings under our non-U.S. credit facilities at December 31, 2024, and September 30, 2024, were not significant. We were in compliance with all covenants under our credit facilities at December 31, 2024, and September 30, 2024. There are no significant commitment fees or compensating balance requirements under our credit facilities.

The following is a summary of our credit ratings as of February 10, 2025:

Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit ratings and market conditions. We have not experienced any difficulty in accessing the commercial paper market. If our access to the commercial paper market is adversely affected due to a change in market conditions or otherwise, we would expect to rely on a combination of available cash and our unsecured committed credit facility to provide short-term funding. In such event, the cost of borrowings under our unsecured committed credit facility could be higher than the cost of commercial paper borrowings.

We regularly monitor the third-party depository institutions that hold our cash and cash equivalents and short-term investments. We diversify our cash and cash equivalents and short-term investments among counterparties to minimize exposure to any one of these entities.

We use foreign currency forward exchange contracts to manage certain foreign currency risks. We enter into these contracts to hedge our exposure to foreign currency exchange rate variability in the expected future cash flows associated with certain third-party and intercompany transactions denominated in foreign currencies forecasted to occur within the next two years. We also may use these contracts to hedge portions of our net investments in certain non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. There were no open net investment hedges for the three months ended December 31, 2024, or September 30, 2024. In addition, we use foreign currency forward exchange contracts that are not designated as hedges to offset transaction gains or losses associated with some of our assets and liabilities resulting from intercompany loans or other transactions with third parties that are denominated in currencies other than our entities' functional currencies. Our foreign currency forward exchange contracts are usually denominated in currencies of major industrial countries. We diversify our foreign currency forward exchange contracts among counterparties to minimize exposure to any one of these entities.

Net gains and losses related to derivative forward exchange contracts designated as cash flow hedges offset the related gains and losses on the hedged items during the periods in which the hedged items are recognized in earnings. Pre-tax net losses related to cash flow hedges reclassified from Accumulated other comprehensive loss into the Consolidated Statement of Operations were not significant during the three months ended December 31, 2024. During the three months ended December 31, 2023, we reclassified $8 million in pre-tax net gains related to cash flow hedges from Accumulated other comprehensive loss into the Consolidated Statement of Operations. As of December 31, 2024, we expect that approximately $8 million of pre-tax net unrealized gains on cash flow hedges will be reclassified into earnings during the next 12 months.

Information with respect to our contractual cash obligations is contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended September 30, 2024. We believe that at December 31, 2024, there has been no material change to this information.

Supplemental Sales Information

We translate sales of subsidiaries operating outside of the United States using exchange rates effective during the respective period. Therefore, changes in currency exchange rates affect our reported sales. Sales by acquired businesses also affect our reported sales. We believe that organic sales, defined as sales excluding the effects of acquisitions and changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional and operating segment performance from the activities of our businesses without the effect of acquisitions and changes in currency exchange rates. We use organic sales as one measure to monitor and evaluate our regional and operating segment performance. When we acquire businesses, we exclude sales in the current period for which there are no comparable sales in the prior period. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the same currency exchange rates that were in effect during the prior year. When we divest a business, we exclude sales in the prior period for which there are no comparable sales in the current period. Organic sales growth is calculated by comparing organic sales to reported sales in the prior year, excluding divestitures. We attribute sales to the geographic regions based on the country of destination.

The following is a reconciliation of reported sales to organic sales by geographic region (in millions):

The following is a reconciliation of reported sales to organic sales by operating segment (in millions):

Critical Accounting Estimates

We have prepared the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and revenues and expenses during the periods reported. These estimates are based on our best judgment about current and future conditions, but actual results could differ from those estimates. Information with respect to accounting estimates that are the most critical to the understanding of our financial statements as they could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended September 30, 2024. We believe that at December 31, 2024, there has been no material change to this information.

Environmental Matters

Information with respect to the effect of compliance with environmental protection requirements and resolution of environmental claims on us and our manufacturing operations is contained in Note 17 in the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the year ended September 30, 2024. We believe that at December 31, 2024, there has been no material change to this information.

Recent Accounting Pronouncements

See Note 1 in the Consolidated Financial Statements regarding recent accounting pronouncements.

Information with respect to our exposure to foreign currency risk and interest rate risk is contained in Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended September 30, 2024. We believe that at December 31, 2024, there has been no material change to this information.

Disclosure Controls and Procedures: We, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the quarter covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the quarter covered by this report, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting: There has not been any change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information with respect to our legal proceedings is contained in Item 3. Legal Proceedings, of our Annual Report on Form 10-K for the year ended September 30, 2024. We believe that at December 31, 2024, there has been no material change to this information.

Information about our most significant risk factors is contained in Item 1A. Risk Factors, of our Annual Report on Form 10-K for the year ended September 30, 2024. We believe that at December 31, 2024, there has been no material change to this information, except as noted below.

Our profitability and market competitiveness may be adversely impacted by changes in trade policies, including tariffs or other factors.

Changes in trade policies, including the imposition of new tariffs or increases in existing tariffs between the United States, Mexico, Canada, China or other countries, or reactionary measures including retaliatory tariffs, legal challenges, or currency manipulation, could adversely affect our cost structure and profitability. If tariffs on imported materials, components, or finished goods increase, our manufacturing and supply chain costs may rise. Furthermore, changes to trade policies, retaliatory measures, or prolonged uncertainty in trade relationships could result in supply chain disruptions, delayed shipments, or increased operational complexity, adversely affecting our business and financial results. While we take steps to mitigate or avoid these increased costs and disruptions, our ability to do so may be limited by operational and supply chain constraints, especially in the short term. In addition, our ability to recover cost increases and maintain profitability levels through price adjustments may be limited by competitive pressures, customer acceptance, and contractual limitations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

The table below sets forth information with respect to purchases made by or on behalf of us of shares of our common stock during the three months ended December 31, 2024:

(1) All of the shares purchased during the quarter ended December 31, 2024, were acquired pursuant to the repurchase programs described in (3) below, except for 326 shares that were acquired in November 2024 in connection with stock swap exercises of employee stock options.

(2) Average price paid per share includes brokerage commissions.

(3) On May 2, 2022, and September 11, 2024, the Board of Directors authorized us to expend an additional $1.0 billion to repurchase shares of our common stock. Our repurchase program allows us to repurchase shares at management’s discretion or at our broker’s discretion pursuant to a share repurchase plan subject to price and volume parameters.

During the quarter ended December 31, 2024, the following officers of the Company adopted Rule 10b5-1 trading arrangements that are each intended to satisfy the affirmative defense of Rule 10b5-1(c) promulgated under the Exchange Act, with such details of the arrangements as further follows:

• Matheus De A G Viera Bulho, Senior Vice President, Software and Control, adopted a Rule 10b5-1 trading arrangement on November 25, 2024, that will terminate on the earlier of November 14, 2025, or the execution of all trades in the trading arrangement. Mr. Bulho’s trading arrangement covers the (i) sale of 350 long shares of the Company’s common stock, (ii) exercise of up to 3,274 stock options and the sale of the underlying shares of the Company's common stock, (iii) sale of the shares of the Company’s common stock remaining following the sale to cover taxes on the vesting of 882 restricted stock units on April 1, 2025 and 776 restricted stock units on June 6, 2025, and (iv) sale of the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Robert L. Buttermore, Senior Vice President and Chief Supply Chain Officer, adopted a Rule 10b5-1 trading arrangement on November 27, 2024, that will terminate on the earlier of February 28, 2026 or the execution of all trades in the trading arrangement. Mr. Buttermore’s trading arrangement covers the sale of (i) 1,704 long shares of the Company’s common stock and (ii) the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Matthew W. Fordenwalt, Senior Vice President, Lifecycle Services, adopted a Rule 10b5-1 trading arrangement on November 26, 2024, that will terminate on the earlier of December 31, 2025, or the execution of all trades in the trading arrangement. Mr. Fordenwalt’s trading arrangement covers the (i) sale of 500 long shares of the Company’s common stock, (ii) exercise of 950 stock options and the sale of the underlying shares of the Company's common stock, and (iii) sale of the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Rebecca W. House, Senior Vice President, Chief People and Legal Officer, and Secretary, adopted a Rule 10b5-1 trading arrangement on November 27, 2024, that will terminate on the earlier of December 31, 2025, or the execution of all trades in the trading arrangement. Ms. House’s trading arrangement covers the (i) exercise of 10,200 stock options and the sale of the underlying shares of the Company's common stock, and (ii) sale of the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• John M. Miller, Senior Vice President and Chief Intellectual Property Counsel, adopted a Rule 10b5-1 trading arrangement on November 26, 2024, that will terminate on the earlier of December 31, 2025, or the execution of all trades in the trading arrangement. Mr. Miller’s trading arrangement covers the (i) sale of 252 long shares of the Company’s common stock, (ii) exercise of 1,800 stock options and the sale of the underlying shares of the Company's common stock, and (iii) sale of the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Tessa M. Myers, Senior Vice President, Intelligent Devices, adopted a Rule 10b5-1 trading arrangement on November 29, 2024, that will terminate on the earlier of December 31, 2025, or the execution of all trades in the trading arrangement. Ms. Myers’ trading arrangement covers the sale of (i) the number of long shares of the Company's common stock having a value of up to $350,000 and (ii) the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Christopher Nardecchia, Senior Vice President and Chief Information Officer, adopted a Rule 10b5-1 trading arrangement on November 27, 2024, that will terminate on the earlier of December 31, 2025, or the execution of all trades in the trading arrangement. Mr. Nardecchia’s trading arrangement covers the (i) exercise of up to 7,500 stock options and the sale of the underlying shares of the Company's common stock, and (ii) sale of the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

• Terry L. Riesterer, Vice President and Controller, adopted a Rule 10b5-1 trading arrangement on November 27, 2024, that will terminate on the earlier of December 31, 2025, or the execution of all trades in the trading arrangement. Mr. Riesterer’s trading arrangement covers (i) the sale of 600 long shares of the Company’s common stock, (ii) exercise of 4,000 stock options and the sale of the underlying shares of the Company's common stock, and (iii) the sale of the number of shares of the Company’s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests.

For the arrangements above referencing transactions to sell shares to cover taxes on vests, the aggregate number of shares to be sold pursuant to each trading arrangement described above is dependent on the taxes on the applicable restricted stock unit and performance share vests, and, therefore, is indeterminable at this time.

During the quarter ended December 31, 2024, no director or officer of the Company adopted or terminated a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, no director of the Company adopted or terminated a Rule 10b5-1 trading arrangement, and no officer of the Company terminated a Rule 10b5-1 trading arrangement.

(a) Exhibits:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.