What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2026-02-04 · 127 added, 76 removed, 217 unchanged (48% of the section changed)

33 unchanged sentences

The forward-looking statements included in this document are made only as of the date of this document, unless otherwise specified, and, except as required by law, Johnson Controls assumes no obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date of this document.

Johnson Controls International plc, headquartered in Cork, Ireland, a global technology leader in energy efficiency, decarbonization, thermal management and mission-critical performance, helps customers use energy more productively, reduce carbon emissions, and operate with the precision and resilience required in rapidly expanding industries such as data centers, healthcare, pharmaceuticals, advanced manufacturing, and higher education.

Johnson Controls International plc, headquartered in Cork, Ireland, a global leader in thermal management, mission-critical building systems, energy efficiency, and decarbonization, helps customers use energy more productively, reduce carbon emissions, and operate with the precision and resilience required in rapidly expanding industries such as data centers, healthcare, pharmaceuticals, advanced manufacturing, and higher education.

The Company is a global leader in engineering, manufacturing, commissioning and retrofitting building products and systems, including commercial heating, ventilating, air-conditioning ("HVAC") equipment, industrial refrigeration systems, controls, security systems, fire-detection systems and fire-suppression solutions.

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The following information should be read in conjunction with the September 30, 2025 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the year ended September 30, 2025 filed with the SEC on November 14, 2025.

References in the following discussion and analysis to "Three Months," "First Quarter" or similar language refer to the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

References in the following discussion and analysis to "Three Months," "Second Quarter" or similar language refer to the three months ended March 31, 2026 compared to the three months ended March 31, 2025, while "Year-to-Date" refers to six months ended March 31, 2026 compared to the six months ended March 31, 2025.

Macroeconomic Trends

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The Company maintains global operations.

The Company has experienced, and could again experience, increased material cost inflation and component shortages, as well as disruptions and delays in its supply chain, as a result of global macroeconomic trends including the imposition of tariffs and other restrictive trade measures.

The United States has announced tariffs and reciprocal tariffs on a wide range of products manufactured or produced worldwide, including Canada, China, the European Union, Japan, India and Mexico, among others.

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Although the Company has been largely able to mitigate the impact of tariffs that have been enacted to date, if additional tariffs and reciprocal tariffs are implemented (whether as currently proposed or otherwise), such actions could negatively impact the Company's revenue growth and margins in future periods through decreased sales and increased cost of goods sold.

Further, the Company has experienced, and could again experience, increased material cost inflation and component shortages, as well as disruptions and delays in its supply chain, as a result of global macroeconomic trends including the imposition of tariffs and other restrictive trade measures, as well as geopolitical and economic tensions.

The net effect of these events will continue to depend on the Company’s ability to successfully mitigate and offset their impact.

The Company is taking actions to mitigate the actual and anticipated impact of these events, including strengthening the Company's in region, for region manufacturing strategy, pivoting to local sourcing in its supply chain, accelerating pricing actions and asserting contractual rights through change orders.

In February 2026, certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA), were invalidated by the U.S.

Supreme Court.

However, the United States has since imposed new tariffs and duties in their place.

The Company is currently evaluating its options to mitigate the impact of prior IEEPA tariffs through participation in the IEEPA refund process.

To date, the tariffs enacted by the United States and other countries have not had a material impact on the Company's financial performance for the periods presented.

Geopolitical and economic tensions, including the ongoing conflicts in the Middle East, have the potential to cause disruptions in global supply chains, increase costs and create overall volatility.

The ongoing conflicts in the Middle East have disrupted energy supplies and supply chains, increased costs for energy and other supplies and created volatility in the capital markets, among other impacts.

The net effect of these events will continue to depend on the Company’s ability to successfully mitigate and offset their impacts.

The Company is taking actions to mitigate the actual and anticipated impact of ongoing trade restrictions and geopolitical conflict, including strengthening the Company's in region, for region manufacturing strategy, pivoting to local sourcing in its supply chain, accelerating pricing actions and asserting contractual rights through change orders.

The Company has historically taken a variety of actions to mitigate trade restrictions, supply chain disruptions and inflation, including through expanding and redistributing its supplier network, supplier financing, accelerated purchasing and productivity improvements.

These actions have largely been successful in mitigating the impacts of the current macroeconomic environment, however, it is uncertain as to whether the actions taken or contemplated to be taken by the Company will be effective in continuing to mitigate the impact of current and future trade restrictions and their related impacts.

The Company continues to actively monitor and evaluate the development and potential impacts of tariffs and other trade restrictions on its supply chain and results of operations.

The Company continues to actively monitor and evaluate the development and potential impacts of tariffs, trade restrictions and geopolitical conflicts on its supply chain and results of operations.

As a result of the Company’s global presence, a significant portion of its revenues and expenses are denominated in currencies other than the U.S.

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See the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the year ended September 30, 2025 filed with the United States Securities and Exchange Commission ("SEC") on November 14, 2025.

Certain of these risk factors have been updated and supplemented in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Restructuring and Cost Optimization Initiatives

During the fourth quarter of fiscal 2024, the Company committed to a multi-year restructuring plan to address stranded costs and further right-size global operations as a result of previously announced portfolio simplification actions.

It is expected that the plan will be completed in fiscal 2027 and the Company will incur one-time restructuring costs, including severance and other employee termination benefits, contract termination costs, and certain other related cash and non-cash charges, totaling approximately $400 million, resulting in expected annual cost savings of approximately $500 million upon full completion of the plan.

Restructuring costs will be incurred across all segments and Corporate functions.

Refer to Note 14, "Restructuring and Related Costs," for an update on the restructuring plan.

Three Months Ended December 31,

(in millions) 2025 2024 Change

Certain of these risk factors have been updated and supplemented in the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2025 filed on February 4, 2026 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2026 2025 Change 2026 2025 Change

Net sales $ 6,142 $ 5,676 8 % $ 11,939 $ 11,102 8 %

The increase in net sales for the three months ended December 31, 2025 was due to higher organic sales ($311 million) and the favorable impact of foreign currency translation ($72 million), partially offset by the net impact of acquisitions and divestitures ($12 million).

The increase in net sales for the three months ended March 31, 2026 was due to higher organic sales ($360 million) and the favorable impact of foreign currency translation ($128 million), partially offset by the impact of divestitures ($22 million).

Excluding the impact of foreign currency translation and business divestitures, net sales increased 6% over the prior year, driven by growth across all segments, led by the Americas.

The increase in net sales for the six months ended March 31, 2026 was due to higher organic sales ($671 million) and the favorable impact of foreign currency translation ($200 million), partially offset by the net impact of acquisitions and divestitures ($34 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, net sales increased 6% over the prior year, driven by growth across all segments, led by the Americas.

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Cost of Sales / Gross Profit

Three Months Ended December 31,

(in millions) 2025 2024 Change

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2026 2025 Change 2026 2025 Change

Cost of sales $ 3,880 $ 3,607 8 % $ 7,603 $ 7,107 7 %

Gross profit 2,262 2,069 9 % 4,336 3,995 9 %

% of sales 35.8 % 35.5%

The increase in gross profit for the three months ended December 31, 2025 was primarily due to margin improvements as a result of disciplined execution across pricing, productivity, and project delivery.

% of sales 36.8 % 36.5 % 30 bp 36.3 % 36.0 % 30 bp

The increase in gross profit for the three and six months ended March 31, 2026 was primarily due to organic sales growth, productivity improvements and better operating leverage.

Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings.

Selling, General and Administrative Expenses ("SG&A")

Three Months Ended December 31,

(in millions) 2025 2024 Change

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2026 2025 Change 2026 2025 Change

SG&A $ 1,401 $ 1,427 (2 %) $ 2,622 $ 2,826 (7 %)

% of sales 21.1 % 25.8 % (470) bp

The decrease in SG&A was primarily due to AFFF insurance recoveries related to the previously disclosed water systems settlement ($130 million) and the gain on the ADT Mexico business divestiture ($70 million).

% of sales 22.8 % 25.1 % (230) bp 22.0 % 25.5 % (350) bp

The decrease in SG&A for the three months ended March 31, 2026 was primarily due to benefits from ongoing cost reduction actions.

The decrease in SG&A for the six months ended March 31, 2026 was primarily due to AFFF insurance recoveries related to the previously disclosed water systems settlement ($119 million), the gain on the ADT Mexico business divestiture ($70 million) and benefits from ongoing cost actions.

Refer to the "Segment Analysis" below within this Item 2 for a discussion of segment earnings.

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Restructuring and Impairment Costs

Three Months Ended December 31,

Restructuring costs will be incurred across all segments and Corporate functions.

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2026 2025 2026 2025

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Restructuring and impairment costs $ 57 $ 62 $ 144 $ 95

Refer to Note 14, "Restructuring and Related Costs," of the notes to the consolidated financial statements for further disclosure related to the Company's restructuring actions.

Refer to No te 3, "Divestitures" and Note 14, "Restructuring and Related Costs," of the notes to the consolidated financial statements for further disclosure related to the Company's restructuring actions and impairment costs.

Net Financing Charges

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Income Tax Provision

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2026 2025 2026 2025

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Segment Analysis

The Chief Executive Officer, the Company’s chief operating decision maker ("CODM"), evaluates the performance of its segments and allocates resources based on two profitability measures, Segment EBITA and Segment EBIT:

• Segment earnings before interest, taxes, and amortization (“EBITA”) represents income from continuing operations, before income taxes and noncontrolling interests, excluding corporate expenses, restructuring and impairment costs, AFFF related settlement costs and insurance recoveries, gains or losses on divestitures, net mark-to-market gains and losses related to pension and postretirement plans and restricted asbestos investments, net finance charges, and amortization.

Segment EBITA is used as a tool to allow the CODM to evaluate the recurring profitability of the segments, including revenues and expenses that are within the operational control of the segments, and excluding the impact of certain non-cash and non-recurring items.

Segment EBITA also provides the CODM with performance comparability across periods and for more accurate benchmarking against peer companies that may not have similar historical acquisition activity, by holding constant the impact of significant acquisitions.

• Segment earnings before interest and taxes ("EBIT") represents Segment EBITA, adding back the impact of amortization of intangible assets.

Segment EBIT allows the CODM to review profitability, inclusive of the impact of significant acquisition activity, informing the CODM of how the business is integrating key strategic initiatives and generating synergies.

Both EBITA and EBIT are reviewed by the CODM and compared against the profit plan and forecast for the current and prior year.

Segment EBITA and Segment EBIT are not defined under GAAP and may not be comparable to similarly titled measures used by other companies.

Measures of total assets by reportable segment are not provided to the CODM.

Therefore, asset information by segment is not disclosed.

Three Months Ended December 31,

(in millions) 2025 2024 Change

• Segment earnings before interest and taxes (“Segment EBIT”) represents segment income from continuing operations, excluding restructuring and impairment costs, AFFF related settlement costs and insurance recoveries, gains or losses on divestitures, and net mark-to-market gains and losses related to pension and postretirement plans and restricted asbestos investments.

Segment EBIT is used as a tool to allow the CODM to evaluate the recurring profitability of the segments, including revenues and expenses that are within the operational control of the segments, and excluding the impact of certain non-cash and non-recurring items.

Segment EBIT also provides the CODM with visibility into the integration of key strategic initiatives, such as acquisitions and mergers.

• Segment earnings before interest, taxes and amortization ("Segment EBITA") (non-GAAP) represents Segment EBIT, excluding the impact of amortization of intangible assets.

Segment EBITA provides the CODM with performance comparability across periods and more accurate benchmarking against peer companies that may not have similar historical acquisition activity, by holding constant the impact of significant acquisitions.

Both Segment EBIT and Segment EBITA are reviewed by the CODM and compared against the profit plan and forecast for the current and prior year.

Segment EBITA is not defined under GAAP and may not be comparable to similarly titled measures used by other companies.

Three Months Ended March 31, Six Months Ended March 31,

(in millions) 2026 2025 Change 2026 2025 Change

Americas $ 4,121 $ 3,837 7 % $ 7,964 $ 7,464 7 %

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$ 6,142 $ 5,676 8 % $ 11,939 $ 11,102 8 %

• The increase in Americas was primarily due to organic growth ($210 million).

Excluding the impact of divestitures and foreign currency translation, sales increased 6%, led by continued strength across Applied HVAC and Controls.

Three Months:

• The increase in Americas was due to organic growth ($260 million) and foreign currency translation ($24 million).

Excluding the impact of foreign currency translation, sales increased 7%, led by continued strength across Applied HVAC.

Products and Systems sales increased 5% and Services increased 10%.

• The increase in EMEA was primarily due to the favorable impact of foreign currency translation ($65 million) and organic growth ($51 million).

Excluding the impact of foreign currency translation, sales increased 4%, led by 8% growth in Services.

• The increase in APAC was primarily due to organic growth ($50 million).

Excluding the impact of foreign currency translation, sales increased 8%, led by 9% growth in Products and Systems.

Segment EBITA and Segment EBIT

Segment EBITA

Three Months Ended December 31, Segment EBIT

Three Months Ended December 31,

• The increase in EMEA was due to the favorable impact of foreign currency translation ($89 million) and organic growth ($14 million), partially offset by the impact of divestitures ($22 million).

Excluding the impact of foreign

currency translation and divestitures, sales increased 1%, as Products and Systems growth offset disruptions caused by the Middle East conflicts and lower non-recurring Services volumes during the quarter.

• The increase in APAC was due to organic growth ($86 million) and foreign currency translation ($15 million) .

Excluding the impact of foreign currency translation, sales increased 13%, led by over 20% growth in Applied HVAC primarily due to data center application growth.

Year to Date:

• The increase in Americas was due to organic growth ($470 million) and foreign currency translation ($30 million).

Excluding the impact of foreign currency translation, sales increased 6%, led by continued strength across Applied HVAC.

Products and Systems sales increased 5% and Services increased 10%.

• The increase in EMEA was due to the favorable impact of foreign currency translation ($154 million) and organic growth ($65 million), partially offset by the net impact of business acquisitions and divestitures ($34 million).

Excluding the impact of foreign currency translation and business acquisitions and divestitures, sales increased 3%.

Products and Systems sales increased 2% and Services increased 3%.

• The increase in APAC was due to organic growth ($136 million) and foreign currency translation ($16 million).

Excluding the impact of foreign currency translation, sales increased 10%, led by 14% growth in Products and Systems primarily due to data center application growth.

Segment EBIT and Segment EBITA (non-GAAP)

Three Months Ended March 31,

Six Months Ended March 31,

(in millions) 2026 2025 Change 2026 2025 Change

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APAC 143 101 42 % 256 186 38 %

• The increase in Americas was primarily due to productivity improvements and improved mix.

• The increase in EMEA was primarily driven by favorable pricing and productivity improvements.

Segment EBITA (non-GAAP)

Three Months Ended March 31,

Segment EBITA (non-GAAP)

Six Months Ended March 31,

(in millions) 2026 2025 Change 2026 2025 Change

Americas $ 782 $ 707 11 % $ 1,402 $ 1,296 8 %

EMEA 186 135 38 % 344 271 27 %

APAC 146 104 40 % 263 194 36 %

Three Months:

• The increase in Americas was primarily driven by favorable pricing, productivity improvements and increased volumes.

• The increase in EMEA was primarily driven by productivity improvements and improved leverage on higher revenue.

• The increase in APAC was primarily driven by increased volumes and productivity improvements.

Year to Date:

• The increase in Americas was primarily driven by favorable pricing, productivity improvements and increased volumes.

• The increase in EMEA was primarily driven by productivity improvements and improved leverage on higher revenue.

• The increase in APAC was primarily driven by increased volumes and productivity improvements.

A reconciliation of income from continuing operations before income taxes to Segment EBIT and Segment EBITA (non-GAAP) is as follows (in millions):

Three Months Ended March 31, Six Months Ended March 31,

2026 2025 2026 2025

Income from continuing operations before income taxes $ 738 $ 501 $ 1,446 $ 909

Corporate expenses 152 186 308 357

Restructuring and impairment costs 57 62 144 95

Water systems AFFF insurance recoveries (1)

(1) (8) (131) (12)

Net financing charges 67 80 126 166

Gain on divestiture — — (70) —

Net mark-to-market adjustments 14 13 12 14

Segment EBIT 1,027 834 1,835 1,529

Amortization of intangible assets 87 112 174 232

Segment EBITA (non-GAAP) $ 1,114 $ 946 $ 2,009 $ 1,761

Backlog and Orders

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Orders provide management with a signal of customer demand for the Company's products and services, as well as an indication of future revenues and performance.

The Company believes backlog is a useful measure for evaluating its operational performance and relationship to total orders.

However, the timing and conversion of backlog and orders are subject to numerous uncertainties and risks and are not necessarily indicative of the amount of revenue to be earned in the upcoming fiscal year.

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Backlog Orders

(in billions) December 31, 2025 Year-over-Year Change (1)

Three Months Ended December 31, 2025 Year-over-Year Change (1)

(in billions) March 31, 2026 Year-over-Year Change (1)

Three Months Ended March 31, 2026 Year-over-Year Change (1)

$ 14.9 32 % $ 5.3 40 %

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Total $ 20.0 26 % $ 7.4 30 %

(1) Change is compared to December 31, 2024 (backlog) and the three months ended December 31, 2024 (orders) and excludes the impact of acquisitions, divestitures and foreign currency.

• The increase in backlog and orders was primarily due to demand led by customers' accelerated investments in data center projects.

Remaining performance obligations were $24.5 billion at December 31, 2025.

(1) Change is compared to March 31, 2025 (backlog) and the three months ended March 31, 2025 (orders) and excludes the impact of acquisitions, divestitures and foreign currency.

Backlog increased 26%, led by growth in Products and Systems.

• The 32% increase in backlog for Americas was led by 37% growth in Products and Systems, partially offset by a 2% decrease in Services.

• The 13% increase in backlog for EMEA was due to 14% growth in Services and 13% growth in Products and Systems.

• The 14% increase in backlog for APAC was due to 14% growth in Products and Systems and 6% growth in Services.

Orders increased 30%, reflecting sustained demand in large projects across our core markets, including our solutions for large-scale data center projects .

• The 40% increase in orders for Americas was led by 57% growth in Products and Systems and 4% growth in Services.

• The 11% increase in orders for EMEA was led by 26% growth in Products and Systems, partially offset by an 8% decrease in Services.

• The 4% increase in backlog for APAC was due to 6% growth in Products and Systems and 2% growth in Services.

Remaining performance obligations were $26.3 billion at March 31, 2026.

Differences between the Company’s remaining performance obligations and backlog are primarily due to:

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• Remaining performance obligations include the full remaining term of service contracts with substantial termination penalties versus backlog which includes only one year for all outstanding service contracts.

The Company reports backlog, which it believes is a useful measure of evaluating the Company's operational performance and relationship to total orders.

Liquidity and Capital Resources

Working Capital

(in millions) December 31, 2025 September 30, 2025 Change

(in millions) March 31, 2026 September 30, 2025 Change

Current assets $ 10,991 $ 10,162

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Accounts payable 3,610 3,614 — %

The increase in working capital at December 31, 2025 as compared to September 30, 2025 was primarily due to increases in cash and inventories and decreases in short-term debt and accrued compensation, partially offset by the net impact of other current assets and liabilities.

The increase in working capital at March 31, 2026 as compared to September 30, 2025 was primarily due to increases in cash and accounts receivable and decreases in accrued compensation and the current portion of long-term debt, partially offset by an increase in deferred revenue and the net impact of other current assets and liabilities.

Cash Flows From Continuing Operations

Three Months Ended December 31,

Six Months Ended March 31,

(in millions) 2026 2025

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Cash provided (used) by investing activities 41 (217)

Cash provided (used) by financing activities (464) 201

The increase in cash provided by operating activities primarily reflects higher net income and favorable changes in accounts payable and accrued liabilities.

Cash used by financing activities (1,030) (474)

The increase in cash provided by operating activities primarily reflects higher net income and favorable changes in accounts payable and accrued liabilities and other assets, partially offset by higher accounts receivable.

The change in investing activities was due to proceeds from the ADT Mexico divestiture.

The change in financing activities was primarily due to changes in net debt activity, partially offset by lower stock repurchases.

The increase in cash used by financing activities was primarily due to changes in net debt activity, partially offset by lower stock repurchases.

Capitalization

(in millions) December 31, 2025 September 30, 2025

(in millions) March 31, 2026 September 30, 2025

Short-term debt $ 882 $ 723

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The Company believes the percentage of net debt to net capitalization is useful to understanding the Company’s financial condition as it provides a view of the extent to which the Company relies on external debt financing for its funding and is a measure of risk to its shareholders.

• As of December 31, 2025, approximately $4.8 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

• The Company completed its previously announced accelerated share repurchase ("ASR") program in the second quarter of fiscal 2026 and resumed open market repurchases after final settlement of the ASR transactions.

In total, the Company invested $5.0 billion to repurchase 43,693,817 shares at an average price of $114.43 per share.

As of March 31, 2026, approximately $4.5 billion remains available under the Company's share repurchase authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

The Company expects to repurchase outstanding shares from time to time depending on market conditions, alternate uses of capital, liquidity, and the economic environment.

• The Company declared a dividend of $0.40 per common share in the quarter ended December 31, 2025 and intends to continue paying dividends throughout fiscal 2026.

• The Company believes its capital resources and liquidity position, including cash and cash equivalents of $552 million at December 31, 2025, are adequate to fund operations and meet its cash obligations for the foreseeable future.

• The Company declared a dividend of $0.40 per common share in the quarter ended March 31, 2026 and intends to continue paying dividends throughout fiscal 2026.

• The Company believes its capital resources and liquidity position, including cash and cash equivalents of $698 million at March 31, 2026, are adequate to fund operations and meet its cash obligations for the foreseeable future.

– The Company manages its short-term debt position in the U.S.

and euro commercial paper and bank loan markets.

Commercial paper outstanding totaled $200 million as of December 31, 2025 and $400 million as of September 30, 2025.

Commercial paper outstanding totaled $441 million as of March 31, 2026 and $400 million as of September 30, 2025.

– The Company maintains a shelf registration statement with the SEC under which it may issue additional debt securities, ordinary shares, preferred shares, depository shares, warrants, purchase contracts and units that may be offered in one or more offerings on terms to be determined at the time of the offering.

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– The Company also has the ability to draw on its $2.5 billion revolving credit facility which is scheduled to expire in December 2028.

There were no draws on the revolving credit facility as of December 31, 2025 and September 30, 2025.

There were no draws on the revolving credit facility as of March 31, 2026 and September 30, 2025.

• The Company's ability to access the global capital markets and the related cost of financing is dependent upon, among other factors, the Company's credit ratings.

As of December 31, 2025, the Company's credit ratings and outlook were as follows:

As of March 31, 2026, the Company's credit ratings and outlook were as follows:

Rating Agency Short-Term Rating Long-Term Rating Outlook

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For purposes of calculating these covenants, consolidated shareholders’ equity attributable to Johnson Controls is calculated without giving effect to (i) the application of Accounting Standards Codification ("ASC") 715-60, "Defined Benefit Plans - Other Postretirement," or (ii) the cumulative foreign currency translation adjustment.

As of December 31, 2025, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future.

As of March 31, 2026, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and the indentures governing its notes, and expects to remain in compliance for the foreseeable future.

None of the Company’s debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Company's credit rating.

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The following table presents the net loss attributable to the Parent Company and TFSCA (collectively, the "Obligor Group") and the net income (loss) attributable to intercompany transactions between the Obligor Group and subsidiaries of the Parent Company other than TFSCA (collectively, the "Non-Obligor Subsidiaries") which are excluded from the Net loss attributable to the Obligor Group (in millions):

Three Months Ended December 31, 2025 Year Ended September 30, 2025

Six Months Ended March 31, 2026 Year Ended September 30, 2025

Net loss attributable to the Obligor Group $ 151 $ 844

Net income (loss) attributable to intercompany transactions 4 (56)

Net loss attributable to intercompany transactions 25 56

The Obligor Group does not have sales, gross profit or amounts attributable to noncontrolling interests.

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Obligor Group Intercompany Balances

December 31, 2025 September 30, 2025 December 31, 2025 September 30, 2025

March 31, 2026 September 30, 2025 March 31, 2026 September 30, 2025

Current assets $ 1,245 $ 2,748 $ 6,272 $ 6,161

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Actual results could differ from those estimates.

The Company’s critical accounting estimates requiring significant judgement that could materially impact the Company's results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the

Company’s Annual Report on Form 10-K for the year ended September 30, 2025.

Since the date of the Company’s most recent Annual Report, there have been no material changes in the Company’s critical accounting estimates or assumptions.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2025, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in its Annual Report on Form 10-K for the year ended September 30, 2025.

As of March 31, 2026, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in its Annual Report on Form 10-K for the year ended September 30, 2025.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis