ROKRockwell Automation

We record liabilities for asbestos and environmental and asbestos matters in the period in which our responsibility is probable and the costs can be reasonably estimated. We make changes to the liabilities in the periods in which the estimated costs of remediation or cost to defend and resolve claims change. At third-party environmental sites where more than one potentially responsible party has been identified, we record a liability for our estimated allocable share of costs related to our involvement with the site, as well as an estimated allocable share of costs related to the involvement of insolvent or unidentified parties. If we determine that recovery future recoveries from insurers or other third parties is are probable and a right of set off exists, we record the liability net of the estimated recovery. If we determine that recovery future recoveries from insurers or other third parties is are probable but a right of set off does not exist, we record a liability for the total estimated costs of remediation or resolution of the claims and a receivable for the estimated recovery. At Accruals for legacy asbestos and environmental sites where we matters are the sole responsible party, we record a liability for the total estimated costs of remediation. Ongoing operating and maintenance expenditures included in our environmental remediation obligations the Consolidated Balance Sheet in Other current liabilities and Other liabilities, and recoveries related to these matters when a right of set off does not exist are discounted to present value over the probable future remediation period. Our remaining environmental remediation obligations are undiscounted due to subjectivity of timing and/or amount of future cash payments. recorded in Receivables and Other assets.

Critical assumptions used in this approach included management’s estimated future revenue growth rates and Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) margins, and a discount rate, and a market multiple. rate. Estimated future revenue growth and EBITDA margins are based on management’s our best estimate about current and future conditions. The revenue growth rate assumption reflects above market growth over the next five years before moderating back to a growth rate approximating longer term average inflationary rates. The forecasted near-term growth rate projections take into account recent revenue performance and the orders order backlog. Margin assumptions reflect volume and volume, mix, productivity to offset cost inflation, and price used to fund investments. The estimates. These estimates and assumptions and estimates made are based on a number of factors, including historical experience, reference to external product available market and industry growth publications, and analysis of peer group projections, and information obtained from the management team, including backlog. projections. Actual results and forecasts of revenue growth and margins for our the Sensia reporting unit may be impacted by its concentration within the Oil & Gas industry and with its customer base. Demand for Sensia hardware and software products, solutions, and services is sensitive to industry volatility and risks, including those related to commodity prices, supply and demand dynamics, production costs, geological activity, and political activities. If such factors impact our ability to achieve forecasted revenue growth rates and margins, the fair value of the reporting unit could decrease, which may result in an impairment. We determined the discount rate using our a weighted average cost of capital adjusted for risk factors including risk associated with our above market revenue growth assumptions, historical performance, and industry-specific and economic factors. Also, industry-specific and economic factors that increase the discount rate or decrease the market multiple can decrease the fair value of the Sensia reporting unit, which may result in an impairment.

We face strong competition in all of our market segments in several significant respects. We compete based on breadth and scope of our hardware and software product portfolio and solution and service offerings, technology differentiation, the domain expertise of our employees and partners, product performance, quality of our hardware and software products, solutions, and services, knowledge of integrated systems and applications that address our customers’ business challenges, pricing, delivery, and customer service. The relative importance of these factors differs across the geographic markets and product areas that we serve and across our market segments. We seek strive to maintain stay competitive pricing levels across by continuously advancing technologies, including through the adoption and within geographic markets by continually developing advanced technologies integration of artificial intelligence (AI), for new hardware and software products products, product enhancements, and product enhancements and offering complete solutions for that address our customers’ business problems. challenges. If we fail to achieve our objectives, to keep pace with technological changes including the development of artificial intelligence and machine learning, or to provide high quality hardware and software products, solutions, and services, objectives we may lose business or experience price erosion and correspondingly lower sales and margins. We expect the level of competition to remain high in the future, which could limit our ability to maintain or increase our market share or profitability.

Additionally, we have maintained insurance coverage that includes indemnity and defense costs, over and above self-insured retentions, for many of these asbestos claims. We believe these arrangements will provide substantial coverage for future defense and indemnity costs for these asbestos claims for many years into the future. The uncertainties of asbestos claim litigation make it difficult to predict accurately the ultimate outcome of asbestos claims. outcome. That uncertainty is increased by the possibility of adverse rulings or new legislation affecting asbestos claim litigation or the settlement process. Subject to these uncertainties and based on our experience defending asbestos these claims, we do not believe these lawsuits will have a material effect on our business, financial condition, or results of operations. In the fourth quarter of 2025, we elected to change our method of accounting for net legacy asbestos-related defense costs from expensing as incurred to accruing for all future defense costs. See Note 1 for further information on this change.