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Johnson Controls International plc 8-K Report, Material Agreement (Apr 12, 2024)

Filed April 12, 2024For Securities:JCI

Summary

Johnson Controls International plc (JCI) has entered into a material definitive agreement to settle a class-action lawsuit related to Aqueous Film Forming Foam (AFFF) products. A wholly-owned subsidiary, Tyco Fire Products LP, agreed to a $750 million settlement with a nationwide class of public water systems alleging PFAS contamination. This settlement resolves claims associated with Tyco's AFFF products used in drinking water systems and includes a release of claims against Tyco and related entities. The company recorded a $750 million charge in the quarter ended March 31, 2024, for this settlement. Initial payment of $250 million is expected around May 25, 2024, with the remaining $500 million due six months after preliminary court approval, anticipated in mid-May 2024. JCI expects to recover a substantial portion of this payment through insurance, though the exact amount and timing remain uncertain. The settlement is subject to court approval and other contingencies, with the finalization process expected to take several months. Importantly, this settlement does not cover all potential PFAS-related claims, such as personal injury cases or claims by state attorneys general, which remain subject to ongoing litigation.

Key Highlights

  • 1Johnson Controls (JCI) subsidiary Tyco Fire Products LP agreed to a $750 million settlement for PFAS-related claims from public water systems concerning AFFF products.
  • 2A $750 million charge was recognized in the quarter ended March 31, 2024, for this settlement.
  • 3The settlement is contingent upon preliminary court approval expected around mid-May 2024.
  • 4Tyco expects to recover a significant portion of the settlement cost through insurance, although timing and amounts are uncertain.
  • 5The settlement includes an initial payment of $250 million due by May 25, 2024.
  • 6The agreement excludes certain water systems and does not resolve personal injury claims, property damage cases, or claims by state attorneys general.
  • 7The company has discontinued its receivables factoring programs and will fund its working capital needs from operations and other borrowing sources.

Frequently Asked Questions

The primary financial impact is the recognition of a $750 million charge in the quarter ended March 31, 2024, related to the settlement of PFAS claims. While this is a significant expense, the company anticipates recovering a substantial portion through insurance.

Tyco Fire Products LP will make an initial payment of $250 million on or about May 25, 2024. The remaining $500 million is due six months after preliminary court approval, which is expected around mid-May 2024. The exact timing of the final payment depends on court processes.

No, this settlement specifically addresses claims from a nationwide class of public water systems regarding AFFF products in drinking water. It does not resolve other categories of cases in the AFFF Multi-District Litigation, such as personal injury cases, property damage cases, claims by state attorneys general, or claims arising after May 15, 2024.

Johnson Controls expects to fund its working capital requirements, capital expenditures, dividends, and debt maturities through operations. These will be supplemented by other sources of short- and long-term borrowings, including term loans, commercial paper, and the issuance of debt securities.