UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

____________________________________

FORM 10-Q

____________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-00812

____________________________________

RAYTHEON TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________


Delaware						06-0570975
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


~~870 Winter Street,~~1000 Wilson Boulevard,	~~Waltham,~~Arlington,	~~Massachusetts~~Virginia	~~02451~~22209
(Address of principal executive offices)			(Zip Code)


(781)			522-3000

(Registrant’s telephone number, including area code)

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($1 par value)	RTX	New York Stock Exchange
(CUSIP 75513E 101)
2.150% Notes due 2030	RTX 30	New York Stock Exchange
(CUSIP 75513E AB7)

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 ☐.

Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.


Large Accelerated Filer	☒	Accelerated Filer	☐

Non-accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐

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 ☒.

At September 30, ~~2021~~2022 there were ~~1,496,777,742~~1,470,060,775 shares of Common Stock outstanding.

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Quarter Ended September 30, ~~2021~~2022


			Page

PART I – FINANCIAL INFORMATION			4

Item 1. Unaudited Financial Statements:			4

Condensed Consolidated Statement of Operations for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021			4

Condensed Consolidated Statement of Comprehensive Income ~~(Loss)~~ for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021			5

Condensed Consolidated Balance Sheet at September 30, ~~2021~~2022 and December 31, ~~2020~~2021			6

Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021			7

Condensed Consolidated Statement of Changes in Equity for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021			8

Notes to Condensed Consolidated Financial Statements			9

Report of Independent Registered Public Accounting Firm			4230

Item 2. Management ’s Discussion and Analysis of Financial Condition and Results of Operations			4331

Item 3. Quantitative and Qualitative Disclosures About Market Risk			6951

Item 4. Controls and Procedures			6951

PART II – OTHER INFORMATION			7153

Item 1. Legal Proceedings			7153

Item 1A. Risk Factors			7153

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			7255

Item 6. Exhibits			7256

SIGNATURES			7357

Raytheon Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and products and services designators are all either the registered or unregistered trademarks or tradenames of Raytheon Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and services designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. References to internet web sites in this Form 10-Q are provided for convenience only. Information available through these web sites is not incorporated by reference into this Form 10-Q.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net Sales:
Products sales $ 12,331 $ 11,469 $ 36,174 $ 30,402
Services sales 3,882 3,278 11,170 9,766
Total Net Sales 16,213 14,747 47,344 40,168
Costs and Expenses:
Cost of sales - products 10,296 10,322 30,267 26,571
Cost of sales - services 2,793 2,682 8,014 7,219
Research and development 676 642 1,922 1,872
Selling, general and administrative 1,229 1,401 3,817 4,189
Total Costs and Expenses 14,994 15,047 44,020 39,851
Goodwill impairment — — — (3,183)
Other income, net 124 734 314 835
Operating profit (loss) 1,343 434 3,638 (2,031)
Non-operating expense (income), net
Non-service pension benefit (491) (253) (1,472) (658)
Interest expense, net 358 350 1,046 1,017
Total non-operating expense (income), net (133) 97 (426) 359
Income (loss) from continuing operations before income taxes 1,476 337 4,064 (2,390)
Income tax expense 3 152 690 753
Net income (loss) from continuing operations 1,473 185 3,374 (3,143)
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations 73 34 162 112
Income (loss) from continuing operations attributable to common shareowners 1,400 151 3,212 (3,255)
Discontinued operations (Note 3):
Income (loss) from discontinued operations, before tax (1) 13 (31) (219)
Income tax expense (benefit) from discontinued operations 6 (100) 3 137
Net income (loss) from discontinued operations (7) 113 (34) (356)
Less: Noncontrolling interest in subsidiaries’ earnings from discontinued operations — — — 43
Income (loss) from discontinued operations attributable to common shareowners (7) 113 (34) (399)
Net income (loss) attributable to common shareowners $ 1,393 $ 264 $ 3,178 $ (3,654)
Earnings (loss) Per Share attributable to common shareowners - Basic:
Income (loss) from continuing operations $ 0.93 $ 0.10 $ 2.13 $ (2.48)
Income (loss) from discontinued operations — 0.08 (0.02) (0.30)
Net income (loss) attributable to common shareowners $ 0.93 $ 0.17 $ 2.11 $ (2.79)
Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income (loss) from continuing operations $ 0.93 $ 0.10 $ 2.13 $ (2.48)
Income (loss) from discontinued operations — 0.08 (0.03) (0.30)
Net income (loss) attributable to common shareowners $ 0.93 $ 0.17 $ 2.10 $ (2.79)


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Net Sales:
Products sales	$	12,756	$	12,331	$	36,876	$	36,174
Services sales	4,195		3,882		12,105		11,170
Total net sales	16,951		16,213		48,981		47,344
Costs and Expenses:
Cost of sales - products	10,493		10,296		30,353		30,267
Cost of sales - services	2,971		2,793		8,527		8,014
Research and development	662		676		1,995		1,922
Selling, general and administrative	1,391		1,229		4,284		3,817
Total costs and expenses	15,517		14,994		45,159		44,020

Other income, net	46		124		91		314
Operating profit	1,480		1,343		3,913		3,638
Non-operating expense (income), net
Non-service pension income	(468)		(491)		(1,422)		(1,472)
Interest expense, net	311		358		958		1,046
Total non-operating expense (income), net	(157)		(133)		(464)		(426)
Income from continuing operations before income taxes	1,637		1,476		4,377		4,064
Income tax expense	242		3		518		690
Net income from continuing operations	1,395		1,473		3,859		3,374
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations	8		73		65		162
Income from continuing operations attributable to common shareowners	1,387		1,400		3,794		3,212






Loss from discontinued operations attributable to common shareowners	—		(7)		(19)		(34)
Net income attributable to common shareowners	$	1,387	$	1,393	$	3,775	$	3,178

Earnings (loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations	$	0.94	$	0.93	$	2.57	$	2.13
Loss from discontinued operations	—		—		(0.02)		(0.02)
Net income attributable to common shareowners	$	0.94	$	0.93	$	2.55	$	2.11
Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations	$	0.94	$	0.93	$	2.55	$	2.13
Loss from discontinued operations	—		—		(0.01)		(0.03)
Net income attributable to common shareowners	$	0.94	$	0.93	$	2.54	$	2.10

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Net income (loss) from continuing and discontinued operations		$	1,466	$	298	$	3,340	$	(3,499)
Net income from continuing and discontinued operations										Net income from continuing and discontinued operations	$	1,395	$	1,466	$	3,840	$	3,340
Other comprehensive income (loss), before tax:	Other comprehensive income (loss), before tax:									Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(321)		605		(239)		(175)		Foreign currency translation adjustments	(1,050)		(321)		(1,998)		(239)
Pension and postretirement benefit plans adjustments	Pension and postretirement benefit plans adjustments	86		83		190		(2,093)		Pension and postretirement benefit plans adjustments	48		86		116		190
Change in unrealized cash flow hedging	Change in unrealized cash flow hedging	(167)		154		(139)		(5)		Change in unrealized cash flow hedging	(251)		(167)		(396)		(139)
Other comprehensive income (loss), before tax	Other comprehensive income (loss), before tax	(402)		842		(188)		(2,273)		Other comprehensive income (loss), before tax	(1,253)		(402)		(2,278)		(188)
Income tax (expense) benefit related to items of other comprehensive income (loss)	Income tax (expense) benefit related to items of other comprehensive income (loss)	18		(54)		(17)		535		Income tax (expense) benefit related to items of other comprehensive income (loss)	62		18		71		(17)
Other comprehensive income (loss), net of tax		(384)		788		(205)		(1,738)
Comprehensive income (loss)		1,082		1,086		3,135		(5,237)
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	(1,191)		(384)		(2,207)		(205)
Comprehensive income										Comprehensive income	204		1,082		1,633		3,135
Less: Comprehensive income attributable to noncontrolling interest	Less: Comprehensive income attributable to noncontrolling interest	73		34		162		155		Less: Comprehensive income attributable to noncontrolling interest	8		73		65		162
Comprehensive income (loss) attributable to common shareowners		$	1,009	$	1,052	$	2,973	$	(5,392)
Comprehensive income attributable to common shareowners										Comprehensive income attributable to common shareowners	$	196	$	1,009	$	1,568	$	2,973

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


(dollars in millions)	(dollars in millions)	September 30, 2021		December 31, 2020		(dollars in millions)	September 30, 2022		December 31, 2021
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	7,476	$	8,802	Cash and cash equivalents	$	5,381	$	7,832
Accounts receivable, net	Accounts receivable, net	9,538		9,254		Accounts receivable, net	9,233		9,661
Contract assets	Contract assets	10,899		9,931		Contract assets	12,297		11,361
Inventory, net	Inventory, net	9,426		9,411		Inventory, net	10,443		9,178

Other assets, current	Other assets, current	4,653		5,978		Other assets, current	4,467		4,018
Total Current Assets		41,992		43,376
Total current assets						Total current assets	41,821		42,050
Customer financing assets	Customer financing assets	2,960		3,144		Customer financing assets	2,618		2,848
Fixed assets	Fixed assets	27,116		26,346		Fixed assets	28,201		27,637
Accumulated depreciation	Accumulated depreciation	(12,599)		(11,384)		Accumulated depreciation	(13,533)		(12,665)
Fixed assets, net	Fixed assets, net	14,517		14,962		Fixed assets, net	14,668		14,972
Operating lease right-of-use assets	Operating lease right-of-use assets	1,876		1,880		Operating lease right-of-use assets	1,802		1,958
Goodwill	Goodwill	53,789		54,285		Goodwill	53,168		54,436
Intangible assets, net	Intangible assets, net	38,842		40,539		Intangible assets, net	37,046		38,516
Other assets	Other assets	4,796		3,967		Other assets	7,102		6,624
Total Assets		$	158,772	$	162,153
Total assets						Total assets	$	158,225	$	161,404
Liabilities, Redeemable Noncontrolling Interest and Equity	Liabilities, Redeemable Noncontrolling Interest and Equity					Liabilities, Redeemable Noncontrolling Interest and Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-term borrowings	Short-term borrowings	$	206	$	247	Short-term borrowings	$	2,195	$	134
Accounts payable	Accounts payable	8,667		8,639		Accounts payable	9,017		8,751
Accrued employee compensation	Accrued employee compensation	2,756		3,006		Accrued employee compensation	2,390		2,658
Other accrued liabilities	Other accrued liabilities	9,685		10,517		Other accrued liabilities	11,210		10,162
Contract liabilities	Contract liabilities	12,543		12,889		Contract liabilities	13,368		13,720

Long-term debt currently due	Long-term debt currently due	274		550		Long-term debt currently due	193		24
Total Current Liabilities		34,131		35,848
Total current liabilities						Total current liabilities	38,373		35,449
Long-term debt	Long-term debt	30,768		31,026		Long-term debt	31,059		31,327
Operating lease liabilities, non-current	Operating lease liabilities, non-current	1,541		1,516		Operating lease liabilities, non-current	1,539		1,657
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	9,742		10,342		Future pension and postretirement benefit obligations	7,362		7,855
Other long-term liabilities	Other long-term liabilities	9,621		9,537		Other long-term liabilities	8,124		10,417
Total Liabilities		85,803		88,269
Commitments and contingencies (Note 17)		0		0
Total liabilities						Total liabilities	86,457		86,705
Commitments and contingencies (Note 15)						Commitments and contingencies (Note 15)
Redeemable noncontrolling interest	Redeemable noncontrolling interest	32		32		Redeemable noncontrolling interest	33		35
Shareowners’ Equity:	Shareowners’ Equity:					Shareowners’ Equity:
Common Stock		37,343		36,930
Treasury Stock		(12,398)		(10,407)
Common stock						Common stock	37,829		37,483
Treasury stock						Treasury stock	(15,141)		(12,727)
Retained earnings	Retained earnings	50,343		49,423		Retained earnings	51,652		50,265
Unearned ESOP shares	Unearned ESOP shares	(41)		(49)		Unearned ESOP shares	(31)		(38)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,939)		(3,734)		Accumulated other comprehensive loss	(4,122)		(1,915)
Total Shareowners’ Equity		71,308		72,163
Total shareowners’ equity						Total shareowners’ equity	70,187		73,068
Noncontrolling interest	Noncontrolling interest	1,629		1,689		Noncontrolling interest	1,548		1,596
Total Equity		72,937		73,852
Total Liabilities, Redeemable Noncontrolling Interest and Equity		$	158,772	$	162,153
Total equity						Total equity	71,735		74,664
Total liabilities, redeemable noncontrolling interest and equity						Total liabilities, redeemable noncontrolling interest and equity	$	158,225	$	161,404

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Operating Activities:	Operating Activities:					Operating Activities:
Net income (loss) from continuing operations		$	3,374	$	(3,143)
Adjustments to reconcile net income (loss) from continuing operations to net cash flows provided by operating activities:
Net income from continuing operations						Net income from continuing operations	$	3,859	$	3,374
Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:						Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:
Depreciation and amortization	Depreciation and amortization	3,413		3,003		Depreciation and amortization	3,060		3,413
Deferred income tax provision		(142)		(34)
Deferred income tax benefit						Deferred income tax benefit	(1,681)		(142)
Stock compensation cost	Stock compensation cost	343		253		Stock compensation cost	318		343
Net periodic pension and other postretirement income	Net periodic pension and other postretirement income	(1,073)		(325)		Net periodic pension and other postretirement income	(1,062)		(1,073)
Goodwill impairment charge		—		3,183

Change in:	Change in:					Change in:
Accounts receivable	Accounts receivable	(397)		567		Accounts receivable	321		(397)
Contract assets	Contract assets	(1,117)		699		Contract assets	(999)		(1,117)
Inventory	Inventory	(57)		(111)		Inventory	(1,434)		(57)
Other current assets	Other current assets	(275)		(381)		Other current assets	(584)		(275)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	425		(866)		Accounts payable and accrued liabilities	1,298		425
Contract liabilities	Contract liabilities	83		354		Contract liabilities	(284)		83

Global pension contributions		(38)		(64)

Other operating activities, net	Other operating activities, net	(558)		(171)		Other operating activities, net	(272)		(596)
Net cash flows provided by operating activities from continuing operations	Net cash flows provided by operating activities from continuing operations	3,981		2,964		Net cash flows provided by operating activities from continuing operations	2,540		3,981
Investing Activities:	Investing Activities:					Investing Activities:
Capital expenditures	Capital expenditures	(1,180)		(1,172)		Capital expenditures	(1,433)		(1,180)
Investments in businesses (Note 2)		(6)		—
Investments in businesses						Investments in businesses	(66)		(6)
Dispositions of businesses, net of cash transferred (Note 2)	Dispositions of businesses, net of cash transferred (Note 2)	1,074		2,575		Dispositions of businesses, net of cash transferred (Note 2)	94		1,074
Cash acquired in Raytheon Merger (Note 2)		—		3,208
Customer financing assets receipts (payments), net		24		(138)

Customer financing assets receipts, net						Customer financing assets receipts, net	25		24
Increase in collaboration intangible assets	Increase in collaboration intangible assets	(138)		(136)		Increase in collaboration intangible assets	(169)		(138)
Receipts (payments) from settlements of derivative contracts, net		42		(115)
(Payments) receipts from settlements of derivative contracts, net						(Payments) receipts from settlements of derivative contracts, net	(259)		42
Other investing activities, net	Other investing activities, net	45		(70)		Other investing activities, net	(83)		45
Net cash flows (used in) provided by investing activities from continuing operations		(139)		4,152
Net cash flows used in investing activities from continuing operations						Net cash flows used in investing activities from continuing operations	(1,891)		(139)
Financing Activities:	Financing Activities:					Financing Activities:
Issuance of long-term debt	Issuance of long-term debt	1,981		1,999		Issuance of long-term debt	—		1,981
Distribution from discontinued operations		—		17,207
Repayment of long-term debt	Repayment of long-term debt	(2,547)		(15,052)		Repayment of long-term debt	(2)		(2,547)
Decrease in short-term borrowings, net		(41)		(2,060)
Proceeds from Common Stock issued under employee stock plans		3		6
Dividends paid on Common Stock		(2,212)		(2,026)
Repurchase of Common Stock		(2,000)		(47)

Change in commercial paper, net (Note 8)						Change in commercial paper, net (Note 8)	2,067		—
Change in other short-term borrowings, net						Change in other short-term borrowings, net	(14)		(41)
Dividends paid on common stock						Dividends paid on common stock	(2,337)		(2,212)
Repurchase of common stock						Repurchase of common stock	(2,395)		(2,000)
Net transfers to discontinued operations	Net transfers to discontinued operations	(27)		(1,998)		Net transfers to discontinued operations	—		(27)
Other financing activities, net	Other financing activities, net	(339)		(85)		Other financing activities, net	(329)		(336)
Net cash flows used in financing activities from continuing operations	Net cash flows used in financing activities from continuing operations	(5,182)		(2,056)		Net cash flows used in financing activities from continuing operations	(3,010)		(5,182)
Discontinued Operations:	Discontinued Operations:					Discontinued Operations:
Net cash used in operating activities	Net cash used in operating activities	(27)		(693)		Net cash used in operating activities	—		(27)
Net cash used in investing activities	Net cash used in investing activities	—		(241)		Net cash used in investing activities	—		—
Net cash provided by (used in) financing activities		27		(1,449)
Net cash provided by financing activities						Net cash provided by financing activities	—		27

Net cash used in discontinued operations	Net cash used in discontinued operations	—		(2,383)		Net cash used in discontinued operations	—		—
Effect of foreign exchange rate changes on cash and cash equivalents from continuing operations		10		11
Effect of foreign exchange rate changes on cash and cash equivalents from discontinued operations		—		(76)
Net (decrease) increase in cash, cash equivalents and restricted cash		(1,330)		2,612
Effect of foreign exchange rate changes on cash and cash equivalents						Effect of foreign exchange rate changes on cash and cash equivalents	(57)		10

Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(2,418)		(1,330)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	8,832		4,961		Cash, cash equivalents and restricted cash, beginning of period	7,853		8,832
Cash, cash equivalents and restricted cash within assets related to discontinued operations, beginning of period		—		2,459

Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	7,502		10,032		Cash, cash equivalents and restricted cash, end of period	5,435		7,502
Less: Restricted cash, included in Other assets		26		31
Less: Restricted cash, included in other assets						Less: Restricted cash, included in other assets	54		26

Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	7,476	$	10,001	Cash and cash equivalents, end of period	$	5,381	$	7,476

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts; shares in thousands)	(dollars in millions, except per share amounts; shares in thousands)	2021		2020		2021		2020		(dollars in millions, except per share amounts; shares in thousands)	2022		2021		2022		2021
Equity beginning balance	Equity beginning balance	$	72,721	$	68,892	$	73,852	$	44,231	Equity beginning balance	$	71,990	$	72,721	$	74,664	$	73,852
Common Stock	Common Stock									Common Stock
Beginning balance	Beginning balance	37,183		36,735		36,930		23,019		Beginning balance	37,673		37,183		37,483		36,930
Common Stock plans activity		160		99		413		320
Common Stock issued for Raytheon Company outstanding common stock and equity awards		—		—		—		10,897
Adjustment to Common Stock for the Otis Distribution		—		—		—		2,598
Sale of subsidiary shares from noncontrolling interest, net		—		(1)		—		(1)
Common stock plans activity										Common stock plans activity	156		160		359		413
Purchase of subsidiary shares from noncontrolling interest, net										Purchase of subsidiary shares from noncontrolling interest, net	—		—		(13)		—
Ending balance	Ending balance	37,343		36,833		37,343		36,833		Ending balance	37,829		37,343		37,829		37,343
Treasury Stock	Treasury Stock									Treasury Stock
Beginning balance	Beginning balance	(11,424)		(10,398)		(10,407)		(32,626)		Beginning balance	(14,539)		(11,424)		(12,727)		(10,407)
Common Stock plans activity		—		—		—		2
Common Stock repurchased		(982)		—		(2,002)		(43)
Common Stock issued for Raytheon Company outstanding common stock and equity awards		—		—		—		22,269

Common stock repurchased										Common stock repurchased	(602)		(982)		(2,414)		(2,002)
Other	Other	8		(9)		11		(9)		Other	—		8		—		11
Ending balance	Ending balance	(12,398)		(10,407)		(12,398)		(10,407)		Ending balance	(15,141)		(12,398)		(15,141)		(12,398)
Retained Earnings	Retained Earnings									Retained Earnings
Beginning balance	Beginning balance	48,954		49,744		49,423		61,594		Beginning balance	50,271		48,954		50,265		49,423
Net income (loss)		1,393		264		3,178		(3,654)
Adjustment to retained earnings for the Carrier Distribution		—		—		—		(5,805)
Dividends on Common Stock		3		15		(2,212)		(2,026)
Dividends on ESOP Common Stock		—		(11)		(37)		(38)
Net income										Net income	1,387		1,393		3,775		3,178
Dividends on common stock										Dividends on common stock	5		3		(2,337)		(2,212)
Dividends on ESOP common stock										Dividends on ESOP common stock	—		—		(40)		(37)

Other, including the adoption impact of ASU 2016-13 (Note 21)		(7)		5		(9)		(54)
Other										Other	(11)		(7)		(11)		(9)
Ending balance	Ending balance	50,343		50,017		50,343		50,017		Ending balance	51,652		50,343		51,652		50,343
Unearned ESOP Shares	Unearned ESOP Shares									Unearned ESOP Shares
Beginning balance	Beginning balance	(43)		(56)		(49)		(64)		Beginning balance	(33)		(43)		(38)		(49)
Common Stock plans activity		2		4		8		12
Common stock plans activity										Common stock plans activity	2		2		7		8
Ending balance	Ending balance	(41)		(52)		(41)		(52)		Ending balance	(31)		(41)		(31)		(41)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Loss										Accumulated Other Comprehensive Loss
Beginning balance	Beginning balance	(3,555)		(8,800)		(3,734)		(10,149)		Beginning balance	(2,931)		(3,555)		(1,915)		(3,734)
Other comprehensive income (loss), net of tax		(384)		788		(205)		(1,738)
Separation of Carrier and Otis		—		—		—		3,875
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	(1,191)		(384)		(2,207)		(205)

Ending balance	Ending balance	(3,939)		(8,012)		(3,939)		(8,012)		Ending balance	(4,122)		(3,939)		(4,122)		(3,939)
Noncontrolling Interest	Noncontrolling Interest									Noncontrolling Interest
Beginning balance	Beginning balance	1,606		1,667		1,689		2,457		Beginning balance	1,549		1,606		1,596		1,689
Net Income		73		34		162		155
Net income										Net income	8		73		65		162
Less: Redeemable noncontrolling interest net income	Less: Redeemable noncontrolling interest net income	(2)		(1)		(5)		(2)		Less: Redeemable noncontrolling interest net income	(3)		(2)		(6)		(5)

Dividends attributable to noncontrolling interest	Dividends attributable to noncontrolling interest	(47)		—		(216)		(80)		Dividends attributable to noncontrolling interest	(6)		(47)		(81)		(216)
Sale of subsidiary shares from noncontrolling interest, net		—		—		—		66
Acquisition (disposition) of noncontrolling interest, net		(1)		1		(1)		1
Purchase of subsidiary shares from noncontrolling interest, net										Purchase of subsidiary shares from noncontrolling interest, net	—		—		(19)		—
Disposition of noncontrolling interest, net										Disposition of noncontrolling interest, net	—		(1)		(13)		(1)
Capital contributions	Capital contributions	—		—		—		(31)		Capital contributions	—		—		6		—
Separation of Carrier and Otis		—		—		—		(865)

Ending balance	Ending balance	1,629		1,701		1,629		1,701		Ending balance	1,548		1,629		1,548		1,629
Equity at September 30	Equity at September 30	$	72,937	$	70,080	$	72,937	$	70,080	Equity at September 30	$	71,735	$	72,937	$	71,735	$	72,937
Supplemental share information	Supplemental share information									Supplemental share information
Shares of Common Stock issued under employee plans, net		240		174		1,516		2,081
Shares of Common Stock repurchased		11,535		—		24,177		330
Shares of Common Stock issued for Raytheon Company outstanding common stock & equity awards		—		—		—		652,638
Dividends declared per share of Common Stock		$	—	$	—	$	1.495	$	1.685
Dividends paid per share of Common Stock		0.510		0.475		1.495		1.685
Shares of common stock issued under employee plans, net										Shares of common stock issued under employee plans, net	189		240		2,469		1,516
Shares of common stock repurchased										Shares of common stock repurchased	6,642		11,535		25,688		24,177
Dividends declared per share of common stock										Dividends declared per share of common stock	$	—	$	—	$	1.610	$	1.495

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The Condensed Consolidated Financial Statements at September 30, ~~2021~~2022 and for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are unaudited, and in the opinion of management include adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the financial statements and notes in our ~~2020~~2021 Annual Report on Form 10-K. ~~In addition, we reclassified certain amounts to conform to our current period presentation.~~

~~Separation Transactions, Distributions and Raytheon Merger.~~ ~~On April 3, 2020, United Technologies Corporation (UTC) completed the~~ ~~separation of its business into three independent, publicly traded companies – UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis) (the Separation Transactions).~~ UTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the distributions (the Distributions) effective at 12:01 a.m., Eastern Time, on April 3, 2020. Immediately following the Separation Transactions and Distributions, on April 3, 2020, ~~UTC and Raytheon Company completed their all-stock merger of equals transaction (the Raytheon Merger)~~, pursuant to which Raytheon Company became a wholly-owned subsidiary of UTC and UTC was renamed Raytheon Technologies Corporation (RTC). As a result of these transactions, we now operate in four principal business segments: Collins Aerospace Systems (Collins Aerospace), Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).

UTC was determined to be the accounting acquirer in the Raytheon Merger, and, as a result, the financial statements of Raytheon Technologies include Raytheon Company’s financial position and results of operations for all periods subsequent to the completion of the Raytheon Merger on April 3, 2020. RIS and RMD follow a 4-4-5 fiscal calendar while Collins Aerospace Systems (Collins) and Pratt & Whitney ~~continue to~~ use a quarter calendar ~~end of September 30, 2021.~~end. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021 with respect to RIS or RMD, we are referring to their October 2, 2022 and October 3, 2021 ~~and September 27, 2020~~ fiscal quarter ends, respectively. The historical results of Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

Unless the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” “Raytheon Technologies,” and “RTC” mean ~~United~~Raytheon Technologies Corporation and its ~~subsidiaries when referring to periods prior~~subsidiaries.

Russia Sanctions. In response to the ~~Raytheon Merger~~Russian military’s invasion of Ukraine on February 24, 2022, the U.S. government and the governments of various jurisdictions in which we operate, including Canada, the United Kingdom, the European Union, and others, have imposed broad economic sanctions and export controls targeting specific industries, entities and individuals in Russia. The Russian government has implemented similar counter-sanctions and export controls targeting specific industries, entities and individuals in the U.S. and other jurisdictions in which we operate. These government measures, among other limitations, restrict transactions involving various Russian banks and financial institutions and impose enhanced export controls limiting transfers of various goods, software and technologies to and from Russia, including broadened export controls specifically targeting the ~~combined company, Raytheon Technologies Corporation, when referring~~aerospace sector. These measures have adversely affected and could continue to ~~periods after~~adversely affect the ~~Raytheon Merger. Unless~~Company and/or our supply chain, business partners or customers. As a result of these sanctions on Russia and export controls, in the ~~context otherwise requires,~~first quarter of 2022, we recorded pretax charges of $290 million, $210 million net of tax and the ~~terms “Raytheon~~impact of noncontrolling interest, within our Collins and Pratt & Whitney businesses primarily related to increased estimates for credit losses on both our accounts receivables and contract assets, inventory reserves and purchase order obligations, impairment of customer financing assets for products under lease, impairment of contract fulfillment costs that are no longer recoverable, and a loss on the exit of our investment in a Russia-based joint venture. Additionally, we reversed approximately $1.3 billion of remaining performance obligations (RPO) in the quarter ended March 31, 2022 related to our sales contracts in Russia at Pratt & Whitney and Collins. We will continue to monitor future developments, including additional sanctions and other measures, that could adversely affect the Company” and/or ~~“Raytheon” mean Raytheon Company and its subsidiaries prior to the Raytheon Merger.~~our supply chain, business partners or customers.

COVID-19 Pandemic. ~~Beginning in 2020, the~~The coronavirus disease 2019 (COVID-19) pandemic continues to negatively ~~impacted~~affect the global economy, our business and operations, supply chains, and the industries in which we operate. ~~The continued disruption~~However, we continue to see signs of ongoing recovery in commercial air ~~travel and commercial activities and~~travel. While we believe that the ~~significant restrictions and limitations on businesses, particularly within~~long-term outlook for the aerospace and commercial airline industries, have negatively impacted global supply, demand and distribution capabilities. In particular, the unprecedented decrease in air travel resulting from the COVID-19 pandemic has adversely affected our airline and airframer customers, and their demand for the products and services of our Collins Aerospace and Pratt & Whitney businesses.

In the nine months ended September 30, 2020 we recorded write-downs of assets and significant unfavorable Estimate at Completion (EAC) adjustments in our Collins Aerospace and Pratt & Whitney businesses primarily related to:

•Goodwill impairment charges of $3.2 billion in the quarter ended June 30, 2020 related to two of our Collins Aerospace reporting units. Refer to “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” for additional information,

•~~increased estimated credit losses on both our receivables and contract assets of $48 million and $357 million in the quarter and nine months ended September 30, 2020, respectively,~~

•an unfavorable EAC adjustment of $334 million on a Pratt & Whitney commercial engine aftermarket contract due to lower estimated revenues driven by a change in the estimated maintenance coverage period in both the quarter and nine months ended September 30, 2020,

~~Table of Contents~~

•~~contract asset and inventory impairments at Collins Aerospace~~industry remains positive due to the ~~impact~~fundamental drivers of lower estimated future customer activity resulting from the expected acceleration of fleet retirements of a commercial aircraft of $13 million and $146 million in the quarter and nine months ended September 30, 2020, respectively,

•an unfavorable EAC adjustment of $129 million related to lower estimated revenues due to the restructuring of a customer contract at Pratt & Whitney in both the quarter and nine months ended September 30, 2020,

•~~an $89 million impairment of commercial aircraft program assets at Pratt & Whitney in both the quarter and nine months ended September 30, 2020,~~

•~~the impairment of a Collins Aerospace trade name of $57 million in total, in the first and second quarters of 2020,~~

•unfavorable EAC adjustments on commercial aftermarket contracts at Pratt & Whitney based on a change in estimated future customer activity of $48 million in total, in the second and third quarters of 2020, and

•~~an unfavorable EAC adjustment at Pratt & Whitney related to a shift in overhead costs to military contracts of $44 million in the second quarter of 2020.~~

~~Our RIS and RMD businesses, although experiencing minor impacts, have not experienced significant business disruptions as a result of the COVID-19 pandemic.~~

~~Given the significant reduction in business and leisure passenger~~ air travel continued travel restrictions that have resulted from the ongoing COVID-19 pandemic, and the resulting impacts on our customers and their business activities, we expect our future operating results, particularly those of our Collins Aerospace and Pratt & Whitney businesses, to continuedemand, there continues to be ~~negatively impacted~~uncertainty with respect to when ~~compared~~commercial air traffic capacity will fully return to and/or exceed pre-COVID-19 ~~(2019) results.~~levels. Our expectations regarding the COVID-19 pandemic and ~~its~~ongoing recovery and their potential financial impact are based on available information and assumptions that we believe are reasonable at this time; however, the actual financial impact is highly uncertain and subject to a wide range of factors and future developments. While we believe that the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, there continues to be uncertainty with respect to the point at which commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels. We have seen indications that commercial air travel is continuing to recover in certain areas of demand; however, other areas continue to lag. In addition, while global vaccination rates have increased, infection from COVID-19 variants have continued, which may impact the pace of the commercial aerospace recovery. However, we continue to estimate that a full recovery may occur in 2023 or 2024. New information may continue to emerge concerning the scope, severity and duration of the COVID-19 pandemic, as well as any worsening of the pandemic, the effect of additional variants, the efficacy, acceptance, distribution and availability of vaccines, new or continued actions to contain the pandemic’s spread or treat its impact, and governmental, business and individual personal actions taken in response to the pandemic (including restrictions and limitations on travel and transportation, and changes in leisure and business travel patterns and work environments) among others. Some of these actions and related impacts may be trends that continue in the future even after the pandemic no longer poses a significant public health risk. As our commercial aerospace business begins to recover, we expect certain employee-related and discretionary costs, which were subject to prior year cost reduction actions, to return in 2021 and beyond. A recovery may also impact our judgments around credit risk related to estimated credit losses.

On September 24, 2021, in furtherance of an executive order, the U.S. Safer Federal Workforce Task Force (Task Force) issued guidance requiring federal contractors and subcontractors to comply with COVID-19 safety protocols, including requiring certain employees to be fully vaccinated against COVID-19 by December 8, 2021 except in limited circumstances. The vaccination requirements will be incorporated in new government contracts, renewals, extensions and other modifications signed on and after October 15, 2021, and will apply to employees working on or in connection with such contracts, as well as to employees working at a location at which an employee working on such contract is likely to be present. We had previously announced an internal vaccine mandate with a January 1, 2022 deadline for all U.S. based employees. We do not expect all of our employees who are covered by the U.S. federal contractor mandate to become fully vaccinated by December 8, 2021, but we will comply with the requirements of the Task Force’s implementing guidance and the associated executive order. While this mandate may have an impact on our operations, we do not expect this to have a material adverse effect on our financial condition, results of operations or liquidity. Our ability to perform on our contracts is also dependent upon our subcontractors and suppliers. Our subcontractors and suppliers who are subject to the U.S. federal contractor vaccine mandate may be impacted by an inability to comply or loss of personnel, which could disrupt subcontractor or supplier performance or deliveries, and negatively impact our business.

Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets

~~Business~~ Acquisitions.During the nine months ended September 30, 2022 and 2021, our investment in business acquisitions were $66 million and $6 million, respectively, and consisted of immaterial acquisitions.

Dispositions. ~~As described above, on April 3, 2020, pursuant~~During the nine months ended September 30, 2022 and 2021, cash inflows related to ~~the Agreement~~dispositions were $94 million and ~~Plan~~$1.1 billion, respectively.

Our dispositions of Merger dated June 9, 2019, as amended (the Raytheon Merger Agreement) UTC and Raytheon Company completed their previously announced all-stock merger of equals, following the completion by UTC of the Separation Transactions and Distributions. Raytheon Company (previously New York Stock Exchange (NYSE): RTN) shares ceased trading prior to the market open on April 3, 2020, and each share of Raytheon common stock was convertedbusinesses in the ~~merger into the right to receive 2.3348 shares~~nine months ended September 30, 2022 consisted of ~~UTC common~~immaterial dispositions.

~~Table~~Dispositions of ~~Contents~~

stock previously traded on the NYSE under the ticker symbol “UTX.” Upon closing of the Raytheon Merger, UTC’s name was changed to “Raytheon Technologies Corporation,” and its shares of common stock began trading as of April 3, 2020 on the NYSE under the ticker symbol “RTX.”

~~Total consideration is calculated as follows:~~


~~(dollars~~businesses in ~~millions)~~	~~Amount~~
~~Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards~~	$	~~33,067~~
~~Fair value attributable to pre-merger service for replacement equity awards~~	99
~~Total merger consideration~~	$	~~33,166~~

~~The fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards is calculated as follows:~~


~~(dollars and shares in millions, except per share amounts and exchange ratio)~~	~~Amount~~
~~Number of Raytheon Company common shares outstanding as of April 3, 2020~~	~~277.3~~
~~Number of Raytheon Company stock awards vested as a result of the Raytheon Merger~~ ~~(1)~~	~~0.4~~
~~Total outstanding shares of Raytheon Company common stock and equity awards entitled to merger consideration~~	~~277.7~~
~~Exchange ratio~~ ~~(2)~~	~~2.3348~~
~~Shares of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards~~	~~648.4~~
~~Price per share of RTC common stock~~ ~~(3)~~	$	~~51.00~~
~~Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards~~	$	~~33,067~~

(1) Represents Raytheon Company stock awards that vested as a result of the Raytheon Merger, which is considered a “change in control” for purposes of the Raytheon 2010 Stock Plan. Certain Raytheon Company restricted stock awards and Raytheon Company restricted stock unit (RSU) awards, issued under the Raytheon 2010 Stock Plan vested on an accelerated basis as a result of the Raytheon Merger. Such vested awards were converted into the right to receive RTC common stock determined as the product of (1) the number of vested awards, and (2) the exchange ratio.

~~(2) The exchange ratio is equal to 2.3348 shares of UTC common stock for each share of Raytheon Company common stock in accordance with the Raytheon Merger Agreement.~~

~~(3) The price per share of RTC common stock is based on the RTC opening stock price as of April 3, 2020.~~

~~Allocation of Consideration Transferred to Net Assets Acquired.~~ We accounted for the Raytheon Merger under the acquisition method and are required to measure identifiable assets acquired and liabilities assumed of the acquiree (Raytheon Company) at the fair values on the closing date. During the first quarter of 2021, based on the finalization of our valuation and internal reviews, we completed the purchase price allocation which resulted in a net increase to goodwill of $61 million.

~~Table of Contents~~

~~The final purchase price allocation, net of cash acquired, for the acquisition was as follows:~~


~~(dollars in millions)~~
~~Cash and cash equivalents~~	$	~~3,208~~
~~Accounts receivable, net~~	~~1,997~~
~~Contract assets~~	~~6,023~~
~~Inventory, net~~	~~705~~
~~Other assets, current~~	~~940~~
~~Fixed assets, net~~	~~4,745~~
~~Operating lease right-of-use assets~~	~~950~~
~~Intangible assets, net:~~	~~19,130~~
~~Customer relationships~~	~~12,900~~
~~Tradenames/trademarks~~	~~5,430~~
~~Developed technology~~	~~800~~
~~Other assets~~	~~1,218~~
~~Total identifiable assets acquired~~	~~38,916~~
~~Accounts payable~~	~~1,477~~
~~Accrued employee compensation~~	~~1,492~~
~~Other accrued liabilities~~	~~1,921~~
~~Contract liabilities~~	~~3,002~~
~~Long-term debt, including current portion~~	~~4,700~~
~~Operating lease liabilities, non-current portion~~	~~738~~
~~Future pension and postretirement benefit obligation~~	~~11,607~~
~~Other long-term liabilities~~	~~2,368~~
~~Total liabilities acquired~~	~~27,305~~
~~Total identifiable net assets~~	~~11,611~~
~~Goodwill~~	~~21,589~~
~~Redeemable noncontrolling interest~~	~~(34)~~
~~Total consideration transferred~~	$	~~33,166~~

Fair value adjustments to Raytheon Company’s identified assets and liabilities included an increase in fixed assets of $1.1 billion and an increase to future pension and postretirement benefit obligations of $3.6 billion, primarily related to remeasurement of the liability based on market conditions on the Raytheon Merger closing date. For further information, see “Note 10: Employee Benefit Plans.” In determining the fair value of identifiable assets acquired and liabilities assumed, a review was conducted for any significant contingent assets or liabilities existing as of the closing date. The assessment did not note any material contingencies related to existing legal or government action.

The fair values of the customer relationship intangible assets were determined by using a discounted cash flow valuation method, which is a form of the income approach. Under this approach, the estimated future cash flows attributable to the asset are adjusted to exclude the future cash flows that can be attributed to supporting assets, such as tradenames or fixed assets. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant future cash flows, which require significant management judgment, included forecasted revenue growth rates, remaining developmental effort, operational performance including company specific synergies, program life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where appropriate, the net cash flows are probability-adjusted to reflect the uncertainties associated with the underlying assumptions, including cancellation rates related to backlog, government demand for sole-source and recompete contracts and win rates for recompete contracts, as well as the risk profile of the net cash flows utilized in the valuation. The probability-adjusted future cash flows are then discounted to present value, using an appropriate discount rate that requires significant judgment by management. The customer relationship intangible assets are being amortized based on the pattern of economic benefits we expect to realize over the estimated economic life of the underlying programs. The fair value of the tradename intangible assets were determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value, using forecasted revenue growth rate projections and a discount rate, respectively, that requires significant judgment by management. The tradename

~~Table of Contents~~

~~intangible assets have been determined to have an indefinite life. The developed technology intangible assets are being amortized based on the pattern of economic benefits.~~

~~The intangible assets included above consist of the following:~~


~~(dollars in millions)~~	~~Fair Value~~		~~Useful Life~~
~~Acquired customer relationships~~	$	~~12,900~~	~~25 years~~
~~Acquired tradenames~~	~~5,430~~		~~Indefinite~~
~~Acquired developed technology~~	~~800~~		~~5 to 7 years~~
~~Total identifiable intangible assets~~	$	~~19,130~~

We also identified customer contractual obligations on loss making programs and recorded liabilities of $222 million related to these programs based on the difference between the actual expected operating loss and a normalized operating profit. These liabilities will be liquidated based on the expected pattern of expenses incurred on these contracts.

We recorded $21.6 billion of goodwill as a result of the Raytheon Merger which primarily relates to expected synergies from combining operations and the value of the existing workforce. The goodwill generated as a result of the Raytheon Merger is nondeductible for tax purposes.

~~Merger-Related Costs.~~ ~~Merger-related costs have been expensed as incurred. In~~ the nine months ended September 30, 2021 we recorded $17 million of transaction and integration costs. In the quarter and nine months ended September 30, 2020 we recorded $26 million and $125 million, respectively, of transaction and integration costs. These costs are included in Selling, general and administrative expenses within the Condensed Consolidated Statement of Operations.

~~Supplemental Pro-Forma Data.~~ Raytheon Company’s results of operations have been included in RTC’s financial statements for the period subsequent to the completion of the Raytheon Merger on April 3, 2020. The following unaudited supplemental pro-forma data presents consolidated information as if the Raytheon Merger had been completed on January 1, 2019. The pro-forma results were calculated by combining the results of Raytheon Technologies with the stand-alone results of Raytheon Company for the pre-acquisition periods, which were adjusted to account for certain costs that would have been incurred during this pre-acquisition period. The results below reflect Raytheon Technologies on a continuing operations basis, in order to more accurately represent the structure of Raytheon Technologies after completion of the Separation Transactions, the Distributions and the Raytheon Merger.

Quarter Ended Nine Months Ended
(dollars in millions, except per share amounts) September 30, 2020 September 30, 2020
Net sales $ 14,747 $ 47,668
Income (loss) from continuing operations attributable to common shareowners 174 (2,328)
Basic earnings (loss) per share of common stock from continuing operations $ 0.12 $ (1.54)
Diluted earnings (loss) per share of common stock from continuing operations 0.11 (1.54)

The unaudited supplemental pro-forma data above includes the following significant adjustments made to account for certain costs which would have been incurred if the acquisition had been completed on January 1, 2019, as adjusted for the applicable

~~Table of Contents~~

~~tax impact. As the merger was completed on April 3, 2020, the pro-forma adjustments in the table below only include the required adjustments through April 3, 2020.~~

Quarter Ended Nine Months Ended
(dollars in millions) September 30, 2020 September 30, 2020
Amortization of acquired Raytheon Company intangible assets, net (1)
$ — $ (270)
Amortization of fixed asset fair value adjustment (2)
— (9)
Utilization of contractual customer obligation (3)
— 8
Deferred revenue fair value adjustment (4)
— (4)
Adjustment to non-service pension (income) expense (5)
— 239
RTC/Raytheon fees for advisory, legal, accounting services (6)
23 119
Adjustment to interest expense related to the Raytheon Merger, net (7)
— 9
Elimination of deferred commission amortization (8)
— 5
$ 23 $ 97

(1) Reflects the additional amortization of the acquired Raytheon Company’s intangible assets recognized at fair value in purchase accounting and eliminates the historical Raytheon Company intangible asset amortization expense.

~~(2) Reflects the amortization of the fixed asset fair value adjustment as of the acquisition date.~~

~~(3) Reflects the additional amortization of liabilities recognized for certain acquired loss making contracts as of the acquisition date.~~

~~(4) Reflects the difference between prepayments related to extended arrangements and the fair value of the assumed performance obligations as they are satisfied.~~

~~(5) Represents the elimination of unamortized prior service costs and actuarial losses, as a result of fair value purchase accounting.~~

(6) Reflects the elimination of transaction-related fees incurred by RTC and Raytheon Company in connection with the Raytheon Merger and assumes all of the fees were incurred during the first quarter of 2019.

~~(7) Reflects the amortization of the fair market value adjustment related to Raytheon Company.~~

~~(8) Reflects the elimination of amortization recognized on deferred commissions that are eliminated in purchase accounting.~~

~~The unaudited supplemental pro-forma financial information does not~~ reflect the potential realization of cost savings related to the integration of the two companies. Further, the pro-forma data should not be considered indicative of the results that would have occurred if the acquisition had been consummated on January ~~1, 2019, nor are they indicative of future results.~~

~~Dispositions.~~ ~~On September~~ 8, 2021 ~~we entered into a definitive agreement to divest our global training and logistics business within our Raytheon Intelligence & Space segment. At September 30, 2021, the related assets~~sale of approximately $860 million and liabilities of approximately $100 million have been accounted for as held for sale; however, the disposition does not qualify for presentation as discontinued operations. These held for sale assets, including a preliminary estimate of approximately $660 million of goodwill and intangibles, and liabilities are presented in Other assets, current and Other accrued liabilities, respectively, on our Condensed Consolidated Balance Sheet. The closing of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals.

~~In October 2020, we entered into a definitive agreement to sell~~ our Forcepoint business, ~~which we completed on January 8, 2021,~~ for proceeds of $1.1 billion, net of cash transferred. At December 31, 2020, the related assets of approximately $1.9 billion and liabilities of approximately $855 million were accounted for as held for sale at fair value less cost to sell; however, Forcepoint did not qualify for presentation as discontinued operations. These held for sale assets and liabilities are presented in Other assets, current and Other accrued liabilities, respectively, on our December 31, 2020 Condensed Consolidated Balance Sheet. Assets held for sale included $1.4 billion of goodwill and intangible assets. We did not recognize a pre-tax gain or loss within the Condensed Consolidated Statement of Operations related to the sale of Forcepoint. ~~The results of Forcepoint were included in Eliminations and other in our segment results.~~

In the third quarter of 2020, in accordance with conditions imposed for regulatory approval of the Raytheon Merger, we completed the sale of our Collins Aerospace military Global Positioning System (GPS) and space-based precision optics businesses for $2.3 billion in cash, resulting in an aggregate pre-tax gain, net of transaction costs, of $580 million ($253 million after tax), of which $608 million was included in Other income (expense), net partially offset by $20 million of aggregate transaction costs included in Selling, general and administrative costs and an $8 million expense included in Non-service pension (income) expense within our Condensed Consolidated Statement of Operations. Income before taxes for 2020, through the date of sale for these businesses was $94 million.

In May 2020, in order to meet the requirements for regulatory approval of the Raytheon Merger, we completed the sale of our airborne tactical radios business within our RIS segment for $231 million in cash, net of transaction-related costs. As the transaction occurred subsequent to the Raytheon Merger, the gain of $199 million was not recorded in the Condensed Consolidated Statement of Operations, but rather was recorded as an adjustment to the fair value of net assets acquired in the

149

Table of Contents

allocation of consideration transferred to net assets acquired in the Raytheon Merger. Income before taxes related to the disposed business for the period from the closing of the Raytheon Merger to disposal date was not material.

As discussed further in “Note 3: Discontinued Operations,” on April 2, 2020, Carrier and Otis entered into a Separation and Distribution Agreement with UTC (since renamed Raytheon Technologies Corporation), pursuant to which, among other things, UTC agreed to separate into three independent, publicly traded companies – UTC, Carrier and Otis and distribute all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020. UTC distributed 866,158,910 and 433,079,455 shares of common stock of Carrier and Otis, respectively in the Distributions. As a result of the Distributions, Carrier and Otis are now independent publicly traded companies.

Goodwill. Changes in our goodwill balances for the nine months ended September 30, ~~2021~~2022 were as follows:

(dollars in millions)
Balance as of January 1, 2021(1)
Acquisitions and Divestitures(2)
Foreign Currency Translation and Other Balance as of September 30, 2021
Collins Aerospace Systems $ 31,571 $ — $ (146) $ 31,425
Pratt & Whitney 1,563 — — 1,563
Raytheon Intelligence & Space(1) (2)
9,522 (397) — 9,125
Raytheon Missiles & Defense(1)
11,608 52 (1) 11,659
Total Segments 54,264 (345) (147) 53,772
Eliminations and other 21 — (4) 17
Total $ 54,285 $ (345) $ (151) $ 53,789

(1) In connection with the previously announced January 1, 2021 reorganization of RIS and RMD, goodwill of $282 million was allocated from RMD to RIS on a relative fair value basis and is reflected in the revised balances at January 1, 2021.

(2) Change in Acquisitions and Divestitures for RIS includes the reclassification of a preliminary estimate of approximately $430 million of goodwill associated with the RIS’s global training and logistics business, as criteria for held for sale accounting treatment was met during the three months ended September 30, 2021.

The Company reviews goodwill for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired. We did not have a triggering event in the nine months ended September 30, 2021.

We considered the deterioration in general economic and market conditions primarily due to the COVID-19 pandemic to be a triggering event in the first and second quarters of 2020, requiring an impairment evaluation of goodwill, intangible assets and other assets in our commercial aerospace businesses, Collins Aerospace and Pratt & Whitney. Beginning in the second quarter of 2020, we observed several airline customer bankruptcies, delays and cancellations of aircraft purchases by airlines, fleet retirements and repositioning of original equipment manufacturer (OEM) production schedules and we experienced significant unfavorable EAC adjustments at our Collins Aerospace and Pratt & Whitney businesses due to a decline in flight hours, aircraft fleet utilization, shop visits and commercial OEM deliveries. These factors contributed to a deterioration of our expectations regarding the timing of a return to pre-COVID-19 commercial flight activity, which further reduced our future sales and cash flows expectations.

In the second quarter of 2020, we evaluated the Collins Aerospace and Pratt & Whitney reporting units for goodwill impairment and determined that the carrying values of two of the six Collins Aerospace reporting units exceeded the sum of discounted future cash flows, resulting in aggregate goodwill impairments of $3.2 billion. For additional discussion, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 8 of our 2020 Annual Report on Form 10-K.

The Company continuously monitors and evaluates relevant events and circumstances that could negatively impact the key assumptions in determining the fair value of goodwill, including long-term revenue growth projections, profitability, discount rates including changes to U.S. treasury rates and equity risk premiums, tax rates, recent market valuations from transactions by comparable companies, volatility in the Company’s market capitalization, and general industry, market and macro-economic conditions. It is possible that future changes in such circumstances, including significant future negative developments in the COVID-19 pandemic, or future changes in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of our reporting units, including the expected long-term recovery of airline travel to pre-COVID-19 levels, would require the Company to record a non-cash impairment charge.

~~Table of Contents~~


(dollars in millions)	Balance as of January 1, 2022		Acquisitions and Divestitures		Foreign Currency Translation and Other		Balance as of September 30, 2022
Collins Aerospace Systems	$	31,384	$	(36)	$	(1,293)	$	30,055
Pratt & Whitney	1,563		—		—		1,563
Raytheon Intelligence & Space	9,813		26		(2)		9,837
Raytheon Missiles & Defense	11,659		41		(4)		11,696
Total Segments	54,419		31		(1,299)		53,151
Eliminations and other	17		—		—		17
Total	$	54,436	$	31	$	(1,299)	$	53,168

Intangible Assets. Identifiable intangible assets are comprised of the following:

September 30, 2021 December 31, 2020
(dollars in millions) Gross Amount Accumulated
Amortization Gross Amount Accumulated
Amortization
Amortized:
Patents and trademarks $ 48 $ (36) $ 48 $ (35)
Collaboration assets 5,269 (1,112) 5,021 (1,024)
Exclusivity assets 2,647 (317) 2,541 (295)
Developed technology and other 939 (407) 906 (316)
Customer relationships 29,956 (6,849) 30,241 (5,262)
38,859 (8,721) 38,757 (6,932)
Unamortized:
Trademarks and other 8,704 — 8,714 —
Total $ 47,563 $ (8,721) $ 47,471 $ (6,932)

Given the deterioration in general economic and market conditions primarily due to the COVID-19 pandemic, we performed an assessment of our unamortized intangible assets and recorded charges of $40 million and $17 million in the first and second quarters of 2020, respectively, related to the impairment of a Collins Aerospace indefinite-lived tradename intangible assets. We will continue to evaluate the impact on our customers and our business in future periods which may result in a different conclusion.


	September 30, 2022				December 31, 2021
(dollars in millions)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Amortized:


Collaboration assets	$	5,480	$	(1,335)	$	5,319	$	(1,173)
Exclusivity assets	2,807		(320)		2,673		(318)
Developed technology and other	1,186		(510)		1,214		(466)
Customer relationships	29,649		(8,510)		29,982		(7,411)
	39,122		(10,675)		39,188		(9,368)
Unamortized:
Trademarks and other	8,599		—		8,696		—
Total	$	47,721	$	(10,675)	$	47,884	$	(9,368)

Amortization of intangible assets for the quarters and nine months ended September 30, 2022 and 2021 were $497 million and ~~2020 were~~$1,451 million and $622 million and $1,820 ~~million and $599 million and $1,506~~ million, respectively. The following is the expected amortization of intangible assets for the ~~years 2021~~remainder of 2022 through ~~2026.~~2027:

(dollars in millions) Remaining 2021 2022 2023 2024 2025 2026
Amortization expense $ 630 $ 1,936 $ 2,035 $ 2,142 $ 2,025 $ 1,939

~~Note 3: Discontinued Operations~~

As discussed above, the Separation Transactions and Distributions were completed on April 3, 2020 resulting in, among other things, UTC (since renamed Raytheon Technologies Corporation), being separated into three independent, publicly traded companies – UTC, Carrier and Otis.

Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Income (loss) from discontinued operations attributable to common shareowners is as follows:

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Otis $ — $ — $ — $ 187
Carrier — — — 196
Separation related transactions (1)
(7) 113 (34) (782)
Income (loss) from discontinued operations attributable to common shareowners $ (7) $ 113 $ (34) $ (399)

(1) Reflects debt extinguishment costs in the nine months ended September 30, 2020 related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges and benefits related to separation activities.


(dollars in millions)	Remaining 2022		2023		2024		2025		2026		2027
Amortization expense	$	487	$	2,084	$	2,206	$	2,090	$	2,007	$	1,868

1610

Table of Contents

The following summarized financial information related to discontinued operations has been reclassified from Income (loss) from continuing operations attributable to common shareowners and included in Income (loss) from discontinued operations attributable to common shareowners:

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Otis
Products sales $ — $ — $ — $ 1,123
Services sales — — — 1,843
Cost of products sold — — — 913
Cost of services sold — — — 1,157
Research and development — — — 38
Selling, general and administrative expense — — — 450
Other income (expense), net — — — (65)
Non-operating expense (income), net — — — 3
Income from discontinued operations, before tax — — — 340
Income tax expense from discontinued operations — — — 116
Net income from discontinued operations — — — 224
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations — — — 37
Income from discontinued operations attributable to common shareowners $ — $ — $ — $ 187
Carrier
Products sales $ — $ — $ — $ 3,143
Services sales — — — 741
Cost of products sold — — — 2,239
Cost of services sold — — — 527
Research and development — — — 98
Selling, general and administrative expense — — — 669
Other income (expense), net — — — (30)
Non-operating expense (income), net — — — 17
Income from discontinued operations, before tax — — — 304
Income tax expense from discontinued operations — — — 102
Net income from discontinued operations — — — 202
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations — — — 6
Income from discontinued operations attributable to common shareowners $ — $ — $ — $ 196
Separation related transactions (1)
Selling, general and administrative expense $ 1 $ (13) 31 $ 154
Non-operating expense, net — — — 709
Income (loss) from discontinued operations, before tax (1) 13 (31) (863)
Income tax expense (benefit) from discontinued operations 6 (100) 3 (81)
Net income (loss) from discontinued operations (7) 113 (34) (782)
Total income (loss) from discontinued operations attributable to common shareowners $ (7) $ 113 $ (34) $ (399)

~~Table of Contents~~

~~Selected financial information related to cash flows from discontinued operations is as follows:~~

Nine Months Ended September 30,
(dollars in millions) 2021 2020
Net cash used in operating activities $ (27) $ (693)
Net cash used in investing activities — (241)
Net cash provided by (used in) financing activities 27 (1,449)

Net cash used in operating activities for the nine months ended September 30, 2020 includes the net operating cash flows of Carrier and Otis prior to the Separation Transactions, as well as costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges related to separation activities. Net cash used in financing activities for the nine months ended September 30, 2020 primarily consists of cash distributed by the Company to Carrier and Otis upon separation and debt extinguishment costs related to the early repayment of debt.

Note 4:3: Earnings Per Share
Quarter Ended September 30, Nine Months Ended September 30,
(dollars and shares in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) attributable to common shareowners:
Income (loss) from continuing operations $ 1,400 $ 151 $ 3,212 $ (3,255)
Income (loss) from discontinued operations (7) 113 (34) (399)
Net income (loss) attributable to common shareowners $ 1,393 $ 264 $ 3,178 $ (3,654)
Basic weighted average number of shares outstanding 1,497.9 1,511.5 1,505.0 1,311.3
Stock awards and equity units (share equivalent) 8.0 2.7 6.0 —
Diluted weighted average number of shares outstanding 1,505.9 1,514.2 1,511.0 1,311.3
Earnings (Loss) Per Share attributable to common shareowners - Basic:
Income (loss) from continuing operations $ 0.93 $ 0.10 $ 2.13 $ (2.48)
Income (loss) from discontinued operations — 0.08 (0.02) (0.30)
Net income (loss) attributable to common shareowners $ 0.93 $ 0.17 $ 2.11 $ (2.79)
Earnings (Loss) Per Share attributable to common shareowners - Diluted:
Income (loss) from continuing operations $ 0.93 $ 0.10 $ 2.13 $ (2.48)
Income (loss) from discontinued operations — 0.08 (0.03) (0.30)
Net income (loss) attributable to common shareowners $ 0.93 $ 0.17 $ 2.10 $ (2.79)


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars and shares in millions, except per share amounts)	2022		2021		2022		2021
Net income attributable to common shareowners:
Income from continuing operations	$	1,387	$	1,400	$	3,794	$	3,212
Loss from discontinued operations	—		(7)		(19)		(34)
Net income attributable to common shareowners	$	1,387	$	1,393	$	3,775	$	3,178
Basic weighted average number of shares outstanding	1,470.1		1,497.9		1,478.7		1,505.0
Stock awards and equity units (share equivalent)	9.2		8.0		10.2		6.0
Diluted weighted average number of shares outstanding	1,479.3		1,505.9		1,488.9		1,511.0
Earnings (Loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations	$	0.94	$	0.93	$	2.57	$	2.13
Loss from discontinued operations	—		—		(0.02)		(0.02)
Net income attributable to common shareowners	$	0.94	$	0.93	$	2.55	$	2.11
Earnings (Loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations	$	0.94	$	0.93	$	2.55	$	2.13
Loss from discontinued operations	—		—		(0.01)		(0.03)
Net income attributable to common shareowners	$	0.94	$	0.93	$	2.54	$	2.10

The computation of diluted earnings per share (EPS) excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted EPS excludes the effect of the potential exercise of stock awards when the awards’ assumed proceeds exceed the average market price of the common shares during the period. For the quarter and nine months ended September 30, 2022, the number of stock awards excluded from the computation was 10.4 million and 7.1 million, respectively. For the quarter and nine months ended September 30, 2021, the number of stock awards excluded from the computation was 8.0 million and 15.3 million, respectively. For the quarter ended September 30, 2020, the number of stock awards excluded from the computation was 38.1 million. For the nine months ended September 30, 2020, all stock awards were excluded from the computation of diluted EPS because their effect was antidilutive due to the loss from continuing operations, and amounted to 31.5 million stock awards.

Note 5:4: Changes in Contract Estimates at Completion

We review our Estimates at Completion (EACs) ~~on significant contracts on a periodic basis and for others, no less than~~at least annually or when a change in circumstances ~~warrant~~warrants a modification to a previous estimate. For significant contracts, we review our EACs more frequently. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment by management on a contract by contract basis. As part of this process, management reviews information including, but not limited to, any outstanding key contract

~~Table of Contents~~

matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities relate to management’s judgment about the ability and cost to achieve the schedule, consideration of customer-directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels, such as flight hours or aircraft landings, and related variable consideration. ~~Management’s judgment related to these considerations has become increasingly more significant given the current economic environment primarily caused by the COVID-19 pandemic.~~ Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer, overhead cost rates, and current and past maintenance cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among others. Cost estimates may also include the estimated cost of satisfying our industrial cooperation agreements, sometimes in the form of either offset obligations or in-country industrial participation (ICIP) agreements, required under certain ~~contracts primarily within our RIS and RMD segments.~~contracts. These obligations may or may not be distinct depending on their nature. If cash is paid to a customer to satisfy our offset obligations it is recorded as a reduction in the transaction price.

Changes in estimates of net sales, cost of sales and the related impact to operating profit on contracts recognized over time are recognized on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage of completion in the current period. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. Our EAC adjustments also include the establishment of and changes to loss provisions for our contracts accounted for on a percentage of completion basis.

Table of Contents

Net EAC adjustments had the following impact on our operating results:

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Operating profit (loss) $ 25 $ (462) $ 64 $ (592)
Income (loss) from continuing operations attributable to common shareowners(1)
20 (365) 51 (468)
Diluted earnings (loss) per share from continuing operations attributable to common shareholders (1)
$ 0.01 $ (0.24) $ 0.03 $ (0.36)


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Total net sales	$	72	$	82	$	150	$	207
Operating profit	7		25		2		64
Income from continuing operations attributable to common shareowners(1)	6		20		2		51
Diluted earnings per share from continuing operations attributable to common shareholders (1)	$	—	$	0.01	$	—	$	0.03

(1) Amounts reflect a U.S. statutory tax rate of 21%, which approximates our tax rate on our EAC adjustments.

In the quarters ended September 30, 2021 and 2020, revenue was increased by $82 million and reduced by $231 million, respectively, for performance obligations satisfied (or partially satisfied) in previous periods. In the nine months ended September 30, 2021 and 2020, revenue was increased by $207 million and reduced by $432 million, respectively, for performance obligations satisfied (or partially satisfied) in previous periods. This relates to EAC adjustments that impacted revenue.

As a result of the Raytheon Merger, Raytheon Company’s contracts accounted for on a percentage of completion basis were reset to zero percent complete as of the merger date, since only the unperformed portion of the contract at such date represents the obligation of the Company. For additional information related to the Raytheon Merger, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets.”

Note 6:5: Accounts Receivable, Net

Accounts receivable, net consisted of the following:
(dollars in millions) September 30, 2021 December 31, 2020
Accounts receivable $ 10,033 $ 9,800
Allowance for expected credit losses (495) (546)
Total accounts receivable, net $ 9,538 $ 9,254

The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables. Under these arrangements, the Company factored receivables of $4.4 billion and $5.4 billion during the nine months ended September 30, 2021 and 2020, respectively, which includes amounts factored on certain aerospace receivables at the customers’ request for which we are compensated by the customer for the extended collection cycle. The cash received from these arrangements is reflected as cash provided by operating activities in the Condensed Consolidated Statement of Cash Flows.

~~Table of Contents~~

~~The changes in the allowance for expected credit losses related to Accounts receivable were as follows:~~

Nine Months Ended September 30,
(dollars in millions) 2021 2020
Balance as of January 1 $ 546 $ 254
Current period provision for expected credit losses, net of recoveries (1)
(32) 263
Write-offs charged against the allowance for expected credit losses (15) (5)
Other, net(2)
(4) 18
Balance as of September 30 $ 495 $ 530

(1) The current provision for expected credit losses for the nine months ended September 30, 2020 includes $223 million of reserves driven by customer bankruptcies and additional reserves for credit losses primarily due to the current economic environment primarily caused by the COVID-19 pandemic.

(2) Other, net for the nine months ended September 30, 2020 includes a $34 million impact related to the January 1, 2020 adoption of Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.


(dollars in millions)	September 30, 2022		December 31, 2021
Accounts receivable	$	9,717	$	10,136
Allowance for expected credit losses	(484)		(475)
Total accounts receivable, net	$	9,233	$	9,661

Note 7:6: Contract Assets and Liabilities

Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. Total contract assets and contract liabilities ~~as of September 30, 2021 and December 31, 2020 are~~were as follows:


(dollars in millions)	(dollars in millions)	September 30, 2021		December 31, 2020		(dollars in millions)	September 30, 2022		December 31, 2021
Contract assets	Contract assets	$	10,899	$	9,931	Contract assets	$	12,297	$	11,361
Contract liabilities	Contract liabilities	(12,543)		(12,889)		Contract liabilities	(13,368)		(13,720)
Net contract liabilities	Net contract liabilities	$	(1,644)	$	(2,958)	Net contract liabilities	$	(1,071)	$	(2,359)

Contract assets increased ~~$968~~$936 million during the nine months ended September 30, ~~2021~~2022 primarily due to sales in excess of billings at Pratt & Whitney, RMD and ~~contractual billing terms on U.S. government and foreign military sales contracts at RMD.~~RIS. Contract liabilities decreased ~~$346~~$352 million during the nine months ended September 30, ~~2021~~2022 primarily due to ~~$364 million~~the effect of ~~contract liability reduction related to a contract termination~~foreign currency exchange rate translation fluctuations at ~~Collins Aerospace in the second quarter of 2021, revenue recognized on certain U.S. government contracts with milestone payments at RIS~~RMD and revenue recognized on certain ~~international~~ contracts associated with ~~advances~~performance at RMD ~~partially offset by billings in excess of sales at Pratt & Whitney.~~and RIS. We recognized revenue of ~~$960 million~~$1.1 billion and ~~$3,686 million~~$4.1 billion during the quarter and nine months ended September 30, 2022, related to contract liabilities as of January 1, 2022 and $1.0 billion and $3.7 billion during the quarter and nine months ended September 30, 2021, ~~respectively,~~ related to contract liabilities as of January 1, ~~2021 and $480 million and $2,288 million during the quarter and nine months ended September 30, 2020, respectively, related to contract liabilities as of January 1, 2020.~~2021.

As of September 30, ~~2021,~~2022, our ~~contract~~Contract liabilities include approximately ~~$440~~$355 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated. In addition, as of September 30, 2022, our Contract liabilities include advance payments, in immaterial amounts, received from Russian customers on contracts we are currently unable to perform on due to global sanctions on Russia and export controls. Depending on the contractual terms and as allowed by sanctions, certain of these advance payments may become refundable.

Contract assets include an allowance for credit losses of ~~$250~~$315 million and ~~$177~~$251 million as of September 30, ~~2021~~2022 and December 31, ~~2020, respectively.~~

~~Note 8: Inventory, net~~
(dollars in millions) September 30, 2021 December 31, 2020
Raw materials $ 2,989 $ 3,015
Work-in-process 3,295 2,924
Finished goods 3,142 3,472
Total inventory, net $ 9,426 $ 9,411

~~Raw materials, work-in-process and finished goods are net of total valuation reserves of $1,943 million and $1,788 million as of September 30,~~ 2021, ~~and December 31, 2020,~~ respectively.

2012

Table of Contents

Note 9:7: Inventory, net


(dollars in millions)	September 30, 2022		December 31, 2021
Raw materials	$	3,387	$	3,024
Work-in-process	3,747		3,085
Finished goods	3,309		3,069
Total inventory, net	$	10,443	$	9,178

Note 8: Borrowings and Lines of Credit
(dollars in millions) September 30, 2021 December 31, 2020
Commercial paper $ 160 $ 160
Other borrowings 46 87
Total short-term borrowings $ 206 $ 247

As of September 30, ~~2021, our maximum commercial paper borrowing limit was $5.0~~2022, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $7.0 billion, ~~as the commercial paper is backed by our~~consisting of a $5.0 billion revolving credit ~~agreement. We~~agreement, which expires in April 2025, and a $2.0 billion revolving credit agreement, which was renewed in September 2022 and expires in September 2023. As of September 30, 2022, there were no borrowings outstanding under these agreements.

From time to time, we use ~~our~~ commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The commercial paper notes have original maturities of not more than 364 days from the date of issuance. As of September 30, 2022, our maximum commercial paper borrowing limit was $5.0 billion as the commercial paper is backed by our $5.0 billion revolving credit agreement. We had $2.1 billion of commercial paper outstanding ~~have~~at September 30, 2022, which is reflected in Short-term borrowings in our Condensed Consolidated Balance Sheet. At September 30, 2022, short-term commercial paper borrowings outstanding had a weighted-average interest rate of 3.6%. There was no commercial paper outstanding at December 31, 2021.

Proceeds from issuance of commercial paper with maturities greater than 90 days were $1.4 billion during the nine months ended September 30, 2022. There were no repayments of commercial paper with maturities greater than 90 days during the nine months ended September 30, 2022. During the nine months ended September 30, 2021 commercial paper borrowings had original maturities of not more than 90 days from the date of issuance.

~~In May 2021, we renewed our $2.0 billion revolving credit agreement, which now expires in May 2022. As~~We had no issuances of September 30, 2021, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $7.0 billion consisting of a $5.0 billion revolving credit agreement that became available upon completion of the Raytheon Merger on April 3, 2020, and the $2.0 billion revolving credit agreement, and there were no borrowings outstanding under these agreements.

In June 2020, we completed an exchange offer of outstanding subsidiary notes with an aggregate principal amount of approximately $8.2 billion in exchange for approximately $8.2 billion of Raytheon Technologies notes with identical interest rates, maturity dates, and redemption provisions.

~~In preparation for and in anticipation of the Separation Transactions and Distributions, the Company, Carrier and Otis issued and the Company repaid~~ long-term debt induring the nine months ended September 30, ~~2020, which are included in the tables below.~~

2022. We had the following issuances of long-term debt during the nine months ended September 30, 2021 and 2020, which is inclusive of issuances made by Carrier and Otis prior to the Distributions, the proceeds of which were primarily used by the Company to extinguish Raytheon Technologies short-term and long-term debt, and therefore, these issuances were treated as a distribution from discontinued operations within financing activities from continuing operations on our Condensed Consolidated Statement of Cash Flows:2021.

Issuance Date

Description of Notes

Aggregate Principal Balance (in millions)

August 10, 2021

1.900% notes due 2031 (1)

1,000

2.820% notes due 2051 (1)

1,000

~~May 18, 2020~~

~~2.250% notes due 2030~~

~~1,000~~

~~3.125% notes due 2050~~

~~1,000~~

~~March 27, 2020~~

~~Term Loan due 2023 (Otis)~~ ~~(2)~~

~~1,000~~

~~Term Loan due 2023 (Carrier)~~ ~~(2)~~

~~1,750~~

~~February 27, 2020~~

~~1.923% notes due 2023~~ ~~(2)~~

~~500~~

~~LIBOR plus 0.450% floating rate notes due 2023~~ ~~(2)~~

~~500~~

~~2.056% notes due 2025~~ ~~(2)~~

~~1,300~~

~~2.242% notes due 2025~~ ~~(2)~~

~~2,000~~

~~2.293% notes due 2027~~ ~~(2)~~

~~500~~

~~2.493% notes due 2027~~ ~~(2)~~

~~1,250~~

~~2.565% notes due 2030~~ ~~(2)~~

~~1,500~~

~~2.722% notes due 2030~~ ~~(2)~~

~~2,000~~

~~3.112% notes due 2040~~ ~~(2)~~

~~750~~

~~3.377% notes due 2040~~ ~~(2)~~

~~1,500~~

~~3.362% notes due 2050~~ ~~(2)~~

~~750~~

~~3.577% notes due 2050~~ ~~(2)~~

~~2,000~~

(1) The net proceeds received from these debt issuances, along with cash on hand, were used to fund the repayment of our 2.800% and 2.500% notes due ~~2022.~~

(2) The debt issuances and term loan draws reflect debt incurred by Carrier and Otis. The net proceeds of these issuances were primarily utilized to extinguish Raytheon Technologies short-term and long-term debt in ~~order to not exceed the maximum applicable net indebtedness required by the Raytheon Merger Agreement.~~

~~Table of Contents~~

2022.

We made the following repayments of long-term debt during the nine months ended September 30, ~~2021 and 2020:~~2021:


Repayment Date	Description of Notes	Aggregate Principal Balance (in millions)










August 26, 2021	2.800% notes due 2022	$	1,100
	2.500% notes due 2022	1,100
March 1, 2021	8.750% notes due 2021	250
~~May 19, 2020~~	~~3.650% notes due 2023~~ ~~(1)(2)~~	~~410~~
~~May 15, 2020~~	~~EURIBOR plus 0.20% floating rate notes due 2020 (€750 million principal value)(2)~~	~~817~~
~~March 29, 2020~~	~~4.500% notes due 2020~~ ~~(1)(2)~~	~~1,250~~
	~~1.125% notes due 2021 (€950 million principal value)~~ ~~(1)(2)~~	~~1,082~~
	~~1.250% notes due 2023 (€750 million principal value)~~ ~~(1)(2)~~	~~836~~
	~~1.150% notes due 2024 (€750 million principal value)~~ ~~(1)(2)~~	~~841~~
	~~1.875% notes due 2026 (€500 million principal value)~~ ~~(1)(2)~~	~~567~~
~~March 3, 2020~~	~~1.900% notes due 2020~~ ~~(1)(2)~~	~~1,000~~
	~~3.350% notes due 2021~~ ~~(1)(2)~~	~~1,000~~
	~~LIBOR plus 0.650% floating rate notes due 2021~~ ~~(1)(2)~~	~~750~~
	~~1.950% notes due 2021~~ ~~(1)(2)~~	~~750~~
	~~2.300% notes due 2022~~ ~~(1)(2)~~	~~500~~
	~~3.100% notes due 2022~~ ~~(1)(2)~~	~~2,300~~
	~~2.800% notes due 2024~~ ~~(1)(2)~~	~~800~~
~~March 2, 2020~~	~~4.875% notes due 2020~~ ~~(1)(2)~~	~~171~~
~~February 28, 2020~~	~~3.650% notes due 2023~~ ~~(1)(2)~~	~~1,669~~
	~~2.650% notes due 2026~~ ~~(1)(2)~~	~~431~~

(1) In connection with the early repayment of outstanding principal, Raytheon Technologies recorded debt extinguishment costs of $703 million for the nine months ended September 30, 2020, which are classified as discontinued operations in our Condensed Consolidated Statement of Operations as we would not have had to redeem the debt, except for the Separation Transactions. No proceeds of the notes issued May 18, 2020 were used to fund the May 19, 2020 redemption.

~~(2) Extinguishment of Raytheon Technologies short-term and long-term debt in order to not exceed the maximum net indebtedness required by the Raytheon Merger Agreement.~~

Long-term debt consisted of the following:

(dollars in millions) September 30, 2021 December 31, 2020
8.750% notes due 2021 $ — $ 250
3.100% notes due 2021 (1)
250 250
2.800% notes due 2022 (1)
— 1,100
2.500% notes due 2022 (1) (2)
— 1,100
3.650% notes due 2023 (1)
171 171
3.700% notes due 2023 (1)
400 400
3.200% notes due 2024 (1)
950 950
3.150% notes due 2024 (1) (2)
300 300
3.950% notes due 2025 (1)
1,500 1,500
2.650% notes due 2026 (1)
719 719
3.125% notes due 2027 (1)
1,100 1,100
3.500% notes due 2027 (1)
1,300 1,300
7.200% notes due 2027 (1) (2)
382 382
7.100% notes due 2027 141 141
6.700% notes due 2028 400 400
7.000% notes due 2028 (1) (2)
185 185
4.125% notes due 2028 (1)
3,000 3,000


(dollars in millions)	September 30, 2022		December 31, 2021




3.650% notes due 2023 (1)	$	171	$	171
3.700% notes due 2023 (1)	400		400
3.200% notes due 2024 (1)	950		950
3.150% notes due 2024 (1)	300		300
3.950% notes due 2025 (1)	1,500		1,500
2.650% notes due 2026 (1)	719		719
3.125% notes due 2027 (1)	1,100		1,100
3.500% notes due 2027 (1)	1,300		1,300

2213

Table of Contents


7.200% notes due 2027 (1)						7.200% notes due 2027 (1)	382		382
7.100% notes due 2027						7.100% notes due 2027	135		135
6.700% notes due 2028						6.700% notes due 2028	285		285
7.000% notes due 2028 (1)						7.000% notes due 2028 (1)	185		185
4.125% notes due 2028 (1)						4.125% notes due 2028 (1)	3,000		3,000
7.500% notes due 2029 (1)	7.500% notes due 2029 (1)	550		550		7.500% notes due 2029 (1)	414		414
2.150% notes due 2030 (€500 million principal value) (1)	2.150% notes due 2030 (€500 million principal value) (1)	585		612		2.150% notes due 2030 (€500 million principal value) (1)	488		565
2.250% notes due 2030 (1)	2.250% notes due 2030 (1)	1,000		1,000		2.250% notes due 2030 (1)	1,000		1,000
1.900% notes due 2031 (1)	1.900% notes due 2031 (1)	1,000		—		1.900% notes due 2031 (1)	1,000		1,000
2.375% notes due 2032 (1)						2.375% notes due 2032 (1)	1,000		1,000
5.400% notes due 2035 (1)	5.400% notes due 2035 (1)	600		600		5.400% notes due 2035 (1)	446		446
6.050% notes due 2036 (1)	6.050% notes due 2036 (1)	600		600		6.050% notes due 2036 (1)	410		410
6.800% notes due 2036 (1)	6.800% notes due 2036 (1)	134		134		6.800% notes due 2036 (1)	117		117
7.000% notes due 2038	7.000% notes due 2038	159		159		7.000% notes due 2038	148		148
6.125% notes due 2038 (1)	6.125% notes due 2038 (1)	1,000		1,000		6.125% notes due 2038 (1)	575		575
4.450% notes due 2038 (1)	4.450% notes due 2038 (1)	750		750		4.450% notes due 2038 (1)	750		750
5.700% notes due 2040 (1)	5.700% notes due 2040 (1)	1,000		1,000		5.700% notes due 2040 (1)	553		553
4.875% notes due 2040 (1) (2)		600		600
4.700% notes due 2041 (1) (2)		425		425
4.875% notes due 2040 (1)						4.875% notes due 2040 (1)	600		600
4.700% notes due 2041 (1)						4.700% notes due 2041 (1)	425		425
4.500% notes due 2042 (1)	4.500% notes due 2042 (1)	3,500		3,500		4.500% notes due 2042 (1)	3,500		3,500
4.800% notes due 2043 (1)	4.800% notes due 2043 (1)	400		400		4.800% notes due 2043 (1)	400		400
4.200% notes due 2044 (1) (2)		300		300
4.200% notes due 2044 (1)						4.200% notes due 2044 (1)	300		300
4.150% notes due 2045 (1)	4.150% notes due 2045 (1)	850		850		4.150% notes due 2045 (1)	850		850
3.750% notes due 2046 (1)	3.750% notes due 2046 (1)	1,100		1,100		3.750% notes due 2046 (1)	1,100		1,100
4.050% notes due 2047 (1)	4.050% notes due 2047 (1)	600		600		4.050% notes due 2047 (1)	600		600
4.350% notes due 2047 (1)	4.350% notes due 2047 (1)	1,000		1,000		4.350% notes due 2047 (1)	1,000		1,000
4.625% notes due 2048 (1)	4.625% notes due 2048 (1)	1,750		1,750		4.625% notes due 2048 (1)	1,750		1,750
3.125% notes due 2050 (1)	3.125% notes due 2050 (1)	1,000		1,000		3.125% notes due 2050 (1)	1,000		1,000
2.820% notes due 2051 (1)	2.820% notes due 2051 (1)	1,000		—		2.820% notes due 2051 (1)	1,000		1,000
3.030% notes due 2052 (1)						3.030% notes due 2052 (1)	1,100		1,100
Other (including finance leases)	Other (including finance leases)	272		292		Other (including finance leases)	256		270
Total principal long-term debt	Total principal long-term debt	30,973		31,470		Total principal long-term debt	31,209		31,300
Other (fair market value adjustments, (discounts)/premiums, and debt issuance costs)		69		106
Other (fair value adjustments, (discounts)/premiums, and debt issuance costs)						Other (fair value adjustments, (discounts)/premiums, and debt issuance costs)	43		51
Total long-term debt	Total long-term debt	31,042		31,576		Total long-term debt	31,252		31,351
Less: current portion	Less: current portion	274		550		Less: current portion	193		24
Long-term debt, net of current portion	Long-term debt, net of current portion	$	30,768	$	31,026	Long-term debt, net of current portion	$	31,059	$	31,327

(1) We may redeem these notes, in whole or in part, at our option pursuant to their ~~terms.~~

~~(2) Debt assumed in~~terms prior to the ~~Raytheon Merger.~~applicable maturity date.

The average maturity of our ~~long-term~~Long-term debt at September 30, ~~2021~~2022 is approximately 1514 years. ~~The average interest expense rate on our total borrowings for the quarters and nine months ended September 30, 2021 and 2020 was as follows:~~

Quarter Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Average interest expense rate 4.2 % 4.2 % 4.1 % 4.0 %

Note ~~10:~~9: Employee Benefit Plans

Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined benefit pension and postretirement benefit (PRB) plans and defined contribution plans.

On April 3, 2020, UTC completed the Separation Transactions, which included the transfer of certain defined benefit plans from UTC to Carrier and Otis. The plans transferred were primarily international plans with the majority of the UTC defined benefit liability remaining with Raytheon Technologies. Upon separation, the pension participants within Carrier and Otis were effectively terminated from Raytheon Technologies. The terminations triggered a mid-year remeasurement of the UTC domestic plans. The remeasurement, which was calculated using discount rates and asset values as of April 3, 2020 (using March 31, 2020 as a practical expedient), resulted in a $2.4 billion increase to our pension liability in the quarter ended June 30, 2020, primarily due to a decrease in the fair market value of the plans’ assets since December 31, 2019. All service cost previously associated with Carrier and Otis was reclassified to discontinued operations. For non-service pension (income)

2314

Table of Contents

expense and pension liabilities, generally only the portions related to the defined benefit plans transferred to Carrier and Otis as part of the Separation Transactions were reclassified to discontinued operations.

Raytheon Company has both funded and unfunded domestic and foreign defined benefit pension and PRB plans. As of the merger date, the Raytheon Company plans were remeasured at fair value using accounting policies consistent with the UTC plans. The deferred pension and PRB plan losses included in Raytheon Company’s accumulated other comprehensive income (loss) as of the merger date were eliminated and are no longer subject to amortization in net periodic benefit (income) expense. Amounts prior to the merger date of April 3, 2020 do not include the Raytheon Company pension and PRB plan results.

Contributions to our plans were as follows:


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
U.S. qualified defined benefit plans	U.S. qualified defined benefit plans	$	—	$	—	$	—	$	—	U.S. qualified defined benefit plans	$	—	$	—	$	—	$	—
International defined benefit plans	International defined benefit plans	8		14		29		56		International defined benefit plans	18		8		48		29
PRB plans	PRB plans	5		8		9		8		PRB plans	8		5		18		9
Defined contribution plans	Defined contribution plans	221		228		730		668		Defined contribution plans	230		221		792		730

The amounts recognized in the Condensed Consolidated Balance Sheet consist of:


(dollars in millions)	(dollars in millions)	September 30, 2021		December 31, 2020		(dollars in millions)	September 30, 2022		December 31, 2021
Noncurrent pension assets (included in Other assets)	Noncurrent pension assets (included in Other assets)	$	1,389	$	424	Noncurrent pension assets (included in Other assets)	$	4,175	$	3,214
Current pension and PRB liabilities (included in Accrued employee compensation)	Current pension and PRB liabilities (included in Accrued employee compensation)	314		314		Current pension and PRB liabilities (included in Accrued employee compensation)	309		310
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	9,742		10,342		Future pension and postretirement benefit obligations	7,362		7,855

The amounts recognized in Future pension and postretirement benefit obligations consist of:


(dollars in millions)	(dollars in millions)	September 30, 2021		December 31, 2020		(dollars in millions)	September 30, 2022		December 31, 2021
Noncurrent pension liabilities	Noncurrent pension liabilities	$	8,638	$	9,131	Noncurrent pension liabilities	$	6,440	$	6,873
Noncurrent PRB liabilities	Noncurrent PRB liabilities	1,039		1,072		Noncurrent PRB liabilities	852		903
Other pension and PRB related items	Other pension and PRB related items	65		139		Other pension and PRB related items	70		79
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	$	9,742	$	10,342	Future pension and postretirement benefit obligations	$	7,362	$	7,855

The ~~following table illustrates the~~ components of net periodic benefit (income) expense for our defined pension and PRB ~~plans:~~plans were as follows:


		Pension Benefits Quarter Ended September 30,				PRB Quarter Ended September 30,					Pension Benefits Quarter Ended September 30,				PRB Quarter Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Operating expense	Operating expense									Operating expense
Service cost	Service cost	$	131	$	149	$	2	$	2	Service cost	$	118	$	131	$	2	$	2
Non-operating expense	Non-operating expense									Non-operating expense
Interest cost	Interest cost	312		465		6		10		Interest cost	380		312		7		6
Expected return on plan assets	Expected return on plan assets	(869)		(827)		(5)		(4)		Expected return on plan assets	(883)		(869)		(5)		(5)
Amortization of prior service cost (credit)		(42)		13		(1)		(1)
Amortization of prior service credit										Amortization of prior service credit	(40)		(42)		—		(1)
Recognized actuarial net loss (gain)	Recognized actuarial net loss (gain)	109		86		(2)		(3)		Recognized actuarial net loss (gain)	76		109		(3)		(2)
Net settlement, curtailment and special termination benefit loss		1		8		—		—
Non-service pension (income) expense		(489)		(255)		(2)		2
Net settlement, curtailment and special termination benefit (gain) loss										Net settlement, curtailment and special termination benefit (gain) loss	—		1		—		—
Non-service pension income										Non-service pension income	(467)		(489)		(1)		(2)
Total net periodic benefit (income) expense	Total net periodic benefit (income) expense	$	(358)	$	(106)	$	—	$	4	Total net periodic benefit (income) expense	$	(349)	$	(358)	$	1	$	—

2415

Table of Contents


		Pension Benefits Nine Months Ended September 30,				PRB Nine Months Ended September 30,					Pension Benefits Nine Months Ended September 30,				PRB Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Operating expense	Operating expense									Operating expense
Service cost	Service cost	$	393	$	328	$	6	$	5	Service cost	$	354	$	393	$	6	$	6
Non-operating expense	Non-operating expense									Non-operating expense
Interest cost	Interest cost	937		1,170		18		26		Interest cost	1,142		937		21		18
Expected return on plan assets	Expected return on plan assets	(2,608)		(2,162)		(15)		(9)		Expected return on plan assets	(2,661)		(2,608)		(16)		(15)
Amortization of prior service cost (credit)		(126)		39		(3)		(3)
Amortization of prior service credit										Amortization of prior service credit	(123)		(126)		—		(3)
Recognized actuarial net loss (gain)	Recognized actuarial net loss (gain)	327		255		(6)		(9)		Recognized actuarial net loss (gain)	230		327		(9)		(6)
Net settlement, curtailment and special termination benefit loss		4		35		—		—
Non-service pension (income) expense		(1,466)		(663)		(6)		5
Net settlement, curtailment and special termination benefit (gain) loss										Net settlement, curtailment and special termination benefit (gain) loss	(6)		4		—		—
Non-service pension income										Non-service pension income	(1,418)		(1,466)		(4)		(6)
Total net periodic benefit (income) expense	Total net periodic benefit (income) expense	$	(1,073)	$	(335)	$	—	$	10	Total net periodic benefit (income) expense	$	(1,064)	$	(1,073)	$	2	$	—

We have set aside assets in separate trusts, which we expect to be used to pay for certain nonqualified defined benefit and defined contribution plan obligations in excess of qualified plan limits. These assets are included in Other assets in our Condensed Consolidated Balance Sheet. The fair value of marketable securities held in trusts was as follows:


(dollars in millions)	(dollars in millions)	September 30, 2021		December 31, 2020		(dollars in millions)	September 30, 2022		December 31, 2021
Marketable securities held in trusts	Marketable securities held in trusts	$	965	$	881	Marketable securities held in trusts	$	740	$	965

Note ~~11:~~10: Income Taxes

Our effective tax rate was 14.8% and 0.2% ~~and 45.1% in~~in the quarters ended September 30, 2022 and 2021, respectively. The effective tax rate in the quarter ended September 30, 2022 includes a benefit of approximately 4 percentage points primarily related to an incremental Foreign Derived Intangible Income (FDII) benefit and ~~2020, respectively.~~other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the quarter ended September 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third ~~quarter. Tax expense in the~~ quarter ~~ended September 30, 2020 includes tax charges incremental to the U.S. statutory rate~~ of ~~$206 million associated with the sales of the Collins Aerospace businesses, as described in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets.”~~2021.

Our effective tax rate was ~~17.0%~~11.8% and ~~(31.5)%~~17.0% in the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate in the nine months ended September 30, 2022 includes a benefit of approximately 5 percentage points primarily related to an incremental FDII benefit and ~~2020, respectively.~~other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the nine months ended September 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter of 2021, tax charges incremental to the U.S. statutory rate of $148 million associated with the sale of the Forcepoint business, as described in “Note 2: Acquisitions, Dispositions, Goodwill and ~~tax charges of~~Intangible Assets,” and $73 million associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% ~~effective~~enacted in 2023. The loss from continuing operations before income taxes for the nine months ended September 30, 2020 includes the $3.2 billion goodwill impairment as described in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets,” most of which is non-deductible for tax purposes. Tax expense2021. Subsequently, in the ~~nine months ended September 30, 2020 includes~~fourth quarter of 2021, we recognized an incremental $104 million tax ~~charges of $430 million resulting from the Separation Transactions or the Raytheon Merger, primarily related~~benefit due to ~~the impairment of deferred tax assets and~~ the revaluation of ~~certain international~~the Forcepoint tax ~~incentives,~~benefit as a result of completing the divestiture of RIS’s global training and ~~$228 million of tax charges incremental to the U.S. statutory rate associated with the sales of the Collins Aerospace and RIS businesses.~~services business.

We conduct business globally and, as a result, Raytheon Technologies or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, China, France, Germany, India, Poland, ~~India,~~ Saudi Arabia, Singapore, Switzerland, the United Kingdom and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2012.

In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that a net reduction within the range of ~~$45~~$20 million to ~~$440~~$400 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of uncertain tax positions arising from ~~the issuance of legislation, regulatory or other guidance or~~ developments in examinations, in appeals, or in the courts, or the closure of tax ~~statutes. Interest recognized during~~statutes, or the ~~quarters ended September 30, 2021 and 2020 was $9 million and $12 million, respectively. Interest recognized during the nine months ended September 30, 2021 and~~issuance of legislation, regulatory or other guidance.

2516

Table of Contents

~~2020 was $28 million and $33 million, respectively. Accrued interest on unrecognized tax benefits was $158 million and $141 million, at September 30, 2021 and December 31, 2020, respectively.~~

Management has determined that the distributions of Carrier and Otis on April 3, 2020, and certain related internal business separation transactions, qualified as tax-free under applicable law. In making these determinations, we applied the tax law in the relevant jurisdictions to our facts and circumstances and obtained tax rulings from the relevant taxing authorities, tax opinions, and/or other external tax advice related to the concluded tax treatment. If the completed distributions of Carrier or Otis, in each case, or certain internal business separation transactions, were to fail to qualify for tax-free treatment, the Company could be subject to significant liabilities, and there could be material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods.

The Examination Division of the Internal Revenue Service (IRS) is currently auditing Raytheon Technologies tax years 2017 and 2018 and pre-merger Raytheon Company tax periods 2017, 2018 and 2019 as well as certain refund claims of Raytheon Company for tax years 2014, 2015 and 2016 filed prior to the Raytheon ~~Merger.~~merger. The audit of each of these tax years is expected to continue into 2023.

The Examination Division of the IRS is also auditing pre-acquisition Rockwell Collins fiscal tax years 2016, 2017 and ~~2017, which~~2018. The audit of each of these tax years is projected to close in the next six to nine months. As a result of the projected closure of the audit of Rockwell Collins fiscal tax years 2016 and 2017, it is reasonably possible that the Company may recognize non-cash gains in the range of $20 million to $100 million in the next six to nine months.during 2023.

~~Note 12: Restructuring Costs~~

Restructuring costs are generally expensed as incurred. All U.S. government unallowable restructuring costs related to the Raytheon Merger are recorded within Corporate expenses and other unallocated items, as these costs are not included in management’s evaluation of the segments’ performance, and as a result, there are no unallowable restructuring costs at the RIS and RMD segments. During the quarter and nine months ended September 30, 2021, we recorded net pre-tax restructuring costs totaling $19 million and $118 million, respectively, for new and ongoing restructuring actions.

~~We recorded charges in the segments as follows:~~

(dollars in millions) Quarter Ended September 30, 2021 Nine Months Ended September 30, 2021
Pratt & Whitney $ 2 $ 6
Collins Aerospace Systems 2 32
Corporate expenses and other unallocated items 15 80
Total $ 19 $ 118

~~Restructuring charges incurred during the quarter and nine months ended September 30, 2021 primarily relate to actions initiated during 2021 and 2020, and were recorded as follows:~~

(dollars in millions) Quarter Ended September 30, 2021 Nine Months Ended September 30, 2021
Cost of sales $ 4 $ 25
Selling, general and administrative 15 93
Total $ 19 $ 118

~~2021 Actions.~~ During the quarter ended September 30, 2021, we recorded net pre-tax restructuring costs of $12 million, comprised of $5 million in Selling, general and administrative expenses and $7 million in Cost of sales. During the nine months ended September 30, 2021, we recorded net pre-tax restructuring costs of $113 million, comprised of $81 million in Selling, general and administrative expenses and $32 million in Cost of sales. The 2021 actions primarily consist of severance costs related to ongoing cost reduction efforts, and to a much lesser extent, the exit and consolidation of facilities.

~~Table of Contents~~

~~The following table summarizes the accrual balance and utilization for the 2021 restructuring actions for the nine months ended September 30, 2021:~~


~~(dollars in millions)~~	~~Nine Months Ended September 30, 2021~~
~~Balance at January 1, 2021~~	$	—
~~Net pre-tax restructuring costs~~	~~113~~
~~Utilization, foreign exchange and other costs~~	~~(37)~~
~~Balance at September 30, 2021~~	$	76

~~The following table summarizes expected, incurred and remaining costs for the 2021 restructuring actions by segment:~~

(dollars in millions) Expected
Costs Costs Incurred Quarter Ended March 31, 2021 Costs Incurred Quarter Ended June 30, 2021
Costs Incurred Quarter Ended
September 30, 2021
Remaining Costs at September 30, 2021
Pratt & Whitney $ 58 $ (20) $ (2) $ (1) $ 35
Collins Aerospace Systems 67 (16) (3) (9) 39
Corporate expenses and other unallocated items 62 — (60) (2) —
Total $ 187 $ (36) $ (65) $ (12) $ 74

~~We are targeting to complete the majority of the remaining workforce and facility related cost reduction actions during the remainder of 2021 and 2022.~~

~~2020 Actions.~~ During the quarter ended September 30, 2021, we recorded a net $1 million of pre-tax restructuring costs for restructuring actions initiated in 2020, comprised of $7 million in Selling, general and administrative expenses and a reversal of $6 million in Cost of sales. During the nine months ended September 30, 2021, we reversed $19 million net pre-tax restructuring costs for restructuring actions initiated in 2020, including a reversal of $5 million in Selling, general and administrative expenses and a reversal of $14 million in Cost of sales. The 2020 actions primarily consist of severance costs principally related to restructuring actions at Pratt & Whitney and Collins Aerospace in response to the impact on our operating results related to the economic environment primarily caused by the COVID-19 pandemic, actions at Corporate related to the Raytheon Merger, and ongoing cost reduction efforts including workforce reductions, and to a lesser extent, consolidation of field operations.

~~The following table summarizes the accrual balances and utilization for the 2020 restructuring actions for the nine months ended September 30, 2021:~~


~~(dollars in millions)~~	~~Nine Months Ended September 30, 2021~~
~~Balance at January 1, 2021~~	$	~~340~~
~~Net pre-tax restructuring costs~~	~~(19)~~
~~Utilization, foreign exchange and other costs~~	~~(245)~~
~~Balance at September 30, 2021~~	$	76

~~The following table summarizes expected, incurred, and remaining costs for the 2020 restructuring actions by segment:~~

(dollars in millions) Expected
Costs Costs Incurred in 2020 Costs (Incurred) Reversed Quarter Ended March 31, 2021 Costs (Incurred) Reversed Quarter Ended June 30, 2021
Costs (Incurred) Reversed
Quarter Ended
September 30, 2021
Remaining Costs at September 30, 2021
Pratt & Whitney $ 188 $ (205) $ — $ 17 $ — $ —
Collins Aerospace Systems 320 (333) 1 7 12 7
Corporate expenses and other unallocated items 250 (232) (5) — (13) —
Total $ 758 $ (770) $ (4) $ 24 $ (1) $ 7

~~Table of Contents~~

~~2019 and Prior Actions.~~ During the quarter and nine months ended September 30, 2021, we had net pre-tax restructuring costs of $6 million and $24 million, respectively, for restructuring actions initiated in 2019 and prior. As of September 30, 2021, we have approximately $28 million of accrual balances remaining related to 2019 and prior actions.

Note ~~13:~~11: Financial Instruments

We enter into derivative instruments primarily for risk management purposes, including derivatives designated as hedging instruments and those utilized as economic hedges. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, interest rate and commodity price exposures.

The aggregate notional amount of our outstanding foreign currency hedges was ~~$9.0~~$10.3 billion and ~~$11.6~~$8.5 billion at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. At September 30, 2022, all derivative contracts accounted for as cash flow hedges will mature by February 2030.

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheet for derivative ~~instruments as of September 30, 2021 and December 31, 2020:~~instruments:


(dollars in millions)	(dollars in millions)	Balance Sheet Location	September 30, 2021		December 31, 2020		(dollars in millions)	Balance Sheet Location	September 30, 2022		December 31, 2021
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Foreign exchange contracts	Foreign exchange contracts	Other assets, current	$	91	$	197	Foreign exchange contracts	Other assets, current	$	41	$	59
		Other accrued liabilities	111		66			Other accrued liabilities	578		202
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Foreign exchange contracts	Foreign exchange contracts	Other assets, current	$	12	$	44	Foreign exchange contracts	Other assets, current	$	19	$	11
		Other accrued liabilities	22		32			Other accrued liabilities	128		11

The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Condensed Consolidated Statement of Operations ~~for~~in the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are presented in ~~the table below.~~“Note 16: Accumulated Other Comprehensive Loss.” The amounts of gain or loss are attributable to foreign exchange contract activity and are primarily recorded as a component of Products sales when reclassified from Accumulated other comprehensive ~~income (loss).~~

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Gain (loss) recorded in Accumulated other comprehensive loss $ (175) $ 117 $ (113) $ (98)
(Gain) loss reclassified from Accumulated other comprehensive loss 8 37 (26) 93
loss.

The Company utilizes the critical terms match method in assessing derivatives for hedge effectiveness. Accordingly, the hedged items and derivatives designated as hedging instruments are highly effective.

As of September 30, ~~2021,~~2022, we have €500 million of euro-denominated long-term debt outstanding, which qualifies as a net investment hedge against our investments in European businesses, which is deemed to be effective.

Assuming current market conditions continue, $3 million of pre-tax losses are expected to be reclassified from Accumulated other comprehensive loss to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months. At September 30, 2021, all derivative contracts accounted for as cash flow hedges will m~~ature by January 2028.~~

The effect of derivatives not designated as hedging instruments is included within Other income, net, on the Condensed Consolidated Statement of ~~Operations was as follows:~~

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Gain (loss) on non-designated foreign exchange contracts $ (1) $ (4) $ (9) $ (33)

Operations.

2817

Table of Contents

Note ~~14:~~12: Fair Value Measurements

The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring basis in our Condensed Consolidated Balance ~~Sheet as of September 30, 2021 and December 31, 2020:~~Sheet:


		September 30, 2021									September 30, 2022
(dollars in millions)	(dollars in millions)	Total		Level 1		Level 2		Level 3		(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:	Recurring fair value measurements:									Recurring fair value measurements:
Marketable securities held in trusts	Marketable securities held in trusts	$	965	$	890	$	75	$	—	Marketable securities held in trusts	$	740	$	682	$	58	$	—
Derivative assets	Derivative assets	103		—		103		—		Derivative assets	60		—		60		—
Derivative liabilities	Derivative liabilities	(133)		—		(133)		—		Derivative liabilities	706		—		706		—


		December 31, 2020									December 31, 2021
(dollars in millions)	(dollars in millions)	Total		Level 1		Level 2		Level 3		(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:	Recurring fair value measurements:									Recurring fair value measurements:
Marketable securities held in trusts	Marketable securities held in trusts	$	881	$	773	$	108	$	—	Marketable securities held in trusts	$	965	$	890	$	75	$	—
Derivative assets	Derivative assets	241		—		241		—		Derivative assets	70		—		70		—
Derivative liabilities	Derivative liabilities	(98)		—		(98)		—		Derivative liabilities	213		—		213		—

Valuation Techniques. Our derivative assets and liabilities include foreign exchange contracts that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties’ credit risks.

As of September 30, ~~2021,~~2022, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties’ credit risks.

The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance ~~Sheet at September 30, 2021 and December 31, 2020:~~Sheet:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
(dollars in millions)	(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Customer financing notes receivable	Customer financing notes receivable	$	299	$	326	$	271	$	264	Customer financing notes receivable	$	183	$	174	$	195	$	192
Short-term borrowings		(206)		(206)		(247)		(247)

Long-term debt (excluding finance leases)	Long-term debt (excluding finance leases)	(30,942)		(36,200)		(31,512)		(38,615)		Long-term debt (excluding finance leases)	31,161		27,277		31,250		35,828
Long-term liabilities		(35)		(33)		(27)		(25)

The following ~~table~~tables provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance ~~Sheet at September 30, 2021~~Sheet:


	September 30, 2022
(dollars in millions)	Total		Level 1		Level 2		Level 3

Customer financing notes receivable	$	174	$	—	$	174	$	—

Long-term debt (excluding finance leases)	27,277		—		27,230		47


	December 31, 2021
(dollars in millions)	Total		Level 1		Level 2		Level 3

Customer financing notes receivable	$	192	$	—	$	192	$	—

Long-term debt (excluding finance leases)	35,828		—		35,778		50

The fair value of our Short-term borrowings approximates the carrying value due to their short-term nature, with commercial paper classified as level 2 and ~~December 31, 2020:~~

September 30, 2021
(dollars in millions) Total Level 1 Level 2 Level 3
Customer financing notes receivable $ 326 $ — $ 326 $ —
Short-term borrowings (206) — (160) (46)
Long-term debt (excluding finance leases) (36,200) — (36,147) (53)
Long-term liabilities (33) — (33) —

December 31, 2020
(dollars in millions) Total Level 1 Level 2 Level 3
Customer financing notes receivable $ 264 $ — $ 264 $ —
Short-term borrowings (247) — (160) (87)
Long-term debt (excluding finance leases) (38,615) — (38,540) (75)
Long-term liabilities (25) — (25) —

other short-term borrowings classified as level 3 within the fair value hierarchy.

~~Table of Contents~~

Note ~~15:~~13: Variable Interest Entities

Pratt & Whitney holds a 61% program share interest in the International Aero Engines AG (IAE) collaboration with MTU Aero Engines AG (MTU) and Japanese Aero Engines Corporation (JAEC) and a 49.5% ownership interest in IAE. IAE’s business purpose is to coordinate the design, development, manufacturing and product support of the V2500 engine program through involvement with the collaborators. Additionally, Pratt & Whitney, JAEC and MTU are participants in the International Aero

Table of Contents

Engines, LLC (IAE LLC), collaboration, whose business purpose is to coordinate the design, development, manufacturing and product support for the PW1100G-JM engine for the Airbus A320neo ~~aircraft and the PW1400G-JM engine for the Irkut MC-21~~ aircraft. Pratt & Whitney holds a 59% program share interest and a 59% ownership interest in IAE LLC. IAE and IAE LLC retain limited equity with the primary economics of the programs passed to the participants. As such, we have determined that IAE and IAE LLC are variable interest entities with Pratt & Whitney as the primary beneficiary. IAE and IAE LLC have, therefore, been consolidated. The carrying amounts and classification of assets and liabilities for variable interest entities in our Condensed Consolidated Balance Sheet are as follows:

(dollars in millions) September 30, 2021 December 31, 2020
Current assets $ 7,026 $ 6,652
Noncurrent assets 826 868
Total assets $ 7,852 $ 7,520
Current liabilities $ 7,664 $ 7,365
Noncurrent liabilities 72 89
Total liabilities $ 7,736 $ 7,454


(dollars in millions)	September 30, 2022		December 31, 2021
Current assets	$	7,274	$	7,081
Noncurrent assets	780		825
Total assets	$	8,054	$	7,906
Current liabilities	$	8,632	$	7,965
Noncurrent liabilities	21		54
Total liabilities	$	8,653	$	8,019

Note ~~16:~~14: Guarantees

We extend a variety of financial, market value and product performance guarantees to third parties. These instruments expire on various dates through ~~2024.~~2028. Additional guarantees of project performance for which there is no stated value also remain outstanding. A portion of our third party guarantees are subject to indemnification for our benefit for any liabilities that could arise. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the following financial guarantees were outstanding:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
(dollars in millions)	(dollars in millions)	Maximum Potential Payment		Carrying Amount of Liability		Maximum Potential Payment		Carrying Amount of Liability		(dollars in millions)	Maximum Potential Payment		Carrying Amount of Liability		Maximum Potential Payment		Carrying Amount of Liability
Commercial aerospace financing arrangements	Commercial aerospace financing arrangements	$	314	$	6	$	322	$	6	Commercial aerospace financing arrangements	$	304	$	—	$	309	$	3
Third party guarantees	Third party guarantees	376		2		386		3		Third party guarantees	310		1		511		5

We have made residual value and other guarantees related to various commercial aerospace customer financing arrangements. The estimated fair ~~market~~ values of the guaranteed assets equal or exceed the value of the related guarantees, net of existing reserves. Collaboration partners’ share of these financing guarantees is ~~$144~~$140 million and ~~$142~~$141 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

We also have obligations arising from sales of certain businesses and assets, including those from representations and warranties and related indemnities for environmental, health and safety, tax and employment matters. The maximum potential payment related to these obligations is not a specified amount as a number of the obligations do not contain financial caps. The carrying amount of liabilities related to these obligations was ~~$114~~$108 million and $120 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~For additional information regarding the~~These primarily relate to environmental ~~indemnifications, see~~liabilities, which are included in our total environmental liabilities as further discussed in “Note ~~17:~~15: Commitments and Contingencies.”

We accrue for costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued.

3019

Table of Contents

We also provide service and warranty policies on our products and extend performance and operating cost guarantees beyond our normal service and warranty policies on some of our products, particularly commercial aircraft engines. In addition, we incur discretionary costs to service our products in connection with specific product performance issues. Liabilities for performance and operating cost guarantees are based upon future product performance and durability, and are largely estimated based upon historical experience. Adjustments are made to accruals as claims data and historical experience warrant. The changes in the carrying amount of service and product warranties and product performance guarantees for the nine months ended September 30, 2022 and 2021 ~~and 2020 are~~were as follows:

(dollars in millions) 2021 2020
Balance as of January 1 $ 1,057 $ 1,033
Warranties and performance guarantees issued 247 206
Settlements (212) (229)
Other (3) (10)
Balance as of September 30 $ 1,089 $ 1,000


(dollars in millions)	2022		2021
Balance as of January 1	$	1,157	$	1,057
Warranties and performance guarantees issued	203		247
Settlements	(196)		(212)
Other	(21)		(3)
Balance as of September 30	$	1,143	$	1,089

Note ~~17:~~15: Commitments and Contingencies

Except as otherwise noted, while we are unable to predict the final outcome, based on information currently available, we do not believe that resolution of any of the following matters will have a material adverse effect upon our competitive position, ~~financial condition,~~ results of operations, financial condition or liquidity.

Environmental. Our operations are subject to environmental regulation by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations. We have accrued for the costs of environmental remediation activities, including but not limited to investigatory, remediation, operating and maintenance costs and performance guarantees, and periodically reassess these amounts. We ~~believe that the likelihood~~do not expect any additional liability to have a material adverse effect on our results of ~~incurring losses materially in excess~~operations, financial condition or liquidity. As of ~~amounts accrued is remote. At both~~ September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$835~~$821 million and $834 million, respectively, reserved for environmental remediation.

Commercial Aerospace Financing and Other Commitments. We had commercial aerospace financing commitments and other contractual commitments of approximately ~~$13.6~~$15.3 billion and ~~$13.4~~$15.6 billion as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, on a gross basis before reduction for our collaboration partners’ share. Aircraft financing commitments, in the form of debt or lease financing, are provided to certain commercial aerospace customers. The extent to which the financing commitments will be utilized is not currently known, since customers may be able to obtain more favorable terms from other financing sources. We may also arrange for third-party investors to assume a portion of these commitments. The majority of financing commitments are collateralized arrangements. We may also lease aircraft and subsequently sublease the aircraft to customers under long-term non-cancelable operating ~~leases.~~leases, or pay deposits on behalf of our customers to secure production slots with the airframers (pre-delivery payments). Our financing commitments with customers are contingent upon maintenance of certain levels of financial condition by the customers. Associated risks on these commitments are mitigated due to the fact that interest rates are variable during the commitment term and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers. As a result, the fair value of these financing commitments is expected to equal the amounts funded.

We also have other contractual commitments to make payments to secure certain contractual rights to provide product on new aircraft platforms. The estimated amount and timing of these payments are generally based on future sales or engine flight hours. Payments made on these contractual commitments are included within intangible assets as exclusivity assets and are amortized over the term of underlying economic benefit. We have entered into certain collaboration arrangements, which may include participation by our collaboration partners in these commitments. In addition, in connection with our 2012 agreement to acquire Rolls-Royce’s ownership and collaboration interests in IAE, additional payments are due to Rolls-Royce contingent upon each hour flown through June 2027 by the V2500-powered aircraft in service as of the acquisition date. These flight hour payments, which are considered in other contractual commitments, are ~~being~~ capitalized as collaboration intangible ~~assets.~~assets as payments are made.

Other Financing Arrangements. We have entered into standby letters of credit and surety bonds with financial institutions to meet various bid, performance, warranty, retention and advance payment obligations for us or our affiliates. We enter into these agreements to assist certain affiliates in obtaining financing on more favorable terms, making bids on contracts and performing their contractual obligations. The stated values of these letters of credit agreements and surety bonds totaled ~~$4.0~~$3.3 billion as of September 30, ~~2021.~~2022.

Table of Contents

Offset Obligations. We have entered into industrial cooperation agreements, sometimes in the form of either offset agreements or ICIP agreements, as a condition to obtaining orders for our products and services from certain customers in foreign countries. At September 30, ~~2021,~~2022, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately ~~$11.3~~$12.2 billion. These agreements are designed to return economic value to the foreign country by requiring us to engage in activities supporting local defense or commercial industries, promoting a balance of trade, developing in-country technology capabilities or addressing other local development priorities. Offset agreements may

~~Table of Contents~~

be satisfied through activities that do not require a direct cash payment, including transferring technology, providing manufacturing, training and other consulting support to in-country projects, and the purchase by third parties (e.g., our vendors) of supplies from in-country vendors. These agreements may also be satisfied through our use of cash for activities such as subcontracting with local partners, purchasing supplies from in-country vendors, providing financial support for in-country projects and making investments in local ventures. Such activities may also vary by country depending upon requirements as dictated by their governments. We typically do not commit to offset agreements until orders for our products or services are definitive. The amounts ultimately applied against our offset agreements are based on negotiations with the customers and typically require cash outlays that represent only a fraction of the notional value in the offset agreements. Offset programs usually extend over several or more years and may provide for penalties in the event we fail to perform in accordance with offset requirements. Historically, we have not been required to pay any penalties of significance.

Government Oversight. In the ordinary course of business, the Company and its subsidiaries and our properties are subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations and threatened legal actions and proceedings. For example, we are now, and believe that, in light of the current U.S. government contracting environment, we will continue to be the subject of one or more U.S. government investigations. Our contracts with the U.S. government are also subject to audits. Agencies that oversee contract performance include: the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), the Inspectors General of the U.S. Department of Defense (DoD) and other departments and agencies, the Government Accountability Office (GAO), the Department of Justice (DOJ), and Congressional Committees. Other areas of our business operations may also be subject to audit and investigation by these and other agencies. From time to time, agencies investigate or conduct audits to determine whether our operations are being conducted in accordance with applicable requirements. Such investigations and audits may be initiated due to a number of reasons, including as a result of a whistleblower complaint. Such investigations and audits could result in administrative, civil or criminal liabilities, including repayments, fines, treble or other damages, forfeitures, restitution, or penalties being imposed upon us, the suspension of government export licenses or the suspension or debarment from future U.S. government contracting. U.S. government investigations often take years to complete. The U.S. government also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal or other seriously improper conduct. The U.S. government could void any contracts found to be tainted by fraud. Like many defense contractors, we have received audit reports recommending the reduction of certain contract prices because, for example, cost or pricing data or cost accounting practices used to price and negotiate those contracts may not have conformed to government regulations. Some of these audit reports recommend that certain payments be repaid, delayed, or withheld, and may involve substantial amounts. We have made voluntary refunds in those cases we believe appropriate, have settled some allegations and, in some cases, continue to negotiate and/or litigate. The Company may be, and in some cases has been, required to make payments into escrow of disputed liabilities while the related litigation is pending. If the litigation is resolved in the Company’s favor, any such payments will be returned to the Company with interest. Our final allowable incurred costs for each year are also subject to audit and have, from time to time, resulted in disputes between us and the U.S. government, with litigation resulting at the Court of Federal Claims (COFC) or the Armed Services Board of Contract Appeals (ASBCA) or their related courts of appeals. In addition, the DOJ has, from time to time, convened grand juries to investigate possible irregularities by us. We also provide products and services to customers outside of the U.S., and those sales are subject to local government laws, regulations and procurement policies and practices. Our compliance with such local government regulations or any applicable U.S. government regulations (e.g., the Foreign Corrupt Practices Act (FCPA) and International Traffic in Arms Regulations (ITAR)) may also be investigated or audited. In addition, we accrue for liabilities associated with those matters that are probable and can be reasonably estimated. The most likely liability amount to be incurred is accrued based upon a range of estimates. Where no amount within a range of estimates is more likely, then we accrue the minimum amount. Other than as specifically disclosed in this Form 10-Q, we do not expect these audits, investigations or disputes to have a material effect on our ~~financial condition,~~ results of operations, financial condition or liquidity, either individually or in the aggregate.

Legal Proceedings. The Company and its subsidiaries are subject to various contract pricing disputes, government investigations and litigation matters across jurisdictions, updates to certain of which are set forth below.

Cost Accounting Standards Claims

As previously disclosed, in April 2019, a Divisional Administrative Contracting Officer (DACO) of the United States DCMA asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $1.73 billion plus interest ($~~711~~ 805

Table of Contents

million at September 30, ~~2021)~~2022). The claim is based on Pratt & Whitney’s alleged noncompliance with Cost Accounting Standards (CAS) from January 1, 2007 to March 31, 2019, due to its method of allocating independent research and development costs to government contracts. Pratt & Whitney believes that the claim is without merit and filed an appeal to the ASBCA on June 7, 2019.

As previously disclosed, in December 2013, a DCMA DACO asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $177 million plus interest ($~~116~~127 million at September 30, ~~2021)~~2022). The claim is based on Pratt &

~~Table of Contents~~

Whitney’s alleged noncompliance with CAS from January 1, 2005 to December 31, 2012, due to its method of determining the cost of collaborator parts used in the calculation of material overhead costs for government contracts. In 2014, Pratt & Whitney filed an appeal to the ASBCA. An evidentiary hearing was held and completed in June 2019. On November 22, 2021, the ASBCA issued its written decision sustaining in part and denying in part Pratt & Whitney’s appeal. The ASBCA rejected the DCMA’s asserted measure of the cost of collaborator parts, and ruled substantially in Pratt & Whitney’s favor on other liability issues. The ASBCA remanded the appeal to the parties ~~concluded post-hearing briefing in January 2020, and now await a decision from~~for resolution of damages issues, which could require further proceedings at the ASBCA. ~~We continue~~On December 23, 2021, the DCMA filed a motion with the ASBCA seeking partial reconsideration of the November 22, 2021 decision. The motion for reconsideration was denied on August 29, 2022. Although the ASBCA decision may also be subject to further appellate review, we believe that the ~~claim~~ASBCA’s rejection of the DCMA’s asserted measure of the cost of collaborator parts is ~~without merit.~~well supported in fact and law and likely will be sustained. In December 2018, a DCMA DACO issued a second claim against Pratt & Whitney that similarly alleges that its method of determining the cost of collaborator parts does not comply with the CAS for calendar years 2013 through 2017. This second claim, which asserts the same measure of the cost of collaborator parts rejected by the ASBCA’s recent decision, demands payment of $269 million plus interest ($7790 million at September 30, ~~2021), which we also believe is without merit and which~~2022). Pratt & Whitney appealed this second claim to the ASBCA in January 2019. Although subject to further proceedings, we continue to believe that the November 22, 2021 decision in the first claim will apply with equal legal effect to the second claim. Accordingly, we believe that the amounts demanded by the DCMA as set forth in the two claims are without legal basis and that any damages owed to the U.S. government for the two claims will not have a material adverse effect on our results of operations, financial condition or liquidity.

Thales-Raytheon Systems Matter

As previously disclosed, in 2019, Raytheon Company received a subpoena from the Securities and Exchange Commission (SEC) seeking information in connection with an investigation into whether there were improper payments made by Thales-Raytheon Systems (TRS) or anyone acting on their behalf in connection with TRS or Raytheon Company contracts in certain Middle East countries since 2014. In the first quarter of 2020, the DOJ advised Raytheon Company it had opened a parallel criminal investigation. In the third quarter of 2020, Raytheon Company received an additional subpoena from the SEC, seeking information and documents as part of its ongoing investigation. ~~Raytheon~~The Company maintains a rigorous anti-corruption compliance program, is cooperating fully with the SEC’s and DOJ’s inquiry, and is examining whether there has been any conduct that is in violation of Raytheon Company policy. At this time, the Company is unable to predict the outcome of the SEC’s or DOJ’s inquiry. Based on the information available to date, however, we do not believe the results of this inquiry will have a material adverse effect on our ~~financial condition,~~ results of operations, financial condition or liquidity.

DOJ Investigation, Contract Pricing Disputes and Related Civil Litigation

As previously disclosed, on October 8, 2020, the Company received a criminal subpoena from the DOJ seeking information and documents in connection with an investigation relating to financial accounting, internal controls over financial reporting, and cost reporting regarding Raytheon Company’s Missiles & Defense (RMD) business ~~(RMD)~~ since 2009. The investigation involves multi-year contracts subject to governmental regulation, including potential civil defective pricing claims for three RMD contracts entered into between 2011 and 2013. As part of the same investigation, on March 24, 2021, the Company received a second criminal subpoena from the DOJ seeking documents relating to a different RMD contract entered into in 2017. We are cooperating fully with, and will continue to review the issues raised by, the DOJ’s ongoing investigation. We have made substantial progress in our internal review of the issues raised by the DOJ investigation. Although we continue to believe we have defenses to the potential claims, the Company has determined that there is a ~~meaningful~~probable risk of ~~civil~~ liability for damages, interest and potential ~~penalties. While the Company is~~penalties and has accrued approximately $290 million for this matter. We are currently unable to ~~predict either~~estimate an incremental loss, if any, which may result following the ~~outcome~~completion of our internal review and resolution of the ~~criminal investigation or the outcome of any potential civil claims based on facts revealed in, or related to, the investigation, based~~DOJ investigation. Based on the information available to date, ~~which may evolve as the investigation and our review of these matters continue, w~~ewe do not believe the results of the investigation or of any potential civil litigation will have a material adverse effect on our ~~financial condition,~~ results of operations, financial condition or liquidity.

Four shareholder lawsuits were filed against the Company after the DOJ investigation was first disclosed. A putative securities class action lawsuit was filed in the United States District Court for the District of Arizona against the Company and certain of its executives alleging that the defendants violated federal securities laws by making material misstatements in regulatory filings regarding internal controls over financial reporting in RMD. Three shareholder derivative lawsuits were filed in the United States District Court for the District of Delaware against the former Raytheon Company Board of Directors, the

Table of Contents

Company and certain of its executives, each alleging that defendants violated federal securities laws and breached their fiduciary duties by engaging in improper accounting practices, failing to implement sufficient internal financial and compliance controls, and making a series of false and misleading statements in regulatory filings. We believe that each of these lawsuits lacks merit.

Darnis, et al.

As previously disclosed, on August 12, 2020, several former employees of ~~UTC~~United Technologies Corporation (UTC) or its subsidiaries filed a putative class action complaint in the United States District Court for the District of Connecticut against the Company, Otis, Carrier, the former members of the UTC Board of Directors, and the members of the Carrier and Otis Boards of Directors (Geraud Darnis, et al. v. Raytheon Technologies Corporation, et al.). The complaint challenged the method by which UTC equity awards were converted to Company, Otis, and Carrier equity awards following the separation of UTC into three independent, publicly-traded companies on April 3, 2020. The complaint also claimed that the defendants are liable for breach of certain equity compensation plans and also asserted claims under certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA). On September 13, 2021, Plaintiffs filed an amended complaint which supersedes the initial complaint and continues to assert claims for breach of the equity compensation plans against the Company, Otis and Carrier, but no longer asserts ERISA claims. Further, no claim is made in the amended complaint against any current or former director of any of the three companies. Plaintiffs seek money damages, attorneys’ fees and other relief. On September 30, 2022, in response to motions to dismiss filed by the Company, Otis and Carrier, the Court dismissed the class action in its entirety with prejudice. Plaintiffs’ time to file an appeal from the judgment dismissing the case has not yet lapsed. Based on the information available to date, including the Court’s recent ruling, we do not believe that this matter will have a material adverse effect on our results of operations, financial condition or liquidity.

DOJ Grand Jury Investigation and Related Civil Litigation

The Company received a grand jury subpoena in late 2019, as part of a DOJ criminal investigation into purported agreements not to solicit or hire employees in violation of the federal antitrust laws. While the investigation has focused on alleged hiring restrictions between and among Pratt & Whitney and certain of its suppliers of outsourced engineering services, the subpoena also included requests regarding Collins. Since receipt of the subpoena, the Company has been cooperating with the DOJ investigation. On December 15, 2021, a criminal indictment was filed in the United States District Court for the District of Connecticut, against a former Pratt & Whitney employee and other employees of certain outsourced engineering suppliers charging each of them with one count of violating the federal antitrust laws. No current or former Collins employees were named in the indictment. We have been advised that the Company is a target of the DOJ investigation, and we continue to cooperate with the investigation. No criminal charge has been filed against the Company or its affiliates.

After the criminal charges against the individuals were filed, numerous civil class action antitrust lawsuits have been filed against Pratt & Whitney and other corporate and individual defendants in the United States District Court for the District of Connecticut. The allegations in each of the civil lawsuits track the factual assertions in the criminal indictment and generally allege that Pratt & Whitney and the other defendants agreed to restrict the hiring and recruiting of certain engineers and skilled laborers in a manner that violated federal antitrust laws. Plaintiffs in each of the civil lawsuits seek to represent different purported classes of engineers and skilled laborers employed by Pratt & Whitney and other supplier-defendants since 2011. Plaintiffs in each of the lawsuits seek treble damages in an undetermined amount, plus attorneys’ fees and costs of suit. All of the lawsuits have been consolidated, and a single amended class action complaint was filed. We believe that the ~~Company has~~

~~Table of Contents~~

~~meritorious defenses to these claims. At this time, the Company is unable to predict the outcome; however, based~~claims asserted lack merit. Based on the information available to date, we do not believe that this matter will have a material adverse effect ~~upon~~on our ~~financial condition,~~ results of operations, financial condition or liquidity.

Where appropriate, we have recorded loss contingency accruals for the above-referenced matters, and the ~~amount~~amounts individually, or in the aggregate, isare not material.

Other. As described in “Note ~~16:~~14: Guarantees,” we extend performance and operating cost guarantees beyond our normal warranty and service policies for extended periods on some of our products. We have accrued our estimate of the liability that may result under these guarantees and for service costs that are probable and can be reasonably estimated.

We also have other commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising out of the normal course of business. We accrue contingencies based upon a range of possible outcomes. If no amount within this range is a better estimate than any other, then we accrue the minimum amount.

In the ordinary course of business, the Company and its subsidiaries are also routinely defendants in, parties to or otherwise subject to many pending and threatened legal actions, claims, disputes and proceedings. These matters are often based on alleged violations of contract, product liability, warranty, regulatory, environmental, health and safety, employment, intellectual property, tax and other laws. In some instances, claims for substantial monetary damages are asserted against the Company and

Table of Contents

its subsidiaries and could result in fines, penalties, compensatory or treble damages or non-monetary relief. We do not believe that these matters will have a material adverse effect upon our ~~competitive position, financial condition,~~ results of operations, financial condition or liquidity.

Note ~~18:~~16: Accumulated Other Comprehensive Loss

A summary of the changes in each component of Accumulated other comprehensive loss, net of tax for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 is provided below:


(dollars in millions)	(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Post-retirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)		(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended September 30, 2021
Balance at June 30, 2021		$	789	$	(4,402)	$	58	$	(3,555)
Quarter Ended September 30, 2022										Quarter Ended September 30, 2022
Balance at June 30, 2022										Balance at June 30, 2022	$	(908)	$	(1,772)	$	(251)	$	(2,931)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	(321)		22		(175)		(474)		Other comprehensive income (loss) before reclassifications, net	(1,050)		15		(285)		(1,320)
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	—		64		8		72		Amounts reclassified, pre-tax	—		33		34		67
Tax benefit (expense)	Tax benefit (expense)	(5)		(16)		39		18		Tax benefit (expense)	4		(6)		64		62
Balance at September 30, 2021		$	463	$	(4,332)	$	(70)	$	(3,939)
Balance at September 30, 2022										Balance at September 30, 2022	$	(1,954)	$	(1,730)	$	(438)	$	(4,122)

Nine Months Ended September 30, 2021
Balance at December 31, 2020		$	710	$	(4,483)	$	39	$	(3,734)
Nine Months Ended September 30, 2022										Nine Months Ended September 30, 2022
Balance at December 31, 2021										Balance at December 31, 2021	$	49	$	(1,828)	$	(136)	$	(1,915)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	(239)		(2)		(113)		(354)		Other comprehensive income (loss) before reclassifications, net	(2,000)		18		(453)		(2,435)
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	—		192		(26)		166		Amounts reclassified, pre-tax	2		98		57		157
Tax benefit (expense)	Tax benefit (expense)	(8)		(39)		30		(17)		Tax benefit (expense)	(5)		(18)		94		71
Balance at September 30, 2021		$	463	$	(4,332)	$	(70)	$	(3,939)
Balance at September 30, 2022										Balance at September 30, 2022	$	(1,954)	$	(1,730)	$	(438)	$	(4,122)

~~Table of Contents~~

(dollars in millions) Foreign Currency Translation Defined Benefit Pension and Post-retirement Plans Unrealized Hedging Gains (Losses) Accumulated Other Comprehensive Income (Loss)
Quarter Ended September 30, 2020
Balance at June 30, 2020 $ (692) $ (7,827) $ (281) $ (8,800)
Other comprehensive income (loss) before reclassifications, net 605 (12) 117 710
Amounts reclassified, pre-tax — 95 37 132
Tax benefit (expense) 7 (22) (39) (54)
Balance at September 30, 2020 $ (80) $ (7,766) $ (166) $ (8,012)
Nine Months Ended September 30, 2020
Balance at December 31, 2019 $ (3,211) $ (6,772) $ (166) $ (10,149)
Other comprehensive income (loss) before reclassifications, net (175) (2,375) (98) (2,648)
Amounts reclassified, pre-tax — 282 93 375
Tax benefit (expense) 19 515 1 535
Separation of Carrier and Otis, net of tax 3,287 584 4 3,875
Balance at September 30, 2020 $ (80) $ (7,766) $ (166) $ (8,012)


(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended September 30, 2021
Balance at June 30, 2021	$	789	$	(4,402)	$	58	$	(3,555)
Other comprehensive income (loss) before reclassifications, net	(321)		22		(175)		(474)
Amounts reclassified, pre-tax	—		64		8		72
Tax benefit (expense)	(5)		(16)		39		18

Balance at September 30, 2021	$	463	$	(4,332)	$	(70)	$	(3,939)

Nine Months Ended September 30, 2021
Balance at December 31, 2020	$	710	$	(4,483)	$	39	$	(3,734)
Other comprehensive income (loss) before reclassifications, net	(239)		(2)		(113)		(354)
Amounts reclassified, pre-tax	—		192		(26)		166
Tax benefit (expense)	(8)		(39)		30		(17)

Balance at September 30, 2021	$	463	$	(4,332)	$	(70)	$	(3,939)

Note ~~19:~~17: Segment Financial Data

Our operations, for the periods presented herein, are classified into four principal segments: Collins, ~~Aerospace,~~ Pratt & Whitney, RIS and RMD. The segments are generally based on the management structure of the businesses and the grouping of similar operating companies, where each management organization has general operating autonomy over diversified products and services. ~~The results of RIS and RMD reflect the period subsequent to the completion of the Raytheon Merger on April 3, 2020.~~

As previously announced, effective January 1, 2021, we reorganized certain product areas of our RIS and RMD businesses to more efficiently leverage our capabilities. The amounts and presentation of our business segments, including intersegment activity, set forth in this Form 10-Q reflect this reorganization. The reorganization does not impact our previously reported Collins Aerospace Systems and Pratt & Whitney segment results, or our consolidated balance sheets, statements of operations or statements of cash flows.

~~Revised financial results for the fiscal quarters and year ended 2020 were as follows:~~

2020
(dollars in millions) Q1 Q2 Q3 Q4 FY
Net Sales
Collins Aerospace Systems $ 6,438 $ 4,202 $ 4,274 $ 4,374 $ 19,288
Pratt & Whitney 5,353 3,487 3,494 4,465 16,799
Raytheon Intelligence & Space — 3,387 3,749 3,933 11,069
Raytheon Missiles & Defense — 3,506 3,706 4,184 11,396
Total segments 11,791 14,582 15,223 16,956 58,552
Eliminations and other (431) (521) (476) (537) (1,965)
Consolidated $ 11,360 $ 14,061 $ 14,747 $ 16,419 $ 56,587

3524

Table of Contents

Operating Profit (Loss)
Collins Aerospace Systems $ 1,246 $ (317) $ 526 $ 11 $ 1,466
Pratt & Whitney 475 (457) (615) 33 (564)
Raytheon Intelligence & Space — 309 350 361 1,020
Raytheon Missiles & Defense — 398 449 33 880
Total segments 1,721 (67) 710 438 2,802
Eliminations and other (25) (27) (49) (6) (107)
Corporate expenses and other unallocated items (130) (277) (84) (99) (590)
FAS/CAS operating adjustment — 356 380 370 1,106
Acquisition accounting adjustments (271) (3,745) (523) (561) (5,100)
Consolidated $ 1,295 $ (3,760) $ 434 $ 142 $ (1,889)
Segment Operating Profit (Loss) Margin
Collins Aerospace Systems 19.4 % (7.5) % 12.3 % 0.3 % 7.6 %
Pratt & Whitney 8.9 % (13.1) % (17.6) % 0.7 % (3.4) %
Raytheon Intelligence & Space NM 9.1 % 9.3 % 9.2 % 9.2 %
Raytheon Missiles & Defense NM 11.4 % 12.1 % 0.8 % 7.7 %
Total segment 14.6 % (0.5) % 4.7 % 2.6 % 4.8 %

~~As a result of the Raytheon Merger, we now~~We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and PRB expense under the Financial Accounting Standards (FAS) requirements of U.S. Generally Accepted Accounting Principles (GAAP) and our pension and PRB expense under U.S. government Cost Accounting Standards (CAS) primarily related to our RIS and RMD segments. While the ultimate liability for pension and PRB costs under FAS and CAS is similar, the pattern of cost recognition is different. WeOver time, we generally expect to recover the related RIS and RMD pension and PRB liabilities ~~over time~~ through the pricing of our products and services to the U.S. government. ~~Because the~~ Collins ~~Aerospace~~ and Pratt & Whitney ~~segments~~ generally record pension and PRB expense on a FAS ~~basis, historical results were~~basis.

Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions and the amortization of customer contractual obligations related to loss making or below market contracts acquired. These adjustments are not ~~impacted by this change in~~considered part of management’s evaluation of segment ~~reporting.~~results.

Total sales and operating profit by segment include inter-segment sales which are generally recorded at ~~prices approximating those that the selling entity is able to obtain on external sales for our Collins Aerospace and Pratt & Whitney segments, and at~~ cost-plus a specified fee ~~which~~or at a negotiated fixed price. These pricing arrangements may ~~differ from~~result in margins different than what the ~~selling entity would be able to obtain~~purchasing segment realizes on ~~sales to external customers, for our RIS and RMD segments.~~the ultimate third-party sale. Results for the quarters ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Net Sales				Operating Profit (Loss)				Operating Profit (Loss) Margins					Net Sales				Operating Profit				Operating Profit Margins
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	4,592	$	4,274	$	478	$	526	10.4	%	12.3	%	Collins Aerospace Systems	$	5,100	$	4,592	$	616	$	478	12.1	%	10.4	%
Pratt & Whitney	Pratt & Whitney	4,725		3,494		187		(615)		4.0	%	(17.6)	%	Pratt & Whitney	5,380		4,725		316		187		5.9	%	4.0	%
Raytheon Intelligence & Space	Raytheon Intelligence & Space	3,740		3,749		391		350		10.5	%	9.3	%	Raytheon Intelligence & Space	3,626		3,740		371		391		10.2	%	10.5	%
Raytheon Missiles & Defense	Raytheon Missiles & Defense	3,902		3,706		490		449		12.6	%	12.1	%	Raytheon Missiles & Defense	3,678		3,902		408		490		11.1	%	12.6	%
Total segment	Total segment	16,959		15,223		1,546		710		9.1	%	4.7	%	Total segment	17,784		16,959		1,711		1,546		9.6	%	9.1	%
Eliminations and other(1)	Eliminations and other(1)	(746)		(476)		(27)		(49)						Eliminations and other(1)	(833)		(746)		(50)		(27)
Corporate expenses and other unallocated items (2)	Corporate expenses and other unallocated items (2)	—		—		(89)		(84)						Corporate expenses and other unallocated items (2)	—		—		(77)		(89)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	—		—		499		380						FAS/CAS operating adjustment	—		—		378		499
Acquisition accounting adjustments	Acquisition accounting adjustments	—		—		(586)		(523)						Acquisition accounting adjustments	—		—		(482)		(586)
Consolidated	Consolidated	$	16,213	$	14,747	$	1,343	$	434	8.3	%	2.9	%	Consolidated	$	16,951	$	16,213	$	1,480	$	1,343	8.7	%	8.3	%

(1) Includes the operating results of certain smaller non-reportable business segments. ~~2020 amounts include Forcepoint, which was acquired as part of the Raytheon Merger and subsequently disposed of on January 8, 2021.~~

(2) ~~Corporate expenses and other unallocated items include~~Includes the net expenses related to the U.S. Army’s Lower Tier Air and Missile Defense Sensor (LTAMDS) project.

~~Table of Contents~~

Results for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Net Sales				Operating Profit (Loss)				Operating Profit (Loss) Margins					Net Sales				Operating Profit				Operating Profit Margins
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	13,507	$	14,914	$	1,298	$	1,455	9.6	%	9.8	%	Collins Aerospace Systems	$	14,935	$	13,507	$	1,602	$	1,298	10.7	%	9.6	%
Pratt & Whitney	Pratt & Whitney	13,035		12,334		319		(597)		2.4	%	(4.8)	%	Pratt & Whitney	14,878		13,035		769		319		5.2	%	2.4	%
Raytheon Intelligence & Space	Raytheon Intelligence & Space	11,310		7,136		1,194		659		10.6	%	9.2	%	Raytheon Intelligence & Space	10,768		11,310		1,064		1,194		9.9	%	10.6	%
Raytheon Missiles & Defense	Raytheon Missiles & Defense	11,680		7,212		1,518		847		13.0	%	11.7	%	Raytheon Missiles & Defense	10,763		11,680		1,143		1,518		10.6	%	13.0	%
Total segment	Total segment	49,532		41,596		4,329		2,364		8.7	%	5.7	%	Total segment	51,344		49,532		4,578		4,329		8.9	%	8.7	%
Eliminations and other (1)	Eliminations and other (1)	(2,188)		(1,428)		(98)		(101)						Eliminations and other (1)	(2,363)		(2,188)		(131)		(98)
Corporate expenses and other unallocated items (2)	Corporate expenses and other unallocated items (2)	—		—		(319)		(491)						Corporate expenses and other unallocated items (2)	—		—		(255)		(319)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	—		—		1,347		736						FAS/CAS operating adjustment	—		—		1,135		1,347
Acquisition accounting adjustments	Acquisition accounting adjustments	—		—		(1,621)		(4,539)						Acquisition accounting adjustments	—		—		(1,414)		(1,621)
Consolidated	Consolidated	$	47,344	$	40,168	$	3,638	$	(2,031)	7.7	%	(5.1)	%	Consolidated	$	48,981	$	47,344	$	3,913	$	3,638	8.0	%	7.7	%

(2) ~~Corporate expenses and other unallocated items include~~Includes the net expenses related to the U.S. Army’s LTAMDS project.

We disaggregate our contracts from customers by geographic ~~location~~region based on customer location, by customer and by sales type. Our geographic ~~location~~region based on customer location uses end user customer location where known or practical to determine, or in instances where the end user customer is not known or not practical to determine, we utilize “ship to” location as the customer location. In addition, for our RIS and RMD segments, we disaggregate our contracts from customers by contract type. We

Table of Contents

believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. ~~Historical results have been recast to reflect the presentation of this disaggregation.~~

Segment sales disaggregated by geographic region for the quarters ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:

2021 2020
(dollars in millions) Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total
United States $ 2,334 $ 2,367 $ 2,977 $ 2,414 $ 4 $ 10,096 $ 2,378 $ 1,856 $ 2,999 $ 2,224 $ 109 $ 9,566
Asia Pacific 465 1,007 199 335 — 2,006 358 772 205 355 13 1,703
Middle East and North Africa 136 127 105 772 — 1,140 97 112 133 703 10 1,055
Europe 1,066 943 107 297 (5) 2,408 965 572 100 337 38 2,012
Canada and All Other 226 281 39 17 — 563 165 179 29 29 9 411
Consolidated net sales 4,227 4,725 3,427 3,835 (1) 16,213 3,963 3,491 3,466 3,648 179 14,747
Inter-segment sales 365 — 313 67 (745) — 311 3 283 58 (655) —
Business segment sales $ 4,592 $ 4,725 $ 3,740 $ 3,902 $ (746) $ 16,213 $ 4,274 $ 3,494 $ 3,749 $ 3,706 $ (476) $ 14,747

~~Table of Contents~~


	2022												2021
(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
United States	$	2,455	$	2,756	$	2,922	$	2,285	$	4	$	10,422	$	2,334	$	2,367	$	2,977	$	2,414	$	4	$	10,096
Europe	1,231		1,074		102		256		—		2,663		1,066		943		107		297		(5)		2,408
Asia Pacific	533		1,028		187		412		—		2,160		465		1,007		199		335		—		2,006
Middle East and North Africa	132		160		48		638		—		978		136		127		105		772		—		1,140
Canada and All Other	310		360		31		27		—		728		226		281		39		17		—		563
Consolidated net sales	4,661		5,378		3,290		3,618		4		16,951		4,227		4,725		3,427		3,835		(1)		16,213
Inter-segment sales	439		2		336		60		(837)		—		365		—		313		67		(745)		—
Business segment sales	$	5,100	$	5,380	$	3,626	$	3,678	$	(833)	$	16,951	$	4,592	$	4,725	$	3,740	$	3,902	$	(746)	$	16,213

Segment sales disaggregated by geographic region for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:

2021 2020
(dollars in millions) Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total
United States $ 6,899 $ 6,665 $ 8,962 $ 7,156 $ 15 $ 29,697 $ 8,027 $ 6,103 $ 5,627 $ 4,311 $ 156 $ 24,224
Asia Pacific 1,340 2,771 608 1,061 — 5,780 1,350 2,980 405 701 26 5,462
Middle East and North Africa 346 316 370 2,267 — 3,299 339 406 270 1,408 18 2,441
Europe 3,207 2,376 339 949 — 6,871 3,497 2,101 202 628 104 6,532
Canada and All Other 646 907 94 50 — 1,697 651 738 53 43 24 1,509
Consolidated net sales 12,438 13,035 10,373 11,483 15 47,344 13,864 12,328 6,557 7,091 328 40,168
Inter-segment sales 1,069 — 937 197 (2,203) — 1,050 6 579 121 (1,756) —
Business segment sales $ 13,507 $ 13,035 $ 11,310 $ 11,680 $ (2,188) $ 47,344 $ 14,914 $ 12,334 $ 7,136 $ 7,212 $ (1,428) $ 40,168

~~Segment sales disaggregated by customer for the quarters ended September 30, 2021 and 2020 are as follows:~~

2021 2020
(dollars in millions) Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total
U.S. government (1)
$ 1,101 $ 1,295 $ 2,923 $ 2,414 $ 4 $ 7,737 $ 1,238 $ 1,270 $ 2,944 $ 2,223 $ 72 $ 7,747
Foreign military sales through the U.S. government 54 322 210 778 — 1,364 34 325 201 812 — 1,372
Foreign government direct commercial sales 258 126 216 642 — 1,242 230 120 245 589 2 1,186
Commercial aerospace and other commercial 2,814 2,982 78 1 (5) 5,870 2,461 1,776 76 24 105 4,442
Consolidated net sales 4,227 4,725 3,427 3,835 (1) 16,213 3,963 3,491 3,466 3,648 179 14,747
Inter-segment sales 365 — 313 67 (745) — 311 3 283 58 (655) —
Business segment sales $ 4,592 $ 4,725 $ 3,740 $ 3,902 $ (746) $ 16,213 $ 4,274 $ 3,494 $ 3,749 $ 3,706 $ (476) $ 14,747

~~(1) Excludes foreign military sales through the U.S. government.~~


	2022												2021
(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
United States	$	7,162	$	7,630	$	8,640	$	6,897	$	8	$	30,337	$	6,899	$	6,665	$	8,962	$	7,156	$	15	$	29,697
Europe	3,815		3,010		312		776		—		7,913		3,207		2,376		339		949		—		6,871
Asia Pacific	1,485		2,726		540		1,074		—		5,825		1,340		2,771		608		1,061		—		5,780
Middle East and North Africa	363		350		191		1,772		—		2,676		346		316		370		2,267		—		3,299
Canada and All Other	908		1,160		105		57		—		2,230		646		907		94		50		—		1,697
Consolidated net sales	13,733		14,876		9,788		10,576		8		48,981		12,438		13,035		10,373		11,483		15		47,344
Inter-segment sales	1,202		2		980		187		(2,371)		—		1,069		—		937		197		(2,203)		—
Business segment sales	$	14,935	$	14,878	$	10,768	$	10,763	$	(2,363)	$	48,981	$	13,507	$	13,035	$	11,310	$	11,680	$	(2,188)	$	47,344

3826

Table of Contents

Segment sales disaggregated by type of customer for the ~~nine months~~quarters ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021												2020													2022												2021
(dollars in millions)	(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
U.S. government (1)	U.S. government (1)	$	3,470	$	3,748	$	8,767	$	7,155	$	15	$	23,155	$	3,880	$	3,792	$	5,504	$	4,301	$	126	$	17,603	U.S. government (1)	$	1,066	$	1,324	$	2,877	$	2,284	$	4	$	7,555	$	1,101	$	1,295	$	2,923	$	2,414	$	4	$	7,737
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	119		961		627		2,449		—		4,156		166		877		419		1,578		—		3,040		Foreign military sales through the U.S. government	57		295		135		788		—		1,275		54		322		210		778		—		1,364
Foreign government direct commercial sales	Foreign government direct commercial sales	804		392		662		1,877		—		3,735		659		380		458		1,154		2		2,653		Foreign government direct commercial sales	205		116		204		539		—		1,064		258		126		216		642		—		1,242
Commercial aerospace and other commercial	Commercial aerospace and other commercial	8,045		7,934		317		2		—		16,298		9,159		7,279		176		58		200		16,872		Commercial aerospace and other commercial	3,333		3,643		74		7		—		7,057		2,814		2,982		78		1		(5)		5,870
Consolidated net sales	Consolidated net sales	12,438		13,035		10,373		11,483		15		47,344		13,864		12,328		6,557		7,091		328		40,168		Consolidated net sales	4,661		5,378		3,290		3,618		4		16,951		4,227		4,725		3,427		3,835		(1)		16,213
Inter-segment sales	Inter-segment sales	1,069		—		937		197		(2,203)		—		1,050		6		579		121		(1,756)		—		Inter-segment sales	439		2		336		60		(837)		—		365		—		313		67		(745)		—
Business segment sales	Business segment sales	$	13,507	$	13,035	$	11,310	$	11,680	$	(2,188)	$	47,344	$	14,914	$	12,334	$	7,136	$	7,212	$	(1,428)	$	40,168	Business segment sales	$	5,100	$	5,380	$	3,626	$	3,678	$	(833)	$	16,951	$	4,592	$	4,725	$	3,740	$	3,902	$	(746)	$	16,213

(1) Excludes foreign military sales through the U.S. government.

Segment sales disaggregated by type of customer for the nine months ended September 30, 2022 and 2021 are as follows:


	2022												2021
(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
U.S. government(1)	$	3,140	$	3,915	$	8,494	$	6,895	$	8	$	22,452	$	3,470	$	3,748	$	8,767	$	7,155	$	15	$	23,155
Foreign military sales through the U.S. government	164		796		444		2,228		—		3,632		119		961		627		2,449		—		4,156
Foreign government direct commercial sales	719		335		620		1,444		—		3,118		804		392		662		1,877		—		3,735
Commercial aerospace and other commercial	9,710		9,830		230		9		—		19,779		8,045		7,934		317		2		—		16,298
Consolidated net sales	13,733		14,876		9,788		10,576		8		48,981		12,438		13,035		10,373		11,483		15		47,344
Inter-segment sales	1,202		2		980		187		(2,371)		—		1,069		—		937		197		(2,203)		—
Business segment sales	$	14,935	$	14,878	$	10,768	$	10,763	$	(2,363)	$	48,981	$	13,507	$	13,035	$	11,310	$	11,680	$	(2,188)	$	47,344

(1) Excludes foreign military sales through the U.S. government.

Table of Contents

Segment sales disaggregated by sales type for the quarters ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021												2020													2022												2021
(dollars in millions)	(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
Products	Products	$	3,336	$	2,877	$	2,613	$	3,506	$	(1)	$	12,331	$	3,231	$	2,142	$	2,615	$	3,324	$	157	$	11,469	Products	$	3,669	$	3,183	$	2,637	$	3,263	$	4	$	12,756	$	3,336	$	2,877	$	2,613	$	3,506	$	(1)	$	12,331
Services	Services	891		1,848		814		329		—		3,882		732		1,349		851		324		22		3,278		Services	992		2,195		653		355		—		4,195		891		1,848		814		329		—		3,882
Consolidated net sales	Consolidated net sales	4,227		4,725		3,427		3,835		(1)		16,213		3,963		3,491		3,466		3,648		179		14,747		Consolidated net sales	4,661		5,378		3,290		3,618		4		16,951		4,227		4,725		3,427		3,835		(1)		16,213
Inter-segment sales	Inter-segment sales	365		—		313		67		(745)		—		311		3		283		58		(655)		—		Inter-segment sales	439		2		336		60		(837)		—		365		—		313		67		(745)		—
Business segment sales	Business segment sales	$	4,592	$	4,725	$	3,740	$	3,902	$	(746)	$	16,213	$	4,274	$	3,494	$	3,749	$	3,706	$	(476)	$	14,747	Business segment sales	$	5,100	$	5,380	$	3,626	$	3,678	$	(833)	$	16,951	$	4,592	$	4,725	$	3,740	$	3,902	$	(746)	$	16,213

Segment sales disaggregated by sales type for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:

2021 2020
(dollars in millions) Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total
Products $ 9,867 $ 7,882 $ 7,964 $ 10,446 $ 15 $ 36,174 $ 11,325 $ 7,285 $ 5,024 $ 6,480 $ 288 $ 30,402
Services 2,571 5,153 2,409 1,037 — 11,170 2,539 5,043 1,533 611 40 9,766
Consolidated net sales 12,438 13,035 10,373 11,483 15 47,344 13,864 12,328 6,557 7,091 328 40,168
Inter-segment sales 1,069 — 937 197 (2,203) — 1,050 6 579 121 (1,756) —
Business segment sales $ 13,507 $ 13,035 $ 11,310 $ 11,680 $ (2,188) $ 47,344 $ 14,914 $ 12,334 $ 7,136 $ 7,212 $ (1,428) $ 40,168

~~Table of Contents~~


	2022												2021
(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
Products	$	10,728	$	8,798	$	7,805	$	9,537	$	8	$	36,876	$	9,867	$	7,882	$	7,964	$	10,446	$	15	$	36,174
Services	3,005		6,078		1,983		1,039		—		12,105		2,571		5,153		2,409		1,037		—		11,170
Consolidated net sales	13,733		14,876		9,788		10,576		8		48,981		12,438		13,035		10,373		11,483		15		47,344
Inter-segment sales	1,202		2		980		187		(2,371)		—		1,069		—		937		197		(2,203)		—
Business segment sales	$	14,935	$	14,878	$	10,768	$	10,763	$	(2,363)	$	48,981	$	13,507	$	13,035	$	11,310	$	11,680	$	(2,188)	$	47,344

RIS and RMD segment sales disaggregated by contract type for the quarters ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021				2020					2022				2021
(dollars in millions)	(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense		(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense
Fixed-price	Fixed-price	$	1,506	$	2,401	$	1,510	$	2,337	Fixed-price	$	1,369	$	2,127	$	1,506	$	2,401
Cost-type	Cost-type	1,921		1,434		1,956		1,311		Cost-type	1,921		1,491		1,921		1,434
Consolidated net sales	Consolidated net sales	3,427		3,835		3,466		3,648		Consolidated net sales	3,290		3,618		3,427		3,835
Inter-segments sales		313		67		283		58
Inter-segment sales										Inter-segment sales	336		60		313		67
Business segment sales	Business segment sales	$	3,740	$	3,902	$	3,749	$	3,706	Business segment sales	$	3,626	$	3,678	$	3,740	$	3,902

RIS and RMD segment sales disaggregated by contract type for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021				2020					2022				2021
(dollars in millions)	(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense		(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense
Fixed-price	Fixed-price	$	4,533	$	7,054	$	2,781	$	4,447	Fixed-price	$	4,062	$	6,245	$	4,533	$	7,054
Cost-type	Cost-type	5,840		4,429		3,776		2,644		Cost-type	5,726		4,331		5,840		4,429
Consolidated net sales	Consolidated net sales	10,373		11,483		6,557		7,091		Consolidated net sales	9,788		10,576		10,373		11,483
Inter-segments sales	Inter-segments sales	937		197		579		121		Inter-segments sales	980		187		937		197
Business segment sales	Business segment sales	$	11,310	$	11,680	$	7,136	$	7,212	Business segment sales	$	10,768	$	10,763	$	11,310	$	11,680

Table of Contents

Note ~~20:~~18: Remaining Performance Obligations (RPO)

RPO represent the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. Total RPO was ~~$156.1 billion and $150.1~~$168 billion as of September 30, ~~2021~~2022. In the quarter ended March 31, 2022, we reversed approximately $1.3 billion of RPO related to our sales contracts in Russia due to global sanctions on and ~~December 31, 2020, respectively.~~export controls with respect to Russia, as further discussed in “Note 1: Basis of Presentation.” Of the total RPO as of September 30, ~~2021,~~2022, we expect approximately 30% will be recognized as sales over the next 12 months. ~~This percentage~~Approximately 40% of our RPO relates to long-term commercial aerospace maintenance contracts at Pratt & Whitney, which are generally expected to be ~~recognized as sales~~realized over ~~the next 12 months depends on future developments, which are highly uncertain and cannot be predicted, including new information which may continue~~a span of up to emerge concerning the scope, severity and duration of the COVID-19 pandemic, as well as any worsening of the pandemic, the effect of additional variants, the efficacy, acceptance, distribution and availability of vaccines, new or continued actions to contain the pandemic’s spread or treat its impact, and governmental, business and individual personal actions taken in response to the pandemic, which may result in customer delays or order cancellations.15 years.

Note ~~21:~~19: Accounting Pronouncements

In ~~June 2016,~~September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-13, Financial Instruments - Credit Losses (Topic 326)~~2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): ~~Measurement~~Disclosure of ~~Credit Losses on Financial Instruments. This ASU and its related amendments (collectively,~~Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose the ~~Credit Loss Standard) modifies~~key terms of supplier finance programs, the ~~impairment model to utilize an expected loss methodology in place~~amount of obligations outstanding at the end of the incurred loss methodology for financial instruments, including trade receivables, contract assets and off-balance sheet credit exposures. The Credit Loss Standard requires consideration of a broader range of information to estimate expected credit losses, including historical information, current economic conditions and a reasonable forecast period. This ASU requiresreporting period that the ~~statement of operations reflect estimates of expected credit losses for newly recognized financial assets~~entity has confirmed as ~~well as changes in~~valid to the estimate of expected credit losses that have taken place during the period, which may result in earlier recognition of certain losses. We adopted this standard effective January 1, 2020 utilizing a modified retrospective approach. A cumulative-effect non-cash adjustment to retained earnings as of January 1, 2020 wasfinance provider, where these obligations are recorded in the ~~amount~~balance sheet, and a roll forward of ~~$59 million.~~the obligations. The ~~adoption~~new standard is effective for fiscal years beginning after December 15, 2022, on a retrospective basis, including interim periods within those fiscal years. We are currently evaluating the impact of adopting this new pronouncement.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to make specific annual disclosures about transactions with a government. The new standard ~~did~~is effective for fiscal years beginning after December 15, 2021. We are currently evaluating the impact of the standard, but we do not expect it to have a material impact on ~~the Company’s Condensed Consolidated Financial Statements.~~our disclosures.

In ~~December 2019,~~October 2021, the FASB issued ASU ~~2019-12, Income Taxes~~2021-08, Business Combinations (Topic ~~740)~~805): ~~Simplifying the~~ Accounting for ~~Income Taxes. The amendments~~Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to apply the guidance in ~~this update remove certain exceptions of Topic 740 including the exception to the incremental approach for intraperiod tax allocation when there is a loss~~ASC 606, Revenue from ~~continuing operations and income from other items; the exception to the requirement~~Contracts with Customers, to recognize and measure contract assets and contract liabilities in a ~~deferred tax liability~~business combination, rather than using fair value. The new standard is effective for ~~equity method investments when a foreign subsidiary becomes an equity method investment;~~fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. Effective January 1, 2022, we elected to early adopt the ~~exception to the ability to reverse a~~ ~~deferred tax liability for a foreign subsidiary when a foreign equity~~

~~Table~~requirements of ~~Contents~~

method investment becomes a subsidiary; and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. There are also additional areas of guidance related to franchise and other taxes partially based on income and the interim recognition of enactment of tax laws and rate changes. We adopted the new standard ~~effective January 1, 2021.~~on a prospective basis. The adoption of ~~this~~the standard did not ~~and is not expected to,~~ have an impact on ~~the Company’s Condensed Consolidated Financial Statements.~~our financial position, results of operations or liquidity.

Other new pronouncements issued but not effective until after September 30, ~~2021~~2022 are not expected to have a material impact on our financial condition, results of operations or liquidity.

4129

Table of Contents

With respect to the unaudited condensed consolidated financial information of Raytheon Technologies for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, PricewaterhouseCoopers LLP (PwC) reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated October ~~26, 2021,~~25, 2022, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information. PwC has not carried out any significant or additional audit tests beyond those that would have been necessary if their report had not been included. Accordingly, the degree of reliance on its report on such information should be restricted in light of the limited nature of the review procedures applied. PwC is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the Act) for its report on the unaudited condensed consolidated financial information because that report is not a “report” or a “part” of a registration statement prepared or certified by PwC within the meaning of Sections 7 and 11 of the Act.

Report of Independent Registered Public Accounting Firm

To the Shareowners and Board of Directors of Raytheon Technologies Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Raytheon Technologies Corporation and its subsidiaries (the “Company”) as of September 30, ~~2021,~~2022, and the related condensed consolidated statements of operations, of comprehensive income, ~~(loss),~~ and of changes in equity for the three-month and nine-month periods ended September 30, ~~2021~~2022 and ~~2020~~2021 and the condensed consolidated statement of cash flows for the nine-month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, including the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, ~~2020,~~2021, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February ~~8, 2021, which included a paragraph describing a change in the manner of accounting for leases in the 2019 financial statements,~~11, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2020,~~2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

October ~~26, 2021~~25, 2022

4230

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

We are a global premier systems provider of high technology products and services to the aerospace and defense industries. ~~On April 3, 2020, United Technologies Corporation (UTC) completed the~~ ~~separation of its business into three independent, publicly traded companies – UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis) (the Separation Transactions).~~ UTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the distributions (the Distributions) effective at 12:01 a.m., Eastern Time, on April 3, 2020. Immediately following the Separation Transactions and Distributions, on April 3, 2020, ~~UTC and Raytheon Company completed their all-stock merger of equals transaction (the Raytheon Merger), pursuant to which Raytheon Company became a wholly-owned subsidiary of UTC and UTC was renamed Raytheon Technologies Corporation (RTC). As a result of these transactions, we now~~

We operate in four principal business segments: Collins Aerospace Systems ~~(Collins Aerospace)~~(Collins), Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).

UTC was determined to be the accounting acquirer in the Raytheon Merger, and, as a result, the financial statements of Raytheon Technologies include Raytheon Company’s financial position and results of operations for all periods subsequent to the completion of the Raytheon Merger on April 3, 2020. RIS and RMD follow a 4-4-5 fiscal calendar while Collins Aerospace and Pratt & Whitney continue to use a quarter calendar end of September 30, 2021. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended September 30, 2021 and September 30, 2020 with respect to RIS or RMD, we are referring to their October 3, 2021 and September 27, 2020 fiscal quarter ends, respectively. The historical results of Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. See “Note 3: Discontinued Operations” within Item 1 of this Form 10-Q for additional information. Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

RIS and RMD follow a 4-4-5 fiscal calendar while Collins and Pratt & Whitney use a quarter calendar end. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended September 30, 2022 and September 30, 2021 with respect to RIS or RMD, we are referring to ~~periods prior to the Raytheon Merger~~their October 2, 2022 and to the combined company, Raytheon Technologies Corporation, when referring to periods after the Raytheon Merger. Unless the context otherwise requires, the terms “Raytheon Company,” or “Raytheon” mean Raytheon Company and its subsidiaries prior to the Raytheon Merger.October 3, 2021 fiscal quarter ends, respectively.

The current status of significant factors affecting our business environment in ~~2021~~2022 is discussed below. For additional discussion, refer to the “Business Overview” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in our ~~2020~~2021 Annual Report on Form 10-K.

Industry Considerations

Our worldwide operations can be affected by industrial, economic and political factors on both a regional and global level. Our operations include original equipment manufacturer (OEM) and extensive related aftermarket parts and services related to our aerospace operations. Our defense business serves both domestic and international customers primarily as a prime contractor or subcontractor on a broad portfolio of defense and related programs for government customers. Our business mix also reflects the combination of shorter cycles onin our commercial aerospace spares contracts and certain service contracts in our defense business primarily at RIS, and longer cycles in our aerospace OEM and aftermarket maintenance contracts and on our defense contracts to design, develop, manufacture or modify complex equipment. Our customers are in the public and private sectors, and our businesses reflect an extensive geographic diversification that has evolved with continued globalization.

Government legislation, policies and regulations, including regulations related to global warming, carbon footprint and fuel efficiency, can have a negative impact on our worldwide operations. Government and industry-driven safety and performance regulations, restrictions on aircraft engine noise and emissions, government imposed travel restrictions, and government procurement practices can impact our businesses.

Collins ~~Aerospace~~ and Pratt & Whitney serve both commercial and government aerospace customers. Revenue passenger miles (RPMs), available seat miles and the general economic health of airline carriers are key barometers for our commercial aerospace operations. Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits. Many of our aerospace operations’ customers are covered under long-term aftermarket service agreements at both Collins ~~Aerospace~~ and Pratt & Whitney, which are inclusive of both spare parts and services.

RIS, RMD, and the defense operations of Collins ~~Aerospace~~ and Pratt & Whitney are affected by U.S. Department of Defense (DoD) budget and spending levels, changes in demand, changes in policy positions or priorities ~~from a new U.S. Administration~~ and the global political environment. ~~Total~~In addition, our defense businesses engage in both direct commercial sales, ~~to the~~which generally require U.S. government ~~excluding~~licenses and approvals, as well as foreign military sales, ~~were $7.7 billion for~~

~~Table~~which are government-to-government transactions initiated by, and carried out at the direction of, ~~Contents~~

~~both the quarters ended September 30, 2021 and 2020, or 48% and 53% of total net sales for those periods, respectively. Total sales to~~ the U.S. government. Changes in these budget and spending levels, policies, or priorities, which are subject to geopolitical risks and threats, may impact our defense businesses, including the timing of and delays in U.S. government ~~were $23.2 billion~~licenses and ~~$17.6 billion~~approvals for sales, the ~~nine months ended September 30, 2021 and 2020,~~risk of sanctions or ~~49% and 44% of total sales for those periods, respectively.~~other restrictions.

Impact of the COVID-19 Pandemic

~~Beginning in 2020, the~~The coronavirus disease 2019 (COVID-19) pandemic continues to negatively ~~impacted~~affect the global economy, our business and operations, supply chains, and the industries in which we operate. ~~The continued disruption~~However, we continue to see signs of ongoing recovery in commercial air ~~travel and commercial activities and~~travel. While we believe that the ~~significant restrictions and limitations on businesses, particularly within~~long-term outlook for the aerospace and commercial airline industries, have negatively impacted global supply, demand and distribution capabilities. In particular, the unprecedented decrease in air travel resulting from the COVID-19 pandemic has adversely affected our airline and airframer customers, and their demand for the products and services of our Collins Aerospace and Pratt & Whitney businesses.

•~~increased estimated credit losses on both our receivables and contract assets of $48 million and $357 million in the quarter and nine months ended September 30, 2020, respectively,~~

•an unfavorable EAC adjustment $334 million on a Pratt & Whitney commercial engine aftermarket contract due to lower estimated revenues driven by a change in the estimated maintenance coverage period in both the quarter and nine months ended September 30, 2020,

•~~an $89 million impairment of commercial aircraft program assets at Pratt & Whitney in both the quarter and nine months ended September 30, 2020,~~

•~~the impairment of a Collins Aerospace trade name of $57 million in total, in the first and second quarters of 2020,~~

•~~an unfavorable EAC adjustment at Pratt & Whitney related to a shift in overhead costs to military contracts of $44 million in the second quarter of 2020.~~

~~Our RIS and RMD businesses, although experiencing minor impacts, have not experienced significant business disruptions as a result of the COVID-19 pandemic.~~

~~Table of Contents~~

In addition, in March 2021, Congress passed the American Rescue Plan Act of 2021 (ARPA) which included pension funding relief provisions. For further discussion, refer to the “FAS/CAS operating adjustment” subsection under the “Segment Review” section below. We continue to monitor for any ongoing government guidance related to COVID-19 that may be issued.

Other Matters

Global economic and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, foreign currency exchange rates, energy costs, levels of air travel, the financial condition of

Table of Contents

commercial airlines, and the impact from natural disasters and weather conditions create uncertainties that could impact our ~~business~~businesses.

During August 2022, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Sciences Act and the Inflation Reduction Act were signed into law, each effective as of January 1, 2023. This new legislation includes the implementation of a new corporate alternative minimum tax, an excise tax on stock buybacks, and tax incentives for energy and climate initiatives, among other provisions. We do not currently expect the ~~remainder~~legislation will have a material effect on our results of ~~2021~~operations, financial condition or liquidity.

In response to the Russian military’s invasion of Ukraine on February 24, 2022, the U.S. government and the governments of various jurisdictions in which we operate, including Canada, the United Kingdom, the European Union, and others, have imposed broad economic sanctions and export controls targeting specific industries, entities and individuals in Russia. The Russian government has implemented similar counter-sanctions and export controls targeting specific industries, entities and individuals in the ~~future. With regard~~U.S. and other jurisdictions in which we operate. These government measures, among other limitations, restrict transactions involving various Russian banks and financial institutions and impose enhanced export controls limiting transfers of various goods, software and technologies to ~~political conditions,~~and from Russia, including broadened export controls specifically targeting the aerospace sector. These measures have adversely affected and could continue to adversely affect the Company and/or our supply chain, business partners or customers; however, based on information available to date, we do not currently expect these issues will have a material adverse effect on our financial results. In the quarter ended March 31, 2022, we reversed $1.3 billion of backlog, which would have been recognized over a span of approximately 10 years, and recorded certain impairment charges and increases to reserves related to operations at our Pratt & Whitney and Collins businesses, as discussed further in “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q. We will continue to monitor future developments, including additional sanctions and other measures, that could adversely affect the Company and/or our supply chain, business partners or customers.

In addition, the People’s Republic of China (China) previously announced that it may take measures against RTC in connection with certain foreign military sales to Taiwan. In addition, China has indicated that it decided to sanction our Chairman and Chief Executive Officer Gregory Hayes, in connection with another potential foreign military sale to Taiwan involving RTC products and services. RTC is not aware of any specific sanctions against Mr. Hayes or RTC, or the nature or timing of any future potential sanctions or countermeasures. If China were to impose sanctions or take other regulatory action against RTC, our suppliers, affiliates or partners, it could potentially disrupt our business operations. The impact of potential sanctions or other actions by China cannot be determined at this time.

Also, in July 2019, the U.S. government suspended Turkey’s participation in the F-35 Joint Strike Fighter program because Turkey accepted delivery of the Russian-built S-400 air and missile defense system. The U.S. has imposed, and may impose additional, sanctions on Turkey, as well as contractual restrictions on the use of Turkish sources on certain military programs, as a result of this or other political disputes. Turkish companies supply us with components, some of which are sole-sourced, primarily in our aerospace operations for commercial and military engines and aerospace products. Depending upon the scope and timing of U.S. sanctions or contractual prohibitions on Turkey and potential reciprocal actions, if any, such sanctions or actions could impact our sources of supply and could have a material adverse effect on our results of operations, cash flows or financial condition. In addition, in October 2020, the People’s Republic of China (China) announced that it may sanction RTC in connection with a possible Foreign Military Sale to Taiwan of six MS-110 Reconnaissance Pods and related equipment manufactured by Collins Aerospace. Foreign Military Sales are government-to-government transactions that are initiated by, and carried out at the direction of, the U.S. government. To date, the Chinese government has not imposed sanctions on RTC or indicated the nature or timing of any future potential sanctions or other actions. If China were to impose sanctions or take other regulatory action against RTC, our suppliers, affiliates or partners, it could potentially disrupt our business operations. The impact of potential sanctions or other actions by China cannot be determined at this time.

~~The change in the U.S. administration could result in changes to the U.S. government’s foreign policies that may impact regulatory approval for~~We have direct commercial sales contracts for ~~certain of our~~ products and services to certain foreign ~~customers.~~customers, for which U.S. government review and approval have been pending. The U.S. government’s approval of these sales is subject to a range of factors, including its foreign policies related to these customers, which are subject to continuing review and potential changes. Likewise, regulatory approvals previously granted for prior sales can be paused or revoked if the products and services have not yet been delivered to the customer. If we ultimately do not receive all of the regulatory approvals, or those approvals are revoked, it could have a material effect on our financial results. In particular, as of September 30, ~~2021,~~2022, our ~~contract~~Contract liabilities include approximately ~~$440~~$355 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated.

Changes in U.S. (federal or state) or international tax laws and regulations, or their interpretation and application, including the amortization for research or experimental expenditures, could significantly impact our provision for income taxes, the amount of taxes payable, and our deferred tax asset and liability balances. Recent proposals to increase the U.S. corporate income tax rate would require us to revalue our deferred tax assets and liabilities upon enactment of new tax legislation, which may result in a material, one-time, noncash increase in income tax expense as well as material increases to our income tax expense and payments in subsequent years.

See Part ~~II,~~I, Item 1A, “Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K for further discussion of these items.

CRITICAL ACCOUNTING ESTIMATES

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management believes the most complex and sensitive judgments, because

~~Table of Contents~~

of their significance to the Condensed Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. See “Critical Accounting Estimates” within Item 7 and “Note 1: Basis of Presentation and Summary of Accounting Principles” within Item 8 of our ~~2020~~2021 Annual Report on Form 10-K, which

Table of Contents

describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management’s estimates. There have been no significant changes in our critical accounting estimates during the nine months ended September 30, ~~2021.~~2022.

RESULTS OF OPERATIONS

As described in our “Cautionary Note ~~Regarding Forward-Looking Statements”~~Concerning Factors That May Affect Future Results” in this Form 10-Q, our interim period results of operations and period-to-period comparisons of such results, particularly at a segment level, may not be indicative of our future operating results. The following discussions of comparative results among periods, including the discussion of segment results, should be viewed in this context. As discussed further above in “Business Overview,” the results of RIS and RMD reflect the period subsequent to the completion of the Raytheon Merger on April 3, 2020. As such, the results of RIS and RMD for the second quarter of 2020 exclude results prior to the merger date, the estimated impact of which is approximately $400 million of sales and approximately $45 million of operating profit. These amounts have been excluded from the nine months ended September 30, 2021 organic changes disclosed throughout our Results of Operations discussion. In addition, as a result of the Separation Transactions and the Distributions, the historical results of Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

~~Net Sales~~
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Net Sales $ 16,213 $ 14,747 $ 47,344 $ 40,168

~~The factors contributing to the total change year-over-year in total net sales for the quarter and nine months ended September 30, 2021 are as follows:~~
(dollars in millions) Quarter Ended September 30, 2021 Nine Months Ended September 30, 2021
Organic(1)
$ 1,664 $ 66
Acquisitions and divestitures, net (215) 6,988
Other 17 122
Total change $ 1,466 $ 7,176

~~(1)~~ We provide the organic change in ~~net~~Net sales and Cost of sales for our consolidated results of ~~operations.~~operations as well as the organic change in Net sales and Operating profit for our segments. We believe that ~~this measure is~~these non-Generally Accepted Accounting Principles (non-GAAP) measures are useful to investors because ~~it provides~~they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic change in Net sales, Cost of sales and Operating profit excludes acquisitions and divestitures, net, and the effect of foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”). Additionally, the organic change in Cost of sales and Operating profit excludes restructuring costs, the FAS/CAS operating adjustment and costs related to certain acquisition accounting adjustments. Restructuring costs generally arise from severance related to workforce reductions and facility exit costs. Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions and the amortization of customer contractual obligations related to loss making or below market contracts acquired.

Net Sales


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2022		2021		2022		2021
Net sales	$	16,951	$	16,213	$	48,981	$	47,344

The factors contributing to the change year-over-year in total net sales for the quarter and nine months ended September 30, 2022 are as follows:


(dollars in millions)	Quarter Ended September 30, 2022		Nine Months Ended September 30, 2022
Organic(1)	$	1,021	$	2,382
Acquisitions and divestitures, net	(185)		(539)
Other	(98)		(206)
Total change	$	738	$	1,637

(1) See “Results of Operations” for definition of organic. A reconciliation of this measure to the reported ~~U.S Generally Accepted Accounting Principles (GAAP) amounts~~U.S. GAAP amount is provided in the table above.

Net sales increased ~~$1,664~~$1,021 million organically in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020~~2021 primarily due to higher organic sales of ~~$1.2~~$0.7 billion at Pratt & Whitney and ~~$0.4~~$0.6 billion at Collins, ~~Aerospace.~~ partially offset by lower organic sales of $0.2 billion at RMD.

The increase at Pratt & Whitney was primarily driven by higher commercial aftermarket sales, primarily due to an increase in shop visits and related spare part sales, and higher commercial OEM sales, primarily due to an increase in commercial engine deliveries, all driven by the recovery from the prior year’s unfavorable economic environment largely due to the COVID-19 pandemic. The increase in Pratt & Whitney commercial aftermarket sales was also due to the absence of unfavorable contract adjustments of $0.3 billion in the prior year. The increase at Collins Aerospace was primarily driven by higher commercial aerospace aftermarket sales primarily due to an increase in flight hours and aircraft fleet utilization as commercial aerospace continues to recover from the prior year’s unfavorable economic environment principally driven by the COVID-19 pandemic. The $215$185 million decrease in net sales related to Acquisitions and divestitures, net for the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020,~~2021, was primarily driven by the sale of our ~~Forcepoint~~global training and services business within our RIS segment in the ~~first~~fourth quarter of 2021.

~~Organic~~The decrease in other net sales of $98 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, was primarily driven by the impact of foreign exchange.

Net sales increased $2,382 million organically in the nine months ended September 30, ~~2021 were relatively consistent~~2022 compared to the nine months ended September 30, ~~2020 as~~2021 primarily due to higher organic sales of ~~$0.6~~$1.9 billion at Pratt & Whitney and ~~$0.5~~$1.6 billion at ~~RMD were~~Collins, partially offset by lower organic sales of ~~$1.1~~$0.9 billion at Collins Aerospace. The higher organic sales at Pratt & Whitney were primarily driven by higher commercial aftermarket sales, primarily due to an increase in shop visits and related spare part sales, principally driven by recovery from the prior year’s unfavorable economic environment principally driven by the COVID-19 pandemic. The increase in Pratt & Whitney commercial aftermarket sales was also due to the absence of unfavorable contract adjustments of $0.3 billion in the prior year. The higher organic sales at RMD were primarily driven by higher sales on an international Patriot

~~Table of Contents~~

RMD.

program, higher sales to an international customer primarily for National Advanced Surface to Air Missile System (NASAMS), higher sales on the Advanced Medium-Range Air-to-Air Missile (AMRAAM) program and higher sales on the StormBreaker program, partially offset by lower sales on direct commercial sales contracts for precision guided munitions with a Middle East customer. The lower organic sales at Collins Aerospace was primarily driven by lower commercial aerospace OEM sales and lower commercial aerospace aftermarket sales, primarily due to the change in the economic environment principally driven by the COVID-19 pandemic. The $6,988$539 million ~~increase~~decrease in net sales related to Acquisitions and divestitures, net for the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020,~~2021, was primarily driven by the sale of our global training and services business within our RIS segment in the fourth quarter of 2021.

The decrease in other net sales of $206 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, was primarily driven by the ~~Raytheon Merger on April 3, 2020,~~ impact of foreign exchange.

~~partially offset~~Table of Contents

See “Segment Review” below for further information by ~~the sale of our Forcepoint business in the first quarter of 2021~~.segment.


		Quarter Ended September 30,				% of Total Net Sales					Quarter Ended September 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Net Sales	Net Sales									Net Sales
Products	Products	$	12,331	$	11,469	76.1	%	77.8	%	Products	$	12,756	$	12,331	75.3	%	76.1	%
Services	Services	3,882		3,278		23.9	%	22.2	%	Services	4,195		3,882		24.7	%	23.9	%
Total net sales	Total net sales	$	16,213	$	14,747	100	%	100	%	Total net sales	$	16,951	$	16,213	100	%	100	%

Refer to “Note ~~19:~~17: Segment Financial Data” within Item 1 of this Form 10-Q for the composition of external net sales by products and services by segment.

Net products sales increased ~~$862~~$425 million in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020 primarily~~2021 due to ~~an increase~~increases in external products sales of ~~$0.7~~$0.3 billion at Pratt & ~~Whitney.~~

~~Net services sales increased $604 million in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 primarily due to an increase in external services sales of $0.5~~Whitney and $0.3 billion at ~~Pratt & Whitney.~~

Nine Months Ended September 30, % of Total Net Sales
(dollars in millions) 2021 2020 2021 2020
Net Sales
Products $ 36,174 $ 30,402 76.4 % 75.7 %
Services 11,170 9,766 23.6 % 24.3 %
Total net sales $ 47,344 $ 40,168 100 % 100 %

Net products sales increased $5,772 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in external products sales of $4.0 billion at RMD and $2.9 billion at RIS, both primarily due to the Raytheon Merger on April 3, 2020, and an increase in external products sales of $0.6 billion at Pratt & Whitney,Collins, partially offset by a decrease in external products sales of ~~$1.5~~$0.2 billion at ~~Collins Aerospace.~~RMD.

Net services sales increased ~~$1,404~~$313 million in the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 primarily due to increases in external services sales of $0.3 billion at Pratt & Whitney and $0.1 billion at Collins, partially offset by a decrease in external services sales of $0.2 billion at RIS primarily driven by the sale of the global training and services business in the fourth quarter of 2021.


	Nine Months Ended September 30,				% of Total Net Sales
(dollars in millions)	2022		2021		2022		2021
Net Sales
Products	$	36,876	$	36,174	75.3	%	76.4	%
Services	12,105		11,170		24.7	%	23.6	%
Total net sales	$	48,981	$	47,344	100	%	100	%

Net products sales increased $702 million in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 due to increases in external products sales of $0.9 billion at Pratt & Whitney and $0.9 billion at Collins, partially offset by decreases in external products sales of $0.9 billion at RMD and $0.2 billion at RIS.

Net services sales increased $935 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to ~~an increase~~increases in external services sales of $0.9 billion at ~~RIS~~Pratt & Whitney and $0.4 billion at ~~RMD, both~~Collins, partially offset by a decrease in external services sales of $0.4 billion at RIS primarily ~~due to~~ driven by the ~~Raytheon Merger on April 3, 2020.~~sale of the global training and services business in the fourth quarter of 2021.

Our sales to major customers were as follows:


		Quarter Ended September 30,				% of Total Net Sales					Quarter Ended September 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Sales to the U.S. government(1)	Sales to the U.S. government(1)	$	7,737	$	7,747	47.7	%	52.5	%	Sales to the U.S. government(1)	$	7,555	$	7,737	44.6	%	47.7	%
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	1,364		1,372		8.4	%	9.3	%	Foreign military sales through the U.S. government	1,275		1,364		7.5	%	8.4	%
Foreign government direct commercial sales	Foreign government direct commercial sales	1,242		1,186		7.7	%	8.0	%	Foreign government direct commercial sales	1,064		1,242		6.3	%	7.7	%
Commercial aerospace and other commercial sales	Commercial aerospace and other commercial sales	5,870		4,442		36.2	%	30.1	%	Commercial aerospace and other commercial sales	7,057		5,870		41.6	%	36.2	%
Total net sales	Total net sales	$	16,213	$	14,747	100	%	100	%	Total net sales	$	16,951	$	16,213	100	%	100	%

(1) Excludes foreign military sales through the U.S. government.

4734

Table of Contents


		Nine Months Ended September 30,				% of Total Net Sales					Nine Months Ended September 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Sales to the U.S. government(1)	Sales to the U.S. government(1)	$	23,155	$	17,603	48.9	%	43.8	%	Sales to the U.S. government(1)	$	22,452	$	23,155	45.8	%	48.9	%
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	4,156		3,040		8.8	%	7.6	%	Foreign military sales through the U.S. government	3,632		4,156		7.4	%	8.8	%
Foreign government direct commercial sales	Foreign government direct commercial sales	3,735		2,653		7.9	%	6.6	%	Foreign government direct commercial sales	3,118		3,735		6.4	%	7.9	%
Commercial aerospace and other commercial sales	Commercial aerospace and other commercial sales	16,298		16,872		34.4	%	42.0	%	Commercial aerospace and other commercial sales	19,779		16,298		40.4	%	34.4	%
Total net sales	Total net sales	$	47,344	$	40,168	100	%	100	%	Total net sales	$	48,981	$	47,344	100	%	100	%

(1) Excludes foreign military sales through the U.S. government.

Cost of Sales


		Quarter Ended September 30,						Nine Months Ended September 30,							Quarter Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021			2020			2021			2020			(dollars in millions)	2022			2021			2022			2021
Total cost of sales	Total cost of sales	$	13,089		$	13,004		$	38,281		$	33,790		Total cost of sales	$	13,464		$	13,089		$	38,880		$	38,281
Percentage of net sales	Percentage of net sales	80.7		%	88.2		%	80.9		%	84.1		%	Percentage of net sales	79.4		%	80.7		%	79.4		%	80.9		%

The factors contributing to the change year-over-year in total cost of sales for the quarter and nine months ended September 30, ~~2021~~2022 are as follows:


(dollars in millions)	(dollars in millions)	Quarter Ended September 30, 2021		Nine Months Ended September 30, 2021		(dollars in millions)	Quarter Ended September 30, 2022		Nine Months Ended September 30, 2022
Organic(1)	Organic(1)	$	416	$	(818)	Organic(1)	$	650	$	1,156

Acquisitions and divestitures, net	Acquisitions and divestitures, net	(53)		5,854		Acquisitions and divestitures, net	(155)		(448)
Restructuring	Restructuring	(138)		(305)		Restructuring	13		(5)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	(117)		(565)		FAS/CAS operating adjustment	105		181
Acquisition accounting adjustments	Acquisition accounting adjustments	63		322		Acquisition accounting adjustments	(113)		(235)
Other	Other	(86)		3		Other	(125)		(50)
Total change	Total change	$	85	$	4,491	Total change	$	375	$	599

(1) ~~We provide the organic change in cost~~See “Results of ~~sales~~Operations” for ~~our consolidated results~~definition of operations. We believe that this measure is useful to investors because it provides transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic change excludes acquisitions and divestitures, net; restructuring costs; the FAS/CAS operating adjustment; costs related to certain acquisition accounting adjustments; and the effect of foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”).organic. A reconciliation of this measure to the reported U.S. GAAP ~~amounts~~amount is provided in the table above.

The organic increase in total cost of sales of ~~$416~~$650 million for the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020~~2021 was primarily driven by the organic sales increases at Pratt & Whitney ~~noted above. The change in organic cost of sales includes a decrease primarily due to favorable commercial aerospace aftermarket~~ and ~~OEM product mix at~~ Collins, ~~Aerospace.~~

The decrease in other cost of sales of $86 million for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020, is primarily driven by the absence of a prior year impairment of commercial aircraft program assets at Pratt & Whitney for $89 million.

The organic decrease in total cost of sales of $818 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, was primarily driven by due to the organic sales decrease at Collins Aerospace noted above, partially offset by the organic sales ~~increases~~decrease at RMD ~~and Pratt & Whitney~~ noted above.

The ~~increase~~$155 million decrease in cost of sales related to Acquisitions and divestitures, net for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, was primarily driven by the sale of ~~$5,854~~our global training and services business within our RIS segment in the fourth quarter of 2021.

The decrease in other cost of sales of $125 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, was primarily driven by the impact of foreign exchange.

The organic increase in total cost of sales of $1,156 million for the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020 is~~2021, was primarily driven by the ~~Raytheon Merger on April 3, 2020,~~ organic sales increases at Pratt & Whitney and Collins, partially offset by the ~~sale of our Forcepoint business~~organic sales decrease at RMD noted above.

The $448 million decrease in ~~the first quarter of 2021 and the sale of the Collins Aerospace military GPS and space-based precision optics businesses in the third quarter of 2020~~.

~~Other~~ cost of sales related to Acquisitions and divestitures, net for the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020, includes~~ 2021, was primarily driven by the ~~absence~~sale of ~~a prior year impairment~~our global training and services business within our RIS segment in the fourth quarter of ~~commercial aircraft program assets~~2021.

The decrease in other cost of sales of $50 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, was primarily driven by the impact of foreign exchange, partially offset by charges recorded during the first quarter of 2022 at Pratt & Whitney and Collins related to impairment of customer financing assets for ~~$89 million, which was more than offset by an unfavorable impact~~products under lease, inventory reserves, purchase order obligations, and the impairment of ~~foreign exchange.~~contract fulfillment costs that are no longer recoverable, all due to global sanctions on and export controls with respect to Russia. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional information.

~~For further discussion on Restructuring costs see the “Restructuring Costs” section below.~~

Table of Contents

For further discussion on FAS/CAS operating adjustment see the “FAS/CAS operating adjustment” subsection under the “Segment Review” section below. For

~~Table of Contents~~

further discussion on Acquisition accounting adjustments, see the “Acquisition accounting adjustments” subsection under the “Segment Review” section below.


		Quarter Ended September 30,				% of Total Net Sales					Quarter Ended September 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Cost of sales	Cost of sales									Cost of sales
Products	Products	$	10,296	$	10,322	63.5	%	70.0	%	Products	$	10,493	$	10,296	61.9	%	63.5	%
Services	Services	2,793		2,682		17.2	%	18.2	%	Services	2,971		2,793		17.5	%	17.2	%
Total cost of sales	Total cost of sales	$	13,089	$	13,004	80.7	%	88.2	%	Total cost of sales	$	13,464	$	13,089	79.4	%	80.7	%

Net products cost of sales increased $197 million in the quarter ended September 30, ~~2021 was relatively consistent~~2022 compared to the quarter ended September 30, ~~2020. Included in the change was an increase in external products cost of sales~~2021 primarily due to increases at Collins and Pratt & Whitney, ~~principally driven~~partially offset by ~~the product sales increase noted above~~decreases at RMD and a decrease in Acquisition accounting adjustments. The changes at Collins, Pratt & Whitney, and RMD were related to the changes in products ~~cost of~~ sales ~~at Collins Aerospace primarily due to favorable commercial aerospace aftermarket and OEM product mix,~~ ~~a decrease in restructuring costs, and~~ ~~the impact of the sale of the~~ ~~military GPS and space-based precision optics businesses in the third quarter of 2020~~.noted above.

Net services cost of sales increased $178 million in the quarter ended September 30, ~~2021 was relatively consistent~~2022 compared to the quarter ended September 30, ~~2020. Included in the change was~~2021 primarily due to an increase in external services cost of sales at Pratt & Whitney, ~~principally~~partially offset by a decrease in external services sales at RIS, both driven by the services sales ~~increase~~changes noted ~~above, largely offset by the absence of prior year significant unfavorable contract adjustments as discussed in the “Segment Review” section below.~~above.


		Nine Months Ended September 30,				% of Total Net Sales					Nine Months Ended September 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Cost of sales	Cost of sales									Cost of sales
Products	Products	$	30,267	$	26,571	63.9	%	66.1	%	Products	$	30,353	$	30,267	62.0	%	63.9	%
Services	Services	8,014		7,219		16.9	%	18.0	%	Services	8,527		8,014		17.4	%	16.9	%
Total cost of sales	Total cost of sales	$	38,281	$	33,790	80.9	%	84.1	%	Total cost of sales	$	38,880	$	38,281	79.4	%	80.9	%

Net products cost of sales increased ~~$3,696~~$86 million in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 primarily due to ~~an increase in external products cost of sales~~increases at Collins and Pratt & Whitney, partially offset by decreases at RMD and RIS ~~principally due~~and in Acquisition Accounting Adjustments. The changes at RMD, RIS, Collins, and Pratt & Whitney were related to the ~~Raytheon Merger on April 3, 2020, partially offset by a decrease~~changes in ~~external products cost of sales at Collins Aerospace, principally driven by the~~ products sales ~~decrease~~ noted above.

Net services cost of sales increased ~~$795~~$513 million in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 primarily due to ~~an increase in external services cost of sales at RIS and RMD principally due to the Raytheon Merger on April 3, 2020, partially offset by a decrease~~increases in external services cost of sales at Pratt & Whitney ~~principally~~and Collins, partially offset by a decrease in external services sales at RIS, all driven by the ~~absence of prior year significant unfavorable contract adjustments as discussed in the “Segment Review” section below.~~services sales changes noted above.

Research and Development


		Quarter Ended September 30,						Nine Months Ended September 30,							Quarter Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021			2020			2021			2020			(dollars in millions)	2022			2021			2022			2021
Company-funded	Company-funded	$	676		$	642		$	1,922		$	1,872		Company-funded	$	662		$	676		$	1,995		$	1,922
Percentage of net sales	Percentage of net sales	4.2		%	4.4		%	4.1		%	4.7		%	Percentage of net sales	3.9		%	4.2		%	4.1		%	4.1		%
Customer-funded (1)	Customer-funded (1)	$	1,125		$	1,207		$	3,414		$	3,032		Customer-funded (1)	$	1,125		$	1,125		$	3,300		$	3,414
Percentage of net sales	Percentage of net sales	6.9		%	8.2		%	7.2		%	7.5		%	Percentage of net sales	6.6		%	6.9		%	6.7		%	7.2		%

(1) ~~Customer-funded research and development costs are included~~Included in cost of sales in our Condensed Consolidated Statement of Operations.

Research and development spending is subject to the variable nature of program development schedules and, therefore, year-over-year fluctuations in spending levels are expected.

~~The increase in company-funded~~Company-funded and customer-funded research and development ~~of $34 million for~~in the quarter ended September 30, ~~2021 compared to~~2022 were relatively consistent with the quarter ended September 30, ~~2020~~2021.

Company-funded research and development as a percentage of net sales for the nine months ended September 30, 2022 was relatively consistent with the nine months ended September 30, 2021. The company-funded research and development increase was principally driven by increased spending at Pratt & Whitney on various commercial programs.

The decrease in customer-funded research and development of $114 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily driven by higher expenses of $37 million spread across various commercial programs at Pratt & Whitney and higher expenses of $28 million at RIS related to continued investment in classified advanced capabilities, partially offset by lower expenses ~~of $32 million within Eliminations and other primarily due to~~ ~~the sale of our Forcepoint business in the first quarter of 2021~~.on various military programs

4936

Table of Contents

~~The decrease~~at Collins and lower expenses spread across various programs at RMD, partially offset by an increase in ~~customer-funded research~~expenses on the Next Generation Interceptor (NGI) program awarded in the second quarter of 2021 at RMD.

Selling, General and ~~development of $82~~Administrative


	Quarter Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2022			2021			2022			2021
Selling, general and administrative expenses	$	1,391		$	1,229		$	4,284		$	3,817
Percentage of net sales	8.2		%	7.6		%	8.7		%	8.1		%

Selling, general and administrative expenses increased $162 million ~~for~~in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020, was~~2021 primarily driven by ~~lower~~higher combined expenses of ~~$80 million on various commercial~~$0.1 billion at Collins and ~~military programs at~~ Pratt & ~~Whitney.~~Whitney principally driven by higher employee-related costs and by higher information technology (IT)-related costs at Corporate.

~~The increase~~Selling, general and administrative expenses increased $467 million in ~~company-funded research and development of $50 million for~~ the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020 was~~2021 primarily driven by ~~$0.2 billion related to the Raytheon Merger on April 3, 2020, partially offset by lower~~higher combined expenses of ~~$0.1 billion across various commercial programs at Collins Aerospace, which includes the impact of cost reduction initiatives.~~

The increase in customer-funded research and development of $382 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, was primarily driven by $0.6 billion related to the Raytheon Merger on April 3, 2020, partially offset by lower expenses of $0.1 billion on various commercial and military programs at Pratt & Whitney and lower expenses of $0.1$0.4 billion at Collins ~~Aerospace primarily related to the sale of the military GPS and space-based precision optics businesses in the third quarter of 2020.~~

~~Selling, General and Administrative~~

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Selling, general and administrative expenses $ 1,229 $ 1,401 $ 3,817 $ 4,189
Percentage of net sales 7.6 % 9.5 % 8.1 % 10.4 %

Selling, general and administrative expenses decreased $172 million in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 primarily driven by lower costs of $101 million due to ~~the sale of our Forcepoint business in the first quarter of 2021,~~ ~~and lower selling, general and administrative restructuring costs of $88 million primarily related to restructuring actions taken at our Collins Aerospace~~ and Pratt & Whitney ~~segments in the prior year.~~

~~Selling, general and administrative expenses decreased $372 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily~~principally driven by ~~$352~~higher employee-related costs and by $71 million of ~~prior year~~ charges related to increased estimates ~~of expected credit losses due to customer bankruptcies and additional allowances~~ for credit losses at our Pratt & Whitney and Collins Aerospace segments, lower general and administrative restructuring costs of $257 million primarily related to restructuring actions taken at Collins Aerospace and Corporate in the prior year and lower costs of $184 million due to ~~the sale~~global sanctions on and export controls with respect to Russia. See “Note 1: Basis of ~~our Forcepoint business in the first quarter~~Presentation” within Item 1 of ~~2021,~~ ~~partially offset by an increase in expenses of $0.4 billion related to the Raytheon Merger.~~this Form 10-Q for additional information on Russia sanctions.

We are continuously evaluating our cost structure and have implemented restructuring actions in an effort to keep our cost structure competitive. As appropriate, the amounts reflected above include the beneficial impact of previous restructuring actions on Selling, general and administrative expenses. ~~See “Note 12: Restructuring Costs” within Item 1 of this Form 10-Q and Restructuring Costs, below, for further discussion.~~

Other Income, Net


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Other income, net	Other income, net	$	124	$	734	$	314	$	835	Other income, net	$	46	$	124	$	91	$	314

Other income, net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, and other ongoing and nonrecurring items.

The decrease in Other income, net of ~~$610~~$78 million for the quarter ended September 30, ~~2021,~~2022 compared to the quarter ended September 30, ~~2020~~2021 was primarily due to the absence of $608 million of gains on the sales of the Collins Aerospace businesses in the third quarter of 2020, as further discussed in “Note 2: Acquisitions, Dispositions, Goodwill and Other Intangible Assets” within Item 1 of this Form 10-Q. Included in the change in Other income, net was a decrease of approximately $90 million of foreign government wage subsidies related to COVID-19 at Pratt & Whitney and Collins Aerospace, with the remaining change spread across multiple items with no common or significant driver.

The decrease in Other income, net of ~~$521~~$223 million for the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 was primarily due to $69 million of charges associated with the disposition of two non-core businesses at Collins in the second quarter of 2022, the absence of ~~$608 million of gains on the sales of the Collins Aerospace businesses in the third quarter of 2020, and a $121 million decrease in~~prior year foreign government wage subsidies related to COVID-19 at Pratt & Whitney of $52 million and a $23 million loss resulting from the exit of our investment in a Russia-based joint venture at Collins ~~Aerospace,~~in the first quarter of 2022. The above items were partially offset by ~~the absence of~~ a ~~prior year impairment of a Collins Aerospace tradename of $57 million resulting from the projected~~net favorable year-over-year impact of ~~COVID-19~~foreign exchange gains and losses of $38 million with the remaining change spread across multiple items with no common or significant driver.

Operating Profit


	Quarter Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2022			2021			2022			2021
Operating profit	$	1,480		$	1,343		$	3,913		$	3,638
Operating profit margin	8.7		%	8.3		%	8.0		%	7.7		%

The increase in Operating profit of $137 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 was primarily driven by the operating performance of our segments and a decrease in Acquisition accounting adjustments, partially offset by the change in our FAS/CAS operating adjustment, all of which are described below in “Segment Review.”

The increase in Operating profit of $275 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily driven by the operating performance of our segments and a decrease in Acquisition accounting adjustments, partially offset by the change in our FAS/CAS operating adjustment, all of which are described below in “Segment Review.”

5037

Table of Contents

~~Operating Profit (Loss)~~Non-service Pension Income
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Operating profit (loss) $ 1,343 $ 434 $ 3,638 $ (2,031)
Operating profit (loss) margin 8.3 % 2.9 % 7.7 % (5.1) %


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2022		2021		2022		2021
Non-service pension income	$	(468)	$	(491)	$	(1,422)	$	(1,472)

The ~~increase~~change in ~~Operating profit (loss)~~Non-service pension income of ~~$909~~$23 million for the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020 was primarily driven by~~2021 included the ~~operating performance at our segments as described below in the individual segment results. Included in the increase in Operating profit was a decrease in restructuring costs~~impact of ~~$226 million primarily related to restructuring actions taken at our Collins Aerospace and Pratt & Whitney segments in the prior year.~~

The change in Operating profit (loss) of $5,669 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily driven by the absence of the prior year goodwill impairment loss of $3,183 million related to two Collins Aerospace reporting units, the operating performance at our operating segments almost half of which was due to the Raytheon Merger, and an increase in our FAS/CAS operating adjustment of $611 million primarily as a result of the Raytheon Merger. Included in the increase in Operating profit was a decrease in restructuring costs of $562 million primarily related to restructuring actions taken at our Collins Aerospace and Pratt & Whitney segments in the prior year.

~~Non-service Pension (Income) Expense~~
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Non-service pension (income) expense $ (491) $ (253) $ (1,472) $ (658)

~~The change in Non-service pension (income) expense of $238 million for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 was primarily driven by a decrease~~ in the discount rate, ~~the Raytheon domestic defined benefit pension plan amendment described below, and~~partially offset by prior ~~year~~years’ pension asset returns exceeding our expected return on assets (EROA) assumption.

The change in Non-service pension ~~(income) expense~~income of ~~$814~~$50 million for the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020 was primarily driven by~~2021 included the ~~inclusion~~impact of ~~the Raytheon Company plans as a result of the Raytheon Merger, and to a lesser extent, a decrease~~an increase in the discount rate, partially offset by prior ~~year~~years’ pension asset returns exceeding our EROA ~~assumption and the Raytheon domestic defined benefit pension plan amendment described below.~~

In December 2020, we approved a change to the Raytheon domestic defined benefit pension plans for non-union participants to cease future benefit accruals based on an employee’s years of service and compensation effective December 31, 2022. The plan change does not impact participants’ historical benefit accruals. Benefits for service after December 31, 2022 will be based on a cash balance formula.assumption.

Interest Expense, Net


		Quarter Ended September 30,						Nine Months Ended September 30,							Quarter Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021			2020			2021			2020			(dollars in millions)	2022			2021			2022			2021
Interest expense	Interest expense	$	367		$	356		$	1,070		$	1,041		Interest expense	$	326		$	336		$	968		$	1,008
Interest income	Interest income	(9)			(6)			(24)			(24)			Interest income	(10)			(9)			(54)			(24)
Other non-operating expense (income)(1)														Other non-operating expense (income)(1)	(5)			31			44			62
Interest expense, net	Interest expense, net	$	358		$	350		$	1,046		$	1,017		Interest expense, net	$	311		$	358		$	958		$	1,046
Average interest expense rate	Average interest expense rate	4.2		%	4.2		%	4.1		%	4.0		%	Average interest expense rate	4.0		%	4.2		%	4.0		%	4.1		%

~~Interest~~(1) Primarily consists of the gains or losses on assets associated with certain of our nonqualified deferred compensation and employee benefit plans, as well as the gains or losses on liabilities associated with certain of our nonqualified deferred compensation plans.

The decrease in interest expense, net of $47 million in the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 was ~~relatively consistent with~~primarily due to the ~~quarter ended September 30, 2020. Included in interest expense was~~absence of $32 million of net debt extinguishment costs in connection with the early repayment of outstanding principal ~~and a~~in the prior year.

The decrease in interest expense, ~~primarily due~~net of $88 million in the ~~repayment of long-term debt. The average maturity of long-term debt at~~nine months ended September 30, ~~2021 is approximately 15 years.~~

~~Interest expense, net in~~2022 compared to the nine months ended September 30, 2021 was ~~relatively consistent with the nine months ended September 30, 2020. Included~~primarily due to a $40 million decrease in ~~interest~~Interest expense, a $30 million increase in Interest income, and an $18 million decrease in Other non-operating expenses. The decrease in Interest expense was ~~a $74 million unfavorable change~~primarily due to repayments of higher interest rate long-term debt during 2021, partially offset by debt issuances with lower interest rates during 2021. The increase in Interest income was primarily due to adjustments of certain tax-related interest reserves in the ~~mark-to-market fair value~~first quarter of ~~marketable securities held~~2022. The decrease in ~~trusts associated with certain~~Other non-operating expense (income) was primarily due to the absence of ~~our nonqualified deferred compensation and employee benefit plans and~~ $32 million of net debt extinguishment costs in ~~connection with~~ the ~~early repayment of outstanding principal, partially offset by a decrease in interest expense primarily due the repayment of long-term debt.~~prior year.

~~Table of Contents~~

Income Taxes
Quarter Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Effective income tax rate 0.2 % 45.1 % 17.0 % (31.5) %


	Quarter Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Effective income tax rate	14.8	%	0.2	%	11.8	%	17.0	%

The effective tax rate in the quarter ended September 30, 2022 includes a benefit of approximately 4 percentage points primarily related to an incremental Foreign Derived Intangible Income (FDII) benefit and other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the quarter ended September 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third ~~quarter. The effective tax rate for the~~ quarter ~~ended September 30, 2020 includes tax charges incremental to the U.S. statutory rate~~ of ~~$206 million associated with the sales of the Collins Aerospace businesses, as described in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.~~2021.

The effective tax rate in the nine months ended September 30, 2022 includes a benefit of approximately 5 percentage points primarily related to an incremental FDII benefit and other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the nine months ended September 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter of 2021, tax charges incremental to the U.S. statutory rate of $148 million associated with the sale of the Forcepoint business, as described in “Note 2: Acquisitions, Dispositions, Goodwill and ~~tax charges~~Intangible Assets” within Item 1 of this Form 10-Q, and $73 million associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% ~~effective~~enacted in ~~2023. The loss from continuing operations before income taxes for~~2021. Subsequently, in the ~~nine months ended September 30, 2020 includes the $3.2 billion goodwill impairment, as described in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1~~fourth quarter of ~~this Form 10-Q, most of which is non-deductible for~~2021, we recognized an incremental $104 million tax purposes. The effective tax rate for the nine months ended September 30, 2020 also includes tax charges of $430 million resulting from the Separation Transactions or the Raytheon Merger, primarily relatedbenefit due to ~~the impairment of deferred tax assets and~~ the revaluation of ~~certain international~~the Forcepoint tax ~~incentives,~~benefit as a result of completing the divestiture of RIS’s global training and ~~$228 million~~services business.

Table of ~~tax charges incremental to the U.S. statutory rate associated with the sales of the Collins Aerospace and RIS businesses.~~Contents

Net Income ~~(Loss)~~ from Continuing Operations Attributable to Common Shareowners

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) from continuing operations attributable to common shareowners $ 1,400 $ 151 $ 3,212 $ (3,255)
Diluted earnings (loss) per share from continuing operations $ 0.93 $ 0.10 $ 2.13 $ (2.48)


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Net income from continuing operations attributable to common shareowners	$	1,387	$	1,400	$	3,794	$	3,212
Diluted earnings per share from continuing operations	$	0.94	$	0.93	$	2.55	$	2.13

Net income ~~(loss)~~from continuing operations attributable to common shareowners for the quarter ended September 30, 2022 includes the following:

•acquisition accounting adjustments of $379 million, net of tax, which had an unfavorable impact on diluted earnings per share (EPS) from continuing operations of $0.26; and

•income of $65 million related to the capitalization of research or experimental expenditures for tax purposes, which had a net favorable impact on diluted EPS from continuing operations of $0.04.

Net income from continuing operations attributable to common shareowners for the quarter ended September 30, 2021 includes the following:

•acquisition accounting adjustments ~~primarily related to the Raytheon Merger~~ of $456 million, net of tax, which had an unfavorable impact on diluted ~~earnings per share (EPS)~~EPS from continuing operations of $0.30; and

•tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter 2021, which had a favorable impact on diluted EPS from continuing operations of $0.16.

Net income ~~(loss)~~ from continuing operations attributable to common shareowners for the ~~quarter~~nine months ended September 30, ~~2020~~2022 includes the following:

•acquisition accounting adjustments ~~primarily related to the Raytheon Merger~~ of ~~$401~~$1,107 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.27;~~$0.74;

•~~restructuring~~impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of ~~$189~~$210 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.12;~~

•~~significant unfavorable contract adjustments primarily at Pratt & Whitney of $430 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.28;~~$0.14; and

•~~gains on~~income of $159 million related to the ~~sales~~capitalization of ~~the Collins Aerospace businesses of $253 million, net of~~research or experimental expenditures for tax ~~as further discussed in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q,~~purposes, which had a net favorable impact on diluted EPS from continuing operations of ~~$0.17.~~$0.11.

Net income ~~(loss)~~ from continuing operations attributable to common shareowners for the nine months ended September 30, 2021 includes the following:

•acquisition accounting adjustments ~~primarily related to the Raytheon Merger~~ of $1,257 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.83;

•tax expense of $148 million related to the sale of our Forcepoint business, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.10;~~$0.10.

•~~restructuring charges of $97 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.06; and~~

~~Table of Contents~~

•tax expense of $73 million associated with the revaluation of deferred taxes resulting from the increase in the U.K. corporate tax rate to 25% effective in 2023, which had an unfavorable impact on diluted EPS from continuing operations of $0.05.

~~Net income (loss) from continuing operations attributable to common shareowners for the nine months ended September 30, 2020 includes the following:~~

•~~acquisition accounting adjustments primarily related to the Raytheon Merger of $1,004 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.77;~~

•~~restructuring charges of $517 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.39;~~

•$3,240 million of non-deductible goodwill and intangibles impairment charges related to our Collins Aerospace segment, which had an unfavorable impact on diluted EPS from continuing operations of $2.47;

•~~significant unfavorable contract adjustments at Collins Aerospace and Pratt & Whitney of $603 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.48;~~

•$415 million of tax charges in connection with the Separation Transactions, including the impairment of deferred tax assets not expected to be utilized, which had an unfavorable impact on diluted EPS from continuing operations of $0.32;

•increased estimates of expected credit losses driven by customer bankruptcies and additional general allowances for credit losses of $272 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.21; and

•~~gains on the sales of the Collins Aerospace businesses of $253 million, net of tax, which had a favorable impact on diluted EPS from continuing operations of $0.19.~~

~~Net Income (Loss) from Discontinued Operations Attributable to Common Shareowners~~
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) from discontinued operations attributable to common shareowners $ (7) $ 113 $ (34) $ (399)
Diluted earnings (loss) per share from discontinued operations $ — $ 0.08 $ (0.03) $ (0.30)

On April 3, 2020, we completed the separation of our commercial businesses, Carrier and Otis. Effective as of such date, the historical results of the Carrier and Otis segments have been reclassified to discontinued operations for all periods presented. See “Note 3: Discontinued Operations” within Item 1 of this Form 10-Q for additional information.

The change in net income (loss) from discontinued operations attributable to common shareowners of $120 million and the related change in diluted earnings (loss) per share from discontinued operations of $0.08 in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 was primarily due to the absence of a prior year tax benefit associated with the Separation Transactions.

The change in net income (loss) from discontinued operations attributable to common shareowners of $365 million and the related change in diluted earnings (loss) per share from discontinued operations of $0.27 in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily due to higher prior year costs associated with the separation of our commercial businesses, including debt extinguishment costs of $611 million, net of tax, in connection with the early repayment of outstanding principal, partially offset by prior year Carrier and Otis operating activity, as the Separation Transactions occurred on April 3, 2020.

Net Income ~~(Loss)~~ Attributable to Common Shareowners

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) attributable to common shareowners $ 1,393 $ 264 $ 3,178 $ (3,654)
Diluted earnings (loss) per share from operations $ 0.93 $ 0.17 $ 2.10 $ (2.79)


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Net income attributable to common shareowners	$	1,387	$	1,393	$	3,775	$	3,178
Diluted earnings per share from operations	$	0.94	$	0.93	$	2.54	$	2.10

The ~~increase~~decrease in net income ~~(loss)~~ attributable to common shareowners and diluted earnings ~~(loss)~~ per share from operations for the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020~~2021 and for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily driven by the ~~increase~~decreases in continuing operations, as discussed above in Net Income ~~(Loss)~~ from Continuing Operations Attributable to Common ~~Shareowners, partially offset by the change from discontinued operations, as discussed above in Net Income (Loss) from Discontinued Operations Attributable to Common Shareholders.~~

~~Table of Contents~~

The increase in net income (loss) attributable to common shareowners and diluted earnings (loss) per share from operations for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was driven by the increase in continuing operations, as discussed above in Net Income (Loss) from Continuing Operations Attributable to Common Shareowners and the change from discontinued operations, as discussed above in Net Income (Loss) from Discontinued Operations Attributable to Common Shareholders.

~~RESTRUCTURING COSTS~~
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Restructuring costs $ 19 $ 250 $ 118 $ 685

Restructuring actions are an essential component of our operating margin improvement efforts and relate to both existing operations and recent mergers and acquisitions. Charges generally arise from severance related to workforce reductions and facility exit costs associated with the consolidation of field and manufacturing operations and costs to exit legacy programs. We continue to closely monitor the economic environment and may undertake further restructuring actions to keep our cost structure aligned with the demands of the prevailing market conditions.

~~2021 Actions.~~ During the quarter and nine months ended September 30, 2021, we recorded net pre-tax restructuring charges of $12 million and $113 million, respectively, primarily related to severance costs related to ongoing cost reduction efforts, and to a much lesser extent, the exit and consolidation of facilities initiated in 2021. We expect to incur additional restructuring charges of $74 million to complete these actions. We are targeting to complete the majority of the remaining workforce and facility related cost reduction actions initiated in 2021 by 2022. We expect recurring pre-tax savings related to these actions to reach approximately $130 million annually within one to two years. Approximately 60% of the restructuring costs will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During the nine months ended September 30, 2021, we had cash outflows of $9 million related to the 2021 actions.

~~2020 Actions.~~ During the quarters ended September 30, 2021 and 2020, we recorded $1 million and $240 million, respectively, of net pre-tax restructuring charges for actions initiated in 2020. During the nine months ended September 30, 2021 and 2020, we reversed $19 million and recorded $686 million, respectively, of net pre-tax restructuring charges for actions initiated in 2020. We expect to incur additional restructuring charges of $7 million to complete these actions. We are targeting to complete in 2021 the majority of the remaining workforce and facility related cost reduction actions initiated in 2020. We expect annual recurring pre-tax savings related to these actions to reach approximately $1.2 billion annually within two years of initiating these actions. Approximately 85% of the restructuring costs will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During the nine months ended September 30, 2021 and 2020, we had cash outflows of $200 million and $222 million, respectively, related to the 2020 actions.

In addition, during the quarters ended September 30, 2021 and 2020, we recorded $6 million and $10 million, respectively, of net pre-tax restructuring charges for restructuring actions initiated in 2019 and prior. During the nine months ended September 30, 2021 and 2020, we recorded $24 million and reversed $1 million, respectively, of net pre-tax restructuring charges for restructuring actions initiated in 2019 and prior. For additional discussion of restructuring, see “Note 12: Restructuring Costs” within Item 1 of this Form 10-Q.Shareowners.

SEGMENT REVIEW

~~As discussed further above in Business Overview, on April 3, 2020, we completed~~ Our operations, for the ~~Separation Transactions, Distributions and the Raytheon Merger.The results of RIS and RMD reflect the period subsequent to the completion of the Raytheon Merger on April 3, 2020. The historical results of Carrier and Otis~~periods presented herein, are ~~presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.~~

As previously announced, effective January 1, 2021, we reorganized certain product areas of our RIS and RMD businesses to more efficiently leverage our capabilities. The amounts and presentation of our business segments, including intersegment activity, set forth in this Form 10-Q reflect this reorganization. The reorganization does not impact our previously reportedclassified into four principal segments: Collins, ~~Aerospace Systems and~~ Pratt & Whitney, segment results, or our consolidated balance sheets, statements of operations or statements of cash flows. Refer to “Note 19: Segment Financial Data” within Item 1 of this Form 10-Q for revised financial results for the fiscal quarters and year ended 2020.

As a result of the Raytheon Merger, we now present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and PRB expense under the Financial Accounting Standards (FAS) requirements of U.S. Generally Accepted Accounting Principles (GAAP) and our pension and postretirement benefit (PRB) expense under U.S. government Cost Accounting Standards (CAS) primarily related to our RIS and ~~RMD~~

~~Table of Contents~~

segments. While the ultimate liability for pension and PRB costs under FAS and CAS is similar, the pattern of cost recognition is different. We generally expect to recover the related RIS and RMD pension and PRB liabilities over time through the pricing of our products and services to the U.S. government. Because the Collins Aerospace and Pratt & Whitney segments generally record pension and PRB expense on a FAS basis, historical results were not impacted by this change in segment reporting.

RMD. Segments are generally based on the management structure of the businesses and the grouping of similar operations, based on capabilities and technologies, where each management organization has general operating autonomy over diversified products and services. Segment total net sales and operating profit include intercompany sales and profit, which are ultimately

Table of Contents

eliminated within Eliminations and other, which also includes certain smaller non-reportable segments. For our defense contracts, where the primary customer is the U.S. government subject to Federal Acquisition Regulation (FAR) part 12, our intercompany sales and profit is generally recorded at cost-plus a specified fee, which may differ from what the selling entity would be able to obtain on sales to external customers. Segment results exclude certain acquisition accounting adjustments, the FAS/CAS operating adjustment and certain corporate expenses, as further discussed below.

Given the nature of our business, we believe that total net sales and operating profit (and the related operating profit margin percentage), which we disclose and discuss at the segment level, are most relevant to an understanding of management’s view of our segment performance, as described below.

We provide the organic change in Net sales and Operating profit for our segments as discussed above in “Results of Operations.” We believe that these non-GAAP measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability. For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada due to its significance to Pratt & Whitney’s overall operating results.

Total Net Sales. Total net sales by segment were as follows:
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Collins Aerospace Systems $ 4,592 $ 4,274 $ 13,507 $ 14,914
Pratt & Whitney 4,725 3,494 13,035 12,334
Raytheon Intelligence & Space 3,740 3,749 11,310 7,136
Raytheon Missiles & Defense 3,902 3,706 11,680 7,212
Total segment 16,959 15,223 49,532 41,596
Eliminations and other (746) (476) (2,188) (1,428)
Consolidated $ 16,213 $ 14,747 $ 47,344 $ 40,168


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2022		2021		2022		2021
Collins Aerospace Systems	$	5,100	$	4,592	$	14,935	$	13,507
Pratt & Whitney	5,380		4,725		14,878		13,035
Raytheon Intelligence & Space	3,626		3,740		10,768		11,310
Raytheon Missiles & Defense	3,678		3,902		10,763		11,680
Total segment	17,784		16,959		51,344		49,532
Eliminations and other	(833)		(746)		(2,363)		(2,188)



Consolidated	$	16,951	$	16,213	$	48,981	$	47,344

Operating ~~Profit (Loss).~~Profit. Operating profit ~~(loss)~~ by segment was as follows:


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	478	$	526	$	1,298	$	1,455	Collins Aerospace Systems	$	616	$	478	$	1,602	$	1,298
Pratt & Whitney	Pratt & Whitney	187		(615)		319		(597)		Pratt & Whitney	316		187		769		319
Raytheon Intelligence & Space	Raytheon Intelligence & Space	391		350		1,194		659		Raytheon Intelligence & Space	371		391		1,064		1,194
Raytheon Missiles & Defense	Raytheon Missiles & Defense	490		449		1,518		847		Raytheon Missiles & Defense	408		490		1,143		1,518
Total segment	Total segment	1,546		710		4,329		2,364		Total segment	1,711		1,546		4,578		4,329
Eliminations and other	Eliminations and other	(27)		(49)		(98)		(101)		Eliminations and other	(50)		(27)		(131)		(98)
Corporate expenses and other unallocated items	Corporate expenses and other unallocated items	(89)		(84)		(319)		(491)		Corporate expenses and other unallocated items	(77)		(89)		(255)		(319)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	499		380		1,347		736		FAS/CAS operating adjustment	378		499		1,135		1,347
Acquisition accounting adjustments	Acquisition accounting adjustments	(586)		(523)		(1,621)		(4,539)		Acquisition accounting adjustments	(482)		(586)		(1,414)		(1,621)
Consolidated	Consolidated	$	1,343	$	434	$	3,638	$	(2,031)	Consolidated	$	1,480	$	1,343	$	3,913	$	3,638

Included in segment operating profit are Estimate at Completion (EAC) adjustments, which relate to changes in operating profit and margin due to revisions to total estimated revenues and costs at completion. These changes may reflect improved or deteriorated operating performance, oras well as changes in facts and assumptions related to contract options, contract modifications, incentive and award ~~fee rates.~~fees associated with program performance, customer activity levels, and other customer-directed changes. For a full description of our EAC process, refer to “Note 5:4: Changes in Contract Estimates at Completion” within Item 1 of this Form 10-Q. Given that we have thousands of individual contracts and given the types and complexity of the assumptions and estimates we must make on an on-going basis and the nature of the work required to perform under our contracts, we have both favorable and unfavorable EAC ~~adjustments.~~adjustments in the ordinary course.

5540

Table of Contents

We had the following aggregate EAC adjustments for the periods presented:
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Gross favorable $ 334 $ 281 $ 955 $ 569
Gross unfavorable (309) (743) (891) (1,161)
Total net EAC adjustments $ 25 $ (462) $ 64 $ (592)

As a result of the Raytheon Merger, RIS’s and RMD’s long-term contracts that are accounted for on a percentage of completion basis, were reset to zero percent complete as of the merger date because only the unperformed portion of the contract at the merger date represents an obligation of the Company. This had the impact of reducing gross favorable and unfavorable EAC adjustments for these segments in the prior year. The change in net EAC adjustments of $487 million in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 was primarily due to a favorable change in net EAC adjustments of $457 million at Pratt & Whitney, due to the absence of unfavorable contract adjustments in the prior year.


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2022		2021		2022		2021
Gross favorable	$	339	$	334	$	1,002	$	955
Gross unfavorable	(332)		(309)		(1,000)		(891)
Total net EAC adjustments	$	7	$	25	$	2	$	64

The change in net EAC adjustments of ~~$656~~$18 million in the ~~nine months~~quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 ~~compared to the nine months ended September 30, 2020~~ was primarily due to ~~a favorable change~~unfavorable changes in net EAC adjustments of ~~$545~~$21 million at ~~Pratt & Whitney, due to the absence of unfavorable contract adjustments in the prior year, and a favorable change in net EAC adjustments of $121 million at RIS and $87 million at~~ RMD ~~primarily due to the Raytheon Merger. This was partially offset by an unfavorable change in net EAC adjustments of $97 million at Collins Aerospace~~ spread across numerous individual programs with no individual or common significant driver and includes the impact of continued supply chain and labor market constraints.

The change in net EAC adjustments of $62 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to unfavorable changes in net EAC adjustments of $143 million at RMD and $59 million at RIS, including the impact of acquisitions and dispositions, both spread across numerous individual programs with no individual or common significant driver. These unfavorable changes were partially offset by a favorable change in net EAC adjustments of $105 million at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments of $35 million at Pratt & Whitney primarily due to a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.

Significant EAC adjustments, when they occur, are discussed in each business segment’s discussion below.

Backlog and Defense Bookings. Total backlog was approximately ~~$156.1~~$168 billion and ~~$150.1~~$156 billion as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which includes defense backlog of ~~$65.0~~$67 billion and ~~$67.3~~$63 billion as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. In the quarter ended March 31, 2022, we reversed $1.3 billion of backlog at our Pratt & Whitney and Collins businesses, as discussed further in “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q. Our defense operations consist primarily of our RIS and RMD businesses and operations in the defense businesses within our Collins ~~Aerospace~~ and Pratt & Whitney segments. Defense bookings were approximately ~~$9.8~~$12 billion and ~~$8.4~~$10 billion for the quarters ended September 30, 2022 and 2021, ~~and 2020,~~respectively, and approximately ~~$30.2~~$34 billion and ~~$21.8~~$30 billion for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Defense bookings are impacted by the timing and amounts of awards in a given period, which are subject to numerous factors, including: ~~(1)~~ the desired capability by the customer and urgency of customer needs, ~~(2)~~ customer budgets and other fiscal constraints, ~~(3)~~ political and economic and other environmental factors, ~~(4)~~ the timing of customer negotiations, ~~(5)~~and the timing of governmental approvals and ~~notifications, and (6) the timing of option exercises or increases in scope.~~notifications. In addition, due to these factors, quarterly bookings tend to fluctuate from period to period, particularly on a segment basis. As a result, we believe comparing bookings on a quarterly basis or for periods less than one year is less meaningful than for longer periods and that shorter term changes in bookings may not necessarily indicate a material trend.

Collins Aerospace Systems
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 4,592 $ 4,274 7 % $ 13,507 $ 14,914 (9) %
Operating Profit 478 526 (9) % 1,298 1,455 (11) %
Operating Profit Margins 10.4 % 12.3 % 9.6 % 9.8 %


	Quarter Ended September 30,								Nine Months Ended September 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net sales	$	5,100		$	4,592		11	%	$	14,935		$	13,507		11	%
Operating profit	616			478			29	%	1,602			1,298			23	%
Operating profit margins	12.1		%	10.4		%			10.7		%	9.6		%

Quarter Ended September 30, ~~2021~~2022 Compared with Quarter Ended September 30, ~~2020~~2021
Factors Contributing to Total Change
(dollars in millions)
Organic(1)
Acquisitions /
Divestitures, net Restructuring
Costs Other Total Change
Net Sales $ 375 $ (67) $ — $ 10 $ 318
Operating Profit 411 (18) 136 (577) (48)


	Factors Contributing to Total Change
(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net sales	$	587	$	(21)	$	—	$	(58)	$	508

Operating profit	158		(3)		(12)		(5)		138

(1) See “Segment Review” above for definition of organic. We provide the organic change in net sales and operating profit for our segments. We believe that these measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic change excludes acquisitions and divestitures, net; restructuring costs; and the effect of foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”). A reconciliation of these measures to reported U.S. GAAP amounts is provided in the table above.

The organic sales increase of ~~$0.4~~$0.6 billion in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020~~2021 primarily relates to higher commercial aerospace aftermarket sales of $0.4 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of $0.2 billion. These increases were principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet

5641

Table of Contents

~~across all aftermarket~~utilization and narrow-body commercial OEM volume growth. This was partially offset by lower military sales channels, primarily due to an increase in flight hours and aircraft fleet utilization as commercial aerospace continues to recover from the prior year’s unfavorable economic environment principally driven by the COVID-19 pandemic. Commercial aerospace OEM sales were down slightlyof $0.1 billion in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020, with narrow-body OEM sales increases partially offsetting wide-body volume declines principally on the 787 platform. Military sales were also down slightly~~2021 primarily due to lower material receipts and decreased volume.

The organic profit increase of $0.2 billion in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020.~~

~~The organic profit increase of $0.4 billion in the quarter ended September 30,~~ 2021 ~~compared to the quarter ended September 30, 2020~~ was primarily due to higher commercial aerospace operating profit of ~~$0.4~~$0.3 billion, principally driven by the higher commercial aerospace aftermarket sales discussed ~~above and favorable~~above. This increase in commercial aerospace ~~aftermarket and OEM product mix. Included in organic profit in the quarter ended September 30, 2020 was $32 million of foreign government wage subsidies related to COVID-19.~~

~~The decrease in net sales and~~ operating profit ~~due to acquisitions / divestitures, net relates to the sale~~was partially offset by lower military operating profit of ~~our Collins Aerospace~~$0.1 billion principally driven by lower military ~~GPS~~sales volume, and ~~space-based precision optics businesses in the third quarter~~higher combined selling, general and administrative expenses and research and development costs of ~~2020.~~

The decrease in Other operating profits of $0.6 billion in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 primarily relates to the absence of prior year gains of $608 million on the sales of the Collins Aerospace businesses discussed above.$0.1 billion.

Nine Months Ended September 30, ~~2021~~2022 Compared with Nine Months Ended September 30, ~~2020~~2021
Factors Contributing to Total Change
(dollars in millions)
Organic(1)
Acquisitions /
Divestitures, net Restructuring
Costs Other Total Change
Net Sales $ (1,145) $ (338) $ — $ 76 $ (1,407)
Operating Profit 275 (94) 263 (601) (157)



	Factors Contributing to Total Change
(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net sales	$	1,576	$	(21)	$	—	$	(127)	$	1,428

Operating profit	498		(10)		13		(197)		304

The organic sales ~~decrease~~increase of ~~$1.1~~$1.6 billion in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 primarily relates to ~~lower~~higher commercial aerospace aftermarket sales of $1.3 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of ~~$0.9~~$0.6 billion, ~~and lower commercial aerospace aftermarket sales of $0.3 billion, including declines across all aftermarket sales channels. These decreases were primarily due to the change in the economic environment~~both principally driven by the ~~COVID-19 pandemic. Military~~recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization and narrow-body commercial OEM volume growth. These increases were partially offset by lower military sales ~~were up slightly~~of $0.4 billion in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020.~~2021, primarily due to lower material receipts and expected declines in F-35 volume.

The organic profit increase of ~~$0.3~~$0.5 billion in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 is primarily due to ~~lower Selling, general and administrative expenses~~higher commercial aerospace operating profit of ~~$0.2~~$1.0 billion ~~primarily~~principally driven by the absence of a $123 million charge related to increased estimates of expected credit losses due to customer bankruptcies and additional allowances for credit losses in the nine months ended September 30, 2020, and lower Research and development expenses of $0.1 billion, which includes the impact of cost reduction initiatives. Commercial aerospace operating profit decreased slightly and includes the impact of the lowerhigher commercial aerospace aftermarket sales discussed above, partially offset by the absence of ~~$157 million of prior year significant unfavorable adjustments, the benefit of cost reduction initiatives, and~~ a $33 million favorable impact from a contract related matter in the nine months ended September 30, 2021. ~~The significant unfavorable adjustments~~This increase in ~~the nine months ended September 30, 2020 were primarily~~commercial aerospace operating profit was partially offset by lower military operating profit of $0.2 billion principally driven by the ~~expected acceleration~~lower military sales discussed above, and higher selling, general and administrative expenses of ~~fleet retirements of a certain aircraft. Included in organic profit in the nine months ended September 30, 2020 was $56 million of foreign government wage subsidies related to COVID-19.~~

The decrease in net sales and operating profit due to acquisitions / divestitures, net relates to the sale of our Collins Aerospace military GPS and space-based precision optics businesses in the third quarter of 2020.$0.2 billion.

The decrease in Other operating profits of ~~$0.6 billion~~$197 million in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 was primarily ~~relates~~due to $141 million of pretax charges related to increased estimates for credit losses, inventory reserves, recognition of purchase order obligations and a loss resulting from the ~~absence~~exit of ~~prior year gains~~our investment in a Russia-based joint venture, all due to global sanctions on and export controls with respect to Russia in the first quarter of ~~$608~~2022. In addition, we recognized $69 million of charges associated with the disposition of two non-core businesses in the second quarter of 2022. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional information on ~~the sales of the Collins Aerospace businesses discussed above.~~Russia sanctions.

~~Table of Contents~~

Pratt & Whitney
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 4,725 $ 3,494 35 % $ 13,035 $ 12,334 6 %
Operating Profit 187 (615) NM 319 (597) NM
Operating Profit Margins 4.0 % (17.6) % 2.4 % (4.8) %

~~NM = Not Meaningful~~


	Quarter Ended September 30,								Nine Months Ended September 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net sales	$	5,380		$	4,725		14	%	$	14,878		$	13,035		14	%
Operating profit	316			187			69	%	769			319			141	%
Operating profit margins	5.9		%	4.0		%			5.2		%	2.4		%

Quarter Ended September 30, ~~2021~~2022 Compared with Quarter Ended September 30, ~~2020~~2021
Factors Contributing to Total Change
(dollars in millions)
Organic(1)
Acquisitions /
Divestitures, net Restructuring
Costs Other Total Change
Net Sales $ 1,217 $ — $ — $ 14 $ 1,231
Operating Profit 645 — 61 96 802


	Factors Contributing to Total Change
(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net sales	$	686	$	—	$	—	$	(31)	$	655

Operating profit	137		—		—		(8)		129

The organic sales increase of ~~$1.2~~$0.7 billion in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020~~2021 reflects higher commercial aftermarket sales of ~~$1.0~~$0.5 billion primarily due to an increase in shop visits and

Table of Contents

related spare part sales ~~and~~as the commercial aerospace environment continues to recover. The increase also includes higher commercial OEM sales of $0.2 billion primarily ~~due to an increase in~~driven by favorable mix and higher volume on commercial engine ~~deliveries, all driven~~shipments. These increases were partially offset by ~~the recovery from the prior year’s unfavorable economic environment largely due to the COVID-19 pandemic. Prior year commercial aftermarket~~a slight decline in military sales ~~include unfavorable EAC adjustments~~reflecting expected lower F135 production volume, partially offset by higher F135 sustainment volume.

The organic profit increase of ~~$0.3~~$0.1 billion ~~discussed further below. Military sales were up slightly~~ in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020.~~

~~The organic profit increase of $0.6 billion in the quarter ended September 30,~~ 2021 ~~compared to the quarter ended September 30, 2020~~ was primarily driven by higher commercial aerospace operating profit of ~~$0.8~~$0.2 billion principally due to the aftermarket sales ~~volume~~ increase discussed above ~~favorable year-over-year EAC adjustments of $459 million,~~ and favorable mix. The favorable year-over-year EAC adjustments were principally driven by the absence of prior year unfavorable EAC adjustments of $334 million related to a change in the estimated maintenance coverage period on a commercial engine aftermarket contract and $129 million due to the restructuring of a customer contract. Included in organic profit in the quarter ended September 30, 2020 was other income of $58 million related to foreign government wage subsidies related to COVID-19.

OEM mix. The increase ~~in Other~~also includes slightly higher military operating profit ~~of $0.1 billion in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 was~~ primarily driven by ~~the absence~~favorable mix. These increases were partially offset by a combined increase in selling, general and administrative expenses and research and development costs of ~~an $89 million impairment of commercial aircraft program assets recorded in the prior year.~~

In the quarter ended September 30, 2021, Pratt & Whitney booked $543 million for two F-135 sustainment contracts and $212 million for F100 engines for an international customer. In the quarter ended September 30, 2020, Pratt & Whitney booked $473 million for F-135 sustainment contracts.

$0.1 billion.

~~Table of Contents~~

Nine Months Ended September 30, ~~2021~~2022 Compared with Nine Months Ended September 30, ~~2020~~2021
Factors Contributing to Total Change
(dollars in millions)
Organic(1)
Acquisitions /
Divestitures, net Restructuring
Costs Other Total Change
Net Sales $ 609 $ — $ — $ 92 $ 701
Operating Profit 634 — 164 118 916



	Factors Contributing to Total Change
(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net sales	$	1,913	$	—	$	—	$	(70)	$	1,843

Operating profit	624		—		1		(175)		450

The organic sales increase of ~~$0.6~~$1.9 billion in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 reflects higher commercial aftermarket sales of ~~$0.7~~$1.5 billion primarily due to an increase in shop visits and related spare part sales as the commercial aerospace environment continues to recover. The increase also includes higher commercial OEM sales of $0.5 billion driven by ~~the recovery from the prior year’s unfavorable economic environment largely due to the COVID-19 pandemic,~~favorable mix and higher volume on commercial engine shipments. These increases were partially offset by lower ~~commercial OEM~~military sales of $0.1 ~~billion. Prior year commercial aftermarket~~billion primarily due to lower sales include unfavorable EAC adjustments of $0.3 billion, discussed further below. Military sales were up slightly in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.on F135 production volume, partially offset by higher F135 sustainment volume.

The organic profit increase of $0.6 billion in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 was primarily driven by higher commercial aerospace operating profit of ~~$0.5~~$1.0 billion principally due to the ~~favorable year-over-year EAC adjustments of $533 million, and lower Selling, general and administrative expenses of $0.2 billion.~~ ~~The higher commercial aerospace operating profit also includes the impact of the~~ aftermarket sales volume increase discussed above~~, which was largely~~ and favorable OEM mix. The organic profit increase also includes slightly higher military operating profit primarily driven by favorable mix. These increases were partially offset by l~~ower commercial OEM operating profit due to unfavorable mix and lower sales volume~~. ~~The year-over-year favorable commercial aerospace EAC adjustments were principally driven by prior year unfavorable EAC adjustments of $334 million related to~~ a ~~change~~combined increase in ~~the estimated maintenance coverage period on a commercial engine aftermarket contract, $129 million due to the restructuring of a customer contract, and~~ ~~$62 million net unfavorable EAC adjustments based on a portfolio review of our commercial aftermarket programs. The lower Selling,~~selling, general and administrative expenses ~~were primarily driven by~~and research and development costs of $0.2 billion. In the ~~absence of~~nine months ended September 30, 2022, our organic profit included a ~~$229~~$50 million ~~charge~~favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the ~~prior year related to increased estimates~~second quarter of ~~expected credit losses due to customer bankruptcies and additional allowances for credit losses. Also included in the organic change in~~2022, which impacted our commercial aerospace operating ~~profit was other income related to foreign government wage subsidies related to COVID-19 of $52 million and $117 million for~~profit. In the nine months ended September 30, 2021 ~~and 2020, respectively, and an unfavorable EAC adjustment on a military program of $44~~our organic profit included $52 million ~~in the second quarter of 2020 primarily driven by a shift in estimated overhead costs~~related to foreign government wage subsidies due to ~~lower commercial engine activity.~~COVID-19.

The ~~increase~~decrease in Other operating profit of ~~$0.1 billion~~$175 million in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 was primarily ~~driven by the absence~~due to $155 million of ~~an $89 million~~pretax charges related to impairment of ~~commercial aircraft program~~customer financing assets ~~recorded~~for products under lease, increased estimates for credit losses, inventory reserves and recognition of purchase order obligations, all due to global sanctions on and export controls with respect to Russia in the ~~prior year.~~first quarter of 2022. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional information.

Defense Bookings – In addition to a number of smaller bookings, in the quarter ended September 30, 2022, Pratt & Whitney booked $524 million for F135 sustainment and $278 million for expanded scope on F135 production Lots 15 and 16. In addition to these bookings, ~~discussed above,~~ in the nine months ended September 30, 2021, Pratt & Whitney had two notable defense bookings for $593 million in total for F-135 sustainment contracts. In addition to the bookings discussed above, in the nine months ended September 30, 2020,2022 Pratt & Whitney booked ~~$1.2~~$4.0 billion for ~~the F-135 program~~F135 production Lots 15 and ~~$168~~16, $408 million for ~~the Tanker program.~~

F135 sustainment, and $251 million for tanker production Lots 7 and 8.

Raytheon Intelligence & Space
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 3,740 $ 3,749 — % $ 11,310 $ 7,136 58 %
Operating Profit 391 350 12 % 1,194 659 81 %
Operating Profit Margins 10.5 % 9.3 % 10.6 % 9.2 %
Bookings $ 2,894 $ 2,955 (2) % $ 10,572 $ 6,667 59 %


	Quarter Ended September 30,								Nine Months Ended September 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net sales	$	3,626		$	3,740		(3)	%	$	10,768		$	11,310		(5)	%
Operating profit	371			391			(5)	%	1,064			1,194			(11)	%
Operating profit margins	10.2		%	10.5		%			9.9		%	10.6		%
Bookings	$	3,897		$	2,894		35	%	$	9,469		$	10,572		(10)	%

5943

Table of Contents

Quarter Ended September 30, ~~2021~~2022 Compared with Quarter Ended September 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales		$	(45)	$	28		$	8	$	(9)
Net sales											Net sales	$	68	$	(164)	$	(18)	$	(114)

(1) See “Segment Review” above for definition of organic. We provide the organic change in net sales for our segments. We believe that this measure is useful to investors because it provides transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic change excludes acquisitions and divestitures, net, and the effect of foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”). A reconciliation of this measure to the reported U.S. GAAP amount is provided in the table above.

Factors Contributing to Change in Operating Profit
(dollars in millions) Volume Net change in EAC adjustments Acquisitions /
Divestitures, net Mix and other performance Total Change
Operating Profit $ (9) $ 45 $ (4) $ 9 $ 41


	Factors Contributing to Change in Operating Profit
(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating profit	$	5	$	9	$	(28)	$	(6)	$	(20)

Organic sales in the quarter ended September 30, ~~2021~~2022 were relatively consistent with the quarter ended September 30, ~~2020.~~2021. Included in the organic change in sales were higher Sensing and Effects sales of $0.2 billion due to certain development programs transitioning into production and an increase in sales on classified programs, partially offset by lower Command, Control and Communications sales of $0.1 billion primarily driven by an anticipated decrease in production volumes on certain tactical communications systems programs.

The ~~increase~~decrease in operating profit of ~~$41~~$20 million, and the related ~~increase~~decrease in operating profit margins, in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020, was~~2021, were primarily due to acquisitions / divestitures, net described below, partially offset by the net favorable change in EAC adjustments of ~~$45~~$9 million, which was spread across numerous ~~programs~~programs.

The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily ~~a result~~relates to the sale of the ~~Raytheon Merger~~global training and services business in the ~~associated reset to zero percent complete for contracts accounted for on a percentage~~fourth quarter of ~~completion basis.~~2021.

Nine Months Ended September 30, ~~2021~~2022 Compared with Nine Months Ended September 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales		$	120	$	4,023		$	31	$	4,174
Net sales											Net sales	$	15	$	(518)	$	(39)	$	(542)


	Factors Contributing to Change in Operating Profit
(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating profit	$	4	$	(29)	$	(92)	$	(13)	$	(130)

Organic sales in the nine months ended September 30, ~~2021~~2022 were relatively consistent with the nine months ended September 30, ~~2020.~~2021. Included in the ~~increase~~organic change in ~~organic~~ sales ~~was~~were higher ~~net~~Sensing and Effects sales of ~~$142 million on certain Airborne Intelligence, Surveillance~~$0.1 billion, and ~~Reconnaissance (ISR) programs within sensing~~higher Cyber, Training and ~~effects primarily due to increased production driven by customer demand, higher volume~~Services sales of ~~$91 million~~$0.1 billion on certain classified cyber programs, ~~within cyber, training~~offset by lower Command, Control and ~~services primarily~~Communications sales of $0.2 billion. The higher Sensing and Effects sales includes an increase due to ~~increases~~certain development programs transitioning into production, an increase in ~~customer-determined activity levels,~~sales on classified programs, and ~~lower net sales of $71 million~~a decrease in surveillance and targeting systems due to lower ~~volume~~production volume. The lower Command, Control and Communications sales were primarily driven by an anticipated decrease in production volumes on certain ~~Space ISR programs within sensing and effects.~~tactical communications systems programs.

The ~~increase~~decrease in operating profit of ~~$535~~$130 million, and the related ~~increase~~decrease in operating profit margins, in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020, was~~2021, were primarily due to ~~the change in acquisitions~~acquisition / divestitures, net ~~of $404 million~~,described below and the net ~~favorable~~unfavorable change in EAC adjustments of ~~$98~~$29 million, which was spread across numerous ~~programs and primarily a result of the Raytheon Merger and the associated reset to zero percent complete for contracts accounted for on a percentage of completion basis.~~programs.

The ~~increase~~decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the ~~Raytheon Merger on April 3, 2020.~~sale of the global training and services business in the fourth quarter of 2021.

Backlog and Bookings– Backlog was ~~$18.7~~$17 billion at September 30, ~~2021~~2022 and ~~$19.2~~$18 billion at December 31, ~~2020.~~2021. In addition to a number of smaller bookings, in the quarter ended September 30, ~~2021,~~2022, RIS booked ~~$962 million~~$1.6 billion on a number of classified contracts. In addition to these bookings, in the nine months ended September 30, ~~2021,~~2022, RIS booked ~~$2,539 million~~$2.3 billion on a number of classified contracts, ~~$365~~$311 million on the ~~Standard Terminal Automation Replacement System (STARS) program for the Federal Aviation Administration (FAA), $227 million on a~~Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) GEO missile warning and defense contract, $211 million to provide additional upgrades to the Global Positioning System Next Generation Operational Control System (GPS OCX) program for the U.S. Air Force, $199 million on an international tactical airborne radar sustainment contract, $185 million on an international training contract with the U.K. Royal

6044

Table of Contents

~~Navy,~~ and ~~$172~~defense contract for the U.S. Space Force, and $253 million on the ~~Next Generation Jammer (NGJ) Mid-Band Low Rate Initial Production (LRIP) contract with the U.S. Navy.~~

~~In the quarter ended September 30, 2020, RIS booked $928 million on a number of classified contracts~~Development, Operations and $176 million to perform operations and sustainment for the U.S. Air Force’s Launch and Test Range System (LTRS). In addition to these bookings, in the nine months ended September 30, 2020, RIS booked $1,418 million on a number of classified contracts and $166 million on the Global Aircrew Strategic Network Terminal (Global ASNT)Maintenance (DOMino) cyber program for the ~~U.S. Air Force.~~Department of Homeland Security (DHS).

Raytheon Missiles & Defense
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 3,902 $ 3,706 5 % $ 11,680 $ 7,212 62 %
Operating Profit 490 449 9 % 1,518 847 79 %
Operating Profit Margins 12.6 % 12.1 % 13.0 % 11.7 %
Bookings $ 3,901 $ 2,489 57 % $ 12,487 $ 6,598 89 %


	Quarter Ended September 30,								Nine Months Ended September 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net sales	$	3,678		$	3,902		(6)	%	$	10,763		$	11,680		(8)	%
Operating profit	408			490			(17)	%	1,143			1,518			(25)	%
Operating profit margins	11.1		%	12.6		%			10.6		%	13.0		%
Bookings	$	5,415		$	3,901		39	%	$	14,052		$	12,487		13	%

Quarter Ended September 30, ~~2021~~2022 Compared with Quarter Ended September 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales		$	193	$	—		$	3	$	196
Net sales											Net sales	$	(209)	$	—	$	(15)	$	(224)


		Factors Contributing to Change in Operating Profit											Factors Contributing to Change in Operating Profit
(dollars in millions)	(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change		(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating Profit		$	21	$	8	$	—	$	12	$	41
Operating profit												Operating profit	$	(19)	$	(21)	$	—	$	(42)	$	(82)

The organic sales ~~increase~~decrease of ~~$193~~$209 million in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020~~2021 was primarily due to lower net sales of $0.2 billion from our Land Warfare and Air Defense programs, including certain international air and missile defense programs, primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production, and lower net sales of $0.1 billion from our Naval Power programs due to lower volumes across multiple programs, partially offset by higher net sales on SPY-6 programs. These declines were partially offset by higher net sales of ~~$143 million to an international customer driven by planned increases in production on NASAMS and~~$0.2 billion from our Strategic Missile Defense programs, which included higher net sales ~~of $87 million~~ on the AMRAAM program including the recognition of previously deferred precontract costs resulting from a contract award in the third quarter of 2021, partially offset by lower net sales of $65 million related to sales on our direct commercial sales contracts for precision guided munitions with a Middle East customer that had been recognized in the quarter ended September 30, 2020, but subsequently reversed in the fourth quarter of 2020. We have not yet obtained regulatory approval on these contracts, and we subsequently reversed these sales because we determined, due to then-current events, that it was no longer probable that we will be able to obtain regulatory approvals for these contracts.NGI program.

The ~~increase~~decrease in operating profit of ~~$41~~$82 million in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020,~~2021, was ~~primarily~~ due to ~~an increase~~a change in mix and other performance of $42 million, a net unfavorable change in EAC adjustments of $21 million, and lower volume of ~~$21 million~~$19 million. The changes in mix and other performance and volume were principally driven by the ~~activity~~lower net sales on the Land Warfare and Air Defense programs ~~described above~~discussed above. The net unfavorable change in ~~organic sales.~~EAC adjustments was spread across numerous programs and includes the impact of continued supply chain and labor market constraints. The ~~increase~~decrease in operating profit margins in the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, was primarily due to the change in mix and other ~~performance.~~

~~Table of Contents~~

performance and the net change in EAC adjustments.

Nine Months Ended September 30, ~~2021~~2022 Compared with Nine Months Ended September 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales		$	452	$	3,999		$	17	$	4,468
Net sales											Net sales	$	(883)	$	—	$	(34)	$	(917)


		Factors Contributing to Change in Operating Profit											Factors Contributing to Change in Operating Profit
(dollars in millions)	(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change		(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating Profit		$	42	$	51	$	521	$	57	$	671
Operating profit												Operating profit	$	(77)	$	(143)	$	—	$	(155)	$	(375)

The organic sales ~~increase~~decrease of ~~$452~~$883 million in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 was primarily due to lower net sales of $0.7 billion from our Land Warfare and Air Defense programs, including certain international air and missile defense programs, primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production; lower net sales of $0.3 billion from our Air Power programs,

Table of Contents

including lower net sales on the Paveway program and the Advanced Medium Range Air-to-Air Missile (AMRAAM) program; and lower net sales of $0.3 billion on our Naval Power programs due to lower volumes across multiple programs, partially offset by higher net sales from SPY-6 programs. These decreases were partially offset by higher net sales of ~~$118 million on an international Patriot program driven by a contract modification in the second quarter of 2021,~~$0.3 billion from our Strategic Missile Defense programs which included ~~the recognition of previously deferred precontract costs,~~ higher net sales ~~of $92 million to an international customer driven by planned increases in production on NASAMS, higher net sales of $84 million on~~from the AMRAAM program including the recognition of previously deferred precontract costs resulting from a contract award in the third quarter of 2021 and higher net sales of $78 million on the StormBreaker program primarily due to the recognition of previously deferred precontract costs based on a contract award in the second quarter of 2021, partially offset by lower net sales of $119 million related to sales on our direct commercial sales contracts for precision guided munitions with a Middle East customer as discussed above.NGI program.

The ~~increase~~decrease in operating profit of ~~$671~~$375 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to a change in mix and other performance of $155 million, a net unfavorable change in EAC adjustments of $143 million, and lower volume of $77 million. The changes in mix and other performance and volume were principally driven by the ~~related increase~~lower net sales on the Land Warfare and Air Defense programs discussed above. The net unfavorable change in EAC adjustments was spread across numerous programs and includes the impact of continued supply chain and labor market constraints. The decrease in operating profit margins in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021, was primarily due to athe change in ~~acquisitions / divestitures,~~mix and other performance and the net ~~of $521 million.~~

~~The increase~~change in ~~net sales and operating profit due to acquisitions / divestitures, net relates to the Raytheon Merger on April 3, 2020.~~EAC adjustments.

Backlog and Bookings– Backlog was ~~$29.6~~$32 billion at September 30, ~~2021~~2022 and ~~$29.1~~$29 billion at December 31, ~~2020.~~2021. In addition to a number of smaller bookings, in the quarter ended September 30, ~~2021,~~2022, RMD booked ~~$570~~$1 billion for the first Hypersonic Attack Cruise Missile (HACM) for the U.S. Air Force, $972 million for AMRAAM for the U.S. Air Force and Navy and international customers, ~~$432 million to provide Guidance Enhanced Missiles (GEM-T) for an international customer, $358~~$353 million for ~~Evolved Sea Sparrow~~the Lower Tier Air and Missile ~~(ESSM)~~Defense Sensor (LTAMDS) Pre-planned Product Improvement program for the U.S. Army, $226 million for systems improvement program hardware for the Air Intercept Missile (AIM-9X) Sidewinder short-range air- to-air missiles for the U.S. Navy, and ~~international customers, $291~~$207 million for ~~Stinger missiles~~integrated effectors and sensors for ~~international customers and $175 million to provide Patriot technical assistance~~Counter-Unmanned Aircraft Systems (C-UAS) defense system for ~~an international customer. RMD also booked $400 million on a number of classified contracts.~~the U.S. Army. In addition to these bookings, in the nine months ended September 30, ~~2021,~~2022, RMD booked ~~approximately $2~~$1.6 billion on a number of classified contracts, including a strategic competitive award. RMD also booked $662 million on Stinger for the ~~Long Range Standoff (LRSO) Weapon System Engineering~~U.S. Army, $651 million for the SPY-6 Hardware Production and ~~Manufacturing Development (EMD)~~Sustainment contract for the U.S. ~~Air Force, $1,315~~Navy, $648 million for ~~the Next Generation Interceptor (NGI)~~Standard Missile-3 (SM-3) for the Missile Defense Agency (MDA), ~~$518~~$423 million ~~for AMRAAM~~on the SPY-6 Hardware Production and Sustainment contract for the U.S. ~~Air Force and~~ Navy, ~~and international customers, $327~~$384 million for Excalibur Rapid Demonstration Phase 2 for the U.S. Army, $219 million for AIM-9X Sidewinder short-range air-to-air missiles for the U.S. Navy and Air Force and international customers, ~~$247~~$218 million to provide Patriot engineering support services ~~support~~ for the U.S. Army and international customers, ~~$242~~and $217 million on ~~the Army Navy/Transportable Radar Surveillance-Model 2 (AN/TPY-2) radar program for the MDA, and $213 million for StormBreaker~~Tomahawk for the U.S. ~~Air Force and~~ Navy.

In the quarter ended September 30, 2020, RMD booked $186 million on the AN/TPY-2 radar program for the Kingdom of Saudi Arabia (KSA). In addition to these bookings, in the nine months ended September 30, 2020, RMD booked $2,253 million on the AN/TPY-2 radar program for KSA

Corporate and ~~$321 million for Standard Missile-3 (SM-3) for the MDA and an international customer.~~

Eliminations and other

Eliminations and other reflects the elimination of sales, other income and operating profit transacted between segments, as well as the operating results of certain smaller non-reportable business segments, including Forcepoint, which was acquired as part of the Raytheon Merger and subsequently disposed of on January 8, 2021, as further discussed in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.

~~Table of Contents~~

Net Sales Operating Profit
Quarter Ended September 30, Quarter Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Inter segment eliminations $ (745) $ (655) $ (16) $ (37)
Other non-reportable segments (1) 179 (11) (12)
Eliminations and other $ (746) $ (476) $ (27) $ (49)

~~The decrease in other non-reportable segment sales for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020, was primarily related to~~ ~~the sale of our Forcepoint business in the first quarter of 2021~~.

~~Other non-reportable segment operating profit for the quarter ended September 30, 2021 was relatively consistent with the quarter ended September 30, 2020.~~

Net Sales Operating Profit
Nine Months Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Inter segment eliminations $ (2,203) $ (1,756) $ (72) $ (73)
Other non-reportable segments 15 328 (26) (28)
Eliminations and other $ (2,188) $ (1,428) $ (98) $ (101)

~~The decrease in other non-reportable segment sales for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, was primarily related to~~ ~~the sale of our Forcepoint business in the first quarter of 2021~~.

~~Other non-reportable segments operating profit for the nine months ended September 30, 2021 was relatively consistent with the nine months ended September 30, 2020.~~

~~Corporate expenses and other unallocated items~~

segments. Corporate expenses and other unallocated items consists of costs and certain other unallowable corporate costs not considered part of management’s evaluation of reportable segment operating performance including restructuring ~~and merger~~ costs related to the Raytheon ~~Merger,~~merger, net costs associated with corporate research and development, including the ~~Lower Tier Air and Missile Defense Sensor (LTAMDS)~~LTAMDS program ~~which was acquired as part of the Raytheon Merger,~~ and certain reserves. ~~See “Restructuring Costs,” above, for a more detailed discussion~~


	Net Sales				Operating Profit
	Quarter Ended September 30,				Quarter Ended September 30,
(dollars in millions)	2022		2021		2022		2021
Eliminations and other	$	(833)	$	(746)	$	(50)	$	(27)
Corporate expenses and other unallocated items	—		—		(77)		(89)

The increase in eliminations and other sales of ~~our restructuring costs.~~$87 million in the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2021 2020 2021 2020
Corporate expenses and other unallocated items $ (89) $ (84) $ (319) $ (491)
Eliminations and other operating profit in the quarter ended September 30, 2022 was relatively consistent with the quarter ended September 30, 2021.

Corporate expenses and other unallocated items in the quarter ended September 30, ~~2021~~2022 were relatively consistent with the quarter ended September 30, ~~2020.~~2021. Included in the change in corporate expenses and other unallocated items were a decrease in expenses related to the LTAMDS project and lower restructuring costs, partially offset by an increase in IT-related costs.


	Net Sales				Operating Profit
	Nine months ended September 30,				Nine months ended September 30,
(dollars in millions)	2022		2021		2022		2021
Eliminations and other	$	(2,363)	$	(2,188)	$	(131)	$	(98)
Corporate expenses and other unallocated items	—		—		(255)		(319)

The increase in eliminations and other sales of $175 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Table of Contents

Eliminations and other operating profit in the nine months ended September 30, 2022 was relatively consistent with the nine months ended September 30, 2021.

The decrease in Corporate expenses and other unallocated items of ~~$172~~$64 million ~~for~~in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021, was primarily ~~driven by~~due to a decrease in ~~merger-related costs~~expenses related to the ~~Raytheon Merger of $128 million~~LTAMDS project and lower restructuring costs, ~~of $112 million,~~ partially offset by an increase in ~~net expenses related to the LTAMDS project.~~IT-related costs.

FAS/CAS operating adjustment

~~The~~We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of ~~RIS~~our pension and ~~RMD include~~postretirement benefit (PRB) expense under the Financial Accounting Standards (FAS) requirements of U.S. Generally Accepted Accounting Principles (GAAP) and our pension and PRB expense ~~as determined~~ under U.S. government Cost Accounting Standards (CAS) primarily related to our RIS and RMD segments. While the ultimate liability for pension and PRB costs under FAS and CAS ~~which~~is similar, the pattern of cost recognition is different. Over time, we generally expect to recover the related RIS and RMD pension and PRB liabilities through the pricing of our products and services to the U.S. government. The difference between our CAS expense and the FAS service cost attributable to these segments under U.S. GAAP is the FAS/CAS operating adjustment. The FAS/CAS operating adjustment results in consolidated pension expense in operating profit equal to the service cost component of FAS expense under U.S. GAAP. The segment results of Collins ~~Aerospace~~ and Pratt & Whitney generally ~~include~~record pension and PRB expense on a FAS ~~service cost.~~

~~Table of Contents~~

basis.

The components of the FAS/CAS operating adjustment were as follows:


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
FAS service cost (expense)	FAS service cost (expense)	$	(102)	$	(118)	$	(304)	$	(227)	FAS service cost (expense)	$	(91)	$	(102)	$	(274)	$	(304)
CAS expense	CAS expense	601		498		1,651		963		CAS expense	469		601		1,409		1,651
FAS/CAS operating adjustment	FAS/CAS operating adjustment	$	499	$	380	$	1,347	$	736	FAS/CAS operating adjustment	$	378	$	499	$	1,135	$	1,347

The change in our FAS/CAS operating adjustment of ~~$119~~$121 million in the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020~~2021 was driven by a ~~$103~~$132 million ~~increase~~decrease in CAS expense, ~~as well as a $16~~partially offset by an $11 million decrease in FAS service cost. The ~~increase~~decrease in CAS expense was primarily due to our 2021 actuarial estimate update in the third quarter of 2021 ~~update to our actuarial estimates.~~and an increase in applicable discount rates as a result of U.S. qualified pension plan funding relief included in the American Rescue Plan Act of 2021 (ARPA).

The change in our FAS/CAS operating adjustment of ~~$611~~$212 million in the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020~~2021 was driven by a ~~$688~~$242 million ~~increase~~decrease in CAS expense, partially offset by a ~~$77~~$30 million ~~increase~~decrease in FAS service cost. The ~~increase~~decrease in ~~our~~ CAS expense was primarily due to ~~the inclusion of the Raytheon Company plans~~an increase in applicable discount rates as a result of ~~the Raytheon Merger.~~The increase in our FAS service cost was primarily due to the inclusion of the Raytheon Company plans as a result of the Raytheon Merger, partially offset by the Raytheon domestic defined pension plan amendment, as described below.

In December 2020, we approved a change to the Raytheon Company domestic defined benefit pension plans for non-union participants to cease future benefit accruals based on an employee’s years of service and compensation effective December 31, 2022. The plan change does not impact participants’ historical benefit accruals. Benefits for service after December 31, 2022 will be based on a cash balance formula.

In response to the economic environment resulting from the COVID-19 pandemic, Congress passed the American Rescue Plan Act of 2021 (ARPA) in March 2021, which included pension funding relief provisions. These provisions extend and expand upon existing pension funding relief, most notably by increasing the liability interest rates used to determine the required cash contributions for our U.S. qualified pension ~~plans. As a result, we do not currently expect cash contributions to be required for our U.S. qualified pension plans in 2021 or 2022.~~

~~The ARPA pension~~plan funding relief ~~provisions are also expected to result~~included in decreases to CAS expense, and the related recovery under our contracts, for our U.S. qualified pension plans beginning in 2022 as the interest rates used to determine pension funding requirements for these plans are also used in determining CAS expense.ARPA.

Acquisition accounting adjustments

Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions and the amortization of customer contractual obligations related to loss making or below market contracts acquired. These adjustments are not considered part of management’s evaluation of segment results.

The components of Acquisition accounting adjustments were as follows:


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Goodwill impairment charge		$	—	$	—	$	—	$	(3,183)

Amortization of acquired intangibles	Amortization of acquired intangibles	(610)		(596)		(1,789)		(1,547)		Amortization of acquired intangibles	$	(486)	$	(610)	$	(1,421)	$	(1,789)
Amortization of property, plant and equipment fair value adjustment	Amortization of property, plant and equipment fair value adjustment	(21)		(19)		(84)		(46)		Amortization of property, plant and equipment fair value adjustment	(20)		(21)		(73)		(84)
Amortization of customer contractual obligations related to acquired loss-making and below-market contracts	Amortization of customer contractual obligations related to acquired loss-making and below-market contracts	45		92		252		237		Amortization of customer contractual obligations related to acquired loss-making and below-market contracts	24		45		80		252
Acquisition accounting adjustments	Acquisition accounting adjustments	$	(586)	$	(523)	$	(1,621)	$	(4,539)	Acquisition accounting adjustments	$	(482)	$	(586)	$	(1,414)	$	(1,621)

6447

Table of Contents

Acquisition accounting adjustments related to acquisitions in each segment were as follows:


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	(196)	$	(157)	$	(466)	$	(3,736)	Collins Aerospace Systems	$	(201)	$	(196)	$	(604)	$	(466)
Pratt & Whitney	Pratt & Whitney	(47)		(7)		(98)		(91)		Pratt & Whitney	(72)		(47)		(168)		(98)
Raytheon Intelligence & Space	Raytheon Intelligence & Space	(132)		(130)		(433)		(258)		Raytheon Intelligence & Space	(73)		(132)		(231)		(433)
Raytheon Missiles & Defense	Raytheon Missiles & Defense	(211)		(204)		(624)		(404)		Raytheon Missiles & Defense	(136)		(211)		(411)		(624)
Total segment	Total segment	(586)		(498)		(1,621)		(4,489)		Total segment	(482)		(586)		(1,414)		(1,621)
Eliminations and other	Eliminations and other	—		(25)		—		(50)		Eliminations and other	—		—		—		—
Acquisition accounting adjustments	Acquisition accounting adjustments	$	(586)	$	(523)	$	(1,621)	$	(4,539)	Acquisition accounting adjustments	$	(482)	$	(586)	$	(1,414)	$	(1,621)

The change in the Acquisition accounting adjustments of ~~$63~~$104 million for the quarter ended September 30, ~~2021~~2022 compared to the quarter ended September 30, ~~2020,~~2021, was primarily driven by ~~an increase at Pratt & Whitney primarily due to an increase~~a decrease in ~~collaboration~~RIS and RMD intangibles amortization ~~driven by an increase in V2500 program activity and Collins Aerospace primarily due~~related to the ~~impact of foreign currency exchange rates.~~Raytheon merger in 2020.

The change in the Acquisition accounting adjustments of ~~$2,918~~$207 million for the nine months ended September 30, ~~2021~~2022 compared to the nine months ended September 30, ~~2020,~~2021, is primarily driven by ~~the $3.2 billion goodwill impairment loss~~a decrease in ~~the second quarter of 2020 related to two Collins Aerospace reporting units, partially offset by an increase of $361 million for acquisition accounting adjustments~~RIS and RMD intangibles amortization related to the Raytheon ~~Merger, primarily due to the timing of the~~ merger in 2020, partially offset by the ~~prior year. Included in Acquisition accounting adjustments in the nine months ended September 30, 2021 was~~absence of $116 million of amortization of customer contractual obligations due to the accelerated liquidation of a below-market contract ~~reserves~~reserve at Collins ~~Aerospace~~ driven by the termination of two customer ~~contracts. Refer to “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q for additional information on~~contracts recognized in the ~~goodwill impairment loss.~~nine months ended September 30, 2021.

LIQUIDITY AND FINANCIAL CONDITION


(dollars in millions)	(dollars in millions)	September 30, 2021			December 31, 2020			(dollars in millions)	September 30, 2022			December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	7,476		$	8,802		Cash and cash equivalents	$	5,381		$	7,832
Total debt	Total debt	31,248			31,823			Total debt	33,447			31,485
Total equity	Total equity	72,937			73,852			Total equity	71,735			74,664
Total capitalization (total debt plus total equity)	Total capitalization (total debt plus total equity)	104,185			105,675			Total capitalization (total debt plus total equity)	105,182			106,149
Total debt to total capitalization	Total debt to total capitalization	30		%	30		%	Total debt to total capitalization	32		%	30		%

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is cash flows from operating activities. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: capital expenditures, customer financing requirements, investments in and divestitures of businesses, dividends, common stock repurchases, pension funding, access to the commercial paper markets, adequacy of available bank lines of credit, redemptions of debt, and the ability to attract long-term capital at satisfactory terms. ~~We had $6.84 billion available under our various credit facilities at September 30, 2021.~~

Although our business has been and will continue to be impacted by COVID-19, as discussed above in Business Overview, we currently believe we have sufficient liquidity to withstand the potential impacts.

At September 30, ~~2021,~~2022, we had cash and cash equivalents of ~~$7.5~~$5.4 billion, of which approximately ~~35%~~38% was held by RTC’s foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. The Company does not intend to reinvest certain undistributed earnings of its international subsidiaries that have been previously taxed in the U.S. Taxes associated with the future remittance of these earnings have been recorded. For the remainder of the Company’s undistributed international earnings, unless tax effective to repatriate, RTC will continue to permanently reinvest these earnings. ~~We have repatriated approximately $1.8 billion of cash in the nine months ended September 30, 2021.~~

Historically, our strong credit ratings and financial position have enabled us to issue long-term debt at favorable interest rates.

As of September 30, ~~2021, our maximum commercial paper borrowing limit was $5.0~~2022, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $7.0 billion, ~~as the commercial paper is backed by our~~consisting of a $5.0 billion revolving credit ~~agreement. We had $160 million of commercial paper borrowings as~~agreement, which expires in April 2025, and a $2.0 billion revolving credit agreement, which was renewed in September 2022 and expires in September 2023. As of September 30, ~~2021. The daily average amount of short-term commercial paper~~2022, there were no borrowings outstanding ~~during the nine months ended~~under these agreements.

~~Table of Contents~~

~~September 30, 2021 was $191 million. We~~From time to time, we use ~~our~~ commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The commercial paper notes have original maturities of not more than 364 days from the date of issuance. As of September 30, 2022, our maximum commercial paper borrowing limit was $5.0 billion as the commercial paper is backed by our $5.0 billion revolving credit agreement. We had $2.1 billion of commercial paper outstanding at September 30, 2022. The proceeds from these borrowings have primarily been used to fund payments related to the impact of a provision enacted in the Tax Cuts and Jobs Act of 2017 requiring the capitalization of research and experimental expenditures for tax purposes. The daily average

Table of Contents

amount of short-term commercial paper borrowings outstanding during the nine months ended September 30, 2022 was $815 million. At September 30, 2022 short-term commercial paper borrowings outstanding had a weighted-average interest rate of 3.6%.

Proceeds from issuance of commercial paper with maturities greater than 90 days were $1.4 billion during the nine months ended September 30, 2022. There were no repayments of commercial paper with maturities greater than 90 days during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, commercial paper borrowings had original maturities of not more than 90 days from the date of issuance.

In May 2021, we renewed our $2.0 billion revolving credit agreement, which now expires in May 2022. As of September 30, 2021, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $7.0 billion consisting of a $5.0 billion revolving credit agreement that became available upon completion of the Raytheon Merger on April 3, 2020, and the $2.0 billion revolving credit agreement, and there were no borrowings outstanding under these agreements.

We have an existing universal shelf registration statement, which we filed with the Securities and Exchange Commission (SEC) on September ~~27, 2019,~~22, 2022, for an indeterminate amount of debt and equity securities for future issuance, subject to our internal limitations on the amount of debt to be issued under this shelf registration statement.

The Company ~~has offered~~offers a voluntary supply chain finance (SCF) program with a global financial institution which enables our suppliers, at their sole discretion, to sell their receivables from the Company to the financial institution at a rate that leverages our credit rating, which might be beneficial to them. Our suppliers’ participation in the SCF program does not impact or change our terms and conditions with those suppliers, and therefore, we have no economic interest in a supplier’s decision to participate in the program. In addition, we provide no guarantees or otherwise pay for any of the costs of the program incurred by those suppliers that choose to participate, and have no direct financial relationship with the financial institution, as it relates to the program. As such, ~~amounts due to suppliers that have elected to participate in~~ the SCF program are included in Accounts payable on our Condensed Consolidated Balance Sheet and all payment activity related to amounts due to suppliers that elected to participate in the SCF program are reflected in cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows. The SCF program does not impact our overall liquidity.

We believe our cash on hand and future operating cash flows will be sufficient to meet our future operating cash needs. Further, we continue to have access to the commercial paper markets and our existing credit facilities, and our ability to obtain debt or equity financing, as well as the availability under committed credit lines, provides additional potential sources of liquidity should they be required or appropriate.

Cash Flow - Operating Activities


		Nine Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Net cash flows provided by operating activities from continuing operations	Net cash flows provided by operating activities from continuing operations	$	3,981	$	2,964	Net cash flows provided by operating activities from continuing operations	$	2,540	$	3,981
Net cash used in operating activities from discontinued operations		(27)		(693)

~~Operating Activities - Continuing Operations.~~ Cash generated by operating activities from continuing operations in the nine months ended September 30, ~~2021~~2022 was ~~$1,017 million higher~~$1.4 billion lower than the same period in ~~2020.~~ ~~This~~2021, primarily driven by the net increase ~~was primarily~~in tax payments discussed below and an unfavorable impact to cash flow from inventory principally due to higher net income after adjustments for depreciation and amortization, deferred income tax provision, stock compensation costs, net periodic pension and other postretirement benefit and the goodwill impairment charge, totaling $3.0 billion,current year increases to support sales volume growth. These unfavorable impacts to cash flow were partially offset by ~~an unfavorable change~~ increases in working capital, primarily due to an unfavorable change in working capital at the RIS and RMD segments in the first quarter of 2021 with no comparable activity in the first quarter of 2020 as a result of the Raytheon Merger. This unfavorable change in working capital at RIS and RMD includes a cash outflow for accounts payable and accrued liabilities primarily driven by deferred revenue and advanced payments. Included in the change in accounts payable and accrued liabilities is a decrease in collaborator payables at Pratt & Whitney, which was mostly offset by a decrease in collaborator receivables due to the timing of incentive compensation payments. Also included in the unfavorable change in working capital was an increase in current year contract assets principally driven by the timing of billings at Pratt & Whitney ~~and contractual billing terms on U.S. government and foreign military sales contracts at RMD, partially offset by~~ the absence of a reduction of accounts payable and accounts receivable in the prior year at Collins Aerospace and Pratt & Whitney due to a decline in volume principally driven by the economic environment primarily due to COVID-19.settlements.

The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables. Factoring activity ~~had~~resulted in an increase of approximately $1.5 billion in cash provided by operating activities during the nine months ended September 30, 2022, compared to a minimal impact on cash flows provided by operating activities during the nine months ended September 30, ~~2021, compared to a decrease in cash flows provided by operating activities of $0.8 billion during the nine months ended September 30, 2020. The year over year increase in factoring~~2021. Factoring activity ~~was primarily due to the higher sales volume in 2021 as compared to 2020, and~~ includes amounts factored on certain aerospace receivables at the customers’ request for which we ~~are~~may be compensated by the ~~customer for the extended collection cycle.~~customer.

We made ~~pension and PRB contributions~~net tax payments of ~~$38~~$2,168 million and ~~$64~~$906 million in the nine months ended September 30, 2022 and 2021, respectively. A provision enacted in the Tax Cuts and ~~2020, respectively.~~

~~Table~~Jobs Act of ~~Contents~~

~~In response~~2017 related to the ~~economic environment resulting from the COVID-19 pandemic, Congress passed the ARPA in March 2021, which included pension funding relief provisions. These provisions extend~~capitalization of research and ~~expand upon existing pension funding relief, most notably by increasing the liability interest rates used to determine the required cash contributions~~experimental expenditures for ~~our U.S. qualified pension plans.~~tax purposes became effective on January 1, 2022. As ~~a result,~~this provision was not deferred legislatively, we ~~do not currently expect cash contributions to be required for our U.S. qualified pension plans in 2021 or 2022.~~

Wehave made ~~net~~incremental tax payments of ~~$906 million and $488 million~~$1.5 billion in the nine months ended September 30, ~~2021~~2022, and ~~2020, respectively.~~

~~Operating Activities - Discontinued Operations.~~ ~~The $666 million change in cash used in operating activities from discontinued operations~~expect to pay an additional amount in the ~~nine months ended September 30, 2021 compared to September 30, 2020 was primarily driven by the absence~~fourth quarter of ~~separation costs in 2021 as the Separation Transactions occurred on April 3, 2020.~~2022.

Cash Flow - Investing Activities
Nine Months Ended September 30,
(dollars in millions) 2021 2020
Net cash flows (used in) provided by investing activities from continuing operations $ (139) $ 4,152
Net cash used in investing activities from discontinued operations — (241)


	Nine Months Ended September 30,
(dollars in millions)	2022		2021
Net cash flows used in investing activities from continuing operations	$	(1,891)	$	(139)

Our investing activities primarily include capital expenditures, cash investments in customer financing assets, investments/dispositions of businesses, payments related to our collaboration intangible assets and contractual rights to provide product on new aircraft platforms, and settlements of derivative contracts not designated as hedging instruments.

~~Investing Activities - Continuing Operations.~~

Table of Contents

The ~~$4,291 million~~$1.8 billion change in cash flows ~~(used in) provided by~~used in investing activities from continuing operations in the nine months ended September 30, ~~2021~~2022 compared to September 30, ~~2020~~2021 primarily relates to the absence of ~~cash acquired in~~ the ~~Raytheon Merger in the prior year~~proceeds of ~~$3.2 billion and~~ the prior year sale of our ~~Collins Aerospace military GPS and space-based precision optics businesses, partially offset by~~Forcepoint business, the ~~current year sale~~timing of our ~~Forcepoint business~~derivative contract settlements, and an increase in capital expenditures, all of which are described below.

Capital expenditures in the nine months ended September 30, ~~2021 were relatively consistent with the nine months ended September 30, 2020.~~

~~Dispositions of businesses in~~2022 increased by $253 million from the nine months ended September 30, 2021 ~~was~~primarily due to investments in production facilities at Pratt & Whitney.

Dispositions of businesses were $94 million and $1.1 billion ~~net~~in nine months ended September 30, 2022 and 2021, respectively. The nine months ended September 30, 2022 consisted of ~~cash transferred and~~immaterial dispositions. In the nine months ended September 30, 2021, dispositions of businesses primarily related to the sale of our Forcepoint business. Dispositions of businesses in the nine months ended September 30, 2020 were $2,575 million primarily related to the sale of our Collins Aerospace military GPS and space-based precision optics businesses for $2.3 billion in gross cash proceeds. For additional detail, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.

Customer financing assets ~~(payments)~~ receipts, net ~~included payments~~were receipts of ~~$175~~$25 million and ~~$251~~$24 million in nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~receipts~~include purchases and sales of ~~$199 million and $113 million~~engines in the nine months ended September 30, 2021 and 2020, respectively. The decrease in payments was due to fewer engines added in the nine months ended 2021 compared to 2020. The increase in receipts was driven by a sale and leaseback transaction for the sale of equipment in the nine months ended September 30, 2021.our leased asset pool as well as customer financing activity.

During the nine months ended September 30, 2022 and 2021, we made payments which increased our collaboration intangible assets by $169 million and $138 million, ~~which~~respectively, primarily ~~relates~~related to ~~payments made under~~ our 2012 agreement to acquire Rolls-Royce’s collaboration interests in International Aero Engines AG (IAE) ~~based on hours flown on the V2500-powered aircrafts in service as of the agreement date.~~.

As discussed in “Note ~~13:~~11: Financial Instruments” within Item 1 of this Form 10-Q, we enter into derivative instruments primarily for risk management purposes, including derivatives designated as hedging instruments and those utilized as economic hedges. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, interest rate and commodity price exposures. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we had net cash payments of $259 million and net cash receipts of $42 ~~million and payments of $115~~ million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.

During the quarter ended September 30, 2021, we entered into definitive agreements related to two pending acquisitions. On August 30, 2021, we entered into a definitive agreement to acquire FlightAware, a digital aviation company that operates flight tracking and data platforms, within our Collins Aerospace segment. On September 12, 2021, we entered into a definitive agreement to acquire SEAKR Engineering, Inc., a supplier of advanced space electronics, within our Raytheon Intelligence &

~~Table of Contents~~

Space segment. We expect cash outflows related to these acquisitions to be approximately $1.0 billion. The closings of these transactions are subject to customary closing conditions, including receipt of regulatory approvals.

On September 8, 2021, we entered into a definitive agreement to divest our global training and logistics business within our Raytheon Intelligence & Space segment. The closing of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals.

~~Investing Activities - Discontinued Operations.~~ The $241 million decrease in cash used in investing activities from discontinued operations in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 is primarily driven by outflows from short-term investment activity of $160 million and capital expenditures of $87 million in 2020 which did not recur in 2021, as the Separation Transactions occurred on April 3, 2020.

Cash Flow - Financing Activities


		Nine Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Net cash flows used in financing activities from continuing operations	Net cash flows used in financing activities from continuing operations	$	(5,182)	$	(2,056)	Net cash flows used in financing activities from continuing operations	$	(3,010)	$	(5,182)
Net cash provided by (used in) financing activities from discontinued operations		27		(1,449)

Our financing activities primarily include the issuance and repayment of commercial paper and other short-term and long-term debt, payment of dividends and stock repurchases.

~~Financing Activities - Continuing Operations.~~ Financing activities were a cash outflow of $3.0 billion in the nine months ended September 30, 2022 compared to a cash outflow of $5.2 billion in the nine months ended September 30, ~~2021 compared to a cash outflow~~2021. This change was primarily driven by an increase in commercial paper borrowings, net of $2.1 billion, inand the ~~nine months ended September 30, 2020. This change was driven by~~absence of the ~~net changes in issuances and~~prior year repayments of long-term debt, ~~not related to the Separation Transactions~~net of ~~$2.6~~issuances of $0.6 billion, ~~and~~partially offset by an increase in share repurchases of ~~$2.0 billion, partially offset by the change in net cash transfers to discontinued operations of $2.0~~$0.4 billion.

Refer to “Note 9:8: Borrowings and Lines of Credit” within Item 1 of this Form 10-Q for additional information on commercial paper and debt issuances and repayments.

At September 30, ~~2021,~~2022, management had remaining authority to repurchase approximately ~~$3.0~~$3.5 billion of our common stock under the December 7, ~~2020~~2021 share repurchase program. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange ~~Act.~~Act of 1934, as amended. We may also reacquire shares outside of the program from time to time in connection with the surrender of shares to cover taxes on vesting of restricted stock and as required under our employee savings plan. Our ability to repurchase shares is subject to applicable law.

Our share repurchases were as follows:


		Nine Months Ended September 30,							Nine Months Ended September 30,
(dollars in millions; shares in thousands)	(dollars in millions; shares in thousands)	2021			2020			(dollars in millions; shares in thousands)	2022			2021
		$		Shares	$		Shares		$		Shares	$		Shares
Shares of Common Stock repurchased		$	2,000	24,152	$	47	330
Shares of common stock repurchased (1)								Shares of common stock repurchased (1)	$	2,395	25,452	$	2,000	24,152

(1) Relates to share repurchases that were settled in cash during the period.

Table of Contents

Our Board of Directors authorized the following cash dividends:


		Nine Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	2021		2020		(dollars in millions, except per share amounts)	2022		2021
Dividends paid per share of Common Stock		$	1.495	$	1.685
Dividends paid per share of common stock						Dividends paid per share of common stock	$	1.610	$	1.495
Total dividends paid	Total dividends paid	$	2,212	$	2,026	Total dividends paid	$	2,337	$	2,212

On June ~~21, 2021~~6, 2022, the Board of Directors declared a dividend of ~~$0.51~~$0.55 per share payable September ~~9, 2021~~8, 2022 to shareowners of record at the close of business on August ~~20, 2021.~~19, 2022. Also, on October ~~13, 2021,~~12, 2022, the Board of Directors declared a dividend of ~~$0.51~~$0.55 per share payable December ~~16, 2021~~15, 2022 to shareowners of record at the close of business on November ~~19, 2021.~~

~~Financing Activities - Discontinued Operations.~~ The $1,476 million increase in cash provided by financing activities from discontinued operations in the nine months ended September 30, 2021 compared to September 30, 2020 is driven by a $2.0 billion change in net transfer activity, partially offset by the absence of $703 million of debt extinguishment costs related to the early repayment of debt in the nine months ended September 30, 2020.

18, 2022.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in our exposure to market risk during the nine months ended September 30, ~~2021.~~2022. For discussion of our exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our ~~2020~~2021 Form 10-K.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, we carried out an evaluation under the supervision and with the participation of our management, including the President and Chief Executive Officer (CEO), the Executive Vice President and Chief Financial Officer (CFO) and the Corporate Vice President and Controller (Controller), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, ~~2021.~~2022. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, CFO and Controller concluded that, as of September 30, ~~2021,~~2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO, CFO and Controller, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6951

Table of Contents

Cautionary Note Concerning Factors That May Affect Future Results

This Form 10-Q contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be ~~valid.~~valid, and are not statements of historical fact. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “outlook,” “goals,” “objectives,” “confident,” “on track” and other words of similar meaning. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax payments and rates, research and development spending, costs savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, the Raytheon Merger or the Separation Transactions, including estimated synergies and customer cost savings resulting from the Raytheon Merger and the anticipated benefits and costs of the Separation Transactions and other statements that are not solely historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation:

•the effect of changes in economic, ~~conditions in the industries~~capital market and ~~countries in which Raytheon Technologies Corporation (RTC) operates~~political conditions in the U.S. and globally, such as from the global sanctions and export controls with respect to Russia, and any changes therein, including related to financial market conditions, fluctuations in commodity prices or supply (including energy supply), inflation, interest rates and foreign currency exchange rates, ~~levels of end-customer demand~~disruptions in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of pandemic health issues (including the impact of the COVID-19 pandemic on global air travel and commercial and business activities which have not yet fully recovered to pre-pandemic levels, and that the timing and extent of such recovery may be impacted by factors including the efficacy, acceptance and distribution of vaccines, coronavirus variants and additional outbreaks) and actions taken in response to pandemic health issues (including the impact on supply generally and impact of vaccine mandates on supply chain and ~~operations), aviation safety concerns, weather conditions~~labor markets, and ~~natural disasters, the financial condition of our customers and suppliers, and the~~ geopolitical risks;

•risks associated with U.S. government sales, ~~(including~~including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration, ~~or the allocation of funds to governmental responses to COVID-19,~~a continuing resolution, a government shutdown, or otherwise, and uncertain funding of ~~programs);~~programs;

•challenges in the development, production, delivery, and support ~~performance, safety, regulatory compliance and realization~~ of ~~the anticipated benefits (including our expected returns under customer contracts) of~~Raytheon Technologies Corporation (RTC) advanced technologies and new products and ~~services;~~services, as well as the challenges of operating in RTC’s highly-competitive industries;

•the effect of and risks relating to coronavirus disease 2019 (COVID-19) on RTC’s business, supply chain, operations and the industries in which it operates, including the decrease in global air travel, and the timing and extent of the recovery from COVID-19;

•risks relating to RTC international operations from, among other things, changes in trade policies and implementation of sanctions, foreign currency fluctuations, economic conditions, political factors, sales methods, and U.S. or local government regulations;

•the condition of the aerospace industry;

•risks relating to RTC’s reliance on U.S. and non-U.S. suppliers and commodity markets, including the effect of sanctions, delays and disruptions in the delivery of materials and services to RTC or its suppliers and price increases;

•the scope, nature, ~~impact or~~ timing and challenges of ~~acquisition~~managing acquisitions, investments, divestitures and ~~divestiture activity,~~other transactions, including ~~among other things~~ the ~~integration of United Technologies Corporation (UTC) and Raytheon Company’s businesses and the integration of RTC with other businesses acquired before and after the Raytheon Merger, and~~ realization of synergies and opportunities for growth and innovation, the assumption of liabilities and other risks and incurrence of related costs and expenses, including the possibility that the anticipated benefits from the combination of UTC and Raytheon Company’s businesses or other acquired businesses cannot be realized in full or may take longer to realize than expected, or the possibility that costs or difficulties related to the integration of UTC’s businesses with Raytheon Company’s or other acquired businesses will be greater than expected or may not result in the achievement of estimated synergies within the contemplated time frame or at all;expenses;

•compliance with legal, environmental, regulatory and other requirements, including, among other things, export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anticorruption requirements, such as the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations in the U.S. and other countries in which RTC and its businesses operate;

•the outcome of pending, threatened and future legal proceedings, investigations and other contingencies, including those related to U.S. government audits and disputes or otherwise;

•factors that could impact RTC’s ability to engage in desirable capital-raising or strategic transactions, including its capital structure, levels of indebtedness, capital ~~spending~~expenditures and research and development ~~spending;~~

•~~future~~spending, and the availability of credit, ~~and factors that may affect such availability, including~~ credit market conditions and ~~our capital structure;~~other factors;

•uncertainties associated with the timing and scope of future repurchases by RTC of its common stock ~~which are subject to a number~~or declarations of ~~uncertainties and~~cash dividends, which may be discontinued, accelerated, suspended or delayed at any time due to various factors, including market conditions and the level of other investing activities and uses of cash;

•~~delays~~risks relating to realizing expected benefits from RTC strategic initiatives such as cost reduction, restructuring, digital transformation and ~~disruption in delivery of materials and services from suppliers;~~other operational initiatives;

•~~company~~risks relating to the integration of the legacy businesses of United Technologies Corporation (UTC) and ~~customer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof (including~~Raytheon Company in connection with the ~~potential termination of U.S. government contracts and performance under undefinitized contract actions~~Raytheon merger, and the ~~potential inability to recover termination costs);~~

•~~new business and investment opportunities;~~

•~~the ability to realize the intended benefits~~realization of ~~organizational changes;~~

•the anticipated benefits of ~~diversification and balance of operations across product lines, regions and industries;~~those transactions;

•~~the outcome~~risks of ~~legal proceedings, investigations and other contingencies;~~

•~~pension plan assumptions and future contributions;~~

•~~the impact of the negotiation of collective bargaining agreements and labor disputes;~~

~~Table of Contents~~

•the effect of changes in political conditions in the U.S. and other countries in which RTC and its businesses operate, including the effect of changes in U.S. trade policies, on general market conditions, global trade policies and currency exchange rates in the near term and beyond;

•~~changes in the U.S. Department of Defense (DoD) policies or priorities;~~

•~~the effect of changes in~~additional tax exposures due to new tax legislation or other developments (including the recent Organization for Economic Co-operation and Development Inclusive Framework agreement and changes that may be enacted by the current U.S. Congress), environmental, regulatory and other laws and regulations (including, among other things, export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements, including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations) in the U.S. and other countries in which RTC and its businesses operate;

Table of Contents

•the ability of RTC to attract, train and retain ~~and hire key~~qualified personnel and ~~the~~maintain its culture and high ethical standards, and ability of our personnel to continue to operate our facilities and businesses around the world;

•risks relating to a RTC product safety failure or other failure affecting RTC’s or its customers’ or suppliers’ products or systems;

•risks relating to cyber-attacks on RTC’s information technology infrastructure, products, suppliers, customers and partners, threats to RTC facilities and personnel, as well as other events outside of RTC’s control such as public health crises, damaging weather or other acts of nature;

•the effect of changes in accounting estimates for our programs on our financial results;

•the effect of changes in pension and other postretirement plan estimates and assumptions and contributions;

•risks relating to an impairment of goodwill and other intangible assets;

•the effects of climate change and changing or new climate-related regulations, customer and market demands, products and technologies; and

•the intended qualification of (1) the Raytheon ~~Merger~~merger as a tax-free reorganization and (2) the ~~Separation Transactions~~Carrier and Otis separation transactions and other internal restructurings as tax-free to UTC and former UTC shareowners, in each case, for U.S. federal income tax purposes.

In addition, this Form 10-Q includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. See “Note ~~17:~~15: Commitments and Contingencies” within Item 1 of this Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Results of Operations,” ~~“Restructuring Costs”~~ and “Liquidity and Financial Condition,” within Item 2 of this Form 10-Q. Additional important information as to these factors is included in our Annual Report on Form 10-K in the sections titled Item 1, “Business” under the headings “General,” “Business Segments” and “Other Matters Relating to Our Business,” Item 1A, “Risk Factors,” Item 3, “Legal Proceedings,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Critical Accounting Estimates,” ~~“Environmental Matters”~~ and ~~“Governmental~~“Government Matters.” The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the Securities and Exchange Commission (SEC).

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See “Note ~~17:~~15: Commitments and Contingencies” within Item 1 of this Form 10-Q for a discussion regarding material legal proceedings.

Except as otherwise noted, ~~above,~~ there have been no material developments in legal proceedings. For previously reported information about legal proceedings refer to Part I, Item 3, “Legal Proceedings,” of our ~~2020~~2021 Annual Report on Form 10-K.

Item 1A. Risk Factors

Risk Factors

You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results set forth under Item ~~1A.~~1A in our ~~2020~~2021 Annual Report on Form 10-K ~~(2020~~(2021 Form 10-K). ~~There~~Except for the risk factors discussed below, there have been no material changes from the factors disclosed in our ~~2020~~2021 Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission (SEC).

Our international business is subject to economic, regulatory, competition and other risks. Our international sales and operations are subject to risks associated with political and economic factors, regulatory requirements, competition and other risks. A significant portion of our sales are from international sales and include U.S. export sales. In addition, transactions in our non-U.S. operations may be denominated in local currencies. Fluctuations in foreign currency exchange rates may negatively affect demand for our products and our reported profits, as well as our operating margins due to changing supplier prices. In particular, a strengthening of the U.S. Dollar against other major foreign currencies could adversely affect our results of operations. The majority of our commercial aerospace sales are in U.S. Dollars, while the majority of their non-U.S. costs are incurred in the applicable local currency. Pratt & Whitney Canada is especially susceptible to fluctuations in exchange rates for this reason. In addition, because our financial statements are denominated in U.S. Dollars, currency fluctuations may cause

7153

Table of Contents

translation gains or losses for non-U.S. operating unit financial statements. For the reasons above, currency fluctuations may adversely affect our results of operations. To manage certain exposures, we employ long-term hedging strategies associated with U.S. Dollar sales.

Our international sales are also subject to risks associated with local government laws, regulations and policies, including export-import controls, investments, taxation, exchange controls, capital controls, employment regulations and repatriation of earnings, and changes to these laws, regulations and policies. Differing legal systems, customs and contract laws and regulations pose additional risk. International transactions may include contractual terms that differ from those of similar contracts in the U.S. or that may be interpreted differently in foreign countries. Our international sales also require us to comply with U.S. laws, regulations and policies, including the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), the Foreign Corrupt Practices Act (FCPA), and other anti-corruption, sanctions and export laws and regulations. In addition, in certain foreign countries, we engage foreign non-employee representatives and consultants for international sales and teaming with international subcontractors, partners and suppliers for international programs. These engagements expose us to various challenges including risks associated with the FCPA and local antibribery laws and regulations. From time to time, we have disputes with such representatives regarding claimed commissions and other matters which can result in litigation or arbitration. In addition, we face risks related to the unintended or unauthorized use of our products.

Our international business faces substantial competition from both U.S. companies and foreign companies. In some instances, foreign companies may be owned by foreign governments or may receive loans, marketing subsidies and other assistance from their governments that may not be available to U.S. companies or our foreign subsidiaries. In addition, foreign companies may be subject to fewer restrictions on technology transfer than U.S. companies.

Our international contracts, particularly for sales of defense products and services, may include offset or industrial cooperation obligations requiring specific local purchases, manufacturing agreements, technology transfer agreements or financial support obligations, sometimes in the form of in-country industrial participation (ICIP) agreements. Approvals of offset or ICIP thresholds and requirements may be subjective and time-consuming and may delay contract awards. Certain customers’ demands are increasing for greater offset or ICIP commitment levels, higher-value content, including the transfer of technologies and capabilities, and local production and economic development.

As a result of the above factors, we could experience financial penalties and award and funding delays on international programs, our profitability on these programs could be negatively affected, and we could incur losses on these programs that could negatively impact our results of operations, financial condition and liquidity.

Geopolitical factors and changes in policies and regulations could adversely affect our business. Our international sales and operations are sensitive to changes in foreign national priorities, foreign government budgets, and regional and local political and economic factors, including volatility in energy prices or supply, political or civil unrest, changes in threat environments and political relations, geopolitical uncertainties, and changes in U.S. foreign policy. Our international sales and operations are also sensitive to changes in foreign government laws, regulations and policies, including those related to tariffs, sanctions, embargoes, export and import controls and other trade restrictions. Government policies on international trade and investments can affect demand for our products and services, the competitive position of our products, our supply chain, and our ability to manufacture or sell products in certain countries. The implementation of more restrictive trade policies, including tariffs, or the renegotiation of existing trade agreements in countries where we have a major customer or supplier presence could negatively affect us. Trends such as populism and economic nationalism, “buy national” policies, limiting exports of a material largely unavailable elsewhere (such as rare earth minerals), or subsequent retaliatory policies by another government (such as tariffs) could negatively affect us. Further, regime change in a major customer’s government could decrease or eliminate its demand for our products and services, as well as adversely affect our supply of materials or components from that county.

We conduct business in numerous countries that carry high levels of currency, political, compliance and economic risk. We expect that sales to customers in these countries will continue to account for a significant portion of our commercial aerospace sales as our businesses evolve and as these and other developing nations and regions around the world increase their demand for our products, particularly our aerospace products. Operations in emerging market countries can present many risks, including volatility in gross domestic product and rates of economic growth, economic and government instability, cultural differences (such as employment and business practices), the imposition of exchange and capital controls, and risks associated with exporting components manufactured in those countries for incorporation into finished products completed in other countries. While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.

In addition, given the role of our defense businesses in the support of the national security interests of the U. S. and its allies, we are subject to risks and uncertainties relating to policies of the U.S. and its allies, as well as other countries, including those who are or become regarded as potential adversaries or threats. We engage in both direct commercial sales, which generally require

Table of Contents

U.S. government licenses and approvals, as well as foreign military sales, which are government-to-government transactions initiated by, and carried out at the direction of, the U.S. government. Changes in these budget and spending levels, policies, or priorities, which are subject to geopolitical risks and threats, may impact our defense businesses, including the timing of and delays in U.S. government licenses and approvals for sales, the risk of sanctions or other restrictions, as well as potential human rights issues associated with the use of our defense products. These risks and uncertainties may directly or indirectly impact our commercial businesses as well.

Of note, in 2019 the U.S. government suspended Turkey’s participation in the F-35 Joint Strike Fighter program because Turkey accepted delivery of the Russian-built S-400 air and missile defense system. The U.S. has imposed, and may impose additional, sanctions on Turkey, as well as contractual restrictions on the use of Turkish sources for certain military programs, as a result of this or other political disputes. Turkish companies supply components, some of which are sole-sourced, to our aerospace businesses for commercial and military engines and aerospace products, as well as to our defense businesses. Depending upon the scope and timing of U.S. sanctions or contractual prohibitions on Turkey and potential reciprocal actions, if any, such sanctions or actions could impact our sources of supply and could have a material adverse effect on our results of operations, financial condition or liquidity. In addition, the People’s Republic of China (China) previously announced it may take measures against Raytheon Technologies Corporation (RTC) in connection with certain foreign military sales to Taiwan involving RTC products and services. In addition, China has indicated that it decided to sanction our Chairman and Chief Executive Officer Gregory Hayes, in connection with another potential foreign military sale to Taiwan involving RTC products and services. RTC is not aware of any specific sanctions against Mr. Hayes or RTC, or the nature or timing of any future potential sanctions or countermeasures. If China were to impose sanctions or take other regulatory action against RTC, our suppliers, affiliates or partners, it could potentially disrupt our business operations. The impact of potential sanctions or other actions by China cannot be determined at this time. From time to time, our businesses have sold, and are expected to sell in the future, additional defense products to Taiwan and we are unable to determine the potential impact, if any, of any future sanctions or other actions by China in response to these sales. Moreover, the Chinese government has generally expanded its ability to restrict China-related import, export and investment activities, which may have an adverse impact on our ability to conduct business or sell our commercial aerospace products in China. In addition, in response to the Russian military’s invasion of Ukraine on February 24, 2022, the U.S. government and the governments of various jurisdictions in which we operate, including Canada, the United Kingdom, the European Union, and others, have imposed broad economic sanctions and export controls targeting specific industries, entities and individuals in Russia. The Russian government has implemented similar counter-sanctions and export controls targeting specific industries, entities and individuals in the U.S. and other jurisdictions in which we operate. These government measures, among other limitations, restrict transactions involving various Russian banks and financial institutions and impose enhanced export controls limiting transfers of various goods, software and technologies to and from Russia, including broadened export controls specifically targeting the aerospace sector. These measures have adversely affected and could continue to adversely affect the Company and/or our supply chain, business partners or customers.

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

Issuer Purchases of Equity Securities

The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the quarter ended September 30, ~~2021.~~2022.


2021		Total Number of Shares Purchased (000’s)	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program (000’s)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions)
2022								2022	Total Number of Shares Purchased (000’s)	Average Price Paid per Share (dollars)		Total Number of Shares Purchased as Part of a Publicly Announced Program (000’s)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions)
July 1 - July 31	July 1 - July 31	1,982	$	85.17	1,982	$	3,811	July 1 - July 31	3,726	$	92.89	3,726	$	3,802
August 1 - August 31	August 1 - August 31	4,604	86.55		4,604	$	3,413	August 1 - August 31	1,146	93.49		1,146	3,695
September 1 - September 30	September 1 - September 30	4,949	83.90		4,949	$	2,998	September 1 - September 30	1,771	84.06		1,771	3,546
Total	Total	11,535	$	85.18	11,535			Total	6,643	$	90.64	6,643

On December 7, ~~2020,~~2021, our Board of Directors authorized a share repurchase program for up to $5$6 billion of our common stock, replacing the previous program announced on ~~October 14, 2015.~~December 7, 2020. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange ~~Act.~~Act of 1934, as amended. We may also reacquire shares outside of the program from time to time in connection with the surrender of shares to cover taxes on vesting of restricted stock and as required under our employee savings plan. Our ability to repurchase shares is subject to applicable law. No shares were reacquired in transactions outside the program during the quarter ended September 30, ~~2021.~~2022.

Table of Contents

Item 6. Exhibits


Exhibit Number						Exhibit Description

15						Letter re: unaudited interim financial information.*

31.1						Rule 13a-14(a)/15d-14(a) Certification.*

31.2						Rule 13a-14(a)/15d-14(a) Certification.*

31.3						Rule 13a-14(a)/15d-14(a) Certification.*

32						Section 1350 Certifications.*

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*

101.SCH						Inline XBRL Taxonomy Extension Schema Document.*

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

Notes to Exhibits List:

* Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, (ii) Condensed Consolidated Statement of Comprehensive Income for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, (iii) Condensed Consolidated Balance Sheet as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, (iv) Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, (v) Condensed Consolidated Statement of Changes in Equity for the quarters and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 and (vi) Notes to Condensed Consolidated Financial Statements.

7256

Table of Contents

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.


		RAYTHEON TECHNOLOGIES CORPORATION (Registrant)

Dated:	October ~~26, 2021~~25, 2022	By:	/s/ NEIL G. MITCHILL, JR.
			Neil G. Mitchill, Jr.
			Executive Vice President and Chief Financial Officer

			(on behalf of the Registrant and as the Registrant’s Principal Financial Officer)

Dated:	October ~~26, 2021~~25, 2022	By:	/s/ AMY L. JOHNSON
			Amy L. Johnson
			Corporate Vice President and Controller

			(on behalf of the Registrant and as the Registrant’s Principal Accounting Officer)

7357


	Quarter Ended		Nine Months Ended
(dollars in millions, except per share amounts)	September 30, 2020		September 30, 2020
Net sales	$	14,747	$	47,668
Income (loss) from continuing operations attributable to common shareowners	174		(2,328)


Basic earnings (loss) per share of common stock from continuing operations	$	0.12	$	(1.54)


Diluted earnings (loss) per share of common stock from continuing operations	0.11		(1.54)


(dollars in millions)	Balance as of January 1, 2021(1)		Acquisitions and Divestitures(2)		Foreign Currency Translation and Other		Balance as of September 30, 2021
Collins Aerospace Systems	$	31,571	$	—	$	(146)	$	31,425
Pratt & Whitney	1,563		—		—		1,563
Raytheon Intelligence & Space(1) (2)	9,522		(397)		—		9,125
Raytheon Missiles & Defense(1)	11,608		52		(1)		11,659
Total Segments	54,264		(345)		(147)		53,772
Eliminations and other	21		—		(4)		17
Total	$	54,285	$	(345)	$	(151)	$	53,789


(dollars in millions)	Remaining 2021		2022		2023		2024		2025		2026
Amortization expense	$	630	$	1,936	$	2,035	$	2,142	$	2,025	$	1,939


(dollars in millions)	Expected Costs		Costs Incurred Quarter Ended March 31, 2021		Costs Incurred Quarter Ended June 30, 2021		Costs Incurred Quarter Ended September 30, 2021		Remaining Costs at September 30, 2021
Pratt & Whitney	$	58	$	(20)	$	(2)	$	(1)	$	35
Collins Aerospace Systems	67		(16)		(3)		(9)		39
Corporate expenses and other unallocated items	62		—		(60)		(2)		—

Total	$	187	$	(36)	$	(65)	$	(12)	$	74


(dollars in millions)	Expected Costs		Costs Incurred in 2020		Costs (Incurred) Reversed Quarter Ended March 31, 2021		Costs (Incurred) Reversed Quarter Ended June 30, 2021		Costs (Incurred) Reversed Quarter Ended September 30, 2021		Remaining Costs at September 30, 2021
Pratt & Whitney	$	188	$	(205)	$	—	$	17	$	—	$	—
Collins Aerospace Systems	320		(333)		1		7		12		7
Corporate expenses and other unallocated items	250		(232)		(5)		—		(13)		—
Total	$	758	$	(770)	$	(4)	$	24	$	(1)	$	7


Operating Profit (Loss)
Collins Aerospace Systems	$	1,246		$	(317)		$	526		$	11		$	1,466
Pratt & Whitney	475			(457)			(615)			33			(564)
Raytheon Intelligence & Space	—			309			350			361			1,020
Raytheon Missiles & Defense	—			398			449			33			880
Total segments	1,721			(67)			710			438			2,802
Eliminations and other	(25)			(27)			(49)			(6)			(107)
Corporate expenses and other unallocated items	(130)			(277)			(84)			(99)			(590)
FAS/CAS operating adjustment	—			356			380			370			1,106
Acquisition accounting adjustments	(271)			(3,745)			(523)			(561)			(5,100)
Consolidated	$	1,295		$	(3,760)		$	434		$	142		$	(1,889)

Segment Operating Profit (Loss) Margin
Collins Aerospace Systems	19.4		%	(7.5)		%	12.3		%	0.3		%	7.6		%
Pratt & Whitney	8.9		%	(13.1)		%	(17.6)		%	0.7		%	(3.4)		%
Raytheon Intelligence & Space	NM			9.1		%	9.3		%	9.2		%	9.2		%
Raytheon Missiles & Defense	NM			11.4		%	12.1		%	0.8		%	7.7		%
Total segment	14.6		%	(0.5)		%	4.7		%	2.6		%	4.8		%