What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-26 compared with 2022-04-26 · 306 added, 148 removed, 377 unchanged (55% of the section changed)

5 unchanged sentences

Unless the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” “Raytheon Technologies,” and “RTC” mean Raytheon Technologies Corporation and its subsidiaries.

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 June 30, 2022 and June 30, 2021 with respect to RIS or RMD, we are referring to their July 3, 2022 and July 4, 2021 fiscal quarter ends, respectively.

The current status of significant factors affecting our business environment in 2022 is discussed below.

16 unchanged sentences

The coronavirus disease 2019 (COVID-19) pandemic continues to negatively affect the global economy, our business and operations, supply chains, and the industries in which we operate.

However, we continue to see indications that commercial air travel is recovering in certain areas of demand.

However, we continue to see that commercial air travel is recovering in certain areas of demand.

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 when commercial air traffic capacity will fully return to and/or exceed pre-COVID-19 levels.

4 unchanged sentences

In response to the Russian military’s invasion of Ukraine on February 24, 2022, the U.S.

government has imposed broad economic sanctions and export controls targeting key industries, entities and individuals in Russia.

government measures, among other items, restrict transactions involving various Russian banks and financial institutions and impose enhanced export controls limiting transfers of various goods, software and technologies to Russia, including broadened export controls specifically targeting Russia’s aerospace sector.

Governments of various other jurisdictions in which we operate, including Canada, the United Kingdom, the European Union and others, have implemented similar measures.

These sanctions and export controls, as well as responses from Russia, have adversely affected and could continue to adversely affect the Company and/or our supply chain, business partners or customers;

however, we do not believe this matter will have a material

adverse effect on our financial results.

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;

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, in October 2020, the People’s Republic of China (China) announced that it may sanction Raytheon in connection with a possible Foreign Military Sale to Taiwan of six MS-110 Reconnaissance Pods and related equipment manufactured by Collins.

15 unchanged sentences

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 March 31, 2022, our Contract liabilities include approximately $420 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.

In particular, as of June 30, 2022, our Contract liabilities include approximately $380 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.

6 unchanged sentences

Actual results in these areas could differ from management’s estimates.

There have been no significant changes in our critical accounting estimates during the quarter ended March 31, 2022.

There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2022.

RESULTS OF OPERATIONS

4 unchanged sentences

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.

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.

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

Net Sales $ 16,314 $ 15,880 $ 32,030 $ 31,131

The factors contributing to the total change year-over-year in total net sales for the quarter ended March 31, 2022 are as follows:

(dollars in millions) Quarter Ended March 31, 2022

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

(dollars in millions) Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

$ 697 $ 1,361

Acquisitions and divestitures, net (186) (354)

Other (77) (108)

Total change $ 434 $ 899

2 unchanged sentences

GAAP amount is provided in the table above.

Net sales increased $664 million organically in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 primarily due to higher organic sales of $0.5 billion at Pratt & Whitney and $0.5 billion at Collins, partially offset by lower organic sales of $0.3 billion at RMD.

The $168 million decrease in net sales related to Acquisitions and divestitures, net for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily driven by the sale of our global training and services business within our RIS segment in the fourth quarter of 2021.

Net sales increased $697 million organically in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily due to higher organic sales of $0.7 billion at Pratt & Whitney and $0.5 billion at Collins, partially offset by lower organic sales of $0.4 billion at RMD.

The $186 million decrease in net sales related to Acquisitions and divestitures, net for the quarter ended June 30, 2022 compared to the quarter ended June 30, 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 $77 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily driven by the impact of foreign exchange.

Net sales increased $1,361 million organically in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to higher organic sales of $1.2 billion at Pratt & Whitney and $1.0 billion at Collins, partially offset by lower organic sales of $0.7 billion at RMD.

The $354 million decrease in net sales related to Acquisitions and divestitures, net for the six months ended June 30, 2022 compared to the six months ended June 30, 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 $108 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, was primarily driven by the impact of foreign exchange.

See “Segment Review” below for further information by segment.

Quarter Ended March 31, % of Total Net Sales

Quarter Ended June 30, % of Total Net Sales

(dollars in millions) 2022 2021 2022 2021

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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 $198 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 primarily due to increases in external products sales of $0.3 billion at Collins and $0.2 billion at Pratt & Whitney, partially offset by a decrease in external products sales of $0.2 billion at RMD.

Net services sales increased $267 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 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 $0.1 billion at RIS.

Net products sales increased $79 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 due to increases in external products sales of $0.4 billion at Pratt & Whitney and $0.2 billion at Collins, partially offset by decreases in external products sales of $0.4 billion at RMD and $0.1 billion at RIS.

Net services sales increased $355 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily due to increases in external services sales of $0.3 billion at Pratt & Whitney and $0.2 billion at Collins, partially offset by a decrease in external services sales of $0.1 billion at RIS.

Six Months Ended June 30, % of Total Net Sales

(dollars in millions) 2022 2021 2022 2021

Products $ 24,120 $ 23,843 75.3 % 76.6 %

Services 7,910 7,288 24.7 % 23.4 %

Total net sales $ 32,030 $ 31,131 100 % 100 %

Net products sales increased $277 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to increases in external products sales of $0.6 billion at Pratt & Whitney and $0.5 billion at Collins, partially offset by decreases in external products sales of $0.7 billion at RMD and $0.2 billion at RIS.

Net services sales increased $622 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to increases in external services sales of $0.6 billion at Pratt & Whitney and $0.3 billion at Collins, partially offset by a decrease in external services sales of $0.3 billion at RIS.

Our sales to major customers were as follows:

Quarter Ended March 31, % of Total Net Sales

Quarter Ended June 30, % of Total Net Sales

(dollars in millions) 2022 2021 2022 2021

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

Six Months Ended June 30, % of Total Net Sales

(dollars in millions) 2022 2021 2022 2021

Sales to the U.S.

government (1)

$ 14,897 $ 15,418 46.5 % 49.5 %

Foreign military sales through the U.S.

government 2,357 2,792 7.4 % 9.0 %

Foreign government direct commercial sales 2,054 2,493 6.4 % 8.0 %

Commercial aerospace and other commercial sales 12,722 10,428 39.7 % 33.5 %

Total net sales $ 32,030 $ 31,131 100 % 100 %

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

Cost of Sales

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

1 unchanged sentence

Percentage of net sales 78.8 % 79.7 % 79.4 % 80.9 %

The factors contributing to the change year-over-year in total cost of sales for the quarter ended March 31, 2022 are as follows:

(dollars in millions) Quarter Ended March 31, 2022

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

(dollars in millions) Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Acquisitions and divestitures, net (150) (293)

2 unchanged sentences

Acquisition accounting adjustments (81) (122)

Other (62) 75

Total change $ 201 $ 224

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GAAP amount is provided in the table above.

The organic increase in total cost of sales of $53 million for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily driven by the organic sales increases at Collins and Pratt & Whitney, partially offset by the organic sales decrease at RMD noted above.

The $143 million decrease in cost of sales related to Acquisitions and divestitures, net for the quarter ended March 31, 2022 compared to the quarter ended March 31, 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 increase in other cost of sales of $137 million for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily driven by charges at Pratt & Whitney and Collins related to impairment of customer financing assets for products under lease, inventory reserves, purchase order obligations, and the impairment of contract fulfillment costs that are no longer recoverable, all due to global sanctions on and export controls with respect to Russia.

The organic increase in total cost of sales of $453 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily driven by the organic sales increases at Pratt & Whitney and Collins, partially offset by the organic sales decrease at RMD noted above.

The $150 million decrease in cost of sales related to Acquisitions and divestitures, net for the quarter ended June 30, 2022 compared to the quarter ended June 30, 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 cost of sales of $62 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily driven by the impact of foreign exchange.

The organic increase in total cost of sales of $506 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, was primarily driven by the organic sales increases at Pratt & Whitney and Collins, partially offset by the organic sales decrease at RMD noted above.

The $293 million decrease in cost of sales related to Acquisitions and divestitures, net for the six months ended June 30, 2022 compared to the six months ended June 30, 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 increase in other cost of sales of $75 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, was primarily driven by charges recorded during the first quarter of 2022 at Pratt & Whitney and Collins related to impairment of customer financing assets for products under lease, inventory reserves, purchase order obligations, and the impairment of contract fulfillment costs that are no longer recoverable, all due to global sanctions on and export controls with respect to Russia.

Basis of Presentation” within Item 1 of this Form 10-Q for additional information.

These charges were partially offset by the impact of foreign exchange.

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

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

Quarter Ended March 31, % of Total Net Sales

Quarter Ended June 30, % of Total Net Sales

(dollars in millions) 2022 2021 2022 2021

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Total cost of sales $ 12,856 $ 12,655 78.8 % 79.7 %

Net products cost of sales decreased $154 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 primarily due to a decrease at RIS and RMD, partially offset by an increase at Collins.

The decrease at RIS was primarily driven by productivity improvements across numerous programs.

The changes at RMD and Collins were related to the changes in products sales noted above.

Net services cost of sales increased $177 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 primarily due to an increase in external services cost of sales at Pratt & Whitney driven by the services sales increase noted above.

Net products cost of sales increased $43 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily due to increases at Collins and Pratt & Whitney, partially offset by decreases at RMD and RIS and a decrease in Acquisition Accounting Adjustments.

The changes at Collins, Pratt & Whitney, RMD and RIS were related to the changes in products sales noted above.

Net services cost of sales increased $158 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, partially offset by a decrease in external services sales at RIS, all driven by the services sales changes noted above.

Six Months Ended June 30, % of Total Net Sales

(dollars in millions) 2022 2021 2022 2021

Cost of sales

Products $ 19,860 $ 19,971 62.0 % 64.2 %

Services 5,556 5,221 17.3 % 16.8 %

Total cost of sales $ 25,416 $ 25,192 79.4 % 80.9 %

Net products cost of sales decreased $111 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to decreases at RMD and RIS and in Acquisition Accounting Adjustments, partially offset by increases at Collins and Pratt & Whitney.

The changes at RMD, RIS, Collins, and Pratt & Whitney were related to the changes in products sales noted above.

Net services cost of sales increased $335 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, partially offset by a decrease in external services sales at RIS, all driven by the services sales changes noted above.

Research and Development

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

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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.

Company- funded research and development as a percentage of net sales for the quarter ended March 31, 2022 was relatively consistent with the quarter ended March 31, 2021, with the increase principally driven by an increase in research and development spending at Pratt & Whitney.

The decrease in customer-funded research and development of $46 million for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily driven by lower expenses on various military programs at Collins and Pratt and Whitney, partially offset by higher expenses at RMD primarily driven by the Next Generation Interceptor (NGI) program awarded in the second quarter of 2021.

Company- funded research and development as a percentage of net sales for the quarter ended June 30, 2022 was relatively consistent with the quarter ended June 30, 2021, with the increase principally driven by an increase in research and development spending at Pratt & Whitney on various commercial programs.

The decrease in customer-funded research and development of $68 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily driven by lower expenses on various military and commercial programs at Collins, and lower expenses on next generation technologies at RMD, partially offset by an increase in expenses on the Next Generation Interceptor (NGI) program awarded in the second quarter of 2021 at RMD.

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

The decrease in customer-funded research and development of $114 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily driven by lower expenses on various military programs at Collins, and lower expenses on next generation technologies at RMD, partially offset by an increase in expenses on the NGI program awarded in the second quarter of 2021 at RMD.

Selling, General and Administrative

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

1 unchanged sentence

Percentage of net sales 8.7 % 8.6 % 9.0 % 8.3 %

Selling, general and administrative expenses increased $249 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 primarily driven by higher expenses of $0.2 billion at Collins and Pratt & Whitney principally driven by $71 million of charges related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia, and higher employee-related costs.

Also included in the increase was higher Corporate selling, general and administrative expenses driven by higher restructuring costs of $34 millio n and unallocated state taxes of $30 million related to the impact of capitalization of research or experimental expenditures for tax-purposes .

Selling, general and administrative expenses as a percentage of net sales for the quarter ended June 30, 2022 was relatively consistent with the quarter ended June 30, 2021.

Included in the increase were higher expenses of $0.1 billion at Collins principally driven by higher employee-related costs.

Selling, general and administrative expenses increased $305 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily driven by higher expenses of $0.3 billion at Collins and Pratt & Whitney principally

driven by $71 million of charges related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia, and higher employee-related costs.

Basis of Presentation” within Item 1 of this Form 10-Q for additional information on Russia sanctions.

2 unchanged sentences

Other Income, Net

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

1 unchanged sentence

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 $80 million for the quarter ended March 31, 2022, compared to the quarter ended March 31, 2021 was primarily due to the absence of prior year foreign government wage subsidies related to COVID-19 at Pratt & Whitney of $29 million, and a loss resulting from the exit of our investment in a Russia-based joint venture at Collins in the quarter ended March 31, 2022.

The decrease in Other income, net of $65 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 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 decrease in Other income, net of $145 million for the six months ended June 30, 2022 compared to the six months ended June 30, 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 prior year foreign government wage subsidies related to COVID-19 at Pratt & Whitney of $44 million, and a loss resulting from the exit of our investment in a Russia-based joint venture at Collins in the first quarter of 2022.

Operating Profit

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

1 unchanged sentence

Operating profit margin 8.3 % 8.1 % 7.6 % 7.4 %

The increase in Operating profit of $67 million for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily driven by the operating performance at our segments as described below in the individual segment results.

The increase in Operating profit of $71 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily driven by a decrease in Corporate expenses and other unallocated items and Acquisition accounting adjustments, partially offset by the operating performance of our segments, all of which are described below in “Segment Review.”

The increase in Operating profit of $138 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily driven by a decrease in Acquisition accounting adjustments and the operating performance of our segments, partially offset by our FAS/CAS operating adjustment, all of which are described below in “Segment Review.”

Non-service Pension Income

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

Non-service pension income $ (474) $ (490) $ (954) $ (981)

The change in Non-service pension income of $11 million for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily due to an increase in the discount rate, partially offset by prior years’ pension asset returns exceeding our expected return on assets (EROA) assumption.

The change in Non-service pension income of $16 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 included the impact of an increase in the discount rate, partially offset by prior years’ pension asset returns exceeding our expected return on assets (EROA) assumption.

The change in Non-service pension income of $27 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 included the impact of an increase in the discount rate, partially offset by prior years’ pension asset returns exceeding our EROA assumption.

Interest Expense, Net

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

4 unchanged sentences

Average interest expense rate 4.0 % 4.2 % 4.0 % 4.1 %

(1) Primarily consists of the unrealized gains or losses on marketable securities held in trusts associated with certain of our nonqualified deferred compensation and employee benefit plans.

The decrease in interest expense, net of $28 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily due to repayments of higher interest rate long-term debt during 2021, partially offset by debt issuances with lower interest rates during 2021, and adjustments of certain tax-related interest reserves in the quarter ended March 31, 2022.

Quarter Ended March 31,

(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 $13 million and $41 million in the quarter and six months ended June 30, 2022 compared to the quarter and six months ended June 30, 2021, respectively, was primarily due to repayments of higher interest rate long-term debt during 2021, partially offset by debt issuances with lower interest rates during 2021.

Interest income in the six months ended June 30, 2022 includes adjustments of certain tax-related interest reserves in the first quarter of 2022.

Quarter Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Effective income tax rate 10.7 % 23.9 % 10.1 % 26.5 %

The effective tax rate in the quarter ended March 31, 2022 includes a benefit of 5 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.

The effective tax rate for the quarter ended March 31, 2021 includes tax charges incremental to the U.S.

The effective tax rate in the quarter ended June 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 June 30, 2021 includes tax charges incremental to the U.S.

tax rate of $73 million associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% enacted in 2021 and effective in 2023.

The effective tax rate in the six months ended June 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 six months ended June 30, 2021 includes 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 Intangible Assets” within Item 1 of this Form 10-Q.

Subsequently, in the fourth quarter of 2021, we recognized an incremental $104 million tax benefit due to the revaluation of that Forcepoint tax benefit as a result of completing the divestiture of RIS’s global training and services business.

Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q, and $73 million associated with the enactment of the U.K.

corporate tax rate change discussed above.

Subsequently, in the fourth quarter of 2021, we recognized an incremental $104 million tax benefit due to the revaluation of the Forcepoint tax benefit as a result of completing the divestiture of RIS’s global training and services business.

Net Income from Continuing Operations Attributable to Common Shareowners

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions, except per share amounts) 2022 2021 2022 2021

1 unchanged sentence

Diluted earnings per share from continuing operations $ 0.88 $ 0.69 $ 1.61 $ 1.20

Net income from continuing operations attributable to common shareowners for the quarter ended March 31, 2022 includes the following:

Net income from continuing operations attributable to common shareowners for the quarter ended June 30, 2022 includes the following:

• acquisition accounting adjustments of $349 million, net of tax, which had an unfavorable impact on diluted earnings per share (EPS) from continuing operations of $0.23;

• income of $58 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 June 30, 2021 includes the following:

• acquisition accounting adjustments of $403 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.26.

Net income from continuing operations attributable to common shareowners for the six months ended June 30, 2022 includes the following:

• acquisition accounting adjustments of $727 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.49;

• impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of $210 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.14;

Net income from continuing operations attributable to common shareowners for the quarter ended March 31, 2021 includes the following:

• income of $94 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 $0.06.

Net income from continuing operations attributable to common shareowners for the six months ended June 30, 2021 includes the following:

• acquisition accounting adjustments of $802 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.53;

1 unchanged sentence

Net Income Attributable to Common Shareowners

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions, except per share amounts) 2022 2021 2022 2021

1 unchanged sentence

Diluted earnings per share from operations $ 0.88 $ 0.68 $ 1.60 $ 1.18

The increase in net income attributable to common shareowners and diluted earnings per share from operations for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily driven by the increase in continuing operations, as discussed above in Net Income from Continuing Operations Attributable to Common Shareowners.

The increase in net income attributable to common shareowners and diluted earnings per share from operations for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 and for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily driven by the increases in continuing operations, as discussed above in Net Income from Continuing Operations Attributable to Common Shareowners.

SEGMENT REVIEW

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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.

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.

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Total net sales by segment were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

8 unchanged sentences

Operating profit by segment was as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

15 unchanged sentences

We had the following aggregate EAC adjustments for the periods presented:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

2 unchanged sentences

Total net EAC adjustments $ (41) $ 27 $ (5) $ 39

The change in net EAC adjustments of $24 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily due to a favorable change in net EAC adjustments of $58 million at Collins, partially offset by an unfavorable change in net EAC adjustments of $42 million at RMD, both spread across numerous individual programs with no individual or common significant driver.

The change in net EAC adjustments of $68 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily due to unfavorable changes in net EAC adjustments of $80 million at RMD and $61 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 $46 million at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments of $27 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.

The change in net EAC adjustments of $44 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to unfavorable changes in net EAC adjustments of $122 million at RMD and $56 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 $104 million at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments of $30 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 $154 billion and $156 billion as of March 31, 2022 and December 31, 2021, respectively, which includes defense backlog of $62 billion and $63 billion as of March 31, 2022 and December 31, 2021, respectively.

Total backlog was approximately $161 billion and $156 billion as of June 30, 2022 and December 31, 2021, respectively, which includes defense backlog of $65 billion and $63 billion as of June 30, 2022 and December 31, 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:

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Our defense operations consist primarily of our RIS and RMD businesses and operations in the defense businesses within our Collins and Pratt & Whitney segments.

Defense bookings were approximately $8 billion and $9 billion for the quarters ended March 31, 2022 and 2021, respectively.

Defense bookings were approximately $13 billion and $12 billion for the quarters ended June 30, 2022 and 2021, respectively, and approximately $22 billion and $20 billion for the six months ended June 30, 2022 and 2021, respectively.

Defense bookings are impacted by the timing and amounts of awards in a given period, which are subject to numerous factors, including:

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Collins Aerospace Systems

Quarter Ended March 31,

(dollars in millions) 2022 2021 Change

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 Change 2022 2021 Change

Net Sales $ 5,011 $ 4,545 10 % $ 9,835 $ 8,915 10 %

1 unchanged sentence

Operating Profit Margins 10.9 % 11.1 % 10.0 % 9.2 %

Quarter Ended March 31, 2022 Compared with Quarter Ended March 31, 2021

Quarter Ended June 30, 2022 Compared with Quarter Ended June 30, 2021

Factors Contributing to Total Change

8 unchanged sentences

GAAP amounts is provided in the table above.

The organic sales increase of $0.5 billion in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 primarily relates to higher commercial aerospace aftermarket sales of $0.5 billion, including increases across all aftermarket sales channels, primarily due to an increase in flight hours and aircraft fleet utilization as commercial aerospace continues to recover from the unfavorable economic environment principally driven by the COVID-19 pandemic.

The increase also includes higher commercial aerospace OEM sales of $0.2 billion primarily due to narrow-body growth.

These increases were partially offset by lower military sales of $0.2 billion in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 primarily due to supply chain constraints and lower F-35 volume.

The organic profit increase of $0.2 billion in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily due to higher commercial aerospace operating profit of $0.4 billion principally driven by the higher commercial aerospace aftermarket sales discussed above.

The organic sales increase of $0.5 billion in the quarter ended June 30, 2022 compared to the quarter ended June 30, 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, both principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization and narrow-body commercial OEM volume growth.

This was partially offset by lower military sales of $0.1 billion in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily due to lower material receipts and expected declines in F-35 volume.

The organic profit increase of $0.1 billion in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily due to higher commercial aerospace operating profit of $0.2 billion principally driven by the higher commercial aerospace aftermarket sales discussed above, slightly offset by the absence of a $33 million favorable impact from a contract related matter in the quarter ended June 30, 2021.

This increase in commercial aerospace operating profit was partially offset by higher selling, general and administrative expenses of $0.1 billion primarily due to higher employee-related costs, and slightly lower military operating profit principally driven by the lower military sales volume discussed above.

The decrease in Other operating profits of $59 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily due to $69 million of charges associated with the disposition of two non-core businesses.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Factors Contributing to Total Change

(dollars in millions) Organic (1)

Acquisitions /

Divestitures, net Restructuring

Costs Other Total Change

Net Sales $ 989 $ — $ — $ (69) $ 920

Operating Profit 340 (7) 25 (192) 166

(1) See “Segment Review” above for definition of organic.

A reconciliation of these measures to reported U.S.

GAAP amounts is provided in the table above.

The organic sales increase of $1.0 billion in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily relates to higher commercial aerospace aftermarket sales of $0.9 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of $0.4 billion, both principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization and narrow-body commercial OEM volume growth.

This was partially offset by lower military sales of $0.3 billion in the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to expected declines in F-35 volume and lower material receipts.

The organic profit increase of $0.3 billion in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 is primarily due to higher commercial aerospace operating profit of $0.6 billion principally driven by the higher commercial aerospace aftermarket sales discussed above, partially offset by the absence of a $33 million favorable impact from a contract related matter in the quarter ended June 30, 2021.

This increase in commercial aerospace operating profit was partially offset by lower military operating profit of $0.1 billion principally driven by the lower military sales volume discussed above, and higher selling, general and administrative expenses of $0.1 billion primarily due to higher employee-related costs.

The decrease in Other operating profits of $133 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily 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 exit of our investment in a Russia-based joint venture, all due to global sanctions on and export controls with respect to Russia.

Basis of Presentation” within Item 1 of this Form 10-Q for additional information.

The decrease in Other operating profits of $192 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily 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 exit of 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 2022.

In addition, we recognized $69 million of charges associated with the disposition of two non-core businesses in the second quarter of 2022.

Basis of Presentation” within Item 1 of this Form 10-Q for additional information on Russia sanctions.

Pratt & Whitney

Quarter Ended March 31,

(dollars in millions) 2022 2021 Change

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 Change 2022 2021 Change

Net Sales $ 4,969 $ 4,280 16 % $ 9,498 $ 8,310 14 %

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Operating Profit Margins 6.1 % 2.6 % 4.8 % 1.6 %

Quarter Ended March 31, 2022 Compared with Quarter Ended March 31, 2021

Quarter Ended June 30, 2022 Compared with Quarter Ended June 30, 2021

Factors Contributing to Total Change

8 unchanged sentences

GAAP amounts is provided in the table above.

The organic sales increase of $0.5 billion in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 reflects higher commercial aftermarket sales of $0.6 billion primarily due to an increase in shop visits and related spare part sales as commercial aerospace continues to recover from the unfavorable economic environment principally driven by the COVID-19 pandemic.

The organic sales increase of $0.7 billion in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 reflects higher commercial aftermarket sales of $0.4 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 $0.2 billion primarily driven by favorable mix and higher volume on large commercial engine shipments, and higher military sales of $0.1 billion primarily due to the timing of an F135 production contract award, resulting in the recognition of previously inventoried costs, and higher F135 sustainment volume.

The organic profit increase of $0.2 billion in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily driven by higher commercial aerospace operating profit of $0.3 billion principally due to the aftermarket sales volume increase discussed above and favorable OEM mix .

The increase also includes higher military operating profit primarily driven by the military sales volume increase discussed above.

This increase was partially offset by an increase in selling, general and administrative expenses and research and development costs of $0.1 billion combined, which includes higher employee-related

In the quarter ended June 30, 2022, our organic profit included a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program, which impacted our commercial aerospace operating profit.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Factors Contributing to Total Change

(dollars in millions) Organic (1)

Acquisitions /

Divestitures, net Restructuring

Costs Other Total Change

Net Sales $ 1,227 $ — $ — $ (39) $ 1,188

Operating Profit 487 — 1 (167) 321

(1) See “Segment Review” above for definition of organic.

A reconciliation of these measures to reported U.S.

GAAP amounts is provided in the table above.

The organic sales increase of $1.2 billion in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 reflects higher commercial aftermarket sales of $1.0 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 $0.3 billion primarily driven by favorable mix on large commercial engine shipments.

These increases were partially offset by lower military sales of $0.2 billion

primarily due to lower sales on F-135 production due to the timing of awards and lower volume, partially offset by higher F-135 sustainment volume.

The organic profit increase of $0.3 billion in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily driven by higher commercial aerospace operating profit of $0.5 billion principally due to the aftermarket sales volume increase discussed above, favorable OEM mix , and higher Pratt & Whitney Canada OEM volume.

This increase was partially offset by an increase in selling, general and administrative expenses and research and development costs of $0.1 billion combined and slightly lower military operating profit principally due to the military sales volume decrease discussed above.

The change in organic operating profit was also affected by the absence of prior year foreign government wage subsidies related to COVID-19 of $29 million.

The decrease in Other operating profits of $156 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily due to $155 million of pretax charges related to impairment of customer financing assets 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.

These increases were partially offset by lower military sales of $0.1 billion primarily due to lower sales on F135 production volume, partially offset by higher F135 sustainment volume.

The organic profit increase of $0.5 billion in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily driven by higher commercial aerospace operating profit of $0.7 billion principally due to the aftermarket sales volume increase discussed above and favorable OEM mix .

This increase was partially offset by an increase in selling, general and administrative expenses and research and development costs of $0.1 billion combined, which includes higher employee-related costs.

This increase was also offset by slightly lower military operating profit .

In the six months ended June 30, 2021, our organic profit included other income of $44 million related to foreign government wage subsidies due to COVID-19.

The decrease in Other operating profit of $167 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to $155 million of pretax charges related to impairment of customer financing assets 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 first quarter of 2022.

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 March 31, 2022 Pratt & Whitney booked $251 million for tanker production Lots 7 and 8.

Defense Bookings – In addition to a number of smaller bookings, in the quarter ended June 30, 2022, Pratt & Whitney booked $4.0 billion for F135 production Lots 15 and 16 and $408 million for F135 sustainment.

In addition to these bookings, in the six months ended June 30, 2022 Pratt & Whitney booked $251 million for tanker production Lots 7 and 8.

Raytheon Intelligence & Space

Quarter Ended March 31,

(dollars in millions) 2022 2021 Change

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 Change 2022 2021 Change

Net Sales $ 3,570 $ 3,805 (6) % $ 7,142 $ 7,570 (6) %

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Bookings $ 2,980 $ 3,952 (25) % $ 5,572 $ 7,678 (27) %

Quarter Ended March 31, 2022 Compared with Quarter Ended March 31, 2021

Quarter Ended June 30, 2022 Compared with Quarter Ended June 30, 2021

Factors Contributing to Total Change in Net Sales

10 unchanged sentences

Operating Profit $ 4 $ (54) $ (36) $ (14) $ (100)

Organic sales in the quarter ended March 31, 2022 were relatively consistent with the quarter ended March 31, 2021.

Included in the organic change in sales were lower command and control and communications sales of $0.1 billion primarily driven by a planned decrease in production volumes on certain tactical communications systems programs and slightly lower sensing and effects sales, nearly offset by an increase in cyber, training and services sales on certain classified cyber programs.

The decrease in operating profit of $10 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily due to acquisition / divestitures, net described below, which was partially offset by the net favorable change in EAC adjustments of $16 million, which was spread across numerous programs.

The increase in operating profit margins in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily due to the net favorable change in EAC adjustments, partially offset by the impact of acquisitions / divestitures, net.

Organic sales in the quarter ended June 30, 2022 were relatively consistent with the quarter ended June 30, 2021.

Included in the organic change in sales were 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, and lower Sensing and Effects sales driven by a decrease in surveillance and targeting systems due to lower production volume, partially offset by an increase in Cyber, Training and Services sales on certain classified cyber programs.

The decrease in operating profit of $100 million, and the related decrease in operating profit margins, in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, were primarily due to the net unfavorable change in EAC adjustments of $54 million, which was spread across numerous programs and includes unfavorable adjustments on certain development programs, as well as acquisitions / divestitures, net.

Included in mix and other performance is an $18 million gain on a real estate transaction in the quarter ended June 30, 2021.

The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the sale of the global training and services business in the fourth quarter of 2021.

Backlog and Bookings – Backlog was $17 billion at March 31, 2022 and $18 billion at December 31, 2021.

In the quarter ended March 31, 2022, RIS booked $1.1 billion on a number of classified contracts and $311 million on the Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) GEO missile warning and defense contract for the U.S.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Factors Contributing to Total Change in Net Sales

(dollars in millions) Organic (1)

Acquisitions /

Divestitures, net Other Total Change

Net Sales $ (53) $ (354) $ (21) $ (428)

(1) See “Segment Review” above for definition of organic.

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 $ 3 $ (38) $ (64) $ (11) $ (110)

Organic sales in the six months ended June 30, 2022 were relatively consistent with the six months ended June 30, 2021.

Included in the organic change in sales were lower Command, Control and Communications sales of $0.1 billion, lower Sensing and Effects sales of $0.1 billion, and higher Cyber, Training and Services sales of $0.1 billion on certain classified cyber programs.

The lower Command, Control and Communications sales were primarily driven by an anticipated decrease in production volumes on certain tactical communications systems programs.

The lower Sensing and Effects sales includes an increase in certain classified programs and a decrease in surveillance and targeting systems due to lower production volume, with the remaining change spread across numerous programs.

The decrease in operating profit of $110 million, and the related decrease in operating profit margins, in the six months ended June 30, 2022 compared to the six months ended June 30, 2021, were primarily due to acquisition / divestitures, net described below, and the net unfavorable change in EAC adjustments of $38 million, which was spread across numerous programs and includes unfavorable adjustments on certain development programs.

Included in mix and other performance is an $18 million gain on a real estate transaction in the quarter ended June 30, 2021.

The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the sale of the global training and services business in the fourth quarter of 2021.

Backlog and Bookings – Backlog was $16 billion at June 30, 2022 and $18 billion at December 31, 2021.

In addition to a number of smaller bookings, in the quarter ended June 30, 2022, RIS booked $1.2 billion on a number of classified contracts and $253 million on the Development, Operations and Maintenance (DOMino) cyber program for the Department of Homeland Security (DHS).

In addition to these bookings, in the six months ended June 30, 2022, RIS booked $1.1 billion on a number of classified contracts and $311 million on the Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) GEO missile warning and defense contract for the U.S.

Raytheon Missiles & Defense

Quarter Ended March 31,

(dollars in millions) 2022 2021 Change

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 Change 2022 2021 Change

Net Sales $ 3,558 $ 3,985 (11) % $ 7,085 $ 7,778 (9) %

2 unchanged sentences

Bookings $ 4,537 $ 6,054 (25) % $ 8,637 $ 8,586 1 %

Quarter Ended March 31, 2022 Compared with Quarter Ended March 31, 2021

Quarter Ended June 30, 2022 Compared with Quarter Ended June 30, 2021

Factors Contributing to Total Change in Net Sales

10 unchanged sentences

Operating Profit $ (34) $ (80) $ — $ (70) $ (184)

The organic sales decrease of $260 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily due to lower net sales of $0.2 billion on our Land Warfare and Air Defense programs, primarily driven by lower material receipts as a result of supply chain constraints and planned decreases in production on certain programs.

Also included in the decrease in organic sales were lower net sales of $85 million on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program and higher net sales of $80 million on the NGI program.

The decrease in operating profit of $109 million and the related decrease in operating margin in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily due to the change in mix and other performance of $43 million primarily driven by the lower sales on the Land Warfare and Air Defense programs discussed above, and a net unfavorable change in EAC adjustments of $42 million, which was spread across numerous programs with no individual or common significant driver.

Backlog and Bookings – Backlog was $29 billion at both March 31, 2022 and December 31, 2021.

In the quarter ended March 31, 2022, RMD booked $1.2 billion on a number of classified contracts, including a strategic competitive award.

The organic sales decrease of $414 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily due to lower net sales of $0.3 billion on our Land Warfare and Air Defense programs, primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production.

Included in the decrease in organic sales were higher net sales of $75 million on SPY-6 programs and higher net sales of $66 million on the NGI program.

The decrease in operating profit of $184 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was due to a net unfavorable change in EAC adjustments of $80 million, a change in mix and other performance of $70 million, and a change in volume of $34 million.

The net unfavorable change in EAC adjustments was spread across numerous programs and includes the impact of continued supply chain constraints.

The changes in mix and other performance and volume were principally driven by the lower net sales on the Land Warfare and Air Defense programs discussed above.

The decrease in operating profit margins in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily due to the net change in EAC adjustments and change in mix and other performance.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Factors Contributing to Total Change in Net Sales

(dollars in millions) Organic (1)

Acquisitions /

Divestitures, net Other Total Change

Net Sales $ (674) $ — $ (19) $ (693)

(1) See “Segment Review” above for definition of organic.

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 $ (58) $ (122) $ — $ (113) $ (293)

The organic sales decrease of $674 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to lower net sales of $0.5 billion on our Land Warfare and Air Defense programs, primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production.

Included in the total decrease in organic sales were lower net sales of $122 million on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program, higher net sales of $146 million on the NGI program and higher net sales of $122 million on SPY-6 programs.

The decrease in operating profit of $293 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to a net unfavorable change in EAC adjustments of $122 million, a change in mix and other performance of $113 million, and a change in volume of $58 million.

The net unfavorable change in EAC adjustments was spread across numerous programs and includes the impact of continued supply chain constraints.

The changes in mix and other performance and volume were principally driven by the lower net sales on the Land Warfare and Air Defense programs

discussed above.

The decrease in operating profit margins in the six months ended June 30, 2022 compared to the six months ended June 30, 2021, was primarily due to the net change in EAC adjustments and change in mix and other performance.

Backlog and Bookings – Backlog was $30 billion at June 30, 2022 and $29 billion at December 31, 2021.

In addition to a number of smaller bookings, in the quarter ended June 30, 2022, RMD booked $662 million on Stinger for the U.S.

Army, $648 million for Standard Missile-3 (SM-3) for the Missile Defense Agency (MDA), $423 million on the SPY-6 Hardware Production and Sustainment contract for the U.S.

Navy, and $217 million on Tomahawk for the U.S.

In addition to these bookings, in the six months ended June 30, 2022, RMD booked $1.2 billion on a number of classified contracts, including a strategic competitive award.

RMD also booked $651 million for the SPY-6 Hardware Production and Sustainment contract for the U.S.

7 unchanged sentences

Net Sales Operating Profit

Quarter Ended March 31, Quarter Ended March 31,

Quarter Ended June 30, Quarter Ended June 30,

(dollars in millions) 2022 2021 2022 2021

1 unchanged sentence

Corporate expenses and other unallocated items — — (42) (149)

The increase in eliminations and other sales of $29 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Eliminations and other operating profit in the quarter ended March 31, 2022 was relatively consistent with the quarter ended March 31, 2021.

The increase in Corporate expenses and other unallocated items of $55 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily due to higher restructuring costs of $34 millio n and unallocated state taxes of $30 million related to the impact of capitalization of research or experimental expenditures for tax-purposes .

The increase in eliminations and other sales of $59 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Eliminations and other operating profit in the quarter ended June 30, 2022 was relatively consistent with the quarter ended June 30, 2021.

The decrease in Corporate expenses and other unallocated items of $107 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily due to lower restructuring costs of $51 millio n, th e allocation of $30 million of state taxes to the segments related to the impact of capitalization of research or experimental expenditures for tax-purposes and a decrease in expenses related to the LTAMDS project.

Net Sales Operating Profit

Six months ended June 30, Six months ended June 30,

(dollars in millions) 2022 2021 2022 2021

Eliminations and other $ (1,530) $ (1,442) $ (81) $ (71)

Corporate expenses and other unallocated items — — (178) (230)

The increase in eliminations and other sales of $88 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

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

The decrease in Corporate expenses and other unallocated items of $52 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021, was primarily due to a decrease in expenses related to the LTAMDS project.

FAS/CAS operating adjustment

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 postretirement benefit (PRB) expense under U.S.

We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and 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 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.

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.

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.

Collins and Pratt & Whitney generally record pension and PRB expense on a FAS basis.

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

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

2 unchanged sentences

FAS/CAS operating adjustment $ 379 $ 425 $ 757 $ 848

The change in our FAS/CAS operating adjustment of $45 million in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 was driven by a $55 million decrease in CAS expense, partially offset by a $10 million decrease in FAS service cost.

The change in our FAS/CAS operating adjustment of $46 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was driven by a $55 million decrease in CAS expense, partially offset by a $9 million decrease in FAS service cost.

The decrease in CAS expense was primarily due to 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 $91 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was driven by a $110 million decrease in CAS expense, partially offset by a $19 million decrease in FAS service cost.

The decrease in CAS expense was primarily due to 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).

Acquisition accounting adjustments

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The components of Acquisition accounting adjustments were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

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

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2022 2021 2022 2021

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Acquisition accounting adjustments $ (448) $ (519) $ (932) $ (1,035)

The change in the Acquisition accounting adjustments of $32 million for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021, was primarily driven by a decrease in RIS and RMD intangibles amortization related to the

Raytheon merger in 2020, partially offset by the absence of $47 million of amortization of customer contractual obligations due to the accelerated liquidation of a below-market contract reserve at Collins driven by the termination of a customer contract recognized in the quarter ended March 31, 2021.

The change in the Acquisition accounting adjustments of $71 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily driven by a decrease in RIS and RMD intangibles amortization related to the Raytheon merger in 2020, partially offset by the absence of $69 million of amortization of customer contractual obligations due to the accelerated liquidation of a below-market contract reserve at Collins driven by the termination of a customer contract recognized in the quarter ended June 30, 2021.

The change in the Acquisition accounting adjustments of $103 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, is primarily driven by a decrease in RIS and RMD intangibles amortization related to the Raytheon merger in 2020, partially offset by the absence of $116 million of amortization of customer contractual obligations due to the accelerated liquidation of a below-market contract reserve at Collins driven by the termination of two customer contracts recognized in the six months ended June 30, 2021.

LIQUIDITY AND FINANCIAL CONDITION

(dollars in millions) March 31, 2022 December 31, 2021

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

Cash and cash equivalents $ 4,767 $ 7,832

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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.

At March 31, 2022, we had cash and cash equivalents of $6.0 billion, of which approximatel y 42% was held by RTC’s foreign subsidiaries.

At June 30, 2022, we had cash and cash equivalents of $4.8 billion, of which approximatel y 47% 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.

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The commercial paper notes have original maturities of not more than 90 days from the date of issuance.

As of March 31, 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 no commercial paper outstanding at March 31, 2022.

As of March 31, 2022, 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, which expires in April 2025, and a $2.0 billion revolving credit agreement, which expires in May 2022 and is expected to be renewed in the second quarter of 2022.

As of March 31, 2022, there were no borrowings outstanding under these agreements.

As of June 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.

The daily average amount of short-term commercial paper borrowings outstanding during the six months ended June 30, 2022 was $150 million.

We had no commercial paper outstanding at June 30, 2022.

As of June 30, 2022, 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, which expires in April 2025, and a $2.0 billion revolving credit agreement, which was renewed in May 2022 and expires in May 2023.

As of June 30, 2022, 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, 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.

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Cash Flow - Operating Activities

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions) 2022 2021

Net cash flows provided by operating activities from continuing operations

Cash generated by operating activities from continuing operations in the quarter ended March 31, 2022 was $0.2 billion lower than the same period in 2021, primarily driven by an unfavorable change in inventory primarily due to current year increases to support anticipated sales volume growth at Pratt & Whitney and Collins, partially offset by a favorable change in accounts receivable primarily driven by the timing of engine deliveries and related billings at Pratt & Whitney.

The remaining favorable change in accounts receivable was primarily driven by collaborator receivables at Pratt & Whitney, which was mostly offset with an unfavorable change in accounts payable and accrued liabilities primarily driven by collaborator payables.

In addition, current year working capital also reflects a $0.5 billion increase in accounts payable and accrued liabilities related to a non-cash charge to income tax expense driven by the capitalization of research and experimental expenditures for tax purposes, as discussed further below.

Net income after adjusting for this non-cash charge, as well as adjustments for depreciation and amortization, deferred income tax (benefit) provision, stock compensation costs, and net periodic pension and other postretirement benefit was consistent with the prior year.

$ 1,762 $ 2,049

Cash generated by operating activities from continuing operations in the six months ended June 30, 2022 was $0.3 billion lower than the same period in 2021, primarily driven by an unfavorable impact to cash flow from inventory principally due to current year increases to support sales volume growth, partially offset by a favorable impact to cash flow from accounts payable and accrued liabilities primarily driven by advances.

The remaining favorable impact from accounts payable and accrued liabilities was primarily driven by an increase in collaborator payables at Pratt & Whitney, which was mostly offset by an increase in collaborator receivables due to the timing of settlements.

In addition, accounts payable and accrued liabilities also reflects a $1.0 billion increase related to the impact of the capitalization of research and experimental expenditures for tax purposes, with a related $1.0 billion reduction to our deferred tax liability.

The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables.

Factoring activity resulted in an increase of approximately $0.5 billion in cash provided by operating activities during the quarter ended March 31, 2022, compared to an increase in cash flows provided by operating activities of approximately $0.6 billion during the quarter ended March 31, 2021.

Factoring activity resulted in an increase of approximately $1.5 billion in cash provided by operating activities during the six months ended June 30, 2022, compared to an increase in cash flows provided by operating activities of approximately $0.8 billion during the six months ended June 30, 2021.

Factoring activity includes amounts factored on certain aerospace receivables at the customers’ request for which we may be compensated by the customer.

We made net tax payments of $133 million and $113 million in the quarters ended March 31, 2022 and 2021, respectively.

We made net tax payments of $530 million and $618 million in the six months ended June 30, 2022 and 2021, respectively.

A provision enacted in the Tax Cuts and Jobs Act of 2017 related to the capitalization of research and experimental expenditures for tax purposes became effective on January 1, 2022.

If this provision is not deferred, our full year 2022 tax payments are expected to increase by an estimated $2 billion, which has a significant impact on our tax payable and deferred tax balances.

The increased payments will begin later in 2022.

If this provision is not deferred legislatively, our full year 2022 tax payments are expected to increase by an estimated $2 billion.

Payments on the increased taxes may begin in the third quarter of 2022, using cash on hand or other sources of liquidity.

Cash Flow - Investing Activities

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions) 2022 2021

2 unchanged sentences

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.

The $1.1 billion change in cash flows (used in) provided by investing activities from continuing operations in the quarter ended March 31, 2022 compared to March 31, 2021 primarily relates to the absence of the prior year sale of our Forcepoint business described below.

Capital expenditures in the quarter ended March 31, 2022 increased by $52 million from the quarter ended March 31, 2021 primarily due to investments in production facilities at Pratt & Whitney.

Dispositions of businesses in the quarter ended March 31, 2021 were $1.0 billion primarily related to the sale of our Forcepoint business.

The $1.4 billion change in cash flows (used in) provided by investing activities from continuing operations in the six months ended June 30, 2022 compared to June 30, 2021 primarily relates to the absence of the prior year sale of our Forcepoint business described below.

Capital expenditures in the six months ended June 30, 2022 increased by $171 million from the six months ended June 30, 2021 primarily due to investments in production facilities at Pratt & Whitney.

Dispositions of businesses were $88 million and $1.1 billion in six months ended June 30, 2022 and 2021, respectively.

In the six months ended June 30, 2022, dispositions of businesses consisted of immaterial dispositions in our aerospace businesses.

In the six months ended June 30, 2021, dispositions of businesses primarily related to the sale of our Forcepoint business.

For additional detail, see “Note 2:

Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.

Customer financing assets payments, net were $19 million and $81 million in quarters ended March 31, 2022 and 2021, respectively, and include purchases and sales of engines in our leased asset pool as well as customer financing.

The decrease in customer financing assets payments, net was primarily due to the absence of a prior year sale and leaseback transaction for the sale of equipment.

During the quarters ended March 31, 2022 and 2021, we increased our collaboration intangible assets by $50 million and $32 million, respectively, which primarily relates to payments made under our 2012 agreement to acquire Rolls-Royce’s collaboration interests in International Aero Engines AG (IAE).

Customer financing assets payments, net were $7 million and $102 million in six months ended June 30, 2022 and 2021, respectively, and include purchases and sales of engines in our leased asset pool as well as customer financing.

The decrease in customer financing assets payments, net was primarily due to decreased customer financing payments, the absence of a payment on a prior year sale and leaseback transaction for the sale of equipment, and fewer engines added to our leased asset pool.

During the six months ended June 30, 2022 and 2021, we increased our collaboration intangible assets by $91 million and $60 million, respectively, which primarily relates to payments made under our 2012 agreement to acquire Rolls-Royce’s collaboration interests in International Aero Engines AG (IAE).

As discussed in “Note 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 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 quarters ended March 31, 2022 and 2021, we had net cash payments of $33 million and receipts of $49 million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.

During the six months ended June 30, 2022 and 2021, we had net cash payments of $151 million and net cash receipts of $50 million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.

Cash Flow - Financing Activities

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions) 2022 2021

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

Financing activities were a cash outflow of $1.7 billion in the quarter ended March 31, 2022 compared to a cash outflow of $1.5 billion in the quarter ended March 31, 2021.

This change was driven by an increase in share repurchases of $0.4 billion and an increase in taxes paid on employee stock awards of $0.1 billion, partially offset by the absence of the prior year repayment of long-term debt of $0.3 billion.

Financing activities were a cash outflow of $3.6 billion in the six months ended June 30, 2022 compared to a cash outflow of $3.1 billion in the six months ended June 30, 2021.

This change was primarily driven by an increase in share repurchases of $0.8 billion, partially offset by the absence of the prior year repayment of long-term debt of $0.3 billion.

Refer to “Note 8:

Borrowings and Lines of Credit” within Item 1 of this Form 10-Q for additional information on debt issuances and repayments.

At March 31, 2022, management had remaining authority to repurchase approximately $5.2 billion of our common stock under the December 7, 2021 share repurchase program.

At June 30, 2022, management had remaining authority to repurchase approximately $4.1 billion of our common stock under the December 7, 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 of 1934, as amended.

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Our share repurchases were as follows:

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions;

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Our Board of Directors authorized the following cash dividends:

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions, except per share amounts) 2022 2021

1 unchanged sentence

Total dividends paid $ 1,543 $ 1,461

On April 25, 2022, the Board of Directors declared a dividend of $0.55 per share payable June 16, 2022 to shareowners of record at the close of business on May 20, 2022.

On June 6, 2022, the Board of Directors declared a dividend of $0.55 per share payable September 8, 2022 to shareowners of record at the close of business on August 19, 2022.

Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in our exposure to market risk during the quarter ended March 31, 2022.

There has been no significant change in our exposure to market risk during the six months ended June 30, 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 2021 Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis