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Item 1. Financial Statements

2022-10-25 compared with 2022-07-26 · 149 added, 131 removed, 786 unchanged (26% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

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

33 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(dollars in millions) 2022 2021 2022 2021

6 unchanged sentences

Income tax (expense) benefit related to items of other comprehensive income (loss) 62 18 71 ( 17 )

Other comprehensive income (loss), net of tax ( 816 ) 366 ( 1,016 ) 179

Other comprehensive loss, net of tax ( 1,191 ) ( 384 ) ( 2,207 ) ( 205 )

Comprehensive income 204 1,082 1,633 3,135

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEET

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

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

Current Assets

44 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars in millions) 2022 2021

3 unchanged sentences

Depreciation and amortization 3,060 3,413

Deferred income tax (benefit) provision ( 1,147 ) 175

Deferred income tax benefit ( 1,681 ) ( 142 )

Stock compensation cost 318 343

12 unchanged sentences

Dispositions of businesses, net of cash transferred (Note 2)

Customer financing assets payments, net ( 7 ) ( 102 )

Customer financing assets receipts, net 25 24

Increase in collaboration intangible assets ( 169 ) ( 138 )

1 unchanged sentence

Other investing activities, net ( 83 ) 45

Net cash flows (used in) provided by investing activities from continuing operations ( 1,136 ) 239

Net cash flows used in investing activities from continuing operations ( 1,891 ) ( 139 )

Financing Activities:

Issuance of long-term debt — 1,981

Repayment of long-term debt ( 2 ) ( 2,547 )

Change in short-term borrowings, net ( 17 ) ( 51 )

Change in commercial paper, net (Note 8) 2,067 —

Change in other short-term borrowings, net ( 14 ) ( 41 )

Dividends paid on common stock ( 2,337 ) ( 2,212 )

18 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(dollars in millions, except per share amounts;

23 unchanged sentences

Beginning balance ( 2,931 ) ( 3,555 ) ( 1,915 ) ( 3,734 )

Other comprehensive income (loss), net of tax ( 816 ) 366 ( 1,016 ) 179

Other comprehensive loss, net of tax ( 1,191 ) ( 384 ) ( 2,207 ) ( 205 )

Ending balance ( 4,122 ) ( 3,939 ) ( 4,122 ) ( 3,939 )

8 unchanged sentences

Ending balance 1,548 1,629 1,548 1,629

Equity at June 30

Equity at September 30

$ 71,735 $ 72,937 $ 71,735 $ 72,937

8 unchanged sentences

Basis of Presentation

The Condensed Consolidated Financial Statements at June 30, 2022 and for the quarters and six months ended June 30, 2022 and 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 Condensed Consolidated Financial Statements at September 30, 2022 and for the quarters and nine months ended September 30, 2022 and 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 2021 Annual Report on Form 10-K.

Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD) follow a 4-4-5 fiscal calendar while Collins Aerospace (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.

Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD) follow a 4-4-5 fiscal calendar while Collins Aerospace Systems (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 their October 2, 2022 and October 3, 2021 fiscal quarter ends, respectively.

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

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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 that commercial air travel is recovering in certain areas of demand.

However, we continue to see signs of ongoing recovery in commercial air travel.

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.

2 unchanged sentences

Acquisitions, Dispositions, Goodwill and Intangible Assets

During the six months ended June 30, 2022 and 2021, cash inflows related to dispositions were $ 88 million and $ 1.1 billion, respectively.

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

Dispositions of businesses in the six months ended June 30, 2021 reflect the January 8, 2021 sale of our Forcepoint business, for proceeds of $ 1.1 billion, net of cash transferred.

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.

During the nine months ended September 30, 2022 and 2021, cash inflows related to dispositions were $ 94 million and $ 1.1 billion, respectively.

Our dispositions of businesses in the nine months ended September 30, 2022 consisted of immaterial dispositions.

Dispositions of businesses in the nine months ended September 30, 2021 reflect the January 8, 2021 sale of our Forcepoint business, for proceeds of $ 1.1 billion, net of cash transferred.

We did not recognize a pre-tax gain or loss within the Condensed Consolidated Statement of Operations related to the sale of Forcepoint.

Changes in our goodwill balances for the six months ended June 30, 2022 were as follows:

(dollars in millions) Balance as of January 1, 2022 Acquisitions and Divestitures Foreign Currency Translation and Other Balance as of June 30, 2022

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

(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

7 unchanged sentences

Identifiable intangible assets are comprised of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(dollars in millions) Gross Amount Accumulated Amortization Gross Amount Accumulated Amortization

6 unchanged sentences

Total $ 47,721 $ ( 10,675 ) $ 47,884 $ ( 9,368 )

Amortization of intangible assets for the quarters and six months ended June 30, 2022 and 2021 were $ 467 million and $ 954 million and $ 602 million and $ 1,198 million, respectively.

Amortization of intangible assets for the quarters and nine months ended September 30, 2022 and 2021 were $ 497 million and $ 1,451 million and $ 622 million and $ 1,820 million, respectively.

The following is the expected amortization of intangible assets for the remainder of 2022 through 2027:

2 unchanged sentences

Earnings Per Share

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

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

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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 six months ended June 30, 2022, the number of stock awards excluded from the computation was 3.4 million and 5.4 million, respectively.

For the quarter and six months ended June 30, 2021, the number of stock awards excluded from the computation was 11.2 million and 19.0 million, respectively.

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.

Changes in Contract Estimates at Completion

12 unchanged sentences

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

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

2 unchanged sentences

Income from continuing operations attributable to common shareowners (1)

( 32 ) 22 ( 4 ) 31

Diluted earnings per share from continuing operations attributable to common shareholders (1)

4 unchanged sentences

Accounts receivable, net consisted of the following:

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

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

Accounts receivable $ 9,717 $ 10,136

6 unchanged sentences

Total contract assets and contract liabilities were as follows:

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

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

Contract assets $ 12,297 $ 11,361

1 unchanged sentence

Net contract liabilities $ ( 1,071 ) $ ( 2,359 )

Contract assets increased $ 475 million during the six months ended June 30, 2022 primarily due to sales in excess of billings at RIS and Pratt & Whitney.

Contract liabilities decreased $ 290 million during the six months ended June 30, 2022 compared to December 31, 2021 primarily due to revenue recognized on certain contracts with milestone and performance based payments at RMD.

We recognized revenue of $ 1.2 billion and $ 3.0 billion during the quarter and six months ended June 30, 2022, related to contract liabilities as of January 1, 2022 and $ 1.0 billion and $ 2.7 billion during the quarter and six months ended June 30, 2021, related to contract liabilities as of January 1, 2021.

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.

Contract assets increased $ 936 million during the nine months ended September 30, 2022 primarily due to sales in excess of billings at Pratt & Whitney, RMD and RIS.

Contract liabilities decreased $ 352 million during the nine months ended September 30, 2022 primarily due to the effect of foreign currency exchange rate translation fluctuations at RMD and revenue recognized on certain contracts associated with performance at RMD and RIS.

We recognized revenue of $ 1.1 billion and $ 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, related to contract liabilities as of January 1, 2021.

As of September 30, 2022, our Contract liabilities include approximately $ 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 June 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.

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 $ 318 million and $ 251 million as of June 30, 2022 and December 31, 2021, respectively.

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

Inventory, net

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

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

Raw materials $ 3,387 $ 3,024

3 unchanged sentences

Borrowings and Lines of Credit

As of September 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 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 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 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.

We had no commercial paper outstanding at June 30, 2022 or December 31, 2021.

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 had no issuances of long-term debt during the six months ended June 30, 2022 and 2021.

We made the following repayments of long-term debt during the six months ended June 30, 2021:

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, 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.

We had no issuances of long-term debt during the nine months ended September 30, 2022.

We had the following issuances of long-term debt during the nine months ended September 30, 2021.

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

August 10, 2021 1.900 % notes due 2031 (1)

2.820 % notes due 2051 (1)

(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 in 2022.

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

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

August 26, 2021 2.800 % notes due 2022

2.500 % notes due 2022

March 1, 2021 8.750 % notes due 2021

Long-term debt consisted of the following:

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

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

3.650 % notes due 2023 (1)

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(1) We may redeem these notes, in whole or in part, at our option pursuant to their terms prior to the applicable maturity date.

The average maturity of our Long-term debt at June 30, 2022 is approximately 15 years.

The average maturity of our Long-term debt at September 30, 2022 is approximately 14 years.

Employee Benefit Plans

2 unchanged sentences

Contributions to our plans were as follows:

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(dollars in millions) 2022 2021 2022 2021

4 unchanged sentences

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

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

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

Noncurrent pension assets (included in Other assets) $ 4,175 $ 3,214

2 unchanged sentences

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

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

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

Noncurrent pension liabilities $ 6,440 $ 6,873

4 unchanged sentences

Pension Benefits

Quarter Ended June 30,

Quarter Ended September 30,

(dollars in millions) 2022 2021 2022 2021

10 unchanged sentences

Pension Benefits

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars in millions) 2022 2021 2022 2021

12 unchanged sentences

The fair value of marketable securities held in trusts was as follows:

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

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

Marketable securities held in trusts $ 740 $ 965

Our effective tax rate was 10.7 % and 23.9 % i n the quarters ended June 30, 2022 and 2021, respectively.

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 of $ 73 million incremental to the U.S.

statutory rate 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.

Our effective tax rate was 10.1 % and 26.5 % in the six months ended June 30, 2022 and 2021, respectively.

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.

Our effective tax rate was 14.8 % and 0.2 % i n 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 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 of 2021.

Our effective tax rate was 11.8 % and 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 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

Intangible Assets,” and $ 73 million associated with the enactment of the U.K.

corporate tax rate change discussed above.

Acquisitions, Dispositions, Goodwill and 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% enacted in 2021.

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.

13 unchanged sentences

The audit of each of these tax years is expected to continue into 2023.

The Examination Division of the IRS is currently auditing pre-acquisition Rockwell Collins fiscal tax years 2016 and 2017.

During the second quarter of 2022, the IRS added fiscal tax year 2018 to their review.

The audit of 2016, 2017, and 2018 is projected to close during 2023.

The Examination Division of the IRS is also auditing pre-acquisition Rockwell Collins fiscal tax years 2016, 2017 and 2018.

The audit of each of these tax years is projected to close during 2023.

Financial Instruments

3 unchanged sentences

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 $ 10.0 billion and $ 8.5 billion at June 30, 2022 and December 31, 2021, respectively.

At June 30, 2022, all derivative contracts accounted for as cash flow hedges will m ature by February 2030.

The aggregate notional amount of our outstanding foreign currency hedges was $ 10.3 billion and $ 8.5 billion at September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022, all derivative contracts accounted for as cash flow hedges will m ature by February 2030.

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheet for derivative instruments:

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

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

Derivatives designated as hedging instruments:

4 unchanged sentences

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 in the quarters and six months ended June 30, 2022 and 2021 are presented in “Note 16:

The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Condensed Consolidated Statement of Operations in the quarters and nine months ended September 30, 2022 and 2021 are presented in “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 loss.

1 unchanged sentence

Accordingly, the hedged items and derivatives designated as hedging instruments are highly effective.

As of June 30, 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.

As of September 30, 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.

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

1 unchanged sentence

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:

June 30, 2022

September 30, 2022

(dollars in millions) Total Level 1 Level 2 Level 3

11 unchanged sentences

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 June 30, 2022, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk.

As of September 30, 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:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(dollars in millions) Carrying

3 unchanged sentences

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

June 30, 2022

September 30, 2022

(dollars in millions) Total Level 1 Level 2 Level 3

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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 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.

Additionally, Pratt & Whitney, JAEC and MTU are participants in the International Aero

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.

Pratt & Whitney holds a 59 % program share interest and a 59 % ownership interest in IAE LLC.

3 unchanged sentences

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) June 30, 2022 December 31, 2021

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

Current assets $ 7,274 $ 7,081

8 unchanged sentences

A portion of our third party guarantees are subject to indemnification for our benefit for any liabilities that could arise.

As of June 30, 2022 and December 31, 2021, the following financial guarantees were outstanding:

June 30, 2022 December 31, 2021

As of September 30, 2022 and December 31, 2021, the following financial guarantees were outstanding:

September 30, 2022 December 31, 2021

(dollars in millions) Maximum Potential Payment Carrying Amount of Liability Maximum Potential Payment Carrying Amount of Liability

3 unchanged sentences

The estimated fair 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 $ 140 million and $ 141 million at June 30, 2022 and December 31, 2021, respectively.

Collaboration partners’ share of these financing guarantees is $ 140 million and $ 141 million at September 30, 2022 and December 31, 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 $ 110 million and $ 120 million at June 30, 2022 and December 31, 2021, respectively.

The carrying amount of liabilities related to these obligations was $ 108 million and $ 120 million at September 30, 2022 and December 31, 2021, respectively.

These primarily relate to environmental liabilities, which are included in our total environmental liabilities as further discussed in “Note 15:

6 unchanged sentences

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 six months ended June 30, 2022 and 2021 were as follows:

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 were as follows:

(dollars in millions) 2022 2021

3 unchanged sentences

Other ( 21 ) ( 3 )

Balance as of June 30 $ 1,143 $ 1,102

Balance as of September 30 $ 1,143 $ 1,089

Commitments and Contingencies

4 unchanged sentences

We do not expect any additional liability to have a material adverse effect on our results of operations, financial condition or liquidity.

As of June 30, 2022 and December 31, 2021, we had $ 824 million and $ 834 million, respectively, reserved for environmental remediation.

As of September 30, 2022 and December 31, 2021, we had $ 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 $ 15.4 billion and $ 15.6 billion as of June 30, 2022 and December 31, 2021, respectively, on a gross basis before reduction for our collaboration partners’ share.

We had commercial aerospace financing commitments and other contractual commitments of approximately $ 15.3 billion and $ 15.6 billion as of September 30, 2022 and December 31, 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.

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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 $ 3.4 billion as of June 30, 2022.

The stated values of these letters of credit agreements and surety bonds totaled $ 3.3 billion as of September 30, 2022.

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 June 30, 2022, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately $ 11.7 billion.

At September 30, 2022, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately $ 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.

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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 ($ 805

million at June 30, 2022).

million at September 30, 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 ($ 124 million at June 30, 2022).

The claim is based on Pratt & 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.

5 unchanged sentences

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 ASBCA’s rejection of the DCMA’s asserted measure of the cost of collaborator parts is 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 ($ 86 million at June 30, 2022).

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 ($ 90 million at September 30, 2022).

Pratt & Whitney appealed this second claim to the ASBCA in January 2019.

Although subject to further litigation at the ASBCA and potentially further appellate proceedings, we believe that the November 22, 2021 decision in the first claim will apply with equal legal effect to the second claim.

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.

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Plaintiffs seek money damages, attorneys’ fees and other relief.

We continue to believe that the Company has meritorious defenses to these claims.

At this time, the Company is unable to predict the outcome;

however, based on the information available to date, we do not believe that this matter will have a material adverse effect on our results of operations, financial condition or liquidity.

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

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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 its subsidiaries and could result in fines, penalties, compensatory or treble damages or non-monetary relief.

In some instances, claims for substantial monetary damages are asserted against the Company and

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 results of operations, financial condition or liquidity.

Accumulated Other Comprehensive Loss

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

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, 2022 and 2021 is provided below:

(dollars in millions) Foreign Currency Translation Defined Benefit Pension and Postretirement Plans Unrealized Hedging Gains (Losses) Accumulated Other Comprehensive Income (Loss)

Quarter Ended June 30, 2022

Balance at March 31, 2022 $ ( 194 ) $ ( 1,811 ) $ ( 110 ) $ ( 2,115 )

Quarter Ended September 30, 2022

Balance at June 30, 2022 $ ( 908 ) $ ( 1,772 ) $ ( 251 ) $ ( 2,931 )

Other comprehensive income (loss) before reclassifications, net ( 1,050 ) 15 ( 285 ) ( 1,320 )

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Tax benefit (expense) 4 ( 6 ) 64 62

Balance at June 30, 2022 $ ( 908 ) $ ( 1,772 ) $ ( 251 ) $ ( 2,931 )

Six Months Ended June 30, 2022

Balance at September 30, 2022 $ ( 1,954 ) $ ( 1,730 ) $ ( 438 ) $ ( 4,122 )

Nine Months Ended September 30, 2022

Balance at December 31, 2021 $ 49 $ ( 1,828 ) $ ( 136 ) $ ( 1,915 )

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Tax benefit (expense) ( 5 ) ( 18 ) 94 71

Balance at June 30, 2022 $ ( 908 ) $ ( 1,772 ) $ ( 251 ) $ ( 2,931 )

Balance at September 30, 2022 $ ( 1,954 ) $ ( 1,730 ) $ ( 438 ) $ ( 4,122 )

(dollars in millions) Foreign Currency Translation Defined Benefit Pension and Postretirement Plans Unrealized Hedging Gains (Losses) Accumulated Other Comprehensive Income (Loss)

Quarter Ended June 30, 2021

Balance at March 31, 2021 $ 529 $ ( 4,441 ) $ ( 9 ) $ ( 3,921 )

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 )

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Tax benefit (expense) ( 5 ) ( 16 ) 39 18

Balance at June 30, 2021 $ 789 $ ( 4,402 ) $ 58 $ ( 3,555 )

Six Months Ended June 30, 2021

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 )

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Tax benefit (expense) ( 8 ) ( 39 ) 30 ( 17 )

Balance at June 30, 2021 $ 789 $ ( 4,402 ) $ 58 $ ( 3,555 )

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

Segment Financial Data

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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.

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.

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These pricing arrangements may result in margins different than what the purchasing segment realizes on the ultimate third-party sale.

Results for the quarters ended June 30, 2022 and 2021 are as follows:

Results for the quarters ended September 30, 2022 and 2021 are as follows:

Net Sales Operating Profit Operating Profit Margins

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Army’s Lower Tier Air and Missile Defense Sensor (LTAMDS) project.

Results for the six months ended June 30, 2022 and 2021 are as follows:

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

Net Sales Operating Profit Operating Profit Margins

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In addition, for our RIS and RMD segments, we disaggregate our contracts from customers by contract type.

We believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

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

believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

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

(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

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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 six months ended June 30, 2022 and 2021 are as follows:

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

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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

Segment sales disaggregated by type of customer for the quarters ended June 30, 2022 and 2021 are as follows:

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

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

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

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

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

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

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

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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 six months ended June 30, 2022 and 2021 are as follows:

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

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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 June 30, 2022 and 2021 are as follows:

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

(dollars in millions) Raytheon Intelligence & Space Raytheon Missiles & Defense Raytheon Intelligence & Space Raytheon Missiles & Defense

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Business segment sales $ 3,626 $ 3,678 $ 3,740 $ 3,902

RIS and RMD segment sales disaggregated by contract type for the six months ended June 30, 2022 and 2021 are as follows:

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

(dollars in millions) Raytheon Intelligence & Space Raytheon Missiles & Defense Raytheon Intelligence & Space Raytheon Missiles & Defense

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RPO represent the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied.

Total RPO was $ 161 billion as of June 30, 2022.

Total RPO was $ 168 billion as of September 30, 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 export controls with respect to Russia, as further discussed in “Note 1:

Basis of Presentation.” Of the total RPO as of June 30, 2022, we expect approximately 30 % will be recognized as sales over the next 12 months.

Basis of Presentation.” Of the total RPO as of September 30, 2022, we expect approximately 30 % will be recognized as sales over the next 12 months.

Approximately 40 % of our RPO relates to long-term commercial aerospace maintenance contracts at Pratt & Whitney, which are generally expected to be realized over a span of up to 15 years.

Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to apply the guidance in ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities in a business combination, rather than using fair value.

The new standard is effective for 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 requirements of the new standard on a prospective basis.

The adoption of the standard did not have an impact on our financial position, results of operations or liquidity.

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose the key terms of supplier finance programs, the amount of obligations outstanding at the end of the reporting period that the entity has confirmed as valid to the finance provider, where these obligations are recorded in the balance sheet, and a roll forward of the obligations.

The 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):

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We are currently evaluating the impact of the standard, but we do not expect it to have a material impact on our disclosures.

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

With respect to the unaudited condensed consolidated financial information of Raytheon Technologies for the quarters and six months ended June 30, 2022 and 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 July 26, 2022, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

The new standard is effective for 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 requirements of the new standard on a prospective basis.

The adoption of the standard did not have an impact on our financial position, results of operations or liquidity.

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

With respect to the unaudited condensed consolidated financial information of Raytheon Technologies for the quarters and nine months ended September 30, 2022 and 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 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.

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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 June 30, 2022, and the related condensed consolidated statements of operations, of comprehensive income, and of changes in equity for the three-month and six-month periods ended June 30, 2022 and 2021 and the condensed consolidated statement of cash flows for the six-month periods ended June 30, 2022 and 2021, including the related notes (collectively referred to as the “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, 2022, and the related condensed consolidated statements of operations, of comprehensive income, and of changes in equity for the three-month and nine-month periods ended September 30, 2022 and 2021 and the condensed consolidated statement of cash flows for the nine-month periods ended September 30, 2022 and 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.

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Boston, Massachusetts

July 26, 2022

October 25, 2022

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 1. Financial Statements