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Item 1. Business

2023-02-07 compared with 2022-02-11 · 145 added, 143 removed, 194 unchanged (60% of the section changed)

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Our defense business serves both domestic and international customers as a prime contractor or subcontractor on a broad portfolio of defense and related programs for military and government customers.

Raytheon Technologies, formerly known as United Technologies Corporation (UTC), was incorporated in Delaware in 1934 and represents the combination of UTC’s aerospace businesses and Raytheon Company through the Separation Transactions and Distributions and Raytheon Merger completed in April 2020, as described in more detail below.

Raytheon Technologies, formerly known as United Technologies Corporation (UTC), was incorporated in Delaware in 1934.

The following description of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within Item 7 of this Form 10-K, including the information contained therein under the heading “Business Overview.”

Separation Transactions and Distributions;

Raytheon Merger.

On April 3, 2020, UTC completed the separation of its business into three independent, publicly traded companies – UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis) (such separations, the “Separation Transactions”).

UTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the distributions (the “Distributions”) effective at 12:01 a.m., Eastern Time, on April 3, 2020.

The historical results of Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

Immediately following the completion of the Separation Transactions and the Distributions, on April 3, 2020, UTC and Raytheon Company completed their all-stock merger of equals transaction (the “Raytheon Merger”), pursuant to which Raytheon Company became a wholly-owned subsidiary of UTC and UTC was renamed “Raytheon Technologies Corporation.”

Business Segments

Our operations are classified into four principal business segments:

Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles & Defense, with each segment comprised of groups of similar operations.

Collins Aerospace Systems.

Collins Aerospace Systems (Collins Aerospace) is a leading global provider of technologically advanced aerospace and defense products and aftermarket service solutions for aircraft manufacturers, airlines, and regional, business and general aviation, as well as for defense and commercial space operations.

Collins Aerospace’s product lines include integrated avionics systems, aviation systems, communications systems, navigation systems, electric power generation, management and distribution systems, environmental control systems, flight control systems, air data and aircraft sensing systems, engine control systems, engine components, engine nacelle systems, including thrust reversers and mounting pylons, interior and exterior aircraft lighting, aircraft seating and cargo systems, evacuation systems, landing systems, including landing gear, wheels and braking systems, hoists and winches, fire and ice detection and protection systems, actuation systems, and propeller systems.

Collins Aerospace also designs, manufactures, and supports cabin interior, oxygen systems, food and beverage preparation, storage and galley systems, lavatory and wastewater management systems.

Collins Aerospace solutions support human space exploration with environmental control and power systems and extravehicular activity suits and support government and defense customer missions by providing airborne intelligence, surveillance and reconnaissance systems, test and training range systems, crew escape systems, and simulation and training solutions.

Collins Aerospace also provides connected aviation solutions and services through worldwide voice and data communication networks and solutions.

Collins Aerospace (Collins), Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD), with each segment comprised of groups of similar operations.

The Company recently announced its intention to streamline the structure of its core businesses into three principal business segments:

Collins Aerospace, Pratt & Whitney and Raytheon.

The Company plans to determine the exact composition of each segment and implement the reorganization in the second half of 2023.

All segment information included in this Form 10-K is reflective of the existing four segments of Collins, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles & Defense in accordance with the management structure in place as of December 31, 2022.

Collins Aerospace.

Collins is a leading global provider of technologically advanced aerospace and defense products and aftermarket service solutions for aircraft manufacturers, airlines, and regional, business and general aviation, as well as for defense and commercial space operations.

Collins’ product lines include integrated avionics systems, aviation systems, communications systems, navigation systems, electric power generation, management and distribution systems, environmental control systems, flight control systems, air data and aircraft sensing systems, engine control systems, engine components, engine nacelle systems, including thrust reversers and mounting pylons, interior and exterior aircraft lighting, aircraft seating and cargo systems, evacuation systems, landing systems, including landing gear, wheels and braking systems, hoists and winches, fire and ice detection and protection systems, actuation systems, and propeller systems.

Collins also designs, manufactures, and supports cabin interior, oxygen systems, food and beverage preparation, storage and galley systems, lavatory and wastewater management systems.

Collins’ solutions support human space exploration with environmental control and power systems and extravehicular activity suits and support government and defense customer missions by providing airborne intelligence, surveillance and reconnaissance systems, test and training range systems, crew escape systems, and simulation and training solutions.

Collins also provides connected aviation solutions and services through worldwide voice and data communication networks and solutions.

Aftermarket services include spare parts, overhaul and repair, engineering and technical support, training and fleet management solutions, asset management services and information management services.

Collins Aerospace sells aerospace and defense products and services to aircraft manufacturers, airlines and other aircraft operators, the U.S.

Collins sells aerospace and defense products and services to aircraft manufacturers, airlines and other aircraft operators, the U.S.

and foreign governments, defense contractors, maintenance, repair and overhaul providers, and independent distributors around the world.

Collins Aerospace’s largest commercial customers are Boeing and Airbus with combined sales, prior to discounts and incentives, of 18%, 21% and 27% of total Collins Aerospace segment sales in 2021, 2020 and 2019, respectively.

In 2021, Collins Aerospace was awarded significant contracts for Airbus A320 Enhanced Vision Systems, Bombardier fleetwide connectivity solutions, and aircraft data access hardware for an undisclosed airline.

In the defense area, Collins Aerospace was awarded significant contracts for wheel and carbon brake systems for the B-52 modernization program, NP2000

propeller systems for 26 C-130H aircraft for the U.S.

Air National Guard and Air Force Reserve, and AN/PCR-162 ground radios for the Handheld, Manpack and Small Form Fit (HMS) program.

Collins Aerospace continued its significant product development activities, including for major systems on the A321XLR, the Boeing 777X, the Irkut MC-21, the Dassault 6X Falcon, and the Xian MA700, as well as systems in support of the Boeing T-7A trainer and the Boeing VC-25B.

Collins Aerospace also received numerous contract awards for buyer-furnished equipment installation for interiors, avionics, and wheels and brakes, and strategically important contract awards for its FlightSense® full life-cycle support services.

In November 2021, Collins Aerospace completed its previously announced acquisition of FlightAware, a digital aviation company that operates flight tracking and data platforms.

In 2021, Collins Aerospace’s F-16 Performance Base Logistics (PBL) program won the Secretary of Defense PBL-of-the-year award.

Collins’ largest commercial customers are Boeing and Airbus with combined sales, prior to discounts and incentives, of 20%, 18% and 21% of total Collins segment sales in 2022, 2021 and 2020, respectively.

In 2022, Collins was awarded significant defense contracts for the electric power generation system on the B-52 modernization program, along with multiple awards related to enabling the Department of Defense’s Joint All Domain Command and Control (JADC2) initiatives for the connected battlespace , including a five-year contract by the U.S.

Army for the Mounted Assured Positions, Navigation and Timing System (MAPS) Gen II and a contract for the mission system for the U.S.

Army Air Launched Effects (ALE).

Collins was also one of two companies selected to develop and produce NASA’s next-generation spacesuit for the International Space Station and for Artemis.

In addition, in 2022, Collins integrated the FlightAware Foresight portfolio of industry-leading machine learning based predictive analytics, following Collins’ acquisition of FlightAware in November 2021.

Collins also received numerous commercial air transport contract awards for airline selected buyer-furnished equipment installation for interiors, avionics, and wheels and brakes, along with a number of long-term FlightSense airline maintenance agreements.

In addition, Collins continued its significant product development activities, including for major systems on the Airbus A321XLR, the Boeing 777X and 737 MAX 10, the Dassault Falcon 6X and the Xian MA700, final certification on COMAC’s C919, and systems in support of the Boeing T-7A trainer and the Boeing VC-25B.

Pratt & Whitney.

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The PW1100G-JM engine is offered on the Airbus A320neo family of aircraft.

PW1000G GTF engine models also power the Airbus A220 passenger aircraft and Embraer’s E-Jet E2 family of aircraft and have been certified by the Russian civil aviation authority to power the Irkut MC-21 passenger aircraft.

PW1000G GTF engine models also power the Airbus A220 passenger aircraft and Embraer’s E-Jet E2 family of aircraft.

In addition, P&WC’s PW800 engine has been selected to exclusively power Gulfstream’s G400, G500 and G600 business jets, as well as to power Dassault’s Falcon 6X business jet, which is scheduled to enter into service in 2023.

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Pratt & Whitney also continues to enhance its programs through performance improvement measures and product base expansion, utilizing similar collaboration arrangements.

In 2021, Pratt & Whitney reached significant milestones on the GTF engine program, including the first flight of the GTF Advantage engine for the A320neo family.

The GTF Advantage configuration further extends the economic and environmental benefits of the existing GTF engine, as it reduces fuel consumption by an additional 1 percent, extending the engine's lead as the most efficient powerplant for the A320neo family.

In 2022, Pratt & Whitney reached significant milestones on the GTF engine program, including surpassing a billion gallons of fuel saved and 10 million metric tons of carbon emissions avoided since entry into service.

The GTF Advantage engine for the A320neo family began Federal Aviation Regulations Part 33 (FAR33) certification and development flight testing on the A320neo aircraft, and successfully ran on 100% sustainable aviation fuel (SAF).

The GTF Advantage configuration extends the economic and environmental benefits of today’s GTF engine, as it reduces fuel consumption by an additional 1 percent, extending the engine's lead as the most efficient powerplant for the A320neo family.

The GTF family now powers more than 1,400 aircraft across 64 airlines and three aircraft platforms:

Airbus A320neo family, Airbus A220 and Embraer E-Jets E2.

Also in 2021, Pratt & Whitney’s V2500 program achieved 250 million flight hours.

Pratt & Whitney was announced as the engine provider on the Dassault Falcon 6X and Gulfstream G400, representing two new platforms for its PW800 engine.

In addition, Pratt & Whitney received a significant number of contract awards for the F135 program, which powers all three variants of the F-35 Lightning II fighter aircraft and achieved several F135 production milestones, including the delivery of the 800th production engine and continuing to add more F135 engine maintenance, repair, overhaul and upgrade (MRO&U) global capacity by activating MRO&U facilities, or depots, in the Netherlands and Australia.

Significant activity continued on development programs, including testing the first XA101 engine as part of the Adaptive Engine Transition Program.

The year also saw the entry into service of multiple new platforms, including the Cessna SkyCourier, Daher Kodiak 900 and TBM960, and ATR’s next generation 42 & 72 aircraft powered by the new PW127XT-M engines, with Transport Canada engine certifications of the PW127XT-M, PW812GA and PW812D engines to power the ATR 72-600 regional turboprop, Gulfstream G400 and Dassault Falcon 6X aircraft respectively.

In addition, Pratt & Whitney received a significant number of contract awards for the F135 program, which powers all three variants of the F-35 Lightning II fighter aircraft including an undefinitized contract action for Lots 15-17 and funding to begin work on an F135 engine core upgrade.

The F135 program also achieved several F135 production milestones, including the delivery of the 1,000th production engine, and Pratt & Whitney added new customers, Switzerland, Canada, and Germany to the program.

Significant activity continued on development programs including the Adaptive Engine Testing Program, as well as the rollout ceremony for the Northrop Grumman B-21 Raider, powered by Pratt & Whitney engines.

Raytheon Intelligence & Space.

Raytheon Intelligence & Space (RIS) is a global leading developer and provider of integrated space, communication and sensor systems for advanced missions in all domains, and cyber and software solutions to intelligence, defense, federal and commercial customers.

These systems and solutions include end-to-end space solutions, data processing systems, multi-domain intelligence solutions, electronic warfare solutions, including high-energy laser weapons systems, secure sensor solutions, command and control systems, modernization services, and advanced cyber analytics, systems defense and services.

RIS is a leading provider of integrated space, communication and sensor systems, and cyber and software solutions to intelligence, defense, federal and commercial customers.

RIS’s Sensing and Effects business provides intelligence, surveillance and reconnaissance, precision targeting radars, and electronic warfare solutions across all domains, as well as end-to-end space solutions, including missile warning and intelligence, weather, and navigation.

RIS Sensing and Effects products include the Multi-Spectral Targeting System (MTS) product family of sensors, Electro Optical Distributed Aperture System (EODAS), AN/APG-79 AESA Radar, AN/APG-82(V)1 AESA Radar, Next Generation Jammer Mid-Band

(NGJ-MB), Global Positioning System (GPS) Next-Generation Operational Control System (GPS-OCX), Next Generation Overhead Persistent Infrared (OPIR), and Future Operationally Resilient Ground Evolution (FORGE).

RIS’s Command, Control and Communications business provides automated battle management and secure, resilient communications systems, including terminals providing satellite communications connecting submarines, ships, aircraft and ground stations for the U.S.

Department of Defense (DoD), identification friend or foe interrogators and transponders, and automation, surveillance, navigation, and landing solutions including the Joint Precision Approach Landing System (JPALS).

RIS’s Cyber, Training and Services provides full-spectrum cyber and service solutions in every domain, including offensive and defensive cyber services for certain classified and department of defense customers, cyber protection solutions which secure and monitor information technology (IT) systems and networks across the federal and commercial domains, and high consequence missions which provide classified special mission support and IT intelligence services to certain classified customers.

RIS serves as a prime contractor or major subcontractor on contracts with the U.S.

Intelligence Community, U.S.

Department of Defense (DoD), Department of Homeland Security, the Federal Aviation Administration (FAA), National Aeronautics and Space Administration, and other international and classified customers.

In 2021, RIS continued to invest in advancing its products and services, as well as developing next generation capabilities to meet evolving customer missions.

RIS achieved significant advancements in key capabilities across its portfolio, including laser technologies;

intelligence surveillance and reconnaissance electro-optical/infrared (EO/IR) radar frequency products;

tactical airborne radars for current and future manned and unmanned aircraft;

classified space mission systems;

offensive and defensive cyber solutions;

and the Next Generation Jammer system.

RIS continued to grow its classified business, receiving a number of significant contracts.

In November 2021, RIS completed its previously announced acquisition of SEAKR Engineering, a supplier of advanced space electronics.

Also in December 2021, RIS completed its previously announced divestiture of its global training and services business .

Intelligence Community, DoD, Department of Homeland Security, the Federal Aviation Administration (FAA), National Aeronautics and Space Administration, and other international and classified customers.

In 2022, RIS continued to grow its classified business, receiving a number of significant contracts.

RIS was selected as the prime contractor to develop a prototype Missile Track Custody system, a Medium Earth Orbit missile tracking system, for the U.S.

In addition, RIS won a competitive contract from the Federal Aviation Administration to upgrade the Wide-Area Augmentation System (WAAS), a space-based precision navigation system that will enhance safer air travel in support of the National Airspace System.

RIS continued to invest in advancing its products and services, as well as developing next generation capabilities to meet evolving customer missions.

RIS achieved significant advancements in key capabilities across its portfolio, including tactical airborne radars for current and future manned and unmanned aircraft, intelligence surveillance and reconnaissance electro-optical/infrared (EO/IR) radar frequency products, laser technologies, and classified space mission systems.

Raytheon Missiles & Defense .

Raytheon Missiles & Defense (RMD) is a leading designer, developer, integrator producer and sustainer of integrated air and missile defense systems;

defensive and combat solutions;

large land- and sea-based radars;

ballistic and hypersonic missile defense systems;

and naval and undersea sensor solutions for the U.S.

and foreign government customers.

RMD’s integrated air and missile defense systems include the proven Patriot air and missile defense system and its Lower Tier Air and Missile Defense Sensor (LTAMDS), the first in a family of radars known as GhostEye™, as well as next-generation radar systems to defeat advanced threats.

Its defensive solutions include counter-unmanned aircraft systems and ship defense systems.

Its combat solutions include precision munitions, missiles, hypersonics, high power microwave and other weapons.

RMD’s naval and undersea solutions include combat and ship electronic and sensing systems, as well as undersea sensing and effects solutions.

Ballistic and hypersonic missile defense systems include portable radar systems and a portfolio of effectors.

Its sustainment solutions include maintenance, depot support, training and predictive analytics services.

RMD serves as a prime contractor or major subcontractor on numerous programs with the U.S.

DoD, including the U.S.

Army, Missile Defense Agency, and U.S.

RMD is a leading provider of end-to-end solutions for U.S.

and foreign government customers designed to detect, track and engage threats.

RMD’s systems span air, land, sea and space, and are designed to defend against the most sophisticated threats.

RMD’s Air Power business provides air-to-air and air-to-ground weapons that deliver power and precision to fourth- and fifth-generation fighters including the Advanced Medium Range Air-to-Air Missile (AMRAAM) and StormBreaker smart weapon, and ground-based sensors for persistent wide-area defense and space surveillance including Early Warning Radar.

RMD’s Land Warfare and Air Defense business provides capabilities ranging from precision weapons including Excalibur, Javelin, Stinger and TOW to integrated air and missile defense, including the proven Patriot air and missile defense system, the Guidance Enhanced Missile (GEM-T), the National Advanced Surface-to-Air Missile System (NASAMS) and the GhostEye family of radars, including the Lower Tier Air and Missile Defense Sensor (LTAMDS).

RMD’s Naval Power business provides advanced sensors, command and control and weapons to protect ships and sailors around the world, including AIM-9X Sidewinder, Tomahawk, Standard Missile 2 (SM-2) and Standard Missile 6 (SM-6) missiles, and the SPY-6 family of radars.

RMD’s Strategic Missile Defense business provides technologically advanced sensors, satellites and interceptors including the AN/TPY-2 radar, Standard Missile 3 (SM-3) Block IA/IB/IIA missiles and development of future integrated missile defense solutions.

RMD’s Advanced Technology business focuses on the development and early introduction of next-generation technologies and systems, including hypersonics, counter-hypersonics, directed energy, advanced weapons and next-generation radars.

RMD serves as a prime contractor or major subcontractor on numerous programs with the DoD, including the U.S.

Army, Missile Defense Agency (MDA), and U.S.

Air Force, and international governments.

In 2021, RMD achieved key advancements in, or received contract awards for, the following programs, which drove its financial performance and positioned it for future growth:

GhostEye, the Lower Tier Air and Missile Defense Sensor (LTAMDS);

the Advanced Medium Range Air-to-Air Missile (AMRAAM);

the Standard Missile Family (Standard Missile 2 (SM-2), Standard Missile 3 (SM-3) and Standard Missile 6 (SM-6));

Patriot Engineering Services;

the Qatar National Advanced Surface-to-Air Missile System (NASAMS);

the Air and Missile Defense Radar (AMDR)/SPY-6;

Poland Patriot;

the Kingdom of Saudi Arabia Transportable Radar Surveillance and Control Model 2 (KSA TPY-2);

the Air Intercept Missile (AIM-9X);

and Phalanx SeaRAM.

Major new awards in 2021 include a contract to develop the Missile Defense Agency’s (MDA) Next Generation Inceptor (NGI) as a strategic partner of Northrop Grumman.

In addition, RMD was selected by the U.S.

Air Force for the Long Range Stand Off (LRSO) Weapon System Engineering and Manufacturing Development contract.

Also, in partnership with Northrop Grumman, RMD successfully completed the first flight test for the scramjet-powered Hypersonic Air-breathing Weapon Concept (HAWC) program.

The HAWC program is a joint Defense Advanced Research Projects Agency (DARPA) and U.S.

Air Force effort that seeks to develop and demonstrate critical technologies to enable an effective and affordable air-launched hypersonic cruise missile.

Other Matters Relating to Our Business

As worldwide businesses, our operations can be affected by a variety of economic, industry and other factors, including those described in this section, in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 1, “Cautionary Note Concerning Factors That May Affect Future Results,” and in Item 1A, “Risk Factors” in this Form 10-K.

Coronavirus Disease 2019 (COVID-19) Pandemic.

The COVID-19 pandemic continues to negatively affect the global economy, our business and operations, and the industries in which we operate.

Government, business and individual actions in response to COVID-19 have resulted in continued disruption to air travel and commercial activities and significant restrictions and limitations on businesses, particularly within the aerospace and commercial airline industries.

While commercial air travel in certain areas appears to be recovering, it continues to lag in other areas and remains below pre-pandemic levels.

Overall, the ongoing disruption from the pandemic continues to adversely affect our airline and airframer customers and their demand for

the products and services of our Collins Aerospace and Pratt & Whitney businesses.

In addition, the COVID-19 pandemic and continuing economic recovery continues to negatively impact the global supply chain and distribution capabilities and we have experienced negative impacts from supply chain pressures.

The pandemic continues to cause product and labor shortages, delivery delays, and increased costs of raw materials, labor and supplier products and services around the world.

We are working with our suppliers and subcontractors to mitigate delays in our receipt of necessary raw materials, components and other supplies and to reduce supply chain costs.

Our RIS and RMD businesses, although experiencing some negative impacts, including from the supply chain pressures and labor shortages discussed above, have not experienced significant business disruptions as a result of the COVID-19 pandemic.

For additional information related to the COVID-19 pandemic, see Item 1A.

“Risk Factors” in this Form 10-K.

In 2022, RMD achieved key advancements in, or received contract awards for, the following programs:

the Next Generation Interceptor (NGI);

Long Range Stand Off Weapon (LRSO);

Hypersonic Air-breathing Weapon Concept (HWAC);

the Standard Missile Family (SM-2, SM-3 and SM-6);

Major new awards in 2022 include a contract to develop the first Hypersonic Attack Cruise Missile (HACM) for the U.S.

a contract to manufacture and deliver GEM-T for an international customer;

a contract for NASAMS for Ukraine;

a contract for the SPY-6 Hardware Production and Sustainment base for the U.S.

a contract for Stinger for the U.S.

Army and a contract for the SM-3 for the MDA.

RMD also received a number of classified contract awards, including a strategic competitive award.

Sales and Customers

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Total backlog was $175 billion and $156 billion as of December 31, 2022 and 2021, respectively.

Approximately 70% of our consolidated backlog as of December 31, 2021 is not expected to be realized as sales in the next twelve months .

Defense backlog primarily relates to backlog with government customers and is included within our total backlog.

At December 31, 2021 and 2020, our defense backlog was approximately 41% and 45%, respectively, of total backlog.

Of the total RPO as of December 31, 2022, we expect approximately 25% will be recognized as sales over the next 12 months.

All of our businesses are subject to significant competition.

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Attracting, developing, advancing and retaining the best talent is critical for us to execute our strategy and grow our business.

We strive to advance a diverse, equitable and inclusive work environment.

Individuals with technical, engineering, and science backgrounds, experience, or interests are particularly important for us to succeed in the industries in which we compete.

In 2021, we renamed the compensation committee of the RTC Board of Directors the Human Capital & Compensation Committee and designated the committee to provide oversight of human capital management.

Due to macroeconomic, industry and labor market conditions, we have experienced and continue to experience a highly competitive environment with respect to hiring and retaining employees with relevant qualifications and experience, particularly personnel with specialized engineering experience and security clearances, which has negatively impacted our operating and financial performance.

We continuously monitor labor market conditions and trends and are working to mitigate this issue through talent acquisition, partnership, sourcing and recruiting arrangements, workforce succession planning, talent identification, development and advancement, engagement and recognition programs, and initiatives to attract and rehire former

However, we expect the current labor market conditions and highly competitive employee hiring and retention environment to continue.

The Human Capital & Compensation Committee of the RTC Board of Directors oversees the Company’s human capital management.

Workforce Demographics.

As of December 31, 2021, our global employee population consisted of a total of approximately 174,000 employees, including approximately 58,000 engineers and approximately 30,000 employees represented by labor unions and other employee representative bodies.

As of December 31, 2022, our global employee population consisted of a total of approximately 182,000 employees, including approximately 55,000 engineering professionals and approximately 31,000 employees represented by labor unions and other employee representative bodies.

Our employees are located in 52 countries, with 70% of our employees located in the U.S.

Diversity, Equity and Inclusion (DE&I).

We strive to advance a diverse, equitable and inclusive work environment.

We believe a work environment where all individuals are respected, valued and supported enables them to focus on developing the most innovative solutions to our industry’s greatest challenges.

We have established a DE&I advisory board of senior leaders.

We have a DE&I advisory board of senior leaders.

We review diversity in talent development and promotion, employee compensation practices and succession planning, and embed DE&I training into our leadership development programs.

We have nine diverse employee resource groups.

We also invest in a more diverse workforce by supporting science, technology, engineering and mathematics initiatives for women and students of color, and providing opportunities and support to military veterans.

We have published our U.S.

Equal Employment Opportunity EEO-1 report data as part of our Environmental Social Governance Report.

We have nine diverse global employee resource groups, which are volunteer-run organizations that are open to all employees and are intended to foster an inclusive culture.

We also invest in a more diverse workforce by supporting science, technology, engineering and mathematics initiatives for women and people of color, and providing opportunities and support to military veterans, people with disabilities and the LGBTQ+ community.

As of December 31, 2022, women represented 25% of our global workforce and 33% of our global executives, and people of color represented 32% of our U.S.

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Moreover, we have industry-leading ethics and compliance programs to help mitigate associated employee risks.

We also provide health and wellness benefits for our employees.

We continue to employ safety measures in our facilities in light of the ongoing COVID-19 pandemic, require all employees to be fully vaccinated against COVID-19 subject to applicable laws, and continue to enable remote working for those employees who are able.

In addition, we are implementing new workplace initiatives to provide our employees with more flexibility, such as different work environment assignments (onsite, remote or hybrid), as appropriate, which will continue after the COVID-19 restrictions ease.

Additional information regarding our human capital strategy is available in our Diversity, Equity and Inclusion Report that can be found on our company website.

Information on our website, including our Diversity, Equity and Inclusion Report, is not incorporated by reference into this Form 10-K.

For information on the risks related to our human capital resources, see Item 1A, “Risk Factors” in this Form 10-K.

We also provide health and wellness benefits and support flexible work arrangements for our employees.

Additional information regarding our human capital strategy is available in our “People” section of our Environmental Social Governance Report that can be found on our company website.

Information on our website, including our Environmental Social Governance Report, is not incorporated by reference into this Form 10-K.

For information on the risks related to our human capital resources, see Item 1A.

“Risk Factors” of this Form 10-K.

Research and Development and Operations

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We manufacture and service our products in over 229 manufacturing, production or overhaul facilities in approximately 30 countries, including the U.S.

In addition, RTC has offices in another 9 countries.

In addition, RTC has offices in approximately 10 other countries.

Intellectual Property

We maintain a portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to our businesses.

We rely on a combination of these rights, along with nondisclosure agreements, information technology (IT) security systems, internal controls and compliance systems and other measures to protect our intellectual property.

We rely on a combination of these rights, along with nondisclosure agreements, IT security systems, internal controls and compliance systems and other measures to protect our intellectual property.

government and foreign governments have licenses to certain of our intellectual property, including certain patents, which are developed or used in the performance of government contracts.

Commercial customers also have licenses to certain of our intellectual property largely in connection with the sale of our products.

Commercial customers also have licenses to certain of our intellectual property largely in connection

with the sale of our products.

While our intellectual property rights in the aggregate are important to the operation of each of our businesses, we do not believe that our business would be materially affected by the expiration of any particular intellectual property right or termination of any particular intellectual property patent license agreement.

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Some of our products require relatively scarce raw materials.

We generally have not experienced significant difficulties in procuring the necessary raw materials, components and other supplies for our products.

However, the COVID-19 pandemic continues to negatively impact the global supply chain, as discussed above.

Our inability to procure the necessary raw materials, components and other supplies for our products could negatively affect our results of operations, financial condition or liquidity.

In addition, a significant prolonged increase in inflation could negatively impact the cost of materials and components, particularly with respect to our commercial business operations within Collins Aerospace and Pratt & Whitney.

We continuously monitor potential supply chain issues and work with our suppliers and subcontractors to mitigate delays in our receipt of necessary raw materials, components and other supplies, and reduce costs, particularly in light of the COVID-19 pandemic’s impact on global supply chain.

In addition, we monitor supplier liquidity and work continuously with our supply base to ensure an adequate source of supply and to reduce costs.

We pursue cost reductions through a number of mechanisms, including consolidating or re-sourcing our purchases, entering long-term agreements, reducing the number of suppliers, strategic global sourcing and competitions among suppliers.

In some instances, we depend upon a single source of supply or participate in commodity markets that may be subject to allocations of limited supplies by suppliers.

Like other users in the U.S., we are largely dependent upon foreign sources for certain raw materials, such as cobalt, tantalum, chromium, rhenium and nickel.

We have a number of ongoing programs to manage this dependence and the accompanying risk, including long-term agreements and the conservation of materials through scrap reclamation and new manufacturing processes.

In addition, in some cases, we must comply with specific procurement requirements, which may limit the suppliers and subcontractors we may utilize.

Like other users in the U.S., we are largely dependent upon foreign sources for certain raw materials, such as cobalt, tantalum, chromium, rhenium, nickel and titanium.

We also have some foreign suppliers as single-source suppliers of components.

Global supply chain and labor markets are continuing to experience high levels of disruption, causing significant materials and parts shortages, including raw material, microelectronics and commodity shortages, as well as delivery delays, labor shortages, distribution issues, energy cost increases and price increases.

We and many of our suppliers and subcontractors have ceased operations in Russia due to sanctions and have ceased sourcing of components that are subject to sanctions.

Other suppliers and subcontractors are located in areas experiencing supply impediments or are at risk of being subjected to trade restrictive actions, due to current geopolitical conditions.

In addition, some suppliers and subcontractors have been, or may in the future be, impacted by credit market conditions, including higher interest rates and the availability of credit.

Our supplier and subcontractor performance continues to be affected by these issues, and we have experienced difficulties receiving necessary raw materials, components, other supplies and third-party services on a timely basis or at all.

Our business has been negatively impacted by the above factors, as well as price increases arising from these issues and ongoing inflation.

We work continuously to mitigate the effects of these supply chain issues through targeted activities as well as through our ongoing supply chain programs.

We work with our suppliers and subcontractors to assess the causes of performance failures and delays.

We are providing our suppliers with access to our contract labor networks to augment supplier workforces, providing suppliers with raw materials and technical support, and leveraging our raw materials contracts to apply our negotiated rates to purchases by our suppliers.

We are also working to arrange second and third supply source alternatives and have increased our inventory of available materials and parts.

We regularly pursue cost reductions through a number of mechanisms, including consolidating or re-sourcing our purchased parts, expanding use of long-term agreements, reducing the number of suppliers generally (except as described above for important supply alternatives), strategic sourcing in cost competitive regions, competitions among suppliers and other low-cost sourcing initiatives.

We also have a number of ongoing programs to manage our dependence on foreign raw material supply and the accompanying risk, including long-term agreements and the conservation of materials through scrap reclamation and new manufacturing processes.

In addition, to help address the risk of supplier closings or bankruptcies, we monitor the liquidity of our significant supplier base.

For additional information related to supply chain issues, see Item IA.

“Risk Factors” of this Form 10-K.

Other Matters Relating to Our Business

As worldwide businesses, our operations can be affected by a variety of economic, industry and other factors, including those described in this section, in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 1.

“Cautionary Note Concerning Factors That May Affect Future Results,” and in Item 1A.

“Risk Factors” of this Form 10-K.

Coronavirus Disease 2019 (COVID-19) Pandemic.

The COVID-19 pandemic continues to negatively affect the global economy, our business and operations, the labor market, supply chains, inflation, and the industries in which we operate.

Commercial air travel has been significantly disrupted by the pandemic and government, business and individual actions in response.

Commercial air travel has not fully returned to pre-COVID-19 levels, although we continue to see signs of ongoing recovery.

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.

For additional information related to the COVID-19 pandemic, see Item 1A.

“Risk Factors” of this Form 10-K.

Regulatory Matters

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We deal with numerous U.S.

government agencies and entities, including but not limited to all of the branches of the U.S.

Department of Defense (DoD), the Federal Aviation Administration (FAA), and the Department of Homeland Security.

government agencies and entities, including but not limited to all of the branches of the DoD, the FAA, and the Department of Homeland Security.

Similar government authorities exist in all of the countries in which we do business.

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government contracts are subject to termination by the government, either for convenience or for default in the event of our failure to perform under the applicable contract.

In the case of a termination for convenience, we would normally be entitled to reimbursement for our allowable costs incurred, termination costs and a reasonable profit.

In the case of a termination for

convenience, we would normally be entitled to reimbursement for our allowable costs incurred, termination costs and a reasonable profit.

If terminated by the government as a result of our default, we could be liable for payments made to us for undelivered goods or services, additional costs the government incurs in acquiring undelivered goods or services from another source and any other damages it suffers.

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For further discussion of risks related to government contracting, including on-going litigation associated with U.S.

government audits and investigations, see Item 1A, “Risk Factors” and Item 3, “Legal Proceedings,” in this Form 10-K and “Note 19:

government audits and investigations, see Item 1A.

“Risk Factors” and Item 3.

“Legal Proceedings” of this Form 10-K and “Note 18:

Commitments and Contingencies” within Item 8 of this Form 10-K.

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Our operations are subject to and affected by environmental regulation by federal, state and local authorities in the U.S.

and regulatory authorities with jurisdiction over our international operations, including with respect to the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes.

and regulatory authorities with jurisdiction over our international operations, including with respect to the generation, treatment, storage, disposal and remediation of hazardous substances and wastes.

We use hazardous substances and generate hazardous wastes in some of our operations and have incurred, and will likely continue to incur, costs associated with environmental compliance activities and management of remediation matters at sites with pollutants.

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At such facilities, environmental compliance and remediation costs have historically been primarily the responsibility of the U.S.

government, and we have relied (and continue to rely consistent with best practices) upon the U.S.

government, and we have relied upon the U.S.

government funding to pay such costs.

We do not anticipate that compliance with current provisions or requirements relating to the protection of the environment or that any payments we may be required to make for cleanup liabilities will have a material adverse effect on our cash flows, competitive position, results of operations, financial condition or liquidity.

We do not anticipate that compliance with current provisions or requirements relating to the protection of the environment or that any payments we may be required to make for cleanup liabilities will have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.

Environmental matters are further addressed in “Note 1:

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government contract we are awarded until the Environmental Protection Agency thereafter certifies that the condition giving rise to the violation has been corrected.

In addition, we could be affected by future foreign or domestic laws or regulations imposed in response to concerns over climate change.

Changes in environmental and climate change laws or regulations, including laws relating to greenhouse gas emissions, could lead to new or additional investment in product designs and could increase environmental compliance expenditures, including increased energy and raw materials costs.

For further discussion of risks related to environmental and climate matters and other government regulations, see Item 1A, “Risk Factors” in this Form 10-K.

In addition, we could be affected by future foreign or domestic laws or regulations imposed in response to concerns over climate change, and we monitor developments in environmental and climate-related laws and regulations and their potential impact to our business and financial condition.

Changes in environmental and climate-related laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, and mandatory disclosure obligations could lead to new or additional investment in product designs and facility upgrades and could increase our operational and environmental compliance expenditures, including increased energy and raw materials costs and costs associated with manufacturing changes.

For further discussion of risks related to environmental and climate matters and other government regulations, see Item 1A.

“Risk Factors” of this Form 10-K.

Other Applicable Regulations.

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As a result, our businesses and operations are subject to both U.S.

government laws, regulations and procurement policies and practices, including regulations relating to import-export controls, tariffs, taxes, investment, exchange controls, anti-corruption, and cash repatriation.

government laws, regulations and procurement policies and

practices, including regulations relating to import-export controls, tariffs, taxes, investment, sanctions, exchange controls, anti-corruption, and cash repatriation.

Our international sales are also subject to varying currency, political and economic risks.

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Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “outlook,” “goals,” “objectives,” “confident,” “on track” and other words of similar meaning.

Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax payments and rates, research and development spending, cost savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, other anticipated benefits to RTC of the Rockwell Collins acquisition, the Raytheon Merger or the Separation Transactions, including estimated synergies and customer cost savings resulting from the Raytheon Merger and the anticipated benefits and costs of the Separation Transactions and other statements that are not solely historical facts.

Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax payments and rates, research and development spending, cost savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, other anticipated benefits to RTC of the Rockwell Collins acquisition, the Raytheon merger or the separation of UTC’s business into three independent, publicly traded companies (UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis)) (the Separation Transactions), including estimated synergies and customer cost savings resulting from the Raytheon merger and the anticipated benefits and costs of the Separation Transactions, and other statements that are not solely historical facts.

All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

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• the effect of changes in economic, capital market and political conditions in the U.S.

and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, inflation, interest rates and foreign currency exchange rates, and geopolitical risks;

• the effect of and risks relating to the coronavirus disease 2019 (COVID-19) pandemic on RTC’s business, supply chain, operations and the industries in which it operates, including the decrease in global air travel and disruption to business and other commercial activities, the impact on the demand for RTC’s products and services, the disruption to global supply and distribution capabilities which have impacted supplies required for RTC’s performance and have led to labor shortages and increased labor costs, the financial condition of RTC’s customers and suppliers, challenges relating to employee health, safety, and availability and workplace and facility operations, and the timing and extent of the recovery from COVID-19 and the impact on such recovery from new COVID-19 variants and outbreaks, vaccine-related issues and other future developments;

and globally, such as from the global sanctions and export controls with respect to Russia, and any changes therein, including related to financial market conditions, fluctuations in commodity prices or supply (including energy supply), inflation, interest rates and foreign currency exchange rates, disruptions in global supply chain and labor markets, and geopolitical risks;

• risks associated with U.S.

government sales, including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration or the allocation of funds to governmental responses to COVID-19, a continuing resolution, a government shutdown, or otherwise, and uncertain funding of programs;

• challenges in the development, production, delivery, and support of RTC advanced technologies and new products and services, as well as the challenges of operating in RTC’s highly-competitive industries;

• risks relating to RTC international operations from, among other things, changes in trade policies, foreign currency fluctuations, economic conditions, political factors, sales methods, and U.S.

government sales, including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration, a continuing resolution, a government shutdown, the debt ceiling or measures taken to avoid default, or otherwise, and uncertain funding of programs;

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

• risks relating to RTC’s reliance on U.S.

suppliers and commodity markets, including the effect of sanctions, delays and disruptions in the delivery of materials and services to RTC or its suppliers and price increases;

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

or local government regulations;

• the condition of the aerospace industry;

• risks relating to RTC’s reliance on U.S.

suppliers and commodity markets, including delays and disruptions in the delivery of materials and services to RTC or its suppliers and price increases;

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

• the scope, nature, timing and challenges of managing acquisitions, investments, divestitures and other transactions, including the realization of synergies and opportunities for growth and innovation, the assumption of liabilities and other risks and incurrence of related costs and expenses;

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• the outcome of pending, threatened and future legal proceedings, investigations and other contingencies, including those related to U.S.

government audits and disputes or otherwise;

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

government audits and disputes;

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

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and other countries in which RTC and its businesses operate;

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

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

• the intended qualification of (1) the Raytheon Merger as a tax-free reorganization and (2) the Separation Transactions and other internal restructurings as tax-free to UTC and former UTC shareowners, in each case, for U.S.

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

federal income tax purposes.

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See “Note 18:

Commitments and Contingencies” within Item 8 of this Form 10-K, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Critical Accounting Estimates,” “Results of Operations,” and “Liquidity and Financial Condition,” within Item 7 of this Form 10-K, and the sections titled Item 1A, “Risk Factors” and Item 3, “Legal Proceedings,” of this Form 10-K.

This Form 10-K also includes important information as to these factors in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Restructuring Costs,” “Environmental Matters” and “Governmental Matters,” within Item 7 of this Form 10-K, and in the “Business” section under the headings “General,” “Description of Business by Segment” and “Other Matters Relating to Our Business as a Whole.” The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document.

“Risk Factors” and Item 3.

“Legal Proceedings,” of this Form 10-K.

This Form 10-K also includes important information as to these factors in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Government Matters,” within Item 7 of this Form 10-K, and in the “Business” section under the headings “General,” “Business Segments”, “Other Matters Relating to Our Business” and “Regulatory Matters.” The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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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-K

Item 1. Business