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Item 1. Financial Statements

2023-04-25 compared with 2022-10-25 · 183 added, 280 removed, 655 unchanged (41% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(dollars in millions, except per share amounts) 2023 2022

18 unchanged sentences

Noncontrolling interest in subsidiaries’ earnings from continuing operations 55 23

Income from continuing operations attributable to common shareowners 1,387 1,400 3,794 3,212

Net income from continuing operations attributable to common shareowners 1,426 1,103

Loss from discontinued operations attributable to common shareowners — ( 19 )

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(dollars in millions) 2023 2022

6 unchanged sentences

Income tax (expense) benefit related to items of other comprehensive income (loss) 41 ( 18 )

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

Other comprehensive income (loss), net of tax 29 ( 200 )

Comprehensive income 1,510 907

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEET

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

(dollars in millions) March 31, 2023 December 31, 2022

Current Assets

44 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Nine Months Ended September 30,

Quarter Ended March 31,

(dollars in millions) 2023 2022

1 unchanged sentence

Net income from continuing operations $ 1,481 $ 1,126

Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:

Adjustments to reconcile net income from continuing operations to net cash flows (used in) provided by operating activities:

Depreciation and amortization 1,034 1,014

9 unchanged sentences

Other operating activities, net ( 68 ) 91

Net cash flows provided by operating activities from continuing operations 2,540 3,981

Net cash flows (used in) provided by operating activities from continuing operations ( 863 ) 476

Investing Activities:

Capital expenditures ( 520 ) ( 439 )

Investments in businesses ( 66 ) ( 6 )

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

Customer financing assets receipts, net 25 24

Increase in collaboration intangible assets ( 169 ) ( 138 )

(Payments) receipts from settlements of derivative contracts, net ( 259 ) 42

Dispositions of businesses, net of cash transferred — 35

Customer financing assets receipts (payments), net 28 ( 19 )

Increase in other intangible assets ( 154 ) ( 82 )

Payments from settlements of derivative contracts, net ( 13 ) ( 33 )

Other investing activities, net 80 20

2 unchanged sentences

Issuance of long-term debt 2,971 —

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

Change in commercial paper, net (Note 8) ( 427 ) —

2 unchanged sentences

Repurchase of common stock ( 562 ) ( 743 )

Net transfers to discontinued operations — ( 27 )

Other financing activities, net ( 118 ) ( 263 )

Net cash flows used in financing activities from continuing operations ( 3,010 ) ( 5,182 )

Discontinued Operations:

Net cash used in operating activities — ( 27 )

Net cash used in investing activities — —

Net cash provided by financing activities — 27

Net cash used in discontinued operations — —

Net cash flows provided by (used in) financing activities from continuing operations 1,096 ( 1,745 )

Effect of foreign exchange rate changes on cash and cash equivalents 1 15

2 unchanged sentences

Cash, cash equivalents and restricted cash, end of period 5,946 6,081

Restricted cash, included in other assets 54 26

Restricted cash, included in Other assets, current and Other assets 53 41

Cash and cash equivalents, end of period $ 5,893 $ 6,040

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(dollars in millions, except per share amounts;

8 unchanged sentences

Common stock repurchased ( 582 ) ( 756 )

Other — 8 — 11

Ending balance ( 16,112 ) ( 13,483 )

12 unchanged sentences

Beginning balance ( 2,018 ) ( 1,915 )

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

Other comprehensive income (loss), net of tax 29 ( 200 )

Ending balance ( 1,989 ) ( 2,115 )

6 unchanged sentences

Disposition of noncontrolling interest, net ( 3 ) ( 11 )

Capital contributions — — 6 —

Ending balance 1,552 1,524

Equity at September 30

Equity at March 31

$ 74,347 $ 73,986

8 unchanged sentences

Basis of Presentation

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 Condensed Consolidated Financial Statements at March 31, 2023 and for the quarters ended March 31, 2023 and 2022 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 2022 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 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.

We reclassified certain immaterial prior period amounts within the Condensed Consolidated Statement of Cash Flows to conform to our current period presentation.

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 March 31, 2023 and 2022 with respect to RIS or RMD, we are referring to their April 2, 2023 and April 3, 2022 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.

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 implement the reorganization beginning in July 2023.

All segment information included in this Form 10-Q is reflective of the existing four segments of Collins, Pratt & Whitney, RIS, and RMD in accordance with the management structure in place as of March 31, 2023.

Russia Sanctions.

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The Russian government has implemented similar counter-sanctions and export controls targeting specific industries, entities, and individuals in the U.S.

and other jurisdictions in which we operate.

and other jurisdictions in which we operate, including certain members of the Company’s management team and Board of Directors.

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

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As a result of these sanctions on Russia and export controls, in the first quarter of 2022, we recorded pretax charges of $ 290 million, $ 210 million net of tax, and the impact of noncontrolling interest, within our Collins and Pratt & Whitney businesses primarily related to increased estimates for credit losses on both our accounts receivables and contract assets, inventory reserves and purchase order obligations, impairment of customer financing assets for products under lease, impairment of contract fulfillment costs that are no longer recoverable, and a loss on the exit of our investment in a Russia-based joint venture.

Additionally, we reversed approximately $ 1.3 billion of remaining performance obligations (RPO) in the quarter ended March 31, 2022 related to our sales contracts in Russia at Pratt & Whitney and Collins.

We will continue to monitor future developments, including additional sanctions and other measures, that could adversely affect the Company and/or our supply chain, business partners, or customers.

COVID-19 Pandemic.

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 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.

Our expectations regarding the COVID-19 pandemic and ongoing recovery and their potential financial impact are based on available information and assumptions that we believe are reasonable at this time;

Coronavirus Disease 2019 (COVID-19) Pandemic.

The COVID-19 pandemic caused continuing negative effects on the global economy, our business and operations, the labor market, supply chains, inflation, and the industries in which we operate.

Commercial air travel continues to recover to varying degrees.

While we believe that the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, uncertainty continues with respect to when commercial air traffic capacity will fully return to and/or exceed pre-pandemic levels.

Our expectations regarding the negative effects of the COVID-19 pandemic and ongoing recovery and their potential financial impact are based on available information and assumptions that we believe are reasonable at this time;

however, the actual financial impact is highly uncertain and subject to a wide range of factors and future developments.

Acquisitions, Dispositions, Goodwill and Intangible Assets

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 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

Changes in our goodwill balances for the quarter ended March 31, 2023 were as follows:

(dollars in millions) Balance as of December 31, 2022 Acquisitions and Divestitures Foreign Currency Translation and Other Balance as of March 31, 2023

Collins Aerospace $ 30,719 $ — $ 65 $ 30,784

Pratt & Whitney 1,563 — — 1,563

6 unchanged sentences

Identifiable intangible assets are comprised of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

4 unchanged sentences

39,589 ( 11,756 ) 39,424 ( 11,242 )

Indefinite-lived:

Trademarks and other 8,644 — 8,641 —

Total $ 48,233 $ ( 11,756 ) $ 48,065 $ ( 11,242 )

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.

Amortization of intangible assets for the quarters ended March 31, 2023 and 2022 was $ 509 million and $ 487 million, respectively.

The following is the expected amortization of intangible assets for the remainder of 2023 through 2028:

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Earnings Per Share

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(dollars and shares in millions, except per share amounts) 2023 2022

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The computation of diluted earnings per share (EPS) excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive.

In addition, the computation of diluted EPS excludes the effect of the potential exercise of stock awards when the awards’ assumed proceeds exceed the average market price of the common shares during the period.

For the quarter and nine months ended September 30, 2022, the number of stock awards excluded from the computation was 10.4 million and 7.1 million, respectively.

For the quarter and nine months ended September 30, 2021, the number of stock awards excluded from the computation was 8.0 million and 15.3 million, respectively.

In addition, the computation of diluted EPS excludes the effect of the potential release or exercise of stock awards when the awards’ assumed proceeds exceed the average market price of the common shares during the period.

For the quarters ended March 31, 2023 and 2022, the number of stock awards excluded from the computation was 4.1 million and 7.5 million, respectively.

Changes in Contract Estimates at Completion

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The risks and opportunities relate to management’s judgment about the ability and cost to achieve the schedule, consideration of customer-directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels, such as flight hours or aircraft landings, and related variable consideration.

Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer, overhead cost rates, and current and past maintenance cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among others.

Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials including any impact from rising costs or inflation, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer, overhead cost rates, and current and past maintenance cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among others.

In particular, fixed-price development programs involve significant management judgment, as development contracts by nature have elements that have not been done before and thus, are highly subject to future unexpected cost changes.

Cost estimates may also include the estimated cost of satisfying our industrial cooperation agreements, sometimes in the form of either offset obligations or in-country industrial participation (ICIP) agreements, required under certain contracts.

5 unchanged sentences

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(dollars in millions, except per share amounts) 2023 2022

2 unchanged sentences

Income from continuing operations attributable to common shareowners (1)

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

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

$ ( 0.07 ) $ 0.02

3 unchanged sentences

Accounts receivable, net consisted of the following:

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

(dollars in millions) March 31, 2023 December 31, 2022

Accounts receivable $ 10,460 $ 9,560

6 unchanged sentences

Total contract assets and contract liabilities were as follows:

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

(dollars in millions) March 31, 2023 December 31, 2022

Contract assets $ 12,729 $ 11,534

1 unchanged sentence

Net contract liabilities $ ( 2,141 ) $ ( 3,064 )

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.

Contract assets increased $ 1,195 million during the quarter ended March 31, 2023 primarily due to sales in excess of billings on certain contracts at RMD, Pratt & Whitney, and RIS.

Contract liabilities increased $ 272 million during the quarter ended March 31, 2023 primarily due to billings in excess of sales on certain contracts at Pratt & Whitney and RMD.

We recognized revenue of $ 1.9 billion during the quarter ended March 31, 2023, related to contract liabilities as of January 1, 2023 and $ 1.8 billion during the quarter ended March 31, 2022, related to contract liabilities as of January 1, 2022.

As of March 31, 2023, our Contract liabilities include approximately $ 395 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals.

These advance payments may become refundable to the customer if the contracts are ultimately terminated.

In addition, as of September 30, 2022, our Contract liabilities include advance payments, in immaterial amounts, received from Russian customers on contracts we are currently unable to perform on due to global sanctions on Russia and export controls.

Depending on the contractual terms and as allowed by sanctions, certain of these advance payments may become refundable.

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

Contract assets include an allowance for credit losses of $ 330 million and $ 318 million as of March 31, 2023 and December 31, 2022, respectively.

Inventory, net

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

Inventory, net consisted of the following:

(dollars in millions) March 31, 2023 December 31, 2022

Raw materials $ 3,841 $ 3,477

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.

As of March 31, 2023, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $ 7.0 billion, consisting of a $ 5.0 billion revolving credit agreement, which expires in April 2025, and a $ 2.0 billion revolving

credit agreement, which expires in September 2023.

As of March 31, 2023, 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 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.

As of March 31, 2023, 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 $ 100 million and $ 524 million of commercial paper outstanding at March 31, 2023 and December 31, 2022, respectively, which is reflected in Short-term borrowings in our Condensed Consolidated Balance Sheet.

At March 31, 2023 and December 31, 2022, short-term commercial paper borrowings outstanding had a weighted-average interest rate of 4.3 % and 4.4 %, respectively.

During the quarter ended March 31, 2023, we had no new commercial paper borrowings with maturities greater than 90 days.

During the quarter ended March 31, 2023, we made $ 100 million in repayments of commercial paper with maturities greater than 90 days.

During the quarter ended March 31, 2022, we had no commercial paper borrowings or repayments with original maturities more than 90 days from the date of issuance.

There were no repayments of long-term debt during the quarters ended March 31, 2023 and 2022, and there were no issuances of long-term debt during the quarter ended March 31, 2022.

We had the following issuances of long-term debt during the quarter ended March 31, 2023:

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

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

February 27, 2023 5.000 % notes due 2026

5.150 % notes due 2033

(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

5.375 % notes due 2053

March 1, 2021 8.750 % notes due 2021

Long-term debt consisted of the following:

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

(dollars in millions) March 31, 2023 December 31, 2022

3.650 % notes due 2023 (1)

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4.125 % notes due 2028 (1)

7.500 % notes due 2029 (1)

2.150 % notes due 2030 (€ 500 million principal value) (1)

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2.820 % notes due 2051 (1)

3.030 % notes due 2052 (1)

5.375 % notes due 2053 (1)

Other (including finance leases)

Total principal long-term debt 34,254 31,249

Other (fair value adjustments, (discounts)/premiums, and debt issuance costs) 43 51

Other (fair market value adjustments, (discounts)/premiums, and debt issuance costs) 8 40

Total long-term debt 34,262 31,289

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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 September 30, 2022 is approximately 14 years.

The average maturity of our long-term debt at March 31, 2023 is approximately 14 years.

Employee Benefit Plans

2 unchanged sentences

Contributions to our plans were as follows:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(dollars in millions) 2023 2022

3 unchanged sentences

Defined contribution plans 372 311

In December 2020, we approved a change to the Raytheon Company domestic defined benefit pension plans for non-union participants to cease future benefit accruals based on an employee’s years of service and compensation under the historical formula effective December 31, 2022.

The plan change does not impact participants’ historical benefit accruals.

Benefits for service after December 31, 2022 are based on a cash balance formula.

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

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

(dollars in millions) March 31, 2023 December 31, 2022

Noncurrent pension assets (included in Other assets) $ 3,527 $ 3,301

2 unchanged sentences

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

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

(dollars in millions) March 31, 2023 December 31, 2022

Noncurrent pension liabilities $ 4,004 $ 4,133

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Pension Benefits

Quarter Ended September 30,

(dollars in millions) 2022 2021 2022 2021

Operating expense

Service cost $ 118 $ 131 $ 2 $ 2

Non-operating expense

Interest cost 380 312 7 6

Expected return on plan assets ( 883 ) ( 869 ) ( 5 ) ( 5 )

Amortization of prior service credit ( 40 ) ( 42 ) — ( 1 )

Recognized actuarial net loss (gain) 76 109 ( 3 ) ( 2 )

Net settlement, curtailment and special termination benefit (gain) loss — 1 — —

Non-service pension income ( 467 ) ( 489 ) ( 1 ) ( 2 )

Total net periodic benefit (income) expense $ ( 349 ) $ ( 358 ) $ 1 $ —

Pension Benefits

Nine Months Ended September 30,

Quarter Ended March 31,

(dollars in millions) 2023 2022 2023 2022

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

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

(dollars in millions) March 31, 2023 December 31, 2022

Marketable securities held in trusts $ 703 $ 774

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 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.

Our effective tax rate was 16.8 % and 9.3 % i n the quarters ended March 31, 2023 and 2022, respectively.

The increase in the effective tax rate for the quarter ended March 31, 2023 as compared to the quarter ended March 31, 2022 is primarily driven by a higher forecasted annualized effective tax rate for 2023 principally due to a lower forecasted Foreign Derived Intangible Income (FDII) benefit in addition to a lower tax benefit from stock based compensation in the current quarter.

We conduct business globally and, as a result, Raytheon Technologies or one or more of our subsidiaries files income tax returns in the U.S.

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income tax examinations for years before 2013.

The Examination Divisions of the Internal Revenue Service (IRS) are currently auditing Raytheon Technologies (formerly United Technologies Corporation) tax years 2017 and 2018, pre-merger Raytheon Company tax years 2017, 2018, and 2019 as well as certain refund claims of Raytheon Company for tax years 2014, 2015, and 2016 filed prior to the Raytheon merger, and pre-acquisition Rockwell Collins fiscal tax years 2016, 2017, and 2018.

The examination phases of these audits are expected to close in 2023.

It is reasonably possible that the expected closure of the examination phase of the Raytheon Technologies 2017 and 2018 tax audit will result in a net income benefit in the range of $ 185 million to $ 225 million in 2023.

This range includes the effects of adjusting interest accruals and certain tax related indemnity receivables related to the separation and distributions

of Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis).

The tax components of this range are included in the revaluation range included below.

In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions.

We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date.

It is reasonably possible that a net reduction within the range of $ 20 million to $ 400 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of uncertain tax positions arising from developments in examinations, in appeals, or in the courts, the closure of tax statutes, or the issuance of legislation, regulatory or other guidance.

Management has determined that the distributions of Carrier and Otis on April 3, 2020, and certain related internal business separation transactions, qualified as tax-free under applicable law.

In making these determinations, we applied the tax law in the relevant jurisdictions to our facts and circumstances and obtained tax rulings from the relevant taxing authorities, tax opinions, and/or other external tax advice related to the concluded tax treatment.

If the completed distributions of Carrier or Otis, in each case, or certain internal business separation transactions, were to fail to qualify for tax-free treatment, the Company could be subject to significant liabilities, and there could be material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods.

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

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

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

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

It is reasonably possible that a net reduction within the range of $ 250 million to $ 375 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of uncertain tax positions arising from developments in examinations, in appeals, or in the courts, or the closure of tax statutes.

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 $ 10.3 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 present value of aggregate notional principal of our outstanding foreign currency hedges was $ 11.6 billion and $ 11.2 billion at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023, 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 September 30, 2022 December 31, 2021

(dollars in millions) Balance Sheet Location March 31, 2023 December 31, 2022

Derivatives designated as hedging instruments:

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Other accrued liabilities 39 39

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:

The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Condensed Consolidated Statement of Operations in the quarters ended March 31, 2023 and 2022 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.

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

As of March 31, 2023, our € 500 million principal value of euro-denominated long-term debt 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 and is not material.

Fair Value Measurements

The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring basis in our Condensed Consolidated Balance Sheet:

September 30, 2022

March 31, 2023

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

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

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

As of March 31, 2023, 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:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(dollars in millions) Carrying

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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:

September 30, 2022

March 31, 2023

(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 family of aircraft.

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

IAE and IAE LLC retain limited equity with the primary economics of the programs passed to the participants.

As such, we have determined that IAE and IAE LLC are variable interest entities with Pratt & Whitney as the primary beneficiary.

As such, we have determined that IAE and IAE LLC are variable interest entities with

Pratt & Whitney as the primary beneficiary.

IAE and IAE LLC have, therefore, been consolidated.

The carrying amounts and classification of assets and liabilities for variable interest entities in our Condensed Consolidated Balance Sheet are as follows:

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

(dollars in millions) March 31, 2023 December 31, 2022

Current assets $ 7,903 $ 7,609

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

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

September 30, 2022 December 31, 2021

As of March 31, 2023 and December 31, 2022, the following financial guarantees were outstanding:

March 31, 2023 December 31, 2022

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

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We have made residual value and other guarantees related to various commercial aerospace customer financing arrangements.

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 September 30, 2022 and December 31, 2021, respectively.

The estimated fair market values of the guaranteed assets equal or exceed the value of the related guarantees, net of existing reserves.

Collaboration partners’ share of these financing guarantees were $ 140 million at both March 31, 2023 and December 31, 2022.

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 $ 108 million and $ 120 million at September 30, 2022 and December 31, 2021, respectively.

The carrying amount of liabilities related to these obligations was $ 96 million and $ 97 million at March 31, 2023 and December 31, 2022, respectively.

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

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Adjustments are made to accruals as claims data and historical experience warrant.

The changes in the carrying amount of service and product warranties and product performance guarantees for the nine months ended September 30, 2022 and 2021 were as follows:

The changes in the carrying amount of service and product warranties and product performance guarantees for the quarters ended March 31, 2023 and 2022 were as follows:

(dollars in millions) 2023 2022

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Other ( 1 ) —

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

Balance as of March 31 $ 1,093 $ 1,154

Commitments and Contingencies

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

As of September 30, 2022 and December 31, 2021, we had $ 821 million and $ 834 million, respectively, reserved for environmental remediation.

As of March 31, 2023 and December 31, 2022, we had $ 795 million and $ 798 million, respectively, reserved for environmental remediation.

Commercial Aerospace Financing and Other Commitments.

We had commercial aerospace financing commitments and other contractual commitments of approximately $ 15.3 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.

We had commercial aerospace financing commitments and other contractual commitments of approximately $ 15.0 billion and $ 15.3 billion as of March 31, 2023 and December 31, 2022, 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 may also lease aircraft and subsequently sublease the aircraft to customers under long-term non-cancelable operating leases, or pay deposits on behalf of our customers to secure production slots with the airframers (pre-delivery payments).

Our financing commitments with customers are contingent upon maintenance of certain levels of financial condition by the customers.

Associated risks on these commitments are mitigated due to the fact that interest rates are variable during the commitment term and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers.

Our financing commitments with customers are contingent upon maintenance of certain levels of financial condition by our customers.

As a result, the fair value of these financing commitments is expected to equal the amounts funded.

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In addition, in connection with our 2012 agreement to acquire Rolls-Royce’s ownership and collaboration interests in IAE, additional payments are due to Rolls-Royce contingent upon each hour flown through June 2027 by the V2500-powered aircraft in service as of the acquisition date.

These flight hour payments, which are considered in other contractual commitments, are capitalized as collaboration intangible assets as payments are made.

These flight hour payments are capitalized as collaboration intangible assets as payments are made.

Other Financing Arrangements.

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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 $ 3.3 billion as of September 30, 2022.

The stated values of these letters of credit agreements and surety bonds totaled $ 3.2 billion as of March 31, 2023.

Offset Obligations.

We have entered into industrial cooperation agreements, sometimes in the form of either offset agreements or ICIP agreements, as a condition to obtaining orders for our products and services from certain customers in foreign countries.

At September 30, 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.

At March 31, 2023, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately $ 12.6 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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Government Oversight.

In the ordinary course of business, the Company and its subsidiaries and our properties are subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations and threatened legal actions and proceedings.

actions and proceedings.

For example, we are now, and believe that, in light of the current U.S.

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Other than as specifically disclosed in this Form 10-Q, we do not expect these audits, investigations, or disputes to have a material effect on our results of operations, financial condition, or liquidity, either individually or in the aggregate.

Tax Treatment of Carrier and Otis Dispositions.

Management has determined that the distributions of Carrier and Otis on April 3, 2020, and certain related internal business separation transactions, qualified as tax-free under applicable law.

If the completed distributions of Carrier or Otis or certain internal business separation transactions, were to fail to qualify for tax-free treatment, the Company could be subject to significant liabilities, and there could be material adverse impacts on the Company’s business, results of operations, financial condition, or liquidity in future reporting periods.

Legal Proceedings.

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Cost Accounting Standards Claims

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

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 ($ 127 million at September 30, 2022).

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 ($ 138 million at March 31, 2023).

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.

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On November 22, 2021, the ASBCA issued its written decision sustaining in part and denying in part Pratt & Whitney’s appeal.

The ASBCA rejected the DCMA’s asserted measure of the cost of collaborator parts, and ruled substantially in Pratt & Whitney’s favor on other liability issues.

The ASBCA rejected the DCMA’s asserted measure of the cost of collaborator parts, and ruled substantially in Pratt & Whitney’s favor on other liability

The ASBCA remanded the appeal to the parties for resolution of damages issues, which could require further proceedings at the ASBCA.

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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.

On December 23, 2022, the DCMA filed an appeal to the United States Court of Appeals for the Federal Circuit.

We continue to 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 ($ 90 million at September 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 ($ 102 million at March 31, 2023).

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

Although subject to further proceedings, we continue to believe that the November 22, 2021 decision in the first claim will apply with equal legal effect to the second claim.

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

Accordingly, we believe that the amounts demanded by the DCMA as set forth in the two claims are without legal basis and that any damages owed to the U.S.

government for the two claims will not have a material adverse effect on our results of operations, financial condition, or liquidity.

Thales-Raytheon Systems Matter

As previously disclosed, in 2019, Raytheon Company received a subpoena from the Securities and Exchange Commission (SEC) seeking information in connection with an investigation into whether there were improper payments made by Thales-Raytheon Systems (TRS) or anyone acting on their behalf in connection with TRS or Raytheon Company contracts in certain Middle East countries since 2014.

Thales-Raytheon Systems and Related Matters

As previously disclosed, in 2019, Raytheon Company received a subpoena from the Securities and Exchange Commission (SEC) seeking information in connection with an investigation into whether there were improper payments made by Raytheon Company, our joint venture known as Thales-Raytheon Systems (TRS) or anyone acting on their behalf in connection with TRS or Raytheon Company contracts in certain Middle East countries since 2014.

In the first quarter of 2020, the DOJ advised Raytheon Company it had opened a parallel criminal investigation.

In the third quarter of 2020, Raytheon Company received an additional subpoena from the SEC, seeking information and documents as part of its ongoing investigation.

The Company maintains a rigorous anti-corruption compliance program, is cooperating fully with the SEC’s and DOJ’s inquiry, and is examining whether there has been any conduct that is in violation of Raytheon Company policy.

At this time, the Company is unable to predict the outcome of the SEC’s or DOJ’s inquiry.

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

The Company maintains a rigorous anti-corruption compliance program, and continues to cooperate fully with the SEC’s and DOJ’s inquiries and to examine through our own investigation whether there were any improper payments or any such conduct that was in violation of Raytheon Company policy.

At this time, the Company is unable to predict the outcome of the SEC’s or DOJ’s inquiries.

Based on the information available to date, however, we cannot reasonably estimate the range of any potential loss or impact to the business that may result, but do not believe that the results of these inquiries will have a material adverse effect on our results of operations, financial condition, or liquidity.

DOJ Investigation, Contract Pricing Disputes and Related Civil Litigation

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We are cooperating fully with, and will continue to review the issues raised by the DOJ’s ongoing investigation.

We have made substantial progress in our internal review of the issues raised by the DOJ investigation.

Although we continue to believe we have defenses to the potential claims, the Company has determined that there is a probable risk of liability for damages, interest and potential penalties and has accrued approximately $ 290 million for this matter .

We are currently unable to estimate an incremental loss, if any, which may result following the completion of our internal review and resolution of the DOJ investigation.

Based on the information available to date, we do not believe the results of the investigation or of any potential civil litigation will have a material adverse effect on our results of operations, financial condition or liquidity.

We continue to make substantial progress in our internal review of the issues raised by the DOJ investigation.

Although we believe we have defenses to the potential claims, the Company has determined that there is a probable risk of liability for damages, interest and potential penalties and has accrued approximately $ 290 million for this matter .

We are currently unable to estimate an incremental loss, if any, which may result when the DOJ investigation is complete.

Based on the information available to date, we do not believe the results of the DOJ investigation or of any pending or potential civil litigation will have a material adverse effect on our results of operations, financial condition, or liquidity.

Four shareholder lawsuits were filed against the Company after the DOJ investigation was first disclosed.

A putative securities class action lawsuit was filed in the United States District Court for the District of Arizona against the Company and certain of its executives alleging that the defendants violated federal securities laws by making material misstatements in regulatory filings regarding internal controls over financial reporting in RMD.

Three shareholder derivative lawsuits were filed in the United States District Court for the District of Delaware against the former Raytheon Company Board of Directors, the

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

Three shareholder derivative lawsuits were also filed in the United States District Court for the District of Delaware against the former Raytheon Company Board of Directors, the Company and certain of its executives, each alleging that defendants violated federal securities laws and breached their fiduciary duties by engaging in improper accounting practices, failing to implement sufficient internal financial and compliance controls, and making a series of false and misleading statements in regulatory filings.

We believe that each of these lawsuits lacks merit.

Darnis, et al.

As previously disclosed, on August 12, 2020, several former employees of United Technologies Corporation (UTC) or its subsidiaries filed a putative class action complaint in the United States District Court for the District of Connecticut against the Company, Otis, Carrier, the former members of the UTC Board of Directors, and the members of the Carrier and Otis Boards of Directors (Geraud Darnis, et al.

and Related Matter

Directors (Geraud Darnis, et al.

Raytheon Technologies Corporation, et al.).

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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.

On October 26, 2022, Plaintiffs filed an appeal to the United States Court of Appeals for the Second Circuit.

We continue to believe that this matter will not have a material adverse effect on our results of operations, financial condition, or liquidity.

On December 6, 2022, a shareholder derivative lawsuit was filed in the Delaware Court of Chancery against the Company and certain current and former members of its Board of Directors, alleging that defendants breached their fiduciary duties in May 2020 by amending the method by which UTC equity awards were converted to certain Company equity awards following the separation of UTC into three independent, publicly-traded companies.

We believe that the lawsuit lacks merit.

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 nine months ended September 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 ended March 31, 2023 and 2022 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 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 )

Amounts reclassified, pre-tax — 33 34 67

Tax benefit (expense) 4 ( 6 ) 64 62

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

Nine Months Ended September 30, 2022

Quarter Ended March 31, 2023

Balance at December 31, 2022 $ ( 1,005 ) $ ( 782 ) $ ( 231 ) $ ( 2,018 )

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Tax benefit (expense) 1 38 2 41

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

Balance at March 31, 2023 $ ( 882 ) $ ( 890 ) $ ( 217 ) $ ( 1,989 )

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

Quarter Ended September 30, 2021

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

Other comprehensive income (loss) before reclassifications, net ( 321 ) 22 ( 175 ) ( 474 )

Amounts reclassified, pre-tax — 64 8 72

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

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

Nine Months Ended September 30, 2021

Quarter Ended March 31, 2022

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

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Tax benefit (expense) ( 3 ) ( 4 ) ( 11 ) ( 18 )

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

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

Segment Financial Data

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The segments are generally based on the management structure of the businesses and the grouping of similar operating companies, where each management organization has general operating autonomy over diversified products and services.

The 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 implement the reorganization beginning in July 2023.

We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and PRB expense under the Financial Accounting Standards (FAS) requirements of U.S.

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

Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions and the amortization of customer contractual obligations related to loss making or below market contracts acquired.

Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment.

These adjustments are not considered part of management’s evaluation of segment results .

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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 September 30, 2022 and 2021 are as follows:

Results for the quarters ended March 31, 2023 and 2022 are as follows:

Net Sales Operating Profit Operating Profit Margins

(dollars in millions) 2023 2022 2023 2022 2023 2022

Collins Aerospace Systems $ 5,100 $ 4,592 $ 616 $ 478 12.1 % 10.4 %

Collins Aerospace $ 5,581 $ 4,824 $ 794 $ 440 14.2 % 9.1 %

Pratt & Whitney 5,230 4,529 415 151 7.9 % 3.3 %

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(1) Includes the operating results of certain smaller non-reportable business segments.

(2) Includes the net expenses related to the U.S.

(2) 2022 included the net expenses related to the U.S.

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

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

Net Sales Operating Profit Operating Profit Margins

(dollars in millions) 2022 2021 2022 2021 2022 2021

Collins Aerospace Systems $ 14,935 $ 13,507 $ 1,602 $ 1,298 10.7 % 9.6 %

Pratt & Whitney 14,878 13,035 769 319 5.2 % 2.4 %

Raytheon Intelligence & Space 10,768 11,310 1,064 1,194 9.9 % 10.6 %

Raytheon Missiles & Defense 10,763 11,680 1,143 1,518 10.6 % 13.0 %

Total segment 51,344 49,532 4,578 4,329 8.9 % 8.7 %

Eliminations and other (1)

( 2,363 ) ( 2,188 ) ( 131 ) ( 98 )

Corporate expenses and other unallocated items (2)

— — ( 255 ) ( 319 )

FAS/CAS operating adjustment — — 1,135 1,347

Acquisition accounting adjustments — — ( 1,414 ) ( 1,621 )

Consolidated $ 48,981 $ 47,344 $ 3,913 $ 3,638 8.0 % 7.7 %

(1) Includes the operating results of certain smaller non-reportable business segments.

(2) Includes the net expenses related to the U.S.

Army’s LTAMDS project.

Beginning in 2023, LTAMDS results are included in the RMD segment.

We disaggregate our contracts from customers by geographic region based on customer location, by customer and by sales type.

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

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

United States $ 2,455 $ 2,756 $ 2,922 $ 2,285 $ 4 $ 10,422 $ 2,334 $ 2,367 $ 2,977 $ 2,414 $ 4 $ 10,096

Europe 1,231 1,074 102 256 — 2,663 1,066 943 107 297 ( 5 ) 2,408

Asia Pacific 533 1,028 187 412 — 2,160 465 1,007 199 335 — 2,006

Middle East and North Africa 132 160 48 638 — 978 136 127 105 772 — 1,140

Canada and All Other 310 360 31 27 — 728 226 281 39 17 — 563

Consolidated net sales 4,661 5,378 3,290 3,618 4 16,951 4,227 4,725 3,427 3,835 ( 1 ) 16,213

Inter-segment sales 439 2 336 60 ( 837 ) — 365 — 313 67 ( 745 ) —

Business segment sales $ 5,100 $ 5,380 $ 3,626 $ 3,678 $ ( 833 ) $ 16,951 $ 4,592 $ 4,725 $ 3,740 $ 3,902 $ ( 746 ) $ 16,213

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

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 March 31, 2023 and 2022 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total Collins Aerospace Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total

United States $ 2,648 $ 2,631 $ 2,806 $ 2,459 $ 4 $ 10,548 $ 2,249 $ 2,312 $ 2,866 $ 2,299 $ 4 $ 9,730

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Middle East and North Africa 156 110 36 461 — 763 112 78 81 558 — 829

Canada and All Other 908 1,160 105 57 — 2,230 646 907 94 50 — 1,697

Consolidated net sales 13,733 14,876 9,788 10,576 8 48,981 12,438 13,035 10,373 11,483 15 47,344

Inter-segment sales 1,202 2 980 187 ( 2,371 ) — 1,069 — 937 197 ( 2,203 ) —

Business segment sales $ 14,935 $ 14,878 $ 10,768 $ 10,763 $ ( 2,363 ) $ 48,981 $ 13,507 $ 13,035 $ 11,310 $ 11,680 $ ( 2,188 ) $ 47,344

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

government (1)

$ 1,066 $ 1,324 $ 2,877 $ 2,284 $ 4 $ 7,555 $ 1,101 $ 1,295 $ 2,923 $ 2,414 $ 4 $ 7,737

Foreign military sales through the U.S.

government 57 295 135 788 — 1,275 54 322 210 778 — 1,364

Foreign government direct commercial sales 205 116 204 539 — 1,064 258 126 216 642 — 1,242

Commercial aerospace and other commercial 3,333 3,643 74 7 — 7,057 2,814 2,982 78 1 ( 5 ) 5,870

Other 345 463 31 24 — 863 293 387 36 12 — 728

Consolidated net sales 5,163 5,229 3,194 3,624 4 17,214 4,465 4,529 3,253 3,465 4 15,716

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Business segment sales $ 5,581 $ 5,230 $ 3,565 $ 3,671 $ ( 833 ) $ 17,214 $ 4,824 $ 4,529 $ 3,572 $ 3,527 $ ( 736 ) $ 15,716

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

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

Segment sales disaggregated by type of customer for the quarters ended March 31, 2023 and 2022 are as follows:

Sales to the U.S.

government (1)

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Foreign government direct commercial sales 240 118 201 445 — 1,004 251 103 204 401 — 959

Commercial aerospace and other commercial 9,710 9,830 230 9 — 19,779 8,045 7,934 317 2 — 16,298

Commercial aerospace and other commercial sales 3,738 3,557 90 6 — 7,391 3,109 3,055 77 2 — 6,243

Consolidated net sales 5,163 5,229 3,194 3,624 4 17,214 4,465 4,529 3,253 3,465 4 15,716

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

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

Products $ 3,669 $ 3,183 $ 2,637 $ 3,263 $ 4 $ 12,756 $ 3,336 $ 2,877 $ 2,613 $ 3,506 $ ( 1 ) $ 12,331

Services 992 2,195 653 355 — 4,195 891 1,848 814 329 — 3,882

Consolidated net sales 4,661 5,378 3,290 3,618 4 16,951 4,227 4,725 3,427 3,835 ( 1 ) 16,213

Inter-segment sales 439 2 336 60 ( 837 ) — 365 — 313 67 ( 745 ) —

Business segment sales $ 5,100 $ 5,380 $ 3,626 $ 3,678 $ ( 833 ) $ 16,951 $ 4,592 $ 4,725 $ 3,740 $ 3,902 $ ( 746 ) $ 16,213

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

Segment sales disaggregated by sales type for the quarters ended March 31, 2023 and 2022 are as follows:

Products $ 4,000 $ 3,052 $ 2,510 $ 3,221 $ 4 $ 12,787 $ 3,482 $ 2,633 $ 2,604 $ 3,139 $ 4 $ 11,862

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Business segment sales $ 5,581 $ 5,230 $ 3,565 $ 3,671 $ ( 833 ) $ 17,214 $ 4,824 $ 4,529 $ 3,572 $ 3,527 $ ( 736 ) $ 15,716

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

RIS and RMD segment sales disaggregated by contract type for the quarters ended March 31, 2023 and 2022 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 $ 3,565 $ 3,671 $ 3,572 $ 3,527

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

Fixed-price $ 4,062 $ 6,245 $ 4,533 $ 7,054

Cost-type 5,726 4,331 5,840 4,429

Consolidated net sales 9,788 10,576 10,373 11,483

Inter-segments sales 980 187 937 197

Business segment sales $ 10,768 $ 10,763 $ 11,310 $ 11,680

Remaining Performance Obligations (RPO)

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

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 September 30, 2022, we expect approximately 30 % will be recognized as sales over the next 12 months.

Total RPO was $ 180 billion as of March 31, 2023.

Of the total RPO as of March 31, 2023, we expect approximately 25 % will be recognized as revenue over the next 12 months.

Approximately 45 % 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.

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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):

Disclosures by Business Entities about Government Assistance, which requires business entities to make specific annual disclosures about transactions with a government.

The new standard is effective for fiscal years beginning after December 15, 2021.

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

In October 2021, the FASB issued 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.

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.

The adoption of this standard did not have an impact on our disclosures as we have determined impact of supplier finance programs is not material.

Other new pronouncements issued but not effective until after March 31, 2023 are not expected to have a material impact on our results of operations, financial condition, or liquidity.

With respect to the unaudited condensed consolidated financial information of Raytheon Technologies for the quarters ended March 31, 2023 and 2022, 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 April 25, 2023, 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 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”).

We have reviewed the accompanying condensed consolidated balance sheet of Raytheon Technologies Corporation and its subsidiaries (the “Company”) as of March 31, 2023, and the related condensed consolidated statements of operations, of comprehensive income, of changes in equity, and of cash flows for the three-month periods ended March 31, 2023 and 2022, including the related notes (collectively referred to as the “interim financial information”).

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 11, 2022, we expressed an unqualified opinion on those consolidated financial statements.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 6, 2023, we expressed an unqualified opinion on those consolidated financial statements.

In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

1 unchanged sentence

This interim financial information is the responsibility of the Company’s management.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Boston, Massachusetts

October 25, 2022

April 25, 2023

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