What changed in this filing

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Item 1A. Risk Factors

2023-10-24 compared with 2023-07-25 · 30 added, 8 removed, 23 unchanged (62% of the section changed)

You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition, or future results set forth under Item 1A in our 2022 Annual Report on Form 10-K (2022 Form 10-K).

You should carefully review and consider the information regarding certain factors which could materially affect our business,

financial condition, or future results set forth under Item 1A in our 2022 Annual Report on Form 10-K (2022 Form 10-K).

Except for the risk factors discussed below, there have been no material changes from the factors disclosed in our 2022 Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission (SEC).

Geopolitical factors and changes in policies and regulations could adversely affect our business.

Our international sales and operations are sensitive to changes in foreign national priorities, foreign government budgets, and regional and local political

and economic factors, including volatility in energy prices or supply, political or civil unrest, changes in threat environments and political relations, geopolitical uncertainties, and changes in U.S.

Our international sales and operations are sensitive to changes in foreign national priorities, foreign government budgets, and regional and local political and economic factors, including volatility in energy prices or supply, political or civil unrest, changes in threat environments and political relations, geopolitical uncertainties, and changes in U.S.

foreign policy.

11 unchanged sentences

These risks and uncertainties may directly or indirectly impact our commercial businesses as well.

Of note, China has announced sanctions against Raytheon Missiles & Defense (RMD), and previously announced it may take measures against RTX Corporation (RTX), in connection with certain foreign military sales to Taiwan.

The Chinese sanctions against RMD include a fine equal to twice the value of the arms that RMD has sold to Taiwan since September 2020.

In addition, China has indicated that it decided to sanction our Chairman and Chief Executive Officer Gregory Hayes, in connection with another foreign military sale to Taiwan involving RTX products and services.

Of note, in February 2023, China announced sanctions against Raytheon Missiles & Defense (RMD) (a former RTX Corporation (RTX) business segment which became part of Raytheon as a result of the July 1, 2023 RTX segment realignment), and previously announced it may take measures against RTX, in connection with certain foreign military sales to Taiwan.

The Chinese sanctions against RMD included a fine equal to twice the value of the arms that RMD sold to Taiwan since September 2020.

In addition, in September 2022, China indicated that it decided to sanction our Chairman and Chief Executive Officer, Gregory Hayes, in connection with another foreign military sale to Taiwan involving RTX products and services.

If China were to enforce sanctions, impose additional sanctions, or take other regulatory action against RTX, our suppliers, affiliates, or partners, it could potentially disrupt our business operations.

2 unchanged sentences

Moreover, the Chinese government has generally expanded its ability to restrict China-related import, export and investment activities, which may have an adverse impact on our ability to conduct business or sell our commercial aerospace products in China.

In addition, in response to the Russian military’s invasion of Ukraine, the U.S.

government and the governments of various jurisdictions in which we operate, including Canada, the United Kingdom, the European Union, and others, have imposed broad economic sanctions and export controls targeting specific industries, entities, and individuals in Russia.

In addition, in response to Russia’s invasion of Ukraine, the U.S.

government and the governments of various jurisdictions in which we operate, have imposed broad economic sanctions and export controls targeting specific industries, entities, and individuals in Russia.

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

2 unchanged sentences

These measures have adversely affected and could continue to adversely affect the Company and/or our supply chain, business partners or customers.

We are closely monitoring developments in the war between Israel and Hamas that began on October 7, 2023 including potential impacts to RTX’s business, customers, suppliers, employees, and operations in Israel, the Middle East and elsewhere.

At this time, impacts to RTX are uncertain and subject to change given the volatile nature of the situation.

Due to the nature of our products and services, a product safety failure or other failure affecting our or our customers’ or suppliers’ products or systems could seriously harm our business.

Our products and services are highly sophisticated and specialized, involve complex advanced technologies, are often integrated with third-party products and services and are utilized for specific purposes that require precision, reliability and durability.

Many of our products and services include both hardware

and software that involve industrial machinery and intricate aviation and defense systems, including commercial and military jet engines, power and control systems and other aircraft parts, air and missile defense systems, and military sensors and command and control systems.

Technical, mechanical and other failures may occur from time to time, whether as a result of manufacturing or design defect, operational process or production issue attributable to us, our customers, suppliers, third party integrators or others.

In addition, our products could fail as a result of cyber-attacks, such as those that seize control and result in misuse or unintended use of our products, or other intentional acts.

The impact of a catastrophic product or system failure or similar event affecting our or our customers’ or suppliers’ products or services could be significant, and could result in injuries or death, property damage, loss of strategic capabilities, loss of intellectual property, loss of reputation, and other significant negative effects.

A product or system failure could lead to negative publicity, a diversion of management attention and damage to our reputation that could reduce demand for our products and services.

It could also result in product recalls and product liability and warranty claims (including claims related to the safety or reliability of our products) and related expenses, other service, repair and maintenance costs, significant damages and other costs, including fines and other remedies and regulatory and environmental liabilities.

We may also incur increased costs, delayed payments, reputational harm or lost equipment or services revenue in connection with a significant issue with a third party’s product with which our products are integrated.

Further, our insurance coverage may not be adequate to cover all related costs and we may not otherwise be fully indemnified for them.

Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.

In particular, as previously disclosed, Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100G-JM (PW1100) Geared Turbofan (GTF) fleet, which powers the A320neo family of aircraft.

This determination and corresponding fleet actions have significantly increased both the incremental number of PW1100 GTF engines that will need to be removed and the incremental number of shop visits necessary to perform the inspections as compared to estimates prior to this determination.

Actual and future estimated aircraft on ground levels for the A320neo family of aircraft have therefore increased.

As a result, we have and will continue to incur significant customer support and mitigation costs and significant labor, material and related costs.

This matter has caused reputational harm and has negatively impacted, and will continue to impact, our results of operations and financial condition.

The financial impact of the powder metal issue is based on historical experience and is subject to various assumptions and judgments, including, without limitation, the number and expected timing of shop visits, inspection results and scope of work to be performed, turnaround time, availability of new parts, available capacity at overhaul facilities and outcomes of negotiations with impacted customers, and these assumptions are subject to variability.

Potential changes to these assumptions could have a material effect on the Company’s results of operations for the periods in which it is recognized.

In addition, these negative impacts to our company could increase if any other engine models are found to be materially impacted by this rare condition.

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 1A. Risk Factors