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Item 8. Financial Statements and Supplementary Data

2024-02-05 compared with 2023-02-07 · 492 added, 723 removed, 1444 unchanged (46% of the section changed)

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of RTC is responsible for establishing and maintaining adequate internal control over financial reporting.

The management of RTX Corporation (RTX) is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management has assessed the effectiveness of RTC’s internal control over financial reporting as of December 31, 2022.

Management has assessed the effectiveness of RTX’s internal control over financial reporting as of December 31, 2023.

In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its Internal Control—Integrated Framework , released in 2013 .

Management concluded that based on its assessment, RTC’s internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of RTC’s internal control over financial reporting, as of December 31, 2022, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Management concluded that based on its assessment, RTX’s internal control over financial reporting was effective as of December 31, 2023.

The effectiveness of RTX’s internal control over financial reporting, as of December 31, 2023, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

/s/ GREGORY J.

President and Chief Executive Officer

Chief Executive Officer

MITCHILL, JR.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareowners and Board of Directors of Raytheon Technologies Corporation

To the Shareowners and Board of Directors of RTX Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Raytheon Technologies Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of RTX Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Contract Estimates at Completion

As described in Note 1 to the consolidated financial statements, a significant portion of the Company’s revenues of $67.1 billion for the year ended December 31, 2022 are from long-term contracts associated with the design, development, manufacture or modification of complex aerospace or defense equipment or related services.

The timing of the satisfaction of performance obligations varies across the Company’s businesses due to their diverse product and service mix, customer base, and contractual terms.

Substantially all of the Company’s revenues from the Raytheon Intelligence & Space and Raytheon Missiles & Defense segments are recognized over time because of the continuous transfer of control to the customer.

The Company’s revenues from certain long-term aftermarket contracts within its Pratt & Whitney segment are recognized over the contract period as a series of daily performance obligations to stand ready to provide spare parts, product maintenance and aftermarket services.

For these performance obligations satisfied over time, revenue is recognized on a percentage of completion basis using costs incurred to date relative to total estimated costs at completion to measure progress.

Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment by management on a contract by contract basis.

Within the Raytheon Intelligence & Space and Raytheon Missiles & Defense segments, the variables and significant judgments relate to key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs.

The risks and opportunities for the contracts relate to management’s ability and cost to achieve the schedule, consideration of customer-directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels and related variable consideration.

Management also makes judgments about variables related to 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 the Company’s subcontractors, the availability and timing of funding from the customer, overhead cost rates, and the estimated cost of satisfying the Company’s industrial cooperation agreements required under certain contracts.

Within the Pratt & Whitney segment, the variables and significant judgments relate to current and past maintenance cost and frequency experience.

Management reviews contract estimates at completion on a periodic basis and no less than annually or when a change in circumstances warrants a modification to a previous estimate.

The principal considerations for our determination that performing procedures relating to revenue recognition - contract estimates at completion is a critical audit matter are (i) the significant judgment by management in developing their estimates of total revenue and total costs at completion, including significant judgments and assumptions on a contract by contract basis, and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s estimates of total revenue and total costs at completion for contracts.

As described in Note 1 to the consolidated financial statements, the majority of the Company’s revenues of $68.9 billion for the year ended December 31, 2023, are from long-term contracts associated with the design, development, manufacture or modification of complex aerospace or defense equipment or related services.

The Collins and Pratt & Whitney segments primarily serve commercial and government customers in both the original equipment manufacturer and aftermarket parts and services markets of the aerospace industry, while the Raytheon segment primarily provides products and services to government customers in the defense industry.

For certain long-term aftermarket contracts, revenue is recognized over the contract period, and the Company generally accounts for such contracts as a series of daily performance obligations to stand ready to provide spare parts, product maintenance and aftermarket services.

Substantially all of the defense business revenue is recognized over time because of the continuous transfer of control to customers.

For performance obligations satisfied over time, revenue is recognized on a percentage-of-completion basis generally using costs incurred to date relative to total estimated costs at completion to measure progress.

Incurred costs represent work performed, which correspond with and best depict transfer of control to the customer.

Management reviews the estimated costs at completion at least annually or when a change in circumstances warrants a modification to a previous estimate.

Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many inputs and requires significant judgment by management on a contract-by-contract basis.

As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs.

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 makes 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 its subcontractors, the availability and timing of funding from the 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.

Changes in estimates of net sales, cost of sales and the related impact to operating profit on contracts recognized over time are recognized on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage of completion in the current period.

A significant change in one or more of these estimates could affect the profitability of one or more of the performance obligations.

The principal considerations for our determination that performing procedures relating to revenue recognition - contract estimates at completion is a critical audit matter are (i) the significant judgment by management in developing the estimates of total revenue and total costs at completion, including significant judgments and assumptions on a contract-by-contract basis, and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s estimates of total revenue and total costs at completion for contracts.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the estimates of total revenue and total costs at completion.

These procedures also included, among others, testing management’s process for developing the estimated total revenue and total costs at completion, including evaluating on a test basis the reasonableness of certain significant judgments and variables considered by management specific to each contract or performance obligation.

Evaluating the significant judgments and assumptions related to the estimates of total revenue and total costs at completion involved evaluating whether the significant judgments and assumptions used were reasonable considering:

(i) management’s historical forecasting accuracy, (ii) evidence to support the relevant aforementioned variables, (iii) the consistent application of accounting policies, and (iv) the timely identification of circumstances which may warrant a modification to a previous estimate.

Goodwill and Indefinite-lived Intangible Assets Impairment Assessments

As described in Notes 1 and 2 to the consolidated financial statements, the Company’s consolidated goodwill and indefinite-lived intangible assets balances were $53.8 billion and $8.6 billion, respectively, as of December 31, 2022.

A portion of the total goodwill balance relates to certain reporting units of the Collins Aerospace segment.

A portion of the total indefinite-lived intangible assets balance relates to the Collins Aerospace segment.

Goodwill and indefinite-lived intangible assets are subject to impairment testing annually, or more frequently if events or changes in circumstances indicate the asset might be impaired.

For the quantitative assessments that are performed, fair value is primarily based on market-based valuation methods, income-based methods using a discounted cash flow model, relief from royalty methods, or a combination of such.

These assessments utilize significant assumptions related to sales growth rates, projected operating profit, terminal growth rates, discount rates, royalty rates, and comparable multiples from publicly traded companies in the aerospace and defense industry.

The impairment testing compares carrying values to estimated fair values.

If the carrying value exceeds the fair value, then the carrying value is reduced to fair value.

The principal considerations for our determination that performing procedures relating to the goodwill and indefinite-lived intangible assets impairment assessments is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of certain reporting units and indefinite-lived intangible assets of the Collins Aerospace segment, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to sales growth rates, discount rates, and comparable multiples from publicly traded companies in the aerospace and defense industry, as applicable, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill and indefinite-lived intangible assets impairment assessments, including controls over the valuation of certain reporting units and indefinite-lived intangible assets of the Collins Aerospace segment.

These procedures also included, among others (i) testing management’s process for developing the fair value estimates, (ii) evaluating the appropriateness of the methodologies used to estimate fair value, (iii) testing the completeness and accuracy of underlying data used in developing the estimates, and (iv) evaluating the reasonableness of the significant assumptions used by management related to sales growth rates, discount rates, and comparable multiples from publicly traded companies in the aerospace and defense industry, as applicable.

Evaluating management’s assumptions related to sales growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the relevant businesses, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s discounted cash flow, market-based valuation, and relief from royalty methods, and (ii) the reasonableness of the discount rates and comparable multiples from publicly traded companies in the aerospace and defense industry assumptions.

These procedures also included, among others, testing management’s process for developing the estimated total revenue and total costs at completion, including evaluating on a test basis the reasonableness of certain significant judgments and inputs considered by management specific to each contract or performance obligation.

Evaluating the significant judgments and assumptions related to the estimates of total revenue and total costs at completion on a contract-by-contract basis involved evaluating whether the significant judgments and assumptions used were reasonable considering:

(i) management’s historical

forecasting accuracy, (ii) evidence to support the aforementioned inputs relevant to an individual contract, (iii) the consistent application of accounting policies, and (iv) the timely identification of circumstances which may warrant a modification to a previous estimate.

/s/ PricewaterhouseCoopers LLP

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We have served as the Company’s auditor since 1947.

RAYTHEON TECHNOLOGIES CORPORATION

RTX CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

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Total costs and expenses 65,445 61,690 59,675

Goodwill impairment — — ( 3,183 )

Other income, net 86 120 423

Operating profit (loss) 5,414 4,958 ( 1,889 )

Operating profit 3,561 5,504 5,136

Non-operating expense (income), net:

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Total non-operating expense (income), net ( 275 ) ( 613 ) 27

Income (loss) from continuing operations before income taxes 6,027 4,931 ( 2,353 )

Income from continuing operations before income taxes 3,836 6,117 5,109

Income tax expense 456 790 964

Net income (loss) from continuing operations 5,327 4,145 ( 2,928 )

Net income from continuing operations 3,380 5,327 4,145

Noncontrolling interest in subsidiaries’ earnings from continuing operations 185 111 248

Net income (loss) from continuing operations attributable to common shareowners 5,216 3,897 ( 3,109 )

Discontinued operations (Note 3)

Loss from discontinued operations ( 30 ) ( 10 ) ( 216 )

Income tax expense (benefit) from discontinued operations ( 11 ) 23 151

Loss from discontinued operations ( 19 ) ( 33 ) ( 367 )

Noncontrolling interest in subsidiaries’ earnings from discontinued operations — — 43

Net income from continuing operations attributable to common shareowners 3,195 5,216 3,897

Loss from discontinued operations attributable to common shareowners — ( 19 ) ( 33 )

Net income (loss) attributable to common shareowners $ 5,197 $ 3,864 $ ( 3,519 )

Net income attributable to common shareowners $ 3,195 $ 5,197 $ 3,864

Earnings (loss) per share attributable to common shareowners - basic

Income (loss) from continuing operations attributable to common shareowners $ 3.54 $ 2.60 $ ( 2.29 )

Income from continuing operations attributable to common shareowners $ 2.24 $ 3.54 $ 2.60

Loss from discontinued operations — ( 0.02 ) ( 0.03 )

Net income (loss) attributable to common shareowners $ 3.52 $ 2.57 $ ( 2.59 )

Net income attributable to common shareowners $ 2.24 $ 3.52 $ 2.57

Earnings (loss) per share attributable to common shareowners - diluted

Income (loss) from continuing operations attributable to common shareowners $ 3.51 $ 2.58 $ ( 2.29 )

Income from continuing operations attributable to common shareowners $ 2.23 $ 3.51 $ 2.58

Loss from discontinued operations — ( 0.01 ) ( 0.02 )

Net income (loss) attributable to common shareowners $ 3.50 $ 2.56 $ ( 2.59 )

Net income attributable to common shareowners $ 2.23 $ 3.50 $ 2.56

Weighted average number of shares outstanding:

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See accompanying Notes to Consolidated Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

RTX CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(dollars in millions) 2023 2022 2021

Net income (loss) from continuing and discontinued operations $ 5,308 $ 4,112 $ ( 3,295 )

Net income from continuing and discontinued operations $ 3,380 $ 5,308 $ 4,112

Pension and postretirement benefit plans adjustments

Net actuarial gain (loss) arising during period 1,291 3,246 ( 202 )

Prior service credit (cost) arising during period ( 131 ) ( 59 ) 2,095

Amortization of actuarial loss and prior service cost 129 258 373

Net actuarial (loss) gain arising during period ( 971 ) 1,291 3,246

Prior service cost arising during period ( 19 ) ( 131 ) ( 59 )

Amortization of actuarial (gain) loss and prior service cost ( 568 ) 129 258

Other ( 51 ) 65 23

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Foreign currency translation adjustments 562 ( 1,048 ) ( 647 )

Other comprehensive income, before tax 163 2,567 3,087

Other comprehensive income (loss), before tax ( 689 ) 163 2,567

Income tax expense related to items of other comprehensive income 288 ( 266 ) ( 748 )

Other comprehensive income (loss), net of tax ( 401 ) ( 103 ) 1,819

Comprehensive income (loss) 5,205 5,931 ( 755 )

Comprehensive income 2,979 5,205 5,931

Comprehensive income attributable to noncontrolling interest 185 111 248

Comprehensive income (loss) attributable to common shareowners $ 5,094 $ 5,683 $ ( 979 )

Comprehensive income attributable to common shareowners $ 2,794 $ 5,094 $ 5,683

See accompanying Notes to Consolidated Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

RTX CORPORATION

CONSOLIDATED BALANCE SHEET

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See accompanying Notes to Consolidated Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

RTX CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

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Operating Activities:

Net income (loss) from continuing operations $ 5,327 $ 4,145 $ ( 2,928 )

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

Net income from continuing operations $ 3,380 $ 5,327 $ 4,145

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

Depreciation and amortization 4,211 4,108 4,557

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Debt extinguishment costs — — 649

Goodwill impairment charge — — 3,183

Accounts receivable ( 1,805 ) 437 ( 570 )

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Contract liabilities 2,322 846 1,372

Global pension contributions ( 94 ) ( 59 ) ( 1,025 )

Other operating activities, net 309 ( 133 ) ( 871 )

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Receipts from customer financing assets 212 179 389

Investments in businesses (Note 2) ( 66 ) ( 1,088 ) ( 419 )

Cash acquired in Raytheon merger — — 3,208

Dispositions of businesses, net of cash transferred (Note 2) 94 1,879 2,556

Investments in businesses — ( 66 ) ( 1,088 )

Dispositions of businesses, net of cash transferred 6 94 1,879

Increase in other intangible assets ( 751 ) ( 487 ) ( 308 )

Payments from settlements of derivative contracts, net ( 205 ) ( 16 ) ( 32 )

Receipts (payments) from settlements of derivative contracts, net 14 ( 205 ) ( 16 )

Other investing activities, net 12 94 145

Net cash flows (used in) provided by investing activities from continuing operations ( 2,829 ) ( 1,364 ) 3,343

Net cash flows used in investing activities from continuing operations ( 3,039 ) ( 2,829 ) ( 1,364 )

Financing Activities:

Issuance of long-term debt 1 4,062 2,004

Distribution from discontinued operations — — 17,207

Proceeds from long-term debt 12,914 1 4,062

Repayment of long-term debt ( 578 ) ( 3 ) ( 4,254 )

Proceeds from bridge loan 10,000 — —

Repayment of bridge loan ( 10,000 ) — —

Debt extinguishment costs — — ( 649 )

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Net cash used in investing activities — — —

Net cash provided by (used in) financing activities — 71 ( 1,414 )

Net cash provided by financing activities — — 71

Net cash used in discontinued operations — — —

Effect of foreign exchange rate changes on cash and cash equivalents from continuing operations 18 ( 42 ) ( 1 )

Effect of foreign exchange rate changes on cash and cash equivalents from discontinued operations — — ( 76 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 1,562 ) ( 979 ) 1,412

Net increase (decrease) in cash, cash equivalents and restricted cash 335 ( 1,562 ) ( 979 )

Cash, cash equivalents and restricted cash, beginning of year 6,291 7,853 8,832

Cash, cash equivalents and restricted cash within assets related to discontinued operations, beginning of year — — 2,459

Cash, cash equivalents and restricted cash, end of year 6,626 6,291 7,853

Restricted cash, included in Other assets 71 21 30

Restricted cash, included in Other assets, current and Other assets 39 71 21

Cash and cash equivalents, end of year $ 6,587 $ 6,220 $ 7,832

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Income taxes paid, net of refunds 1,527 2,400 1,124

(1) Amounts are inclusive of continuing operations and discontinued operations payments.

See accompanying Notes to Consolidated Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

RTX CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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Common stock plans activity 610 485 553

Common stock issued for Raytheon Company outstanding common stock and equity awards — — 10,897

Adjustment to Common stock for the Otis Distribution — — 2,598

Common stock repurchased ( 1,500 ) — —

Common stock contributed to defined benefit pension plans 7 — —

Purchase of subsidiary shares from noncontrolling interest, net ( 1 ) ( 29 ) —

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Balance at January 1 ( 15,530 ) ( 12,727 ) ( 10,407 )

Common stock plans activity — — 2

Common stock repurchased ( 11,490 ) ( 2,803 ) ( 2,331 )

Common stock issued for Raytheon Company outstanding common stock and equity awards — — 22,269

Other — 11 ( 9 )

Common stock contributed to defined benefit pension plans 43 — —

Balance at December 31 ( 26,977 ) ( 15,530 ) ( 12,727 )

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Balance at January 1 52,269 50,265 49,423

Net income (loss) 5,197 3,864 ( 3,519 )

Adjustment to retained earnings for the Carrier Distribution — — ( 5,805 )

Net income 3,195 5,197 3,864

Dividends on common stock ( 3,239 ) ( 3,128 ) ( 2,957 )

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Other comprehensive income (loss), net of tax ( 401 ) ( 103 ) 1,819

Separation of Carrier and Otis — — 3,875

Balance at December 31 ( 2,419 ) ( 2,018 ) ( 1,915 )

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Net income 185 111 248

Redeemable noncontrolling interest net income (loss) ( 8 ) ( 8 ) ( 4 )

Redeemable noncontrolling interest net income ( 8 ) ( 8 ) ( 8 )

Dividends attributable to noncontrolling interest ( 108 ) ( 132 ) ( 332 )

Sale (purchase) of subsidiary shares from noncontrolling interest, net ( 19 ) — 66

Acquisition (disposition) of noncontrolling interest, net ( 13 ) ( 1 ) 1

Separation of Carrier and Otis — — ( 865 )

Capital contributions (distributions) 11 — ( 31 )

Purchase of subsidiary shares from noncontrolling interest, net — ( 19 ) —

Disposition of noncontrolling interest, net ( 3 ) ( 13 ) ( 1 )

Capital contributions — 11 —

Balance at December 31 1,612 1,546 1,596

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Shares of common stock repurchased 141,712 29,935 28,052

Shares of common stock issued for Raytheon Company outstanding common stock and equity awards — — 652,638

Shares of common stock contributed to benefit plans 623 — —

Dividends declared per share of common stock $ 2.320 $ 2.160 $ 2.005

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Actual results could differ from those estimates.

Separation Transactions, Distributions and Raytheon Merger.

On April 3, 2020, United Technologies Corporation (UTC) (since renamed Raytheon Technologies Corporation) completed the separation of its business into three independent, publicly traded companies – UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis) (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 Distributions).

Immediately following 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.” 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.

Unless otherwise indicated, amounts and activity throughout these Consolidated Financial Statements are presented on a continuing operations basis.

Refer to “Note 3:

Discontinued Operations” below for further details.

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

UTC was determined to be the accounting acquirer in the Raytheon merger and, as a result, the financial statements of Raytheon Technologies for the year ended December 31, 2020 include Raytheon Company’s financial position and results of operations for the period subsequent to the completion of the Raytheon merger on April 3, 2020.

Effective July 17, 2023, we changed our legal name from Raytheon Technologies Corporation to RTX Corporation.

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

Organizational Structure.

As previously announced, effective July 1, 2023, we streamlined the structure of our core businesses to three principal business segments:

Collins Aerospace (Collins), Pratt & Whitney, and Raytheon.

All segment information included in this Form 10-K is reflective of this new structure and prior period information has been recast to conform to our current period presentation.

In conjunction with the segment realignment, the Company revised its accounting policy with respect to the financial statement presentation of an immaterial amount of state income taxes allocable to U.S.

government contracts related to our legacy Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD) segments.

Prior to July 1, 2023, these state income taxes were classified as Selling, general and administrative expenses.

Effective with the segment change, state income tax amounts previously reported within Selling, general, and administrative expenses were reclassified to Income tax expense (benefit) within the Consolidated Statement of Operations, and prior period amounts have been reclassified to conform to our current period presentation.

Pratt & Whitney Powder Metal Matter.

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 (A320neo) (herein referred to as the “Powder Metal Matter”).

See “Note 17:

Commitments and Contingencies” for additional information.

Russia Sanctions.

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

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

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 Aerospace (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 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.

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 receivable 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.

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

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.

As a result of COVID-19, commercial air travel demand experienced an unprecedented downturn as governments, businesses and individuals reacted to the pandemic in ways such as lockdowns, quarantines, border closings and other travel restrictions and requirements, the adoption of remote working and decreased leisure travel.

The unprecedented decrease in air travel adversely affected our airline and airframer customers and their demand for our products and services of our Collins and Pratt & Whitney businesses.

In addition, the border closings, lockdowns and labor shortages resulting from COVID-19 negatively impacted global supply and distribution capabilities.

Decreases in the availability of supplies, increases in the cost of supplies and delivery issues have caused shortages and delays for the procurement of raw materials, components and other supplies required for our performance, although 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, uncertainty continues with respect to when commercial air traffic capacity will fully return to and/or exceed pre-COVID-19 levels.

The pace of the commercial aerospace recovery is tied to general economic conditions and may be impacted by inflation, an economic downturn, or government budget deficits, among other factors, and may also be impacted by a resurgence of the pandemic and corresponding travel restrictions and protocols.

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;

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

However, we believe the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, and we are not expecting significant additional direct COVID-19-related impacts on our business.

Our expectations regarding the effects of the COVID-19 pandemic 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.

In 2020, we recorded write-downs of assets and significant unfavorable Estimate at Completion (EAC) adjustments in our Collins and Pratt & Whitney businesses primarily related to:

• goodwill impairment charges of $ 3.2 billion related to two of our Collins reporting units.

Refer to “Note 2:

Business Acquisitions, Dispositions, Goodwill and Intangible Assets” for additional information;

• increased estimated credit losses on both our receivables and contract assets of $ 387 million;

• an unfavorable EAC adjustment on a Pratt & Whitney commercial engine aftermarket contract due to lower estimated revenues driven by a change in the estimated maintenance coverage period of $ 334 million;

• contract asset and inventory impairments at Collins due to the impact of lower estimated future customer activity resulting from the expected acceleration of fleet retirements of a certain commercial aircraft type of $ 146 million;

• an unfavorable EAC adjustment of $ 129 million related to lower estimated revenues due to the restructuring of a customer contract at Pratt & Whitney;

• an $ 89 million impairment of commercial aircraft program assets at Pratt & Whitney;

• the impairment of a Collins trade name of $ 57 million;

• net unfavorable EAC adjustments on commercial aftermarket contracts at Pratt & Whitney based on a change in estimated future customer activity of $ 75 million;

• an unfavorable EAC adjustment at Pratt & Whitney related to a shift in overhead costs to military contracts of $ 44 million;

• reserves related to a commercial financing arrangement at Pratt & Whitney of $ 43 million.

Summary of Accounting Principles.

The following represents the significant accounting principles of Raytheon Technologies Corporation.

The following represents the significant accounting principles of RTX Corporation.

Consolidation and Classification.

The Consolidated Financial Statements include the accounts of Raytheon Technologies Corporation, and all wholly owned, majority-owned and otherwise controlled domestic and foreign subsidiaries.

The Consolidated Financial Statements include the accounts of RTX Corporation, and all wholly owned, majority-owned, and otherwise controlled domestic and foreign subsidiaries.

All intercompany transactions have been eliminated.

For our consolidated non-wholly owned subsidiaries, a noncontrolling interest is recognized to reflect the portion of equity that is not attributable to us.

For our consolidated non-wholly owned subsidiaries, a noncontrolling interest is recognized to reflect the portion of income and equity that is not attributable to us.

For classification of certain current assets and liabilities, the duration of our contracts or programs is utilized to define our operating cycle, which is generally longer than one year.

Included within our Current assets and liabilities are Contract assets and liabilities related to our aftermarket and development arrangements, which can generally span up to fifteen years.

Included within our current assets and liabilities are Contract assets and liabilities related to our aftermarket and development arrangements, which can generally span up to twenty years.

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

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Accounts receivable are stated at the net amount expected to be collected.

Accounts receivable related to the commercial aerospace industry was approximately 80 % and 73 % of Accounts receivable, net at December 31, 2023 and 2022, respectively.

We are exposed to credit losses primarily on our accounts receivable and contract assets related to our sales of products and services to commercial customers.

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We conduct a review of customer credit ratings, published historical credit default rates for different rating categories, and multiple third-party aircraft value publications as a basis to validate the reasonableness of the allowance for expected credit losses on a quarterly basis, or when events and circumstances warrant.

A credit limit is established for each

customer based on the outcome of this review and consideration of the other factors discussed above.

A credit limit is established for each customer based on the outcome of this review and consideration of the other factors discussed above.

In certain cases, we may require collateral or prepayment to mitigate credit risk.

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These items are expected to be billed and collected in the normal course of business.

Accounts receivable as of December 31, 2022 and 2021 includes unbilled receivables of $ 298 million and $ 342 million, respectively, which primarily includes unbilled receivables with commercial aerospace customers.

Accounts receivable, net as of December 31, 2023 and 2022 includes unbilled receivables of $ 427 million and $ 298 million, respectively, which primarily includes unbilled receivables with commercial aerospace customers.

Other unbilled receivables where payment is subject to factors beyond just the passage of time are included in Contract assets in the Consolidated Balance Sheet.

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Manufacturing costs are allocated to current production contracts.

In our commercial aerospace businesses, excess costs beyond standard manufacturing costs are expensed when they meet certain thresholds.

Equity Investments.

Investments in entities we do not control are included in Other assets on the Consolidated Balance Sheet.

For investments where we have significant influence, we apply the equity method of accounting, and as such, our share of the net earnings or losses of the investee is recorded.

For investments where we have significant influence, we apply the equity method of accounting, and as such, our share of the

net earnings or losses of the investee is recorded.

For investments where we do not have significant influence, we record them at cost under the measurement alternative and record adjustments for observable price changes.

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Customer financing assets (CFA) relate to our commercial aerospace businesses in which we provide financing to airline customers.

Our financing predominantly relates to products under lease, and to a lesser extent, notes and lease receivables.

Our financing predominantly relates to products under lease, often provided through the customers’ aftermarket maintenance coverage, and to a lesser extent, notes and lease receivables.

In certain limited circumstances, we pay deposits on behalf of our airline customers to secure production slots with the airframers, and such pre-delivery payments are included in Accounts receivable, net, if current, and Customer financing assets, if non-current, in our Consolidated Balance Sheet.

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Commitments and Contingencies.” Interest income from notes and financing leases and rental income from operating lease assets is generally included in Other income, net in the Consolidated Statement of Operations, while gains or losses on sales of operating lease assets are included in Products sales and Cost of sales.

The current portion of these financing arrangements are aggregated in Accounts receivable, net and the non-current portion of these financing arrangements are aggregated in CFA in the Consolidated Balance Sheet.

The increases and decreases in CFA from funding, receipts, and certain other activity, are generally reflected as Investing Activities in the Consolidated Statement of Cash Flows.

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Notes and lease receivables are valued at the net amount expected to be collected.

For notes and lease receivables, we determine a specific reserve for exposure based on the difference between the carrying value of the receivable and the estimated fair value of the related collateral in connection with

the evaluation of credit risk and collectability.

As of December 31, 2023 and 2022, the reserves related to CFA were not material.

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Once a business is acquired, the fair value of the identifiable assets acquired and liabilities assumed is determined with the excess cost recorded to goodwill.

As required, a preliminary fair value is determined once a business is acquired, with the final determination of the fair value being completed no later than one year from the date of acquisition.

A preliminary fair value is determined once a business is acquired, with the final determination of the fair value being completed no later than one year from the date of acquisition.

In connection with the acquisitions of Rockwell Collins in 2018 and Goodrich in 2012, and to a lesser extent the acquisition of Raytheon Company in 2020, we recorded assumed liabilities related to customer contractual obligations on certain contracts with economic returns that were lower than what could be realized in market transactions as of the acquisition date.

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If the carrying value exceeds the fair value then the carrying value is reduced to fair value.

In developing our estimates for the fair value of our reporting units and indefinite-lived intangible assets, significant judgment is required in the determination of the appropriateness of using a qualitative assessment or quantitative assessment.

In evaluating our reporting units and indefinite-lived intangible assets for impairment, we may perform both qualitative and quantitative assessments.

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These flight hour payments are being capitalized as collaboration assets and amortized to cost of sales.

Useful lives of finite-lived intangible assets are estimated based upon the nature of the intangible asset and the industry in which the intangible asset is used.

Useful lives of finite-lived intangible assets are estimated based upon the nature of the intangible asset and how the intangible asset is used.

These intangible assets are amortized based on the pattern in which the economic benefits of the intangible assets are consumed, as represented by the underlying cash flows, which may result in an amortization method other than straight-line.

For both our commercial aerospace collaboration assets and exclusivity arrangements, the pattern of economic benefit generally results in no amortization during the development period with amortization beginning as programs enter full rate production and aftermarket cycles.

If a pattern of economic benefit cannot be reliably determined or if straight-

line amortization approximates the pattern of economic benefit, a straight-line amortization method may be used.

If a pattern of economic benefit cannot be reliably determined or if straight-line amortization approximates the pattern of economic benefit, a straight-line amortization method may be used.

The range of estimated useful lives is as follows:

Collaboration assets 30

Collaboration assets 9 to 30

Customer relationships and related programs 3 to 30

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Operating leases are included in Operating lease right-of-use assets and Operating lease liabilities, non-current on our Consolidated Balance Sheet.

The current portion of our operating lease liabilities is included in Accrued liabilities on our Consolidated Balance Sheet.

The current portion of our operating lease liabilities is included in Other accrued liabilities on our Consolidated Balance Sheet.

Finance leases are not considered significant to our Consolidated Balance Sheet or Consolidated Statement of Operations.

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Lease expense is generally recognized on a straight-line basis over the lease term.

In limited instances we act as a lessor, primarily for commercial aerospace engines, the majority of which are classified as operating leases.

In limited instances we act as a lessor, primarily for commercial aerospace engines for a short term during maintenance events.

The majority of these leases are classified as operating leases.

These leases are not significant to our Consolidated Balance Sheet or Consolidated Statement of Operations.

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State income tax amounts are generally included in income tax expense.

however state income tax payments related to our Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD) segments are generally recoverable through the pricing of products and

services to the U.S.

government, and, accordingly, we have recorded the future recovery of these costs from the U.S.

government within Other assets, current in the Consolidated Balance Sheet.

Accordingly, these state income taxes are generally allocated to contracts and then classified as Selling, general and administrative expenses when paid (recovered) or otherwise agreed as allocable with the U.S.

We have elected to account for tax on Global Intangible Low-Taxed Income ( GILTI) as a period cost, as incurred.

Revenue Recognition.

The vast majority of our revenues are from long-term contracts associated with the design, development, manufacture or modification of complex aerospace or defense equipment or related services.

Collins and Pratt & Whitney primarily serve commercial and government customers in both the original equipment manufacturer (OEM) and aftermarket parts and services markets of the aerospace industry, while RIS and RMD primarily provide products and services to government customers in the defense industry.

A majority of our revenues are from long-term contracts associated with the design, development, manufacture, or modification of complex aerospace or defense equipment or related services.

Collins and Pratt & Whitney primarily serve commercial and government customers in both the original equipment manufacturer (OEM) and aftermarket parts and services markets of the aerospace industry, while Raytheon primarily provides products and services to government customers in the defense industry.

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

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We consider the contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price, including contractual discounts, contract incentive payments, estimates of award fees, flight hours, aircraft landings or other customer usage activities on long-term maintenance contracts, and other sources of variable consideration, when determining the transaction price of each contract.

We account for consideration payable to a customer as a reduction of revenue.

Consideration payable to a customer may include cash amounts we are obligated to pay or expect to pay a customer, as well as credits or other items that can be applied against amounts owed to us.

In our Collins and Pratt & Whitney businesses, we may offer customer incentives to purchase our products, which may result in payments made to those customers.

When reasonably able to estimate, we include variable consideration in the transaction price at the most likely amount to which we expect to be entitled.

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Revenue is recognized when control of the product transfers to the customer, generally upon product shipment.

Since billing also typically occurs upon product shipment, we generally do not have Contract assets or Contract liabilities balances related to point in time sales.

Since billing also

typically occurs upon product shipment, we generally do not have Contract assets or Contract liabilities balances related to point-in-time sales.

Performance obligations are satisfied over time if the customer receives the benefits as we perform work, if the customer controls the asset as it is being produced (continuous transfer of control), or if the product being produced for the customer has no alternative use and we have a contractual right to payment for performance to date.

We recognize revenue on an over-time basis for substantially all defense contracts and certain long-term aerospace OEM and aftermarket contracts.

Substantially all of our defense business revenue, which primarily relates to our RIS and RMD segments, and to a lesser extent Pratt & Whitney and Collins, is recognized over time because of the continuous transfer of control to our customers.

Substantially all of our defense business revenue, which primarily relates to our Raytheon segment, and to a lesser extent Pratt & Whitney and Collins, is recognized over time because of the continuous transfer of control to our customers.

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government fixed-price contracts, the customer pays us either performance-based payments (PBPs) or progress payments.

PBPs are interim payments equal to a negotiated percentage of the

contract price based on quantifiable measures of performance or on the achievement of specified events or milestones.

PBPs are interim payments equal to a negotiated percentage of the contract price based on quantifiable measures of performance or on the achievement of specified events or milestones.

Progress payments are interim payments up to 80-90% of costs incurred as the work progresses.

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For significant contracts, we review our EACs more frequently.

Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many inputs, and requires significant judgment by management on a contract-by-contract basis.

this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities, and the related changes in estimates of revenues and costs.

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, 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.

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 changing 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.

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Changes in estimates of net sales, cost of sales, and the related impact to operating profit on contracts recognized over time are recognized on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage-of-completion in the current period.

A significant change in one or

more of these estimates could affect the profitability of one or more of our performance obligations.

A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations.

Our EAC adjustments also include the establishment of, and changes to, loss provisions for our contracts accounted for on a percentage-of-completion basis.

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statutory tax rate of 21%, which approximates our tax rate on our EAC adjustments.

For additional discussion on significant unfavorable EAC adjustments in 2020, see the COVID-19 Pandemic discussion above.

As a result of the Raytheon merger, Raytheon Company’s contracts accounted for on a percentage of completion basis were reset to zero percent complete as of the merger date, because only the unperformed portion of the contract at the merger date represented the obligation of the Company.

This had the impact of reducing EAC adjustments for these segments in the short term period following the merger, most notably in 2020.

For additional information related to the Raytheon merger, see “Note 2:

Business Acquisitions, Dispositions, Goodwill and Intangible Assets.”

In our Collins and Pratt & Whitney businesses, we may offer customers incentives to purchase our products, which may result in payments made to those customers, which are treated as a reduction in sales.

In our Collins and Pratt & Whitney businesses, we incur contract fulfillment costs for engineering and development of aerospace products directly related to existing or anticipated contracts with customers.

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Capitalized contract fulfillment costs were $ 2.6 billion and $ 2.3 billion as of December 31, 2023 and 2022, respectively, and are classified in Other assets, current in our Consolidated Balance Sheet and are included in Other current assets in our Consolidated Statement of Cash Flows.

We regularly assess capitalized contract fulfillment costs for impairment and recognized $ 111 million of impairment for contract fulfillment costs in 2020 in conjunction with the related impacts of the COVID-19 pandemic.

Costs to obtain contracts are not material.

In view of the risks and costs associated with developing new engines and the large up-front investments required that often require returns generated over the full estimated life of the engine, Pratt & Whitney has entered into certain collaboration arrangements in which sales, costs, and risks are shared.

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Pratt & Whitney is the principal participant in all existing collaborative arrangements, with the exception of the Engine Alliance (EA), a joint venture with GE Aviation, which provides aftermarket support, spare parts, and service for the GP7000 engine for the Airbus A380 aircraft.

There are no individually significant collaborative arrangements, and none of the collaborators individually have more than a

25 % share in an individual program.

The following table illustrates the Consolidated Statement of Operations classification and amounts attributable to transactions arising from the collaborative arrangements between participants for each period presented.

There are no individually significant collaborative arrangements, and none of the collaborators individually have more than a 25 % share in an individual program where Pratt & Whitney is the principal participant.

The following table illustrates the

Consolidated Statement of Operations classification and amounts attributable to transactions arising from the collaborative arrangements between participants for each period presented.

(dollars in millions) 2023 2022 2021

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Cost of sales - products (1)

$ ( 181 ) $ 2,058 $ 1,534

Cost of sales - services 2,151 1,808 1,428

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Selling, general, and administrative ( 114 ) ( 105 ) ( 85 )

(1) Total cost of sales includes a net reduction of $ 2.6 billion related to our collaborators’ share of the Powder Metal Matter.

Remaining Performance Obligations (RPO).

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

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

Total RPO was $ 196 billion as of December 31, 2023.

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 above.

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

Of the total RPO as of December 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 20 years.

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We enter into transactions that are subject to enforceable master netting arrangements or similar agreements with various counterparties.

However, we have not elected to offset multiple contracts with a single counterparty and, as a result, the fair value of the derivative instruments in a loss position is not offset against the fair value of derivative instruments in a gain position.

While we have rights to offset multiple contracts with a single counterparty in an event of default, those obligations remain separate and distinct otherwise, and, as a result, the fair value of the derivative instruments in a loss position is not offset against the fair value of derivative instruments in a gain position in our financial statements.

Derivatives used for hedging purposes may be designated and effective as a hedge of the identified risk exposure at the inception of the contract.

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Funded status is measured at least annually in the fourth quarter and represents the difference between the plans’ projected benefit obligation (PBO) and the fair market value of the plans’ assets.

Changes to our pension and PRB plans’ funded status can result from company actions, such as contributions or changes in plan provisions, or by gains and losses.

Changes to our pension and PRB plans’ funded status can result from company actions, such as contributions, changes in plan provisions, or by gains and losses.

Gains and losses are primarily a result of changes in assumptions and actual experience that differs from these assumptions.

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These gains or losses are recorded in other comprehensive income, net of tax effects, until they are amortized as a component of net periodic benefit (income) expense.

A calculated “market-related value” of our plan assets is used to develop the amount of deferred asset gains or losses to be amortized.

The market-related value of assets is equal to the fair value of assets adjusted to reflect the recognition, and subsequent amortization, of the difference between actual and expected asset returns over a five-year period.

A calculated “market-related value” of our plan assets is generally used to develop the amount of deferred asset gains or losses to be amortized.

The market-related value of assets is generally equal to the fair value of assets adjusted to reflect the recognition, and subsequent amortization, of the difference between actual and expected asset returns over a five-year period.

The market-related value of assets is used to calculate the expected return on assets included in the net periodic benefit (income) expense.

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Gains and losses exceeding the corridor are amortized in net periodic benefit (income) expense over either the projected average remaining employee service period or the projected average remaining lifetime of inactive participants depending on the plan.

Net periodic benefit (income) expense is classified between operating and non-operating, whereby only the service cost component is included in operating profit and the remaining components are included in Non-service pension (income) expense.

Product Performance Obligations.

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Accounting Pronouncements.

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

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, to enhance income tax reporting disclosures and require disclosure of specific categories in the tabular rate reconciliation.

The new standard is effective for fiscal years beginning after December 15, 2024, on a prospective basis.

Early adoption and retrospective application are permitted.

We are currently evaluating the impact on our disclosures of adopting this new pronouncement.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which expands the segment reporting disclosures and requires disclosure of segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, amounts and description of its composition for other segment items, and interim disclosure of a reportable segment’s profit or loss and assets.

Additionally, the amendments require the disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing performance and deciding how to allocate resources.

The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis.

Early adoption is permitted.

We are currently evaluating the impact on our disclosures of adopting this new pronouncement.

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

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

The new standard is effective for fiscal years beginning after December 15, 2022, on a retrospective basis, including interim periods within those fiscal years.

We are currently evaluating the impact of adopting this new pronouncement.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

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.

The adoption of this standard did not have an 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.

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

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

BUSINESS ACQUISITIONS, DISPOSITIONS, GOODWILL AND INTANGIBLE ASSETS

Business Acquisitions.

Our investments in businesses, net of cash acquired, in 2022, 2021 and 2020 totaled $ 66 million, $ 1.1 billion and $ 35.1 billion, respectively.

Our investments in business in 2022 consisted of immaterial acquisitions.

Our investments in business in 2021 and 2020 primarily consisted of the acquisitions discussed below.

ACQUISITIONS AND DISPOSITIONS

Acquisitions.

Our investments in businesses, net of cash acquired, in 2022 and 2021 totaled $ 66 million and $ 1.1 billion, respectively.

Our investments in businesses in 2022 consisted of insignificant acquisitions.

Our investments in businesses in 2021 primarily consisted of the acquisitions discussed below.

In November 2021, we completed the acquisitions of FlightAware and SEAKR Engineering Inc., for a total of approximately $ 1.1 billion, net of cash received.

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SEAKR Engineering Inc.

is a leading supplier of advanced space electronics and is reported in the RIS segment.

is a leading supplier of advanced space electronics and is reported in the Raytheon segment.

In connection with these acquisitions, we recorded $ 0.8 billion of goodwill and $ 0.3 billion of intangible assets.

In December 2020, we completed the acquisition of Blue Canyon Technologies, a leading provider of small satellites and spacecraft systems components for $ 425 million, net of cash received.

Blue Canyon Technologies is reported in the RIS segment.

In connection with this acquisition, we recorded $ 281 million of goodwill and $ 149 million of intangible assets.

Pro forma financial information and revenue from the date of acquisition have not been provided for these acquisitions as they are not material either individually or in the aggregate.

Raytheon Merger.

As discussed in “Note 1:

Basis of Presentation and Summary of Accounting Principles”, on April 3, 2020, UTC and Raytheon Company completed an all-stock merger of equals, following the completion by UTC of the Separation Transactions and Distributions.

Raytheon Company (previously New York Stock Exchange (NYSE):

RTN) shares ceased trading prior to the market open on April 3, 2020, and each share of Raytheon common stock was converted in the merger into the right to receive 2.3348 shares of UTC common stock, previously traded on the NYSE under the ticker symbol “UTX.” Upon closing of the Raytheon merger, UTC’s name was changed to “Raytheon Technologies Corporation,” and its shares of common stock began trading as of April 3, 2020 on the NYSE under the ticker symbol “RTX.”

Total consideration is calculated as follows:

(dollars in millions) Amount

Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards $ 33,067

Fair value attributable to pre-merger service for replacement equity awards 99

Total merger consideration $ 33,166

The fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards is calculated as follows:

(dollars and shares in millions, except per share amounts and exchange ratio) Amount

Number of Raytheon Company common shares outstanding as of April 3, 2020 277.3

Number of Raytheon Company stock awards vested as a result of the Raytheon merger (1)

Total outstanding shares of Raytheon Company common stock and equity awards entitled to merger consideration 277.7

Exchange ratio (2)

Shares of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards 648.4

Price per share of RTC common stock (3)

Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards $ 33,067

(1) Represents Raytheon Company stock awards that vested as a result of the Raytheon merger, which is considered a “change in control” for purposes of the Raytheon 2010 Stock Plan.

Certain Raytheon Company restricted stock awards and Raytheon Company restricted stock unit (RSU) awards, issued under the Raytheon 2010 Stock Plan vested on an accelerated basis as a result of the Raytheon merger.

Such vested awards were converted into the right to receive RTC common stock determined as the product of (1) the number of vested awards, and (2) the exchange ratio.

(2) The exchange ratio is equal to 2.3348 shares of UTC common stock for each share of Raytheon Company common stock in accordance with the Raytheon merger agreement.

(3) The price per share of RTC common stock is based on the RTC opening stock price as of April 3, 2020.

Allocation of Consideration Transferred to Net Assets Acquired.

We accounted for the Raytheon merger under the acquisition method and are required to measure identifiable assets acquired and liabilities assumed of the acquiree (Raytheon Company) at the fair values on the closing date.

During the first quarter of 2021, based on the finalization of our valuation and internal reviews, we completed the purchase price allocation which resulted in a net increase to goodwill of $ 61 million.

The final purchase price allocation, net of cash acquired, for the acquisition was as follows:

(dollars in millions)

Cash and cash equivalents $ 3,208

Accounts receivable 1,997

Contract assets 6,023

Inventory 705

Other assets, current 940

Fixed assets 4,745

Operating lease right-of-use assets 950

Intangible assets 19,130

Other assets 1,218

Total identifiable assets acquired 38,916

Accounts payable 1,477

Accrued employee compensation 1,492

Other accrued liabilities 1,921

Contract liabilities 3,002

Long-term debt, including current portion 4,700

Operating lease liabilities, non-current 738

Future pension and postretirement benefit obligations 11,607

Other long-term liabilities 2,368

Total liabilities acquired 27,305

Total identifiable net assets 11,611

Goodwill 21,589

Redeemable noncontrolling interest ( 34 )

Total consideration transferred $ 33,166

Fair value adjustments to Raytheon Company’s identified assets and liabilities included an increase in fixed assets of

$ 1.1 billion and an increase to future pension and postretirement benefit obligations of $ 3.6 billion, primarily related to remeasurement of the liability based on market conditions on the Raytheon merger closing date.

In determining the fair value of identifiable assets acquired and liabilities assumed, a review was conducted for any significant contingent assets or liabilities existing as of the closing date.

The assessment did not note any material contingencies related to existing legal or government action.

The Separation Transactions included the transfer of certain defined benefit plans from UTC to Carrier and Otis.

The plans transferred were primarily international plans with the majority of the UTC defined benefit liability remaining with Raytheon Technologies.

Upon separation, the pension participants within Carrier and Otis were effectively terminated from Raytheon Technologies.

The terminations triggered a mid-year remeasurement of the UTC domestic plans.

The remeasurement, which was calculated using discount rates and asset values as of April 3, 2020 (using March 31, 2020 as a practical expedient), resulted in a $ 2.4 billion increase to our pension liability, primarily due to a decrease in the fair market value of the plans’ assets since December 31, 2019.

All service cost previously associated with Carrier and Otis was reclassified to discontinued operations.

For non-service pension (income) expense and pension liabilities, generally only the portions related to the defined benefit plans transferred to Carrier and Otis as part of the Separation Transactions were reclassified to discontinued operations.

The fair values of the customer relationship intangible assets were determined by using a discounted cash flow valuation method, which is a form of the income approach.

Under this approach, the estimated future cash flows attributable to the asset are adjusted to exclude the future cash flows that can be attributed to supporting assets, such as tradenames or fixed assets.

Both the amount and the duration of the cash flows are considered from a market participant perspective.

Our estimates of market participant future cash flows, which required significant management judgment, included forecasted revenue growth rates, remaining developmental effort, operational performance including company specific synergies, program life cycles, material and labor pricing, and other relevant customer, contractual and market factors.

Where appropriate, the net cash flows were probability-adjusted to reflect the uncertainties associated with the underlying assumptions, including cancellation rates related to backlog, government demand for sole-source and recompete contracts and win rates for recompete contracts, as well as the risk profile of the net cash flows utilized in the valuation.

The probability-adjusted future cash flows were then discounted to present value, using an appropriate discount rate that required significant judgment by management.

The customer relationship intangible assets are being amortized based on the pattern of economic benefits we expect to realize over the estimated economic life of the underlying programs.

The fair value of the tradename intangible assets were determined utilizing the relief from royalty method, which is a form of the income approach.

Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value, using forecasted revenue growth rate projections and a discount rate, respectively, that required significant judgment by management.

The tradename intangible assets were determined to have an indefinite life.

The developed technology intangible assets are being amortized based on the pattern of economic benefits.

The intangible assets included above consist of the following:

(dollars in millions) Fair Value Useful Life

Acquired customer relationships $ 12,900 25 years

Acquired tradenames 5,430 Indefinite

Acquired developed technology 800 5 to 7 years

Total identifiable intangible assets $ 19,130

We also identified customer contractual obligations on loss making programs and recorded liabilities of $ 222 million related to these programs based on the difference between the actual expected operating loss and a normalized operating profit.

These liabilities are being liquidated based on the expected pattern of expenses incurred on these contracts.

We recorded $ 21.6 billion of goodwill as a result of the Raytheon merger which primarily relates to expected synergies from combining operations and the value of the existing workforce.

The goodwill generated as a result of the Raytheon merger is nondeductible for tax purposes.

Merger-Related Costs.

Merger-related costs have been expensed as incurred.

In 2021 and 2020, we recorded $ 17 million and $ 142 million, respectively, of Raytheon merger transaction and integration costs.

These costs were recorded in Selling, general and administrative expenses within the Consolidated Statement of Operations.

Supplemental Pro-Forma Data.

Raytheon Company’s results of operations have been included in RTC’s financial statements for the period subsequent to the completion of the Raytheon merger on April 3, 2020.

The following unaudited supplemental pro-forma data presents consolidated information as if the Raytheon merger had been completed on January 1, 2019.

The pro-forma results were calculated by combining the results of Raytheon Technologies with the stand-alone results of Raytheon Company for the pre-acquisition periods, which were adjusted to account for certain costs that would have been incurred during

this pre-acquisition period.

The results below reflect Raytheon Technologies on a continuing operations basis, in order to more accurately represent the structure of Raytheon Technologies after completion of the Separation Transactions, the Distributions and the Raytheon merger.

(dollars in millions, except per share amounts) 2020

Net sales $ 64,087

Loss from continuing operations attributable to common shareowners ( 2,167 )

Basic loss per share of common stock from continuing operations $ ( 1.43 )

Diluted loss per share of common stock from continuing operations ( 1.43 )

The unaudited supplemental pro-forma data above includes the following significant adjustments made to account for certain costs which would have been incurred if the acquisition had been completed on January 1, 2019, as adjusted for the applicable tax impact.

As the merger was completed on April 3, 2020, the pro-forma adjustments in the table below only include the required adjustments through April 3, 2020.

(dollars in millions) 2020

Amortization of acquired Raytheon Company intangible assets, net (1)

Amortization of fixed asset fair value adjustment (2)

Utilization of contractual customer obligation (3)

Deferred revenue fair value adjustment (4)

Adjustment to non-service pension (income) expense (5)

RTC/Raytheon fees for advisory, legal, accounting services (6)

Adjustment to interest expense related to the Raytheon merger, net (7)

Elimination of deferred commission amortization (8)

(1) Reflects the additional amortization of the acquired Raytheon Company’s intangible assets recognized at fair value in purchase accounting and eliminates the historical Raytheon Company intangible asset amortization expense.

(2) Reflects the amortization of the fixed asset fair value adjustment as of the acquisition date.

(3) Reflects the additional amortization of liabilities recognized for certain acquired loss making contracts as of the acquisition date.

(4) Reflects the difference between prepayments related to extended arrangements and the fair value of the assumed performance obligations as they are satisfied.

(5) Represents the elimination of unamortized prior service costs and actuarial losses, as a result of fair value purchase accounting.

(6) Reflects the elimination of transaction-related fees incurred by RTC and Raytheon Company in connection with the Raytheon merger and assumes all of the fees were incurred during the first quarter of 2019.

(7) Reflects the amortization of the fair market value adjustment related to Raytheon Company.

(8) Reflects the elimination of amortization recognized on deferred commissions that are eliminated in purchase accounting.

The unaudited supplemental pro-forma financial information does not reflect the potential realization of cost savings related to the integration of the two companies.

Further, the pro-forma data should not be considered indicative of the results that would have occurred if the acquisition had been consummated on January 1, 2019, nor are they indicative of future results.

Dispositions.

In 2022, 2021 and 2020 cash inflows related to dispositions were $ 94 million, $ 1.9 billion and $ 2.6 billion, respectively.

Our dispositions of businesses in 2022 were immaterial.

Our dispositions of businesses in 2021 and 2020 consisted of the dispositions discussed below and other immaterial dispositions.

In December 2021, we divested our global training and services business within our RIS segment for approximately $ 0.9 billion in cash and other consideration, resulting in an aggregate pre-tax gain, net of transaction costs, of $ 251 million ($ 135 million after tax), which includes a $ 12 million pre-tax gain recognized in Non-service pension income within the Consolidated Statement of Operations.

In 2023, 2022, and 2021 cash inflows related to dispositions of businesses were $ 6 million, $ 94 million, and $ 1.9 billion, respectively.

Our dispositions of businesses in 2023 and 2022 consisted of insignificant dispositions.

Our dispositions of businesses in 2021 primarily consisted of the dispositions discussed below.

On October 18, 2023, we entered into a definitive agreement to sell our Cybersecurity, Intelligence and Services (CIS) business within our Raytheon segment for proceeds of approximately $ 1.3 billion.

At December 31, 2023, the related assets of approximately $ 1.0 billion and liabilities of approximately $ 300 million have been accounted for as held for sale at fair value less cost to sell;

however the disposition does not qualify for presentation as discontinued operations.

These held for sale assets and liabilities, including approximately $ 700 million of goodwill and intangibles, are presented in Other assets, current and Other assets and Other accrued liabilities and Other long-term liabilities, respectively, on our Consolidated Balance Sheet, consistent with the nature of the assets and liabilities classification before held for sale criteria was met.

The closing of the transaction is subject to regulatory approvals and other customary closing conditions.

As previously disclosed, on July 20, 2023, we entered into a definitive agreement to sell the actuation and flight control business within our Collins segment to Safran S.A.

for gross proceeds of approximately $ 1.8 billion.

The closing of the transaction is subject to regulatory approvals and other customary closing conditions.

On November 16, 2023, the Italian government notified RTX that it has denied Safran’s proposed acquisition of the portion of the Collins business conducted by

Microtecnica S.r.l.

RTX and Safran have both appealed that decision to the relevant regional court in Italy, and continue to evaluate additional options in response to the Italian government’s decision.

In December 2021, we divested our global training and services business within our Raytheon segment for approximately $ 0.9 billion in cash and other consideration, resulting in an aggregate pre-tax gain, net of transaction costs, of $ 251 million ($ 135 million after tax), which includes a $ 12 million pre-tax gain recognized in Non-service pension income within the Consolidated Statement of Operations.

In January 2021, we sold our Forcepoint business for proceeds of $ 1.1 billion, net of cash transferred.

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The results of Forcepoint were included in Eliminations and other in our segment results.

In the third quarter of 2020, in accordance with conditions imposed for regulatory approval of the Raytheon merger, we completed the sale of our Collins military Global Positioning System (GPS) and space-based precision optics businesses for $ 2.3 billion in cash, resulting in an aggregate pre-tax gain, net of transaction costs, of $ 580 million ($ 253 million after tax), of which $ 608 million was included in Other income, net partially offset by $ 20 million of aggregate transaction costs included in

Selling, general and administrative costs and an $ 8 million expense included in Non-service pension income within our Consolidated Statement of Operations.

In May 2020, in order to meet the requirements for regulatory approval of the Raytheon merger, we completed the sale of our airborne tactical radios business within our RIS segment for $ 231 million in cash, net of transaction-related costs.

As the transaction occurred subsequent to the Raytheon merger, the gain of $ 199 million was not recorded in the Consolidated Statement of Operations, but rather was recorded as an adjustment to the fair value of net assets acquired in the allocation of consideration transferred to net assets acquired in the Raytheon merger.

Changes in our goodwill balances for the year ended in 2022 were as follows:

(dollars in millions) Balance as of January 1, 2022 Acquisitions and Divestitures Foreign currency

translation and other Balance as of

December 31, 2022

GOODWILL AND INTANGIBLE ASSETS

Changes in our goodwill balances for the year ended December 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 December 31, 2023

Collins Aerospace $ 32,846 $ ( 3 ) $ 292 $ 33,135

Pratt & Whitney 1,563 — — 1,563

Raytheon Intelligence & Space 9,813 26 2 9,841

Raytheon Missiles & Defense 11,659 41 — 11,700

Total Segment 54,419 31 ( 627 ) 53,823

19,414 ( 430 ) — 18,984

Total Segments 53,823 ( 433 ) 292 53,682

Eliminations and other 17 — — 17

Total $ 53,840 $ ( 433 ) $ 292 $ 53,699

(1) The $ 430 million reduction in Acquisition and Divestitures reflects the reclassification of goodwill to held for sale assets as a result of our definitive agreement to sell our CIS business.

Acquisitions and Dispositions” for additional information.

The Company reviews goodwill for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired.

Effective July 1, 2023, we implemented a new organizational structure resulting in a change from four principal business segments to three principal business segments.

As a result, we reassigned goodwill and customer relationship intangibles to our new segment structure.

Goodwill was reassigned on a relative fair value basis, and we tested goodwill related to the impacted reporting units immediately before and after the reassignment and determined that no impairment existed.

We completed our annual goodwill impairment testing as of October 1, 2023 and determined that no adjustments to the carrying value of goodwill were necessary.

For those reporting units where we performed a quantitative test, we estimated the fair value of our reporting units using a combination of discounted cash flows and market-based valuation methodologies.

As noted above, these methodologies involve significant assumptions that are subject to variability.

The key assumptions used in our quantitative analysis include our business projections, including revenue growth rates and operating profit margins, the long-term growth rate used to calculate the terminal value of the reporting unit, the discount rate, and comparable multiples from publicly traded companies in our industry.

We consider both internal and external factors and refresh key assumptions annually or as considered necessary.

Material changes in these estimates could occur and result in impairments in future periods.

Based on our annual impairment analysis as of October 1, 2022, the reporting units that were closest to impairment were two previously combined Collins reporting units with fair values in excess of book values, including goodwill, of 15 % and 17 %.

The combined value of goodwill allocated to these two reporting units is approximately $ 9.5 billion as of the date testing was performed.

All other reporting units had a fair value substantially in excess of book value.

We considered the deterioration in general economic and market conditions primarily due to the COVID-19 pandemic to be a triggering event in the first and second quarters of 2020, requiring an impairment evaluation of goodwill, intangible assets, net and other assets in our commercial aerospace businesses, Collins and Pratt & Whitney.

Beginning in the second quarter of 2020, we observed several airline customer bankruptcies, delays and cancellations of aircraft purchases by airlines, fleet retirements and repositioning of OEM production schedules and we experienced significant unfavorable EAC adjustments at our Collins and Pratt & Whitney businesses due to a decline in flight hours, aircraft fleet utilization, shop visits and commercial OEM deliveries.

These factors contributed to a deterioration of our expectations regarding the timing of a return to pre-COVID-19 commercial flight activity, which further reduced our future sales and cash flows expectations.

In the second quarter of 2020, we evaluated the Collins and Pratt & Whitney reporting units for goodwill impairment and determined that the carrying values of two of the six Collins reporting units exceeded the sum of discounted future cash flows, resulting in goodwill impairments of $ 3.2 billion.

Goodwill impairment was not indicated for any of the other reporting units evaluated for impairment in any of these scenarios.

The Company continuously monitors and evaluates relevant events and circumstances that could unfavorably impact the significant assumptions noted above, including changes to U.S.

treasury rates and equity risk premiums, tax rates, recent market valuations from transactions by comparable companies, volatility in the Company’s market capitalization, and general industry, market and macro-economic conditions.

It is possible that future changes in such circumstances or in the inputs and assumptions used in estimating the fair value of our reporting units, could require the Company to record a non-cash impairment charge.

We assessed all of our reporting units using qualitative factors to determine whether it was more likely than not that any individual reporting unit’s fair value is less than its carrying value (step 0) and determined that no further testing was required.

Intangible Assets.

Identifiable intangible assets are comprised of the following:

(dollars in millions) Gross

Amount Accumulated

Amortization Gross

Amount Accumulated

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

Collaboration assets $ 5,810 $ ( 1,688 ) $ 5,536 $ ( 1,408 )

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We also completed our annual indefinite-lived intangible assets impairment testing as of October 1, 2023 and determined that no adjustments to the carrying value of these assets were necessary.

In 2020, given the deterioration in general economic and market conditions primarily due to the COVID-19 pandemic, we performed an assessment of our indefinite-lived intangible assets and recorded charges of $ 57 million related to the impairment of an indefinite-lived tradename intangible assets at Collins.

Amortization of intangible assets was $ 2,085 million, $ 1,957 million, and $ 2,439 million in 2023, 2022, and 2021, respectively.

The following is the expected amortization of total intangible assets for 2023 through 2027:

The following is the expected amortization of intangible assets for 2024 through 2028:

(dollars in millions) 2024 2025 2026 2027 2028

Amortization expense $ 2,193 $ 2,079 $ 2,005 $ 1,887 $ 1,811

DISCONTINUED OPERATIONS

As discussed above, on April 3, 2020, UTC separated into three independent, publicly traded companies – UTC, Carrier and Otis and distributed all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of U TC common stock as of the close of business on March 19, 2020.

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.

Loss from discontinued operations is as follows:

(dollars in millions) 2022 2021 2020

Otis $ — $ — $ 187

Carrier — — 196

Separation related and other discontinued operations transactions ( 19 ) ( 33 ) ( 793 )

Loss from discontinued operations attributable to common shareowners $ ( 19 ) $ ( 33 ) $ ( 410 )

The following summarized financial information related to discontinued operations has been reclassified from Income from continuing operations and included in Income (loss) from discontinued operations:

(dollars in millions) 2022 2021 2020

Products sales $ — $ — $ 1,123

Services sales — — 1,843

Cost of sales - products — — 913

Cost of sales - services — — 1,157

Research and development — — 38

Selling, general and administrative expense — — 450

Other income (expense), net — — ( 65 )

Non-operating expense (income), net — — 3

Income from discontinued operations, before income taxes — — 340

Income tax expense — — 116

Income from discontinued operations — — 224

Noncontrolling interest in subsidiaries earnings from discontinued operations — — 37

Income from discontinued operations attributable to common shareowners $ — $ — $ 187

Products sales $ — $ — $ 3,143

Services sales — — 741

Cost of sales - products — — 2,239

Cost of sales - services — — 527

Research and development — — 98

Selling, general and administrative expense — — 669

Other income (expense), net — — ( 30 )

Non-operating expense (income), net — — 17

Income from discontinued operations, before income taxes — — 304

Income tax expense — — 102

Income from discontinued operations — — 202

Noncontrolling interest in subsidiaries earnings from discontinued operations — — 6

Income from discontinued operations attributable to common shareowners $ — $ — $ 196

Separation related and other discontinued operations transactions (1)

Selling, general and administrative expense $ — $ 10 $ 151

Other income (expense), net ( 30 ) — ( 709 )

Loss from discontinued operations, before income taxes ( 30 ) ( 10 ) ( 860 )

Income tax (benefit) expense ( 11 ) 23 ( 67 )

Loss from discontinued operations, net of tax ( 19 ) ( 33 ) ( 793 )

Total loss from discontinued operations attributable to common shareowners $ ( 19 ) $ ( 33 ) $ ( 410 )

(1) Primarily reflects unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges and benefits related to separation activities.

In addition, 2020 includes debt extinguishment costs related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon merger agreement.

Selected financial information related to cash flows from discontinued operations is as follows:

(dollars in millions) 2022 2021 2020

Net cash flows used in operating activities from discontinued operations $ — $ ( 71 ) $ ( 728 )

Net cash flows used in investing activities from discontinued operations — — ( 241 )

Net cash flows provided by (used in) financing activities from discontinued operations — 71 ( 1,414 )

Net cash flows used in operating activities from discontinued operations includes the net operating cash flows of Carrier and Otis prior to the Separation Transactions, as well as costs incurred by the Company primarily related to professional services pertaining to the Separation Transactions and the establishment of Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges related to separation activities.

Net cash flows provided by (used in) financing activities from discontinued operations primarily consists of net cash transfers from Carrier and Otis to the Company, as well as debt extinguishment costs related to the early repayment of debt in 2020.

The Separation of Carrier was treated as a return on capital and recorded as a reduction to retained earnings, as it was in a net asset position, while the Separation of Otis was treated as a return of capital and recorded as an adjustment to Common stock, as it was in a net liability position.

EARNINGS PER SHARE

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shares in millions) 2023 2022 2021

Net income (loss) attributable to common shareowners:

Income (loss) from continuing operations $ 5,216 $ 3,897 $ ( 3,109 )

Net income attributable to common shareowners:

Income from continuing operations $ 3,195 $ 5,216 $ 3,897

Loss from discontinued operations — ( 19 ) ( 33 )

Net income (loss) attributable to common shareowners $ 5,197 $ 3,864 $ ( 3,519 )

Net income attributable to common shareowners $ 3,195 $ 5,197 $ 3,864

Basic weighted average number of shares outstanding 1,426.0 1,475.5 1,501.6

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Earnings (loss) per share attributable to common shareowners - basic

Income (loss) from continuing operations $ 3.54 $ 2.60 $ ( 2.29 )

Income from continuing operations $ 2.24 $ 3.54 $ 2.60

Loss from discontinued operations — ( 0.02 ) ( 0.03 )

Net income (loss) attributable to common shareowners $ 3.52 $ 2.57 $ ( 2.59 )

Net income attributable to common shareowners $ 2.24 $ 3.52 $ 2.57

Earnings (loss) per share attributable to common shareowners - diluted

Income (loss) from continuing operations $ 3.51 $ 2.58 $ ( 2.29 )

Income from continuing operations $ 2.23 $ 3.51 $ 2.58

Loss from discontinued operations — ( 0.01 ) ( 0.02 )

Net income (loss) attributable to common shareowners $ 3.50 $ 2.56 $ ( 2.59 )

The computation of diluted 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 2022 and 2021, there were 6.2 million and 13.4 million stock awards excluded from the computation, respectively.

For 2020, all stock awards were excluded from the computation of diluted EPS because their effect was antidilutive due to the loss from continuing operations, and amounted to 32.5 million stock awards.

Net income attributable to common shareowners $ 2.23 $ 3.50 $ 2.56

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 release or exercise of stock awards when the awards’ assumed proceeds exceed the average market price of the common shares during the period.

For 2023, 2022, and 2021, there were 9.6 million, 6.2 million, and 13.4 million stock awards excluded from the computation, respectively.

ACCOUNTS RECEIVABLE, NET

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Balance as of January 1

Current period provision for expected credit losses, net of recoveries 26 ( 47 )

Current period (recoveries) provision for expected credit losses, net ( 92 ) 26

Write-offs charged against the allowance for expected credit losses ( 42 ) ( 42 )

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Balance as of December 31 $ 316 $ 452

The activity in the allowance for expected credit losses was not material in 2021.

CONTRACT ASSETS AND LIABILITIES

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Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract.

We receive payments

from customers based on the terms established in our contracts.

We receive payments from customers based on the terms established in our contracts.

Total contract assets and contract liabilities as of December 31, 2023 and 2022 are as follows:

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Net contract liabilities $ ( 5,044 ) $ ( 3,064 )

Contract assets increased $ 173 million during 2022 primarily due to sales in excess of billings at Pratt & Whitney, partially offset by contractual billing terms on U.S.

government and foreign military sales contracts at RMD.

Contract liabilities increased $ 878 million during 2022 primarily due to billings in excess of sales at Pratt & Whitney and RMD.

Contract assets increased $ 605 million during 2023 primarily due to sales in excess of billings on certain contracts at Pratt & Whitney and Raytheon.

The above items were partially offset by a decrease in contract assets driven by a customer insolvency charge recorded in the second quarter of 2023 at Pratt & Whitney, the reclassification of certain Raytheon Contract assets to Other assets, current as a result of our definitive agreement to sell our CIS business (see “Note 2:

Acquisitions and Dispositions” for additional information), and the EAC impacts related to the Powder Metal Matter recorded in the third quarter of 2023 at Pratt & Whitney.

Contract liabilities increased $ 2,585 million during 2023 primarily due to billings in excess of sales on certain contracts at Pratt & Whitney and Raytheon and international advances at Raytheon.

In 2023, 2022 and 2021, we recognized revenue of $ 5.3 billion, $ 4.8 billion, and $ 4.3 billion related to our Contract liabilities at January 1, 2023, January 1, 2022, and January 1, 2021, respectively.

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

In addition, as of December 31, 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 consisted of the following at December 31:

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Contract assets are net of an allowance for expected credit losses of $ 197 million and $ 318 million as of December 31, 2023 and 2022, respectively.

The allowance for expected credit losses activity was not material in 2022 or 2021.

The allowance for expected credit losses activity was not significant in 2023 or 2022.

INVENTORY, NET

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Raw materials, work-in-process and finished goods are net of total valuation reserves of $ 2.4 billion and $ 2.2 billion as of December 31, 2023 and 2022, respectively.

COMMERCIAL AEROSPACE INDUSTRY ASSETS AND COMMITMENTS

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

The pandemic and government, business and individual actions in response, including lockdowns, quarantines, border closings and other travel restrictions and requirements, remote working, facilities closures and reduced business and leisure travel, led to significant declines in demand for commercial air travel.

The decrease in commercial air travel decreased demand for our commercial aerospace products and services of our Collins and Pratt & Whitney businesses.

Refer to “Note 1:

Basis of Presentation and Summary of Accounting Principles” for further details.

While we have seen indications that commercial air travel is recovering, we continue to closely monitor our commercial aerospace assets for

recoverability and our off-balance sheet exposures.

The following summarizes certain significant assets and off-balance sheet exposures specifically related to our commercial aerospace customers as of December 31:

(dollars in millions) 2022 2021

Assets related to commercial aerospace industry customers:

Accounts receivable, net (Note 5) $ 6,653 $ 7,235

Contract assets (Note 6) 4,274 3,264

Customer financing assets (1) (Note 1)

Contract fulfillment costs (Note 1) 1,962 1,711

Guarantees and commitments related to commercial aerospace industry customers:

Commercial aerospace guarantees (net of reserves and collaboration partners’ share) (Note 17) 164 165

Commercial aerospace commitments (net of collaboration partners’ share) (Note 18) 9,364 9,659

(1) Customer financing assets is inclusive of both the current and long term balances.

We also have goodwill and intangible assets, including exclusivity assets and collaboration assets, associated with our commercial aerospace business.

Refer to “Note 2:

Business Acquisitions, Dispositions, Goodwill and Intangible Assets” for further discussion.

FIXED ASSETS, NET

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Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the improvement.

Depreciation expense related to Fixed assets, net is recorded predominantly utilizing the straight-line method and was $ 1,843 million in 2022, $ 1,828 million in 2021 and $ 1,767 million in 2020.

Depreciation expense related to Fixed assets, net is recorded predominantly utilizing the straight-line method and was $ 1.8 billion in 2023, 2022, and 2021.

BORROWINGS AND LINES OF CREDIT

As of December 31, 2022, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $ 7.0 billion, consisting of a $ 5.0 billion revolving credit agreement, which expires in April 2025, and a $ 2.0 billion revolving credit agreement, which was renewed in September 2022 and expires in September 2023.

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

In addition, at December 31, 2022, approximately $ 0.8 billion was available under short-term lines of credit with local banks at our various domestic and international subsidiaries.

As of December 31, 2023, we had a revolving credit agreement with various banks permitting aggregate borrowings of up to $ 5.0 billion.

This agreement was renewed in August 2023 and expires in August 2028.

As of December 31, 2023, there were no borrowings outstanding under this agreement.

The Company’s $ 2.0 billion revolving credit agreement scheduled to expire in September 2023 was terminated in August 2023, and there were no outstanding borrowings at the time of termination.

In addition, at December 31, 2023, approximately $ 0.7 billion was available under short-term lines of credit with local banks primarily at our international subsidiaries.

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.

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

We had no commercial paper borrowings outstanding at December 31, 2023.

At December 31, 2022, we had $ 0.5 billion of commercial paper borrowings outstanding, which is reflected in Short-term borrowings in our Consolidated Balance Sheet.

During 2023, we had no new proceeds from issuance, and $ 200 million of repayments, of commercial paper with maturities greater than 90 days.

During 2022, we had $ 1.4 billion of proceeds from issuance, and $ 1.2 billion of repayments, of commercial paper with maturities greater than 90 days.

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

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 2022.

There were $ 1.2 billion repayments of commercial paper with maturities greater than 90 days during 2022.

During 2021, we had no commercial paper borrowings with original maturities more than 90 days from the date of issuance.

On November 17, 2021, we completed a cash tender offer for the notes included in the repayments table below (the Tender Offer Notes), resulting in a partial repayment of approximately $ 1.5 billion of aggregate principal on these notes.

In connection with this transaction, we recorded debt extinguishment costs of $ 617 million, primarily related to premiums.

We had de minimis issuances and repayments of long-term debt during 2022.

We had the following issuances of long-term debt during 2021:

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

On October 24, 2023, we entered into a senior unsecured bridge credit agreement (Bridge Loan) with various banks permitting aggregate borrowings of up to $ 10.0 billion, to fund an accelerated share repurchase (ASR) and pay related fees and expenses.

The $ 10.0 billion Bridge Loan was paid in full and terminated in the fourth quarter of 2023 upon receipt of proceeds from the $ 4.0 billion term loan facilities and the $ 6.0 billion of long-term debt issuances as described below and cash on hand.

During 2022, we had insignificant issuances and repayments of long-term debt.

During 2023, we had the following issuances of long-term debt and proceeds from term loan borrowings:

Date Description of Notes Aggregate Principal Balance (in millions)

November 8, 2023 5.750 % notes due 2026 (1)

5.750 % notes due 2029 (1)

August 10, 2021 1.900 % notes due 2031 (2)

6.000 % notes due 2031 (1)

(1) The net proceeds received from these debt issuances were used to fund the purchase of the Tender Offer Notes.

(2) 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 2021:

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

November 17, 2021 5.700 % notes due 2040 (1)

6.100 % notes due 2034 (1)

6.400 % notes due 2054 (1)

November 7, 2023 18 Month term loan at 3 Month Secured Overnight Financing Rate (SOFR) plus 1.225 % due 2025 (1)

3-Year term loan at 3 Month SOFR plus 1.225 % due 2026 (1)

February 27, 2023 5.000 % notes due 2026

5.150 % notes due 2033

5.375 % notes due 2053

(1) The net proceeds received from these debt issuances and term loans, along with cash on hand, were used to fund the repayment of the Bridge Loan, which was used to fund the ASR.

During 2023, we made the following repayments of long-term debt:

Date Description of Notes Aggregate Principal Balance (in millions)

December 15, 2023 3.700 % notes due 2023

August 16, 2023 3.650 % notes due 2023

Long-term debt consisted of the following as of December 31:

(dollars in millions) 2023 2022

3.650 % notes due 2023 (1)

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3.150 % notes due 2024 (1)

November 15, 2021 3.100 % notes due 2021

August 26, 2021 2.800 % notes due 2022 (1)

3 Month SOFR plus 1.225 % term loan due 2025

3.950 % notes due 2025 (1)

March 1, 2021 8.750 % notes due 2021

(1) In connection with the early repayment of outstanding principal, we recorded debt extinguishment costs of $ 649 million in 2021.

Long-term debt consisted of the following as of December 31:

(dollars in millions) 2022 2021

5.000 % notes due 2026 (1)

2.650 % notes due 2026 (1)

3 Month SOFR plus 1.225 % term loan due 2026

5.750 % notes due 2026 (1)

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7.500 % notes due 2029 (1)

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

2.250 % notes due 2030 (1)

6.000 % notes due 2031 (1)

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

1.900 % notes due 2031 (1)

2.375 % notes due 2032 (1)

(dollars in millions) 2023 2022

5.150 % notes due 2033 (1)

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2.820 % notes due 2051 (1)

3.030 % notes due 2052 (1)

5.375 % notes due 2053 (1)

6.400 % notes due 2054 (1)

Other (including finance leases) 255 253

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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 weighted-average interest rate related to total debt was 4.0 % at both December 31, 2022 and 2021.

The weighted-average interest rate related to total debt was 4.6 % and 4.0 % at December 31, 2023 and 2022, respectively.

The average maturity of our long-term debt at December 31, 2023 is approximately 13 years.

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Our contributions to employer sponsored defined contribution plans were $ 1,301 million, $ 1,037 million, and $ 962 million for 2023, 2022, and 2021, respectively.

Our non-union domestic employee savings plan for legacy UTC employees uses an Employee Stock Ownership Plan (ESOP) for employer matching contributions.

Our domestic employee savings plan uses an Employee Stock Ownership Plan (ESOP) for certain employer matching contributions.

External borrowings were used by the ESOP to fund a portion of its purchase of ESOP stock from us.

The external borrowings have been extinguished and only re-amortized loans remain between RTC and the ESOP Trust.

The external borrowings have been extinguished and only re-amortized loans remain between RTX and the ESOP Trust.

As ESOP debt service payments are made, common stock is released from an unreleased shares account.

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Our plans use a December 31 measurement date consistent with our fiscal year.

Raytheon Company has both funded and unfunded domestic and foreign defined benefit pension and PRB plans.

As of the merger date, the Raytheon Company plans were remeasured at fair value using accounting policies consistent with the UTC plans.

Refer to “Note 2:

Business Acquisitions, Dispositions, Goodwill and Intangible Assets” for additional information.

The deferred pension and PRB plan losses included in Raytheon Company’s accumulated other comprehensive income (loss) as of the merger date were eliminated and are no longer subject to amortization in net periodic benefit (income) expense.

Amounts prior to the merger date of April 3, 2020 do not include the Raytheon Company pension plan results.

In December 2020, we approved a change to the Raytheon Company domestic 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.

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 will be based on a cash balance formula.

We utilized a practical expedient and measured the plan assets and pension benefit obligations for the effected pension plans as of the nearest month end, December 31, 2020, resulting in a prior service credit of $ 2.1 billion.

For non-union employees in the UTC domestic pension plans, benefits for service up to December 31, 2014 are generally based on the employee’s years of service and compensation.

Benefits for service after December 31, 2014 and through December 31, 2019 are based on the existing cash balance formula that was adopted in 2003 for newly hired non-union employees and for non-union employees who made a one-time voluntary election to have future benefit accruals determined under this formula.

In September 2019, we amended the UTC domestic defined benefit pension plans to cease accrual of additional benefits for future service and compensation for non-union participants effective December 31, 2019.

Beginning January 1, 2020, these participants began receiving additional contributions under the UTC domestic defined contribution

Benefits for union employees in the UTC domestic pension plans are generally based on a stated amount for each year of service.

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

This plan change resulted in lower pension service cost beginning January 1, 2023.

At December 31, 2023, we merged our remaining Raytheon Company domestic defined benefit pension plans into the RTX Consolidated Pension Plan.

This plan merger does not impact participants’ benefit formulas.

We made the following contributions to our pension and PRB plans’ trusts during the years ended December 31:

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PRB plans 28 25 17

The contributions to our U.S.

qualified defined benefit plans in 2020 include a $ 750 million discretionary contribution to the Raytheon Company U.S.

qualified pension plans’ trust.

The contributions to our International defined benefit plans in 2020 include discretionary contributions of $ 51 million.

(1) 2023 includes $ 50 million of RTX common stock contributions.

(dollars in millions) 2023 2022 2023 2022

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Interest cost 2,507 1,520 50 29

Actuarial gain ( 15,466 ) ( 1,643 ) ( 294 ) ( 73 )

Actuarial loss (gain) 1,909 ( 15,466 ) 53 ( 294 )

Total benefits paid (1)

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Plan amendments 19 131 — —

Business combinations and divestitures — 48 — —

160 ( 516 ) 57 47

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Amounts Recognized in Accumulated Other Comprehensive Loss Consist of:

Net actuarial (gain) loss $ 2,950 $ 4,402 $ ( 394 ) $ ( 199 )

Net actuarial loss (gain) $ 4,311 $ 2,950 $ ( 325 ) $ ( 394 )

Prior service credit ( 1,246 ) ( 1,424 ) ( 3 ) ( 4 )

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Internal Revenue Service (IRS) qualified pension plans, which comprise 86 % and 87 % of our pension PBO as of December 31, 2023 and 2022, respectively.

3 % of our pension PBO as of both December 31, 2022 and 2021 is attributable to our nonqualified domestic pension plans, which provide supplementary retirement benefits to certain employees in excess of the IRS qualified plan limits.

3 % of our pension PBO as of both December 31, 2023 and 2022, respectively, is attributable to our nonqualified domestic pension plans, which provide supplementary retirement benefits to certain employees in excess of the IRS qualified plan limits.

International plans comprise 11 % and 10 % of the pension PBO as of December 31, 2023 and 2022, respectively, and are considered defined benefit pension plans for accounting purposes.

In addition to the pension and PRB noncurrent liabilities shown above, Future pension and postretirement benefit obligations on the Consolidated Balance Sheet includes other immaterial pension and PRB-related liabilities.

In addition to the pension and PRB noncurrent liabilities shown above, Future pension and postretirement benefit obligations on the Consolidated Balance Sheet include other immaterial pension and PRB-related liabilities.

Information for pension plans with accumulated benefit obligations in excess of plan assets:

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Fair value of plan assets 1,781 17,747

The components of the net periodic pension (income) expense are as follows:

The components of the net periodic pension income are as follows:

(dollars in millions) 2023 2022 2021

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Expected return on plan assets ( 3,753 ) ( 3,544 ) ( 3,476 )

Amortization of prior service cost (credit) ( 163 ) ( 168 ) 51

Recognized actuarial net loss 305 435 337

Amortization of prior service credit ( 158 ) ( 163 ) ( 168 )

Recognized actuarial net (gain) loss ( 378 ) 305 435

Net settlement, curtailment, and special termination benefits loss 6 2 22

Non-service pension income ( 1,776 ) ( 1,880 ) ( 1,938 )

Total net periodic pension benefit (income) expense $ ( 1,410 ) $ ( 1,415 ) $ ( 429 )

Total net periodic pension income $ ( 1,554 ) $ ( 1,410 ) $ ( 1,415 )

The components of the net periodic PRB (income) expense are as follows:

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Recognized actuarial net gain ( 31 ) ( 11 ) ( 6 )

Net settlement, curtailment and special termination benefits (gain) loss ( 3 ) — 1

Non-service pension (income) expense ( 9 ) ( 6 ) 10

Total net periodic PRB benefit (income) expense $ ( 3 ) $ 1 $ 16

Net settlement, curtailment, and special termination benefits gain ( 2 ) ( 3 ) —

Non-service pension income ( 4 ) ( 9 ) ( 6 )

Total net periodic PRB (income) expense $ ( 1 ) $ ( 3 ) $ 1

Other changes in pension plan assets and benefit obligations recognized in other comprehensive loss in 2023 and 2022 are as follows:

(dollars in millions) 2023 2022

Net actuarial gain arising during the period $ ( 1,082 ) $ ( 3,158 )

Amortization of actuarial loss ( 305 ) ( 435 )

Net actuarial loss (gain) arising during the period $ 935 $ ( 1,082 )

Amortization of actuarial gain (loss) 378 ( 305 )

Current year prior service cost 19 131

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Total recognized in other comprehensive income (loss) 1,539 ( 1,161 )

Net recognized in net periodic benefit (income) cost and other comprehensive (income) loss $ ( 2,571 ) $ ( 4,804 )

Net recognized in net periodic income and other comprehensive loss $ ( 15 ) $ ( 2,571 )

(1) The amount included in Other primarily reflects the impact of foreign exchange translation, primarily for plans in the U.K.

The Actuarial loss arising in 2023 was primarily due to a decrease in discount rates during 2023, partially offset by actual asset returns greater than our expected return on assets.

The Actuarial gain arising in 2022 was primarily due to an increase in discount rates during 2022, partially offset by actual asset returns less than our expected return on assets.

The Actuarial gain arising in 2021 was primarily due to an increase in discount rates during 2021 and asset returns exceeding our expected return on assets, partially offset by demographic losses.

Other changes in PRB assets and benefit obligations recognized in other comprehensive loss in 2023 and 2022 are as follows:

(dollars in millions) 2023 2022

Net actuarial gain arising during the period $ ( 209 ) $ ( 88 )

Net actuarial loss (gain) arising during the period $ 36 $ ( 209 )

Amortization of actuarial gain 31 11

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Total recognized in other comprehensive income (loss) 70 ( 193 )

Net recognized in net periodic benefit (income) cost and other comprehensive loss $ ( 196 ) $ ( 78 )

Net recognized in net periodic expense (income) and other comprehensive loss $ 69 $ ( 196 )

The Actuarial loss arising in 2023 was primarily due to a decrease in discount rates during 2023, partially offset by actual asset returns greater than our expected return on assets on our funded plans.

The Actuarial gain arising in 2022 was primarily due to an increase in discount rates during 2022, partially offset by actual asset returns less than our expected return on assets on our funded plans.

The Actuarial gain arising in 2021 was primarily due to an increase in discount rates during 2021 and asset returns exceeding our expected return on assets on our funded plans.

The table below reflects the total benefit payments expected to be paid from the plans or from corporate assets.

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2029-2033 17,426 337

Major assumptions used in determining the pension benefit obligation and net periodic pension benefit (income) expense are presented in the following table as weighted-averages:

Major assumptions used in determining the pension benefit obligation and net periodic pension (income) expense are presented in the following table as weighted-averages:

Benefit Obligation Net Periodic Benefit (Income) Expense

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Year that the rate reaches the ultimate health care cost trend rate 2029 2029

The weighted-average discount rates used to measure pension and PRB liabilities are based on yield curves developed using high-quality corporate bonds as well as plan specific expected cash flows.

The weighted-average discount rates used to measure pension and PRB liabilities are generally based on yield curves developed using high-quality corporate bonds as well as plan specific expected cash flows.

For our significant plans, we utilize a full yield curve approach in the estimation of the service cost and interest cost components of net periodic benefit expense by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant discounted projected cash flows.

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Return projections are validated using a simulation model that incorporates yield curves, credit spreads, and risk premiums to project long-term prospective returns.

As a result of this analysis at year end 2022, our weighted average pension EROA assumption for 2023 increased to 7.1 %.

The plans’ investment management objectives include providing the liquidity and asset levels needed to meet current and future benefit payments, while maintaining a prudent degree of portfolio diversification considering interest rate risk and market volatility.

Globally, investment strategies generally target a mix of 40 % to 45 % of growth seeking assets and 55 % to 60 % of income generating and hedging assets using a wide set of diversified asset types, fund strategies and investment managers.

Globally, on average, investment strategies generally target a mix o f 26 % to 46 % of growth seeking assets and 54 % to 74 % of income generating and hedging assets using a wide set of diversified asset types, fund strategies, and investment managers.

The growth seeking allocation consists of global public equities in developed and emerging countries, private equity, real estate, and multi-asset class strategies.

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Under this objective the interest rate hedge is intended to increase as funded status improves.

hedging programs incorporate a range of assets and investment tools, each with varying interest rate sensitivities.

The investment portfolios are currently hedging approximately 40 % to 80 % of the interest rate sensitivity of the pension plan liabilities, depending on the funded status of the plan.

The hedging programs incorporate a range of assets and investment tools, each with varying interest rate sensitivities.

investment portfolios are currently hedging approximatel y 80 % of the interest rate sensitivity of the pension plan liabilities, depending on the funded status of the plan.

The fair values of pension plan assets at December 31, 2023 and 2022 by asset category are as follows:

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Enhanced Global Equities (2)

( 53 ) 75 — — 22

Other Public Equities — — — 2,308 2,308

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(7) Represents receivables, payables, and certain individually immaterial international plan assets that are not leveled.

(8) In accordance with ASU 2015-07, Fair Value Measurement (Topic 820) , certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(8) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets.

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The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed due to the following:

(dollars in millions) Corporate Bonds Real Estate Total

(dollars in millions)

Balance, December 31, 2021

$ 2 $ 1,647 $ 1,649

Realized gains 76

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Balance, December 31, 2022

— 1,885 1,885

Realized gains — 76 76

Unrealized gains relating to instruments still held in the reporting period — 64 64

Realized losses ( 69 )

Unrealized losses relating to instruments still held in the reporting period ( 134 )

Purchases, sales, and settlements, net 20

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Balance, December 31, 2023

$ — $ 1,650 $ 1,650

Quoted market prices are used to value investments when available.

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Marketable securities held in trusts $ 745 $ 774

We enter into lease agreements for the use of real estate space, vehicles, information technology equipment, and certain other equipment under both operating and finance leases.

The majority of our lease agreements are accounted for as operating leases.

Operating lease expense was $ 463 million, $ 475 million, and $ 525 million for 2023, 2022, and 2021, respectively.

Finance leases and leases where we are the lessor are not considered significant to our Consolidated Balance Sheet, Consolidated Statement of Operations or Consolidated Statement of Cash Flows.

In 2021 and 2020, we entered into sale and leaseback transactions for the sale of equipment and related maintenance.

We subsequently leased back the equipment sold for a limited timeframe, which is accounted for as an operating lease.

The proceeds received as a result of the equipment sales are classified in Receipts from customer financing assets within the Investing Activities in our Consolidated Statement of Cash Flows, and the portion related to future maintenance services are classified within Operating Activities.

Finance leases are not considered significant to our Consolidated Balance Sheet, Consolidated Statement of Operations, or Consolidated Statement of Cash Flows.

Leases under which we are the lessor are generally short-term leases that support our commercial aerospace customers during maintenance events.

Our commercial aerospace customers have varying forms of aftermarket maintenance coverage that often provide a level of support for leased engines as part of the revenue arrangement.

As such, leases where we are the lessor are not considered significant to our Consolidated Balance Sheet, Consolidated Statement of Operations, or Consolidated Statement of Cash Flows.

In 2023 and 2021, we entered into sale and leaseback transactions for the sale of new engines, and used leasepool engines and related maintenance, respectively.

We subsequently leased back the engines sold for a limited timeframe, which are accounted for as operating leases.

The proceeds received in 2023 as a result of sales of new engines are classified primarily in Other operating activities, net within our Consolidated Statement of Cash Flows.

The proceeds received in 2021 as a result of sales of engines held in our leasepool are classified in Receipts from customer financing assets within Investing Activities in our Consolidated Statement of Cash Flows.

The net gains as a result of these transactions were not material.

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Income Before Income Taxes.

The sources of income (loss) from continuing operations before income taxes are:

The sources of income from continuing operations before income taxes are:

(dollars in millions) 2023 2022 2021

United States (1)

$ 938 $ 4,151 $ 3,676

Foreign 2,898 1,966 1,433

Income (loss) from continuing operations before income taxes $ 6,027 $ 4,931 $ ( 2,353 )

The Company no longer intends to reinvest certain undistributed earnings of its international subsidiaries that have been previously taxed in the U.S.

Income from continuing operations before income taxes $ 3,836 $ 6,117 $ 5,109

(1) 2023 includes the impacts of the Powder Metal Matter.

The Company intends to repatriate certain undistributed earnings of its international subsidiaries that have been previously taxed in the U.S.

As such, we recorded the taxes associated with the future remittance of these earnings.

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Income tax expense $ 456 $ 790 $ 964

Prior to 2022, research and experimental expenditures were generally deductible in the period incurred.

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

In September and December 2023, the Internal Revenue Service (IRS) issued interim guidance, retroactive to 2022, clarifying the capitalization requirements for certain types of research and experimental expenditures.

The IRS notices also provide that the Department of the Treasury and the IRS intend to issue proposed regulations consistent with the guidance set forth in the notices and that taxpayers may rely on the guidance in the notices prior to the issuance of the proposed regulations.

The Company’s analysis indicates the guidance provided in the notices result in fewer costs being subject to capitalization, and as such, costs previously required to be capitalized are now deductible in the year incurred.

Accordingly, the financial statements for the year ended December 31, 2023 include the estimated impacts of the interim guidance provided in the notices for both the 2022 and 2023 tax years including lower income tax payables, adjustments to deferred taxes, a higher income tax expense due to the diluted Foreign Derived Intangible Income (FDII) benefit resulting from lower taxable income, and reductions in revenue attributable to the decreased reimbursable state income taxes.

The Company will continue to review the applicability of the notices to our businesses and will review the proposed regulations when issued and adjust the estimates as necessary.

Reconciliation of Effective Income Tax Rate.

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Tax on international activities ( 27 ) ( 0.7 ) ( 186 ) ( 3.1 ) ( 204 ) ( 4.0 )

Tax charges related to Separation Transactions and Raytheon merger — — ( 39 ) ( 0.8 ) 416 ( 17.7 )

Tax charges related to separation of Carrier and Otis and Raytheon merger — — — — ( 39 ) ( 0.8 )

Disposals of businesses — — — — 108 2.2

research and development credit ( 168 ) ( 4.4 ) ( 164 ) ( 2.7 ) ( 172 ) ( 3.4 )

Goodwill impairment — — — — 668 ( 28.4 )

federal statute lapse ( 59 ) ( 1.5 ) — — — —

State income tax, net 17 0.4 59 1.0 174 3.4

Foreign Derived Intangible Income ( 214 ) ( 3.5 ) ( 121 ) ( 2.5 ) ( 83 ) 3.5

Foreign Derived Intangible Income (FDII) ( 142 ) ( 3.7 ) ( 214 ) ( 3.5 ) ( 121 ) ( 2.4 )

corporate tax rate enactment — — — — 73 1.5

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Effective income tax rate $ 456 11.9 % $ 790 12.9 % $ 964 18.9 %

The 2022 effective tax rate includes a benefit of $ 214 million related to the Foreign Derived Intangible Income (FDII) benefit, $ 207 million associated with legal entity and operational reorganizations implemented in 2022, and $ 164 million associated with U.S.

The 2023 effective tax rate includes a benefit of $ 168 million associated with U.S.

research and development credits, $ 142 million related to the FDII benefit, and a federal tax benefit of $ 59 million associated with the expiration of the U.S.

federal income tax statute of limitations for RTX’s 2019 tax year.

The 2022 effective tax rate includes a benefit of $ 214 million related to the FDII benefit, $ 207 million associated with legal entity and operational reorganizations implemented in 2022, and $ 164 million associated with U.S.

research and development credits.

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The 2021 effective tax rate includes tax benefits of $ 244 million included in international activities associated with legal entity and operational reorganizations implemented in 2021, $ 172 million associated with U.S.

research and development credits and $ 121 million associated with FDII, and tax charges of $ 73 million associated with the revaluation of deferred taxes resulting from the increase in the U.K.

research and development credits and $ 121 million associated with FDII, and tax charges of $ 174 million associated with net state income taxes, $ 108 million associated with the disposition of the Forcepoint business and the global training and services business, and $ 73 million associated with the revaluation of deferred taxes resulting from the increase in the U.K.

corporate tax rate to 25% enacted in 2021.

In the first quarter of 2021, we recorded $ 148 million of tax charges associated with the sale of the Forcepoint business, and subsequently recognized a $ 104 million tax benefit due to the revaluation of that tax benefit as a result of completing the divestiture of RIS’s global training and services business for a gain in the fourth quarter of 2021.

The 2020 negative effective tax rate is a result of having tax expense of $ 575 million on a loss from continuing operations before income taxes of $ 2.4 billion.

The loss from continuing operations before income taxes in 2020 includes the $ 3.2 billion goodwill impairment as described in “Note 2:

Business Acquisitions, Dispositions, Goodwill and Intangible Assets,” most of which was non-deductible for tax purposes.

Tax expense includes net deferred tax charges of $ 416 million resulting from the Separation Transactions and the Raytheon merger primarily related to the impairment of deferred tax assets and the revaluation of certain international tax incentives, and incremental tax expense of $ 177 million related to the disposal of businesses, including the sales of businesses at Collins, the airborne tactical radios business at RIS and the entry into a definitive agreement to sell Forcepoint, as described in “Note 2:

Business Acquisitions, Dispositions, Goodwill and Intangible Assets.” Also included in the 2020 effective tax rate are tax benefits of $ 142 million associated with U.S.

research and development credits and $ 83 million associated with FDII.

Deferred Tax Assets and Liabilities.

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Other basis differences 779 828

Powder Metal Matter 644 —

Tax loss carryforwards 905 305

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Valuation allowances have been established primarily for tax credit carryforwards, tax loss carryforwards, and certain temporary differences to reduce the future income tax benefits to expected realizable amounts.

Prior to 2023, certain of the Company’s indefinite-lived non-US tax loss carryforwards were determined to have a remote possibility of realization and therefore were not reported in the table above.

In connection with the implementation of the Organisation for Economic Co-operation and Development (OECD) global minimum tax initiative known as Pillar Two, any existing deferred taxes not disclosed in the Company’s 2023 financial statements will not be available in the future to reduce tax otherwise due under Pillar Two.

Accordingly, beginning in 2023, the Company is disclosing in the above table the tax effects of these indefinite-lived non-US tax loss carryforwards offset with a full valuation allowance.

Changes to valuation allowances consisted of the following:

(dollars in millions) 2023 2022 2021

Balance at January 1 $ 842 $ 825 $ 757

Additions charged to income tax expense 170 54 136

Reductions credited to goodwill, due to acquisitions — — ( 19 )

Reductions credited to income tax expense ( 58 ) ( 82 ) ( 37 )

Other adjustments (1)

511 45 ( 12 )

Balance at December 31 $ 1,465 $ 842 $ 825

(1) 2023 includes the addition of the indefinite-lived tax loss carryforwards now disclosed in connection with OECD Pillar Two.

Tax Credit and Loss Carryforwards.

At December 31, 2023, tax credit carryforwards, principally state and foreign, and tax loss carryforwards, principally state and foreign, were as follows:

(dollars in millions) Tax Credit

Carryforwards Tax Loss

Carryforwards

(dollars in millions) Tax Credit Carryforwards Tax Loss Carryforwards

Expiration period:

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Settlements ( 26 ) ( 16 ) ( 110 )

Separation of Carrier and Otis — — ( 439 )

Balance at December 31 $ 1,442 $ 1,515 $ 1,458

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Total accrued interest balance at December 31 233 190 165

The unrecognized tax benefit table includes discontinued operations activity in 2020.

As a result of the Separation Transactions and the Distributions in April 2020, we transferred unrecognized tax benefits to Carrier and Otis of $ 439 million and associated interest of approximately $ 165 million.

Pursuant to the terms of the separation agreements, certain other unrecognized tax benefits retained by the Company are subject to indemnification.

The 2020 additions for tax positions of prior years in the table above include amounts related to the Raytheon merger .

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.

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

federal jurisdiction and various state and foreign jurisdictions.

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income tax examinations for years before 2013.

The Examination Division of the IRS is currently auditing Raytheon Technologies tax years 2017 and 2018 and 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.

The examination phase of the audits for each of these tax years is expected to close in 2023.

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

The examination phase of the audit for each of these tax years is expected to close during 2023.

It is reasonably possible that a net reduction within the range of $ 25 million to $ 375 million of unrecognized tax benefits may occur over 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.

As a result of the expiration of the U.S.

federal income tax statute of limitations for RTX’s 2019 tax year, we recognized a net income benefit of $ 53 million in the fourth quarter of 2023, of which $ 59 million is within Income tax expense.

The Examination Division of the IRS is concluding the examination phase of RTX (formerly United Technologies Corporation) tax years 2017 and 2018, pre-acquisition Rockwell Collins tax years 2016, 2017 and 2018, and 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.

The examination phase of these audits is expected to close in the first half of 2024.

The Company will dispute certain IRS proposed adjustments for each exam at the Appeals Division of the IRS.

The timing of any resolution at the Appeals Division is currently uncertain.

The Company believes that it is reasonably possible that the closure of the examination phase for the RTX 2017 and 2018 and Rockwell Collins 2016, 2017, and 2018 tax years will result in a net income benefit in the range of $ 225 million to $ 305 million.

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 discussed 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 $ 300 million to $ 450 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

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The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Consolidated Statement of Operations in 2023 and 2022 are presented in “Note 18:

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 December 31, 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 Consolidated Statement of Operations and is not material.

As of December 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 Consolidated Statement of Operations and is not significant.

FAIR VALUE MEASUREMENTS

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Long-term debt (excluding finance leases) 43,546 41,598 31,201 28,049

The following table provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Consolidated Balance Sheet at December 31:

December 31, 2022

The following tables provide the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Consolidated Balance Sheet at December 31:

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

Customer financing notes receivables $ 161 $ — $ 161 $ —

Customer financing notes receivable $ 63 $ — $ 63 $ —

Long-term debt (excluding finance leases) 41,598 — 37,559 4,039

December 31, 2021

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

Customer financing notes receivables $ 192 $ — $ 192 $ —

Customer financing notes receivable $ 161 $ — $ 161 $ —

Long-term debt (excluding finance leases) 28,049 — 28,003 46

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IAE and IAE LLC have, therefore, been consolidated.

Other collaborators participate in Pratt & Whitney’s program share interest in IAE and IAE LLC.

Pratt & Whitney’s net program share interest in IAE and IAE LLC, after considering its sub-collaborator share, is 57 % and 51 %, respectively.

The carrying amounts and classification of assets and liabilities for variable interest entities in our Consolidated Balance Sheet as of December 31, 2023 and 2022 are as follows:

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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 $ 97 million and $ 120 million at December 31, 2022 and 2021, respectively.

The carrying amount of liabilities related to these obligations were $ 97 million at both December 31, 2023 and 2022.

These primarily relate to environmental liabilities, which are included in our total environmental liabilities as further discussed in “Note 17:

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Balance as of December 31 $ 1,091 $ 1,109 $ 1,157

Product and service guarantees incurred in connection with long-term production contracts and certain aftermarket arrangements are generally accounted for within the contract estimates at completion.

COMMITMENTS AND CONTINGENCIES

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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 December 31, 2022 and 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 $ 14.6 billion and $ 15.3 billion as of December 31, 2023 and 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.

The extent to which the financing commitments will be utilized is not currently known, since customers may be able to obtain more favorable terms from other

financing sources.

The extent to which the financing commitments will be utilized is not currently known, since customers may be able to obtain more favorable terms from other financing sources.

We may also arrange for third-party investors to assume a portion of these commitments.

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

government contracting environment, we will continue to be the subject of one or more U.S.

government contracting

environment, we will continue to be the subject of one or more U.S.

government investigations.

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the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), the Inspectors General of the U.S.

Department of Defense (DoD) and other

departments and agencies, the Government Accountability Office (GAO), the Department of Justice (DOJ), and Congressional Committees.

Department of Defense (DoD) and other departments and agencies, the Government Accountability Office (GAO), the Department of Justice (DOJ), and Congressional Committees.

Other areas of our business operations may also be subject to audit and investigation by these and other agencies.

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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.

Pratt & Whitney Powder Metal Matter.

Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo.

This determination was made pursuant to Pratt & Whitney’s safety management system.

On August 4, 2023, Pratt & Whitney issued a special instruction (SI), to operators of PW1100 GTF powered A320neo aircraft, which required accelerated inspections and engine removals covering an initial subset of operational engines, no later than September 15, 2023.

During the third quarter of 2023, through its safety management system, Pratt & Whitney continued its engineering and industrial assessment which resulted in an updated fleet management plan for the remaining PW1100 fleet.

This updated plan requires a combination of part inspections and retirements for some high pressure turbine and high pressure compressor parts made from affected raw material.

Guidance to affected operators was released via service bulletins (SB) and SI in November 2023 and this guidance is expected to be reflected in one or more airworthiness directives issued by the Federal Aviation Administration (FAA).

Consistent with previous information, the actions are expected to result in significant incremental shop visits through the end of 2026.

As a result, Pratt & Whitney expects a significant increase in aircraft on ground levels for the PW1100 powered A320neo fleet through 2026.

As a result of anticipated increased aircraft on ground levels and expected compensation to customers for this disruption, as well as incremental maintenance costs resulting from increased inspections and shop visits, Pratt & Whitney recorded a pre-tax operating profit charge in the third quarter of 2023 of $ 2.9 billion, reflecting Pratt & Whitney’s net 51 % program share of the PW1100 program.

This reflects our current best estimate of expected customer compensation for the estimated duration of the

disruption as well as the EAC adjustment impact of this matter to Pratt & Whitney’s long-term maintenance contracts.

The incremental costs to the business’s long-term maintenance contracts include the estimated cost of additional inspections, replacement of parts, and other related impacts.

The $ 2.9 billion charge is reflected in the Consolidated Statement of Operations as a reduction of sales of $ 5.4 billion which was partially offset by a net reduction of cost of sales of $ 2.5 billion primarily representing our partners’ 49 % share of this charge.

This resulted in a net increase in Other accrued liabilities of $ 2.8 billion, which principally relates to our 51 % share of an accrual for expected customer compensation.

There was no utilization of the accrual during the fourth quarter of 2023.

Other engine models within Pratt & Whitney’s fleet contain parts manufactured with affected powder metal, and while Pratt & Whitney continues to evaluate the impact of this powder metal issue on other engine models within its fleet, we do not currently believe there will be any significant financial impact with respect to these other engine models.

The financial impact of the powder metal issue is based on historical experience and is subject to various assumptions and judgments, most notably, the number and expected timing of shop visits, inspection results and scope of work to be performed, turnaround time, availability of parts, available capacity at overhaul facilities and outcomes of negotiations with impacted customers.

While these assumptions reflect our best estimates at this time, they are subject to variability.

Potential changes to these assumptions and actual incurred costs could significantly affect the estimates inherent in our financial statements and could have a material effect on the Company’s results of operations for the periods in which they are recognized.

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 ($ 843 million at December 31, 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.

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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.

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.

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

Although subject to further litigation at the ASBCA and potentially 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.

In December 2023, a DCMA DACO issued a third 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 2018 through 2022.

This third claim, which asserts the same measure of the cost of collaborator parts rejected by the ASBCA’s prior decision, demands payment of $ 277 million plus interest ($ 52 million at December 31, 2023).

Pratt & Whitney appealed this third claim to the ASBCA at the end of December 2023.

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 and third claims.

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

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

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.

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.

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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.

Although the investigation of these issues remains ongoing, information indicating that such conduct has occurred with respect to certain contracts has been identified.

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

Further, based on the information available to date, we cannot reasonably estimate the range of 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

As previously disclosed, on October 8, 2020, the Company received a criminal subpoena from the DOJ seeking information and documents in connection with an investigation relating to financial accounting, internal controls over financial reporting, and cost reporting regarding Raytheon Company’s Missiles & Defense (RMD) business since 2009.

The investigation involves multi-year contracts subject to governmental regulation, including potential civil defective pricing claims for three RMD contracts entered into between 2011 and 2013.

As part of the same investigation, on March 24, 2021, the Company received a second criminal subpoena from the DOJ seeking documents relating to a different RMD contract entered into in 2017.

The investigation involves multi-year contracts subject to governmental regulation, including potential civil defective pricing claims for certain Raytheon contracts entered into between 2011 and 2013.

As part of the same investigation, on March 24, 2021, the Company received a second criminal subpoena from the DOJ seeking documents relating to a certain Raytheon contract entered into in 2017.

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

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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 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.

and Related Matter

As previously disclosed, on August 12, 2020, several former employees of 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.

Raytheon Technologies Corporation, et al.).

The complaint challenged the method by which UTC equity awards were converted to Company, Otis, and Carrier equity awards following the separation of UTC into three independent, publicly-traded companies on April 3, 2020.

The complaint also claimed that the defendants are liable for breach of certain equity

compensation plans and also asserted claims under certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

On September 13, 2021, Plaintiffs filed an amended complaint which supersedes the initial complaint and continues to assert claims for breach of the equity compensation plans against the Company, Otis and Carrier, but no longer asserts ERISA claims.

Further, no claim is made in the amended complaint against any current or former director of any of the three companies.

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

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.

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.

Following the Company’s initial disclosure of the DOJ subpoena, 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 current and former 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.

Those shareholder derivative lawsuits were consolidated.

In December 2023, the consolidated action was further consolidated with certain newly filed derivative lawsuits related to the Powder Metal Matter, discussed below in “Powder Metal Disclosure Litigation and SEC Investigation”.

Plaintiffs in the consolidated action then filed an operative complaint that removed all claims and allegations connected to the Company’s disclosure of the aforementioned DOJ subpoena, removing from the case that theory of relief against the former Raytheon Company Board of Directors, the Company, and the executives originally named in the consolidated lawsuit.

The operative complaint now contains only allegations directed at certain former and current Directors and Officers of the Company related to the Powder Metal Matter, discussed below in “Powder Metal Disclosure Litigation and SEC Investigation”.

UTC Equity Conversion Litigation

As previously disclosed, 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

The Company received a grand jury subpoena in late 2019, as part of a DOJ criminal investigation into purported agreements not to solicit or hire employees in violation of the federal antitrust laws.

While the investigation has focused on alleged hiring restrictions between and among Pratt & Whitney and certain of its suppliers of outsourced engineering services, the subpoena also included requests regarding Collins.

Since receipt of the subpoena, the Company has been cooperating with the DOJ investigation.

On December 15, 2021, a criminal indictment was filed in the United States District Court for the District of Connecticut, against a former Pratt & Whitney employee and other employees of certain outsourced engineering suppliers charging each of them with one count of violating the federal antitrust laws.

No current or former Collins employees were named in the indictment.

We have been advised that the Company is a target of the DOJ investigation, and we continue to cooperate with the investigation.

No criminal charge has been filed against the Company or its affiliates.

After the criminal charges against the individuals were filed, numerous civil class action antitrust lawsuits have been filed against Pratt & Whitney and other corporate and individual defendants in the United States District Court for the District of Connecticut.

The allegations in each of the civil lawsuits track the factual assertions in the criminal indictment and generally allege that Pratt & Whitney and the other defendants agreed to restrict the hiring and recruiting of certain engineers and skilled laborers in a manner that violated federal antitrust laws.

Plaintiffs in each of the civil lawsuits seek to represent different purported classes of engineers and skilled laborers employed by Pratt & Whitney and other supplier-defendants since 2011.

Plaintiffs in each of the lawsuits seek treble damages in an undetermined amount, plus attorneys’ fees and costs of suit.

All of the lawsuits have been consolidated and a single amended class action complaint was filed.

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

Civil Litigation Related to Employee Hiring Practices

Pratt & Whitney is one of multiple defendants in a putative class action lawsuit pending in the United States District Court for the District of Connecticut alleging that Pratt & Whitney and the other defendants agreed to restrict the hiring and recruiting of certain engineers and skilled laborers in a manner that violated federal antitrust laws.

Plaintiffs seek to represent different purported classes of engineers and skilled laborers employed by Pratt & Whitney and other supplier-defendants since 2011, and are seeking to recover treble damages in an undetermined amount, plus attorneys’ fees and costs of suit.

We believe that the claims asserted lack merit.

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

Powder Metal Disclosure Litigation and SEC Investigation

Following the Company’s disclosures of a rare condition in powder metal used to manufacture certain Pratt & Whitney engine parts, two sets of civil actions were filed against RTX.

First, two putative federal securities class action lawsuits were filed in the United States District Court for the District of Connecticut against the Company and certain current and former executives of the Company.

The lawsuits allege that defendants violated federal securities laws by making material misstatements and omitting material facts relating to Pratt & Whitney’s Geared Turbofan engine fleet, including the impact of the powder metal issue on the fleet, in various regulatory filings.

The lawsuits were consolidated and remain pending.

Second, three shareholder derivative lawsuits were filed against current and former Officers and Directors of the Company, two in the United States District Court for the District of Delaware and one in the United States District Court for the District of Connecticut, which has since been transferred to the District of Delaware.

In addition, the complaint in the consolidated derivative action discussed above under “DOJ Investigation, Contract Pricing Disputes, and Related Civil Litigation” was amended to add allegations relating to the powder metal manufacturing matter.

The four lawsuits have been consolidated in the District of Delaware, and a single operative complaint has been filed.

The operative complaint alleges that the defendants caused the Company to make materially false and misleading statements relating to Pratt & Whitney’s Geared Turbofan engines, and failed to maintain an adequate system of oversight, disclosure controls and procedures, and internal controls over financial reporting.

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

On November 7, 2023 and January 30, 2024, the Company received subpoenas from the SEC seeking engineering, operational, organizational, accounting, and financial documents in connection with an investigation relating to the Company’s disclosures in 2023 of issues arising from Pratt & Whitney’s use of powder metal in manufacturing various engine parts, its identification of certain risks associated with those manufacturing processes, and corrective actions identified by Pratt & Whitney to mitigate those risks.

The Company is cooperating with the SEC and is responding to the subpoenas.

At this time, we are unable to predict the timing or outcome of this SEC investigation.

Where appropriate, we have recorded loss contingency accruals for the above-referenced matters, and the amounts individually, or in the aggregate, are not material.

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We do not believe that these matters will have a material adverse effect upon our results of operations, financial condition, or liquidity.

Common Stock - Share Repurchases.

On October 24, 2023, we entered into ASR agreements with certain financial institution counterparties to repurchase shares of our common stock for an aggregate purchase price of $ 10 billion.

Pursuant to the ASR agreements, we made aggregate payments of $ 10 billion on October 26, 2023, and received initial deliveries of approximately 108.4 million shares of our common stock at a price of $ 78.38 per share, representing approximately 85% of the shares expected to be repurchased.

The aggregate purchase price was recorded as a reduction to shareowners’ equity, consisting of a $ 8.5 billion increase in treasury stock and a $ 1.5 billion decrease in common stock.

We funded the payments with borrowings under a bridge credit agreement, which was repaid with the proceeds from term loan facilities, proceeds from issuances of long-term debt in the fourth quarter of 2023 and cash on hand.

Borrowings and Lines of Credit” for additional information.

The final number of shares to be repurchased will be based on the average of the daily volume-weighted average prices of our common stock during the term of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements.

Upon final settlement of the ASR, under certain circumstances, each of the counterparties may be required to deliver additional shares of common stock, or we may be required to deliver shares of common stock or to make a cash payment to the counterparties, at our election.

The final settlement of each transaction under the ASR agreements

is scheduled to occur no later than the third quarter of 2024 and in each case may be accelerated at the option of the applicable counterparty.

Accumulated Other Comprehensive Loss.

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Tax benefit (expense) ( 14 ) ( 813 ) 79 ( 748 )

Separation of Carrier and Otis, net of tax 3,287 584 4 3,875

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

Other comprehensive income before reclassifications, net ( 647 ) 3,210 ( 226 ) 2,337

Other comprehensive income (loss) before reclassifications, net ( 1,050 ) 1,225 ( 246 ) ( 71 )

Amounts reclassified, pre-tax 2 129 103 234

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STOCK-BASED COMPENSATION

RTC’s long-term incentive plans authorize various types of market and performance based incentive awards that may be granted to officers and key employees.

Certain historic awards remain outstanding under predecessor plans.

The Raytheon Technologies Corporation 2018 Long-Term Incentive Plan, as amended and restated (2018 LTIP) was approved by shareowners on April 26, 2021.

A total of 134.8 million shares have been authorized for issuance pursuant to awards under the 2018 LTIP including shares assumed from predecessor plans.

There is also an additional 21.5 million shares for future issuance due to adjustments related to the Separation Transactions.

RTX’s long-term incentive plans authorize various types of market and performance based incentive awards that may be granted to officers and key employees.

The RTX Corporation 2018 Long-Term Incentive Plan, as amended and restated (2018 LTIP) was approved by shareowners on April 26, 2021.

A total of 156.3 million shares have been authorized for issuance pursuant to awards under the 2018 LTIP including shares assumed from predecessor plans and adjustments associated with the separation of Carrier and Otis.

As of December 31, 2023, approximately 63.3 million shares remain available for awards under the 2018 LTIP.

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Generally, stock appreciation rights and stock options have a term of ten years and a three-year vesting period, subject to limited exceptions.

In the event of retirement, annual stock appreciation rights, stock options, and RSUs held for more than one year may become vested and exercisable, subject to certain terms and conditions.

In the event of retirement, annual stock appreciation rights, stock options, and restricted stock units (RSUs) held for more than one year may become vested and exercisable, subject to certain terms and conditions.

LTIP awards with performance-based vesting generally have a minimum three-year vesting period and vest based on actual performance against pre-established metrics.

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December 31, 2023 1,461 $ 81.72 31,155 $ 82.36 3,001 $ 87.33 9,730 $ 86.53

(1) Weighted-average exercise price.

(2) Weighted-average grant date fair value.

(1) Weighted-average exercise price per share.

(2) Weighted-average grant date fair value per share.

The weighted-average grant date fair value of stock options and stock appreciation rights granted during 2023, 2022, and 2021 was $ 24.66 , $ 21.80 , and $ 15.60 , respectively.

The weighted-average grant date fair value of performance share units, which vest upon achieving certain performance metrics, granted during 2023, 2022, and 2021 was $ 96.39 , $ 96.15 , and $ 73.75 , respectively.

There were no performance share units granted in 2020.

The total fair value of awards vested during the years ended December 31, 2022, 2021 and 2020 was $ 346 million, $ 287 million and $ 284 million, respectively.

The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of stock options and stock appreciation rights exercised during the years ended December 31, 2022, 2021 and 2020 was $ 110 million, $ 54 million and $ 206 million, respectively.

The total intrinsic value (which is the stock price at vesting multiplied by the number of underlying shares) of performance share units and other restricted awards vested was $ 427 million, $ 256 million and $ 295 million during the years ended December 31, 2022, 2021 and 2020, respectively.

The total fair value of awards vested during 2023, 2022, and 2021 was $ 273 million, $ 346 million, and $ 287 million, respectively.

The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of stock options and stock appreciation rights exercised during 2023, 2022, and 2021 was $ 46 million, $ 110 million, and $ 54 million, respectively.

The total intrinsic value (which is the stock price at vesting multiplied by the number of underlying shares) of performance share units and other restricted awards vested was $ 263 million, $ 427 million, and $ 256 million during 2023, 2022, and 2021, respectively.

The following table summarizes information about equity awards outstanding that are vested and expected to vest as well as equity awards outstanding that are exercisable at December 31, 2023:

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SEGMENT FINANCIAL DATA

Our operations, for the periods presented herein, are classified into four principal segments:

Collins, Pratt & Whitney, RIS and RMD.

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 results of RIS and RMD reflect the period subsequent to the completion of the Raytheon merger on April 3, 2020.

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, at which time management will begin to manage its operations under its new segment structure.

The changes will require the Company to revise its segment reporting.

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

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’ 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.

Our 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.

As previously announced, effective July 1, 2023, we streamlined the structure of our core businesses to three principal business segments:

Collins Aerospace (Collins), Pratt & Whitney, and Raytheon.

All segment information is reflective of this new structure and prior period information has been recast to conform to our current period presentation.

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

Collins designs, manufactures and supplies 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 cargo systems, evacuation systems, landing systems (including landing gear, wheels and braking systems), communication, navigation, surveillance systems, fire and ice detection and protection systems, actuation systems, integrated avionics, and propeller systems.

Collins also designs, manufactures, and supports complete cabin interiors, including seating, 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.

Collins also provides connected aviation solutions and services through worldwide voice and data communication networks, airport systems and integrations, and air traffic management solutions.

Collins supports government and defense customer missions by providing systems solutions for connected battlespace, test and training range systems, crew escape systems, and simulation and training.

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

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Pratt & Whitney’s Commercial Engines and Military Engines businesses design, develop, produce, and maintain families of large engines for wide- and narrow-body and large regional aircraft for commercial customers and for fighter, bomber, tanker, and transport aircraft for military customers.

Pratt & Whitney’s small engine business, Pratt & Whitney Canada (P&WC), is among the world’s leading suppliers of engines powering regional airlines, general and business aviation, as well as helicopters.

Pratt & Whitney’s small engine business, Pratt & Whitney Canada, is among the world’s leading suppliers of engines powering regional airlines, general and business aviation, as well as helicopters.

Pratt & Whitney also produces, sells, and services military and commercial auxiliary power units.

Pratt & Whitney provides fleet management services and aftermarket maintenance, repair, and overhaul services in all of these segments.

Raytheon Intelligence & Space 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.

Raytheon Missiles & Defense 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.

Raytheon is a leading provider of defensive and offensive threat detection, tracking and mitigation capabilities for U.S.

and foreign government and commercial customers.

Raytheon designs, develops, and provides advanced capabilities in integrated air and missile defense, smart weapons, missiles, advanced sensors and radars, interceptors, space-based systems, hypersonics, and missile defense across land, air, sea, and space.

Raytheon provides air-to-air and air-to-ground sensors, command and control and weapons including the Advanced Medium Range Air-to-Air Missile (AMRAAM), StormBreaker smart weapon, Long Range Stand Off Weapon (LRSO), and the Early Warning Radar.

Raytheon also provides advanced naval sensors, command and control and weapons including classified naval radars, the Next Generation Jammer (NGJ), shipboard missiles including the Tomahawk and Standard Missile 6 (SM-6), air-to-air missiles such as the AIM-9X SIDEWINDER missile, and integrated systems such as the SPY-6 radar.

In addition, Raytheon provides advanced systems and products that span layered land and integrated air and missile defense, including the proven Patriot air and missile defense system, the Lower Tier Air and

Missile Defense Sensor (LTAMDS), the National Advanced Surface-to-Air Missile System (NASAMS), Javelin, Excalibur, Stinger, and High-Energy Lasers.

Raytheon also provides technologically advanced sensors, satellites and interceptors, including the AN/TPY-2 radar, and Standard Missile 3 (SM-3).

Raytheon delivers integrated space solutions including sensors, mission orchestration, satellite control, and software.

Raytheon also focuses on the development and early introduction of next-generation technologies and systems, including hypersonics, counter-hypersonics, next-generation radars, sensor experimentation and electro-optical/infrared (EO/IR) advancements, and aligns products that use shared technologies, including fire control radars, surveillance radars, EO/IR, space-qualified satellite components, and electronics.

Segment Information.

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GAAP and our pension and PRB expense under U.S.

government Cost Accounting Standards (CAS) primarily related to our RIS and RMD segments.

government Cost Accounting Standards (CAS) primarily related to our Raytheon segment.

While the ultimate liability for pension and PRB costs under FAS and CAS is similar, the pattern of cost recognition is different.

Over time, we generally expect to recover the related RIS and RMD pension and PRB liabilities through the pricing of our products and services to the U.S.

Over time, we generally expect to recover the related Raytheon pension and PRB liabilities through the pricing of our products and services to the U.S.

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

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.

In connection with the segment realignment, prior period results were recast in order to maintain the segment cost recognition patterns described above.

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, if applicable.

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

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Pratt & Whitney (2)

Raytheon Intelligence & Space 14,312 15,180 11,069 1,342 1,833 1,020 9.4 % 12.1 % 9.2 %

Raytheon Missiles & Defense 14,863 15,539 11,396 1,519 2,004 880 10.2 % 12.9 % 7.7 %

18,296 20,530 18,150 ( 1,455 ) 1,075 454 ( 8.0 ) % 5.2 % 2.5 %

Raytheon 26,350 25,176 26,611 2,379 2,448 3,399 9.0 % 9.7 % 12.8 %

Total segment 70,899 68,758 65,913 4,749 6,339 6,233 6.7 % 9.2 % 9.5 %

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Acquisition accounting adjustments — — — ( 1,998 ) ( 1,893 ) ( 2,203 )

— — — ( 1,893 ) ( 2,203 ) ( 5,100 )

Consolidated $ 68,920 $ 67,074 $ 64,388 $ 3,561 $ 5,504 $ 5,136 5.2 % 8.2 % 8.0 %

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

2020 amounts include Forcepoint, LLC, which was acquired as part of the Raytheon merger, and subsequently disposed of on January 8, 2021.

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

Army’s LTAMDS project.

(3) Operating profit (loss) in 2020 includes the $ 3.2 billion goodwill impairment charge in the second quarter of 2020 related to two Collins reporting units.

Refer to “Note 2:

Business Acquisitions, Dispositions, Goodwill and Intangible Assets” for additional information.

(1) Includes the operating results of certain smaller operations.

(2) 2023 includes the impacts of the Powder Metal Matter.

(3) 2022 and 2021 included the net expenses related to the U.S.

Army’s LTAMDS program.

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

Total Assets Capital Expenditures Depreciation & Amortization

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40,723 36,205 1,025 949 700 736 724 642

Raytheon Intelligence & Space (1)

44,929 45,666 637 563 558 544 526 504

Raytheon Missiles & Defense (1)

27,852 28,766 260 287 280 333 333 228

Total segment 157,737 152,275 2,290 2,183 1,955 2,004 2,006 1,887

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Geographic external sales are attributed to the geographic regions based on their location of origin.

external sales include export sales to commercial customers outside the U.S.

and sales to the U.S.

external sales include export sales to commercial customers outside the U.S., as well as sales to the U.S.

government, commercial and affiliated customers, which are known to be for resale to customers outside the U.S.

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United States (1)

$ 57,539 $ 57,869 $ 55,837 $ 12,646 $ 12,162

International

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Middle East and North Africa 492 173 136 103 113

Other 3,380 3,037 2,654 962 1,003

Other regions 3,858 3,380 3,037 984 962

Consolidated $ 68,920 $ 67,074 $ 64,388 $ 15,748 $ 15,170

(1) 2023 external net sales includes the reduction in sales from the Powder Metal Matter.

Disaggregation of Revenue.

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

Our geographic region based on customer location uses end user customer location where known or practical to determine, or in instances where the end user customer is not known or not practical to determine, we utilize “ship to” location as the customer location.

In addition, for our RIS and RMD segments, we disaggregate our

contracts from customers by contract type.

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

Our geographic region based on customer location uses end user customer location where known or practical to determine, or in instances where the end user customer is not known or not practical to determine, uses “ship to” location as the customer location.

In addition, for our Raytheon segment, we disaggregate our contracts from customers by contract type.

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

Segment sales disaggregated by geographic region for the years ended December 31 are as follows:

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

Segment sales disaggregated by geographic region based on customer location for the years ended December 31 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total

United States $ 13,185 $ 11,403 $ 20,187 $ 106 $ 44,881

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Middle East and North Africa 684 539 2,014 — 3,237

Other 1,240 1,658 141 78 — 3,117

Other regions 1,377 2,095 181 — 3,653

Powder Metal Matter — ( 5,401 ) — — ( 5,401 )

Consolidated net sales 24,294 18,296 26,220 110 68,920

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Business segment sales $ 26,253 $ 18,296 $ 26,350 $ ( 1,979 ) $ 68,920

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

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total

United States $ 11,944 $ 10,433 $ 18,643 $ 170 $ 41,190

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Middle East and North Africa 510 450 2,639 — 3,599

Other 915 1,302 144 70 — 2,431

Other regions 1,256 1,658 203 — 3,117

Consolidated net sales 21,330 20,527 25,043 174 67,074

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Business segment sales $ 23,052 $ 20,530 $ 25,176 $ ( 1,684 ) $ 67,074

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

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total

United States $ 11,669 $ 9,034 $ 19,139 $ 169 $ 40,011

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Middle East and North Africa 483 441 3,455 — 4,379

Other 904 1,001 83 73 23 2,084

Other regions 933 1,302 196 — 2,431

Consolidated net sales 19,613 18,150 26,452 173 64,388

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Segment sales disaggregated by type of customer for the years ended December 31 are as follows:

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

(dollars in millions) Collins Aerospace Pratt & Whitney (2)

Raytheon Other Total

Sales to the U.S.

government (1)

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Foreign government direct commercial sales 1,110 515 2,620 4 4,249

Commercial aerospace and other commercial 13,403 13,666 303 16 — 27,388

Commercial aerospace and other commercial sales (2)

16,523 11,133 407 6 28,069

Consolidated net sales 24,294 18,296 26,220 110 68,920

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

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

(2) Includes the reduction in sales from the Powder Metal Matter.

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total

Sales to the U.S.

government (1)

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Foreign government direct commercial sales 1,063 474 2,786 4 4,327

Commercial aerospace and other commercial 11,042 11,196 431 3 — 22,672

Commercial aerospace and other commercial sales 13,411 13,666 308 3 27,388

Consolidated net sales 21,330 20,527 25,043 174 67,074

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

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

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total

Sales to the U.S.

government (1)

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Foreign government direct commercial sales 1,223 541 3,227 2 4,993

Commercial aerospace and other commercial 11,610 9,785 249 100 322 22,066

Commercial aerospace and other commercial sales 11,065 11,196 408 3 22,672

Consolidated net sales 19,613 18,150 26,452 173 64,388

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

The largest contributor to our Commercial aerospace and other commercial sales is Airbus.

Sales to Airbus primarily relate to Pratt & Whitney and Collins products, and prior to discounts and incentives were approximately 17 %, 14 %, and 12 % of total net sales in 2023, 2022, and 2021, respectively.

Total net sales in 2023 includes the reduction in sales from the Powder Metal Matter.

Segment sales disaggregated by sales type for the years ended December 31 are as follows:

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

(dollars in millions) Collins Aerospace Pratt & Whitney (1)

Raytheon Other Total

Products $ 19,034 $ 8,579 $ 21,847 $ 111 $ 49,571

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Business segment sales $ 26,253 $ 18,296 $ 26,350 $ ( 1,979 ) $ 68,920

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

(1) Includes the reduction in sales from the Powder Metal Matter.

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total

Products $ 16,917 $ 12,411 $ 21,276 $ 169 $ 50,773

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Business segment sales $ 23,052 $ 20,530 $ 25,176 $ ( 1,684 ) $ 67,074

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

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total

Products $ 15,648 $ 11,189 $ 22,264 $ 169 $ 49,270

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Business segment sales $ 21,152 $ 18,150 $ 26,611 $ ( 1,525 ) $ 64,388

RIS and RMD segment sales disaggregated by contract type for the years ended December 31 are as follows:

2022 2021 2020

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

Raytheon segment sales disaggregated by contract type for the years ended December 31 are as follows:

(dollars in millions) 2023 2022 2021

Fixed-price $ 13,164 $ 12,910 $ 14,270

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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 8. Financial Statements and Supplementary Data