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Item 1. Financial Statements

2024-07-25 compared with 2024-04-23 · 292 added, 146 removed, 710 unchanged (38% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions, except per share amounts) 2024 2023 2024 2023

8 unchanged sentences

Total costs and expenses 18,296 16,847 36,103 32,462

Other income, net 372 88

Other income (expense), net ( 896 ) 25 ( 524 ) 113

Operating profit 529 1,493 2,399 3,180

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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CONDENSED CONSOLIDATED BALANCE SHEET

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Current Assets

44 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions) 2024 2023

3 unchanged sentences

Depreciation and amortization 2,131 2,078

Deferred income tax benefit ( 114 ) ( 329 )

Deferred income tax provision (benefit) 185 ( 700 )

Stock compensation cost 223 212

Net periodic pension and other postretirement income ( 666 ) ( 778 )

Gain on sale of Cybersecurity, Intelligence and Services business, net of transaction costs

Gain on sale of business, net of transaction costs (Note 2)

Accounts receivable 587 ( 699 )

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Increase in other intangible assets ( 318 ) ( 314 )

Payments from settlements of derivative contracts, net ( 1 ) ( 13 )

(Payments) receipts from settlements of derivative contracts, net ( 29 ) 45

Other investing activities, net 28 113

Net cash flows provided by (used in) investing activities 693 ( 579 )

Net cash flows used in investing activities ( 40 ) ( 1,202 )

Financing Activities:

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions, except per share amounts;

3 unchanged sentences

Common stock plans activity 194 198 247 290

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

Ending balance 37,302 38,228 37,302 38,228

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Ending balance 1,665 1,576 1,665 1,576

Equity at March 31

Equity at June 30

$ 60,650 $ 74,056 $ 60,650 $ 74,056

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Basis of Presentation

The Condensed Consolidated Financial Statements at March 31, 2024 and for the quarters ended March 31, 2024 and 2023 are unaudited, and in the opinion of management include adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods.

The Condensed Consolidated Financial Statements at June 30, 2024 and for the quarters and six months ended June 30, 2024 and 2023 are unaudited, and in the opinion of management include adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods.

The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year.

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Effective July 1, 2023, we streamlined the structure of our core businesses to three principal business segments:

Collins Aerospace, Pratt & Whitney, and Raytheon.

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

Prior period information has been recast to conform to our current period presentation.

Raytheon follows a 4-4-5 fiscal calendar while Collins Aerospace (Collins) and Pratt & Whitney use a quarter calendar end.

Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended March 31, 2024 and 2023 with respect to Raytheon, we are referring to their March 31, 2024 and April 2, 2023 fiscal quarter ends, respectively.

Raytheon follows a 4-4-5 fiscal calendar while Collins and Pratt & Whitney use a quarter calendar end.

Throughout this Form 10-Q, when we refer to the quarters and six months ended June 30, 2024 and 2023 with respect to Raytheon, we are referring to their June 30, 2024 and July 2, 2023 fiscal quarter ends, respectively.

Legal Matters.

The Company has made progress in the quarter ended June 30, 2024 toward resolving several outstanding legal matters, herein referred to as “Expected Resolution of Certain Legal Matters.” The Company expects to enter into a deferred prosecution agreement with the Department of Justice (DOJ) and to be subject to an administrative order with the Securities and Exchange Commission (SEC) to resolve the previously disclosed criminal and civil government investigations into improper payments made by Raytheon Company and its joint venture, Thales-Raytheon Systems (TRS), in connection with certain Middle East contracts since 2012 (Thales-Raytheon Systems and Related Matters);

the Company also expects to enter into a deferred prosecution agreement and a False Claims Act (FCA) settlement agreement with the DOJ to resolve previously disclosed criminal and civil government investigations into defective pricing claims for certain legacy Raytheon Company contracts entered into between 2011 and 2013 and in 2017 (DOJ Investigation and Contract Pricing Disputes).

In addition, the Company has made progress in the quarter ended June 30, 2024 toward resolving certain voluntarily disclosed export controls violations primarily identified in connection with the integration of Rockwell Collins and, to a lesser extent, Raytheon Company, including certain violations expected to be resolved pursuant to a consent agreement with the Department of State (DOS) (Trade Compliance Matters).

As a result of the progress made, we recorded a combined pre-tax charge of $ 918 million during the quarter ended June 30, 2024, which included an accrual of $ 269 million related to the DOJ Investigation and Contract Pricing Disputes (in addition to amounts previously accrued), an accrual of $ 364 million related to Thales-Raytheon Systems and Related Matters (in addition to amounts previously accrued), and an accrual of $ 285 million related to Trade Compliance Matters.

See “Note 16:

Commitments and Contingencies” for additional information.

Pratt & Whitney Powder Metal Matter.

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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.

As a result of the Canadian government’s imposition of sanctions in February 2024, which included U.S.- and German-based Russian-owned entities from which we source titanium for use in our Canadian operations, we recorded charges of $ 175 million in the first quarter of 2024 within our Collins segment.

As a result of the Canadian government’s imposition of sanctions in February 2024, including those imposed on U.S.- and German-based Russian-owned entities from which we source titanium for use in our Canadian operations, we recorded charges of $ 175 million in the first quarter of 2024 within our Collins segment.

These charges are primarily related to the recognition of unfavorable purchase commitments and an impairment of contract fulfillment costs that are no longer recoverable as a result of initiating alternative titanium sources.

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Dispositions.

On March 29, 2024, we completed the sale of our Cybersecurity, Intelligence and Services (CIS) business within our Raytheon segment for proceeds of approximately $ 1.3 billion in cash, resulting in an aggregate pre-tax gain, net of transaction and other related costs, of $ 0.4 billion ($ 0.2 billion after tax), primarily recognized in Other income, net within the Condensed Consolidated Statement of Operations.

On March 29, 2024, we completed the sale of our Cybersecurity, Intelligence and Services (CIS) business within our Raytheon segment for proceeds of approximately $ 1.3 billion in cash, resulting in an aggregate pre-tax gain, net of transaction and other related costs, of $ 0.4 billion ($ 0.2 billion after tax), primarily recognized in Other income (expense), net within the Condensed Consolidated Statement of Operations.

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.

On November 16, 2023, the Italian government notified RTX that it had denied Safran’s proposed acquisition of the portion of the Collins business conducted by Microtecnica S.r.l.

On June 4, 2024, the Italian government notified RTX that it will now approve the proposed transaction in response to additional commitments Safran has agreed to make in respect of the proposed transaction.

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

On July 1, 2024, we entered into a definitive agreement to sell our Goodrich Hoist & Winch business within our Collins segment for approximately $ 0.5 billion in cash.

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.

Goodwill and Intangible Assets

Changes in our goodwill balances for the quarter ended March 31, 2024 were as follows:

(dollars in millions) Balance as of December 31, 2023 Acquisitions and Divestitures Foreign Currency Translation and Other Balance as of March 31, 2024

Changes in our goodwill balances for the six months ended June 30, 2024 were as follows:

(dollars in millions) Balance as of December 31, 2023 Acquisitions and Divestitures Foreign Currency Translation and Other Balance as of June 30, 2024

Collins Aerospace (1)

$ 33,135 $ ( 263 ) $ ( 91 ) $ 32,781

Pratt & Whitney 1,563 — — 1,563

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Total $ 53,699 $ ( 263 ) $ ( 89 ) $ 53,347

(1) The reduction in Acquisitions and Divestitures includes the reclassification of goodwill to held for sale assets.

Intangible Assets.

Identifiable intangible assets are comprised of the following:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

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Total $ 48,901 $ ( 14,398 ) $ 48,757 $ ( 13,358 )

Amortization of intangible assets for the quarters ended March 31, 2024 and 2023 was $ 526 million and $ 509 million, respectively.

Amortization of intangible assets for the quarters and six months ended June 30, 2024 and 2023 was $ 534 million and $ 1,060 million and $ 510 million and $ 1,019 million, respectively.

The following is the expected amortization of intangible assets for the remainder of 2024 through 2029:

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Earnings Per Share

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars and shares in millions, except per share amounts) 2024 2023 2024 2023

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

For the quarters ended March 31, 2024 and 2023, the number of stock awards excluded from the computation was 15.3 million and 4.1 million, respectively.

For the quarter and six months ended June 30, 2024, the number of stock awards excluded from the computation was 3.9 million and 9.6 million, respectively.

For both the quarter and six months ended June 30, 2023, the number of stock awards excluded from the computation was 4.0 million.

Changes in Contract Estimates at Completion

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

Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials 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.

Management must make assumptions and estimates regarding contract revenues 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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Net EAC adjustments had the following impact on our operating results:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions, except per share amounts) 2024 2023 2024 2023

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

In addition to the amounts included in the table above, during the quarter ended June 30, 2024, Raytheon initiated the termination of a fixed price development contract with a foreign customer, herein referred to as “Raytheon Contract Termination.” As a result of this action, Raytheon recognized a $ 575 million charge related to the estimated impact of this termination.

This charge includes the write-off of remaining contract assets and our best estimate of the expected settlement in conjunction with this termination.

Accounts Receivable, Net

Accounts receivable, net consisted of the following:

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Accounts receivable $ 10,561 $ 11,154

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Total contract assets and contract liabilities were as follows:

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Contract assets $ 13,581 $ 12,139

1 unchanged sentence

Net contract liabilities $ ( 4,084 ) $ ( 5,044 )

Contract assets increased $ 965 million during the quarter ended March 31, 2024 primarily due to sales in excess of billings on certain contracts at Pratt & Whitney and Raytheon.

We recognized revenue of $ 2.6 billion during the quarter ended March 31, 2024, related to contract liabilities as of January 1, 2024 and $ 1.9 billion during the quarter ended March 31, 2023, related to contract liabilities as of January 1, 2023.

As of March 31, 2024, our Contract liabilities include approximately $ 405 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals.

Contract assets increased $ 1.4 billion during the six months ended June 30, 2024 primarily due to sales in excess of billings on certain contracts at Pratt & Whitney and Raytheon.

Contract liabilities increased $ 0.5 billion during the six months ended June 30, 2024 primarily due to billings in excess of sales on certain contracts at Raytheon.

We recognized revenue of $ 1.8 billion and $ 4.4 billion during the quarter and six months ended June 30, 2024, respectively, related to contract liabilities outstanding as of January 1, 2024 and recognized revenue of $ 1.5 billion and $ 3.4 billion during the quarter and six months ended June 30, 2023, respectively, related to contract liabilities outstanding as of January 1, 2023.

As of June 30, 2024, our Contract liabilities include approximately $ 405 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals.

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

Contract assets are net of an allowance for expected credit losses of $ 194 million and $ 197 million as of March 31, 2024 and December 31, 2023, respectively.

Contract assets are net of an allowance for expected credit losses of $ 203 million and $ 197 million as of June 30, 2024 and December 31, 2023, respectively.

Inventory, net

Inventory, net consisted of the following:

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Raw materials $ 4,250 $ 3,911

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Borrowings and Lines of Credit

As of March 31, 2024, we had a revolving credit agreement with various banks permitting aggregate borrowings of up to $ 5.0 billion, which expires in August 2028.

As of March 31, 2024, there were no borrowings outstanding under this agreement.

As of June 30, 2024, we had a revolving credit agreement with various banks permitting aggregate borrowings of up to $ 5.0 billion, which expires in August 2028.

As of June 30, 2024, there were no borrowings outstanding under this agreement.

From time to time, we use commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments, and repurchases of our common stock.

The commercial paper notes have original maturities of not more than 364 days from the date of issuance.

As of March 31, 2024, our maximum commercial paper borrowing limit was $ 5.0 billion as the commercial paper is backed by our $ 5.0 billion revolving credit agreement.

At March 31, 2024 and December 31, 2023, we had no commercial paper borrowings outstanding.

During the quarter ended March 31, 2024, we had no new borrowings, and no repayments, of commercial paper with maturities greater than 90 days.

During the quarter ended March 31, 2023, we had no new borrowings, and $ 100 million in repayments, of commercial paper with maturities greater than 90 days.

There were no issuances of long-term debt during the quarter ended March 31, 2024.

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

As of June 30, 2024, our maximum commercial paper borrowing limit was $ 5.0 billion as the commercial paper is backed by our $ 5.0 billion revolving credit agreement.

At June 30, 2024 and December 31, 2023, we had no commercial paper borrowings outstanding.

During the six months ended June 30, 2024, we had no new borrowings or repayments of commercial paper with maturities greater than 90 days.

During the six months ended June 30, 2023, we had no new borrowings and $ 200 million in repayments of commercial paper with maturities greater than 90 days.

There were no issuances of long-term debt during the six months ended June 30, 2024.

We had the following issuances of long-term debt during the six months ended June 30, 2023:

Date Description of Notes Aggregate Principal Balance (in millions)

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5.375 % notes due 2053

There were no repayments of long-term debt during the quarter ended March 31, 2023.

We made the following repayment of long-term debt during the quarter ended March 31, 2024:

There were no repayments of long-term debt during the six months ended June 30, 2023.

We made the following repayments of long-term debt during the six months ended June 30, 2024:

Date Description of Notes Aggregate Principal Balance (in millions)

May 7, 2024 3 Month SOFR plus 1.225 % Term Loan due 2025

April 17, 2024 3 Month SOFR plus 1.225 % Term Loan due 2025

April 4, 2024 3 Month SOFR plus 1.225 % Term Loan due 2025

March 15, 2024 3.200 % notes due 2024

In April 2024, we repaid $ 500 million of the 3 Month Secured Overnight Financing Rate (SOFR) plus 1.225 % term loan due 2025 .

Long-term debt consisted of the following:

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

3.200 % notes due 2024 (1)

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

The average maturity of our long-term debt at March 31, 2024 is approximately 13 years.

The average maturity of our long-term debt as of June 30, 2024 is approximately 13 years.

Employee Benefit Plans

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Contributions to our plans were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Noncurrent pension assets (included in Other assets) $ 1,906 $ 1,296

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

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Noncurrent pension liabilities $ 1,634 $ 1,737

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Pension Benefits

Quarter Ended March 31,

Quarter Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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Total net periodic (income) expense $ ( 327 ) $ ( 390 ) $ 1 $ —

Pension Benefits

Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

Operating expense

$ 94 $ 111 $ 2 $ 2

Non-operating expense

Interest cost 1,192 1,253 22 24

Expected return on plan assets ( 1,873 ) ( 1,875 ) ( 10 ) ( 10 )

Amortization of prior service credit ( 85 ) ( 79 ) — —

Recognized actuarial net (gain) loss 10 ( 190 ) ( 12 ) ( 16 )

Net settlement, curtailment and special termination benefit (gain) loss ( 4 ) 2 — —

Non-service pension income ( 760 ) ( 889 ) — ( 2 )

Total net periodic (income) expense $ ( 666 ) $ ( 778 ) $ 2 $ —

We have set aside assets in separate trusts, which we expect to be used to pay for certain nonqualified defined benefit and defined contribution plan obligations in excess of qualified plan limits.

1 unchanged sentence

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

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Marketable securities held in trusts $ 714 $ 745

Our effective tax rate for the quarter ended March 31, 2024 was 5.8 %, as compared to 18.4 % for the quarter ended March 31, 2023.

The lower effective tax rate for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 is primarily driven by the $ 275 million tax benefit recognized as a result of the conclusion of the examination phases of the RTX and Rockwell Collins audits, partially offset by the tax costs related to the sale of the CIS business of $ 143 million.

Our effective tax rates for the quarter and six months ended June 30, 2024 were 59.1 % and 15.8 %, respectively, as compared to 15.4 % and 17.0 % for the quarter and six months ended June 30, 2023, respectively.

The increase in the effective tax rate for the quarter ended June 30, 2024 as compared to the quarter ended June 30, 2023 is primarily driven by a $ 918 million charge associated with the Expected Resolution of Certain Legal Matters accrued during the quarter ended June 30, 2024 where no tax benefit has been recorded.

Additionally, the annualized effective tax rate currently forecasted for 2024 is higher than the comparable period in 2023, principally driven by lower U.S.

federal research and development tax credits and higher non-U.S.

income taxes.

The higher forecasted non-U.S.

income taxes are principally driven by legislation enacted during the quarter ended June 30, 2024 by the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two initiatives.

The effective tax rate for the six months ended June 30, 2024 includes a $ 275 million tax benefit recognized in the quarter ended March 31, 2024 resulting from the conclusion of the examination phases of the RTX and Rockwell Collins audits and $ 143 million of tax costs associated with the sale of the CIS business.

The resulting net tax benefit from these items, coupled with lower year to date pre-tax income, more than offset the effective tax rate impact of a $ 918 million charge associated with the Expected Resolution of Certain Legal Matters accrued during the quarter ended June 30, 2024 where no tax benefit has been recorded.

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

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income tax examinations for years before 2014.

The Examination Division of the Internal Revenue Service (IRS) has concluded 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 Company filed protests with respect to certain IRS proposed adjustments for each exam and will dispute these adjustments at the Appeals Division of the IRS.

The Company filed protests with respect to certain IRS proposed adjustments for 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 Company will dispute these adjustments at the Appeals Division of the IRS.

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

As a result of the conclusion of the examination phases for RTX and Rockwell Collins during the quarter ended March 31, 2024, the Company recognized a net income benefit of $ 285 million in the quarter, of which $ 275 million is within income tax expense.

The net income benefit recognized includes the effects of adjusting interest accruals and certain tax related indemnity receivables.

Separately, the Company expects the IRS’ examination of RTX’s tax year 2020 to commence in the fourth quarter of 2024.

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 over the next 12 months the amount of unrecognized tax benefits may change within a range of a net reduction of $ 50 million to a net increase of $ 75 million 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.

It is reasonably possible that over the next 12 months the amount

of unrecognized tax benefits may change within a range of a net reduction of $ 50 million to a net increase of $ 75 million 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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We have used derivative instruments, including swaps, forward contracts, and options, to manage certain foreign currency, interest rate, and commodity price exposures.

The present value of aggregate notional principal of our outstanding foreign currency hedges was $ 14.9 billion and $ 15.8 billion at March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024, all derivative contracts accounted for as cash flow hedges will m ature by March 2036.

The present value of the aggregate notional principal of our outstanding foreign currency hedges was $ 15.7 billion and $ 15.8 billion at June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024, all derivative contracts accounted for as cash flow hedges will m ature by March 2036.

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

(dollars in millions) Balance Sheet Location March 31, 2024 December 31, 2023

(dollars in millions) Balance Sheet Location June 30, 2024 December 31, 2023

Derivatives designated as hedging instruments:

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Other accrued liabilities 64 37

The effect of cash flow hedging relationships on Accumulated other comprehensive loss and on the Condensed Consolidated Statement of Operations in the quarters ended March 31, 2024 and 2023 are presented in “Note 17:

The effect of cash flow hedging relationships on Accumulated other comprehensive loss and on the Condensed Consolidated Statement of Operations in the quarters and six months ended June 30, 2024 and 2023 are presented in “Note 17:

Equity.” 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 March 31, 2024, our € 500 million principal value of euro-denominated long-term debt qualifies as a net investment hedge against our investments in European businesses, which is deemed to be effective.

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

As of June 30, 2024, 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 (expense), net, on the Condensed Consolidated Statement of Operations and is not significant.

Fair Value Measurements

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

March 31, 2024

June 30, 2024

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

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

As of March 31, 2024, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk.

As of June 30, 2024, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk.

Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties’ credit risks.

The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance Sheet:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(dollars in millions) Carrying

3 unchanged sentences

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

March 31, 2024

June 30, 2024

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

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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.

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 Condensed Consolidated Balance Sheet are as follows:

(dollars in millions) March 31, 2024 December 31, 2023

(dollars in millions) June 30, 2024 December 31, 2023

Current assets $ 9,869 $ 9,309

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These instruments expire on various dates through 2032.

Additional guarantees of project performance for which there is no stated value also remain

Additional guarantees of project performance for which there is no stated value also remain outstanding.

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

As of March 31, 2024 and December 31, 2023, the following financial guarantees were outstanding:

March 31, 2024 December 31, 2023

As of June 30, 2024 and December 31, 2023, the following financial guarantees were outstanding:

June 30, 2024 December 31, 2023

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

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

Collaboration partners’ share of these financing guarantees were $ 134 million and $ 135 million at March 31, 2024 and December 31, 2023, respectively.

Collaboration partners’ share of these financing guarantees were $ 134 million and $ 135 million at June 30, 2024 and December 31, 2023, respectively.

We also have obligations arising from sales of certain businesses and assets, including those from representations and warranties and related indemnities for environmental, health and safety, tax, and employment matters.

The maximum potential payment related to these obligations is not a specified amount, as a number of the obligations do not contain financial caps.

The carrying amount of liabilities related to these obligations were $ 94 million and $ 97 million at March 31, 2024 and December 31, 2023, respectively.

The carrying amount of liabilities related to these obligations were $ 98 million and $ 97 million at June 30, 2024 and December 31, 2023, respectively.

These primarily relate to environmental liabilities, which are included in our total environmental liabilities as further discussed in “Note 16:

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

The changes in the carrying amount of service and product warranties and product performance guarantees for the quarters ended March 31, 2024 and 2023 were as follows:

The changes in the carrying amount of service and product warranties and product performance guarantees for the six months ended June 30, 2024 and 2023 were as follows:

(dollars in millions) 2024 2023

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Other ( 5 ) 6

Balance as of March 31 $ 1,084 $ 1,093

Balance as of June 30 $ 1,068 $ 1,079

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.

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

As of March 31, 2024 and December 31, 2023, we had $ 770 million and $ 760 million, respectively, reserved for environmental remediation.

As of June 30, 2024 and December 31, 2023, we had $ 769 million and $ 760 million, respectively, reserved for environmental remediation.

Commercial Aerospace Financing and Other Commitments.

We had commercial aerospace financing commitments and other contractual commitments of approximately $ 14.5 billion and $ 14.6 billion as of March 31, 2024 and December 31, 2023, respectively, on a gross basis before reduction for our collaboration partners’ share.

We had commercial aerospace financing commitments and other contractual commitments of approximately $ 14.4 billion and $ 14.6 billion as of June 30, 2024 and December 31, 2023, 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 enter into these agreements to assist certain affiliates in obtaining financing on more favorable terms, making bids on contracts and performing their contractual obligations.

The stated values of these letters of credit agreements and surety bonds totaled $ 3.3 billion as of March 31, 2024.

The stated values of these letters of credit agreements and surety bonds totaled $ 3.1 billion as of June 30, 2024.

Offset / Industrial Participation Obligations.

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

At March 31, 2024, the aggregate amount of these agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately $ 12.5 billion.

At June 30, 2024, the aggregate amount of these agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately $ 12.6 billion.

These agreements are designed to return economic value to the foreign country by requiring us to engage in activities supporting local defense or commercial industries, promoting a balance of trade, developing in-country technology capabilities, or addressing other local development priorities.

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Government Oversight.

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

actions and proceedings.

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

government contracting environment, we will continue to be the subject of one or more U.S.

government contracting and overall enforcement environment, we will continue to be the subject of one or more U.S.

government investigations.

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Such investigations and audits may be initiated due to a number of reasons, including as a result of a whistleblower complaint.

Such investigations and audits could result in administrative, civil or criminal liabilities, including repayments, fines, treble or other damages, forfeitures, restitution, or penalties being imposed upon us, the suspension of government export licenses, or the suspension or debarment from future U.S.

Such investigations and audits could result in administrative, civil or criminal liabilities, including the imposition of repayment obligations, fines, treble or other damages, forfeitures, disgorgement, restitution, or penalties, the suspension of government export licenses, and/or suspension or debarment from future U.S.

government contracting.

They could also result in deferred prosecution agreements, consent agreements, guilty plea agreements, and/or imposition of an independent compliance monitor.

government investigations often take years to complete.

government also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal, or other seriously improper conduct.

government could void any contracts found to be tainted by fraud.

Like many defense contractors, we have received audit reports recommending the reduction of certain contract prices because, for example, cost or pricing data or cost accounting

practices used to price and negotiate those contracts may not have conformed to government regulations.

As noted above, the U.S.

government reserves the right to suspend or debar a contractor from receiving new government contracts for fraudulent, criminal, or other seriously improper conduct.

government could also void any contracts found to be tainted by fraud.

Like many defense contractors, we have received audit reports recommending the reduction of certain contract prices because, for example, cost or pricing data or cost accounting practices used to price and negotiate those contracts may not have conformed to government regulations.

Some of these audit reports recommend that certain payments be repaid, delayed, or withheld, and may involve substantial amounts.

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Our compliance with such local government regulations or any applicable U.S.

government regulations (e.g., the Foreign Corrupt Practices Act (FCPA) and International Traffic in Arms Regulations (ITAR)) may also be investigated or audited.

government regulations (e.g., Arms Export Control Act (AECA), Export Administration Regulations (EAR), Foreign Corrupt Practices Act (FCPA), and International Traffic in Arms Regulations (ITAR)) may also be investigated or audited.

In addition, we accrue for liabilities associated with those matters that are probable and can be reasonably estimated.

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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, 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.

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The charge recorded in the third quarter of 2023 resulted in a net increase in Other accrued liabilities of $ 2.8 billion, which principally related to our 51 % share of an accrual for expected customer compensation.

At March 31, 2024 and December 31, 2023, we had Other accrued liabilities of $ 2.7 billion and $ 2.8 billion, respectively, related to the Powder Metal Matter.

The change in the accrual during the quarter ended March 31, 2024 was primarily due to customer payments and credits issued.

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.

At June 30, 2024 and December 31, 2023, we had Other accrued liabilities of $ 2.6 billion and $ 2.8 billion, respectively, primarily related to expected compensation to customers.

The reduction in the accrual during the six months ended June 30, 2024 was due to customer compensation.

Other engine models within Pratt & Whitney’s fleet contain parts manufactured with affected powder metal, but we do not currently believe there will be any resultant significant financial impact with respect to these other engine models at this time.

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.

assumptions reflect our best estimates at this time, they are subject to variability.

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.

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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 ($ 1.09 billion at March 31, 2024).

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 $ 1.7 billion plus interest ($ 1.1 billion at June 30, 2024).

The claim is based on Pratt & Whitney’s alleged noncompliance with Cost Accounting Standards (CAS) from January 1, 2007 to March 31, 2019, due to its method of allocating independent research and development costs to government contracts.

Pratt & Whitney believes that the claim is without merit and filed an appeal to the ASBCA on June 7, 2019.

As previously disclosed, in December 2013, a DCMA DACO asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $ 177 million plus interest ($ 162 million at March 31, 2024).

The claim is based on Pratt & Whitney’s alleged noncompliance with CAS from January 1, 2005 to December 31, 2012, due to its method of determining the cost of collaborator parts used in the calculation of material overhead costs for government contracts.

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In December 2018, a DCMA DACO issued a second claim against Pratt & Whitney that similarly alleges that its method of determining the cost of collaborator parts does not comply with the CAS for calendar years 2013 through 2017.

This second claim, which asserts the same measure of the cost of collaborator parts rejected by the ASBCA’s November 22, 2021 decision, demands payment of $ 269 million plus interest ($ 131 million at March 31, 2024).

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

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 ($ 59 million at March 31, 2024).

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 ($ 66 million at June 30, 2024).

Pratt & Whitney appealed this third claim to the ASBCA at the end of December 2023.

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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.

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

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

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

The Company maintains a rigorous anti-corruption compliance program, 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.

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.

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

Based on the government’s and our own internal investigations, the Company engaged in resolution discussions with the SEC and DOJ, and during the quarter ended June 30, 2024, the Company reached agreements in principle with the DOJ and SEC as to the principal elements of such resolutions.

Resolution with the SEC and DOJ remains subject to reaching final agreements satisfactory to all parties and the final approval of the SEC, the DOJ and the Company.

Pursuant to the agreements in principle reached, the Company expects that it will enter into a deferred prosecution agreement (DPA) with the DOJ under which the DOJ will defer, for a period of three years, criminal prosecution of Raytheon Company related to Raytheon Company’s conspiracy to violate the anti-bribery provisions of the FCPA and conspiracy to violate the AECA by failing to make related disclosures of certain payments that may qualify as fees, commissions and/or political contributions under Part 130 of the ITAR.

If the Company, including Raytheon Company, fully complies with all of the obligations to be set forth in a final DPA during such DPA’s three-year term, the DOJ will move for dismissal with prejudice of the deferred charges against Raytheon Company.

In addition, the Company expects that the SEC will issue an administrative cease and desist order finding that the Company violated the anti-bribery, books and records, and internal controls provisions of the FCPA.

The Company also expects, based on the agreements in principle described above, that it will be required to retain an independent compliance monitor for Raytheon Company satisfactory to the DOJ and the SEC and undertake compliance self-reporting obligations for a three-year term.

The compliance monitor will oversee our compliance with the DPA.

The Company further expects that, as part of the resolution, it will pay the DOJ an amount that includes a criminal monetary penalty and forfeiture and the SEC an amount that includes disgorgement, prejudgment interest on disgorgement, and a civil penalty.

The Company has recorded an aggregate accrual of $ 384 million for these matters during the quarter ended June 30, 2024.

In the event that final agreements with the DOJ and the SEC are not reached, litigation may ensue and, accordingly, the actual loss incurred in connection with these matters, if any, could be less than, equal to or more than the aggregate accrued amount noted above.

Based upon the status of discussions, we believe that the finalization of our agreements with the DOJ and the SEC will occur during the second half of 2024 and therefore, expect payments to be made within the same timeframe.

However, there can be no assurance that final agreements of such resolutions will be reached or as to the timing or ultimate terms, including those described herein, of such final resolutions, if any.

The Company does not believe that these matters, including the accrual (and the future payment of the accrual), will have a material adverse effect on our results of operations, financial condition, or liquidity.

DOJ Investigation and Contract Pricing Disputes

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’s business since 2009.

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.

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

Although we believe we have defenses to the potential claims, the Company has determined that there is a probable risk of liability for damages, interest, and potential penalties, and has accrued $ 306 million for this matter.

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

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

The investigation involves multi-year contracts subject to governmental regulation, including potential defective pricing claims for certain Raytheon Company 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 contract entered into in 2017 by Raytheon Company.

Based on the government’s and our own internal investigations, the Company engaged in resolution discussions with the DOJ, and during the quarter ended June 30, 2024, the Company reached an agreement in principle with the DOJ as to the principal elements of such resolution.

Resolution with the DOJ remains subject to reaching a final agreement satisfactory to all parties and the final approval of the DOJ and the Company.

Pursuant to this agreement in principle, the Company expects that it will enter into a DPA with the DOJ under which the DOJ will defer, for a period of three years, criminal prosecution of Raytheon Company related to two counts of major fraud against the United States by Raytheon Company involving two legacy contracts.

In addition, the Company expects, based on the agreement in principle described above, that it will be required to retain an independent compliance monitor for Raytheon Company satisfactory to the DOJ and undertake self-reporting obligations for a three-year term.

The compliance monitor will oversee our compliance with the DPA.

In addition, the Company has been cooperating with the DOJ with respect to a related civil defective pricing investigation under the FCA.

The Company also has reached an agreement in principle with the DOJ as to the principal elements necessary to resolve the related defective pricing investigation under the FCA.

Resolution also remains subject to reaching a final agreement satisfactory to all parties and the final approval of the DOJ and the Company.

The Company further expects that, as part of the resolution, it will pay the DOJ an amount that includes a criminal monetary penalty, an FCA settlement that includes restitution, and interest on the FCA settlement.

The Company has updated its accrual for these matters to an aggregate accrual of $ 575 million as of June 30, 2024 .

In the event that final agreement with the DOJ is not reached, litigation may ensue and, accordingly, the actual loss incurred in connection with these matters, if any, could be less than, equal to or more than the aggregate accrued amount noted above.

Based upon the current status of discussions, we believe that the finalization of our agreement with the DOJ will occur during the second half of 2024 and therefore, expect payments to be made within the same timeframe .

However, there can be no assurance that final agreements of such resolutions will be reached or as to the timing or ultimate terms, including those described herein, of such final resolutions if any.

The Company does not believe that these matters, including the increased accrual (and the future payment of the accrual), will have a material adverse effect on our results of operations, financial condition, or liquidity.

Trade Compliance Matters

From time to time, we identify, investigate, remediate, and voluntarily disclose violations or potential violations of the ITAR and EAR to the relevant regulators.

In May 2024, the Department of State’s Office of Defense Trade Controls Compliance (DTCC) informed the Company of its intent to seek administrative penalties for alleged violations of the AECA and the ITAR.

The DTCC informed us that it considers certain of our voluntary disclosur es, primarily identified in connection with the integration of Rockwell Collins and, to a lesser extent, Raytheon Company, filed since 2019 to reflect deficiencies warranting a civil penalty.

We are currently in discussions with the DTCC to reach a consent agreement, which we anticipate will provide for a payment by the Company, an independent compliance monitor, and commitments regarding additional remedial compliance efforts.

At this time, the Company has determined that there is a probable risk of liability for potential penalties related to the anticipated consent agreement with the DTCC, as well as other export compliance matters which have been voluntarily disclosed to the cognizant regulators.

We have accrued approximately $ 285 million for these matters in aggregate.

Based on the current status of discussions, we believe that finalization of the consent agreement with the DTCC will occur during the second half of 2024, and we expect related payments to be made over the next three years.

We are currently unable to estimate the timing or outcome of the other voluntarily disclosed export compliance matters that are not subject to the consent agreement.

However, the Company does not believe the ultimate outcome of these matters will have a material adverse effect on our results of operations, financial condition, or liquidity.

UTC Equity Conversion Litigation

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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 allege that defendants violated federal securities laws by making material misstatements and omitting material facts relating to Pratt & Whitney’s GTF 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, multiple shareholder derivative lawsuits were filed against current and former officers and directors of the Company, all of which have now been consolidated into a single action which is pending in the United States District Court for the District of Delaware.

The operative complaint in the consolidated action 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.

The operative complaint in

the consolidated action alleges that the defendants caused the Company to make materially false and misleading statements relating to Pratt & Whitney’s GTF 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

On November 7, 2023, January 30, 2024, and May 21, 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.

Where appropriate, we have recorded loss contingency accruals for the above-referenced matters.

Unless noted above, loss contingency accruals are immaterial individually or in the aggregate.

As described in “Note 15:

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On October 24, 2023, we entered into accelerated share repurchase (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.

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, which, on that date, represented approximately 85% of the shares expected to be repurchased.

The total number of shares to be repurchased is subject to final settlement as discussed below.

The aggregate purchase price was recorded as a reduction to Shareowners’ equity, consisting of an $ 8.5 billion increase in Treasury stock and a $ 1.5 billion decrease in Common stock.

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.

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Accumulated Other Comprehensive Loss.

A summary of the changes in each component of Accumulated other comprehensive loss, net of tax for the quarters ended March 31, 2024 and 2023 is provided below:

A summary of the changes in each component of Accumulated other comprehensive loss, net of tax for the quarters and six months ended June 30, 2024 and 2023 is provided below:

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

Quarter Ended March 31, 2024

Quarter Ended June 30, 2024

Balance at March 31, 2024 $ ( 562 ) $ ( 2,065 ) $ ( 8 ) $ ( 2,635 )

Other comprehensive income (loss) before reclassifications, net ( 68 ) ( 3 ) 20 ( 51 )

Amounts reclassified, pre-tax — ( 43 ) 1 ( 42 )

Tax benefit (expense) ( 2 ) 9 3 10

Balance at June 30, 2024 $ ( 632 ) $ ( 2,102 ) $ 16 $ ( 2,718 )

Six Months Ended June 30, 2024

Balance at December 31, 2023 $ ( 440 ) $ ( 2,026 ) $ 47 $ ( 2,419 )

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Tax benefit (expense) ( 3 ) 21 21 39

Balance at March 31, 2024 $ ( 562 ) $ ( 2,065 ) $ ( 8 ) $ ( 2,635 )

Balance at June 30, 2024 $ ( 632 ) $ ( 2,102 ) $ 16 $ ( 2,718 )

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

Quarter Ended March 31, 2023

Quarter Ended June 30, 2023

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

Other comprehensive income (loss) before reclassifications, net 404 ( 40 ) 260 624

Amounts reclassified, pre-tax — ( 143 ) 25 ( 118 )

Tax benefit (expense) 2 38 ( 59 ) ( 19 )

Balance at June 30, 2023 $ ( 476 ) $ ( 1,035 ) $ 9 $ ( 1,502 )

Six Months Ended June 30, 2023

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

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Tax benefit (expense) 3 76 ( 57 ) 22

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

Balance at June 30, 2023 $ ( 476 ) $ ( 1,035 ) $ 9 $ ( 1,502 )

Segment Financial Data

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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 Raytheon 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 .

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

Results for the quarters ended March 31, 2024 and 2023 are as follows:

Results for the quarters ended June 30, 2024 and 2023 are as follows:

Net Sales Operating Profit Operating Profit Margins

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Corporate expenses and other unallocated items (3)

— — ( 930 ) ( 59 )

FAS/CAS operating adjustment — — 212 284

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(1) Includes the operating results of certain smaller operations.

(2) Operating Profit includes a $0.4 billion gain, net of transaction and other related costs, related to the sale of our CIS business.

Acquisitions and Dispositions” for additional information.

(2) Operating Profit and Margins include a $ 0.6 billion charge in the second quarter of 2024 related to the anticipated Raytheon Contract Termination.

Changes in Contract Estimates at Completion” for additional information.

(3) Includes a $ 0.9 billion charge in the second quarter of 2024 related to the Expected Resolution of Certain Legal Matters.

Basis of Presentation” for additional information.

Results for the six months ended June 30, 2024 and 2023 are as follows:

Net Sales Operating Profit Operating Profit Margins

(dollars in millions) 2024 2023 2024 2023 2024 2023

Collins Aerospace $ 13,672 $ 12,504 $ 1,967 $ 1,796 14.4 % 14.4 %

Pratt & Whitney 13,258 10,931 954 645 7.2 % 5.9 %

13,170 12,992 1,123 1,215 8.5 % 9.4 %

Total segment 40,100 36,427 4,044 3,656 10.1 % 10.0 %

Eliminations and other (1)

( 1,074 ) ( 898 ) ( 41 ) 35

Corporate expenses and other unallocated items (3)

— — ( 1,026 ) ( 102 )

FAS/CAS operating adjustment — — 426 573

Acquisition accounting adjustments — — ( 1,004 ) ( 982 )

Consolidated $ 39,026 $ 35,529 $ 2,399 $ 3,180 6.1 % 9.0 %

(1) Includes the operating results of certain smaller operations.

(2) Operating Profit and Margins include a $ 0.6 billion charge in the second quarter of 2024 related to the anticipated Raytheon Contract Termination and a $ 0.4 billion gain, net of transaction and other related costs, in the first quarter of 2024 related to the sale of our CIS business.

Changes in Contract Estimates at Completion” and “Note 2:

Acquisitions and Dispositions,” respectively, for additional information.

(3) Includes a $ 0.9 billion charge in the second quarter of 2024 related to the Expected Resolution of Certain Legal Matters.

Basis of Presentation” for additional information.

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

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In addition, for our Raytheon segment, we disaggregate our contracts from customers by contract type.

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

Segment sales disaggregated by geographic region based on customer location for the quarters ended March 31, 2024 and 2023 are as follows:

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

Segment sales disaggregated by geographic region based on customer location for the quarters ended June 30, 2024 and 2023 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total Collins Aerospace Pratt & Whitney Raytheon Other Total

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Business segment sales $ 6,999 $ 6,802 $ 6,511 $ ( 591 ) $ 19,721 $ 6,384 $ 5,701 $ 6,700 $ ( 470 ) $ 18,315

Segment sales disaggregated by type of customer for the quarters ended March 31, 2024 and 2023 are as follows:

Segment sales disaggregated by geographic region for the six months ended June 30, 2024 and 2023 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total Collins Aerospace Pratt & Whitney Raytheon Other Total

United States $ 6,727 $ 6,283 $ 9,896 $ 80 $ 22,986 $ 6,334 $ 5,478 $ 9,877 $ 86 $ 21,775

Europe 3,260 3,077 1,083 2 7,422 3,000 2,465 809 2 6,276

Asia Pacific 1,471 2,528 1,088 1 5,088 1,190 1,877 1,092 — 4,159

Middle East and North Africa 376 310 954 — 1,640 344 214 1,056 — 1,614

Other regions 751 1,059 80 — 1,890 715 896 94 — 1,705

Consolidated net sales 12,585 13,257 13,101 83 39,026 11,583 10,930 12,928 88 35,529

Inter-segment sales 1,087 1 69 ( 1,157 ) — 921 1 64 ( 986 ) —

Business segment sales $ 13,672 $ 13,258 $ 13,170 $ ( 1,074 ) $ 39,026 $ 12,504 $ 10,931 $ 12,992 $ ( 898 ) $ 35,529

Segment sales disaggregated by type of customer for the quarters ended June 30, 2024 and 2023 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total Collins Aerospace Pratt & Whitney Raytheon Other Total

Sales to the U.S.

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

Segment sales disaggregated by sales type for the quarters ended March 31, 2024 and 2023 are as follows:

Segment sales disaggregated by customer for the six months ended June 30, 2024 and 2023 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total Collins Aerospace Pratt & Whitney Raytheon Other Total

Sales to the U.S.

government (1)

$ 3,194 $ 3,069 $ 9,837 $ 79 $ 16,179 $ 3,168 $ 2,535 $ 9,728 $ 84 $ 15,515

Foreign military sales through the U.S.

government 163 696 1,659 — 2,518 150 684 1,669 — 2,503

Foreign government direct commercial sales 626 318 1,434 1 2,379 536 220 1,334 3 2,093

Commercial aerospace and other commercial 8,602 9,174 171 3 17,950 7,729 7,491 197 1 15,418

Consolidated net sales 12,585 13,257 13,101 83 39,026 11,583 10,930 12,928 88 35,529

Inter-segment sales 1,087 1 69 ( 1,157 ) — 921 1 64 ( 986 ) —

Business segment sales $ 13,672 $ 13,258 $ 13,170 $ ( 1,074 ) $ 39,026 $ 12,504 $ 10,931 $ 12,992 $ ( 898 ) $ 35,529

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

Segment sales disaggregated by sales type for the quarters ended June 30, 2024 and 2023 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total Collins Aerospace Pratt & Whitney Raytheon Other Total

Products $ 5,027 $ 3,849 $ 5,657 $ 29 $ 14,562 $ 4,603 $ 3,199 $ 5,568 $ 41 $ 13,411

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Business segment sales $ 6,999 $ 6,802 $ 6,511 $ ( 591 ) $ 19,721 $ 6,384 $ 5,701 $ 6,700 $ ( 470 ) $ 18,315

Raytheon segment sales disaggregated by contract type for the quarters ended March 31, 2024 and 2023 are as follows:

Segment sales disaggregated by sales type for the six months ended June 30, 2024 and 2023 are as follows:

(dollars in millions) Collins Aerospace Pratt & Whitney Raytheon Other Total Collins Aerospace Pratt & Whitney Raytheon Other Total

Products $ 9,860 $ 7,806 $ 11,124 $ 75 $ 28,865 $ 9,053 $ 6,251 $ 10,810 $ 84 $ 26,198

Services 2,725 5,451 1,977 8 10,161 2,530 4,679 2,118 4 9,331

Consolidated net sales $ 12,585 $ 13,257 $ 13,101 $ 83 $ 39,026 $ 11,583 $ 10,930 $ 12,928 $ 88 $ 35,529

Inter-segment sales 1,087 1 69 ( 1,157 ) — 921 1 64 ( 986 ) —

Business segment sales $ 13,672 $ 13,258 $ 13,170 $ ( 1,074 ) $ 39,026 $ 12,504 $ 10,931 $ 12,992 $ ( 898 ) $ 35,529

Raytheon segment sales disaggregated by contract type for the quarters ended June 30, 2024 and 2023 are as follows:

(dollars in millions) 2024 2023

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Business segment sales $ 6,511 $ 6,700

Raytheon segment sales disaggregated by contract type for the six months ended June 30, 2024 and 2023 are as follows:

(dollars in millions) 2024 2023

Fixed-price $ 6,611 $ 6,642

Cost-type 6,490 6,286

Consolidated net sales 13,101 12,928

Inter-segments sales 69 64

Business segment sales $ 13,170 $ 12,992

Remaining Performance Obligations (RPO)

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

Total RPO was $ 202 billion as of March 31, 2024.

Of the total RPO as of March 31, 2024, we expect approximately 25 % will be recognized as revenue over the next 12 months.

Total RPO was $ 206 billion as of June 30, 2024.

Of the total RPO as of June 30, 2024, 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.

Accounting Pronouncements

In March 2024, the SEC issued the final rule under SEC Release No.

In March 2024, the SEC issued the final rule under SEC Release Nos.

33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors, requiring public companies to provide certain climate-related information in their registration statements and annual reports.

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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.

The new standard is effective for annual reporting periods 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.

Other new pronouncements issued but not effective until after March 31, 2024 are not expected to have a material impact on our results of operations, financial condition, or liquidity.

With respect to the unaudited condensed consolidated financial information of RTX for the quarters ended March 31, 2024 and 2023, PricewaterhouseCoopers LLP (PwC) reported that it has applied limited procedures in accordance with professional standards for a review of such information.

However, its report dated April 23, 2024, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information.

Other new pronouncements issued but not effective until after June 30, 2024 are not expected to have a material impact on our results of operations, financial condition, or liquidity.

With respect to the unaudited condensed consolidated financial information of RTX for the quarters and six months ended June 30, 2024 and 2023, PricewaterhouseCoopers LLP (PwC) reported that it has applied limited procedures in accordance with professional standards for a review of such information.

However, its report dated July 25, 2024, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information.

PwC has not carried out any significant or additional audit tests beyond those that would have been necessary if their report had not been included.

4 unchanged sentences

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of RTX Corporation and its subsidiaries (the “Company”) as of March 31, 2024, and the related condensed consolidated statements of operations, of comprehensive income, of changes in equity, and of cash flows for the three-month periods ended March 31, 2024 and 2023, including the related notes (collectively referred to as the “interim financial information”).

We have reviewed the accompanying condensed consolidated balance sheet of RTX Corporation and its subsidiaries (the “Company”) as of June 30, 2024, and the related condensed consolidated statements of operations, of comprehensive income, and of changes in equity for the three-month and six-month periods ended June 30, 2024 and 2023, and the condensed consolidated statement of cash flows for the six-month periods ended June 30, 2024 and 2023, including the related notes (collectively referred to as the “interim financial information”).

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

11 unchanged sentences

Boston, Massachusetts

April 23, 2024

July 25, 2024

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements