What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-25 compared with 2024-04-23 · 281 added, 137 removed, 361 unchanged (54% of the section changed)

5 unchanged sentences

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

Prior period information has been recast to conform to our current period presentation as discussed in our 2023 Annual Report on Form 10-K.

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

Raytheon follows a 4-4-5 fiscal calendar while 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.

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.

The current status of significant factors affecting our business environment in 2024 is discussed below.

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tax law changes, foreign currency exchange rates, energy costs and supply, levels of air travel, the financial condition of commercial airlines, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.

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.

Basis of Presentation” and “Note 16:

Commitments and Contingencies” within Item 1 of this Form 10-Q for additional information.

Pratt & Whitney Powder Metal Matter.

As described further in “Note 16:

Commitments and Contingencies,” within Item 1 of this Form 10-Q, 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”).

Commitments and Contingencies,” within Item 1 of this Form 10-Q, 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”).

Global Supply Chain.

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These disruptions impacted our ability to procure raw materials, microelectronics, and certain commodities on a timely basis and/or at expected prices, and have been driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.

Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, are contributing to these issues.

Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, continue to contribute to these issues.

Furthermore, our suppliers and subcontractors have been impacted by these same issues.

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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Economic Environment.

High inflation levels have increased material and component prices, labor rates, and supplier costs and have negatively impacted our operating profit and margin, including impact on productivity expectations.

High inflation levels have increased material and component prices, labor rates, and supplier costs and have negatively impacted our operating profit and margin, including the impact on productivity expectations.

Due to the nature of our government and commercial aerospace businesses, and their respective customer and supplier contracts, we are not always able to offset cost increases by increasing our contract value or pricing, in particular on our fixed-price contracts.

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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, including as discussed above in Global Supply Chain;

however, based on information available to date, we do not currently expect these issues will have a material adverse effect on our financial results.

however, based

on information available to date, we do not currently expect these issues will have a material adverse effect on our financial results.

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

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

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

Most recently, in January 2024, China announced sanctions against Data Link Solutions LLC, a Collins Aerospace joint venture.

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

In January 2024, China announced sanctions against Data Link Solutions LLC, a Collins joint venture and, most recently, in May 2024, China announced sanctions against Raytheon Missile Systems and the Javelin Joint Venture between Raytheon and Lockheed Martin.

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

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Likewise, regulatory approvals previously granted for prior sales can be paused or revoked if the products and services have not yet been delivered to the customer.

In addition, certain programs require approvals by foreign governments, and those approvals

may not be obtained on a timely basis or at all or may be revoked.

In addition, certain programs require approvals by foreign governments, and those approvals may not be obtained on a timely basis or at all or may be revoked.

If we ultimately do not receive all of the regulatory approvals, or those approvals are revoked, it could have a material effect on our financial results.

In particular, 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.

In particular, 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.

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Actual results in these areas could differ from management’s estimates.

There have been no significant changes in our critical accounting estimates during the quarter ended March 31, 2024.

There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2024.

RESULTS OF OPERATIONS

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We believe that these non-Generally Accepted Accounting Principles (non-GAAP) measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability.

The organic change in Net sales, Cost of sales, and Operating profit excludes acquisitions and divestitures, net, and the effect of foreign currency exchange rate translation fluctuations and other significant non-operational items and/or significant operational items that may occur at irregular intervals (Other).

The organic change in Net sales, Cost of sales, and Operating profit excludes acquisitions and divestitures, net, and the effect of foreign currency exchange rate translation

fluctuations and other significant non-operational items and/or significant operational items that may occur at irregular intervals (Other).

Additionally, the organic change in Cost of sales and Operating profit excludes restructuring costs, the FAS/CAS operating adjustment, and costs related to certain acquisition accounting adjustments.

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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.

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

Net sales $ 19,721 $ 18,315 $ 39,026 $ 35,529

The factors contributing to the change year-over-year in total net sales for the quarter ended March 31, 2024 are as follows:

(dollars in millions) Quarter Ended March 31, 2024

The factors contributing to the change year-over-year in total net sales for the quarter and six months ended June 30, 2024 are as follows:

(dollars in millions) Quarter Ended June 30, 2024 Six Months Ended June 30, 2024

$ 1,911 $ 4,034

Acquisitions and divestitures, net (413) (432)

Other (92) (105)

Total change $ 1,406 $ 3,497

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GAAP amounts is provided in the table above.

Net sales increased $2.1 billion organically in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 primarily due to higher organic sales of $1.2 billion at Pratt & Whitney, $0.5 billion at Collins, and $0.4 billion at Raytheon.

Net sales increased $1.9 billion organically in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 primarily due to higher organic net sales of $1.1 billion at Pratt & Whitney, $0.6 billion at Collins, and $0.3 billion at Raytheon.

Net sales increased $4.0 billion organically in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to higher organic net sales of $2.3 billion at Pratt & Whitney, $1.2 billion at Collins, and $0.7 billion at Raytheon.

The decrease in net sales due to Acquisitions and divestitures, net of $0.4 billion for both the quarter and six months ended June 30, 2024 compared to the quarter and six months ended June 30, 2023, was primarily driven by the sale of our Cybersecurity, Intelligence and Services (CIS) business within our Raytheon segment completed in the first quarter of 2024.

See “Segment Review” below for further information by segment.

Quarter Ended March 31, % of Total Net Sales

Quarter Ended June 30, % of Total Net Sales

(dollars in millions) 2024 2023 2024 2023

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Segment Financial Data” within Item 1 of this Form 10-Q for the composition of external net sales by products and services by segment.

Net products sales increased $1.5 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 primarily due to increases in external products sales of $0.9 billion at Pratt & Whitney, $0.4 billion at Collins, and $0.2 billion at Raytheon.

Net services sales increased $0.6 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 primarily due to increases in external services sales of $0.3 billion at Pratt & Whitney, $0.2 billion at Raytheon, and $0.1 billion at Collins.

Net products sales increased $1.2 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 primarily due to increases in external products sales of $0.7 billion at Pratt & Whitney, $0.4 billion at Collins, and $0.1 billion at Raytheon.

Net services sales increased $0.3 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 primarily due to increases in external services sales of $0.5 billion at Pratt & Whitney and $0.1 billion at Collins, partially offset by a decrease in external services sales of $0.3 billion at Raytheon, primarily driven by the sale of our CIS business completed in the first quarter of 2024.

Six Months Ended June 30, % of Total Net Sales

(dollars in millions) 2024 2023 2024 2023

Products $ 28,865 $ 26,198 74.0 % 73.7 %

Services 10,161 9,331 26.0 % 26.3 %

Total net sales $ 39,026 $ 35,529 100 % 100 %

Net products sales increased $2.7 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily driven by increases in external products sales of $1.6 billion at Pratt & Whitney, $0.8 billion at Collins, and $0.3 billion at Raytheon.

Net services sales increased $0.8 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to increases in external services sales of $0.8 billion at Pratt & Whitney and $0.2 billion at Collins, partially offset by a decrease in external services sales of $0.1 billion at Raytheon, including the sale of our CIS business in the first quarter of 2024.

Our sales to major customers were as follows:

Quarter Ended March 31, % of Total Net Sales

Quarter Ended June 30, % of Total Net Sales

(dollars in millions) 2024 2023 2024 2023

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

Six Months Ended June 30, % of Total Net Sales

(dollars in millions) 2024 2023 2024 2023

Sales to the U.S.

government (1)

$ 16,179 $ 15,515 41.5 % 43.7 %

Foreign military sales through the U.S.

government 2,518 2,503 6.5 % 7.0 %

Foreign government direct commercial sales 2,379 2,093 6.1 % 5.9 %

Commercial aerospace and other commercial sales 17,950 15,418 46.0 % 43.4 %

Total net sales $ 39,026 $ 35,529 100 % 100 %

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

Cost of Sales

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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Percentage of net sales 81.8 % 79.3 % 81.7 % 79.3 %

The factors contributing to the change year-over-year in total cost of sales for the quarter ended March 31, 2024 are as follows:

(dollars in millions) Quarter Ended March 31, 2024

The factors contributing to the change year-over-year in total cost of sales for the quarter and six months ended June 30, 2024 are as follows:

(dollars in millions) Quarter Ended June 30, 2024 Six Months Ended June 30, 2024

$ 1,512 $ 3,341

Acquisitions and divestitures, net (391) (410)

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Acquisition accounting adjustments 16 23

Other 426 639

Total change $ 1,623 $ 3,722

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GAAP amounts is provided in the table above.

The organic increase in total cost of sales of $1.8 billion for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023, was primarily driven by the organic sales increases at Pratt & Whitney, Collins, and Raytheon noted above.

Other cost of sales increased $0.2 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 primarily driven by $175 million of charges at Collins 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.

The organic increase in total cost of sales of $1.5 billion for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, was primarily driven by the organic net sales increases at Pratt & Whitney, Collins, and Raytheon noted above.

Other cost of sales increased $0.4 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 primarily driven by a $0.5 billion charge at Raytheon related to the anticipated termination of a fixed price development contract with a foreign customer (herein referred to as “Raytheon Contract Termination”), partially offset by the absence of charges of $0.1 billion at Pratt & Whitney related to a customer insolvency recorded in the second quarter of 2023.

The organic increase in total cost of sales of $3.3 billion for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, was primarily driven by the organic net sales increases at Pratt & Whitney, Collins, and Raytheon noted above.

Other cost of sales increased $0.6 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily driven by a $0.5 billion charge related to the anticipated Raytheon Contract Termination in the second quarter of 2024 and $0.2 billion of charges recorded in the first quarter of 2024 at Collins 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, partially offset by the absence of charges of $0.1 billion at Pratt & Whitney related to a customer insolvency recorded in the second quarter of 2023.

The decrease in total cost of sales due to Acquisitions and divestitures, net of $0.4 billion for both the quarter and six months ended June 30, 2024 compared to the quarter and six months ended June 30, 2023, was primarily driven by the sale of our CIS business within our Raytheon segment completed in the first quarter of 2024.

Restructuring actions relate to ongoing cost reduction efforts including workforce reductions and the consolidation of facilities.

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For discussion on Acquisition accounting adjustments, see the “Acquisition accounting adjustments” subsection under the “Segment Review” section below.

Quarter Ended March 31, % of Total Net Sales

Quarter Ended June 30, % of Total Net Sales

(dollars in millions) 2024 2023 2024 2023

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Total cost of sales $ 16,141 $ 14,518 81.8 % 79.3 %

Net products cost of sales increased $1.5 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023, primarily driven by increases in external products cost of sales at Pratt & Whitney, Collins, and Raytheon, all driven by the products sales changes noted above, and charges at Collins as a result of initiating alternative titanium sources.

Net services cost of sales increased $0.6 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023, primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, each driven by the services sales changes noted above.

Net products cost of sales increased $1.5 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, primarily driven by increases in external products cost of sales at Pratt & Whitney, Raytheon, and Collins, all driven by the products sales changes noted above, and a $0.5 billion charge related to the anticipated Raytheon Contract Termination in the second quarter of 2024.

Net services cost of sales increased $0.1 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, partially offset by a decrease in external services cost of sales at Raytheon, each driven by the services sales changes noted above.

Six Months Ended June 30, % of Total Net Sales

(dollars in millions) 2024 2023 2024 2023

Cost of sales

Products $ 24,841 $ 21,789 63.7 % 61.3 %

Services 7,044 6,374 18.0 % 17.9 %

Total cost of sales $ 31,885 $ 28,163 81.7 % 79.3 %

Net products cost of sales increased $3.1 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by increases in external products cost of sales at Pratt & Whitney, Raytheon, and Collins, all driven by the products sales changes noted above, a $0.5 billion charge related to the anticipated Raytheon Contract Termination in the second quarter of 2024, and charges of $0.2 billion at Collins as a result of initiating alternative titanium sources recorded in the first quarter of 2024.

Net services cost of sales increased $0.7 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, partially offset by a decrease in external services sales at Raytheon, all driven by the services sales changes noted above.

Research and Development

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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Research and development spending is subject to the variable nature of program development schedules and, therefore, year-over-year fluctuations in spending levels are expected.

The increase in company-funded research and development of $0.1 billion for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily driven by increased spending on commercial program development at Pratt & Whitney and Collins.

The increase in customer-funded research and development of $0.1 billion for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily driven by higher expenses on commercial and defense programs at Collins and increased spending at Pratt & Whitney on military programs, partially offset by lower expenses on various development programs at Raytheon.

Company- and customer-funded research and development expenses in the quarter ended June 30, 2024 were relatively consistent with the quarter ended June 30, 2023.

Company- funded research and development expenses in the six months ended June 30, 2024 were relatively consistent with the six months ended June 30, 2023.

The increase in customer-funded research and development of $0.1 billion for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by higher expenses on commercial and defense programs at Collins and increased spending at Pratt & Whitney on military programs, partially offset by lower expenses on various development programs at Raytheon.

Selling, General, and Administrative

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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Percentage of net sales 7.3 % 8.7 % 7.3 % 8.3 %

Selling, general, and administrative expenses in the quarter ended March 31, 2024 were relatively consistent with the quarter ended March 31, 2023.

Selling, general, and administrative expenses decreased $0.2 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, primarily driven by the absence of a $0.1 billion charge at Pratt & Whitney related to a customer insolvency recorded in the second quarter of 2023.

Selling, general and administrative expenses decreased $0.1 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by the absence of a $0.1 billion charge at Pratt & Whitney related to a customer insolvency recorded in the second quarter of 2023.

We are continuously evaluating our cost structure and have implemented restructuring actions in an effort to keep our cost structure competitive.

Therefore, the amounts reflected above include the beneficial impact of previous restructuring actions on Selling, general, and administrative expenses.

Other Income, Net

Quarter Ended March 31,

Other Income (Expense), Net

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

Other income, net $ 372 $ 88

Other income, net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, and other ongoing and non-recurring items.

The increase in Other income, net of $0.3 billion for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily due to a $0.4 billion gain on sale of Raytheon’s Cybersecurity, Intelligence and Services (CIS) business, net of transaction costs in the first quarter of 2024.

This increase was partially offset by the absence of a gain on sale of land during the first quarter of 2023 and the reversal of certain tax related indemnity receivables in the first quarter of 2024.

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

Other income (expense), net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, and other ongoing and non-recurring items.

The decrease in Other income (expense), net of $0.9 billion for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was primarily due to a $0.9 billion charge related to the Expected Resolution of Certain Legal Matters.

The decrease in Other income (expense), net of $0.6 billion for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to a $0.9 billion charge related to the Expected Resolution of Certain Legal Matters, partially offset by a $0.4 billion gain on sale of Raytheon’s CIS business, net of transaction costs.

Operating Profit

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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Operating profit margin 2.7 % 8.2 % 6.1 % 9.0 %

The change in Operating profit of $0.2 billion for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily driven by a $0.4 billion gain on sale of the CIS business, net of transaction and other related costs, in the first quarter of 2024 and the operating performance of our segments.

These items were partially offset by charges at Collins as a result of initiating alternative titanium sources, the change in our FAS/CAS operating adjustment, the change in Eliminations and other, and the change in Corporate expenses and other unallocated items, all of which are described below in “Segment Review.”

The decrease in Operating profit of $1.0 billion for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was primarily driven by a $0.9 billion charge related to the Expected Resolution of Certain Legal Matters and a $0.6 billion charge related to the anticipated Raytheon Contract Termination, partially offset by the operating performance of our segments and the absence of $0.2 billion of charges at Pratt & Whitney related to a customer insolvency recorded in the second quarter of 2023.

The decrease in Operating profit of $0.8 billion for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by a $0.9 billion charge related to the Expected Resolution of Certain Legal Matters, a $0.6 billion charge related to the anticipated Raytheon Contract Termination, $0.2 billion of charges at Collins 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 recorded in the first quarter of 2024, and the change in our FAS/CAS operating adjustment which is described below in “Segment Review.” The above items were partially offset by the operating performance of our segments, a $0.4 billion gain on sale of the CIS business, net of transaction and other related costs, and the absence of $0.2 billion of charges at Pratt & Whitney related to a customer insolvency recorded in the second quarter of 2023.

Non-service Pension Income

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

Non-service pension income $ (374) $ (447) $ (760) $ (891)

The change in Non-service pension income of $58 million for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily driven by the decrease in the recognized actuarial net (gain) loss as a result of the merger of the remaining Raytheon Company qualified pension plans into the RTX Consolidated Pension Plan at December 31, 2023.

The change in Non-service pension income of $73 million for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was primarily driven by the decrease in the recognized actuarial net (gain) loss as a result of the merger of the remaining Raytheon Company qualified pension plans into the RTX Consolidated Pension Plan at December 31, 2023.

The change in Non-service pension income of $131 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by the decrease in the recognized actuarial net (gain) loss as a result of the merger of the remaining Raytheon Company qualified pension plans into the RTX Consolidated Pension Plan at December 31, 2023.

Interest Expense, Net

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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Other non-operating expense (income) (1)

6 (22) 2 (36)

Interest expense, net $ 475 $ 333 $ 880 $ 648

1 unchanged sentence

(1) Primarily consists of the gains or losses on assets associated with certain of our nonqualified deferred compensation and employee benefit plans, as well as the gains or losses on liabilities associated with certain of our nonqualified deferred compensation plans and non-operating dividend income.

Interest expense, net increased $90 million in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023.

The increase in Interest expense of $81 million was primarily due to the long-term debt issuances in 2023, partially offset by the reversal of interest accruals as a result of the conclusion of the examination phases of the RTX and Rockwell Collins tax audits in the first quarter of 2024.

Quarter Ended March 31,

Interest expense, net increased $142 million in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 primarily due to an increase in Interest expense as a result of the long-term debt issuances in 2023.

Interest expense, net increased $232 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to an increase in Interest expense as a result of long-term debt issuances in 2023, partially offset by the reversal of interest accruals as a result of the conclusion of the examination phases of the RTX and Rockwell Collins tax audits in the first quarter of 2024.

Quarter Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Effective income tax rate 59.1 % 15.4 % 15.8 % 17.0 %

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.

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.

Net Income Attributable to Common Shareowners

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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Diluted earnings per share $ 0.08 $ 0.90 $ 1.36 $ 1.87

Net income attributable to common shareowners for the quarter ended March 31, 2024 includes the following:

• acquisition accounting adjustments of $389 million, net of tax, which had an unfavorable impact on diluted earnings per share (EPS) of $0.29;

Net income attributable to common shareowners for the quarter ended June 30, 2024 includes the following:

• charge related to the Expected Resolution of Certain Legal Matters of $918 million, which had an unfavorable impact on diluted earnings per share (EPS) of $0.68;

• a charge of $438 million, net of tax, related to the anticipated Raytheon Contract Termination, which had an unfavorable impact on diluted EPS of $0.33;

• acquisition accounting adjustments of $393 million, net of tax, which had an unfavorable impact on diluted EPS of $0.29.

Net income attributable to common shareowners for the quarter ended June 30, 2023 includes the following:

• acquisition accounting adjustments of $384 million, net of tax, which had an unfavorable impact on diluted EPS of $0.26;

• charges on our contract assets and customer financing assets related to a customer insolvency of $114 million, net of tax and noncontrolling interest, which had an unfavorable impact on diluted EPS of $0.08.

Net income attributable to common shareowners for the six months ended June 30, 2024 includes the following:

• charge related to the Expected Resolution of Certain Legal Matters of $918 million, which had an unfavorable impact on diluted EPS of $0.69;

• acquisition accounting adjustments of $782 million, net of tax, which had an unfavorable impact on diluted EPS of $0.58;

• a charge of $438 million, net of tax, related to the anticipated Raytheon Contract Termination, which had an unfavorable impact on diluted EPS of $0.33;

• benefit recognized as a result of the conclusion of the examination phases of the RTX and Rockwell Collins tax audits of $285 million, net of tax, which had a favorable impact on diluted EPS of $0.21;

1 unchanged sentence

• charges related to initiating alternative titanium sources at our Collins segment of $175 million, which had an unfavorable impact on diluted EPS of $0.13.

Net income attributable to common shareowners for the quarter ended March 31, 2023 includes the following:

Net income attributable to common shareowners for the six months ended June 30, 2023 includes the following:

• acquisition accounting adjustments of $769 million, net of tax, which had an unfavorable impact on diluted EPS of $0.52;

SEGMENT REVIEW

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Segment Total net sales and Operating profit include intercompany sales and profit, which are ultimately eliminated within Eliminations and other, which also includes certain smaller non-reportable segments.

Segment results exclude

certain acquisition accounting adjustments, the FAS/CAS operating adjustment, and certain corporate expenses, as further discussed below.

Segment results exclude certain acquisition accounting adjustments, the FAS/CAS operating adjustment, and certain corporate expenses, as further discussed below.

Given the nature of our business, we believe that total net sales and operating profit (and the related operating profit margin percentage), which we disclose and discuss at the segment level, are most relevant to an understanding of management’s view of our segment performance, as described below.

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Total net sales by segment were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

4 unchanged sentences

Eliminations and other (1)

(591) (470) (1,074) (898)

Consolidated $ 19,721 $ 18,315 $ 39,026 $ 35,529

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

Operating Profit.

Operating profit by segment was as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

1 unchanged sentence

Pratt & Whitney 542 230 954 645

Raytheon 996 571

127 644 1,123 1,215

Total segment 1,787 1,773 4,044 3,656

Eliminations and other (1)

(36) (16) (41) 35

Corporate expenses and other unallocated items (3)

(930) (59) (1,026) (102)

FAS/CAS operating adjustment 212 284 426 573

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Consolidated $ 529 $ 1,493 $ 2,399 $ 3,180

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

(2) Operating Profit includes 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” within Item 1 of this Form 10-Q, 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” within Item 1 of this Form 10-Q for additional information.

Included in segment Operating profit are Estimate at Completion (EAC) adjustments, which relate to changes in Operating profit and margin due to revisions to total estimated revenues and costs at completion.

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We had the following aggregate EAC adjustments for the periods presented:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

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Total net EAC adjustments $ (62) $ (30) $ (224) $ (154)

The change in net EAC adjustments of $38 million in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily due to unfavorable changes in net EAC adjustments at Collins, partially offset by favorable changes in net EAC adjustments at Raytheon.

The change in net EAC adjustments of $32 million in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was primarily due to unfavorable changes in net EAC adjustments at Collins, partially offset by favorable changes in net EAC adjustments at Raytheon.

The change in net EAC adjustments of $70 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to unfavorable changes in net EAC adjustments at Collins, partially offset by favorable changes in net EAC adjustments at Raytheon.

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.

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.

Significant EAC adjustments, when they occur, are discussed in each business segment’s discussion below.

Backlog and Bookings.

Total backlog was approximately $202 billion and $196 billion as of March 31, 2024 and December 31, 2023, respectively, which includes defense backlog of $77 billion and $78 billion as of March 31, 2024 and December 31, 2023, respectively.

Total backlog was approximately $206 billion and $196 billion as of June 30, 2024 and December 31, 2023, respectively.

Total backlog includes commercial backlog of $129 billion and $118 billion as of June 30, 2024 and December 31, 2023, respectively, and defense backlog of $77 billion and $78 billion as of June 30, 2024 and December 31, 2023, respectively.

In the quarter ended March 31, 2024, Raytheon backlog was reduced by $1.1 billion as a result of the sale of the CIS business.

Our defense operations consist primarily of our Raytheon business and operations in the defense businesses within our Collins and Pratt & Whitney segments.

Defense bookings were approximately $11 billion and $12 billion for the quarters ended March 31, 2024 and 2023, respectively.

We believe bookings are an important measure of future performance for our defense businesses.

Our defense operations consist primarily of our Raytheon business and operations in the defense businesses within our Collins and Pratt & Whitney

Defense bookings were approximately $11 billion and $13 billion for the quarters ended June 30, 2024 and 2023, respectively, and approximately $22 billion and $25 billion for the six months ended June 30, 2024 and 2023, respectively.

Bookings are impacted by the timing and amounts of awards in a given period, which are subject to numerous factors, including:

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Collins Aerospace

Quarter Ended March 31,

(dollars in millions) 2024 2023 Change

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 Change 2024 2023 Change

Net sales $ 6,999 $ 6,384 10 % $ 13,672 $ 12,504 9 %

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Operating profit margins 16.0 % 14.1 % 14.4 % 14.4 %

Quarter Ended March 31, 2024 Compared with Quarter Ended March 31, 2023

Quarter Ended June 30, 2024 Compared with Quarter Ended June 30, 2023

Factors Contributing to Total Change

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GAAP amounts is provided in the table above.

The organic net sales increase of $0.5 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 primarily relates to higher commercial aerospace aftermarket sales of $0.3 billion, principally driven by an increase in commercial air traffic which has resulted in an increase in flight hours.

Commercial aerospace OEM sales increased $0.2 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 primarily due to increased volume across all OEM sales channels.

Defense sales were up slightly in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 due to higher volume.

The organic operating profit increase of $0.2 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily due to higher commercial aerospace operating profit of $0.2 billion, principally driven by the higher aftermarket sales volume discussed above partially offset by unfavorable OEM mix.

This increase in commercial aerospace operating profit was partially offset by higher space program costs in our defense business and higher research and development costs.

The decrease in Other operating profit of $0.2 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily driven by $175 million of charges 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.

Refer to “Note 1:

Basis of Presentation” within Item 1 of this Form 10-Q for further information regarding sanctions.

The organic net sales increase of $0.6 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 primarily relates to higher commercial aerospace aftermarket sales of $0.3 billion, higher commercial aerospace OEM sales of $0.2 billion, and a $0.1 billion increase in defense sales.

The increase in commercial aerospace sales was principally driven by an increase in commercial air traffic, which has resulted in an increase in flight hours, and increased volume across all OEM sales channels.

The defense sales increase was primarily due to higher volume.

The organic operating profit increase of $0.3 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was primarily due to higher commercial aerospace operating profit of $0.2 billion, principally driven by the higher aftermarket and OEM sales volume discussed above.

Defense operating profit increased in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 due to the higher volume discussed above.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Factors Contributing to Total Change

(dollars in millions) Organic (1)

Acquisitions /

Divestitures, net Restructuring

Costs Other Total Change

Net sales $ 1,167 $ — $ — $ 1 $ 1,168

Operating profit 402 — (10) (221) $ 171

(1) See “Segment Review” above for definition of organic.

A reconciliation of these measures to reported U.S.

GAAP amounts is provided in the table above.

The organic net sales increase of $1.2 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily relates to higher commercial aerospace aftermarket sales of $0.6 billion, higher commercial aerospace OEM sales of $0.4 billion, and a $0.2 billion increase in defense sales.

The defense sales increase was primarily due to higher volume.

The organic profit increase of $0.4 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to higher commercial aerospace operating profit of $0.4 billion, principally driven by the higher aftermarket and OEM sales volume discussed above.

Defense operating profit was relatively flat in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 as the higher volume discussed above was partially offset by higher space program costs.

The decrease in Other operating profit of $0.2 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by $175 million of charges in the first quarter of 2024, 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.

Basis of Presentation” within Item 1 of this Form 10-Q for additional information on Russia sanctions.

Defense Bookings – In addition to a number of smaller bookings, in the quarter ended June 30, 2024, Collins booked $1.9 billion to support the U.S.

Air Force’s next-generation Survivable Airborne Operations Center and $254 million for F-35 landing gear Lots 18 and 19.

Pratt & Whitney

Quarter Ended March 31,

(dollars in millions) 2024 2023 Change

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 Change 2024 2023 Change

Net sales $ 6,802 $ 5,701 19 % $ 13,258 $ 10,931 21 %

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Operating profit margins 8.0 % 4.0 % 7.2 % 5.9 %

Quarter Ended March 31, 2024 Compared with Quarter Ended March 31, 2023

Quarter Ended June 30, 2024 Compared with Quarter Ended June 30, 2023

Factors Contributing to Total Change

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GAAP amounts is provided in the table above.

The organic net sales increase of $1.2 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 reflects higher commercial OEM sales of $0.6 billion primarily driven by higher GTF volume and favorable mix.

The increase in military sales was $0.4 billion, driven by higher sustainment volume and favorable mix across multiple platforms as well as higher development volume.

The increase also includes higher commercial aftermarket sales of $0.2 billion primarily driven by higher GTF volume.

Organic operating profit was relatively consistent in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023.

Commercial aerospace operating profit was flat as the benefit from favorable commercial OEM mix and higher commercial aftermarket volume was offset by the unfavorable impact from higher commercial OEM volume and commercial aftermarket mix, as well as, the absence of a $60 million favorable contract matter in the first quarter of 2023.

Additionally, higher military operating profit, driven by the volume and favorable mix discussed above, was offset by higher research and development and selling, general, and administrative expenses.

Restructuring actions relate to ongoing cost reduction efforts including workforce reductions and the consolidation of facilities.

Quarter Ended March 31,

(dollars in millions) 2024 2023 Change

The organic net sales increase of $1.1 billion in the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023, reflects higher commercial aftermarket sales of $0.4 billion, driven by higher volume and favorable mix.

The increase in commercial OEM sales was $0.4 billion driven by higher volume and favorable mix within large commercial engines.

The increase also includes higher military sales of $0.3 billion driven by higher sustainment volume across multiple platforms.

Organic operating profit increased $0.1 billion in the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023.

Commercial aerospace operating profit increased $0.1 billion as the benefit from higher commercial aftermarket volume as well as favorable large commercial OEM and commercial aftermarket mix, was partially offset by the unfavorable impact from higher large commercial OEM volume and the absence of a $60 million favorable contract matter in the second quarter of 2023.

Additionally, the increase in military operating profit, driven by the sales volume discussed above and favorable mix, was more than offset by higher production costs and higher research and development and selling, general, and administrative expenses.

The increase in Other operating profit of $0.2 billion in the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023, reflects the absence of a $181 million charge related to a customer insolvency during the second quarter of 2023.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Factors Contributing to Total Change

(dollars in millions) Organic (1)

Acquisitions /

Divestitures, net Restructuring

Costs Other Total Change

Net sales $ 2,332 $ — $ — $ (5) $ 2,327

Operating profit 95 — 11 203 309

(1) See “Segment Review” above for definition of organic.

A reconciliation of these measures to reported U.S.

GAAP amounts is provided in the table above.

The organic net sales increase of $2.3 billion in the six months ended June 30, 2024, compared to the six months ended June 30, 2023 reflects higher commercial OEM sales of $1.0 billion primarily driven by volume and favorable mix and higher commercial aftermarket sales of $0.7 billion primarily driven by higher volume.

The organic increase also includes higher military sales of $0.6 billion, driven by higher sustainment volume across multiple platforms.

Organic operating profit increase of $0.1 billion in the six months ended June 30, 2024, compared to the six months ended June 30, 2023 reflects higher commercial aerospace operating profit of $0.1 billion as the benefit from favorable large commercial OEM mix and higher commercial aftermarket volume was partially offset by the unfavorable impact from higher large commercial OEM volume, as well as, the absence of two favorable contracts matters totaling approximately $120 million during the six months ended June 30, 2023.

Additionally, the increase in military operating profit of $0.1 billion, driven by the higher sales volume discussed above and favorable mix, was partially offset by higher production costs.

The increases described above were also partially offset by higher research and development and selling, general and administrative expenses of $0.1 billion.

The increase in Other operating profit of $0.2 billion in the six months ended June 30, 2024, compared to in the six months ended June 30, 2023, reflects the absence of a $181 million charge related to a customer insolvency during the second quarter of 2023.

Defense Bookings – In addition to a number of smaller bookings, in the six months ended June 30, 2024, Pratt & Whitney booked $381 million for F135 sustainment and $302 million for F135 production.

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 Change 2024 2023 Change

Net sales $ 6,511 $ 6,700 (3) % $ 13,170 $ 12,992 1 %

Operating profit 127 644 (80) % 1,123 1,215 (8) %

Operating profit margins 2.0 % 9.6 % 8.5 % 9.4 %

Defense Bookings $ 5,028 $ 6,203 (19) % $ 13,150 $ 15,308 (14) %

Quarter Ended March 31, 2024 Compared with Quarter Ended March 31, 2023

Quarter Ended June 30, 2024 Compared with Quarter Ended June 30, 2023

Factors Contributing to Total Change

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GAAP amounts is provided in the table above.

The organic net sales increase of $0.4 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily due to higher net sales of $0.2 billion from land and air defense systems programs, and $0.1 billion from advanced technology programs.

The increase in land and air defense systems programs was primarily driven by higher net sales on c ertain international Patriot programs, higher net sales on Counter-Unmanned Aircraft Systems (C-UAS), and higher volume

The organic net sales increase of $0.3 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was primarily due to higher net sales of $0.4 billion from land and air defense systems programs primarily driven by higher net sales on certain international Patriot programs, higher net sales on Counter-Unmanned Aircraft Systems (C-UAS) programs, and higher volume on Stinger.

The organic operating profit increase of $0.1 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was driven by a favorable change in mix and other performance of approximately $40 million spread across numerous individual programs, higher volume of approximately $30 million primarily driven by the sales increases noted above, and a net favorable change in EAC adjustments of approximately $20 million.

The decrease in net sales and operating profit due to acquisitions / divestitures, net in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 primarily relates to the sale of the CIS business completed in the first quarter of 2024.

The Other net sales and operating profit decreases of $0.1 billion and $0.6 billion, respectively, in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 was primarily due to a charge of $0.6 billion related to the anticipated Raytheon Contract Termination initiated in the quarter ended June 30, 2024.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Factors Contributing to Total Change

(dollars in millions) Organic (1)

Acquisitions /

Divestitures, net Restructuring

Costs Other Total Change

Net sales $ 679 $ (432) $ — $ (69) $ 178

Operating Profit 133 (23) 8 (210) (92)

(1) See “Segment Review” above for definition of organic.

A reconciliation of this measure to the reported U.S.

GAAP amount is provided in the table above.

The organic net sales increase of $0.7 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by higher net sales of $0.6 billion from land and air defense systems programs and $0.2 billion from advanced technology programs.

The increase in land and air defense systems programs was primarily driven by higher net sales on certain international Patriot programs, higher net sales on C-UAS programs, higher volume on Stinger, and higher volume

on certain international National Advanced Surface-to-air Missile System (NASAMS) programs.

The increase in advanced technology programs was primarily driven by higher volume on classified programs and an advanced development program.

The organic operating profit increase of $0.1 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023, was due to a favorable change in net EAC adjustments of approximately $60 million and higher volume of approximately $40 million on the sales increases noted above, partially offset by an unfavorable change in mix and other performance of approximately $50 million.

The favorable change in net EAC adjustments benefited from the absence of an unfavorable impact related to a significant contract option exercised in the first quarter of 2023.

The unfavorable change in mix and other performance was spread across numerous programs with no individual or common significant driver.

The Other operating profit change of $0.4 billion in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 is primarily due to a $0.4 billion gain on sale of the Cybersecurity, Intelligence and Services (CIS) business, net of transaction and other related costs in the first quarter of 2024.

Restructuring actions relate to ongoing cost reduction efforts including workforce reductions and the consolidation of facilities.

Defense Backlog and Bookings – Backlog was $53 billion at March 31, 2024 and $52 billion at December 31, 2023.

The organic operating profit increase of $0.1 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to a favorable change in net EAC adjustments of approximately $80 million and higher volume of approximately $70 million primarily driven by the sales increases noted above, partially offset by a decrease in mix and other performance of approximately $20 million.

The favorable change in net EAC adjustments benefited from the absence of an unfavorable impact related to a significant contract option exercised in the first quarter of 2023, and the remaining change was spread across numerous individual programs.

The decrease in net sales and operating profit due to acquisitions / divestitures, net in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily relates to the sale of the CIS business completed in the first quarter of 2024.

The Other net sales and operating profit decreases of $0.1 billion and $0.2 billion, respectively in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 were primarily due to a charge of $0.6 billion related to the anticipated Raytheon Contract Termination initiated in the quarter ended June 30, 2024, with the operating profit decrease partially offset by a $0.4 billion gain on sale of the CIS business, net of transaction and other related costs, in the first quarter of 2024.

Defense Backlog and Bookings – Backlog was $51 billion as of June 30, 2024 and $52 billion as of December 31, 2023.

Included in the change in backlog was a $1.1 billion reduction related to the sale of the CIS business discussed above.

In addition to a number of smaller bookings, in the quarter ended March 31, 2024, Raytheon booked $1.6 billion on a number of classified contracts, $1.2 billion to provide Patriot Air Defense systems to Germany, $818 million to provide Guidance Enhanced Missiles (GEM-T) for NATO Support and Procurement Agency (NSPA), $623 million to provide GEM-T for an international customer, $282 million to provide NASAMS for Ukraine, and $251 million to provide GEM-T for an international customer.

In addition to a number of smaller bookings, in the quarter ended June 30, 2024, Raytheon booked $928 million on a number of classified contracts, $639 million to produce AN/SPY-6(V) radars for the U.S.

Navy, and $393 million to design and build the Landsat Next Instrument Suite (LandIS) for NASA.

In addition to these bookings, in the six months ended June 30, 2024, Raytheon booked $1.6 billion on a number of classified contracts, $1.2 billion to provide Patriot Air Defense systems to Germany, $818 million to provide Guidance Enhanced Missiles (GEM-T) for NATO Support and Procurement Agency (NSPA), $623 million to provide GEM-T for an international customer, $282 million to provide NASAMS for Ukraine, and $251 million to provide GEM-T for an international customer.

Corporate and Eliminations and other

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Net Sales Operating Profit

Quarter Ended March 31, Quarter Ended March 31,

Quarter Ended June 30, Quarter Ended June 30,

(dollars in millions) 2024 2023 2024 2023

1 unchanged sentence

Corporate expenses and other unallocated items — — (930) (59)

The increase in eliminations and other net sales of $55 million in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

The change in eliminations and other operating profit of $56 million in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily due to a gain on sale of land in the first quarter of 2023.

The change in corporate expenses and other unallocated items operating profit of $53 million in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was primarily due to the reversal of certain tax related indemnity receivables in the first quarter of 2024.

The increase in eliminations and other net sales of $0.1 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Eliminations and other operating profit in the quarter ended June 30, 2024 was relatively consistent with the quarter ended June 30, 2023.

The change in Corporate expenses and other unallocated items of $0.9 billion in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, was primarily due to a $0.9 billion charge related to the Expected Resolution of Certain Legal Matters.

Net Sales Operating Profit

Six months ended June 30, Six months ended June 30,

(dollars in millions) 2024 2023 2024 2023

Eliminations and other $ (1,074) $ (898) $ (41) $ 35

Corporate expenses and other unallocated items — — (1,026) (102)

The increase in eliminations and other sales of $0.2 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, was primarily due to an increase in intersegment eliminations, principally driven by Collins.

The change in eliminations and other operating profit of $0.1 billion in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to a gain on sale of land recorded in the first quarter of 2023.

The change in Corporate expenses and other unallocated items of $0.9 billion in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, was primarily due to a $0.9 billion charge related to the Expected Resolution of Certain Legal Matters.

FAS/CAS operating adjustment

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

GAAP and our pension and PRB expense under U.S government CAS, primarily related to our Raytheon segment.

GAAP and our pension and PRB expense under U.S.

government 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.

2 unchanged sentences

The components of the FAS/CAS operating adjustment were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

2 unchanged sentences

FAS/CAS operating adjustment $ 212 $ 284 $ 426 $ 573

The change in our FAS/CAS operating adjustment of $75 million in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 was driven by a decrease in CAS expense, primarily due to the recognition of historical CAS gain/loss experience.

The change in our FAS/CAS operating adjustment of $72 million in the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023, was driven by a decrease in CAS expense, primarily due to the recognition of historical CAS gain/loss experience.

The change in our FAS/CAS operating adjustment of $147 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, was driven by a decrease in CAS expense, primarily due to the recognition of historical CAS gain/loss experience.

Acquisition accounting adjustments

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The components of Acquisition accounting adjustments were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

4 unchanged sentences

Acquisition accounting adjustments related to acquisitions in each segment were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(dollars in millions) 2024 2023 2024 2023

5 unchanged sentences

Acquisition accounting adjustments $ (504) $ (489) $ (1,004) $ (982)

Acquisition accounting adjustments for the quarter ended March 31, 2024 were relatively consistent with the quarter ended March 31, 2023, respectively.

Acquisition accounting adjustments for the quarter and six months ended June 30, 2024 were relatively consistent with the quarter and six months ended June 30, 2023, respectively.

LIQUIDITY AND FINANCIAL CONDITION

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

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

Cash and cash equivalents $ 6,011 $ 6,587

6 unchanged sentences

In addition to operating cash flows, other significant factors that affect our overall management of liquidity include:

capital expenditures, customer financing requirements, investments in and divestitures of businesses, dividends, common stock repurchases, pension funding, access to

the commercial paper markets, adequacy of available bank lines of credit, redemptions of debt, and the ability to attract long-term capital at satisfactory terms.

At March 31, 2024, we had cash and cash equivalents of $5.6 billion, of which approximatel y 31% was held by RTX’s foreign subsidiaries.

capital expenditures, customer financing requirements, investments in and divestitures of businesses, dividends, common stock repurchases, pension funding, access to the commercial paper markets, adequacy of available bank lines of credit, redemptions of debt, and the ability to attract long-term capital at satisfactory terms.

At June 30, 2024, we had cash and cash equivalents of $6.0 billion, of which approximatel y 31% was held by RTX’s foreign subsidiaries.

We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed.

5 unchanged sentences

Though the Company expects to continue having adequate access to funds, declines in our credit ratings or Company outlook could result in higher borrowing costs.

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, we had no commercial paper borrowings outstanding.

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

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, we had no commercial paper borrowings outstanding.

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.

We have an existing universal shelf registration statement, which we filed with the Securities and Exchange Commission (SEC) on September 22, 2022, for an indeterminate amount of debt and equity securities for future issuance, subject to our internal limitations on the amount of debt to be issued under this shelf registration statement.

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Cash Flow - Operating Activities

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions) 2024 2023

1 unchanged sentence

$ 3,075 $ (144)

The $1.2 billion change in cash flows provided by (used in) operating activities in the quarter ended March 31, 2024, compared to in the quarter ended March 31, 2023, was driven by a favorable impact from accounts receivable primarily due to the timing of collections and the related increase in factoring discussed below.

Included in the change in accounts payable and accrued liabilities was a change in collaborator payables at Pratt & Whitney, which was mostly offset by a change in collaborator receivables, included in accounts receivable, due to the timing of settlements.

Net income for the six months ended June 30, 2024 included a $0.9 billion charge related to the Expected Resolution of Certain Legal Matters and a $0.4 billion, net of tax, charge related to the anticipated Raytheon Contract Termination, both of which had no effect on cash flow in the period.

These charges also had the effect of increasing Other accrued liabilities by $1.3 billion in the six months ended June 30, 2024.

Excluding the impact of these charges, the $3.2 billion change in cash flows provided by (used in) operating activities in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was driven by a favorable impact from accounts receivable collections, including the related increase in factoring, as discussed below, the timing of collaborator receivables and lower tax payments year-over-year including a tax refund received in the second quarter of 2024.

The Company enters into various factoring agreements with third-parties to sell certain of its receivables, primarily related to customer facilitated programs.

The activity in these agreements is generally dependent on underlying delivery volumes within our commercial OEM programs.

During the quarter ended March 31, 2024, factoring activity resulted in an increase of approximately $0.4 billion in cash provided by operating activities, compared to a decrease of approximately $0.4 billion in cash provided by operating activities during the quarter ended March 31, 2023.

During the six months ended June 30, 2024, factoring activity resulted in an increase of approximately $0.4 billion in cash provided by operating activities, compared to a decrease of approximately $0.3 billion in cash provided by operating activities during the six months ended June 30, 2023.

Factoring activity includes amounts factored on certain aerospace receivables at the customer’s request for which we may be compensated by the customer.

We made net tax payments of $129 million and $171 million in the quarters ended March 31, 2024 and 2023, respectively.

While the timing of cash flows relating to the Powder Metal Matter are subject to a number of variables, we estimate the accrual for expected customer compensation to be utilized consistent with the timing of execution of the fleet management plan and period of increased aircraft on ground levels.

We made net tax payments of $0.2 billion and $1.4 billion in the six months ended June 30, 2024 and 2023, respectively.

While the timing of cash flows are subject to a number of variables, for the Powder Metal Matter we estimate the accrual for expected customer compensation to be utilized consistent with the timing of execution of the fleet management plan, the period of increased aircraft on ground levels, and contractual terms with customers.

We currently estimate cash outflows related to the Powder Metal Matter of approximately $1.3 billion in 2024.

Additionally, we currently estimate 2024 cash outflows of approximately $1.0 billion related to the Expected Resolution of Certain Legal Matters.

Cash Flow - Investing Activities

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions) 2024 2023

Net cash flows provided by (used in) investing activities

Net cash flows used in investing activities

$ (40) $ (1,202)

Our investing activities primarily include capital expenditures, cash investments in customer financing assets, investments in and dispositions of businesses, payments related to our collaboration intangible assets and contractual rights to provide product on new aircraft platforms, and settlements of derivative contracts not designated as hedging instruments.

The $1.3 billion change in cash flows provided by (used in) investing activities in the quarter ended March 31, 2024, compared to in the quarter ended March 31, 2023, was primarily related to the sale of our CIS business within Raytheon for proceeds of approximately $1.3 billion in cash.

During the quarters ended March 31, 2024 and 2023, we increased other intangible assets by $163 million and $154 million, respectively, primarily related to collaboration payment commitments made under our 2012 agreement to acquire Rolls-Royce’s collaboration interests in International Aero Engines AG (IAE) and exclusivity payments made on contractual commitments included within intangible assets.

The $1.2 billion change in cash flows used in investing activities in the six months ended June 30, 2024, compared to in the six months ended June 30, 2023, was primarily related to the sale of our CIS business within Raytheon for proceeds of approximately $1.3 billion in cash.

During the six months ended June 30, 2024 and 2023, we increased other intangible assets by $318 million and $314 million, respectively, primarily related to collaboration payment commitments made under our 2012 agreement to acquire Rolls-Royce’s collaboration interests in International Aero Engines AG (IAE) and exclusivity payments made on contractual commitments included within intangible assets.

Cash Flow - Financing Activities

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions) 2024 2023

2 unchanged sentences

Our financing activities primarily include the issuance and repayment of commercial paper and other short-term and long-term debt, payment of dividends, and stock repurchases.

The $3.1 billion change in cash flows (used in) provided by financing activities in the quarter ended March 31, 2024, compared to in the quarter ended March 31, 2023, was primarily driven by prior year cash provided by long-term debt issuances of $3.0 billion and current year repayment of long-term debt of $1.0 billion, partially offset by lower share repurchases of $0.5 billion, and prior year repayments of commercial paper, net, of $0.4 billion.

The $4.1 billion change in cash flows (used in) provided by financing activities in the six months ended June 30, 2024, compared to in the six months ended June 30, 2023, was primarily driven by the absence of prior year long-term debt issuances of $3.0 billion, current year repayment of long-term debt of $1.7 billion, and the absence of prior year issuances of commercial paper, net, of $0.5 billion, partially offset by lower share repurchases of $1.1 billion.

Refer to “Note 9:

Borrowings and Lines of Credit” within Item 1 of this Form 10-Q for additional information on debt issuances and repayments and commercial paper.

At March 31, 2024, management had remaining authority to repurchase approximately $1.0 billion of our common stock under the October 21, 2023 share repurchase program.

At June 30, 2024, management had remaining authority to repurchase approximately $1.0 billion of our common stock under the October 21, 2023 share repurchase program.

Under the 2023 program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.

2 unchanged sentences

Our share repurchases, which include shares reacquired outside of our share repurchase program, were as follows:

Quarter Ended March 31,

Six Months Ended June 30,

(dollars in millions;

5 unchanged sentences

Our Board of Directors authorized the following cash dividends:

Quarter Ended March 31,

Six Months Ended June 30,

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

1 unchanged sentence

Total dividends paid $ 1,592 $ 1,634

On June 3, 2024, the Board of Directors declared a dividend of $0.63 per share payable September 5, 2024 to shareowners of record at the close of business on August 16, 2024.

Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in our exposure to market risk during the quarter ended March 31, 2024.

There has been no significant change in our exposure to market risk during the six months ended June 30, 2024.

For discussion of our exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our 2023 Form 10-K.

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 2. Management’s Discussion and Analysis