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Item 7. Management’s Discussion and Analysis

2025-02-03 compared with 2024-02-05 · 343 added, 303 removed, 652 unchanged (50% of the section changed)

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BUSINESS OVERVIEW

We are a global premier systems provider of high technology products and services to the aerospace and defense industries.

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

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

W e are a global premier systems provider of high technology products and services to the aerospace and defense industries.

We operate in three principal business segments:

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

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

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

References to “Raytheon Company” mean Raytheon Company, which became a wholly owned subsidiary of RTX on April 3, 2020 through an all-stock merger transaction between United Technologies Corporation and Raytheon Company (the surviving company of which is RTX Corporation).

Industry Considerations

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Collins and Pratt & Whitney serve both commercial and government aerospace customers.

Revenue passenger miles (RPMs), available seat miles, and the general economic health of airline carriers are key barometers for our commercial aerospace operations.

Revenue passenger miles (RPMs), available seat miles, and the general economic health of airline carriers and airframers, as well as the financial strength and performance of airframers, are key barometers for our commercial aerospace operations.

Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits.

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Other Matters

Global economic and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, geopolitical conflicts and strained intercountry relations, U.S.

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.

Global, economic, and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, potential changes in U.S.

government policy positions, including changes in DoD policies or priorities, geopolitical conflicts and strained intercountry relations, U.S.

tax law changes, foreign currency exchange rates, sanctions, tariffs, 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.

As previously announced, in 2024 the Company resolved several outstanding legal matters, herein referred to as “Resolution of Certain Legal Matters.” The Company entered into a deferred prosecution agreement (DPA) (DPA-1) with the Department of Justice (DOJ) and the Company settled an administrative proceeding with the Securities and Exchange Commission (SEC) (the SEC Administrative Order) to resolve the previously disclosed criminal and civil government investigations into 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 entered into a DPA 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).

Under these DPAs and the SEC Administrative Order, Raytheon Company and the Company are required to retain, among other things, an independent compliance monitor satisfactory to the DOJ and the SEC (for a term ending three years from the date on which the monitor is engaged) and are required to undertake certain cooperation and disclosure obligations (for a term commencing on the effective date of DPA-1 and the SEC Administrative Order, as applicable, and ending three years from the date on which the monitor is engaged).

The compliance monitor will oversee Raytheon Company’s and the Company’s compliance with their respective obligations under the DPAs and the SEC Administrative Order.

The DPAs further provide that, in the event the DOJ, in its sole discretion, determines during the period of deferral of prosecution that Raytheon Company or the Company have violated any provision of either DPA, Raytheon Company or the Company may be subject to prosecution for any federal criminal violation, including the charges against Raytheon Company in the relevant DPA.

The SEC Administrative Order further provides that, in the event of a breach of the SEC Administrative Order, the SEC may vacate the SEC Administrative Order and institute proceedings against the Company.

In the event of any such determination or breach, the Company may face additional adverse impacts.

In addition, the Company resolved 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 that were resolved pursuant to a Consent Agreement (CA) with the Department of State (DOS) (Trade Compliance Matters).

The CA, which has a three-year term, requires the Company to implement remedial compliance measures and to conduct an external audit of the Company’s International Traffic in Arms Regulations (ITAR) compliance program.

The CA also requires appointment of an external, independent Special Compliance Officer (SCO).

The Company appointed its SCO on September 27, 2024.

As a result of the DPAs, SEC Administrative Order, FCA settlement agreement and CA, we recorded a combined pre-tax charge of $918 million during the second quarter of 2024, which included $269 million related to the DOJ Investigation and Contract Pricing Disputes (in addition to amounts previously accrued), $364 million related to Thales-Raytheon Systems and Related Matters (in addition to amounts previously accrued), and $285 million related to Trade Compliance Matters.

In the fourth quarter we made payments of $580 million related to the DOJ Investigation and Contract Pricing Dispute and $384 million related to Thales-Raytheon Systems and Related Matters.

See “Note 17:

Commitments and Contingencies” within Item 8 of this Form 10-K for additional information.

Pratt & Whitney Powder Metal Matter.

As described further in “Note 17:

Commitments and Contingencies” within Item 8 of this Form 10-K, 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”).

In 2023, Pratt & Whitney determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100G-JM (PW1100) Geared Turbofan (GTF) fleet, which powers the A320neo family of aircraft (A320neo) (herein referred to as the “Powder Metal Matter”).

See “Note 17:

Commitments and Contingencies” within Item 8 of this Form 10-K for additional information.

Global Supply Chain.

We are dependent on a global supply chain and in recent years have experienced supply chain disruptions that resulted in delays and increased costs and adversely affected our performance.

We are dependent on a global supply chain and have experienced supply chain disruptions that resulted in delays and increased costs and adversely affected our performance.

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

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

We have implemented actions and programs to mitigate some of the impacts but anticipate supply chain disruptions to continue into 2024.

We have implemented actions and programs to mitigate some of the impacts but anticipate supply chain disruptions to continue.

Economic Environment.

Current 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.

The inflationary environment has increased material and component prices, labor rates, and supplier costs and has negatively impacted our performance, including our 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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Moreover, volatility in interest rates and financial markets can lead to economic uncertainty, an economic downturn or recession, and impact the demand for our products and services as well as our supply chain.

We continue to pursue strategic and operational initiatives to help address these macroeconomic pressures, including our digital transformation, operational modernization, cost reduction, and advanced technology programs, and we apply our Customer Oriented Results Excellence (CORE) operating platform to the execution of these initiatives.

technology programs, and we apply our Customer Oriented Results and Excellence (CORE) operating platform to the execution of these initiatives.

However, the impact of these pressures and corresponding initiatives is uncertain and subject to a range of factors and future developments.

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Since the end of its fiscal year 2024, the U.S.

government has been operating under a series of continuing resolutions to keep the government funded while Congress works to enact full year fiscal year 2024 (FY24) appropriation bills.

On January 7, 2024, congressional leaders announced an overall funding agreement enabling Congress to complete action on the FY24 appropriations bills.

The current continuing resolution, signed on January 19, 2024, funds certain agencies through March 1 and others through March 8.

government has been operating under two continuing resolutions, the most recent of which was signed on December 21, 2024, to keep the government funded through March 14, 2025 while Congress works to enact full year fiscal year 2025 (FY25) appropriation bills.

Under a continuing resolution, federal agencies continue to operate generally at the same funding levels as the prior year, but typically new spending initiatives cannot be executed during this period.

While we expect Congress to complete the full year FY24 appropriations bills before the current continuing resolution expires and for the FY24 defense appropriations bill to provide increased spending consistent with the overall funding agreement, if Congress is unable to complete the FY24 appropriation bills (or pass another continuing resolution), then the U.S.

government would shut down during which federal agencies would cease all non-essential functions.

It is currently uncertain whether Congress will be able to enact FY25 appropriations bills and, if such bills are passed, the spending levels and priorities for defense and other areas.

If Congress is unable to complete the FY25 appropriation bills (or pass another continuing resolution) by March 14, 2025, then the U.S.

government would shut down, during which time federal agencies would cease all non-essential functions.

In the event of a U.S.

government shutdown, our business, program performance and results of operations could be impacted by the resulting disruptions to federal government offices, workers, and operations, including risks relating to the funding of certain programs, stop work orders, delays in contract awards, new program starts, payments for work performed, and other actions.

We also may experience similar impacts in the event of an extended period of continuing resolutions.

Generally, the significance of these impacts will primarily be based on the length of the shutdown or continuing resolution.

Furthermore, under the Fiscal Responsibility Act of 2023, which imposes limits on discretionary spending for defense and non-defense programs in exchange for the lifting of the debt ceiling in June 2023, if Congress fails to enact appropriation bills by April 30, 2025, budget caps will be reduced and corresponding automatic reductions to agency budget accounts will be enforced through sequestration.

Geopolitical Matters.

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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.

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

In February 2023, China announced sanctions against Raytheon Missiles & Defense (RMD) (a former RTX business segment which became part of the Raytheon business during the third quarter of 2023), and previously announced it may take measures against RTX, in connection with certain foreign military sales to Taiwan.

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

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

Since that time, China has announced additional sanctions against the Raytheon business and a Collins joint venture.

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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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 December 31, 2023, 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.

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

At this time, impacts to RTX are minimal.

We continue to closely monitor potential impacts to RTX’s business, customers, suppliers, employees, and operations in Israel, the Middle East, and the region at large due to the war in Gaza, including a recently-announced ceasefire, the related escalation of conflict and instability in the region, and the regime change in Syria.

RTX’s commercial manufacturing facilities in Israel remain open and operational and have continued exporting products and importing critical items and raw materials.

The war has also not impacted our defense programs’ ability to receive components from Israel.

For some products, there could be future delivery delays because of the ongoing war.

The potential impacts to RTX are subject to change given the volatile nature of the situation.

RTX’s defense programs’ ability to receive components from Israel has not been impacted in any material respect, although we could experience future delivery delays of certain products if the ceasefire does not hold, or if further escalations arise.

The overall impacts to RTX from this situation have been minimal;

however, given the volatile nature of the situation, the potential impacts to RTX are subject to change.

On February 1, 2025, President Trump issued three executive orders directing the United States to impose new tariffs on imports from Canada, Mexico, and China, to take effect on February 4, 2025, and on February 3, 2025, President Trump announced his intention to pause tariffs on Canada and Mexico for the next month.

The tariffs impose an additional 25% ad valorem rate of duty on all imports from Canada and Mexico (other than imports of Canadian energy resources exports, which are subject to a 10% ad valorem rate of duty) and an additional 10% ad valorem rate of duty on all imports from China.

We are currently evaluating the potential impact of the imposition of the announced tariffs to our business and financial condition.

RTX also exports products to Canada, Mexico and China and we are currently monitoring the potential impact, if any, of actions taken in response to these tariffs by Canada, Mexico and China.

On January 28, 2025, RTX announced its full-year 2025 financial outlook, and that outlook does not reflect the impact of tariffs on imports from Canada, Mexico and China announced pursuant to the February 1, 2025 executive orders.

While we do not believe that the tariffs announced by the United States on February 1, 2025 will have a material adverse effect upon our results of operations, financial condition, or liquidity, there may be an impact to our previously issued outlook.

The actual impact of the new tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take and any mitigating actions that may become available.

“Risk Factors” within Part I of this Form 10-K for further discussion.

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We use the following key financial performance measures to manage our business on a consolidated basis and by business segment, and to monitor and assess our results of operations:

a growth metric that measures our revenue for the current year;

a metric that measures our revenue for the current year;

• Operating profit:

a measure of our profit for the year, before non-operating expenses, net and income taxes;

a measure of our profit for the year, before non-operating expenses (income), net and income tax expense;

• Operating profit margin:

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Operating profit 6,538 3,561 5,504

Operating profit margins 5.2 % 8.2 % 8.0 %

Operating profit margin 8.1 % 5.2 % 8.2 %

Operating cash flow from continuing operations $ 7,159 $ 7,883 $ 7,168

In order to better assess the underlying performance of our business, we also focus on the change in organic net sales on both a consolidated basis and business segment basis, and the change in organic operating profit on a business segment basis, which allows for better year-over-year comparability.

See Results of Operations below for our definition of the organic change in Net sales and Operating profit, which are not defined measures under U.S.

See “Results of Operations” below for our definition of the organic change in Net sales and Operating profit, which are non-Generally Accepted Accounting Principles (non-GAAP) measures that are not defined measures under U.S.

Generally Accepted Accounting Principles (GAAP) and may be calculated differently by other companies.

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In addition, we maintain a strong focus on program execution and the prudent management of capital and investments in order to maximize operating income and cash.

We focus on adjusted earnings per share (EPS) and measures to assess our cash generation and the efficiency and effectiveness of our use of capital, such as free cash flow, both of which are not defined measures under U.S.

GAAP and may be calculated differently by other companies.

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RESULTS OF OPERATIONS

As described in our “Cautionary Note Concerning Factors That May Affect Future Results” of this Form 10-K, our period-to-period comparisons of our results, particularly at a segment level, may not be indicative of our future operating results.

As described in our “Cautionary Note Concerning Factors That May Affect Future Results and Risk Factor Summar y ” of this Form 10-K, our period-to-period comparisons of our results, particularly at a segment level, may not be indicative of our future operating results.

The following discussions of comparative results among periods, including the discussion of segment results, should be viewed in this context.

We provide the organic change in Net sales and Cost of sales for our consolidated results of operations as well as the organic change in Net sales and Operating profit for our segments.

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, 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).

We believe that these 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).

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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GAAP amounts is provided in the table above.

Net sales increased $7.8 billion organically in 2024 compared to 2023, primarily due to higher organic sales of $4.4 billion at Pratt & Whitney, $2.1 billion at Collins, and $1.7 billion at Raytheon.

The $1.3 billion decrease in net sales related to Acquisitions and divestitures, net in 2024 compared to 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.

The increase in Other net sales of $5.3 billion in 2024 compared to 2023, was primarily driven by the absence of the net sales charge of $5.4 billion associated with the Powder Metal Matter recognized in the third quarter of 2023.

Net sales increased $7.3 billion organically in 2023 compared to 2022, primarily due to higher organic sales of $3.2 billion at Collins, $3.1 billion at Pratt & Whitney, and $1.3 billion at Raytheon.

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The decrease in Other net sales of $5.4 billion in 2023 compared to 2022, was primarily driven by the net sales charge of $5.4 billion associated with the Powder Metal Matter recognized in the third quarter of 2023.

Net sales increased $3.7 billion organically in 2022 compared to 2021, primarily due to higher organic sales of $2.5 billion at Pratt & Whitney and $2.1 billion at Collins, partially offset by lower organic sales of $0.7 billion at Raytheon.

The $0.7 billion decrease in net sales related to Acquisitions and divestitures, net in 2022 compared to 2021, was primarily driven by the sale of our global training and services business within our Raytheon segment in the fourth quarter of 2021 .

The decrease in Other net sales of $0.3 billion in 2022 compared to 2021 represents the impact of foreign exchange.

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

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(dollars in millions) 2024 2023 2022 2024 2023 2022

Products sales $ 49,571 $ 50,773 $ 49,270 72 % 76 % 77 %

Services sales 19,349 16,301 15,118 28 % 24 % 23 %

Products $ 59,612 $ 49,571 $ 50,773 74 % 72 % 76 %

Services 21,126 19,349 16,301 26 % 28 % 24 %

Total net sales $ 80,738 $ 68,920 $ 67,074 100 % 100 % 100 %

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Segment Financial Data” within Item 8 of this Form 10-K for the composition of external net sales by products and services by segment.

Net products sales decreased $1.2 billion in 2023 compared to 2022, primarily driven by a $3.8 billion decrease at Pratt & Whitney primarily driven by a net sales charge of $5.3 billion associated with the Powder Metal Matter, partially offset by increases of $2.1 billion at Collins and $0.6 billion at Raytheon.

Net services sales increased $3.0 billion in 2023 compared to 2022, primarily due to increases in external services sales of $1.7 billion at Pratt & Whitney, $0.8 billion at Collins, and $0.6 billion at Raytheon, partially offset by a net sales charge of $0.1 billion associated with the Powder Metal Matter.

Net products sales increased $1.5 billion in 2022 compared to 2021, primarily due to increases in external products sales of $1.3 billion at Collins and $1.2 billion at Pratt & Whitney, partially offset by decreases in external products sales of $1.0 billion at Raytheon.

Net services sales increased $1.2 billion in 2022 compared to 2021 primarily due to increases in external services sales of $1.2 billion at Pratt & Whitney and $0.4 billion at Collins, partially offset by a decrease in external services sales of $0.4 billion at Raytheon, primarily driven by the sale of the global training and services business in the fourth quarter of 2021 .

Net products sales increased $10.0 billion in 2024 compared to 2023, primarily driven by the absence of the net sales charge of $5.3 billion associated with the Powder Metal Matter, and increases in external products sales of $2.4 billion at Pratt & Whitney, $1.2 billion at Collins, and $1.0 billion at Raytheon.

Net services sales increased $1.8 billion in 2024 compared to 2023, primarily due to increases in external services sales of $2.0 billion at Pratt & Whitney, including the absence of a services sales charge of $0.1 billion associated with the Powder Metal Matter, and a $0.4 billion increase at Collins, partially offset by a decrease in external services sales of $0.7 billion at Raytheon, primarily driven by the sale of our CIS business completed in the first quarter of 2024.

Net products sales decreased $1.2 billion in 2023 compared to 2022, primarily driven by a $3.8 billion decrease at Pratt & Whitney due to a net sales charge of $5.3 billion associated with the Powder Metal Matter, partially offset by increases of $2.1 billion at Collins and $0.6 billion at Raytheon.

Net services sales increased $3.0 billion in 2023 compared to 2022, primarily due to increases in external services sales of $1.7 billion at Pratt & Whitney, $0.8 billion at Collins, and $0.6 billion at Raytheon, partially offset by a services sales charge of $0.1 billion associated with the Powder Metal Matter.

Our sales to major customers were as follows:

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GAAP amounts is provided in the table above.

The organic increase in Total cost of sales in 2023 compared to 2022 of $5.7 billion was primarily due to the organic sales increases at Pratt & Whitney, Collins, and Raytheon noted above.

The organic increase in Total cost of sales in 2024 compared to 2023 of $6.2 billion was primarily due to the organic net sales increases at Pratt & Whitney, Collins, and Raytheon noted above.

The $1.2 billion decrease in cost of sales related to

Acquisitions and divestitures, net in 2024 compared to 2023, was primarily driven by the sale of our CIS business within our Raytheon segment completed in the first quarter of 2024.

The increase in Other cost of sales of $3.2 billion in 2024 compared to 2023 was primarily driven by the absence of the Powder Metal Matter charge recorded in the third quarter of 2023, which resulted in a $2.5 billion net reduction in cost of sales primarily reflecting our partners’ 49% share of the impact.

In addition, the increase in Other cost of sales includes a $0.5 billion charge at Raytheon related to the termination of a fixed price development contract with a foreign customer, herein referred to as “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.

The organic increase in Total cost of sales in 2023 compared to 2022 of $5.7 billion was primarily due to the organic net sales increases at Pratt & Whitney, Collins, and Raytheon noted above.

The $0.1 billion decrease in cost of sales related to Acquisitions and divestitures, net in 2023 compared to 2022, was primarily driven by the divestiture of a small non-core naval power business in the fourth quarter of 2022 .

The decrease in Other cost of sales of $2.6 billion in 2023 compared to 2022 was

primarily driven by a net reduction in cost of sales of $2.5 billion primarily reflecting our partners’ share of the Powder Metal Matter.

The organic increase in Total cost of sales in 2022 compared to 2021 of $2.4 billion was primarily due to the organic sales increases at Pratt & Whitney and Collins noted above.

The decrease related to Acquisitions and divestitures, net of $0.6 billion in 2022 compared to 2021 was primarily driven by t he sale of our global training and services business within our Raytheon segment in the fourth quarter of 2021.

The decrease in Other cost of sales of $0.2 billion in 2022 compared to 2021 was primarily driven by the impact of foreign exchange, partially offset by charges recorded during the first quarter of 2022 at Pratt & Whitney and Collins related to impairment of customer financing assets for products under lease, inventory reserves, purchase order obligations, and the impairment of contract fulfillment costs that are no longer recoverable, all due to global sanctions on and export controls with respect to Russia.

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for additional information.

The decrease in Other cost of sales of $2.6 billion in 2023 compared to 2022 was primarily driven by a net reduction in cost of sales of $2.5 billion primarily reflecting our partners’ 49% share of the Powder Metal Matter.

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

For further discussion on FAS/CAS operating adjustment see the “FAS/CAS operating adjustment” subsection under the “Segment Review” section below.

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

For discussion on FAS/CAS operating adjustment, see the “FAS/CAS operating adjustment” subsection under the “Segment Review” section below.

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

% of Total Net Sales

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Total cost of sales $ 65,328 $ 56,831 $ 53,406 81 % 82 % 80 %

Net products cost of sales increased $7.3 billion in 2024 compared to 2023, primarily due to the absence of the Powder Metal Matter charge recorded in the third quarter of 2023, which resulted in a $2.5 billion net reduction in cost of sales primarily reflecting our partners’ 49% share of the impact.

In addition, net product cost of sales includes increases in external products cost of sales at Pratt & Whitney, Collins, and Raytheon all driven by the products sales changes noted above, a $0.5 billion charge related to the Raytheon Contract Termination in the second quarter of 2024, and $0.2 billion of charges at Collins as a result of initiating alternative titanium sources recorded in the first quarter of 2024.

Net services cost of sales increased $1.2 billion in 2024 compared to 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, all driven by the services sales changes noted above.

Net products cost of sales increased $1.5 billion in 2023 compared to 2022, primarily due to increases in external products cost of sales at Pratt & Whitney, Collins, and Raytheon, all driven by the products sales changes noted above, partially offset by a net reduction in cost of sales of $2.5 billion primarily reflecting our partners’ 49% share of the Powder Metal Matter.

Net services cost of sales increased $1.9 billion in 2023 compared to 2022, primarily due to increases in external services cost of sales at Pratt & Whitney, Collins, and Raytheon, all driven by the services sales changes noted above.

Net products cost of sales increased $0.8 billion in 2022 compared to 2021, primarily due to increases at Collins and Pratt & Whitney, partially offset by decreases at Raytheon and declines in Acquisition Accounting Adjustments.

The changes at Collins, Pratt & Whitney, and Raytheon were related to the changes in products sales noted above.

Net services cost of sales increased $0.7 billion in 2022 compared to 2021, 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, all driven by the services sales changes noted above.

Research and Development

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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 in 2023 compared to 2022, was primarily driven by increased spending on commercial program development at Pratt & Whitney and higher program expenses at Collins, partially offset by decreased spend on other development programs.

Company-funded research and development in 2022 was relatively consistent with 2021.

The increase in company-funded research and development of $0.1 billion in 2024 compared to 2023, was primarily driven by increased spending on commercial program development at Collins and Pratt & Whitney, partially offset by lower expenses on development programs at Raytheon.

The increase in company-funded research and development of $0.1 billion in 2023

compared to 2022, was primarily driven by increased spending on commercial program development at Pratt & Whitney and higher program expenses at Collins, partially offset by decreased spend on other development programs.

The increase in customer-funded research and development of $0.3 billion in 2024 compared to 2023, was primarily driven by higher expenses on various military and commercial programs at Collins and increased spending at Pratt & Whitney on military programs primarily driven by the F135 Engine Core Upgrade (ECU), partially offset by lower expenses at Raytheon primarily related to the Next Generation Interceptor (NGI) program.

The increase in customer-funded research and development of $0.1 billion in 2023 compared to 2022, was primarily driven by higher expenses on various commercial and military programs at Collins and increased spending at Pratt & Whitney on military programs, partially offset by lower expenses on various programs at Raytheon.

The decrease in customer-funded research and

development of $0.1 billion in 2022 compared to 2021, was primarily driven by lower expenses on various programs at Raytheon, partially offset by an increase in expenses on a missile defense technology program at Raytheon.

Selling, General, and Administrative

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Percentage of net sales 7.2 % 8.4 % 8.3 %

Selling, general, and administrative expenses increased $0.2 billion in 2023 compared to 2022, primarily driven by a $0.1 billion charge at Pratt & Whitney related to a customer insolvency in the second quarter of 2023, costs related to our segment realignment and recently announced divestitures in 2023, and increased employee-related costs, partially offset by the absence of $0.1 billion of charges recorded in the first quarter of 2022 related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia.

Selling, general, and administrative expenses in 2024 were relatively consistent with 2023, as a $0.1 billion customer bankruptcy charge recorded in the fourth quarter of 2024 was offset by the absence of a $0.1 billion customer insolvency charge recorded in the second quarter of 2023, both at Pratt & Whitney.

Selling, general, and administrative expenses increased $0.2 billion in 2023 compared to 2022, primarily driven by a $0.1 billion charge at Pratt & Whitney related to a customer insolvency in the second quarter of 2023, costs related to our segment realignment and divestitures in 2023, and increased employee-related costs, partially offset by the absence of $0.1 billion of charges recorded in the first quarter of 2022 related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia.

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for additional information on Russia sanctions.

Selling, general, and administrative expenses increased $0.5 billion in 2022 compared to 2021, primarily driven by higher information technology-related costs at Corporate, Collins, and Pratt & Whitney, and higher combined expenses at Collins and Pratt & Whitney, principally driven by higher employee-related costs and $0.1 billion of charges related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia.

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

Other Income (Expense), Net

(dollars in millions) 2024 2023 2022

Other income, net $ 86 $ 120 $ 423

Other income, 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, net of $34 million in 2023 compared to 2022 was primarily due to the net unfavorable year-over-year impact of foreign exchange gains and losses of $79 million, which was more than offset by the absence of $111 million of charges associated with the disposition of three businesses in 2022, and a $68 million gain on sale of land during the first quarter of 2023.

Other income (expense), net $ (132) $ 86 $ 120

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 $0.2 billion in 2024 compared to 2023 was primarily due to a $0.9 billion charge during the second quarter of 2024 related to the Resolution of Certain Legal Matters.

This was partially offset by a $0.4 billion gain on the sale of Raytheon’s CIS business in the first quarter of 2024, a $0.2 billion benefit from a tax related indemnity receivable recorded in the third quarter of 2024, a $0.1 billion gain on the sale of Collins’ Goodrich Hoist & Winch business in the fourth quarter of 2024, and an insurance recovery at Pratt & Whitney of approximately $0.1 billion in the fourth quarter of 2024.

See “Note 12:

Income Taxes” within Item 8 of this Form 10-K for additional information on the indemnity receivable and the offsetting impacts to Income tax expense.

Other income (expense), net in 2023 was relatively consistent with 2022, as the net unfavorable year-over-year impact of foreign exchange gains and losses of $0.1 billion, was more than offset by the absence of $0.1 billion of charges associated with the disposition of three businesses in 2022 and a $0.1 billion gain on sale of land during the first quarter of 2023.

The remaining decrease was spread across individually less significant items.

The decrease in Other income, net of $303 million in 2022 compared to 2021 was primarily due to the absence of a $269 million gain on sale of Raytheon’s global training and services business recorded in 2021, $111 million of charges associated with the disposition of three businesses in 2022 including two non-core businesses at Collins and a non-core naval power business at Raytheon, and the absence of foreign government wage subsidies related to Coronavirus Disease 2019 (COVID-19) at Pratt & Whitney of $41 million in 2021.

The above items were partially offset by an accrual of $147 million in the fourth quarter of 2021 related to the ongoing Department of Justice (DOJ) investigation into contract pricing matters at Raytheon.

Acquisitions and Dispositions” within Item 8 of this Form 10-K for further discussion on business dispositions.

Operating Profit

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Operating profit margin 8.1 % 5.2 % 8.2 %

The increase in Operating profit of $3.0 billion in 2024 compared to 2023 was primarily driven by the absence of the $2.9 billion of charges associated with the Powder Metal Matter recorded in the third quarter of 2023.

In addition, the increase in Operating profit was driven by the increased operating performance of our segments of approximately $1.5 billion, a $0.4

billion gain on sale of the CIS business recorded in the first quarter of 2024, and a $0.2 billion benefit from a tax related indemnity receivable recorded in the third quarter of 2024.

The above items were partially offset by a $0.9 billion charge in the second quarter of 2024 related to the Resolution of Certain Legal Matters, a $0.6 billion charge in the second quarter of 2024 related to the Raytheon Contract Termination, and the $0.3 billion change in our FAS/CAS operating adjustment which is described below in “Segment Review.” See “Note 12:

Income Taxes” within Item 8 of this Form 10-K for additional information on the indemnity receivable and the offsetting impacts to Income tax expense.

The decrease in Operating profit of $1.9 billion in 2023 compared to 2022 was primarily driven by a decrease at Pratt & Whitney primarily driven by the $2.9 billion charge associated with the Powder Metal Matter and a decrease in the change in our FAS/CAS operating adjustment, partially offset by an increase in Operating profit at Collins and Raytheon, all of which are described below in “Segment Review.”

The increase in Operating profit of $0.4 billion in 2022 compared to 2021 was primarily driven by a decrease in Acquisition accounting adjustments, the operating performance at our operating segments, and a decrease in Corporate and Eliminations and other, partially offset by the change in our FAS/CAS operating adjustment, all of which are described below in “Segment Review.”

Non-service Pension Income

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Non-service pension income $ (1,518) $ (1,780) $ (1,889)

The change in Non-service pension income of $0.3 billion in 2024 compared to 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 $0.1 billion in 2023 compared to 2022 was primarily driven by an increase in interest rates during 2022 and prior years’ pension asset returns performing below our expected return on plan assets (EROA) assumption, partially offset by an increase in our 2023 EROA assumption.

The change in Non-service pension income of $0.1 billion in 2022 compared to 2021 was primarily driven by the impact of an increase in interest rates, partially offset by prior years’ pension asset returns exceeding our EROA assumption.

Interest Expense, Net

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4.5 % 4.6 % 4.0 %

(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.

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

Interest expense, net increased $0.4 billion in 2024 compared to 2023.

The increase in Interest expense of $0.3 billion was primarily due to long-term debt issuances and term loan borrowings in 2023, partially offset by the reversal of interest accruals as a result of the conclusion of the examination phases of certain RTX and Rockwell Collins tax audits in the first quarter of 2024.

Interest expense, net increased $0.2 billion in 2023 compared to 2022.

The increase in Interest expense of $0.4 billion was primarily due to the long-term debt issuances in the first and the fourth quarters of 2023, interest and fees on short-term loans related to an accelerated share repurchase (ASR), and the increase in commercial paper activity in 2023.

For additional discussion of the ASR and associated funding, see “Liquidity and Financial Condition” below.

The change in Other non-operating expense (income) of $0.1 billion was primarily driven by a change in the mark-to-market fair value of marketable securities held in trusts associated with certain of our nonqualified deferred compensation and employee benefit plans and an increase in dividend income.

Interest expense, net in 2022 was relatively consistent with 2021.

2024 2023 2022

Effective income tax rate 19.1 % 11.9 % 12.9 %

The lower 2023 effective tax rate compared to 2022 is primarily driven by a favorable impact related to the $2.9 billion charge associated with the Powder Metal Matter driving lower pretax income in 2023 resulting in an approximate 4% benefit to the rate in 2023, and the absence of a 3.4% reduction in the 2022 effective tax rate associated with the $207 million of tax benefits recorded in 2022 related to legal entity and operational reorganizations.

The lower 2022 effective tax rate compared to 2021 is primarily driven by the absence of a net $108 million charge, a 2.2% tax rate increase in 2021, associated with the disposition of the Forcepoint business and the global training and services business, and the absence of a $73 million charge, a 1.5% tax rate increase in 2021, for the revaluation of deferred taxes resulting from the increase in the U.K.

corporate tax rate to 25% enacted in 2021.

Additionally, the benefits associated with legal entity and operational reorganizations were lower in 2022 at $207 million, a 3.4% tax benefit in 2022, and $244 million, a 4.8% tax benefit, in 2021.

The 2021 effective tax rate also includes higher net state income taxes as compared to 2022.

The higher 2024 effective tax rate compared to 2023 is primarily driven by the $2.9 billion Powder Metal Matter pre-tax charge and the associated tax benefit of $663 million recorded in 2023.

The 2024 effective tax rate includes $224 million of tax expense associated with the 2024 dispositions.

Also included in the 2024 effective tax rate is a $212 million tax charge related to U.S.

federal income taxes now owed by the Company resulting from a favorable non-U.S.

tax ruling Otis received in 2024.

The ruling reduces U.S.

foreign tax credits previously claimed by the Company in pre-separation tax years.

The Company also recognized a $56 million tax benefit in response to favorable U.S.

Tax Court rulings issued to unrelated taxpayers, but with similar facts as ours.

Both of these items are subject to a tax matters agreement entered into with Carrier and Otis in connection with the separations of those businesses in 2020.

Accordingly, the Company recorded a pre-tax benefit of $212 million for a portion of the indemnity owed by Otis to the Company for the reduction in foreign taxes in the pre-separation years and a pre-tax charge of $32 million for the indemnified amounts payable to Carrier and Otis associated with the $56 million tax benefit.

The Company will record the remaining amounts owed by Otis to the Company related to Otis’ non-U.S.

ruling upon receipt of the amounts from Otis.

Additionally, the Company is indemnified by Otis for the associated interest related to the Otis non-U.S.

The items above are partially offset by a $275 million tax benefit resulting from the conclusion of the examination phases of the U.S.

federal income tax audits for RTX 2017 and 2018 tax years and Rockwell Collins 2016, 2017, and 2018 tax years, as well as, a $138 million deferred tax benefit associated with legal entity reorganizations.

The lower 2023 effective tax rate compared to 2022 is primarily driven by a favorable impact related to the $2.9 billion charge for the Powder Metal Matter and the associated tax benefit of $663 million, and the absence of a $207 million tax benefit recorded in 2022 related to legal entity and operational reorganizations.

For additional discussion of income taxes and the effective income tax rate, see “Income Taxes” within Critical Accounting Estimates below, and “Note 12:

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Net income from continuing operations attributable to common shareowners for 2024 includes the following:

• charge associated with the Powder Metal Matter of $2.2 billion, net of tax and partner share, which had an unfavorable impact on diluted EPS from continuing operations of $1.55;

• acquisition accounting adjustments of $1.6 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $1.20;

• restructuring charges of $193 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.13;

• 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 from continuing operations of $0.08.

• a charge related to the Resolution of Certain Legal Matters of $0.9 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.65;

• a charge of $0.4 billion, net of tax, related to the Raytheon Contract Termination, which had an unfavorable impact on diluted EPS from continuing operations of $0.33;

• benefit recognized as a result of the conclusion of the examination phases of the RTX and Rockwell Collins tax audits of $0.3 billion, net of tax, which had a favorable impact on diluted EPS from continuing operations of $0.21;

• a gain on sale of the CIS business, net of transaction and other related costs, of $0.2 billion, net of tax, which had a favorable impact on diluted EPS from continuing operations of $0.18;

• charges related to initiating alternative titanium sources at our Collins segment of $0.2 billion, which had an unfavorable impact on diluted EPS from continuing operations of $0.13;

• restructuring charges of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.12;

• a charge of $0.1 billion, net of tax, related to a customer bankruptcy, which had an unfavorable impact on diluted EPS from continuing operations of $0.09;

• a charge of $0.1 billion, net of tax, related to impairment of contract fulfillment costs in the fourth quarter of 2024, due to a contract cancellation at our Collins segment, which had an unfavorable impact on diluted EPS from continuing operations of $0.09.

Net income from continuing operations attributable to common shareowners for 2023 includes the following:

• charge associated with the Powder Metal Matter of $2.2 billion, net of tax and partner share, which had an unfavorable impact on diluted EPS from continuing operations of $1.55;

• acquisition accounting adjustments of $1.6 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $1.09;

• impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of $210 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.14;

• combined charges associated with disposition of businesses at Collins and Raytheon of $102 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.07;

• restructuring charges of $91 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.06.

• restructuring charges of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.13;

• charges related to a customer insolvency of $0.1 billion, net of tax and noncontrolling interest, which had an unfavorable impact on diluted EPS from continuing operations of $0.08.

Net income from continuing operations attributable to common shareowners for 2022 includes the following:

• acquisition accounting adjustments primarily related to the Raytheon merger of $1.7 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $1.13;

• net debt extinguishment costs of $524 million, net of tax, in connection with the early repayment of outstanding principal, which had an unfavorable impact on diluted EPS from continuing operations of $0.35;

• tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter 2021, which had a favorable impact on diluted EPS from continuing operations of $0.16;

• tax expense of $148 million related to the sale of our Forcepoint business in the first quarter of 2021, which had an unfavorable impact on diluted EPS from continuing operations of $0.10, and the subsequent revaluation of that tax benefit of $104 million in the fourth quarter of 2021, due to the completion of the divestiture of Raytheon’s global training and services business for a gain, which had a favorable impact on diluted EPS from continuing operations of $0.07;

• accrual of $147 million related to the ongoing DOJ investigation into contract pricing matters at Raytheon, which had an unfavorable impact on diluted EPS from continuing operations of $0.10;

• restructuring charges of $121 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.08;

• gain on the sale of our global training and services business within our Raytheon segment of $126 million, net of tax, which had a favorable impact on diluted EPS from continuing operations of $0.08.

• acquisition accounting adjustments of $1.5 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.99;

• impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.14;

• combined charges associated with disposition of businesses at Collins and Raytheon of $0.1 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.07;

• restructuring charges of $0.1 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.06.

Net Income Attributable to Common Shareowners

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Diluted earnings per share from operations $ 3.55 $ 2.23 $ 3.50

The changes in Net income attributable to common shareowners and diluted EPS from operations for 2023 compared to 2022 and for 2022 compared to 2021 were driven by the changes in continuing operations, as discussed above in Net Income from Continuing Operations Attributable to Common Shareowners.

The changes in Net income attributable to common shareowners and diluted EPS from operations for 2024 compared to 2023 and for 2023 compared to 2022 were driven by the changes in continuing operations, as discussed above.

SEGMENT REVIEW

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

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

All segment information is reflective of this new structure and prior period information has been recast to conform to our current period presentation.

For a detailed description of our businesses, see “Business Segments” within Item 1 of this Form 10-K.

For a detailed description of our businesses, see “Business Segments” within Item 1.

“Business” of this Form 10-K.

Segments are generally based on the management structure of the businesses and the grouping of similar operations, based on capabilities and technologies, where each management organization has general operating autonomy over diversified products and services.

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

In connection with the segment realignment, prior period results were recast in order to maintain the segment cost recognition patterns described above.

Given the nature of our business, we believe that Total net sales and Operating profit (loss) (and the related operating profit (loss) 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.

We provide the organic change in Net sales and Operating profit (loss) for our segments as discussed above in “Results of Operations.” We believe that these 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.

For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada due to its significance to Pratt & Whitney’s overall operating results.

Total Net Sales.

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

(2) 2022 and 2021 included the net expenses related to the U.S.

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

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

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

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

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for additional information.

Included in segment Operating profit (loss) 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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Given that we have thousands of individual contracts, and given the types and complexity of the assumptions and estimates we must make on an on-going basis and the nature of the work required to be performed under our contracts, we have both favorable and unfavorable EAC adjustments in the ordinary course.

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

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

(dollars in millions) 2024 2023 2022

Gross favorable $ 1,169 $ 1,368 $ 1,286

Gross unfavorable (1,817) (1,405) (1,176)

Total net EAC adjustments $ (648) $ (37) $ 110

The change in net EAC adjustments of $611 million in 2023 compared 2022 was primarily due to unfavorable changes in net EAC adjustments at Pratt & Whitney and to a lesser extent at Collins and Raytheon.

Included in the change at Pratt & Whitney was the unfavorable impact of $133 million recorded in the third quarter of 2023 as a result of increased cost to our aftermarket contracts resulting from the Powder Metal Matter and an unfavorable impact of approximately $60 million recorded in the fourth quarter of 2023 as a result of increased cost on a military program.

Net EAC adjustments $ (473) $ (648) $ (37)

The change in net EAC adjustments of $0.2 billion in 2024 compared to 2023 was primarily due to favorable changes in net EAC adjustments at Pratt & Whitney and Raytheon, partially offset by unfavorable changes in net EAC adjustments at Collins.

The change at Pratt was primarily driven by the absence of a $0.1 billion unfavorable impact recorded in the third quarter of 2023 as a result of increased cost to our aftermarket contracts resulting from the Powder Metal Matter.

The change at Collins was spread across numerous individual programs, with no individual or common significant driver.

The change at Raytheon was primarily due to improvement in net EAC adjustments related to certain fixed price development contracts.

In addition to the amounts included in the table above, during the fourth quarter of 2024, as a result of obtaining critical licenses and further regulatory approvals, we restarted work under certain contracts with a Middle East customer and began recognizing revenue on these contracts.

As a result, Raytheon recognized a net operating profit benefit of $0.1 billion primarily related to reserve and contract loss provision adjustments.

Additionally, during the second quarter of 2024, Raytheon initiated the termination of a fixed price development contract with a foreign customer (Raytheon Contract Termination) and recognized a $0.6 billion charge related to the impact of the termination.

The charge included the write-off of remaining contract assets and the estimated settlement with the customer.

The contract termination was completed and customer settlement occurred during the fourth quarter of 2024, in line with previously accrued amounts.

The change in net EAC adjustments of $0.6 billion in 2023 compared to 2022 was primarily due to unfavorable changes in net EAC adjustments at Pratt & Whitney and to a lesser extent at Collins and Raytheon.

Included in the change at Pratt & Whitney was the unfavorable impact of $0.1 billion recorded in the third quarter of 2023 as a result of increased cost to our aftermarket contracts resulting from the Powder Metal Matter and an unfavorable impact of approximately $60 million recorded in the fourth quarter of 2023 as a result of increased cost on a military program.

The change in net EAC adjustments at Pratt & Whitney also includes the absence of a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.

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The change at Raytheon was primarily due to unfavorable changes in net EAC adjustments related to certain fixed price development contracts and $51 million of unfavorable EAC adjustments related to significant contract options exercised in 2023.

The change in net EAC adjustments of $147 million in 2022 compared 2021 was primarily due to unfavorable changes in net EAC adjustments at Raytheon, including the impact of acquisitions and dispositions, spread across numerous individual programs, with no individual or common significant driver, and includes the impact of continued supply chain and labor market constraints.

This unfavorable change was partially offset by a favorable change in net EAC adjustments at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments at Pratt & Whitney primarily due to a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.

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

Backlog and Defense Bookings.

Backlog and Bookings.

Total backlog was approximately $218 billion and $196 billion as of December 31, 2024 and 2023, respectively.

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Total backlog $ 218 $ 196

Included in total backlog is defense backlog of $78 billion and $69 billion as of December 31, 2023 and 2022, respectively.

Total backlog includes commercial backlog of $125 billion and $118 billion as of December 31, 2024 and 2023, respectively, and defense backlog of $93 billion and $78 billion as of December 31, 2024 and 2023, respectively.

Backlog, which is equivalent to our RPO for our sales contracts, represents the aggregate dollar value of firm orders for which products have not been provided or service has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., IDIQ type contracts).

Backlog generally increases with bookings and/or orders and generally decreases as sales are recognized on these bookings and is affected by changes in foreign exchange rates, as well as contract cancellations and terminations, and cost underruns on cost-type contracts as discussed further below.

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 segments.

Defense bookings were approximately $61 billion, $51 billion, and $47 billion for 2024, 2023, and 2022 respectively.

Backlog generally increases with bookings and/or orders and

generally decreases as sales are recognized on these bookings and is affected by changes in foreign exchange rates, as well as contract cancellations and terminations, and cost underruns on cost-type contracts as discussed further below.

We believe defense bookings are an important measure of future performance for our defense operations and are an indicator of potential future changes in these operations’ Total net sales, because we cannot recognize revenues under a new contract without first having a booking in the current or a preceding period.

Defense bookings generally represent the dollar value of new external defense contracts awarded to us during the reporting period and include firm orders for which funding has not been appropriated.

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2024 Compared with 2023

The organic sales increase of $3.2 billion in 2023 compared to 2022 primarily relates to higher commercial aerospace aftermarket sales of $2.1 billion, including increases across all aftermarket sales channels.

These increases were principally driven by the continued recovery of commercial air traffic which has resulted in an increase in flight hours.

The organic net sales increase of $2.1 billion in 2024 compared to 2023 primarily relates to higher commercial aerospace aftermarket sales of $1.2 billion, higher defense sales of $0.8 billion, and higher commercial aerospace OEM sales of $0.1 billion.

The increase in commercial aerospace sales was principally driven by continued growth in commercial air traffic, which has resulted in an increase in flight hours and increased OEM volume primarily within wide-body and regional aircraft, partially offset by decreased OEM volume in narrow-body aircraft.

The defense sales increase was primarily due to higher volume across multiple programs and platforms.

The organic operating profit increase of $0.6 billion in 2024 compared to 2023 was primarily due to higher commercial aerospace operating profit of $0.4 billion, principally driven by the higher aftermarket sales volume discussed above, partially offset by unfavorable OEM mix.

Defense operating profit increased $0.3 billion 2024 compared to 2023 due to the higher volume discussed above, partially offset by higher space program costs.

The above increases were partially offset by $0.1 billion of higher research and development costs.

The decrease in Other operating profit of $0.3 billion in 2024 compared to 2023 was primarily driven by $0.2 billion of charges in the first quarter of 2024, 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, $0.2 billion impairment of contract fulfillment costs in the fourth quarter of 2024 due to a contract cancellation, and the absence of net favorable customer settlements recorded in 2023.

These decreases in Other operating profit were partially offset by a $0.1 billion net gain on the sale of the Goodrich Hoist & Winch business in the fourth quarter of 2024.

Restructuring actions relate to ongoing cost reduction efforts driven by various workforce reductions.

2023 Compared with 2022

The organic net sales increase of $3.2 billion in 2023 compared to 2022 primarily relates to higher commercial aerospace aftermarket sales of $2.1 billion, including increases across all aftermarket sales channels.

These increases were principally driven by the continued recovery of commercial air traffic which resulted in an increase in flight hours.

Commercial aerospace OEM sales increased $1.1 billion due to increased production rates in narrow-body, wide-body, and business jets.

Military sales were relatively consistent in 2023 compared to 2022.

The increase in Other net sales of $0.1 billion in 2023 compared to 2022 was primarily due to net favorable customer settlements in 2023, including a $112 million favorable customer settlement recorded in the fourth quarter of 2023, partially offset by a $57 million charge related to a customer litigation matter recorded in the third quarter 2023.

The increase in Other net sales of $0.1 billion in 2023 compared to 2022 was primarily due to net favorable customer settlements in 2023, including a $0.1 billion favorable customer settlement recorded in the fourth quarter of 2023, partially offset by a $0.1 billion charge related to a customer litigation matter recorded in the third quarter 2023.

The organic operating profit increase of $0.9 billion in 2023 compared to 2022 was primarily due to higher commercial aftermarket volume and favorable mix, partially offset by lower commercial aerospace OEM as drop through on volume was more than offset by higher production costs.

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Military operating profit decreased $0.1 billion primarily due to unfavorable mix and higher production costs.

The increase in Other operating profit of $0.2 billion in 2023 compared to 2022 was primarily due to the absence of $141 million of pretax charges related to global sanctions and export controls with respect to Russia recorded in 2022, the absence of $69 million of charges associated with the disposition of two non-core businesses in 2022, and the net favorable customer

settlements discussed above.

The above items were partially offset by $62 million of divestiture costs related to the pending sale of our actuation and flight control business.

Acquisitions and Dispositions” within Item 8 of this Form 10-K for further discussion on business dispositions.

Restructuring actions relate to ongoing cost reduction efforts driven by various workforce reductions.

2022 Compared with 2021

The organic sales increase of $2.1 billion in 2022 compared to 2021 primarily relates to higher commercial aerospace aftermarket sales of $1.7 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of $1.0 billion, both principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization, and narrow-body commercial OEM volume growth.

These increases were partially offset by lower military sales of $0.6 billion in 2022 compared to 2021, primarily due to lower material receipts and decreased volume.

The organic operating profit increase of $0.6 billion in 2022 compared to 2021 was primarily due to higher commercial aerospace operating profit of $1.2 billion, principally driven by the higher commercial aerospace aftermarket sales discussed above, partially offset by the absence of a favorable $52 million impact from a contract-related matter in 2021.

The increase in commercial aerospace operating profit was partially offset by lower military operating profit of $0.4 billion, principally driven by the lower military sales discussed above, and higher selling, general, and administrative expenses of $0.2 billion, which includes the benefits of cost reduction initiatives.

The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the disposition of two non-core businesses in the second quarter of 2022.

The decrease in Other operating profit of $0.1 billion in 2022 compared to 2021 primarily relates to $141 million of pretax charges recorded in the first quarter of 2022 related to increased estimates for credit losses, inventory reserves, recognition of purchase order obligations, and a loss resulting from the exit of our investment in a Russia-based joint venture, all due to global sanctions on and export controls with respect to Russia.

In addition, we recognized $69 million of charges associated with the disposition of two non-core businesses in the second quarter of 2022.

The increase in Other operating profit of $0.2 billion in 2023 compared to 2022 was primarily due to the absence of $0.1 billion of pre-tax charges related to global sanctions and export controls with respect to Russia recorded in 2022, the absence of $0.1 billion of charges associated with the disposition of two non-core businesses in 2022, and the net favorable customer settlements discussed above.

The above items were partially offset by $0.1 billion of divestiture costs related to the pending sale of our actuation and flight control business.

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for additional information on Russia sanctions.

Acquisitions and Dispositions” within Item 8 of this Form 10-K for further discussion on business dispositions.

Defense Bookings – In addition to a number of smaller bookings in 2024, Collins booked $2.2 billion to support the U.S.

Air Force’s next-generation Survivable Airborne Operations Center, $470 million for Federal Aviation Administration (FAA) air traffic control automation system sustainment, and $391 million for F-35 landing gear Lots 18, 19, and 20.

Pratt & Whitney

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Net sales $ 28,066 $ 18,296 $ 20,530 53 % (11) %

Operating profit (loss) (1,455) 1,075 454 (235) % 137 %

Operating profit (loss) 2,015 (1,455) 1,075 NM (235) %

Operating profit (loss) margins 7.2 % (8.0) % 5.2 %

NM = Not meaningful

2024 Compared with 2023

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2024 Compared with 2023

The organic sales increase of $3.1 billion in 2023 compared to 2022 primarily reflects higher commercial aftermarket sales of $1.9 billion, primarily due to an increase in volume, content, and favorable mix as the commercial aerospace environment continues to recover.

The organic net sales increase of $4.4 billion in 2024 compared to 2023 primarily reflects higher commercial OEM sales of $1.7 billion primarily driven by favorable mix on higher volume and higher commercial aftermarket sales of $1.6 billion primarily driven by higher volume.

Military sales increased $1.1 billion, primarily due to higher sustainment and production volume across multiple platforms.

The Other net sales increase of $5.4 billion in 2024 compared to 2023 primarily relates to the absence of a charge recognized in the third quarter of 2023 related to the Powder Metal Matter.

The organic operating profit increase of $0.6 billion in 2024 compared to 2023 reflects higher commercial aerospace operating profit of $0.4 billion driven by favorable mix on higher large commercial OEM volume which was partially offset by higher OEM production costs.

Commercial aerospace operating profit also benefited from higher commercial aftermarket volume, which was partially offset by the impact of a shift in aftermarket mix towards higher GTF volume as well as two favorable contract matters in 2023 totaling $0.1 billion that did not repeat in 2024.

The increase in military operating profit of $0.2 billion was driven by the increases from the sales volume discussed above, as well as favorable sustainment mix, partially offset by higher production costs.

Military operating profit also benefited from the absence of an unfavorable EAC adjustment of approximately $60 million in the fourth quarter of 2023, which was partially offset by an unfavorable EAC adjustment of approximately $50 million in the fourth quarter of 2024.

Higher research and development expenses and selling, general, and administrative expenses were partially offset by an insurance recovery of approximately $0.1 billion in the fourth quarter of 2024.

The change in Other operating profit (loss) of $2.9 billion in 2024 compared to 2023 reflects the absence of a charge recognized in the third quarter of 2023 related to the Powder Metal Matter of $2.9 billion and a $0.2 billion charge related to a customer insolvency in the second quarter of 2023, partially offset by a $0.2 billion charge related to a customer bankruptcy in the fourth quarter of 2024.

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

2023 Compared with 2022

The organic net sales increase of $3.1 billion in 2023 compared to 2022 primarily reflects higher commercial aftermarket sales of $1.9 billion, primarily due to an increase in volume, content, and favorable mix.

The increase also includes higher commercial OEM sales of $0.9 billion, primarily driven by higher volume and favorable mix.

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The organic operating profit increase of $0.4 billion in 2023 compared to 2022 was primarily driven by higher commercial aerospace operating profit of $0.6 billion, principally due to the aftermarket sales increase discussed above, partially offset by lower commercial OEM operating profit as the OEM volume increase combined with higher production costs more than offset the benefit from favorable mix.

Commercial aerospace operating profit in 2023 also benefited from two favorable contract matters totaling approximately $120 million, which was partially offset by the absence of a prior year $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket contract.

Commercial aerospace operating profit in 2023 also benefited from two favorable contract matters totaling $0.1 billion, which was partially offset by the absence of a prior year $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket contract.

Military operating profit was relatively consistent compared to 2022.

The increase from the military sales volume was more than offset by higher production costs and an unfavorable EAC adjustment of approximately $60 million in the fourth quarter of 2023.

The increase from the military sales volume was more than offset by higher production costs and an unfavorable EAC adjustment of $0.1 billion in the fourth quarter of 2023.

Higher research and development expenses were partially offset by lower selling, general, and administrative expenses.

The change in Other operating profit (loss) of $2.9 billion in 2023 compared to 2022 was primarily due to the charge recognized in the third quarter of 2023 related to the Powder Metal Matter of $2.9 billion and a $181 million charge related to a customer insolvency during the second quarter of 2023, partially offset by the absence of $155 million of pretax charges recorded in the first quarter of 2022 related to global sanctions on and export controls with respect to Russia.

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for additional information on Russia sanctions.

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

2022 Compared with 2021

The organic sales increase of $2.5 billion in 2022 compared to 2021 primarily reflects higher commercial aftermarket sales of $1.8 billion primarily due to an increase in shop visits and related spare part sales as the commercial aerospace environment continues to recover.

The increase also includes higher commercial OEM sales of $0.9 billion driven by favorable mix and higher volume on commercial engine shipments.

These increases were partially offset by lower military sales of $0.2 billion primarily due to lower sales on F135 production volume and lower volume on legacy aftermarket programs, partially offset by higher F135 sustainment volume.

The organic operating profit increase of $0.8 billion in 2022 compared to 2021 was primarily driven by higher commercial aerospace operating profit of $1.1 billion principally due to the aftermarket sales volume increase and favorable OEM mix.

The organic profit increase also includes slightly higher military operating profit primarily driven by favorable mix.

These increases were partially offset by a combined increase in selling, general, and administrative expenses and research and development costs of $0.3 billion.

The year over year increase in commercial aerospace operating profit includes a $50 million favorable contract adjustment on a commercial aftermarket program in the second quarter of 2022.

In 2021, organic profit included approximately $50 million related to foreign government wage subsidies due to COVID-19.

The decrease in Other operating profit of $0.1 billion in 2022 compared to 2021 was primarily due to $155 million of pretax charges recorded in the first quarter of 2022 related to impairment of customer financing assets for products under lease, increased estimates for credit losses, inventory reserves, and recognition of purchase order obligations, all due to global sanctions on and export controls with respect to Russia.

The change in Other operating profit (loss) of $2.9 billion in 2023 compared to 2022 was primarily due to the charge recognized in the third quarter of 2023 related to the Powder Metal Matter of $2.9 billion and a $0.2 billion charge related to a customer insolvency during the second quarter of 2023, partially offset by the absence of $0.2 billion of pre-tax charges recorded in the first quarter of 2022 related to global sanctions on and export controls with respect to Russia.

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for additional information on Russia sanctions.

Defense Bookings – In addition to a number of smaller bookings, in 2023 Pratt & Whitney booked $2.5 billion for F135 production, $2.2 billion for F135 sustainment, $1.7 billion for F117 sustainment, $751 million for F119 sustainment, $355

million for F100 sustainment, $232 million for the prototype phase of the Next Generation Adaptive Propulsion (NGAP) program, and $217 million for tanker production Lots 8 and 9.

Defense Bookings – In addition to a number of smaller bookings, in 2024 Pratt & Whitney booked $2.3 billion for F117 sustainment, $2.2 billion for F135 sustainment, $1.5 billion for F135 ECU development, $729 million for F135 production, and $475 million for F119 sustainment.

(dollars in millions) 2024 2023 2022 2024 compared with 2023 2023 compared with 2022

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Operating profit margins 9.7 % 9.0 % 9.7 %

Bookings $ 31,889 $ 30,479 $ 27,246 5 % 12 %

Defense Bookings $ 39,235 $ 31,889 $ 30,479 23 % 5 %

2024 Compared with 2023

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2024 Compared with 2023

The organic sales increase of $1.3 billion in 2023 compared to 2022 was primarily due to higher net sales of $0.5 billion from advanced technology programs, $0.3 billion from naval power programs, $0.3 billion from air power programs, and $0.2 billion from cybersecurity, intelligence and services programs.

The organic net sales increase of $1.7 billion in 2024 compared to 2023 was primarily due to higher net sales of $1.4 billion from land and air defense systems programs driven by higher net sales on certain international Patriot programs, certain international National Advanced Surface-to-Air Missile System (NASAMS) programs, and Counter-Unmanned Aircraft Systems (C-UAS) programs.

Also contributing to the increase was higher net sales of $0.4 billion from advanced technology programs primarily driven by higher volume on classified programs and on a development program.

Additionally, the organic net sales increase includes $0.3 billion of sales associated with the restart of certain contracts with a Middle East customer.

These increases were partially offset by lower net sales of $0.5 billion from air and space defense systems programs primarily due to the completion of certain programs, and the timing of a prior year program award.

The decrease in Other net sales in 2024 compared to 2023 was primarily driven by $0.1 billion related to the Raytheon Contract Termination initiated in the second quarter of 2024.

The organic operating profit increase of $0.4 billion in 2024 compared to 2023 was primarily due to higher volume of $0.2 billion primarily driven by the net sales increases noted above and an improvement in net EAC adjustments of $0.2 billion.

The change in net EAC adjustments was primarily due to improvement in net EAC adjustments related to certain fixed price development contracts.

Included in the change in net EAC adjustments was a benefit from the absence of a $51 million unfavorable adjustment in 2023 related to significant contract options exercised, which was offset by a $53 million unfavorable EAC adjustment in the third quarter of 2024 related to cost increases on a classified program.

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

The decrease in Other operating profit in 2024 compared to 2023 was primarily driven by $0.6 billion related to the Raytheon Contract Termination initiated in the second quarter of 2024, partially offset by a $0.4 billion gain on the sale of the CIS business in the first quarter of 2024, and a $0.1 billion net benefit primarily related to reserve and contract loss provision adjustments recognized in the fourth quarter of 2024 as a result of restarting work under certain contracts with a Middle East customer.

2023 Compared with 2022

The organic net sales increase of $1.3 billion in 2023 compared to 2022 was primarily due to higher net sales of $0.5 billion from advanced technology programs, $0.3 billion from air and space defense systems programs, $0.2 billion from cybersecurity, intelligence and services programs, and $0.2 billion from naval power programs.

The increase in advanced technology programs includes higher net sales on an advanced development program awarded in the third quarter of 2022, and higher net sales on certain classified programs awarded in 2022.

The increase in naval power programs was due to higher volumes on Naval Strike Missile (NSM) and AIM-9X programs.

The increase in air power programs includes higher net sales on the StormBreaker program, driven by awards in the first and fourth quarters of 2023 and higher net sales on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program, driven by an award in the second quarter of 2023.

The increase in air and space defense systems programs includes higher net sales on the StormBreaker program, driven by awards in the first and fourth quarters of 2023 and higher net sales on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program, driven by an award in the second quarter of 2023.

The increase in cybersecurity, intelligence and services programs was driven by certain classified programs as well as federal and civil programs.

The increase in naval power programs was due to higher volumes on Naval Strike Missile and AIM-9X programs.

The organic operating profit decrease of $0.1 billion in 2023 compared to 2022 was primarily due to an unfavorable change in mix and other performance of $0.1 billion, and an unfavorable net change in EAC adjustments of $0.1 billion, partially offset by higher volume of $0.2 billion.

The unfavorable change in mix and other performance was primarily driven by an expected decline in certain higher margin international programs and higher volume on various lower margin programs including early production phase programs.

The net change in EAC adjustments was primarily due to unfavorable changes in net EAC adjustments related to certain fixed price development contracts and $51 million of unfavorable EAC adjustments related to significant contract options exercised in 2023.

The net change in EAC adjustments was primarily due to unfavorable changes in net EAC adjustments related to certain fixed price development contracts and approximately $50 million of unfavorable EAC adjustments related to significant contract options exercised in 2023.

The increase in volume was principally driven by the higher net sales discussed above.

The increase in Other operating profit in 2023 compared to 2022 was primarily driven by the absence of a $42 million charge in 2022 associated with a divestiture of a small non-core naval power business, with the remaining change spread across multiple items.

The decrease in net sales due to acquisitions / divestitures, net in 2023 compared to 2022 primarily relates to the divestiture of a small non-core naval power business in the fourth quarter of 2022.

The decrease in net sales due to acquisitions / divestitures, net in 2023 compared to 2022 primarily relates to the divestiture of a small non-core naval power business in the first quarter of 2023.

Restructuring actions relate to ongoing cost reduction efforts including workforce reductions.

2022 Compared with 2021

The organic sales decrease of $0.7 billion in 2022 compared to 2021 was primarily due to lower net sales of $0.6 billion from our land warfare and air defense programs and lower net sales of $0.2 billion from our air power programs, partially offset by higher net sales of $0.3 billion from our strategic missile defense programs.

The decrease in land warfare and air defense programs was primarily due to lower sales on certain international air and missile defense programs primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production.

The decrease in air power programs included lower net sales on Paveway programs and AMRAAM programs.

The increase in strategic missile defense programs included higher net sales from the Next Generation Interceptor (NGI) program.

The organic operating profit decrease of $0.5 billion in 2022 compared to 2021 was primarily due to an unfavorable change in mix and other performance of $0.3 billion, due to unfavorable program mix, and an unfavorable net change in EAC adjustments of $0.3 billion.

The net unfavorable change in EAC adjustments was driven by numerous programs and included the impact of continued supply chain and labor market constraints.

The decrease in Other operating profit in 2022 compared to 2021 was primarily driven by a $239 million gain, net of transaction costs, in 2021 on the sale of the global training and services business, as further discussed in “Note 2:

Acquisitions and Dispositions” within Item 8 of this Form 10-K, and a $42 million charge in 2022 associated with a divestiture of a small non-core naval power business.

The decrease in net sales and operating profit due to acquisitions / divestitures, net in 2022 compared to 2021 primarily relates to the sale of the global training and services business in the fourth quarter of 2021.

Backlog and Bookings – Backlog was $52 billion at December 31, 2023 compared to $47 billion at December 31, 2022.

In addition to a number of smaller bookings, in 2023, Raytheon booked $7.8 billion on a number of classified contracts, $2.8 billion to provide Guidance Enhanced Missiles (GEM-T) for NATO Support and Procurement Agency (NSPA), $1.2 billion for AMRAAM for the U.S.

Air Force and Navy and international customers, $1.2 billion to provide Patriot Air Defense systems to Switzerland, $663 million on StormBreaker for the U.S.

Air Force and Navy, $650 million on Next Generation Jammer Mid-Band (NGJ-MB) for the U.S.

Navy and the government of Australia, $619 million on the SPY-6 Hardware Production and Sustainment contract for the U.S.

Navy, $489 million on Excalibur for the U.S.

Army and international customers, $412 million on Next Generation Short Range Interceptor (NGSRI) for the U.S.

Army, $408 million for Hypersonic Attack Cruise Missile (HACM) for the U.S.

Air Force, $383 million to provide training and technical support for HAWK and Patriot Air Defense Systems for an international customer, $368 million for Tube-Launched, Optically-Tracked, Wireless-Guided (TOW) Missiles for the U.S.

Marine Corps, and international customers, $332 million on cyber defense services contracts for certain federal and civil customers, $321 million for Silent Knight radars to U.S.

Special Operations Command (USSOCOM), $297 million to provide National Advanced Surface-to-Air Missile System (NASAMS) to Ukraine, $266 million to deliver airborne radars to an international customer, $265 million for Javelin for the U.S.

Army and international customers, $251 million for AIM-9X Sidewinder short-range air-to-air missiles for the U.S.

Navy and Air Force and international customers, $237 million for CLEAVAR, an integrated U.S.

Army Counter- Unmanned Aircraft Systems (C-UAS) defense system, $234 million on NSM for the U.S.

Navy, and $206 million for the Air and Missile Defense Radar (AMDR) program for the U.S.

Defense Backlog and Bookings – Backlog was $63 billion at December 31, 2024 compared to $52 billion at December 31, 2023.

Included in the change in backlog was a $1.1 billion reduction related to the sale of the CIS business and a $0.9 billion increase related to restarting work on certain contracts with a Middle East customer, as discussed above.

In addition to a number of smaller bookings, in 2024, Raytheon booked $2.4 billion to provide Patriot Air Defense systems to Germany, $1.9 billion for low-rate initial production of LTAMDS for the U.S.

Army and Poland, $1.6 billion to provide Standard Missile 3 (SM-3) to the U.S.

Navy and international customers, $1.4 billion to provide Guidance Enhanced Missiles (GEM-T) for NATO Support and Procurement Agency (NSPA), $1.2 billion to provide AMRAAM to the U.S.

Air Force and international customers, $1.0 billion to provide Evolved SeaSparrow Missile (ESSM) for the U.S.

Navy and international consortium partners, $848 million to provide Patriot Air Defense systems, including GEM-T missiles, to Romania, $763 million to provide Stinger missiles to NSPA and Poland, $737 million to provide AIM-9X Sidewinder short-range air-to-air missiles for the U.S.

Air Force, and international customers, $639 million to produce AN/SPY-6(V) radars for the U.S.

Navy, $623 million to provide GEM-T for an international customer, $591 million for Next Generation Jammer Mid-Band (NGJ-MB) for the U.S.

Navy and the Royal Australian Air Force, $538 million to provide Javelin for the U.S.

Army and international customers, $530 million to provide Patriot launchers for Poland, $479 million to provide GEM-T for an international customer, $473 million for an Advanced Tactical Electro-Optical Infrared (EO/IR) system for the U.S.

Air Force, $453 million to provide GEM-T for an international customer, $393 million to design and build the Landsat Next Instrument Suite (LandIS) for NASA, $333 million to provide Standard Missile 6 (SM-6) for the U.S.

Navy, $301 million to provide Tomahawk to the U.S.

Navy and international customers, $282 million to provide Stormbreaker to the U.S.

Air Force, $282 million to provide NASAMS for Ukraine, $272 million for Standard Missile II (SM-2) provisioned items and ordered spares for the U.S.

Navy, $251 million to provide GEM-T for an international customer, and $5.7 billion on a number of classified contracts.

Corporate and Eliminations and other

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Corporate expenses and other unallocated items consists of costs not considered part of management’s evaluation of reportable segment operating performance, including certain unallowable costs and reserves.

In addition, in 2022 and 2021, net costs associated with corporate research and development related to the LTAMDS program were included in Corporate expenses and other unallocated items.

Beginning in 2023, the remaining net costs associated with the LTAMDS program are within the Raytheon segment.

In addition, in 2022, net costs associated with corporate research and development related to the LTAMDS program were included in Corporate expenses and other unallocated items.

Beginning in 2023, the remaining net costs associated with the LTAMDS program are reflected within the Raytheon segment.

Net Sales Operating Profit

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Corporate expenses and other unallocated items — — — (933) (275) (318)

The increase in eliminations and other net sales of $295 million in 2023 compared to 2022 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

The increase in eliminations and other net sales of $0.3 billion in 2024 compared to 2023 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Eliminations and other operating profit in 2024 was relatively consistent with 2023.

The increase in eliminations and other net sales of $159 million in 2022 compared to 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

The increase in eliminations and other net sales of $0.3 billion in 2023 compared to 2022 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Eliminations and other operating profit in 2023 was relatively consistent with 2022.

The change in corporate expenses and other unallocated items of $43 million in 2023 compared to 2022 was primarily due to a decrease in expenses related to the LTAMDS program, which are included in the Raytheon segment beginning in 2023, partially offset by an increase in costs related to the segment realignment, with the remaining change spread across multiple items.

The change in corporate expenses and other unallocated items of $234 million in 2022 compared to 2021 was primarily driven by an accrual of $147 million in the fourth quarter of 2021 related to the ongoing DOJ investigation into contract pricing matters at Raytheon, a decrease in expenses related to the LTAMDS program and lower restructuring costs, partially offset by an increase in information technology-related costs.

The change in corporate expenses and other unallocated items of $0.7 billion in 2024 compared to 2023 was primarily due to a $0.9 billion charge related to the Resolution of Certain Legal Matters recorded in the second quarter of 2024, partially offset by a $0.2 billion benefit from a tax related indemnity receivable recorded in the third quarter of 2024.

The change in corporate expenses and other unallocated items of $43 million in 2023 compared to 2022 was primarily due to a decrease in expenses related to the LTAMDS program, which are included in the Raytheon segment beginning in 2023, partially offset by an increase in costs related to our segment realignment in 2023, with the remaining change spread across multiple items.

FAS/CAS operating adjustment

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The segment results of Collins and Pratt & Whitney generally include FAS service cost.

In connection with the segment realignment, prior period results were recast in order to maintain the segment cost recognition patterns described above.

The CAS expense calculation is different from the FAS requirements and calculation methodology.

8 unchanged sentences

FAS/CAS operating adjustment $ 833 $ 1,127 $ 1,399

The change in our FAS/CAS operating adjustment of $272 million in 2023 compared to 2022 was driven by a $463 million decrease in CAS expense, partially offset by a $191 million decrease in FAS service cost.

The change in our FAS/CAS operating adjustment of $0.3 billion in 2024 compared to 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 $0.3 billion in 2023 compared to 2022 was driven by a $0.5 billion decrease in CAS expense, partially offset by a $0.2 billion decrease in FAS service cost.

The decrease in CAS expense was primarily due to changes to the Raytheon Company domestic pension plans announced in December 2020 that were effective December 31, 2022, and the recognition of historical CAS gain/loss experience.

2 unchanged sentences

Employee Benefit Plans” within Item 8 of this Form 10-K for additional information on the Raytheon Company domestic pension plan change.

The change in our FAS/CAS operating adjustment of $255 million in 2022 compared to 2021 was driven by a $292 million decrease in CAS expense, partially offset by a $37 million decrease in FAS service cost.

The decrease in CAS expense was primarily due to an increase in applicable discount rates as a result of U.S.

qualified pension plan funding relief included in the American Rescue Plan Act of 2021 (ARPA).

Acquisition accounting adjustments

12 unchanged sentences

Raytheon (913) (857) (785)

Total segment (1,998) (1,893) (2,202)

Eliminations and other — — (1)

Acquisition accounting adjustments $ (2,058) $ (1,998) $ (1,893)

Acquisition accounting adjustments in 2023 were relatively consistent with 2022.

The change in the Acquisition accounting adjustments of $0.3 billion in 2022 compared to 2021, is primarily driven by a decrease in Raytheon intangibles amortization related to the Raytheon merger, partially offset by $116 million of amortization of customer contractual obligations due to the accelerated liquidation of below-market contract reserves at Collins in 2021 driven by the termination of two customer contracts.

Acquisition accounting adjustments in 2024 and 2023 were relatively consistent with 2023 and 2022, respectively.

LIQUIDITY AND FINANCIAL CONDITION

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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 December 31, 2023, we had cash and cash equivalents of $6.6 billion, of which approximately 32% 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 December 31, 2024, we had cash and cash equivalents of $5.6 billion, of which 41% 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.

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Our ability to access global debt markets and the related cost of these borrowings depends on the strength of our credit rating and market conditions.

As previously disclosed, in August 2023, S&P Global downgraded our credit rating from A-/negative to BBB+/stable, and our credit rating with Moody’s Investors Service remained at Baa1/stable.

Subsequently, in October 2023, both S&P Global and Moody’s Investors Service outlook changed from stable to negative when we entered into the ASR transactions.

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

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

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

Our S&P Global credit rating remains at BBB+/negative, and our Moody’s Investors Service outlook is Baa1/negative.

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 December 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 December 31, 2024, there were no borrowings outstanding under this agreement.

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

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

In addition, at December 31, 2024, approximately $0.7 billion was available under short-term lines of credit primarily with global banks at our international subsidiaries.

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

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We had no commercial paper borrowings outstanding at December 31, 2024.

On October 24, 2023, we entered into a Bridge Loan with various banks permitting aggregate borrowings of up to $10.0 billion, to fund an ASR and pay related fees and expenses.

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

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

Date Description of Notes Aggregate Principal Balance (in millions)

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

5.750% notes due 2029 (1)

6.000% notes due 2031 (1)

6.100% notes due 2034 (1)

6.400% notes due 2054 (1)

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

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

February 27, 2023 5.000% notes due 2026 (2)

5.150% notes due 2033 (2)

5.375% notes due 2053 (2)

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

(2) The net proceeds from the issuances were used to fund repayment of the 3.650% notes due August 16, 2023 and the 3.700% notes due December 15, 2023, with the remaining proceeds used for general corporate purposes.

There were no issuances of long-term debt during 2024.

During 2024, we made the following repayments of long-term debt:

Date Description of Notes Aggregate Principal Balance (in millions)

December 24, 2024 3 Month Secured Overnight Financing Rate (SOFR) plus 1.225% Term Loan due 2025 $ 500

December 15, 2024 3.150% notes due 2024

August 16, 2023 3.650% notes due 2023

We have an existing universal shelf registration statement, which we filed with the Securities and E xchange 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.

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

We have an existing universal shelf registration statement, which we filed with the 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.

The Company offers voluntary supply chain finance (SCF) programs with global financial institutions which enables our suppliers, at their sole discretion, to sell their receivables from the Company to the financial institutions at a rate that leverages our credit rating, which might be beneficial to them.

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We believe our cash on hand and future operating cash flows will be sufficient to meet our future operating cash needs.

Further, we continue to have access to the commercial paper markets and our existing credit facilities, and our ability to obtain debt or

equity financing, as well as the availability under committed credit lines, provides additional potential sources of liquidity should they be required or appropriate.

Further, we continue to have access to the commercial paper markets and our existing credit facilities, and our ability to obtain debt or equity financing, as well as the availability under committed credit lines, provides additional potential sources of liquidity should they be required.

Cash Flow - Operating Activities

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2024 Compared with 2023 Operating Activities

Net income from continuing operations in 2023 included a $2.9 billion charge related to the Powder Metal Matter, which had no effect on cash flow in the period.

This charge also had the effect of increasing accrued liabilities by $2.8 billion in 2023.

Excluding the impact of this charge, the $0.7 billion favorable change in cash flows provided by operating activities from continuing operations in 2023 compared to 2022, is primarily driven by higher net income from continuing operations after adjustments for depreciation and amortization, deferred income tax benefit, stock compensation cost, and net periodic pension and other postretirement income.

Net income from continuing operations in 2024 included charges of $0.9 billion related to the Resolution of Certain Legal Matters and $0.4 billion related to the Raytheon Contract Termination, net of tax.

Net income from continuing operations in 2023 included a $2.2 billion charge related to the Powder Metal Matter, net of tax.

The Powder Metal Matter also had the effect of increasing Other accrued liabilities by $2.8 billion in 2023.

Utilization of Other accrued liabilities in 2024 related to this matter were $1.0 billion and represent cash paid and credits issued to customers.

During 2024, we also paid a combined $1.5 billion related to the Resolution of Certain Legal Matters and the Raytheon Contract Termination.

Additionally, a favorable impact from accounts receivable collections, including the related impact of factoring as discussed below, and a favorable change in accounts payable and other accrued liabilities driven by timing of payments and an increase in material purchases, partially offset by the net change in contract assets and contract liabilities, primarily at Pratt & Whitney, due to sales in excess of billings, contributed to an increase in net cash flows provided by operating activities from continuing operations in 2024 compared to 2023.

Excluding the charges discussed above, higher net income from continuing operations after adjustments for depreciation and amortization, deferred income tax benefit, stock compensation cost, net periodic pension and other postretirement income, and gain on sale of business also contributed to an increase in net cash flows provided by operating activities from continuing operations in 2024 compared to 2023, primarily driven by the operating performance of our segments.

The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables.

Factoring activity resulted in an increase of $0.1 billion in cash provided by operating activities from continuing operations during 2024 , compared to a decrease of $0.8 billion in cash provided by operating activities from continuing operations during 2023 .

2023 Compared with 2022 Operating Activities

Net income from continuing operations in 2023 included a $2.2 billion charge related to the Powder Metal Matter, net of tax, which had no effect on cash flow in the period.

This charge also had the effect of increasing Other accrued liabilities by $2.8 billion in 2023 .

Excluding the impact of this charge, the favorable change in cash flows provided by operating activities from continuing operations in 2023 compared to 2022 , is primarily driven by higher net income from continuing operations after adjustments for depreciation and amortization, deferred income tax benefit, stock compensation cost, and net periodic pension and other postretirement income.

Also contributing to the change in cash flows is a net favorable impact of net contract assets and liabilities due to the timing of collections, a net decrease in tax payments further discussed below, and lower inventory receipts compared to 2022.

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The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables.

Factoring activity resulted in a decrease of approximately $0.8 billion in cash provided by operating activities during 2023 , compared to an increase of approximately $2.3 billion in cash provided by operating activities during 2022 .

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

2022 Compared with 2021 Operating Activities

Cash flows provided by operating activities in 2022 were relatively consistent with 2021 and benefited from an improvement in working capital, which was more than offset by the net increase in tax payments resulting from a change in tax law discussed below.

Included in the change in working capital was a favorable impact from accounts receivable driven by higher collections resulting from increased sales volume and a related increase in factoring as discussed below.

The change in working capital also included a favorable impact from contract assets in 2022 compared to 2021 primarily due to the timing of billings and collections, and increases in accounts payable and accrued liabilities primarily driven by higher inventory receipts, deferred revenue, and advanced payments.

This impact was largely offset by an unfavorable impact from inventory principally due to increases to support sales volume growth.

Higher sales volume in 2022 supported increased factoring activity that resulted in approximately $2.3 billion of increased cash flows provided by operating activities during 2022, compared to a decrease in cash flows provided by operating activities of approximately $0.2 billion in cash provided by operating activities during 2021.

Factoring activity resulted in a decrease of $0.8 billion in cash provided by operating activities from continuing operations during 2023, compared to an increase of $2.3 billion in cash provided by operating activities from continuing operations during 2022.

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

Operating Activities

We made pension and PRB contributions to trusts of $157 million, $94 million, and $59 million in 2023, 2022, and 2021, respectively.

Included in the 2023 contribution of $157 million is a discretionary noncash contribution of $50 million made in RTX common stock to our U.S.

We made pension and PRB contributions to trusts of $0.1 billion, $0.2 billion, and $0.1 billion in 2024, 2023, and 2022, respectively.

Included in the 2023 contributions is a discretionary noncash contribution of $50 million made in RTX common stock to our U.S.

qualified pension plans.

We make both required and discretionary contributions to our pension plans.

Required contributions are primarily determined by Employee Retirement Income Security Act of 1974 (ERISA) funding rules, which require us to fully fund our U.S qualified pension plans over a rolling seven-year period as determined annually based on the Pension Protection Act of 2006 (PPA) calculated funded status at the beginning of each year.

Required contributions are primarily determined by Employee Retirement Income Security Act of 1974 (ERISA) funding rules, which require us to fully fund our U.S qualified pension plans over a rolling fifteen-year period as determined annually based on the calculated funded status at the beginning of each year per the Pension Protection Act of 2006 and subsequent amendments.

The funding requirements are primarily based on the year’s expected service cost and amortization of other previously unfunded liabilities, which are dependent upon many factors, including returns on invested assets, the level of market interest rates, and actuarial assumptions.

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qualified pension plans in RTX shares was less than 1% of total plan assets.

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

In the fourth quarter of 2024, we expanded the use of ESOP shares to fund our matching contributions to additional participants who had previously received matching contributions in cash.

We made net income tax payments of $1.2 billion, $1.5 billion, and $2.4 billion in 2024, 2023, and 2022, respectively.

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As such, we made incremental income tax payments of $1.6 billion in 2022.

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

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

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

These notices resulted in the Company making lower income tax payments in 2023 compared to 2022.

Included in cash flows from operating activities are payments related to our operating lease obligations.

Included in cash flows from operating activities from continuing operations are payments related to our operating lease obligations.

See “Note 11:

Leases” within Item 8 of this Form 10-K for actual and expected payments on operating lease obligations.

In addition, the majority of our cash flows for purchase obligations are classified as cash flows from operating activities.

In addition, the majority of our cash flows for purchase obligations are classified as cash flows from operating activities from continuing operations.

We expect future payments related to our purchase obligations to be $40.1 billion, of which $25.5 billion is payable in 2025.

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government for which we have full recourse under customary contract termination clauses.

While the timing of cash flows relating to the Powder Metal Matter are subject to a number of variables, we estimate the $2.8 billion of Other accrued liabilities, which principally relates to our 51% share of an 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 currently estimate cash outflows related to the Powder Metal Matter of approximately $1.3 billion in 2024.

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 a full year 2025 cash impact related to the Powder Metal Matter of approximately $1.1 billion to $1.3 billion, which includes the impact of cash paid, customer credits applied and the timing of partner recovery.

Cash Flow - Investing Activities

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2024 Compared with 2023 Investing Activities

The $0.2 billion change in cash flows used in investing activities in 2023 compared to 2022 primarily related to an increase in payments for intangible assets and capital expenditures, both of which are described below, partially offset by the timing of our derivative contract settlements.

The $1.5 billion change in cash flows used in investing activities from continuing operations in 2024 compared to 2023 primarily related to the cash proceeds from the sale of our CIS business within our Raytheon segment and the sale of our Goodrich Hoist & Winch business within our Collins segment of approximately $1.3 billion and $0.5 billion, respectively.

2023 Compared with 2022 Investing Activities

The $1.5 billion change in cash flows used in investing activities in 2022 compared to 2021 primarily relates to the absence of 2021 investments in and dispositions of businesses, as discussed below.

The $0.2 billion change in cash flows used in investing activities from continuing operations in 2023 compared to 2022 primarily related to an increase in payments for intangible assets discussed below and capital expenditures primarily due to investments in production facilities at Pratt & Whitney and Raytheon, partially offset by the timing of our derivative contract settlements.

Investing Activities

There were no significant acquisitions in 2024, 2023, or 2022.

Investments in businesses in 2021 of $1.1 billion primarily related to the acquisitions of FlightAware at Collins and SEAKR Engineering Inc.

For additional detail, see “Note 2:

Acquisitions and Dispositions” within Item 8 of this Form 10-K.

There were no significant dispositions of businesses in 2023 or 2022.

Dispositions of businesses in 2021 of $1.9 billion, net of cash transferred, primarily related to the sale of our Forcepoint business and the sale of our global training and services business within Raytheon.

For additional detail, see “Note 2:

For information on dispositions of businesses in 2024, 2023, or 2022, see above or “Note 2:

Acquisitions and Dispositions” within Item 8 of this Form 10-K.

Capital expenditures were $2.4 billion, $2.3 billion, and $2.1 billion in 2023, 2022, and 2021, respectively.

Capital expenditures increased $127 million in 2023 compared to 2022, primarily due to investments in production facilities at Pratt & Whitney and Raytheon.

Capital expenditures increased $154 million in 2022 compared to 2021, primarily due to investments in production facilities at Pratt & Whitney.

Payments on customer financing assets were $117 million, $150 million, and $231 million in 2023, 2022, and 2021, respectively.

The decrease in payments in 2023 compared to 2022 and 2022 compared to 2021 was primarily due to fewer engines added to our leased asset pool.

Receipts from customer financing assets were $212 million, $179 million, and $389 million in 2023, 2022, and 2021, respectively.

The decrease in receipts in 2022 compared to 2021 was primarily driven by the absence of the 2021 sale and leaseback transaction.

Refer to “Note 11:

Leases” within Item 8 of this Form 10-K for additional discussion of this transaction.

In 2023, 2022, and 2021 we increased other intangible assets by approximately $751 million, $487 million, $308 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.

In 2024, 2023, and 2022 our intangible assets increased by $0.6 billion, $0.8 billion, and $0.5 billion, 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.

At December 31, 2024, we had commercial aerospace financing and other contractual commitments, including exclusivity and collaboration payment commitments, of approximately $14.1 billion, on a gross basis before reduction for our collaboration partners’ share.

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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.

During 2023 we had net cash receipts of $14 million, and during 2022 and 2021 we had net cash payments of $205 million and $16 million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.

During 2024 and 2022, we had net cash payments of $142 million and $205 million, respectively and had net cash receipts of $14 million during 2023, from the settlement of these derivative instruments not designated as hedging instruments.

Cash Flow - Financing Activities

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Net cash flows used in financing activities from continuing operations $ (6,617) $ (4,527) $ (5,859)

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.

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

2024 Compared with 2023 Financing Activities

The $1.3 billion change in cash flows used in financing activities in 2023 compared to 2022 was primarily driven by long-term debt proceeds of $12.9 billion, partially offset by higher share repurchases of $10.1 billion as discussed below, an increase in repayment of commercial paper borrowings, net of $1.0 billion, and repayments of long-term debt of $0.6 billion.

The $2.1 billion increase in cash flows used in financing activities from continuing operations in 2024 compared to the 2023 was primarily driven by higher year-over-year long-term debt repayments of $1.9 billion.

Prior year long-term debt proceeds of $12.9 billion were partially offset by lower year-over-year share repurchases of $12.4 billion, primarily related to the prior year ASR.

2023 Compared with 2022 Financing Activities

The $0.9 billion change in cash flows used in financing activities in 2022 compared to 2021 was primarily driven by the absence of 2021 repayments of long-term debt, including debt extinguishment costs, net of issuances of $0.8 billion and an increase in commercial paper borrowings, net of $0.7 billion, partially offset by an increase in share repurchases of $0.5 billion, as discussed below.

The $1.3 billion decrease in cash flows used in financing activities from continuing operations in 2023 compared to 2022 was primarily driven by long-term debt proceeds of $12.9 billion, partially offset by higher share repurchases of $10.1 billion primarily related to the ASR, an increase in repayment of commercial paper borrowings, net of $1.0 billion, and repayments of long-term debt of $0.6 billion.

Financing Activities

Included in cash flows from financing activities are payments related to our long-term debt, including both interest and principal payments.

A summary of our long-term debt commitments as of December 31, 2023 was as follows:

Included in cash flows from financing activities from continuing operations are principal payments related to our long-term debt.

A summary of our long-term debt commitments, including interest payments which are included in cash flows provided by operating activities from continuing operations, as of December 31, 2024 was as follows:

Payments Due by Period

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Long-term debt—future interest $ 1,848 $ 1,741 $ 1,491 $ 18,238

At December 31, 2024, management had remaining authority to repurchase approximately $0.7 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.

We may also reacquire shares outside of the program in connection with the surrender of shares to cover taxes on vesting of restricted stock.

Our ability to repurchase shares is subject to applicable law.

Our share repurchases were as follows for the years ended December 31:

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$ 186 1,781 $ 12,870 141,696 $ 2,803 29,943

(1) Relates to share repurchases that were settled in cash during the period.

At December 31, 2023, management had remaining authority to repurchase approximately $1.0 billion of our common stock.

On October 21, 2023, our Board of Directors authorized a share repurchase program for up to $11 billion of our common stock, replacing the previous program announced on December 12, 2022.

We may also reacquire shares outside of the program in connection with the surrender of shares to cover taxes on vesting of restricted stock, and as required under our employee savings plan.

Our ability to repurchase shares is subject to applicable law.

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.

See “Note 18:

ASR Tranche 1 settlement - shares received (2)

— 391 — — — —

ASR Tranche 2 settlement - financing cash paid (2) (3)

258 — — — — —

Total shares of common stock repurchased $ 444 2,172 $ 12,870 141,696 $ 2,803 29,943

(1) Relates to share repurchases that were settled in cash during the year.

(2) Includes the settlement of the ASR first and second tranches in the third quarter of 2024.

Refer to “Note 18:

Equity” within Item 8 of this Form 10-K for additional information.

(3) Excludes the change in fair value of the stock price from trade date to settlement date of $3 million, which is classified as an operating cash flow in our Consolidated Statement of Cash Flows.

Our Board of Directors authorized the following cash dividends for the years ended December 31:

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Total dividends paid $ 3,217 $ 3,239 $ 3,128

On February 2, 2024, the Board of Directors declared a dividend of $0.59 per share payable March 21, 2024 to shareowners of record at the close of business on February 23, 2024.

On January 31, 2025, the Board of Directors declared a dividend of $0.63 per share payable March 20, 2025 to shareowners of record at the close of business on February 21, 2025.

CRITICAL ACCOUNTING ESTIMATES

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

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

Our EAC adjustments also

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

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

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

As a result, Raytheon recognized a net operating profit benefit of $0.1 billion primarily related to reserve and contract loss provision adjustments.

The charge included the write-off of remaining contract assets and the estimated settlement with the customer.

The contract termination was completed and customer settlement occurred during the fourth quarter of 2024, in line with previously accrued amounts.

Costs incurred for engineering and development of certain aerospace products under contracts with customers are capitalized as contract fulfillment costs, to the extent recoverable from the associated contract margin and customer funding, and subsequently amortized as the products are delivered to the customer.

The estimation of contract costs, and margin, considered as part of this recoverability assessment requires significant judgment.

We regularly assess capitalized contract fulfillment costs for impairment.

In 2024, we recognized impairment charges of $0.2 billion and $0.1 billion at Collins due to a contract cancellation and as a result of the impact of initiating alternative titanium sources, respectively.

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for further discussion.

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

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

In making these determinations, we applied the tax law in the relevant jurisdictions to our facts and circumstances and obtained tax rulings from the relevant taxing authorities, tax opinions,

and/or other external tax advice related to the concluded tax treatment.

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

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

Under this method, a

royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value using an appropriate discount rate.

Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value using an appropriate discount rate.

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for further details.

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

For the quantitative assessments that are performed for goodwill, we primarily utilize a combination of discounted cash flows (DCF) and market-based valuation methodologies.

For the quantitative assessments that are performed for goodwill, we primarily utilize a combination of discounted cash flows and market-based valuation methodologies.

For the quantitative assessments of indefinite-lived intangible assets, fair value is primarily based on the relief from royalty method.

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Such assumptions are subject to variability from year to year and are directly impacted by, among other things, global market conditions.

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

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

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

We completed our annual goodwill impairment testing as of October 1, 2024 and determined that no adjustments to the carrying value of goodwill were necessary.

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

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

We also completed our annual indefinite-lived intangible assets impairment testing using a qualitative approach as of October 1, 2024 and determined that no adjustments to the carrying value of these assets were necessary.

As noted above, our indefinite-lived intangible assets impairment analysis involves significant assumptions that are subject to variability.

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Technical issues associated with these technolog ies may arise in the normal course and may result in financial impacts, including increased warranty provisions, customer contract settlements, and changes in contract performance e stimates.

These impacts could be material to the Company’s results of operations, financial condition, and liquidity.

These impacts could be

material to the Company’s results of operations, financial condition, and liquidity.

Additionally, we have significant contracts with the U.S.

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The inherent uncertainty related to the outcome of these matters could result in amounts materially different from any provisions made with respect to their resolution.

Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo.

This determination was made pursuant to Pratt &

Whitney’s safety management system.

In 2023, Pratt & Whitney determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo.

This determination was made pursuant to Pratt & Whitney’s safety management system.

On August 4, 2023, Pratt & Whitney issued a special instruction (SI) to operators of PW1100 GTF powered A320neo aircraft, which required accelerated inspections and engine removals covering an initial subset of operational engines, no later than September 15, 2023.

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This updated plan requires a combination of part inspections and retirements for some high pressure turbine and high pressure compressor parts made from affected raw material.

Guidance to affected operators was released via service bulletins (SB) and SI in November 2023 and this guidance is expected to be reflected in one or more airworthiness directives issued by the Federal Aviation Administration (FAA).

Consistent with previous information, the actions are expected to result in significant incremental shop visits through the end of 2026.

As a result, Pratt & Whitney expects a significant increase in aircraft on ground levels for the PW1100 powered A320neo fleet through 2026.

Guidance to affected operators was released via service bulletins (SB) and SI in November 2023, and this guidance has been reflected in airworthiness directives issued by the Federal Aviation Administration (FAA).

Consistent with previous information, the actions are resulting in significant incremental shop visits.

As a result of this matter, Pratt & Whitney expects aircraft on ground levels for the PW1100 powered A320neo fleet to remain elevated through 2026.

As a result of anticipated increased aircraft on ground levels and expected compensation to customers for this disruption, as well as incremental maintenance costs resulting from increased inspections and shop visits, Pratt & Whitney recorded a pre-tax operating profit charge in the third quarter of 2023 of $2.9 billion, reflecting Pratt & Whitney’s net 51% program share of the PW1100 program.

This reflects our current best estimate of expected customer compensation for the estimated duration of the disruption as well as the EAC adjustment impact of this matter to Pratt & Whitney’s long-term maintenance contracts.

This amount reflected our best estimate of expected customer compensation for the estimated duration of the disruption as well as the EAC adjustment impact of this matter to Pratt & Whitney’s long-term maintenance contracts.

The incremental costs to the business’s long-term maintenance contracts include the estimated cost of additional inspections, replacement of parts, and other related impacts.

The $2.9 billion charge is reflected in the Consolidated Statement of Operations as a reduction of sales of $5.4 billion which was partially offset by a net reduction of cost of sales of $2.5 billion primarily representing our partners’ 49% share of this charge.

This resulted in a net increase in Other accrued liabilities of $2.8 billion, which principally relates to our 51% share of an accrual for expected customer compensation.

While the timing of settlement is subject to a number of variables, we expect the $2.8 billion of Other accrued liabilities to be utilized consistent with the timing of execution of the fleet management plan and period of increased aircraft on ground levels referenced above.

There was no utilization of the accrual during the fourth quarter of 2023.

Other engine models within Pratt & Whitney’s fleet contain parts manufactured with affected powder metal, and while Pratt & Whitney continues to evaluate the impact of this powder metal issue on other engine models within its fleet, we do not currently believe there will be any significant financial impact with respect to these other engine models.

The 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 December 31, 2024 and 2023, we had other accrued liabilities of $1.7 billion and $2.8 billion, respectively, primarily related to expected compensation to customers.

The decrease in the accrual during 2024 was primarily due to customer compensation in the form of credits issued and cash paid to customers during the period.

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.

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

For our significant plans, we utilize a full yield curve approach in the estimation of the service cost and interest cost

components of net periodic benefit expense by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant discounted projected cash flows.

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

The following table shows the sensitivity of our pension and PRB plan liabilities and net periodic benefit income to a 25 basis point change in the discount rates for benefit obligations, interest cost, and service cost as of December 31, 2024:

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government with respect to government contract matters.

In addition, as described in “Note 1:

Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K, in 2024, the Company entered into a deferred prosecution agreement (DPA) with the DOJ and the Company settled an administrative proceeding with the SEC (the SEC Administrative Order) to resolve the previously disclosed criminal and civil government investigations into payments made by Raytheon Company and its joint venture, Thales-Raytheon Systems (TRS) since 2012, in connection with certain Middle East contracts.

The Company also entered into a DPA and a 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.

The compliance monitor will oversee Raytheon Company’s and the Company’s compliance with their respective obligations under the DPAs and the SEC Administrative Order.

In 2024, the Company also resolved 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 that were resolved pursuant to a Consent Agreement (CA) with the DOS.

The CA, which has a three-year term, requires the Company to implement remedial compliance measures and to conduct an external audit of the Company’s ITAR compliance program.

The CA also requires appointment of an external, independent Special Compliance

Officer (SCO).

The Company appointed its SCO on September 27, 2024.

See “Note 17:

1 unchanged sentence

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What changed 10-K

Item 7. Management’s Discussion and Analysis