What changed in this filing

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Item 1A. Risk Factors

2026-02-06 compared with 2025-02-03 · 84 added, 136 removed, 494 unchanged (31% of the section changed)

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INDUSTRY RISKS

Our business may be adversely affected by changes in global economic, capital market, and political conditions.

Our business, operating results, financial condition, and liquidity may be adversely affected by changes in global economic conditions, international relations, and geopolitical events and actions, including inflation, credit market conditions, levels of consumer and business confidence, commodity (including energy) prices and supply, trade policies (including tariffs), exchange rates, levels of government spending and deficits, the threat environment, political conditions, and actual or anticipated default on sovereign debt.

Supply chain challenges and inflationary pressures continue to negatively affect our performance and the performance of our suppliers and subcontractors.

Inflation has increased material and component prices, labor rates, and supplier costs.

In addition, due to the nature of our government and commercial aerospace businesses, and their respective customer and supplier contracts, we may be unable to increase our contract value or pricing to offset cost increases, in particular on our fixed price contracts.

Our operating profits and margins under our contracts could be adversely affected by these factors.

In addition, high interest rates can increase the cost of borrowing and tighten the availability of capital for the Company, which could have an adverse effect on our operating results, financial condition, and liquidity.

Tightening of credit in financial markets also could adversely affect the ability of our customers and suppliers to obtain financing for significant purchases and operations, could result in a decrease in, or cancellation of, orders for our products and services, could impact the ability of our customers to make payments, and could increase the risk of supplier financial distress.

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 impact our supply chain.

Our global business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, air travel, the financial strength and performance of airframers, airlines and business jet operators, and government procurement.

In addition, geopolitical risks could affect government priorities, budgets, and policies, such as U.S.

approvals of our foreign defense sales as well as sanctions, imposition of tariffs, and other trade-restrictive activities, which could impact sales of defense and other products and services.

Changes in U.S.

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government programs, primarily defense-related programs with the U.S.

Department of Defense (DoD), and a broad range of programs with other departments and agencies.

Department of War (DoW) (formerly referred to as the U.S.

Department of Defense), and a broad range of programs with other departments and agencies.

Changes in U.S.

government defense spending for various reasons, including as a result of potential changes in policy or budgetary positions or priorities, could negatively impact our results of operations, financial condition, and liquidity.

Our programs are subject to U.S.

Our programs and contracts are subject to U.S.

government policies, budget decisions, and appropriation processes, which are driven by numerous factors including U.S.

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government agencies to continue operating at prior-year levels.

government is currently operating under a continuing resolution to keep the government funded while Congress works to enact full year fiscal year 2025 (FY25) appropriation bills.

It is currently uncertain whether Congress will be able to enact FY25 appropriation 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), then the U.S.

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

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, as well as 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 continuing resolution or shutdown.

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 all appropriation bills by April 30, 2025, then the budget caps will be reduced and corresponding automatic reductions to agency budget accounts will be enforced through sequestration.

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 or contracts, stop work orders, as well as delays in contract awards, new program starts, payments for work performed, and other actions.

As a result, U.S.

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The termination of one or more of our U.S.

government contracts, or the occurrence of performance delays, cost overruns (due to inflation or otherwise), product failures, shortages in materials, components, or labor, contract definitization delays, or other failures to perform to customer expectations and contract requirements, could negatively impact our reputation and competitive position, results of operations, financial condition, and liquidity.

government contracts, or the occurrence of performance delays, cost overruns, product failures, shortages in materials, components, or labor, contract definitization delays, or other failures to perform to customer expectations and contract requirements, could negatively impact our reputation and competitive position, results of operations, financial condition, and liquidity.

government contracts with prime contractors generally permit the government to terminate the contract, in whole or in part, without prior notice, at the U.S.

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As a result of untested or unproven technologies, or modified requirements or specifications, we may experience technological and other performance difficulties (including delays, setbacks, cost overruns, or product failures), our attention or resources may be diverted from other projects, and our future sales opportunities may be impacted.

Additionally, as our customers demand more mature and proven solutions, we may be required to invest in development prior to contract award with no guarantee of award.

Additionally, as our customers demand more mature solutions, we may be required to invest in development prior to contract award with no guarantee of award.

Our profitability could be negatively affected based on the mix of our U.S.

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government contracts are typically either fixed-priced contracts or cost reimbursement contracts.

Fixed-price contracts are predominantly either firm fixed-price (FFP) contracts or fixed-price incentive (FPI) contracts.

Fixed-price contracts are predominantly either firm fixed-price (FFP) contracts or fixed-price

incentive (FPI) contracts.

Under FFP contracts, we receive a fixed price irrespective of the actual costs we incur, and we therefore carry the burden of any cost overruns.

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Excess costs on cost reimbursable contracts could also result in lower profit rates.

We may incur unexpected costs for various reasons, including technical and manufacturing challenges, schedule delays, the timeliness and availability of materials, components, or labor, the inaccuracy of initial contract cost estimates, internal and subcontractor performance or product quality issues, inability to achieve the benefits of our expected cost reduction, digital transformation, manufacturing, operating, and other strategic initiatives, inflation, inability to pass on tariff costs, and changing laws or regulations, natural disasters, and public health crises.

We may incur unexpected costs for various reasons, including technical and manufacturing challenges, schedule delays, the timeliness and availability of materials, components, or labor, the inaccuracy of initial contract cost estimates, internal and subcontractor performance or product quality issues, inability to achieve expected cost reduction, digital transformation, manufacturing, operating, and other strategic initiatives, inflation, inability to pass on tariff costs, and changing laws or regulations, natural disasters, and public health crises.

We may also experience cost underruns which would reduce contract value and related expected revenues, and we may be unable to expand the contract scope or secure additional work to offset the resulting lost revenues.

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In addition, other contracts in backlog are for the transition from development to production, which includes starting and stabilizing a manufacturing and test line while the final design is still being validated.

Moreover, over the past several years, the DoD has increased its use of Other Transaction Authority (OTA) agreements, under which it awards certain prototypes, research, and production contracts without all of the procurement requirements that typically apply to DoD contracts, including justification of sole source awards.

Moreover, over the past several years, the DoW has increased its use of Other Transaction Authority (OTA) agreements, under which it awards certain prototypes, research, and production contracts without all of the procurement requirements that typically apply to DoW contracts, including justification of sole source awards.

OTAs may use fixed-price contracting during all phases of the contract, or mandated contract cost sharing.

They may also require non-traditional subcontractor participation and impose other requirements that differ from our other DoD contracts.

They may also require non-traditional subcontractor participation and impose other requirements that differ from our other DoW contracts.

Our business may be negatively impacted if we are unable to bid for OTA work and/or perform on our OTA agreements, including any applicable non-traditional requirements.

In addition, in order to support U.S.

government priorities, we may begin performance on an undefinitized contract action with a not-to-exceed price before completing contract

negotiations on the terms, specifications, or price between the parties.

government priorities, we may begin performance on an undefinitized contract action with a not-to-exceed price before completing contract negotiations on the terms, specifications, or price between the parties.

government has the ability to unilaterally definitize contracts, which would obligate us to perform under terms and conditions imposed by the U.S.

government, affecting our ability to negotiate mutually agreeable contract terms.

government without our agreement.

Uncertainties in final contract price, specifications and terms, or loss of negotiating leverage associated with particularly long delays in contract definitization may negatively affect our profitability.

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export sales.

operations transactions may be denominated in local currencies.

Foreign currency exchange rate fluctuations (including their impact on supplier prices) may negatively affect demand for our products and our reported profits, as well as our operating margins.

Transactions related to non-U.S.

operations may be denominated in local currencies.

Foreign currency exchange rate fluctuations (including their impact on supplier prices) may negatively affect demand for our products and our operating profit and margins.

The majority of our commercial aerospace sales are in U.S.

Dollars, while the majority of their non-U.S.

Dollars, while the majority of our non-U.S.

operating costs are incurred in the applicable local currency.

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In addition, in certain foreign countries, we engage foreign non-employee representatives and consultants for international sales and teaming with international subcontractors, partners, and suppliers for international programs.

While we have robust policies and controls in place, these engagements expose us to various challenges including risks associated with the Foreign Corrupt Practices Act (FCPA) and local antibribery laws and regulations.

From time to time, we have disputes with such representatives regarding claimed commissions and other matters which can result in litigation or arbitration.

In addition, we face risks related to the unintended or unauthorized use of our products.

While we have robust policies and controls in place, these engagements expose us to various risks including those associated with the Foreign Corrupt Practices Act (FCPA) and local antibribery laws and regulations.

Our international business faces substantial competition from both U.S.

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Further, operations in emerging market countries are subject to additional risks, including volatility in rates of economic growth, government instability, cultural differences (such as employment and business practices), the imposition of exchange and capital controls, and risks associated with exporting components manufactured in those countries for incorporation into finished products completed in other countries.

While these factors and their impact are difficult to predict, any one or more of

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

While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.

In addition, given the role of our defense businesses in the support of the national security interests of the U.S.

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

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.

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.

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 continued regional instability and tensions.

Our financial performance is dependent on the condition of the aerospace industry.

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Other factors, including future terrorist actions, aviation safety concerns, public health issues, or major natural disasters, could also dramatically reduce the demand for commercial air travel, which could negatively impact the sales and margins of our aerospace businesses.

Additionally, because a substantial portion of product deliveries to commercial aerospace customers are scheduled for delivery in the future, changes in economic conditions may cause customers to request that firm

orders be rescheduled or canceled.

At times, our aerospace businesses also enter into FFP or cost-share development contracts with customers, which may require us to bear cost overruns related to unforeseen technical and design challenges that arise during the development and early production stages of a program.

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The evolving nature of these standards, along with the long duration of development, production, and aftermarket support programs, creates uncertainty regarding program profitability, particularly with our aircraft engine products.

Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely basis or meet the needs of our customers as fully as alternative investments.

Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely

basis or meet the needs of our customers as fully as alternative investments.

In addition, the industries for our products or products that incorporate our technologies may not develop or grow as we anticipate.

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In addition, in July 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) GTF fleet, which powers the A320neo family of aircraft.

This issue has resulted in

increased engine removals and inspections, shop visits, aircraft on ground levels, costs to the Company, and other negative impacts described in more detail below.

This issue has resulted in increased engine removals and inspections, shop visits, aircraft on ground levels, and costs to the Company.

If any of our production or maintenance, repair, and overhaul ramp-up efforts are delayed, if suppliers cannot timely deliver or perform to our standards, if any other engine models are found to be materially impacted by the powder metal issue, and/or if we identify or experience other issues, including durability issues, with in-service engines in the GTF family of engines (or other engines), whether for manufacturing reasons or otherwise, we may not meet customer requirements, which could result in material additional costs, including liquidated damages or other liabilities.

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In addition, we may face customer-directed cost reduction targets that could have a material adverse effect on the profitability of our contracts if these targets are not achieved when required.

Moreover, bid protests from unsuccessful bidders on new program awards are frequent with respect to DoD awards in particular.

Moreover, bid protests from unsuccessful bidders on new program awards are frequent with respect to DoW awards in particular.

Generally, a bid protest will delay the start of contract activities, delay earnings, and could result in the award decision being overturned and require a re-bid of the contract.

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In addition, the possibility exists that competitors or customers will develop aftermarket services and parts for our products that attract customers and adversely impact our return on investment on original equipment manufacturer products.

We also anticipate companies continuing to enhance their competitive position against our defense businesses as a result of continued domestic and cross-border defense industry consolidation and the expansion of competitors’ capabilities throughout the supply chain through vertical integration.

We are also facing increased competition domestically and internationally from foreign and multinational firms.

Additionally, some customers, including the DoD, are increasingly turning to commercial contractors, rather than traditional defense contractors, for space and data science work, and we are also seeing increased activity from other non-traditional defense contractors and startups.

Additionally, some customers, including the DoW, are increasingly turning to commercial contractors, other non-traditional defense contractors, and startups.

For example, the U.S.

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government procurement policies and procedures and the application thereof are regularly changing.

Moreover, our potential international contract awards, particularly for sales of defense products and services, may be limited by our ability to agree to offset obligations or industrial cooperation obligations or enter into ICIP agreements, as discussed above.

For example, an increase in the use of contract structures that shift risk to the contractor (such as fixed-price development contracts and incentive-based fee arrangements), use of novel award fee criteria (such as the evaluation of environmental factors), evaluation of a bidder’s willingness to provide detailed competitively sensitive intellectual property (such as detailed RTX design, manufacturing and process information that would risk loss of competitively sensitive information), or requirements to transfer technology to domestic sources in connection with offset obligations, could adversely affect our profit rates, ability to preserve differentiated product offerings, maintain lower tier suppliers, or make it more difficult to win new contracts.

For example, an increase in the use of contract structures that shift risk to the contractor (such as fixed-price development contracts and incentive-based fee arrangements), use of novel award fee criteria, evaluation of a bidder’s willingness to provide detailed competitively sensitive intellectual property (such as detailed RTX design, manufacturing and process information that would risk loss of competitively sensitive information), or requirements to transfer technology to domestic sources in connection with offset obligations, could adversely affect our profit rates, ability to preserve differentiated product offerings, maintain lower tier suppliers, or make it more difficult to win new

If we are unable to continue to compete successfully against our current or future competitors in our core businesses, we may experience declines in revenues and industry segment share which could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.

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Cybersecurity threats are continuously evolving and may have an impact on our customers, suppliers, subcontractors, and other third parties with whom we do business routinely, both on premises and in the cloud, attempting to gain unauthorized access to our confidential, proprietary, or otherwise protected information, classified information, or personal data or other information relating to our employees, customers, and other third parties, or to disrupt our systems or the systems of third parties.

Cybersecurity threats also include attacks targeting the security, confidentiality, integrity, and/or availability of the hardware, software, and information installed, stored, or transmitted in our products, including after the purchase of those products and when they are

incorporated into third-party products, facilities, or infrastructure.

We are also exposed to the risk of insider threat attacks.

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In some instances, we depend upon a single source of supply, manufacturing, services support, or assembly, or participate in commodity markets that may be subject to allocations of limited supplies by suppliers.

Emerging laws and increasing regulatory requirements aimed at global supply chains may impact our ability to access certain materials and components, and otherwise adversely affect our business, and we may not only be held responsible for our compliance, but for that of our suppliers.

Emerging laws and increasing regulatory

requirements aimed at global supply chains may impact our ability to access certain materials and components, and otherwise adversely affect our business, and we may not only be held responsible for our compliance, but for that of our suppliers.

In addition, our defense businesses are subject to specific procurement requirements that limit the types of materials they use.

Our defense businesses also must require suppliers to comply with various DoD requirements, any of which requirements may further limit the suppliers and subcontractors they may utilize.

Our defense businesses also must require suppliers to comply with various DoW requirements, any of which requirements may further limit the suppliers and subcontractors they may utilize.

Identifying and qualifying second- or third- source suppliers can be difficult, time-consuming, and may result in increased costs.

In recent years, global supply chain disruptions have impacted our ability to procure raw materials, microelectronics, and certain commodities.

These disruptions were driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.

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

Global supply chain disruptions have impacted our ability to procure raw materials, including certain rare earth elements, microelectronics, and certain commodities.

These disruptions have been driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.

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

In addition, the inflationary environment has increased material and component prices, labor rates, and supplier costs, and negatively impacted costs.

Credit market conditions, including higher interest rates and the availability of credit, have impacted some of our suppliers and subcontractors as well.

As a result of these procurement issues, the production flow in our factories has been negatively impacted, which has, in turn, hindered our ability to perform on our commitments to customers and negatively

affected our results of operations, financial condition, and liquidity.

Our supply costs have increased due to the above factors.

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price increases for various reasons;

and worsening shortages of raw materials or commodities, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition, and liquidity.

and worsening shortages of raw materials or commodities, including as a result of war or other geopolitical actions, natural disaster, health pandemics or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition, and liquidity.

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

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In particular, 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 family of aircraft.

This determination and corresponding fleet actions have resulted in, and are expected to continue to result in, an elevated level of aircraft on ground for the A320neo family of aircraft and significant incremental shop visits necessary to perform inspections on PW1100 GTF engines through the end of 2026.

determination and corresponding fleet actions have resulted in, and are expected to continue to result in, an elevated level of aircraft on ground for the A320neo family of aircraft and significant incremental shop visits necessary to perform inspections on PW1100 GTF engines through the end of 2026.

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

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We depend on the recruitment and retention of qualified personnel, and our failure to attract, train, and retain such personnel could seriously harm our business.

Due to the specialized nature of our business, our future performance is highly

dependent upon the continued services of our key technical personnel and executive officers, and the hiring, development, and retention of qualified technical, engineering, manufacturing, marketing, sales, and management personnel for our operations.

Due to the specialized nature of our business, our future performance is highly dependent upon the continued services of our key technical personnel and executive officers, and the hiring, development, and retention of qualified technical, engineering, manufacturing, marketing, sales, and management personnel for our operations.

Our defense business in particular requires qualified personnel with security clearances due to our classified programs.

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In addition, the cost of labor remains high.

Some candidates and new personnel may have job-related expectations that differ from our current workforce and are inconsistent with our corporate culture.

With respect to existing personnel, some may become required to receive various security clearances and substantial training in order to work on certain programs or perform certain tasks.

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Moreover, some of our employees are covered by collective bargaining agreements.

Historically, we have been able to renegotiate expiring agreements without experiencing significant disruptions to business operations.

However, the U.S.

labor environment has experienced shifts, and if we have additional challenges renegotiating agreements or if our employees pursue new collective representation, then we could experience additional costs and/or be subject to work stoppages.

Historically, we have been able to renegotiate expiring agreements without experiencing significant prolonged disruptions to business operations.

However, the labor environment has experienced shifts that pose higher risk of future labor disruption.

Any of the above factors could seriously harm our business.

Moreover, we believe that a critical element of our ability to successfully attract, train, and retain qualified personnel is our corporate culture, which we believe fosters innovation, collaboration, and a focus on execution, all in an environment of high ethical standards.

Our global operations may present challenges in maintaining these important aspects of our corporate culture, and a failure to maintain our corporate culture could negatively impact us.

Further, we rely on our key personnel to lead with integrity and to meet our high ethical standards that promote excellent performance.

To the extent any of our key personnel were to behave in a way that is inconsistent with our values, including with respect to product safety or quality, legal or regulatory compliance, financial reporting, or people management, we could experience a materially adverse impact to our reputation and our operating results.

In addition, failure or perceived failure to meet stakeholder expectations on environmental, social, and governance (ESG) matters could harm our reputation and impact demand for our products and services.

Exports and imports of certain of our products are subject to various export control, sanctions, and import regulations and may require authorization from regulatory agencies of the U.S.

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foreign policy or the foreign policy of other licensing jurisdictions may affect the licensing process or otherwise prevent us from engaging in business dealings with certain individuals, entities, or countries.

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

From time to time, we identify, investigate, remediate and voluntarily disclose violations or potential violations of the ITAR, EAR, or other global trade laws and regulations.

Any failure by us, our customers, or our suppliers to comply with the above-referenced laws and regulations, arising out of our voluntary disclosures or otherwise, could result in civil or criminal penalties, fines, seizure of our products, adverse publicity, restrictions on our ability to engage in export or import transactions, or the suspension or debarment from doing business with the U.S.

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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.

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

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

The Company appointed its SCO on September 27, 2024.

If we are unable to satisfy the requirements of the CA within three years as determined by the DOS, we may face a continuation of the CA, additional fines, or other adverse impacts.

In addition, during the term of the CA, the CA’s transaction-related requirements may impact our ability to execute potential future divestitures within expected timeframes or consistent with expected valuation metrics, which could delay or impair our ability to achieve the expected benefits from our strategic plan, or otherwise harm our competitive position, results of operations, financial condition, or liquidity.

In addition, during the term of the CA, the CA’s transaction-related requirements may impact our ability to execute potential future divestitures within expected timeframes or consistent with expected valuation metrics, and on acceptable terms and conditions, which could delay or impair our ability to achieve the expected benefits from our strategic plan, or otherwise harm our competitive position, results of operations, financial condition, or liquidity.

Our business and financial performance may be adversely affected by threats to our physical security and other events outside our control.

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government contracts.

government investigations often take years to complete and could result in administrative, civil, or criminal liabilities, including repayments, fines, treble and other damages, forfeitures, restitution, or penalties, or could lead to suspension or debarment of U.S.

government investigations

often take years to complete and could result in administrative, civil, or criminal liabilities, including repayments, fines, treble and other damages, forfeitures, restitution, or penalties, or could lead to suspension or debarment of U.S.

government contracting or of export privileges.

For instance, if we or one of our business units were charged with wrongdoing in connection with a U.S.

government investigation (including fraud, or violation of certain environmental, FCPA, and other anti-bribery and

anti-corruption laws, or export laws, as further described below), the U.S.

government investigation (including fraud, or violation of certain environmental, FCPA, and other anti-bribery and anti-corruption laws, or export laws, as further described below), the U.S.

government could suspend us from bidding on or receiving awards of new U.S.

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government, including DCMA claims to recover payments for alleged noncompliance with cost accounting standards.

In some cases, the DOJ has conducted investigations or convened grand juries to investigate possible irregularities in our costs.

As discussed below and as previously disclosed, in October 2024, the Company entered into certain deferred prosecution agreements and a civil settlement agreement with the DOJ to resolve investigations relating to pricing on certain government contracts.

Any costs found to be improperly allocated to a specific contract will not be reimbursed by the U.S.

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government if already reimbursed.

In some cases, the DOJ has conducted investigations or convened grand juries to investigate possible irregularities in our costs.

An adverse outcome of any audit or investigation could result in civil and criminal penalties and fines, which could negatively impact our results of operations, financial condition, and liquidity.

In addition, if allegations of impropriety were made against us, we could suffer serious reputational harm, which could negatively affect our results of operations, financial position, and liquidity.

As discussed below and as previously disclosed, in October 2024, the Company entered into a deferred prosecution agreement and a civil settlement agreement with the DOJ to resolve investigations relating to pricing on certain government contracts.

A violation by Raytheon Company or the Company of any one of the deferred prosecution agreements or Securities and Exchange Commission (SEC) administrative order announced on October 16, 2024 could adversely affect our business.

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

Pursuant to DPA-1, among other terms, the DOJ will defer, for a period of three years, criminal prosecution of Raytheon Company related to Raytheon Company’s alleged conspiracy to violate the anti-bribery provisions of the FCPA and alleged conspiracy to violate the AECA by failing to make related disclosures of certain payments that qualified as fees, commissions and/or political contributions under Part 130 of ITAR.

Pursuant to DPA-1, among other terms, the DOJ will defer, for a period of three years, criminal prosecution of Raytheon Company related to one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of conspiracy to violate the AECA by failing to make related disclosures of certain payments that qualified as fees, commissions and/or political contributions under Part 130 of ITAR.

Pursuant to DPA-2, among other terms, the DOJ will defer, for a period of three years, criminal prosecution of Raytheon Company related to two counts of major fraud against the United States by Raytheon Company involving two legacy contracts.

Under DPA-1, DPA-2, and the SEC Administrative Order, Raytheon Company and the Company are required to retain 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 DPA-1, DPA-2, and the SEC’s Administrative Order.

Under DPA-1, DPA-2, and the SEC Administrative Order, Raytheon Company and the Company 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 Raytheon Company and the Company engage an independent compliance monitor satisfactory to the DOJ and SEC).

A single independent compliance monitor was selected to oversee Raytheon Company’s and the Company’s compliance with their respective obligations under DPA-1, DPA-2, and the SEC Administrative Order, and that monitor is expected to be in place by the end of the first quarter.

DPA-1 and DPA-2 further provide that, in the event the DOJ, in its sole discretion, determines during the deferred prosecution period that Raytheon Company or the Company has violated any provision of either DPA, Raytheon Company or the Company may be subject to prosecution for any federal criminal violations brought against Raytheon Company or the relevant Company in DPA-1 and DPA-2.

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

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

against the Company.

Any breach of DPA-1, DPA-2, or the SEC Administrative Order could subject Raytheon Company or the Company to criminal prosecutions and/or administrative proceedings, resulting in additional criminal and civil penalties and fines, extension of either DPA’s term(s), including the terms of the monitorship, increased future regulatory and legal scrutiny by U.S.

or foreign government agencies, additional reputational harm, additional compliance costs, suspension of export privileges and/

or suspension or debarment from U.S.

or foreign government agencies, additional reputational harm, additional compliance costs, suspension of export privileges and/or suspension or debarment from U.S.

government contracting or subcontracting for a period of time, any of which could negatively affect our results of operations, financial position, and liquidity.

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We are subject to a variety of litigation and legal compliance risks.

These risks relate to, among other things, product safety and reliability, personal injuries, intellectual property rights, contract-related claims, government contracts, taxes, environmental matters, the use of artificial intelligence, export control, sanctions, employment matters, securities laws, competition laws, and laws governing improper business practices.

These risks relate to, among other things, product safety and reliability, personal injuries, intellectual property rights, contract-related claims, government contracts, taxes, environmental matters, the use of chemical substances, the use of artificial intelligence, export control, sanctions, employment matters, securities laws, competition laws, and laws governing improper business practices.

We or one of our businesses could be charged with wrongdoing as a result of such matters.

If convicted or found liable, we could be subject to significant fines, penalties, repayments, or other damages (in certain cases, treble damages).

Product recalls and product liability and warranty claims can result in significant damages and costs, including fines, as well as other harm to our business as discussed above.

Product recalls or other supply disruptions and product liability and warranty claims can result in significant damages and costs, including fines, as well as other harm to our business as discussed above.

As a global business, we are subject to complex laws and regulations in the U.S.

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Uncertainty relating to laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights.

We use hazardous substances and generate hazardous wastes in certain of our operations.

We use hazardous substances and generate hazardous wastes in our operations.

We also rely upon the use of chemical substances that are heavily regulated in connection with our products, manufacturing processes and operation of our facilities.

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Certain of our customer relationships outside of the U.S.

are with governmental entities and are, therefore, subject to the FCPA and other anti-bribery and anti-corruption laws, including the anti-bribery and anti-corruption laws of non-U.S.

are with governmental entities and are, therefore, subject to the FCPA and other anti-bribery and anti-corruption laws, including the anti-

bribery and anti-corruption laws of non-U.S.

Our policies mandate compliance with these anti-bribery and anti-corruption laws.

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As discussed above and as previously disclosed, in October 2024, the Company entered into a DPA with the DOJ and consented to the entry of an SEC Administrative Order to resolve investigations related to conduct that, among other things, violated the FCPA.

We have been subject to regulatory investigations for alleged violations of anti-bribery and anti-corruption laws, and could be subject to such

investigations in the future, which could result in criminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes, or other remedial actions.

We have been subject to regulatory investigations for alleged violations of anti-bribery and anti-corruption laws, and could be subject to such investigations in the future, which could result in criminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes, or other remedial actions.

Violations of these laws, or allegations of such violations, could disrupt our operations, cause reputational harm, involve significant management attention, and result in a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.

Cybersecurity and data security and protection laws and regulations are evolving and present increasing compliance challenges, which may increase our costs, affect our competitiveness, cause reputational harm, and expose us to substantial fines or other penalties.

Cybersecurity, artificial intelligence, and data security and protection laws and regulations are evolving and present increasing compliance challenges, which may increase our costs, affect our competitiveness, cause reputational harm, and expose us to substantial fines or other penalties.

Our business and financial performance may be adversely affected by climate change, including regulations, customer demand, technologies, and extreme weather.

Our business may be impacted by climate change and governmental and industry actions taken in response, which present short, medium, and long-term risks to our business and financial condition.

government procurement requirements, could increase our operational and compliance expenditures and those of our suppliers, including increased energy and raw materials costs, and costs associated with manufacturing changes, and lead to new or additional investments in product designs and facility upgrades.

In addition, we continue to see ever-increasing demands for offerings focused on addressing climate change, transitioning to lower emission technologies, including low to no carbon products and services, the use of alternative energy sources, and other sustainable aviation technologies, and climate monitoring and adaptation products and services.

Customers, shareholders, and institutional investors are focused on ESG, including our environmental sustainability practices and commitments with respect to our operations, products, and suppliers.

As a result, we continue to make additional investments in new technologies and capabilities, and devote management and other resources in response to the foregoing.

Current and emerging environmental and climate-related laws, regulations, or other policies, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, and mandatory disclosure obligations, could increase our operational and compliance expenditures and those of our suppliers, including increased energy and raw materials costs, and costs associated with manufacturing changes, and lead to new or additional investments in product designs and facility upgrades.

In addition, we continue to see ever-increasing demands for offerings focused on addressing long-term climate change, transitioning to lower emission technologies, including low to no carbon products and services, the use of alternative energy sources, and other sustainable aviation technologies, weather and climate monitoring products and services.

Customers, shareholders, and institutional investors may focus on measuring and minimizing environmental impact, including our environmental sustainability practices and commitments with respect to our operations, products, and suppliers.

As a result, we continue to evaluate making additional investments in new technologies and capabilities, and devoting management and other resources in response to the foregoing.

We may not realize, on a timely basis or at all, the anticipated benefits of these investments and actions for a variety of reasons, including technological challenges, evolving government and customer requirements, and our ability to anticipate them and develop in-demand technologies on a timely basis, and other risks related to the development of advanced technologies described above.

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In addition, as we and our competitors develop increasingly sustainable technologies, demand for our older offerings may decrease or become nonexistent.

Our reputation may also be damaged if we or our industry fail, or are perceived to fail, to achieve sustainability goals or commitments or to comply with evolving climate-related regulations.

Our reputation may also be damaged if we or our industry fail, or are perceived to fail, to achieve sustainability goals or commitments or to comply with evolving environmental and climate-related regulations.

In addition, climate-related litigation and government investigations could be commenced against us, could be costly to defend, and could adversely affect our business.

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We have outstanding debt and other financial obligations, and we depend, in part, upon the issuance of debt to fund our business requirements.

The increased indebtedness of RTX in connection with the $10 billion accelerated share repurchase (ASR) transactions that began in October 2023 and completed at the end of September 2024 may have various negative impacts on our business.

These include shifting significant cash flow from operations to debt principal and interest payments, which will reduce funds we have available for other purposes, such as acquisitions, research and development, and other reinvestments in our businesses, and dividends and common stock repurchases.

The increased indebtedness of RTX in connection with the $10 billion accelerated share repurchase (ASR) transactions that began in October 2023 and completed in September 2024 may have various negative impacts on our business.

These include shifting significant cash flow from operations to debt principal and interest payments, which will reduce funds we have available for

other purposes, such as acquisitions, research and development, and other reinvestments in our businesses, and dividends and common stock repurchases.

It could also reduce our flexibility in planning for, or reacting to, changes in our business and market conditions.

It exposes us to interest rate and credit market risk at the time of refinancing outstanding debt, as well as these same risks on our commercial paper obligations, which are issued at variable rates.

public and private markets for debt, any of which may adversely affect our ability to fund our business requirements.

In addition, if we require additional funding in order to fund outstanding financing commitments or meet other business requirements, a number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt, any of which may adversely affect our ability to fund our business requirements.

These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook, or credit ratings.

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Additionally, in the ordinary course of business, we are subject to examinations by various tax authorities.

In addition to ongoing examinations, there could be additional examinations launched in the future by governmental authorities in various jurisdictions, and existing examinations could be expanded.

In addition to ongoing examinations, there could be additional

examinations launched in the future by governmental authorities in various jurisdictions, and existing examinations could be expanded.

The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.

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Decisions with respect to dividends and share repurchases are subject to the discretion of our Board of Directors and are based on a variety of factors.

Important factors that could cause us to discontinue, limit, suspend, increase, or delay our quarterly cash dividends or share repurchases include market conditions, the price of our common stock, the nature and timing of other investment opportunities, changes in our business strategy, the terms of our financing arrangements, our outlook as to the ability to obtain financing at attractive rates, the impact on our credit ratings, the availability of domestic cash, and overall business expectations.

In addition, pursuant to a January 7, 2026 Executive Order, the Secretary of War could seek to limit our ability to pay cash dividends or make share repurchases if the Secretary of War determines that we have underperformed or lacked sufficient prioritization of, investment in or production speed in carrying out / performing under our U.S.

government contracts.

Other important factors that could cause us to discontinue, limit, suspend, increase, or delay our quarterly cash dividends or share repurchases include market conditions, the price of our common stock, the nature and timing of other investment opportunities, changes in our business strategy, the terms of our financing arrangements, our outlook as to the ability to obtain financing at attractive rates, the impact on our credit ratings, the availability of domestic cash, and overall business expectations.

The reduction or elimination of our cash dividend, or suspension or elimination of our share repurchase program could adversely affect the market price of our common stock.

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In order to operate more effectively and efficiently, from time to time we undertake strategic and other operational initiatives.

For example, we are undergoing significant, multi-year digital transformation initiatives to improve our business, modernize operations, and reduce costs.

For example, we are undergoing significant, multi-

year digital transformation initiatives to improve our business, modernize operations, and reduce costs.

Under these initiatives, we are leveraging digital capabilities throughout the way in which we conduct our business and provide our products and services to customers, including how we design, build, and maintain our products and services and operate our facilities.

We also continue to engage our Customer Oriented Results and Excellence (CORE) operating system to drive continuing improvement into our processes and facilities.

In addition, we continue to invest in structural cost reduction in our facilities, including aligning work to more efficient manufacturing centers, implementing advanced manufacturing capabilities including Industry 4.0 digital initiatives and automation, and closing facilities that are not required to meet future capacity and work needs.

We also use our Customer Oriented Results and Excellence (CORE) operating system to drive continuing improvement into our processes and facilities.

In addition, we continue to invest in structural cost reduction in our facilities, including aligning work to more efficient manufacturing centers, implementing advanced manufacturing capabilities including digital initiatives and automation, and closing facilities that are not required to meet future capacity and work needs.

Other initiatives include the pursuit of advanced technologies and new business acquisitions and subsequent integrations.

For example, we continue to invest in the integration of artificial intelligence technologies into our processes and business operations.

We realigned our business segment structure in 2023, and we also implement restructuring plans from time to time.

Restructuring activities include or may result in workforce reductions, global facility reductions, procurement cost reduction

activities, legal entity and operational reorganizations, and other cost reduction initiatives.

We also implement restructuring plans from time to time.

Restructuring activities include or may result in reductions of the workforce, the number of global facilities, procurement costs, legal entity and operational reorganizations, and other cost reduction initiatives.

These strategic activities are complex and require the investment of resources including in personnel and systems.

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Any of the above factors may impair our ability to achieve anticipated benefits, or otherwise harm our business, or have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.

Failure to successfully manage potential future acquisitions, investments, divestitures, joint ventures, and other transactions, and other risks associated with these activities could adversely affect our future financial results.

Failure to successfully manage and execute potential future acquisitions, investments, divestitures, joint ventures, and other transactions, and other risks associated with these activities could adversely affect our future financial results.

In pursuing our business strategies, we continually review, evaluate, and consider potential investments, acquisitions, divestitures, joint ventures, and other teaming and collaborative arrangements.

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(1) the risks involved with entering new markets; (2) the difficulty in integrating newly-acquired businesses and managing or monitoring other collaborative business arrangements; (3) the complexity of separating a portion of our business to enable a divestiture;

(4) the risk that we may be unable to execute potential transactions, if at all, within the expected timeline, on acceptable financial or other terms and conditions;

(5) continued financial involvement in divested businesses, such as through continued equity ownership, guarantees, retained assets or liabilities, transition services or other ongoing commercial commitments, indemnities, or other current or contingent financial or commercial commitments, following a divestiture;

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In addition, future transactions may impact our deployment of capital, including dividends, share repurchases, pension contributions, and investments.

In particular, if we are unable to complete the pending divestiture of Collins’ actuation and flight controls business within our expected timeframe or at all, we may be unable to reduce our outstanding debt according to planned timeframes.

If either distribution of the stock of Carrier or Otis, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free, including as a result of subsequent acquisitions of our stock (including pursuant to the Raytheon merger), we could be subject to significant tax liabilities.

On April 3, 2020, United Technologies Corporation (UTC) completed the separation of UTC’s business into three independent, publicly traded companies (UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis)) (the Separation Transactions).

UTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the distributions (the Distributions) effective at 12:01 a.m., Eastern Time, on April 3, 2020.

We received (1) a private letter ruling from the Internal Revenue Service (IRS) regarding certain U.S.

federal income tax matters relating to the Separation Transactions and Distributions and (2) an opinion of outside counsel regarding the qualification of certain elements of the Distributions under Section 355 of the Code.

Although we intend for the Distributions generally to be tax-free for U.S.

federal income tax purposes, there can be no assurance that they will so qualify.

Even if the Distributions were to otherwise qualify as tax-free transactions under Sections 355 and 368(a)(1)(D) of the Code, either Distribution or both Distributions may result in taxable gain to us (but not our stockholders) under Section 355(e) of the Code if such Distribution(s) were deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50% or greater interest (by vote or value) in shares of Carrier, Otis, or us, as applicable.

If the IRS were to determine that any post-Distribution acquisitions of Carrier stock, Otis stock, or our stock, as applicable, pursuant to such a plan (when aggregated with any pre-Distribution acquisitions of Carrier stock, Otis stock, or our stock, as applicable, pursuant to such a plan) would represent a 50% or greater interest in shares of Carrier, Otis, or us, as applicable, such determination could result in significant tax liabilities to us.

For purposes of this test, even if the Raytheon merger were treated as part of such plan, it did not result in an acquisition of a 50% or greater interest in us.

Any such tax liabilities imposed on us may adversely affect an investment in us.

In addition, we obtained tax rulings in certain non-U.S.

jurisdictions and/or opinions of external tax advisors, in each case, regarding the tax treatment of certain Separation Transactions.

Notwithstanding the receipt of such tax rulings and opinions, there can be no assurance that the relevant taxing authorities will not assert that the tax treatment of the relevant Separation

Transactions differs from the conclusions reached therein.

In the event the relevant taxing authorities prevail with any challenge in respect of any relevant Separation Transaction, we would be subject to significant tax liabilities, which may adversely affect an investment in us.

Further, under a tax matters agreement that we entered into with Carrier and Otis in connection with the Separation Transactions and Distributions, each of Carrier and Otis generally is required to indemnify us for certain taxes we may incur resulting from the Separation Transactions and/or the Distributions failing to qualify for the intended tax treatment.

In addition, under the tax matters agreement, each of Carrier and Otis is responsible for (i) a specified portion of any installment payment we are required to make pursuant to Section 965(h)(2) of the Code and (ii) specified taxes that exclusively relate to the Carrier business or the Otis business, as applicable.

The amount of any such taxes for which we would be responsible may be significant, and if we were unable to obtain indemnification payments from Carrier or Otis to which we are entitled under the tax matters agreement and/or other agreements entered into in connection with the Separation Transactions and the Distributions, we would incur significant losses.

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

What changed 10-K

Item 1A. Risk Factors