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Item 7. Management’s Discussion and Analysis

2026-02-06 compared with 2025-02-03 · 274 added, 310 removed, 685 unchanged (46% of the section changed)

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BUSINESS OVERVIEW

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

We 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:

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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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Our defense operations are affected by U.S.

Department of Defense (DoD) budget and spending levels, changes in demand, changes in policy positions or priorities, the domestic and global political and economic environment, and the evolving nature of the global and national security threat environment.

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

Department of Defense) budget and spending levels, changes in demand, changes in policy positions or priorities, the domestic and global political and economic environment, and the evolving nature of the global and national security threat environment.

In addition, our defense businesses engage in both direct commercial sales, which generally require U.S.

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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.

government policy positions, including changes in DoW 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:

As previously disclosed, in 2024 the Company resolved several outstanding legal matters, herein referred to as “Resolution of Certain Legal Matters.” See “Note 17:

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

Pratt & Whitney 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.

As described further in “Note 17:

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

Global Supply Chain.

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.

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

These disruptions impacted our ability to procure raw materials, including certain rare earth elements, 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.

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.

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

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Among other things, these effects can constrain our customers’ purchasing power and decrease orders for our products and services and impact the ability of our customers to make payments and our suppliers to perform.

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.

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

Moreover, changes in the macroeconomic environment, including volatility with respect to global trade policy, 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 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.

Government’s Budget.

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

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.

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.

The global trade environment is highly dynamic.

Since February 2025, the U.S.

government has imposed tariffs on imports from all countries with which the U.S.

engages in trade.

In response, certain countries have announced, and in some cases imposed, tariffs, and non-tariff countermeasures on goods that are imported from the U.S.

Our businesses and suppliers import goods subject to U.S.

imposed tariffs, as well as goods subject to counter tariffs imposed by other countries.

We continue to pursue available options to mitigate the impact of tariffs and countermeasures, including (i) utilizing available exemptions or exclusions to tariffs, such as trade agreements, treaties or other statutory relief, (ii) evaluating operational and supply chain changes, and (iii) where feasible, increasing the prices of our goods and services.

Our results for 2025 reflect our best estimate of the impact of the tariffs then in effect.

As the duration, extent and enforceability of the tariffs and counter tariffs remain uncertain, we are continuing to evaluate the potential future impacts of the imposition of the announced tariffs to our business and financial condition.

Based on current conditions, we do not believe that the tariffs announced by the U.S.

or counter tariffs or other actions taken by other countries will have a material adverse effect upon our results of operations, financial condition, or cash flows.

However, the actual financial impacts of tariffs are dependent upon various factors, most notably, the scope of goods covered by tariffs, the value of our imports subject to tariffs, the rate of tariffs applied, the timing and duration of tariffs, the enforceability of tariffs and counter-tariffs, the implementation of tariff and non-tariff countermeasures by countries subject to U.S.

tariffs, and our and our suppliers’ ability to mitigate the impacts of tariffs.

Changes in any of these factors and actual tariff costs incurred could significantly affect the estimates inherent in our financial statements, including those used in our estimates-at-completion (EACs), and estimates supporting the recoverability of our inventories, contract fulfillment costs, deferred tax assets, intangible assets and goodwill, and could have a material effect on our results of operations and cash flows in the periods recognized and paid.

Government’s Budget, Tax Legislation and Executive Orders.

On February 3, 2026, Congress passed and the President signed a spending package to end a U.S.

government shutdown.

The spending package funds the government through the end of the government’s fiscal year, with the exception of the Department of Homeland Security, which remains subject to a continuing resolution.

On July 4, 2025, “An Act to Provide for Reconciliation Pursuant to Title II of the H.

14” (the Act) was enacted.

The Act provides for several corporate tax changes including, but not limited to, restoring full expensing of domestic research and

development costs, restoring immediate deductibility of certain capital expenditures, and changes in the computations of U.S.

taxation on international earnings.

See “Note 12:

Income Taxes,” within Item 8 of this Form 10-K, for additional information.

The Act also provides a supplementary $156.2 billion to the DoW for obligations through 2029, which includes $24.4 billion for the Golden Dome for America project.

The project, outlined in a January 27, 2025 Executive Order, calls for the development and deployment of a next-generation missile defense shield.

On May 20, 2025, the DoW announced a draft architecture and implementation plan for the system.

With next generation technologies across land, sea and space that build upon existing, proven defense capabilities, RTX’s portfolio is well-positioned to play a role in delivering reliable solutions for the Golden Dome for America initiative.

Whether this Executive Order or corresponding funding will have a material impact on our business or results of operations will depend on a variety of factors, including actual awards, award timelines, mission priorities, and future budget determinations.

The Act also includes $25.4 billion in funding to enhance DoW resources for munitions and supply chain resiliency.

As a leading munitions manufacturer, RTX is strategically situated to play a key role in supporting this initiative.

The President has also issued multiple executive orders, including one intended to reform the DoW’s defense acquisition processes and promote expedited and streamlined acquisitions.

Following issuance of those orders, the Secretary of War issued a memorandum and released the DoW’s Acquisition Transformation Strategy, which is aligned with the executive orders and seeks to overhaul the existing defense acquisition system through process changes that prioritize speed, flexibility, and rigorous execution.

A subsequent executive order was issued that may limit corporate distributions, share repurchases, and executive compensation incentives during periods of defense contractor underperformance, insufficient prioritization, investment or production speed under their U.S.

Government contracts.

We are monitoring how these executive orders and related actions will be implemented and any potential future impacts to our business.

While those impacts are uncertain, a limitation on our ability to issue distributions or engage in share repurchases related to the defense contractor performance executive order could adversely affect the market price of our common stock.

Geopolitical Matters.

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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.

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.

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.

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.

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

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a measure of our Operating profit as a percentage of Total net sales;

• Operating cash flow from continuing operations:

• Operating cash flow:

a measure of the amount of cash generated by our business operations.

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Operating profit margin 10.5 % 8.1 % 5.2 %

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

Operating cash flow $ 10,567 $ 7,159 $ 7,883

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.

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RESULTS OF OPERATIONS

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.

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.

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

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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.

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

Restructuring costs generally arise from severance related to workforce reductions and facility exit costs.

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

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

The FAS/CAS operating adjustment represents the difference between the service cost component of our pension and postretirement benefit (PRB) expense under the Financial Accounting Standards (FAS) requirements of U.S.

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government Cost Accounting Standards (CAS), primarily related to our Raytheon segment.

Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant, and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment, if applicable.

accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant, and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment, if applicable.

(dollars in millions) 2025 2024 2023

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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.

The $0.1 billion decrease in net 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 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 $8.9 billion organically in 2025, primarily due to higher organic sales of $4.8 billion at Pratt & Whitney, $2.6 billion at Collins, and $1.7 billion at Raytheon.

The $1.2 billion decrease in net sales related to Acquisitions and divestitures, net in 2025 was primarily driven by the sale of the actuation and flight control business within our Collins segment completed in the third quarter of 2025, the sale of the Simmonds Precision Products business within our Collins segment completed in the fourth quarter of 2025, the sale of the Cybersecurity, Intelligence and Services (CIS) business within our Raytheon segment completed in the first quarter of 2024, and the sale of the Goodrich Hoist & Winch business within our Collins segment completed in the fourth quarter of 2024.

Net sales increased $7.8 billion organically in 2024, 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 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 net sales of $5.3 billion in 2024 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.

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

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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 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.

Net products sales increased $4.6 billion in 2025 compared to 2024, primarily due to increases in external products sales of $2.2 billion at Pratt & Whitney, $1.2 billion at Collins, and $1.2 billion at Raytheon.

Net services sales increased $3.3 billion in 2025 compared to 2024, primarily due to increases in external services sales of $2.7 billion at Pratt & Whitney, $0.5 billion at Collins, and $0.1 billion at Raytheon.

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 product 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 of $0.7 billion at Raytheon, primarily driven by the sale of our CIS business completed in the first quarter of 2024.

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 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’ 49% share of the Powder Metal Matter.

The organic increase in total cost of sales in 2025 of $7.1 billion was primarily due to the organic net sales increases at Pratt & Whitney, Collins, and Raytheon noted above.

The $1.1 billion decrease in cost of sales related to Acquisitions and divestitures, net in 2025 was primarily due to the net sales decreases related to Acquisitions and divestitures, net noted above.

The decrease in Other cost of sales of $0.6 billion in 2025 was primarily driven by the absence of charges recorded in 2024, including a $0.5 billion charge recorded in the second quarter of 2024 at Raytheon related to the termination of a fixed price development contract with a foreign customer (herein referred to as “Raytheon Contract Termination”) 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 were no longer recoverable as a result of initiating alternative titanium sources.

The organic increase in total cost of sales in 2024 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 was primarily driven by the sale of our CIS business within our Raytheon segment completed in the first quarter 2024 .

The increase in Other cost of sales of $3.2 billion in 2024 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 related to the Raytheon Contract Termination recorded 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.

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

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Total cost of sales $ 70,814 $ 65,328 $ 56,831 80 % 81 % 82 %

Net products cost of sales increased $3.0 billion in 2025 compared to 2024, primarily driven by increases in external products cost of sales at Pratt & Whitney and Collins, each driven by the products sales changes noted above.

The increase was partially offset by the absence of a $0.5 billion charge recorded in the second quarter of 2024 at Raytheon related to the Raytheon Contract Termination and charges of $0.2 billion recorded in the first quarter of 2024 at Collins as a result of initiating alternative titanium sources.

Net services cost of sales increased $2.5 billion in 2025 compared to 2024, primarily due to an increase in external services cost of sales at Pratt & Whitney, driven by the services sales change noted above.

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.

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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.

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 decrease in company-funded research and development of $0.1 billion in 2025 compared to 2024, was primarily driven by lower spending on military and commercial programs at Collins and Pratt & Whitney, partially offset by higher expenses on development programs at Raytheon.

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 increase in customer-funded research and development of $0.2 billion in 2025 compared to 2024, was primarily driven by higher development spend on various military and commercial programs at Collins and increased spending at Pratt & Whitney on military development programs, partially offset by lower spending on customer-funded expenses at Raytheon on military development programs, specifically related to the Next Generation Interceptor (NGI) program.

The increase in customer-funded research and development of $0.3 billion in 2024 compared to 2023, was primarily driven by higher development spend 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 NGI program.

Selling, General, and Administrative

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Percentage of net sales 6.9 % 7.2 % 8.4 %

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 $0.3 billion in 2025 compared to 2024, primarily driven by higher employee-related costs and higher restructuring costs related to ongoing cost reduction efforts driven by various workforce reductions initiated in 2025 at Collins.

Selling, general, and administrative expenses in 2024 were relatively consistent compared to 2023.

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

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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 increase in Other income (expense), net of $0.5 billion in 2025 compared to 2024 was primarily due to a $0.2 billion gain on sale of the actuation and flight control business in the third quarter of 2025, a $0.1 billion gain on sale of the Simmonds Precision Products business in the fourth quarter of 2025, and $0.1 billion of gains related to the increase in fair value on investments in 2025.

The increase in Other income (expense), net in 2025 compared to 2024 also benefited from the absence of a $0.9 billion charge related to the Resolution of Certain Legal Matters in 2024, partially offset by the absence of a prior year benefit of $0.4 billion gain on sale of the CIS business net of transaction and other related costs, a $0.2 billion benefit from a tax related indemnity receivable, a $0.1 billion gain on sale of Collin’s Goodrich Hoist & Winch business, and an insurance recovery at Pratt & Whitney of approximately $0.1 billion.

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.

This was partially offset by a $0.4 billion gain on 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 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.

Operating Profit

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Operating profit margin 10.5 % 8.1 % 5.2 %

The increase in Operating profit of $2.8 billion in 2025 compared to 2024 was primarily driven by an increase in the organic operating performance of our segments of $1.5 billion, a $0.2 billion gain on sale of the actuation and flight control business in 2025, and a $0.1 billion gain on sale of the Simmonds Precision Products business in the fourth quarter of 2025.

The increase in Operating profit in 2025 compared to 2024 also benefited from the absence of 2024 charges, including a $0.9 billion charge related to the Resolution of Certain Legal Matters, a $0.6 billion charge related to the Raytheon Contract Termination, and charges of $0.2 billion at Collins as a result of initiating alternative titanium sources.

These increases were partially offset by the absence of prior year benefits including a $0.4 billion gain on sale of the CIS business, net of transaction and other related costs and a $0.2 billion benefit from a tax related indemnity receivable.

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.”

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.”

Non-service Pension Income

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Non-service pension income $ (1,182) $ (1,518) $ (1,780)

The change in Non-service pension income of $0.3 billion in 2025 compared to 2024 was primarily driven by a $0.3 billion settlement charge recorded in fourth quarter of 2025 associated with the annuity buy-out conversion.

See “Note 10:

Employee Benefit Plans” within Item 8 of this Form 10-K for further discussion.

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.

Interest Expense, Net

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(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 decreased $0.1 billion in 2025 compared to 2024, primarily driven by debt repayments in 2025.

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.

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.

2025 2024 2023

Effective income tax rate 19.1 % 19.1 % 11.9 %

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.

Although the 2025 and 2024 effective tax rates are the same, the 2025 effective rate reflects a lower U.S.

tax benefit associated with Foreign Derived Intangible Income resulting from the Act.

Both periods include tax benefits associated with certain legal entity reorganizations and the tax effects of dispositions.

The 2024 effective tax rate includes tax benefits of $0.3 billion 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.

Also included in the 2024 effective tax rate is a $0.2 billion tax charge related to U.S.

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

tax ruling Otis received in 2024.

The ruling reduces U.S.

The ruling Otis received 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.

This item is 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 $0.2 billion for a portion of the indemnity owed by Otis to the Company for the reduction in foreign taxes in the pre-separation years.

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

The 2023 effective tax rate includes a deferred tax benefit of $0.7 billion associated with the $2.9 billion Powder Metal Matter pre-tax charge.

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

Income Taxes” within Item 8 of this Form 10-K.

Net Income from Continuing Operations Attributable to Common Shareowners

(dollars in millions, except per share amounts) 2024 2023 2022

Net income from continuing operations attributable to common shareowners $ 4,774 $ 3,195 $ 5,216

Diluted earnings per share from continuing operations $ 3.55 $ 2.23 $ 3.51

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

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

• 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;

• 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 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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Net income attributable to common shareowners $ 6,732 $ 4,774 $ 3,195

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 2024 compared to 2023 and for 2023 compared to 2022 were driven by the changes in continuing operations, as discussed above.

Diluted earnings per share $ 4.96 $ 3.55 $ 2.23

Net income attributable to common shareowners for 2025 includes the following:

• acquisition accounting adjustments of $1.6 billion, net of tax, which had an unfavorable impact on diluted earnings per share (EPS) of $1.15;

• a pension settlement charge of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS of $0.15;

• restructuring charges of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS of $0.14.

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

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

• 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 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 of $0.33;

• 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 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 of $0.13;

• restructuring charges of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS 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 of $0.09;

Net income 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 of $1.55;

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

• restructuring charges of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS 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 of $0.08.

SEGMENT REVIEW

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

(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.

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

8 unchanged sentences

Net EAC adjustments $ (386) $ (473) $ (648)

The change in net EAC adjustments of $0.1 billion in 2025 compared to 2024 was primarily due to favorable changes in net EAC adjustments at Raytheon, partially offset by unfavorable changes in net EAC adjustments at Pratt & Whitney.

The change at Raytheon benefited from the absence of a $53 million unfavorable adjustment in the third quarter of 2024, with the remaining change spread across numerous individual programs.

The unfavorable changes at Pratt & Whitney were spread across numerous programs, with no individual or common significant driver.

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.

4 unchanged sentences

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.

Additionally, during the second quarter of 2024, Raytheon recognized a $0.6 billion charge related to the impact of the Raytheon Contract 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.

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 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.

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

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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.

Defense bookings were approximately $61 billion in both 2025 and 2024 and $51 billion in 2023.

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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2025 Compared with 2024

The organic net sales increase of $2.6 billion in 2025 compared to 2024 primarily relates to higher commercial aerospace aftermarket sales of $1.4 billion, higher defense sales of $0.7 billion and higher commercial OEM sales of $0.5 billion.

The increase in commercial aftermarket sales was driven by higher volume across all aftermarket sales channels.

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

The increase in commercial OEM sales was primarily driven by higher volume on widebody and narrowbody.

The organic operating profit increase of $0.5 billion in 2025 compared to 2024 was primarily due to higher commercial aerospace operating profit of $0.3 billion, principally driven by the higher sales volume discussed above, partially offset by the impact of tariffs and unfavorable commercial OEM mix.

Defense operating profit increased $0.1 billion in 2025 compared to 2024 due to higher sales volume.

Lower research and development expenses were partially offset by higher selling, general and administrative expenses.

The decrease in net sales due to Acquisitions/Divestitures, net from 2025 compared to 2024 primarily relates to the sale of the actuation and flight control business completed in 2025, the sale of Simmonds Precision Products completed in 2025, and the sale of the Goodrich Hoist & Winch business completed in 2024.

The increase in Other operating profit of $0.5 billion in 2025 compared to 2024 primarily relates to higher net gains on the sale of businesses, as referenced above, of $0.3 billion in 2025 as compared to $0.1 billion in 2024.

The increase is also driven by the absence of $0.2 billion of charges recorded in 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, and the absence of a $0.2 billion charge related to the impairment of contract fulfillment costs due to a contract cancellation recognized in 2024.

The increase in restructuring costs from 2025 compared to 2024 relates to ongoing cost reduction efforts driven by various workforce reductions initiated in 2025.

2024 Compared with 2023

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 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 widebody and regional aircraft, partially offset by decreased OEM volume in narrowbody aircraft.

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

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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 $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.

This increase in commercial aerospace operating profit was partially offset by $0.2 billion of higher selling, general, and administrative expenses and research and developments costs primarily due to increased employee-related costs.

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 $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.

Defense Bookings – In 2025, Collins recorded $12 billion in defense bookings, comprised of a number of smaller individual bookings under $0.5 billion.

Pratt & Whitney

11 unchanged sentences

Net sales $ 4,810 $ — $ — $ 40 $ 4,850

Operating profit (loss) 559 — (28) 2,939 3,470

Operating profit 448 — 81 52 581

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

13 unchanged sentences

2025 Compared with 2024

The organic net sales increase of $4.8 billion in 2025 compared to 2024 was primarily driven by higher commercial aftermarket sales of $2.9 billion primarily driven by higher volume.

Also contributing to the organic net sales increase was higher commercial OEM sales of $0.9 billion driven by favorable mix and higher volume.

Military sales increased $1.0 billion, primarily due to higher production volume on the F135 program.

The organic operating profit increase of $0.4 billion in 2025 compared to 2024 reflects higher commercial aerospace operating profit of $0.5 billion and higher military operating profit of $0.2 billion.

Higher commercial aftermarket volume and favorable commercial OEM mix more than offset the impacts of unfavorable aftermarket mix and higher tariffs and production costs.

The increase in military operating profit was driven by the higher sales volume discussed above, as well as favorable mix and the absence of an unfavorable EAC adjustment of approximately $50 million in the fourth quarter of 2024, partially offset by higher production costs.

These increases were partially offset by higher selling and general administrative expenses of $0.2 billion and the absence of a fourth quarter 2024 insurance recovery of approximately $0.1 billion.

The increase in Other operating profit in 2025 compared to 2024 primarily relates to a customer bankruptcy charge of $0.1 billion in 2025 compared to a $0.2 billion charge in 2024.

2024 Compared with 2023

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.

The Other net sales decrease of $5.4 billion in 2024 compared to 2023 was 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 (loss) 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.

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.

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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.

Military sales increased $0.3 billion, primarily due to higher F135 sustainment volume.

The Other net sales decrease of $5.4 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.

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 $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 $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 $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 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.

Defense Bookings – In 2025, Pratt & Whitney recorded $9 billion in defense bookings.

In addition to a number of smaller individual bookings, Pratt & Whitney booked $2.9 billion for F135 production and $2.4 billion for F135 sustainment.

(dollars in millions) 2025 2024 2023 2025 compared with 2024 2024 compared with 2023

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2025 Compared with 2024

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.

The organic net sales increase of $1.7 billion in 2025 compared to 2024 was primarily due to higher net sales of $1.6 billion from land and air defense systems programs driven by higher net sales on Patriot programs, international National Advanced Surface-to-Air Missile System (NASAMS) programs, and Lower Tier Air and Missile Defense Sensor (LTAMDS) programs.

Also contributing to the increase was higher net sales of $0.7 billion from naval power programs primarily due to higher net sales on Evolved SeaSparrow Missile (ESSM) programs, SPY-6 radar programs, and certain classified programs.

These increases were partially offset by lower net sales of $0.3 billion within air and space defense systems, primarily driven by lower development program volume partially offset by higher net sales on advanced medium-range air-to-air missile (AMRAAM) programs.

Additionally, the organic net sales increase was partially offset by the absence of $0.3 billion of sales recognized in the fourth quarter of 2024 associated with the restart of certain contracts with a Middle East customer.

The increase in Other net sales of $0.1 billion in 2025 compared to 2024 was primarily driven by the absence of $0.1 billion charge related to Raytheon Contract Termination initiated in the second quarter of 2024.

The organic operating profit increase of $0.6 billion in 2025 compared to 2024 was primarily due to a favorable change in mix and other performance of $0.3 billion, a favorable change in net EAC adjustments of $0.2 billion and higher volume of approximately $0.1 billion.

The favorable change in mix and other performance was primarily driven by increased production

on Patriot programs.

The favorable change in net EAC adjustments was spread across numerous programs and benefited from the absence of a $53 million unfavorable adjustment in the third quarter of 2024 related to cost increases on a classified program.

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

The decrease in net sales and operating profit due to Acquisitions / Divestitures, net in 2025 compared to 2024 primarily relates to the sale of the CIS business completed in the first quarter of 2024.

The increase in Other operating profit of $0.1 billion in 2025 compared to 2024 was primarily due to the absence of a $0.6 billion charge related to the Raytheon Contract Termination initiated in the second quarter of 2024, partially offset by the absence of a $0.4 billion gain on 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.

2024 Compared with 2023

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 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.

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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 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 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 first quarter of 2023.

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

Defense Backlog and Bookings – Backlog was $75 billion at December 31, 2025 compared to $63 billion at December 31, 2024.

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.

In 2025, Raytheon recorded $40 billion in defense bookings.

In addition to a number of smaller individual bookings, Raytheon booked $2.5 billion on several contracts to provide Guidance Enhanced Missiles (GEM-T) and Patriot launchers for international customers and the U.S.

Army, $2.1 billion to provide AMRAAM to the U.S.

Air Force, U.S.

Navy, and international customers, $1.5 billion for low-rate initial production (LRIP) of LTAMDS for the U.S.

Army and Poland, $1.2 billion for Iron Dome Tamir production for an international customer, $1.2 billion to provide Patriot systems for Spain, $1.1 billion for AIM-9X Sidewinder Block II short-range air-to-air missiles for the U.S.

Navy and international customers, $901 million to provide Standard Missile-3 (SM-3) for the Missile Defense Agency (MDA), $647 million for a SPY-6 Hardware Production and Sustainment contract for the U.S.

Navy, $581 million for Next Generation Jammer Mid-Band (NGJ-MB) for the U.S.

Navy and the Royal Australian Air Force, $556 million to provide NASAMS to an international customer, $529 million to provide Patriot systems for the Netherlands, $517 million to provide Stinger missiles to the U.S.

Army and international customers, $513 million to provide Tomahawk to the U.S.

Navy, and $5.9 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, 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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The increase in eliminations and other net sales of $0.2 billion in 2025 compared to 2024 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 change in eliminations and other operating profit of $0.1 billion in 2025 compared to 2024 was primarily due to gains related to the increase in fair value on investments recognized in 2025.

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 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.

The change in corporate expenses and other unallocated items of $0.7 billion in 2025 compared to 2024 was primarily due to the absence of a $0.9 billion charge related to the Resolution of Certain Legal Matters recorded in the second quarter of 2024 related to the Resolution of Certain Legal Matters, partially offset by higher selling, general and administrative expenses of $0.1 billion in 2025 and the absence of 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 $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.

FAS/CAS operating adjustment

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FAS/CAS operating adjustment $ 753 $ 833 $ 1,127

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.

Similarly, the decrease in FAS service cost was primarily due to changes to the Raytheon Company domestic pension plans announced in December 2020 that were effective December 31, 2022.

Refer to “Note 10:

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 $0.1 billion in 2025 compared to 2024 was driven by a decrease in CAS expense, primarily due to increases in the applicable CAS discount rates and reductions in administrative expenses paid by the pension plans.

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.

Acquisition accounting adjustments

Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant, and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss-making or below-market contracts acquired, and goodwill impairment, if applicable.

customer contractual obligations related to loss-making or below-market contracts acquired, and goodwill impairment, if applicable.

These adjustments are not considered part of management’s evaluation of segment results.

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Acquisition accounting adjustments $ (2,005) $ (2,058) $ (1,998)

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.

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, 2025, we had cash and cash equivalents of $7.4 billion, of which 33% was held by RTX’s foreign subsidiaries.

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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.

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

In March 2025, our Moody’s Investors Service outlook improved from Baa1/negative to Baa1/stable.

In June 2025, our S&P Global rating was affirmed and our outlook was revised from BBB+/negative to BBB+/stable.

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.

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We had no commercial paper borrowings outstanding at December 31, 2025.

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

During 2025, 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

December 17, 2025 3 Month SOFR plus 1.225% Term Loan due 2026

August 18, 2025 3.950% notes due 2025

May 7, 2025 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 18, 2025, for an indeterminate amount of debt and equity securities for future issuance, subject to our internal limitations on the amount of debt to be issued under this shelf registration statement.

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(dollars in millions) 2025 2024 2023

Net cash flows provided by operating activities from continuing operations $ 7,159 $ 7,883 $ 7,168

Net cash flows provided by operating activities $ 10,567 $ 7,159 $ 7,883

2025 Compared with 2024 Operating Activities

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.

Included within Net income for 2024 was a $0.9 billion charge related to the Resolution of Certain Legal Matters and a $0.4 billion, net of tax, charge related to the Raytheon Contract Termination.

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

The $3.4 billion increase in cash flows provided by operating activities in 2025 compared to 2024 was primarily driven by higher net income after adjustments to reconcile to net cash provided by operating activities driven by our segment performance, an increase in accounts payable and accrued liabilities due to the timing of collaborator payables, and the benefit of lower inventory growth.

These increases were partially offset by an increase in accounts receivable due to higher volume and timing of collections.

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

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

Factoring activity resulted in a $0.1 billion decrease in cash provided by operating activities in 2025 compared to 2024 .

2024 Compared with 2023 Operating Activities

Net income 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 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.

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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.

These favorable changes were partially offset by higher accounts receivable as a result of increased sales volume and timing of collections and a decrease in factoring.

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 $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

Excluding the charges discussed above, higher net income 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 CIS business, net of transaction costs also contributed to an increase in net cash flows provided by operating activities 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, primarily related to customer facilitated programs.

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

Factoring activity resulted in a $0.9 billion increase in cash provided by operating activities in 2024, compared to 2023.

Operating Activities

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 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.

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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We made net income tax payments of $1.6 billion, $1.2 billion, and $1.5 billion in 2025, 2024, and 2023, respectively.

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

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

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

The 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 from continuing operations are payments related to our operating lease obligations.

See “Note 12:

Income Taxes” within Item 8 of this Form 10-K for further discussion.

Included in cash flows from operating activities 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 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.

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

We expect future payments related to our purchase obligations to be approximately $47 billion, of which $29 billion is payable in 2026.

Purchase obligations include current amounts committed for the purchase of goods and services under legally enforceable contracts or purchase orders, and do not represent our entire anticipated purchases in the future.

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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.

In both 2025 and 2024, we utilized $1.0 billion of the accrual through cash payments and credits issued to customers.

We currently estimate a full year 2026 cash impact related to the Powder Metal Matter of approximately $0.7 billion, which includes the impact of cash paid, customer credits applied and the timing of partner recovery.

Cash Flow - Investing Activities

(dollars in millions) 2025 2024 2023

Net cash flows used in investing activities from continuing operations $ (1,534) $ (3,039) $ (2,829)

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

Net cash flows used in investing activities $ (1,265) $ (1,534) $ (3,039)

2025 Compared with 2024 Investing Activities

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.

The $0.3 billion change in cash flows used in investing activities in 2025 compared to 2024 primarily related to higher receipts from settlements of derivative contracts of $0.3 billion.

Also contributing to the change was a $0.1 billion increase in net proceeds received from divestitures.

In 2025, we received $1.2 billion from the actuation and flight control business divestiture and $0.7 billion from the sale of the Simmonds Precision Products business as compared to $1.3 billion from the CIS divestiture and $0.5 billion from the Goodrich Hoist & Winch divestiture in 2024.

2024 Compared with 2023 Investing Activities

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.

The $1.5 billion change in cash flows used in investing activities 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.

Investing Activities

There were no significant acquisitions in 2025, 2024, or 2023.

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

For information on dispositions of businesses in 2025, 2024, or 2023, see above and “Note 2:

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

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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 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

(dollars in millions) 2025 2024 2023

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

Net cash flows used in financing activities $ (7,486) $ (6,617) $ (4,527)

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.

2025 Compared with 2024 Financing Activities

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.

The $0.9 billion increase in cash flows used in financing activities in 2025 compared to the 2024 was primarily driven by higher year-over-year long-term debt repayments of $0.9 billion.

Refer to “Note 9:

Borrowings and Lines of Credit” within Item 8 of this Form 10-K for additional information on debt repayments.

Additionally, lower share repurchases were more than offset by higher dividends paid in 2025 as compared to 2024.

2024 Compared with 2023 Financing Activities

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.

The $2.1 billion increase in cash flows used in financing activities in 2024 compared to 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.

Financing Activities

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:

Included in cash flows from financing activities 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, as of December 31, 2025 was as follows:

Payments Due by Period

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(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:

(dollars in millions, except per share amounts) 2024 2023 2022

Dividends paid per share of common stock $ 2.480 $ 2.320 $ 2.160

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

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.

Pursuant to the ASR agreements entered into in 2023, the shares associated with the remaining portion of the aggregate purchase price have been settled over two tranches.

In July 2024, the first tranche was settled upon final delivery to us of approximately 0.4 million shares of common stock.

In September 2024, with respect to the second tranche, we owed approximately 2.2 million shares of common stock that we elected to cash settle for $261 million.

The cash payment required as a result of the second tranche settlement was due to the significant increase in the price of our common stock during the ASR term.

The final average price under the ASR was $94.28 per share.

On February 6, 2026, the Board of Directors declared a dividend of $0.68 per share payable March 19, 2026 to shareowners of record at the close of business on February 20, 2026.

CRITICAL ACCOUNTING ESTIMATES

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For significant contracts, we review our EACs more frequently.

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

Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is

complex, subject to many inputs, and requires significant judgment by management on a contract by contract basis.

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

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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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Total net sales $ (208) $ (144) $ (452)

Operating profit (loss) (473) (648) (37)

Income (loss) from continuing operations attributable to common shareowners (1)

Operating profit (386) (473) (648)

Net income attributable to common shareowners (1)

(305) (374) (512)

Diluted earnings (loss) per share from continuing operations attributable to common shareowners (1)

Diluted earnings per share attributable to common shareowners (1)

$ (0.22) $ (0.28) $ (0.36)

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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 recognized a $0.6 billion charge related to the impact of the Raytheon Contract Termination.

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

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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.

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

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

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Valuation allowances related to deferred tax assets can be affected by changes to tax laws, changes to statutory tax rates, and future taxable income levels.

In the event we were to determine that we would not be able to realize all or a portion of our deferred tax assets in the future, we would reduce such amounts through an increase to tax expense in the period in which that determination is made or when tax law changes are enacted.

In the event we were to determine that we would not be able to realize all or a portion of our deferred tax assets in the future, we would

reduce such amounts through an increase to tax expense in the period in which that determination is made or when tax law changes are enacted.

Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net carrying amounts, we would decrease the recorded valuation allowance through a decrease to tax expense in the period in which that determination is made.

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Adjustments to our tax positions are made as new information becomes available or when our assessments change.

In addition, we have entered into certain internal legal entity restructuring transactions necessary to effectuate the separation of Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis).

We have accrued tax on these transactions based on our interpretation of the applicable tax laws and our determination of appropriate entity valuations.

Basis of Presentation and Summary of Accounting Principles” and “Note 12:

Income Taxes” within Item 8 of this Form 10-K for further discussion.

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.

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.

Goodwill and Intangible Assets.

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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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At December 31, 2025 and 2024, we had other accrued liabilities of $0.7 billion and $1.7 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.

The decrease in the accrual in 2025 and 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.

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They are evaluated annually at December 31 and when significant events require a mid-year remeasurement.

A change in any of these assumptions or actual experience that differs from these assumptions are subject to recognition in pension and postretirement net periodic benefit (income) expense reported in the Consolidated Financial Statements.

Assumptions used in the accounting for these employee benefit plans require judgement.

Major assumptions include the discount rate and EROA.

Other assumptions include mortality rates, demographic assumptions (such as retirement age), rate of increase in employee compensation levels, and health care cost increase projections.

A change in any of these assumptions

or actual experience that differs from these assumptions are subject to recognition in pension and postretirement net periodic benefit (income) expense reported in the Consolidated Financial Statements.

Assumptions used in the accounting for these employee benefit plans require judgment.

Major assumptions include the discount rate and expected return on planned assets (EROA).

Other assumptions include actuarial and demographic assumptions including mortality rates, retirement age, and rate of increase in employee compensation levels.

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 pension income 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, 2025:

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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.

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 Department of Justice (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.

Under these DPAs 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 the DPAs and the SEC Administrative Order, and that monitor is expected to be in place by the end of the first quarter.

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

The Company appointed its SCO on September 27, 2024.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis