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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
____________________________________ 
FORM 10-Q
____________________________________ 
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2021
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-812001-00812
____________________________________ 
UNITEDRAYTHEON TECHNOLOGIES CORPORATION
____________________________________ 
DELAWAREDelaware06-0570975
10 Farm Springs Road, Farmington, Connecticut 06032
(860) 728-7000
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)


870 Winter Street,Waltham,Massachusetts02451
(Address of principal executive offices, including zip code)
(781)522-3000
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($1 par value)RTXNew York Stock Exchange
(CUSIP 75513E 101)
2.150% Notes due 2030RTX 30New York Stock Exchange
(CUSIP 75513E AB7)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒.    No  ¨☐.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒.    No  ¨☐.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒Accelerated Filer☐
Large accelerated filerNon-accelerated Filerý☐Accelerated filerSmaller Reporting Company¨☐
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting companyEmerging Growth Company¨
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐.    No  ý☒.
At September 30, 2017March 31, 2021 there were 798,569,9211,515,089,870 shares of Common Stock outstanding.




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UNITEDRAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended September 30, 2017March 31, 2021
 
Page
Page
34
Item 1. Unaudited Financial Statements:
34
Condensed Consolidated Statement of Operations for the quarters ended September 30, 2017March 31, 2021 and 20162020
34
Condensed Consolidated Statement of Operations for the nine months ended September 30, 2017 and 2016
4
Condensed Consolidated Statement of Comprehensive Income (Loss) for the quarters ended March 31, 2021 and nine months ended September 30, 2017 and 20162020
5
Condensed Consolidated Balance Sheet at September 30, 2017March 31, 2021 and December 31, 20162020
6
Condensed Consolidated Statement of Cash Flows for the nine monthsquarters ended September 30, 2017March 31, 2021 and 20162020
7
Condensed Consolidated Statement of Changes in Equity for the quarters ended March 31, 2021 and 2020
8
Notes to Condensed Consolidated Financial Statements
89
Report of Independent Registered Public Accounting Firm
2735
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
2836
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4453
Item 4. Controls and Procedures
4453
4655
Item 1. Legal Proceedings
4655
Item 1A. Risk Factors
4655
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
4756
Item 6. Exhibits
4857
4958


United
Raytheon Technologies Corporation and its subsidiaries'subsidiaries’ names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of UnitedRaytheon Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. As used herein, the terms "we," "us," "our," "the Company," or "UTC," unless the context otherwise requires, mean United Technologies Corporation and its subsidiaries. References to internet web sites in this Form 10-Q are provided for convenience only. Information available through these web sites is not incorporated by reference into this Form 10-Q.

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PART I – FINANCIAL INFORMATION


Item 1.
Item 1.    Financial Statements

UNITEDRAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Quarter Ended March 31,
Quarter Ended September 30,
(Dollars in millions, except per share amounts)2017 2016
(dollars in millions, except per share amounts)(dollars in millions, except per share amounts)20212020
Net Sales:   Net Sales:
Product sales$10,378
 $10,194
Product sales$11,664 $8,165 
Service sales4,684
 4,160
Service sales3,587 3,195 
15,062
 14,354
Total Net SalesTotal Net Sales15,251 11,360 
Costs and Expenses:   Costs and Expenses:
Cost of products sold7,750
 7,522
Cost of services sold3,293
 2,820
Cost of sales - productsCost of sales - products9,974 6,629 
Cost of sales - servicesCost of sales - services2,563 1,943 
Research and development582
 582
Research and development589 535 
Selling, general and administrative1,524
 1,390
Selling, general and administrative1,220 977 
Total Costs and ExpensesTotal Costs and Expenses14,346 10,084 
13,149
 12,314
Other income, net250
 211
Other income, net108 19 
Operating profit2,163
 2,251
Operating profit1,013 1,295 
Non-operating expense (income), netNon-operating expense (income), net
Non-service pension benefitNon-service pension benefit(491)(168)
Interest expense, net223
 225
Interest expense, net346 332 
Total non-operating expense (income), netTotal non-operating expense (income), net(145)164 
Income from continuing operations before income taxes1,940
 2,026
Income from continuing operations before income taxes1,158 1,131 
Income tax expense506
 492
Income tax expense345 639 
Net income from continuing operations1,434
 1,534
Net income from continuing operations813 492 
Less: Noncontrolling interest in subsidiaries' earnings from continuing operations104
 91
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operationsLess: Noncontrolling interest in subsidiaries’ earnings from continuing operations41 54 
Income from continuing operations attributable to common shareowners1,330
 1,443
Income from continuing operations attributable to common shareowners772 438 
Discontinued operations (Note 2):   
Income from operations—
 1
Loss on disposal—
 (4)
Income tax benefit—
 40
Income from discontinued operations attributable to common shareowners—
 37
Net income attributable to common shareowners$1,330
 $1,480
Earnings Per Share of Common Stock - Basic:   
Income from continuing operations attributable to common shareowners$1.69
 $1.76
Net income attributable to common shareowners$1.69
 $1.80
Earnings Per Share of Common Stock - Diluted:   
Income from continuing operations attributable to common shareowners$1.67
 $1.74
Net income attributable to common shareowners$1.67
 $1.78
Discontinued operations (Note 3):Discontinued operations (Note 3):
Loss from discontinued operations, before taxLoss from discontinued operations, before tax(20)(176)
Income tax (benefit) expense from discontinued operationsIncome tax (benefit) expense from discontinued operations(1)302 
Net loss from discontinued operationsNet loss from discontinued operations(19)(478)
Less: Noncontrolling interest in subsidiaries’ earnings from discontinued operationsLess: Noncontrolling interest in subsidiaries’ earnings from discontinued operations0 43 
Loss from discontinued operations attributable to common shareownersLoss from discontinued operations attributable to common shareowners(19)(521)
Net income (loss) attributable to common shareownersNet income (loss) attributable to common shareowners$753 $(83)
Earnings (loss) Per Share attributable to common shareowners - Basic:Earnings (loss) Per Share attributable to common shareowners - Basic:
Income from continuing operationsIncome from continuing operations$0.51 $0.51 
Loss from discontinued operationsLoss from discontinued operations(0.01)(0.61)
Net income (loss) attributable to common shareownersNet income (loss) attributable to common shareowners$0.50 $(0.10)
Earnings (loss) Per Share attributable to common shareowners - Diluted:Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operationsIncome from continuing operations$0.51 $0.50 
Loss from discontinued operationsLoss from discontinued operations(0.01)(0.60)
Net income (loss) attributable to common shareownersNet income (loss) attributable to common shareowners$0.50 $(0.10)
See accompanying Notes to Condensed Consolidated Financial Statements

UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
4
 Nine Months Ended September 30,
(Dollars in millions, except per share amounts)2017 2016
Net Sales:   
Product sales$30,676
 $30,247
Service sales13,481
 12,338
 44,157
 42,585
Costs and Expenses:   
Cost of products sold22,920
 22,542
Cost of services sold9,300
 8,195
Research and development1,768
 1,711
Selling, general and administrative4,544
 4,204
 38,532
 36,652
Other income, net1,095
 600
Operating profit6,720
 6,533
Interest expense, net662
 673
Income from continuing operations before income taxes6,058
 5,860
Income tax expense1,624
 1,548
Net income from continuing operations4,434
 4,312
Less: Noncontrolling interest in subsidiaries' earnings from continuing operations279
 271
Income from continuing operations attributable to common shareowners4,155
 4,041
Discontinued operations (Note 2):   
Income from operations—
 2
Gain on disposal—
 11
Income tax expense—
 (12)
Income from discontinued operations attributable to common shareowners—
 1
Net income attributable to common shareowners$4,155
 $4,042
Earnings Per Share of Common Stock - Basic:   
Income from continuing operations attributable to common shareowners$5.26
 $4.90
Net income attributable to common shareowners$5.26
 $4.91
Earnings Per Share of Common Stock - Diluted:   
Income from continuing operations attributable to common shareowners$5.20
 $4.86
Net income attributable to common shareowners$5.20
 $4.86
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See accompanying Notes to Condensed Consolidated Financial Statements


UNITEDRAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)


 
Quarter Ended
September 30,
 
Nine Months Ended
September 30,
(Dollars in millions)2017 2016 2017 2016
Net income from continuing operations$1,434
 $1,534
 $4,434
 $4,312
Net income from discontinued operations—
 37
 —
 1
Net income1,434
 1,571
 4,434
 4,313
Other comprehensive income (loss), net of tax (expense) benefit:       
Foreign currency translation adjustments       
Foreign currency translation adjustments arising during period514
 (359) 909
 (596)
Less: Reclassification adjustments for gain on sale of an investment in a foreign entity recognized in Other income, net(3) (1) (3) —
 511
 (360) 906
 (596)
Pension and postretirement benefit plans       
Pension and postretirement benefit plans adjustments during the period(50) 7
 (54) (30)
Amortization of actuarial loss and prior service cost132
 127
 395
 381
 82
 134
 341
 351
Tax expense(53) (50) (149) (131)
 29
 84
 192
 220
Unrealized gain (loss) on available-for-sale securities       
Unrealized holding gain (loss) arising during period19
 49
 17
 139
Reclassification adjustments for gain included in Other income, net(138) (20) (545) (72)
 (119) 29
 (528) 67
Tax benefit (expense)43
 (11) 199
 (25)
 (76) 18
 (329) 42
Change in unrealized cash flow hedging       
Unrealized cash flow hedging gain (loss) arising during period310
 (7) 440
 188
(Gain) loss reclassified into Product sales(24) 32
 (14) 139
 286
 25
 426
 327
Tax expense(73) (7) (105) (87)
 213
 18
 321
 240
Other comprehensive income (loss), net of tax677
 (240) 1,090
 (94)
Comprehensive income2,111
 1,331
 5,524
 4,219
Less: Comprehensive income attributable to noncontrolling interest(144) (96) (362) (287)
Comprehensive income attributable to common shareowners$1,967
 $1,235
 $5,162
 $3,932
Quarter Ended March 31,
(dollars in millions)20212020
Net income from continuing and discontinued operations$794 $14 
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments(176)(1,453)
Pension and postretirement benefit plans adjustments54 110 
Change in unrealized cash flow hedging(60)(374)
Other comprehensive income (loss), before tax(182)(1,717)
Income tax (expense) benefit related to items of other comprehensive income (loss)(5)70 
Other comprehensive income (loss), net of tax(187)(1,647)
Comprehensive income (loss)607 (1,633)
Less: Comprehensive income attributable to noncontrolling interest41 91 
Comprehensive income (loss) attributable to common shareowners$566 $(1,724)
See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions)September 30, 2017 December 31, 2016
(dollars in millions)(dollars in millions)March 31, 2021December 31, 2020
Assets   Assets
Current AssetsCurrent Assets
Cash and cash equivalents$8,523
 $7,157
Cash and cash equivalents$8,579 $8,802 
Accounts receivable, net13,128
 11,481
Accounts receivable, net10,037 9,254 
Inventories and contracts in progress, net10,083
 8,704
Contract assetsContract assets10,238 9,931 
Inventory, netInventory, net9,498 9,411 
Other assets, current1,229
 1,208
Other assets, current4,200 5,978 
Total Current Assets32,963
 28,550
Total Current Assets42,552 43,376 
Customer financing assets2,184
 1,398
Customer financing assets3,079 3,144 
Future income tax benefits1,723
 1,809
Fixed assets20,975
 19,469
Fixed assets26,554 26,346 
Less: Accumulated depreciation(11,212) (10,311)
Accumulated depreciationAccumulated depreciation(11,812)(11,384)
Fixed assets, net9,763
 9,158
Fixed assets, net14,742 14,962 
Operating lease right-of-use assetsOperating lease right-of-use assets1,913 1,880 
Goodwill27,916
 27,059
Goodwill54,265 54,285 
Intangible assets, net15,955
 15,684
Intangible assets, net39,999 40,539 
Other assets5,848
 6,048
Other assets4,058 3,967 
Total Assets$96,352
 $89,706
Total Assets$160,608 $162,153 
Liabilities and Equity   
Liabilities, Redeemable Noncontrolling Interest and EquityLiabilities, Redeemable Noncontrolling Interest and Equity
Current LiabilitiesCurrent Liabilities
Short-term borrowings$1,077
 $601
Short-term borrowings$234 $247 
Accounts payable8,999
 7,483
Accounts payable9,182 8,639 
Accrued liabilities13,053
 12,219
Accrued employee compensationAccrued employee compensation2,511 3,006 
Other accrued liabilitiesOther accrued liabilities10,184 10,517 
Contract liabilitiesContract liabilities12,879 12,889 
Long-term debt currently due2,120
 1,603
Long-term debt currently due1,369 550 
Total Current Liabilities25,249
 21,906
Total Current Liabilities36,359 35,848 
Long-term debt24,063
 21,697
Long-term debt29,935 31,026 
Operating lease liabilities, non-currentOperating lease liabilities, non-current1,552 1,516 
Future pension and postretirement benefit obligations3,227
 5,612
Future pension and postretirement benefit obligations9,808 10,342 
Other long-term liabilities11,693
 11,026
Other long-term liabilities9,612 9,537 
Total Liabilities64,232
 60,241
Total Liabilities87,266 88,269 
Commitments and contingent liabilities (Note 15)
 
Commitments and contingencies (Note 17)Commitments and contingencies (Note 17)00
Redeemable noncontrolling interest429
 296
Redeemable noncontrolling interest34 32 
Shareowners' Equity:   
Shareowners’ Equity:Shareowners’ Equity:
Common Stock17,486
 17,285
Common Stock36,997 36,930 
Treasury Stock(35,575) (34,150)Treasury Stock(10,780)(10,407)
Retained earnings55,385
 52,873
Retained earnings49,460 49,423 
Unearned ESOP shares(88) (95)Unearned ESOP shares(46)(49)
Accumulated other comprehensive loss(7,327) (8,334)Accumulated other comprehensive loss(3,921)(3,734)
Total Shareowners' Equity29,881
 27,579
Total Shareowners’ EquityTotal Shareowners’ Equity71,710 72,163 
Noncontrolling interest1,810
 1,590
Noncontrolling interest1,598 1,689 
Total Equity31,691
 29,169
Total Equity73,308 73,852 
Total Liabilities and Equity$96,352
 $89,706
Total Liabilities, Redeemable Noncontrolling Interest and EquityTotal Liabilities, Redeemable Noncontrolling Interest and Equity$160,608 $162,153 
See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
(dollars in millions)(dollars in millions)20212020
Operating Activities:Operating Activities:
Net income from continuing operationsNet income from continuing operations$813 $492 
Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:
Depreciation and amortizationDepreciation and amortization1,123 728 
Deferred income tax provisionDeferred income tax provision153 392 
Stock compensation costStock compensation cost84 63 
Net periodic pension and other postretirement incomeNet periodic pension and other postretirement income(358)(130)
Change in:Change in:
Accounts receivableAccounts receivable(799)390 
Contract assetsContract assets(311)(349)
InventoryInventory(113)(395)
Other current assetsOther current assets(193)(208)
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities538 612 
Contract liabilitiesContract liabilities(56)(101)
Global pension contributionsGlobal pension contributions(7)(8)
Other operating activities, netOther operating activities, net(151)(354)
Net cash flows provided by operating activities from continuing operationsNet cash flows provided by operating activities from continuing operations723 1,132 
Investing Activities:Investing Activities:
Capital expendituresCapital expenditures(387)(325)
Investments in businessesInvestments in businesses(6)0 
Dispositions of businesses, net of cash transferred (Note 2)Dispositions of businesses, net of cash transferred (Note 2)1,049 0 
Increase in customer financing assets, netIncrease in customer financing assets, net(81)(88)
Increase in collaboration intangible assetsIncrease in collaboration intangible assets(32)(78)
Receipts (payments) from settlements of derivative contracts, netReceipts (payments) from settlements of derivative contracts, net49 (524)
Other investing activities, netOther investing activities, net(10)(25)
Net cash flows provided by (used in) investing activities from continuing operationsNet cash flows provided by (used in) investing activities from continuing operations582 (1,040)
Financing Activities:Financing Activities:
Distribution from discontinued operationsDistribution from discontinued operations0 17,207 
Repayment of long-term debtRepayment of long-term debt(286)(13,810)
Decrease in short-term borrowings, netDecrease in short-term borrowings, net(13)(663)
Proceeds from Common Stock issued under employee stock plansProceeds from Common Stock issued under employee stock plans1 6 
Dividends paid on Common StockDividends paid on Common Stock(705)(614)
Repurchase of Common StockRepurchase of Common Stock(375)(47)
Net transfers to discontinued operationsNet transfers to discontinued operations(5)(1,016)
Other financing activities, netOther financing activities, net(161)(23)
Net cash flows (used in) provided by financing activities from continuing operationsNet cash flows (used in) provided by financing activities from continuing operations(1,544)1,040 
Discontinued Operations:Discontinued Operations:
Net cash used in operating activitiesNet cash used in operating activities(5)(472)
Net cash used in investing activitiesNet cash used in investing activities0 (241)
Net cash provided by financing activitiesNet cash provided by financing activities5 322 
Nine Months Ended September 30,
(Dollars in millions)2017 2016
Operating Activities of Continuing Operations:   
Net income from continuing operations$4,434
 $4,312
Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities of continuing operations:   
Depreciation and amortization1,582
 1,456
Deferred income tax provision724
 273
Stock compensation cost145
 112
Change in:   
Accounts receivable(1,051) (636)
Inventories and contracts in progress(1,249) (810)
Other current assets78
 (27)
Accounts payable and accrued liabilities1,864
 774
Global pension contributions(2,008) (125)
Canadian government settlement(246) (237)
Other operating activities, net(1,163) (525)
Net cash flows provided by operating activities of continuing operations3,110
 4,567
Investing Activities of Continuing Operations:   
Capital expenditures(1,214) (1,043)
Investments in businesses(196) (535)
Dispositions of businesses37
 148
Proceeds from sale of investments in Watsco, Inc.596
 —
Increase in customer financing assets, net(525) (128)
Increase in collaboration intangible assets(290) (301)
Payments from settlements of derivative contracts(183) (29)
Other investing activities, net117
 (11)
Net cash flows used in investing activities of continuing operations(1,658) (1,899)
Financing Activities of Continuing Operations:   
Issuance of long-term debt4,044
 2,482
Repayment of long-term debt(1,587) (201)
Increase (decrease) in short-term borrowings, net400
 (63)
Proceeds from Common Stock issued under employee stock plans25
 6
Dividends paid on Common Stock(1,541) (1,561)
Repurchase of Common Stock(1,430) (528)
Other financing activities, net(204) (338)
Net cash flows used in financing activities of continuing operations(293) (203)
Discontinued Operations:   
Net cash used in operating activities—
 (2,486)
Net cash provided by investing activities—
 6
Net cash flows used in discontinued operations—
 (2,480)
Effect of foreign exchange rate changes on cash and cash equivalents208
 28
Net increase in cash, cash equivalents and restricted cash1,367
 13
Cash, cash equivalents and restricted cash, beginning of year7,189
 7,120
Net cash used in discontinued operationsNet cash used in discontinued operations0 (391)
Effect of foreign exchange rate changes on cash and cash equivalents from continuing operationsEffect of foreign exchange rate changes on cash and cash equivalents from continuing operations23 (19)
Effect of foreign exchange rate changes on cash and cash equivalents from discontinued operationsEffect of foreign exchange rate changes on cash and cash equivalents from discontinued operations0 (76)
Net (decrease) increase in cash, cash equivalents and restricted cashNet (decrease) increase in cash, cash equivalents and restricted cash(216)646 
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period8,832 4,961 
Cash, cash equivalents and restricted cash within assets related to discontinued operations, beginning of periodCash, cash equivalents and restricted cash within assets related to discontinued operations, beginning of period0 2,459 
Cash, cash equivalents and restricted cash, end of period8,556
 7,133
Cash, cash equivalents and restricted cash, end of period8,616 8,066 
Less: Restricted cash, included in Other assets33
 26
Less: Restricted cash, included in Other assets37 48 
Less: Cash, cash equivalents and restricted cash for discontinued operationsLess: Cash, cash equivalents and restricted cash for discontinued operations0 1,993 
Cash and cash equivalents, end of period$8,523
 $7,107
Cash and cash equivalents, end of period$8,579 $6,025 
See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
Quarter Ended March 31,
(dollars in millions, except per share amounts; shares in thousands)20212020
Equity beginning balance$73,852 $44,231 
Common Stock
Beginning balance36,930 23,019 
Common Stock plans activity67 81 
Purchase of subsidiary shares from noncontrolling interest, net0 (1)
Ending balance36,997 23,099 
Treasury Stock
Beginning balance(10,407)(32,626)
Common Stock plans activity0 4 
Common Stock repurchased(375)(43)
Other2 0 
Ending balance(10,780)(32,665)
Retained Earnings
Beginning balance49,423 61,594 
Net income (loss)753 (83)
Dividends on Common Stock(705)(614)
Dividends on ESOP Common Stock(11)(17)
Redeemable noncontrolling interest fair value adjustment0 1 
Other, including the adoption impact of ASU 2016-13 (Note 21)0 (55)
Ending balance49,460 60,826 
Unearned ESOP Shares
Beginning balance(49)(64)
Common Stock plans activity3 3 
Ending balance(46)(61)
Accumulated Other Comprehensive Income (Loss)
Beginning balance(3,734)(10,149)
Other comprehensive income (loss), net of tax(187)(1,639)
Ending balance(3,921)(11,788)
Noncontrolling Interest
Beginning balance1,689 2,457 
Net Income41 97 
Less: Redeemable noncontrolling interest net income(2)0 
Other comprehensive income (loss), net of tax0 (6)
Dividends attributable to noncontrolling interest(130)(58)
Capital contributions0 34 
Ending balance1,598 2,524 
Equity at March 31$73,308 $41,935 
Supplemental share information
Shares of Common Stock issued under employee plans, net1,043 2,050 
Shares of Common Stock repurchased5,197 330 
Dividends per share of Common Stock$0.475 $0.735 
See accompanying Notes to Condensed Consolidated Financial Statements
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RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The Condensed Consolidated Financial Statements at September 30, 2017March 31, 2021 and for the quarters ended March 31, 2021 and nine months ended September 30, 2017 and 20162020 are unaudited, butand in the opinion of management include all adjustments (consisting only of a normal recurring adjustments)nature necessary for a fair statement of the results for the interim periods. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the financial statements and notes in our Annual Report to Shareowners (2016 Annual Report) incorporated by reference in our2020 Annual Report on Form 10-K for calendar year 2016 (2016 Form 10-K).
Certain reclassifications have been made to the prior year10-K. In addition, we reclassified certain amounts to conform to our current period presentation.
Separation Transactions, Distributions and Raytheon Merger. On April 3, 2020, United Technologies Corporation (UTC) completed the current year presentation. As previously disclosed in our 2016 Form 10-K, in 2016 we early adopted Accounting Standards Update (ASU) 2016-15, Statementseparation of Cash Flows (Topic 230): Classificationits business into three independent, publicly traded companies – UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis) (the Separation Transactions). UTC distributed all of Certain Cash Receiptsthe outstanding shares of Carrier common stock and Cash Payments and ASU 2016-18, Statementall of Cash Flows (Topic 230): Restricted Cash. Amounts previously reportedthe outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the distributions (the Distributions) effective at 12:01 a.m., Eastern Time, on April 3, 2020. Immediately following the Separation Transactions and Distributions, on April 3, 2020, UTC and Raytheon Company completed their all-stock merger of equals transaction (the Raytheon Merger), pursuant to which Raytheon Company became a wholly-owned subsidiary of UTC and UTC was renamed Raytheon Technologies Corporation. As a result of these transactions, we now operate in four principal business segments: Collins Aerospace Systems (Collins Aerospace), Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).
UTC was determined to be the accounting acquirer in the Raytheon Merger, and, as a result, the financial statements of Raytheon Technologies include Raytheon Company’s financial position and results of operations for all periods subsequent to the completion of the Raytheon Merger on April 3, 2020. RIS and RMD follow a 4-4-5 fiscal calendar with a quarter end of April 4, 2021 while Collins Aerospace and nine monthsPratt & Whitney continue to use a quarter calendar end of March 31, 2021. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarter ended September 30, 2016March 31 with respect to RIS or RMD, we are referring to their April 4, 2021 fiscal quarter end. The historical results of Carrier and Otis are presented as discontinued operations and, as such, have been restatedexcluded from both continuing operations and segment results for all periods presented. Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.
Unless the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” “Raytheon Technologies,” and “RTC” mean United Technologies Corporation and its subsidiaries when referring to periods prior to the Raytheon Merger and to the combined company, Raytheon Technologies Corporation, when referring to periods after the Raytheon Merger. Unless the context otherwise requires, the terms “Raytheon Company,” or “Raytheon” mean Raytheon Company and its subsidiaries prior to the Raytheon Merger.
COVID-19 Pandemic. In 2020, the coronavirus disease 2019 (COVID-19) negatively impacted both the U.S. and global economy and our business and operations and the industries in which we operate. The continued disruption to air travel and commercial activities and the significant restrictions and limitations on businesses, particularly within the aerospace and commercial airline industries, have negatively impacted global supply, demand and distribution capabilities. In particular, the unprecedented decrease in air travel resulting from the COVID-19 pandemic has adversely affected our airline and airframer customers, and their demand for the products and services of our Collins Aerospace and Pratt & Whitney businesses. We continue to monitor these trends and are working closely with our customers to actively mitigate costs and adjust production schedules to accommodate these declines in demand. Our RIS and RMD businesses, although experiencing minor impacts, have not experienced significant business disruptions as required upon adoptiona result of the COVID-19 pandemic.
Given the significant reduction in business and leisure passenger air travel, the number of planes temporarily grounded, and continued travel restrictions that have resulted from the ongoing COVID-19 pandemic, and the resulting impacts on our customers and their business activities, we expect our future operating results, particularly those of our Collins Aerospace and Pratt & Whitney businesses, to continue to be negatively impacted when compared to pre-COVID-19 results. Our expectations regarding the COVID-19 pandemic and its potential financial impact are based on available information and assumptions that we believe are reasonable at this time; however, the actual financial impact is highly uncertain and subject to a wide range of factors and future developments. While we believe that the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, there is significant uncertainty with respect to the point at which commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels. While we have begun to see some indications that
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commercial air travel is recovering in certain areas of demand, other areas continue to lag. As a result, we continue to estimate that a full recovery may occur in 2023 or 2024. New information may emerge concerning the scope, severity and duration of the COVID-19 pandemic, as well as any worsening of the pandemic, the effect of mutating strains and whether additional outbreaks of the pandemic will continue to occur, actions to contain the pandemic’s spread or treat its impact, continued availability of vaccines, and their distribution, acceptance and efficacy, and governmental, business and individual personal actions taken in response to the pandemic (including restrictions and limitations on travel and transportation, and changes in leisure and business travel patterns and work environments) among others. Some of these ASUs. These restatements had an immaterial impact onactions and related impacts may be trends that continue in the Condensed Consolidated Financial Statements as of September 30, 2016, and forfuture even after the quarter and nine months then ended.pandemic no longer poses a significant public health risk.
Note 1:2: Acquisitions, Dispositions, Goodwill and Other Intangible Assets
Business AcquisitionsAcquisitions. As described above, on April 3, 2020, pursuant to the Agreement and Dispositions. DuringPlan of Merger dated June 9, 2019, as amended (the Raytheon Merger Agreement) UTC and Raytheon Company completed their previously announced all-stock merger of equals, following the nine months ended September 30, 2017, our investment in business acquisitions was $196 million, and consisted of a number of small acquisitions, primarily in our commercial businesses.
On September 4, 2017, we announced that we had entered into a merger agreement with Rockwell Collins, Inc. (Rockwell Collins), under which we agreed to acquire Rockwell Collins. Under the termscompletion by UTC of the Separation Transactions and Distributions. Raytheon Company (previously New York Stock Exchange (NYSE): RTN) shares ceased trading prior to the market open on April 3, 2020, and each share of Raytheon common stock was converted in the merger agreement, each Rockwell Collins shareowner willinto the right to receive $93.33 per share in cash and a fraction of a share2.3348 shares of UTC common stock previously traded on the NYSE under the ticker symbol “UTX.” Upon closing of the Raytheon Merger, UTC’s name was changed to “Raytheon Technologies Corporation,” and its shares of common stock began trading as of April 3, 2020 on the NYSE under the ticker symbol “RTX.”
Total consideration is calculated as follows:
(dollars in millions)Amount
Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards$33,067 
Fair value attributable to pre-merger service for replacement equity awards99 
Total merger consideration$33,166 
The fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards is calculated as follows:
(dollars and shares, in millions, except per share amounts and exchange ratio)Amount
Number of Raytheon Company common shares outstanding as of April 3, 2020277.3
Number of Raytheon Company stock awards vested as a result of the Raytheon Merger (1)
0.4
Total outstanding shares of Raytheon Company common stock and equity awards entitled to merger consideration277.7
Exchange ratio (2)
2.3348
Shares of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards648.4
Price per share of RTC common stock (3)
$51.00 
Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards$33,067 
(1)    Represents Raytheon Company stock awards that vested as a result of the Raytheon Merger, which is considered a “change in control” for purposes of the Raytheon 2010 Stock Plan. Certain Raytheon Company restricted stock awards and Raytheon Company restricted stock unit (RSU) awards, issued under the Raytheon 2010 Stock Plan vested on an accelerated basis as a result of the Raytheon Merger. Such vested awards were converted into the right to receive RTC common stock determined as the product of (1) the number of vested awards, and (2) the exchange ratio.
(2)    The exchange ratio is equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share2.3348 shares of UTC common stock for each share of Raytheon Company common stock in accordance with the Raytheon Merger Agreement.
(3)    The price per share of RTC common stock is based on the NYSE on eachRTC opening stock price as of April 3, 2020.
Allocation of Consideration Transferred to Net Assets Acquired. We accounted for the Raytheon Merger under the acquisition method and are required to measure identifiable assets acquired and liabilities assumed of the 20 consecutive trading days endingacquiree (Raytheon Company) at the fair values on the closing date. During the first quarter of 2021, based on the finalization of our valuation and internal reviews, we completed the purchase price allocation which resulted in a net increase to goodwill of $61 million during the quarter.
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The final purchase price allocation, net of cash acquired, for the acquisition was as follows:
(dollars in millions)
Cash and cash equivalents$3,208 
Accounts receivable1,997 
Inventory705 
Contract assets6,023 
Other assets, current940 
Fixed assets4,745 
Operating lease right-of-use assets950 
Intangible assets:19,130 
Customer relationships12,900 
Tradenames/trademarks5,430 
Developed technology800 
Other assets1,218 
Total identifiable assets acquired38,916 
Accounts payable1,477 
Accrued employee compensation1,492 
Other accrued liabilities1,921 
Contract liabilities3,002 
Long-term debt, including current portion4,700 
Operating lease liabilities, non-current portion738 
Future pension and postretirement benefit obligation11,607 
Other long-term liabilities2,368 
Total liabilities acquired27,305 
Total identifiable net assets11,611 
Goodwill21,589 
Redeemable noncontrolling interest(34)
Total consideration transferred$33,166 
Fair value adjustments to Raytheon Company’s identified assets and liabilities included an increase in fixed assets of $1.1 billion and an increase to future pension and postretirement benefit obligations of $3.6 billion, primarily related to remeasurement of the liability based on market conditions on the Raytheon Merger closing date. For further information, see “Note 10: Employee Benefit Plans.” In determining the fair value of identifiable assets acquired and liabilities assumed, a review was conducted for any significant contingent assets or liabilities existing as of the closing date. The assessment did not note any material contingencies related to existing legal or government action.
The fair values of the customer relationship intangible assets were determined by using a discounted cash flow valuation method, which is a form of the income approach. Under this approach, the estimated future cash flows attributable to the asset are adjusted to exclude the future cash flows that can be attributed to supporting assets, such as trade names or fixed assets. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant future cash flows, which require significant management judgement, included forecasted revenue growth rates, remaining developmental effort, operational performance including company specific synergies, program life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where appropriate, the net cash flows are probability-adjusted to reflect the uncertainties associated with the trading day immediately priorunderlying assumptions, including cancellation rates related to backlog, government demand for sole-source and recompete contracts and win rates for recompete contracts, as well as the closing date, (the “UTC Stock Price”), subjectrisk profile of the net cash flows utilized in the valuation. The probability-adjusted future cash flows are then discounted to adjustmentpresent value, using an appropriate discount rate that requires significant judgment by management. The customer relationship intangible assets are being amortized based on the pattern of economic benefits we expect to realize over the estimated economic life of the underlying programs. The fair value of the tradename intangible assets were determined utilizing the relief from royalty method which is a two-way collar mechanism as described below (the “Stock Consideration”).form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value, using forecasted revenue growth rate projections and a discount rate, respectively, that requires significant judgment by management. The cashtradename intangible assets have been determined to have an indefinite life. The developed technology intangible assets are being amortized based on the pattern of economic benefits.
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The intangible assets included above consist of the following:
(dollars in millions)Fair ValueUseful Life
Acquired customer relationships$12,900 25 years
Acquired tradenames5,430 Indefinite
Acquired developed technology800 5 to 7 years
Total identifiable intangible assets$19,130 
We also identified customer contractual obligations on loss making programs and UTC stock payable in exchange for each such sharerecorded liabilities of Rockwell Collins common stock are collectively$222 million related to these programs based on the “Merger Consideration.” The fraction ofdifference between the actual expected operating loss and a share of UTC common stock into which each such share of Rockwell Collins common stocknormalized operating profit. These liabilities will be converted isliquidated based on the “Exchange Ratio.” The Exchange Ratio will be determined based uponexpected pattern of expenses incurred on these contracts.
We recorded $21.6 billion of goodwill as a result of the UTC Stock Price. If the UTC Stock Price is greater than $107.01 but less than $124.37, the Exchange Ratio will be equalRaytheon Merger which primarily relates to the quotient of (i) $46.67 divided by (ii) the UTC Stock Price, which, in each case, will result in the Stock Consideration having a value equal to $46.67. If the UTC Stock Price is less than or equal to $107.01 or greater than or equal to $124.37, then a two-way collar mechanism will apply, pursuant to which, (x) if the UTC Stock Price is greater than or equal to $124.37, the Exchange Ratio will be fixed at 0.37525expected synergies from combining operations and the value of the Stock Consideration will be greater than $46.67, and (y) if the UTC Stock Price is less than or equal to $107.01, the Exchange Ratio will be fixed at 0.43613 and the valueexisting workforce. The goodwill generated as a result of the Stock Consideration will be less than $46.67. We currently expect thatRaytheon Merger is nondeductible for tax purposes.
Merger-Related Costs. Merger-related costs have been expensed as incurred. In the merger will be completedquarters ended March 31, 2021 and 2020, we recorded $17 million and $29 million, respectively, of transaction and integration costs, which are included in Selling, general and administrative expenses within the third quarterCondensed Consolidated Statement of 2018, subject to approval by Rockwell Collins’ shareowners, as well as other customary closing conditions, includingOperations.
Supplemental Pro-Forma Data. Raytheon Company’s results of operations have been included in RTC’s financial statements for the receipt of required regulatory approvals.
We anticipate that approximately $15 billion will be required to pay the aggregate cash portion of the Merger Consideration. We expect to fund the cash portion of the Merger Consideration through debt issuances and cash on hand. Additionally, we have entered into a $6.5 billion 364-day unsecured bridge loan credit agreement that would be funded only to the extent certain anticipated debt issuances are not completed priorperiod subsequent to the completion of the merger. We expectRaytheon Merger on April 3, 2020. The following unaudited supplemental pro-forma data presents consolidated information as if the Raytheon Merger had been completed on January 1, 2019. The pro-forma results were calculated by combining the results of Raytheon Technologies with the stand-alone results of Raytheon Company for the pre-acquisition periods, which were adjusted to assume approximately $7 billionaccount for certain costs that would have been incurred during this pre-acquisition period. The results below reflect Raytheon Technologies on a continuing operations basis, in order to more accurately represent the structure of existing Rockwell Collins long-term debt uponRaytheon Technologies after completion of the merger.Separation Transactions, the Distributions and the Raytheon Merger.

Quarter Ended March 31,
(dollars in millions, except per share amounts)2020
Net sales$18,451 
Income from continuing operations attributable to common shareowners1,239 
Basic earnings per share of common stock from continuing operations$0.82 
Diluted earnings per share of common stock from continuing operations0.82 
The unaudited supplemental pro-forma data above includes the following significant adjustments made to account for certain costs which would have been incurred if the acquisition had been completed on January 1, 2019, as adjusted for the applicable tax impact.
Quarter Ended March 31,
(dollars in millions)2020
Amortization of acquired Raytheon Company intangible assets, net (1)
$(270)
Amortization of fixed asset fair value adjustment (2)
(9)
Utilization of contractual customer obligation (3)
8 
Deferred revenue fair value adjustment (4)
(4)
Adjustment to non-service pension (income) expense (5)
239 
RTC/Raytheon fees for advisory, legal, accounting services (6)
35 
Adjustment to interest expense related to the Raytheon Merger, net (7)
9 
Elimination of deferred commission amortization (8)
5 
$13 
(1)    Reflects the additional amortization of the acquired Raytheon Company’s intangible assets recognized at fair value in purchase accounting and eliminates the historical Raytheon Company intangible asset amortization expense.
(2)    Reflects the amortization of the fixed asset fair value adjustment as of the acquisition date.
(3)    Reflects the additional amortization of liabilities recognized for certain acquired loss making contracts as of the acquisition date.
(4)    Reflects the difference between prepayments related to extended arrangements and the fair value of the assumed performance obligations as they are satisfied.
(5)    Represents the elimination of unamortized prior service costs and actuarial losses, as a result of fair value purchase accounting.
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(6)    Reflects the elimination of transaction-related fees incurred by RTC and Raytheon Company in connection with the Raytheon Merger and assumes all of the fees were incurred during the first quarter of 2019.
(7)    Reflects the amortization of the fair market value adjustment related to Raytheon Company.
(8)    Reflects the elimination of amortization recognized on deferred commissions that are eliminated in purchase accounting.
The unaudited supplemental pro-forma financial information does not reflect the potential realization of cost savings related to the integration of the two companies. Further, the pro-forma data should not be considered indicative of the results that would have occurred if the acquisition had been consummated on January 1, 2019, nor are they indicative of future results.
Dispositions. As discussed further in “Note 3: Discontinued Operations,” on April 2, 2020, Carrier and Otis entered into a Separation and Distribution Agreement with UTC (since renamed Raytheon Technologies Corporation), pursuant to which, among other things, UTC agreed to separate into three independent, publicly traded companies – UTC, Carrier and Otis and distribute all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020. UTC distributed 866,158,910 and 433,079,455 shares of common stock of Carrier and Otis, respectively in the Distributions. As a result of the Distributions, Carrier and Otis are now independent publicly traded companies.
In October 2020, we entered into a definitive agreement to sell our Forcepoint business, which we completed on January 8, 2021, for proceeds of $1.0 billion, net of cash transferred. At December 31, 2020, the related assets of approximately $1.9 billion and liabilities of approximately $855 million were accounted for as held for sale at fair value less cost to sell; however, Forcepoint did not qualify for presentation as discontinued operations. These held for sale assets and liabilities are presented in Other assets, current and Other accrued liabilities, respectively, on our December 31, 2020 Condensed Consolidated Balance Sheet. Assets held for sale included $1.4 billion of goodwill and intangible assets. A further breakout of major classes of assets and liabilities has not been provided as the assets and liabilities held for sale are not material. We did not recognize a pre-tax gain or loss within the Condensed Consolidated Statement of Operations related to the sale of Forcepoint. The results of Forcepoint were included in Eliminations and other in our segment results.
Goodwill. Changes in our goodwill balances for the nine monthsquarter ended September 30, 2017March 31, 2021 were as follows:
(dollars in millions)Balance as of January 1, 2021Acquisitions and DivestituresForeign Currency Translation and OtherBalance as of March 31, 2021
Collins Aerospace Systems$31,571 $0 $(98)$31,473 
Pratt & Whitney1,563 0 0 1,563 
Raytheon Intelligence & Space(1)
9,522 30 0 9,552 
Raytheon Missiles & Defense(1)
11,608 52 0 11,660 
Total Segments54,264 82 (98)54,248 
Eliminations and other21 0 (4)17 
Total$54,285 $82 $(102)$54,265 
(1)    In connection with the previously announced January 1, 2021 reorganization of RIS and RMD, goodwill of $282 million was allocated from RMD to RIS on a relative fair value basis and is reflected in the revised balances at January 1, 2021.
The Company reviews goodwill for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired.
In the first quarter of 2020, the company considered the deterioration in general economic and market conditions due to the COVID-19 pandemic to be a triggering event requiring us to reassess our goodwill and intangibles valuations as well as significant assumptions of future income from our underlying assets and potential changes in our liabilities, which resulted in no impairment to our goodwill at that time. We did not have a triggering event in the first quarter of 2021.
The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining the fair value of goodwill, including long-term revenue growth projections, profitability, discount rates, including changes to U.S. treasury rates and equity risk premiums, recent market valuations from transactions by comparable companies, volatility in the Company’s market capitalization, and general industry, market and macro-economic conditions. It is possible that future changes in such circumstances, including significant future negative developments in the COVID-19 pandemic, or future changes in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of our reporting units, including the expected long-term recovery of airline travel to pre-COVID-19 levels, would require the Company to record a non-cash impairment charge.
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(Dollars in millions)Balance as of
January 1, 2017		 
Goodwill 
Resulting from Business Combinations
 Foreign Currency Translation and Other Balance as of September 30, 2017
Otis$1,575
 $3
 $114
 $1,692
UTC Climate, Controls & Security9,487
 110
 443
 10,040
Pratt & Whitney1,511
 —
 —
 1,511
UTC Aerospace Systems14,483
 —
 187
 14,670
Total Segments27,056
 113
 744
 27,913
Eliminations and other3
 —
 —
 3
Total$27,059
 $113
 $744
 $27,916
Intangible Assets. Identifiable intangible assets are comprised of the following:
 March 31, 2021December 31, 2020
(dollars in millions)Gross AmountAccumulated
Amortization		Gross AmountAccumulated
Amortization
Amortized:
Patents and trademarks$48 $(36)$48 $(35)
Collaboration assets5,047 (1,042)5,021 (1,024)
Exclusivity assets2,581 (305)2,541 (295)
Developed technology and other928 (364)906 (316)
Customer relationships30,237 (5,804)30,241 (5,262)
$38,841 $(7,551)$38,757 $(6,932)
Unamortized:
Trademarks and other8,709 — 8,714 — 
Total$47,550 $(7,551)$47,471 $(6,932)
 September 30, 2017 December 31, 2016
(Dollars in millions)Gross Amount 
Accumulated
Amortization
 Gross Amount 
Accumulated
Amortization
Amortized:       
Service portfolios$2,197
 $(1,531) $1,995
 $(1,344)
Patents and trademarks401
 (228) 378
 (201)
Collaboration intangible assets4,023
 (342) 3,724
 (211)
Customer relationships and other13,323
 (3,999) 12,798
 (3,480)
 19,944
 (6,100) 18,895
 (5,236)
Unamortized:       
Trademarks and other2,111
 —
 2,025
 —
Total$22,055
 $(6,100) $20,920
 $(5,236)
Customer relationshipIntangible assets are tested for impairment when events occur that indicate that the net book value may not be recovered from future cash flows. Given the deterioration in general economic and market conditions primarily due to the COVID-19 pandemic, we performed an assessment of our unamortized intangible assets include payments madein the first quarter of 2020 and recorded a charge of $40 million related to the impairment of a Collins Aerospace indefinite-lived tradename intangible assets. We will continue to evaluate the impact on our customers to secure certain contractual rights. Such payments are capitalized when distinct rights are obtained and sufficient incremental cash flows to support the recoverability of the assets have been established. Otherwise, the applicable portion of the payments are expensed. We amortize these intangible assets based on the underlying pattern of economic benefit,our business in future periods which may result in an amortization method other than straight-line. In the aerospace industry, amortization based on the pattern of economic benefit generally results in lower amortization expense during the development period with amortization expense increasing as programs enter full production and aftermarket cycles. If a pattern of economic benefit cannot be reliably determined, a straight-line amortization method is used. We classify amortization of such payments as a reduction of sales. The collaboration intangible assets are amortized based upon the pattern of economic benefits as represented by the underlying cash flows.different conclusion.
Amortization of intangible assets for the quarterquarters ended March 31, 2021 and nine months ended September 30, 2017 was $2112020 were $596 million and $626$307 million, respectively, compared with $197 million and $578 million for the same periods of 2016.respectively. The following is the expected amortization of intangible assets for the years 20172021 through 2022, which reflects the pattern of expected economic benefit on certain aerospace intangible assets.2026.
(dollars in millions)Remaining 202120222023202420252026
Amortization expense$1,862 $1,953 $2,078 $2,139 $2,034 $1,974 

(Dollars in millions) Remaining 2017 2018 2019 2020 2021 2022
Amortization expense $210
 $879
 $866
 $888
 $898
 $893
Note 2:3: Discontinued Operations
On November 6, 2015, weAs discussed above, on April 2, 2020, Carrier and Otis entered into a Separation and Distribution Agreement with UTC (since renamed Raytheon Technologies Corporation), pursuant to which, among other things, UTC agreed to separate into three independent, publicly traded companies – UTC, Carrier and Otis and distribute all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020. The Separation Transactions and Distributions were completed the sale of Sikorsky to Lockheed Martin Corp. In the nine months ended September 30, 2016, we recognized approximately $11 million of additional gain on the disposal, primarily resultingApril 3, 2020.
Carrier and Otis are presented as discontinued operations and, as such, have been excluded from the settlement of working capital adjustments. In the quarterboth continuing operations and nine months ended September 30, 2016, we recognized approximately $40 million of income tax benefit and $12 million of additional income tax expense, respectively, including the impacts related to filing Sikorsky's 2015 tax returns. Net cash outflowssegment results for all periods presented. Loss from discontinued operations of approximately $2.5 billion resulted fromattributable to common shareowners is as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Otis$0 $187 
Carrier0 196 
Separation related transactions (1)
(19)(904)
Loss from discontinued operations attributable to common shareowners$(19)$(521)
(1)    Reflects debt extinguishment costs in the payment of taxesquarter ended March 31, 2020 related to the 2015 gain realized onCompany’s paydown of debt to not exceed the salemaximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Sikorsky.Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges and benefits related to separation activities.

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The following summarized financial information related to discontinued operations has been reclassified from Income from continuing operations attributable to common shareowners and included in Loss from discontinued operations attributable to common shareowners:
Quarter Ended March 31,
(dollars in millions)20212020
Otis
Product sales$0 $1,123 
Service sales0 1,843 
Cost of products sold0 913 
Cost of services sold0 1,157 
Research and development0 38 
Selling, general and administrative expense0 450 
Other income (expense), net0 (65)
Non-operating (income) expense, net0 3 
Income from discontinued operations, before tax0 340 
Income tax expense from discontinued operations0 116 
Net income from discontinued operations0 224 
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations0 37 
Income from discontinued operations attributable to common shareowners$0 $187 
Carrier
Product sales$0 $3,143 
Service sales0 741 
Cost of products sold0 2,239 
Cost of services sold0 527 
Research and development0 98 
Selling, general and administrative expense0 669 
Other income (expense), net0 (30)
Non-operating (income) expense, net0 17 
Income from discontinued operations, before tax0 304 
Income tax expense from discontinued operations0 102 
Net income from discontinued operations0 202 
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations0 6 
Income from discontinued operations attributable to common shareowners$0 $196 
Separation related transactions (1)
Selling, general and administrative expense$20 $154 
Non-operating expense, net0 666 
Loss from discontinued operations, before tax(20)(820)
Income tax (benefit) expense from discontinued operations(1)84 
Net loss from discontinued operations(19)(904)
Total loss from discontinued operations attributable to common shareowners$(19)$(521)
(1)    Reflects debt extinguishment costs in the quarter ended March 31, 2020 related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges and benefits related to separation activities.
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Selected financial information related to cash flows from discontinued operations is as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Net cash used in operating activities$(5)$(472)
Net cash used in investing activities0 (241)
Net cash provided by financing activities5 322 
Net cash used in operating activities for the three months ended March 31, 2020 includes the net operating cash flows of Carrier and Otis prior to the Separation Transactions, as well as costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges related to separation activities. Net cash provided by financing activities for the three months ended March 31, 2020 primarily consists of net transfer activity, partially offset by debt extinguishment costs related to the early repayment of debt.
Note 3:4: Earnings Per Share
 Quarter Ended March 31,
(dollars in millions, except per share amounts; shares in millions)20212020
Net income (loss) attributable to common shareowners:
Income from continuing operations$772 $438 
Loss from discontinued operations(19)(521)
Net income (loss) attributable to common shareowners$753 $(83)
Basic weighted average number of shares outstanding1,511.1 858.4 
Stock awards and equity units (share equivalent)3.0 7.4 
Diluted weighted average number of shares outstanding1,514.1 865.8 
Earnings (Loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations$0.51 $0.51 
Loss from discontinued operations(0.01)(0.61)
Net income (loss) attributable to common shareowners$0.50 $(0.10)
Earnings (Loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations$0.51 $0.50 
Loss from discontinued operations(0.01)(0.60)
Net income (loss) attributable to common shareowners$0.50 $(0.10)
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per share amounts; shares in millions)2017 2016 2017 2016
Net income attributable to common shareowners:       
Net income from continuing operations$1,330
 $1,443
 $4,155
 $4,041
Income from discontinued operations—
 37
 —
 1
Net income attributable to common shareowners$1,330
 $1,480
 $4,155
 $4,042
Basic weighted average number of shares outstanding788.3
 822.4
 790.3
 824.0
Stock awards and equity units8.8
 8.8
 9.1
 7.8
Diluted weighted average number of shares outstanding797.1
 831.2
 799.4
 831.8
Earnings Per Share of Common Stock - Basic:       
Net income from continuing operations$1.69
 $1.76
 $5.26
 $4.90
Income from discontinued operations—
 0.04
 —
 —
Net income attributable to common shareowners1.69
 1.80
 5.26
 4.91
Earnings Per Share of Common Stock - Diluted:       
Net income from continuing operations$1.67
 $1.74
 $5.20
 $4.86
Income from discontinued operations—
 0.04
 —
 —
Net income attributable to common shareowners1.67
 1.78
 5.20
 4.86
It may not be possible to recalculate earnings per share (EPS) attributable to common shareowners by adjusting EPS from continuing operations by EPS from discontinued operations as each amount is calculated independently.
The computation of diluted earnings per shareEPS excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted EPS excludes the effect of the potential exercise of stock awards when the awards’ assumed proceeds exceed the average market price of the common shares during the period. For the quarterquarters ended March 31, 2021 and nine months ended September 30, 2017,2020, the number of stock awards excluded from the computation was approximately 5.826.7 million and 6.4 million, respectively. For the quarter and nine months ended September 30, 2016, the number of stock awards excluded from the computation was approximately 12.2 million and 15.09.3 million, respectively.
Note 4: Inventories5: Changes in Contract Estimates at Completion
We review our Estimates at Completion (EACs) on significant contracts on a periodic basis and Contractsfor others, no less than annually or when a change in Progress
(Dollars in millions)September 30, 2017 December 31, 2016
Raw materials$2,189
 $2,040
Work-in-process3,453
 2,787
Finished goods3,715
 3,305
Contracts in progress10,417
 9,395
 19,774
 17,527
Less:   
Progress payments, secured by lien, on U.S. Government contracts(224) (130)
Billings on contracts in progress(9,467) (8,693)
 $10,083
 $8,704
Inventories include capitalizedcircumstances warrant a modification to a previous estimate. 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 variables and requires significant judgment by management on a contract development costsby 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. The risks and opportunities relate to management’s judgment about the ability and cost to achieve the schedule, consideration of customer-directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels, such as flight hours or aircraft landings, and related variable consideration. Management’s judgment related to these considerations has become increasingly more significant given the current economic
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environment primarily caused by the COVID-19 pandemic. Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer, overhead cost rates, and current and past maintenance cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among others. Cost estimates may also include the estimated cost of satisfying our industrial cooperation agreements, sometimes in the form of either offset obligations or in-country industrial participation (ICIP) agreements, required under certain aerospace programscontracts primarily within our RIS and RMD segments. These obligations may or may not be distinct depending on their nature. If cash is paid to a customer to satisfy our offset obligations it is recorded as a reduction in the transaction price.
Changes in estimates of net sales, cost of sales and the related impact to operating profit on contracts recognized over time are recognized on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage of completion in the current period. 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 loss provisions for our contracts accounted for on a percentage of completion basis.
Net EAC adjustments had the following impact on our operating results:
Quarter Ended March 31,
(dollars in millions, except per share amounts)20212020
Operating profit$12 $21 
Income from continuing operations attributable to common shareowners(1)
9 16 
Diluted earnings per share from continuing operations attributable to common shareholders (1)
$0.01 $0.02 
(1)     Amounts reflect a U.S. statutory tax rate of 21%, which approximates our tax rate on our EAC adjustments.
In the quarters ended March 31, 2021 and 2020, revenue was increased by $52 million and $17 million, respectively, for performance obligations satisfied (or partially satisfied) in previous periods. This primarily relates to EAC adjustments that impacted revenue.
As a result of the Raytheon Merger, Raytheon Company’s contracts accounted for on a percentage of completion basis were reset to zero percent complete as of the date of completion of the Raytheon Merger, since only the unperformed portion of the contract at UTC Aerospace Systems. Assuch date represents the obligation of September 30, 2017the Company. For additional information related to the Raytheon Merger, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets.”
Note 6: Accounts Receivable, Net
Accounts receivable, net consisted of the following:
(dollars in millions)March 31, 2021December 31, 2020
Accounts receivable$10,557 $9,800 
Allowance for expected credit losses(520)(546)
Total accounts receivable, net$10,037 $9,254 
The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables. Under these arrangements, the Company factored receivables of $1.6 billion and $2.7 billion during the quarters ended March 31, 2021 and 2020, respectively. The cash received from these arrangements is reflected as cash provided by operating activities in the Condensed Consolidated Statement of Cash Flows. In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions. At March 31, 2021 and December 31, 2016, these capitalized costs were $1302020, the Company had $16 million and $140$10 million, respectively, which will be liquidatedthat was collected on behalf of the financial institutions and recorded as production unitsrestricted cash and accrued liabilities. The net cash flows relating to these collections are deliveredreported as financing activities in the Condensed Consolidated Statement of Cash Flows.
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The changes in the allowance for expected credit losses related to customers. Within commercial aerospace, inventory costs attributableAccounts receivable were as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Balance as of January 1$546 $254 
Current period provision for expected credit losses, net of recoveries (1)
(20)47 
Write-offs charged against the allowance for expected credit losses(5)(2)
Other, net(2)
(1)9 
Balance as of March 31,$520 $308 
(1)    The current provision for expected credit losses for the quarter ended March 31, 2020 includes $38 million of reserves driven by customer bankruptcies and additional reserves for credit losses primarily due to new engine offerings arethe current economic environment primarily caused by the COVID-19 pandemic.
(2)    Other, net for the quarter ended March 31, 2020 includes a $34 million impact related to the January 1, 2020 adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
Note 7: Contract Assets and Liabilities
Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the average cost per unit expected over the lifeterms established in our contracts. Total contract assets and contract liabilities as of each contract using the units-of-delivery method of percentage of completion accounting. Under this method, costs of initial engine deliveries in excess of the projected contract per unit average cost are capitalized, and these capitalized amounts are subsequently expensed as additional engine deliveries occur for engines with costs below the projected contract per unit average cost over the life of the contract. As of September 30, 2017March 31, 2021 and December 31, 2016, inventory included $3572020 are as follows:
(dollars in millions)March 31, 2021December 31, 2020
Contract assets$10,238 $9,931 
Contract liabilities(12,879)(12,889)
Net contract liabilities$(2,641)$(2,958)
Contract assets increased $307 million during the quarter ended March 31, 2021 primarily due to the timing of billings on certain long-term maintenance contracts. Contract liabilities were relatively consistent during the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020. We recognized revenue of $1,705 million during the quarter ended March 31, 2021, related to contract liabilities as of January 1, 2021 and $1,183 million during the quarter ended March 31, 2020, related to contract liabilities as of January 1, 2020.
As of March 31, 2021, our contract liabilities include approximately $440 million of advance payments received from a certain Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated.
Contract assets include an allowance for credit losses of $222 million and $233$177 million respectively,as of such capitalized amounts.March 31, 2021 and December 31, 2020, respectively. Changes in the allowance for credit losses were not material for the quarters ended March 31, 2021 and 2020.

Note 8: Inventory, net
(dollars in millions)March 31, 2021December 31, 2020
Raw materials$2,995 $3,015 
Work-in-process3,240 2,924 
Finished goods3,263 3,472 
Total inventory, net$9,498 $9,411 
Raw materials, work-in-process and finished goods are net of total valuation reserves of $1,842 million and $1,788 million as of March 31, 2021 and December 31, 2020, respectively.
Note 5:9: Borrowings and Lines of Credit
(dollars in millions)March 31, 2021December 31, 2020
Commercial paper$160 $160 
Other borrowings74 87 
Total short-term borrowings$234 $247 
(Dollars in millions)September 30, 2017 December 31, 2016
Commercial paper$943
 $522
Other borrowings134
 79
Total short-term borrowings$1,077
 $601
At September 30, 2017, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $4.35 billion, pursuant to a $2.20 billion revolving credit agreement and a $2.15 billion multicurrency revolving credit agreement, both of which expire in August 2021. As of September 30, 2017, there were no borrowings under these revolving credit agreements. The undrawn portions of these revolving credit agreements are also available to serve as backup facilities for the issuance of commercial paper. As of September 30, 2017,March 31, 2021, our maximum commercial paper borrowing limit was $4.35 billion. Commercial$5.0 billion as the commercial paper borrowings at September 30, 2017 include approximately €500 million ($594 million) of euro-denominated commercial paper.is backed by our $5.0 billion revolving credit agreement. We use our commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, discretionary pension contributions, debt refinancing, dividend payments and repurchases of our
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common stock. The need for commercial paper notes outstanding have original maturities of not more than 90 days from the date of issuance.
As of March 31, 2021, we had revolving credit agreements with various banks permitting aggregate borrowings arises whenof up to $7.0 billion consisting of a $5.0 billion revolving credit agreement that became available upon completion of the useRaytheon Merger on April 3, 2020, and a $2.0 billion revolving credit agreement that we entered into in May 2020 and there were 0 borrowings outstanding under these agreements.
We did 0t issue long-term debt during the quarter ended March 31, 2021.
In preparation for and in anticipation of domestic cash for general corporate purposes exceeds the sumSeparation Transactions and Distributions, the Company, Carrier and Otis issued and the Company repaid long-term debt in the quarter ended March 31, 2020, which are included in the tables below.
We had the following issuances of domestic cash generationlong-term debt during the quarter ended March 31, 2020, which is inclusive of issuances made by Carrier and foreign cash repatriatedOtis prior to the U.S.Distributions, the proceeds of which were primarily used by the Company to extinguish Raytheon Technologies short-term and long-term debt, and therefore, these issuances were treated as a distribution from discontinued operations within financing activities from continuing operations on our Condensed Consolidated Statement of Cash Flows:
Issuance DateDescription of NotesAggregate Principal Balance (in millions)
March 27, 2020
Term Loan due 2023 (Otis) (1)
$1,000 
Term Loan due 2023 (Carrier) (1)
1,750 
February 27, 2020
1.923% notes due 2023 (1)
500 
LIBOR plus 0.450% floating rate notes due 2023 (1)
500 
2.056% notes due 2025 (1)
1,300 
2.242% notes due 2025 (1)
2,000 
2.293% notes due 2027 (1)
500 
2.493% notes due 2027 (1)
1,250 
2.565% notes due 2030 (1)
1,500 
2.722% notes due 2030 (1)
2,000 
3.112% notes due 2040 (1)
750 
3.377% notes due 2040 (1)
1,500 
3.362% notes due 2050 (1)
750 
3.577% notes due 2050 (1)
2,000 
(1)    The debt issuances and term loan draws reflect debt incurred by Carrier and Otis. The net proceeds of these issuances were primarily utilized to extinguish Raytheon Technologies short-term and long-term debt in order to not exceed the maximum applicable net indebtedness required by the Raytheon Merger Agreement.
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We made the following repayments of long-term debt during the quarters ended March 31, 2021 and 2020:
Repayment DateDescription of NotesAggregate Principal Balance (in millions)
March 1, 20218.750% notes due 2021$250
March 29, 2020
4.500% notes due 2020 (1)(2)
1,250 
1.125% notes due 2021 (€950 million principal value) (1)(2)
1,082 
1.250% notes due 2023 (€750 million principal value) (1)(2)
836 
1.150% notes due 2024 (€750 million principal value) (1)(2)
841 
1.875% notes due 2026 (€500 million principal value) (1)(2)
567 
March 3, 2020
1.900% notes due 2020 (1)(2)
1,000 
3.350% notes due 2021 (1)(2)
1,000 
LIBOR plus 0.650% floating rate notes due 2021 (1)(2)
750 
1.950% notes due 2021 (1)(2)
750 
2.300% notes due 2022 (1)(2)
500 
3.100% notes due 2022 (1)(2)
2,300 
2.800% notes due 2024 (1)(2)
800 
March 2, 2020
4.875% notes due 2020 (1)(2)
171 
February 28, 2020
3.650% notes due 2023 (1)(2)
1,669 
2.650% notes due 2026 (1)(2)
431 
(1)    In connection with the merger agreement with Rockwell Collins announced on September 4, 2017,early repayment of outstanding principal, Raytheon Technologies recorded debt extinguishment costs of $660 million for the quarter ended March 31, 2020, which are classified as discontinued operations in our Condensed Consolidated Statement of Operations as we would not have entered into a $6.5 billion 364-day unsecured bridge loan credit agreement that would be funded onlyhad to redeem the extent certain anticipated debt, issuances areexcept for the Separation Transactions.
(2)    Extinguishment of Raytheon Technologies short-term and long-term debt in order to not completed prior toexceed the completion ofmaximum net indebtedness required by the merger. See Note 1 for additional discussion.
On May 4, 2017, we issued $1.0 billion aggregate principal amount of 1.900% notes due 2020, $500 million aggregate principal amount of 2.300% notes due 2022, $800 million aggregate principal amount of 2.800% notes due 2024, $1.1 billion aggregate principal amount of 3.125% notes due 2027 and $600 million aggregate principal amount of 4.050% notes due 2047. The net proceeds received from these debt issuances were used to fund the repayment at maturity of our 1.800% notes due 2017, representing $1.5 billion in aggregate principal, and for other general corporate purposes.


Raytheon Merger Agreement.
Long-term debt consisted of the following:
(dollars in millions)March 31, 2021December 31, 2020
8.750% notes due 2021$0 $250 
3.100% notes due 2021250 250 
2.800% notes due 20221,100 1,100 
2.500% notes due 2022 (2)
1,100 1,100 
3.650% notes due 2023 (1)
171 171 
3.700% notes due 2023400 400 
3.200% notes due 2024950 950 
3.150% notes due 2024 (2)
300 300 
3.950% notes due 2025 (1)
1,500 1,500 
2.650% notes due 2026 (1)
719 719 
3.125% notes due 2027 (1)
1,100 1,100 
3.500% notes due 20271,300 1,300 
7.200% notes due 2027 (2)
382 382 
7.100% notes due 2027141 141 
6.700% notes due 2028400 400 
7.000% notes due 2028 (2)
185 185 
4.125% notes due 2028 (1)
3,000 3,000 
7.500% notes due 2029 (1)
550 550 
2.150% notes due 2030 (€500 million principal value) (1)
590 612 
2.250% notes due 2030 (1)
1,000 1,000 
5.400% notes due 2035 (1)
600 600 
6.050% notes due 2036 (1)
600 600 
6.800% notes due 2036 (1)
134 134 
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(Dollars in millions)September 30, 2017 December 31, 2016
1.800% notes due 2017 1
$—
 $1,500
6.800% notes due 201899
 99
EURIBOR plus 0.800% floating rate notes due 2018 (€750 million principal value) 2
890
 783
1.778% junior subordinated notes due 20181,100
 1,100
LIBOR plus 0.350% floating rate notes due 2019 3
350
 350
1.500% notes due 2019 1
650
 650
8.875% notes due 2019271
 271
4.875% notes due 2020 1
171
 171
4.500% notes due 2020 1
1,250
 1,250
1.900% notes due 2020 1
1,000
 —
8.750% notes due 2021250
 250
1.950% notes due 2021 1
750
 750
1.125% notes due 2021 (€950 million principal value) 1
1,128
 992
2.300% notes due 2022 1
500
 —
3.100% notes due 2022 1
2,300
 2,300
1.250% notes due 2023 (€750 million principal value) 1
890
 783
2.800% notes due 2024 1
800
 —
1.875% notes due 2026 (€500 million principal value) 1
594
 522
2.650% notes due 2026 1
1,150
 1,150
3.125% notes due 2027 1
1,100
 —
7.100% notes due 2027141
 141
6.700% notes due 2028400
 400
7.500% notes due 2029 1
550
 550
5.400% notes due 2035 1
600
 600
6.050% notes due 2036 1
600
 600
6.800% notes due 2036 1
134
 134
7.000% notes due 2038159
 159
6.125% notes due 2038 1
1,000
 1,000
5.700% notes due 2040 1
1,000
 1,000
4.500% notes due 2042 1
3,500
 3,500
4.150% notes due 2045 1
850
 850
3.750% notes due 2046 1
1,100
 1,100
4.050% notes due 2047 1
600
 —
Project financing obligations137
 155
Other (including capitalized leases)195
 189
Total principal long-term debt26,209
 23,299
Other (fair market value adjustments and discounts)(26) 1
Total long-term debt26,183
 23,300
Less: current portion2,120
 1,603
Long-term debt, net of current portion$24,063
 $21,697
7.000% notes due 2038159 159 
6.125% notes due 2038 (1)
1,000 1,000 
4.450% notes due 2038 (1)
750 750 
5.700% notes due 2040 (1)
1,000 1,000 
4.875% notes due 2040 (2)
600 600 
4.700% notes due 2041 (2)
425 425 
4.500% notes due 2042 (1)
3,500 3,500 
4.800% notes due 2043400 400 
4.200% notes due 2044 (2)
300 300 
4.150% notes due 2045 (1)
850 850 
3.750% notes due 2046 (1)
1,100 1,100 
4.050% notes due 2047 (1)
600 600 
4.350% notes due 20471,000 1,000 
4.625% notes due 2048 (1)
1,750 1,750 
3.125% notes due 2050 (1)
1,000 1,000 
Other (including finance leases)
296 292 
Total principal long-term debt31,202 31,470 
Other (fair market value adjustments, (discounts)/premiums, and debt issuance costs)102 106 
Total long-term debt31,304 31,576 
Less: current portion1,369 550 
Long-term debt, net of current portion$29,935 $31,026 
1We may redeem these notes at our option pursuant to their terms.
2The three-month EURIBOR rate as of September 30, 2017 was approximately -0.329%. The notes may be redeemed at our option in whole, but not in part, at any time in the event of certain developments affecting U.S. taxation.
3The three-month LIBOR rate as of September 30, 2017 was approximately 1.334%.

(1)We may redeem these notes at our option pursuant to their terms.
(2)    Debt assumed in the Raytheon Merger.
The average maturity of our long-term debt at September 30, 2017March 31, 2021 is approximately twelve14 years. The average interest expense rate on our total borrowings for the quarters ended March 31, 2021 and nine months ended September 30, 2017 and 20162020 was as follows:
 Quarter Ended March 31,
20212020
Average interest expense rate4.1 %3.8 %

 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Average interest expense rate3.6% 4.0% 3.6% 4.1%
We have an existing universal shelf registration statement filed with the Securities and Exchange Commission (SEC) for an indeterminate amount of equity and debt securities for future issuance, subject to our internal limitations on the amount of equity and debt to be issued under this shelf registration statement.
Note 6: Income Taxes
We conduct business globally and, as a result, UTC or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Netherlands, Poland, Singapore, South Korea, Spain, Switzerland, the United Kingdom, and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2005.
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that a net reduction within the range of $30 million to $435 million of unrecognized tax benefits may occur within the next 12 months as a result of additional worldwide uncertain tax positions, the revaluation of current uncertain tax positions arising from developments in examinations, in appeals, in the courts, or the closure of tax statutes. See Note 15, Contingent Liabilities, for discussion regarding uncertain tax positions, included in the above range, related to pending litigation with respect to certain deductions claimed in Germany.
The Examination Division of the Internal Revenue Service is currently auditing UTC tax years 2014 and 2015, which is expected to continue beyond the next 12 months.
As a result of federal, state and non-U.S. tax year closures related to audit resolutions and the expiration of applicable statutes of limitation during the quarter, including expiration of the U.S. federal income tax statute of limitations for UTC’s 2013 tax year, we recognized non-cash gains of approximately $55 million of income tax and $9 million of related interest, in the quarter ended September 30, 2017.
Note 7:10: Employee Benefit Plans
Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit (PRB) plans and defined contribution plans.
On April 3, 2020, UTC completed the Separation Transactions, which included the transfer of certain defined benefit plans from UTC to Carrier and Otis. The plans transferred were primarily international plans with the majority of the UTC defined benefit liability remaining with Raytheon Technologies. All service cost previously associated with Carrier and Otis was reclassified to discontinued operations. For non-service pension (income) expense and pension liabilities, generally only the portions related to the defined benefit plans transferred to Carrier and Otis as part of the Separation Transactions were reclassified to discontinued operations.
Raytheon Company has both funded and unfunded domestic and foreign defined benefit pension and PRB plans. As of the merger date, the Raytheon Company plans were remeasured at fair value using accounting policies consistent with the UTC plans. The deferred pension and PRB plan losses included in Raytheon Company’s accumulated other comprehensive income (loss) as of the merger date were eliminated and are no longer subject to amortization in net periodic benefit (income) expense. Amounts prior to the merger date of April 3, 2020 do not include the Raytheon Company pension plan results.
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Contributions to our plans were as follows:
 Quarter Ended March 31,
(dollars in millions)20212020
U.S. qualified defined benefit plans$0 $0 
International defined benefit plans7 8 
PRB plans0 0 
Defined contribution plans271 213 
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Defined benefit plans$1,929
 $18
 $2,008
 $125
Defined contribution plans86
 79
 262
 235
Future pension and postretirement benefit obligations on the Condensed Consolidated Balance Sheet consists of the following:
There was a $1.9 billion contribution to our domestic defined benefit pension plans in the quarter and nine months ended September 30, 2017. There were no contributions to our domestic defined benefit pension plans in the quarter and nine months ended September 30, 2016.
(dollars in millions)March 31, 2021December 31, 2020
Long-term pension liabilities$8,669 $9,131 
Long-term PRB liabilities1,073 1,072 
Other pension and PRB related items66 139 
Total long-term pension and PRB liabilities$9,808 $10,342 
The following table illustrates the components of net periodic benefit cost(income) expense for our defined pension and other postretirement benefitPRB plans:

 
Pension Benefits
Quarter Ended March 31,
PRB
Quarter Ended March 31,
(dollars in millions)2021202020212020
Operating expense
Service cost$131 $37 $2 $1 
Non-operating expense
Interest cost312 253 6 6 
Expected return on plan assets(868)(521)(5)(1)
Amortization of prior service cost (credit)(42)13 (1)(1)
Recognized actuarial net loss (gain)109 86 (2)(3)
Net settlement and curtailment loss (gain)0 0 0 0 
Non-service pension (income) expense(489)(169)(2)1 
Total net periodic benefit (income) expense$(358)$(132)$0 $2 
We have set aside assets in separate trusts, which we expect to be used to pay for certain nonqualified defined benefit and defined contribution plan obligations in excess of qualified plan limits. These assets are included in Other assets, current in our Condensed Consolidated Balance Sheet. The fair value of marketable securities held in trusts consisted of the following:
(dollars in millions)March 31, 2021December 31, 2020
Marketable securities held in trusts$879 $881 

Note 11: Income Taxes
 
Pension Benefits
Quarter Ended September 30,
 
Other Postretirement Benefits
Quarter Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Service cost$94
 $96
 $—
 $1
Interest cost281
 302
 9
 9
Expected return on plan assets(555) (554) —
 —
Amortization of prior service credit(9) (7) (1) —
Recognized actuarial net loss (gain)144
 135
 (2) (1)
Net settlement and curtailment loss2
 3
 —
 —
Total net periodic benefit (income) cost$(43) $(25) $6
 $9
 
Pension Benefits
Nine Months Ended September 30,
 
Other Postretirement Benefits
Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Service cost$280
 $287
 $2
 $3
Interest cost838
 908
 22
 25
Expected return on plan assets(1,636) (1,669) —
 —
Amortization of prior service credit(27) (22) (1) —
Recognized actuarial net loss (gain)430
 406
 (7) (3)
Net settlement and curtailment loss1
 18
 —
 —
Total net periodic benefit (income) cost$(114) $(72) $16
 $25
Effective January 1, 2017, a voluntary lump-sum option is available forOur effective tax rate was 29.8% and 56.5% in the frozen final average earnings benefitsquarters ended March 31, 2021 and 2020, respectively. Tax expense in the quarter ended March 31, 2021 includes tax charges of certain U.S. salaried employees upon termination of employment after 2016. This option provides participants$148 million associated with the choicesale of electingthe Forcepoint business. Tax expense in the quarter ended March 31, 2020 includes net deferred tax charges of $415 million resulting from the Separation Transactions, primarily related to receivethe impairment of deferred tax assets.
We conduct business globally and, as a lump-sum paymentresult, Raytheon Technologies or one or more of our subsidiaries files income tax returns in lieuthe U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of receivingbusiness we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, China, France, Germany, India, Philippines, Poland, Saudi Arabia, Singapore, Switzerland, the United Kingdom and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2012.
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that a net reduction within the range of $50 million to $140 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of
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uncertain tax positions arising from the issuance of legislation, regulatory or other guidance or developments in examinations, in appeals, or in the courts, or the closure of tax statutes. Interest on unrecognized tax benefits during the quarters ended March 31, 2021 and 2020 were $143 million and $97 million, respectively. The amount of interest accrued at March 31, 2021 was $9 million.
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, financial condition, results of operations and cash flows in future monthly pension benefit. This plan change reducedreporting periods.
The Examination Division of the Internal Revenue Service (IRS) is currently auditing Raytheon Technologies tax years 2017 and 2018 and pre-merger Raytheon Company tax periods 2017, 2018 and 2019 as well as certain refund claims of Raytheon Company for tax years 2014, 2015 and 2016 filed prior to the Raytheon Merger.
The Examination Division of the IRS is also auditing pre-acquisition Rockwell Collins fiscal tax years 2016 and 2017, which is projected to close in the second half of 2021. As a result of the projected benefit obligation by $170 million.closure of the audit of Rockwell Collins fiscal tax years 2016 and 2017, it is reasonably possible that the Company may recognize non-cash gains in the range of $50 million to $100 million, primarily tax, in the second half of 2021.
Note 8:12: Restructuring Costs
Restructuring costs are generally expensed as incurred. All U.S. government unallowable restructuring costs related to the Raytheon Merger are recorded within Corporate expenses and other unallocated items, as these costs are not included in management’s evaluation of the segments’ performance, and as a result, there are no unallowable restructuring costs at the RIS and RMD segments. During the nine monthsquarter ended September 30, 2017,March 31, 2021, we recorded net pre-tax restructuring costs totaling $177$43 million for new and ongoing restructuring actions.
We recorded charges in the segments as follows:
(Dollars in millions) 
Otis$23
UTC Climate, Controls & Security84
Pratt & Whitney4
UTC Aerospace Systems64
Eliminations and other2
Total$177
(dollars in millions)Quarter Ended March 31, 2021
Pratt & Whitney$20
Collins Aerospace Systems18
Corporate expenses and other unallocated items5
Total$43
Restructuring charges incurred during the nine monthsquarter ended September 30, 2017March 31, 2021 primarily relate to actions initiated during 20172021 and 2016,2020, and were recorded as follows:
(dollars in millions)Quarter Ended March 31, 2021
Cost of sales$20
Selling, general and administrative23
Total$43
(Dollars in millions) 
Cost of sales$81
Selling, general and administrative96
Total$177
2017 Actions.2021 Actions. During the nine monthsquarter ended September 30, 2017,March 31, 2021, we recorded net pre-tax restructuring costs of $114$36 million,, comprised of $40$21 million in costCost of sales and $74$15 million in selling,Selling, general and administrative expenses. The 20172021 actions primarily relate to ongoing cost reduction efforts including workforce reductions and the consolidation of field operations.facilities.

The following table summarizes the accrual balance and utilization for the 2021 restructuring actions for the quarter ended March 31, 2021:
(dollars in millions)SeveranceFacility Exit and Other CostsTotal
Restructuring accruals at December 31, 2020$0 $0 $0 
Net pre-tax restructuring costs24 12 36 
Utilization, foreign exchange and other costs(1)(3)(4)
Balance at March 31, 2021$23 $9 $32 
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The following table summarizes expected, incurred and remaining costs for the 2021 restructuring actions by segment:
(dollars in millions)Expected
Costs		Costs Incurred Quarter Ended March 31, 2021Remaining Costs at March 31, 2021
Pratt & Whitney$20 $(20)$0 
Collins Aerospace Systems49 (16)33 
Corporate expenses and other unallocated items0 0 0 
Total$69 $(36)$33 
We are targeting to complete the majority of the remaining workforce and facility related cost reduction actions during 20172021 and 2018. No specific plans2022.
2020 Actions. During the quarter ended March 31, 2021, we recorded $4 million of net pre-tax restructuring costs for significant otherrestructuring actions have been finalizedinitiated in 2020 comprised of $6 million in Selling, general and administrative expenses and a reversal of $2 million in Cost of sales. The 2020 actions primarily relate to severance and restructuring actions at this time. Pratt & Whitney and Collins Aerospace in response to the impact on our operating results related to the current economic environment primarily caused by the COVID-19 pandemic, the Raytheon Merger, and ongoing cost reduction efforts including workforce reductions and consolidation of field operations.
The following table summarizes the accrual balancebalances and utilization for the 20172020 restructuring actions for the quarter and nine months ended September 30, 2017:March 31, 2021:
(dollars in millions)SeveranceFacility Exit, and Other CostsTotal
Restructuring accruals at December 31, 2020$334 $6 $340 
Net pre-tax restructuring costs1 3 4 
Utilization, foreign exchange and other costs(130)(5)(135)
Balance at March 31, 2021$205 $4 $209 
(Dollars in millions)Severance Facility Exit, Lease Termination and Other Costs Total
Quarter Ended September 30, 2017     
Restructuring accruals at June 30, 2017$43
 $—
 $43
Net pre-tax restructuring costs49
 2
 51
Utilization and foreign exchange(20) (2) (22)
Balance at September 30, 2017$72
 $—
 $72
      
Nine Months Ended September 30, 2017     
Net pre-tax restructuring costs$106
 $8
 $114
Utilization and foreign exchange(34) (8) (42)
Balance at September 30, 2017$72
 $—
 $72
The following table summarizes expected, incurred and remaining costs for the 20172020 restructuring actions by segment:
(dollars in millions)Expected
Costs		Costs Incurred in 2020Costs Incurred Quarter Ended March 31, 2021Remaining Costs at March 31, 2021
Pratt & Whitney$205 $(205)$0 $0 
Collins Aerospace Systems340 (333)1 8 
Corporate expenses and other unallocated items237 (232)(5)0 
Total$782 $(770)$(4)$8 
(Dollars in millions)
Expected
Costs
 
Costs Incurred Quarter Ended
March 31, 2017
 
Costs Incurred Quarter Ended
June 30, 2017
 
Costs Incurred Quarter Ended
September 30, 2017
 
Remaining Costs at
September 30, 2017
Otis$71
 $(2) $(12) $(5) $52
UTC Climate, Controls & Security83
 (12) (11) (35) 25
Pratt & Whitney8
 —
 (6) —
 2
UTC Aerospace Systems54
 (9) (10) (10) 25
Eliminations and other2
 (1) —
 (1) —
Total$218
 $(24) $(39) $(51) $104
2016 Actions.2019 and Prior Actions. During the nine monthsquarter ended September 30, 2017,March 31, 2021, we recordedhad net pre-tax restructuring costs totaling $48 million for restructuring actions initiated in 2016, including $20 million in cost of sales and $28 million in selling, general and administrative expenses. The 2016 actions relate to ongoing cost reduction efforts, including workforce reductions, consolidation of field operations, and costs to exit legacy programs. The following table summarizes the accrual balances and utilization for the 2016 restructuring actions for the quarter and nine months ended September 30, 2017:
(Dollars in millions)Severance 
Facility Exit,
Lease
Termination and
Other Costs
 Total
Quarter Ended September 30, 2017     
Restructuring accruals at June 30, 2017$49
 $48
 $97
Net pre-tax restructuring costs3
 5
 8
Utilization and foreign exchange(12) (1) (13)
Balance at September 30, 2017$40
 $52
 $92
      
Nine Months Ended September 30, 2017     
Restructuring accruals at December 31, 2016$63
 $46
 $109
Net pre-tax restructuring costs29
 19
 48
Utilization and foreign exchange(52) (13) (65)
Balance at September 30, 2017$40
 $52
 $92

The following table summarizes expected, incurred and remaining costs for the 2016 restructuring actions by segment:
(Dollars in millions)
Expected
Costs
 Costs Incurred in 2016 
Costs Incurred Quarter Ended
March 31, 2017
 
Costs Incurred Quarter Ended
June 30, 2017
 
Costs Incurred Quarter Ended
September 30, 2017
 
Remaining Costs at
September 30, 2017
Otis$55
 $(48) $(3) $1
 $—
 $5
UTC Climate, Controls & Security80
 (45) (6) (7) (3) 19
Pratt & Whitney118
 (118) —
 —
 —
 —
UTC Aerospace Systems87
 (31) (13) (12) (5) 26
Total$340
 $(242) $(22) $(18) $(8) $50
2015 and Prior Actions. During the nine months ended September 30, 2017, we recorded net pre-tax restructuring costs totaling $15$3 million for restructuring actions initiated in 20152019 and prior. As of September 30, 2017,March 31, 2021, we have approximately $52$32 million of accrual balances remaining related to 20152019 and prior actions.
Note 9:13: Financial Instruments
We enter into derivative instruments primarily for risk management purposes, only, including derivatives designated as hedging instruments under the Derivatives and Hedging Topic of the FASB ASC and those utilized as economic hedges. We operate internationally and, in the ordinarynormal course of business, we are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, interest rate and commodity price exposures.
The four quarter rolling average of theaggregate notional amount of foreign exchange contracts hedgingour outstanding foreign currency transactionshedges was $18.6$11.1 billion and $11.6 billion at March 31, 2021 and $18.3 billion at September 30, 2017 and December 31, 2016,2020, respectively.
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The following table summarizes the fair value ofand presentation in the Condensed Consolidated Balance Sheet for derivative instruments as of September 30, 2017March 31, 2021 and December 31, 2016, which consist solely2020:
(dollars in millions)Balance Sheet LocationMarch 31, 2021December 31, 2020
Derivatives designated as hedging instruments:
Foreign exchange contractsOther assets, current$171 $197 
Other accrued liabilities105 66 
Derivatives not designated as hedging instruments:
Foreign exchange contractsOther assets, current$22 $44 
Other accrued liabilities62 32 
The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Condensed Consolidated Statement of Operations for the quarters ended March 31, 2021 and 2020 are presented in the table below. The amounts of gain or loss are attributable to foreign exchange contracts:contract activity and are generally recorded as a component of Product sales when reclassified from Accumulated other comprehensive income (loss).
 Quarter Ended March 31,
(dollars in millions)20212020
Loss recorded in Accumulated other comprehensive loss$(46)$(403)
(Gain) loss reclassified from Accumulated other comprehensive loss into Product sales(14)29 
 Asset Derivatives Liability Derivatives
(Dollars in millions)September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Derivatives designated as hedging instruments$295
 $15
 $15
 $196
Derivatives not designated as hedging instruments95
 155
 75
 158
The Company utilizes the critical terms match method in assessing derivatives for hedge effectiveness. Accordingly, the hedged items and derivatives designated as hedging instruments are highly effective.
As discussed in Note 5,of March 31, 2021, we have issued approximately €2.95 billion€500 million of euro-denominated long-term debt and €500 million of outstanding, euro-denominated commercial paper borrowings, which qualifyqualifies as a net investment hedge against our investments in European businesses,. As of September 30, 2017, the net investment hedge which is deemed to be effective.
The amount of gains and losses related to the Company's derivative financial instruments was as follows:
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Gain (loss) recorded in Accumulated other comprehensive loss$310
 $(7) $440
 $188
(Gain) loss reclassified from Accumulated other comprehensive loss into Product sales (effective portion)(24) 32
 (14) 139
Assuming current market conditions continue, a $80$22 million of pre-tax losslosses is expected to be reclassified from Accumulated other comprehensive loss into Product sales to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months. At September 30, 2017,March 31, 2021, all derivative contracts accounted for as cash flow hedges will maturemature by November 2022.January 2028.
The effect of derivatives not designated as hedging instruments within Other income, net, on the Condensed Consolidated Statement of Operations of foreign exchange contracts not designated as hedging instruments was as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Foreign exchange contracts$(8)$(39)

 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Gain recognized in Other income, net$10
 $19
 $50
 $49

We paid $183 million and $29 million for settlements of derivative contracts during the nine months ended September 30, 2017 and 2016, respectively.
Note 10:14: Fair Value Measurements
In accordance with the provisions of ASC 820, the following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring and nonrecurring basis in our Condensed Consolidated Balance Sheet as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
March 31, 2021
(dollars in millions)TotalLevel 1Level 2Level 3
Recurring fair value measurements:
Marketable securities held in trusts$879 $813 $66 $0 
Derivative assets193 0 193 0 
Derivative liabilities(167)0 (167)0 

December 31, 2020
(dollars in millions)TotalLevel 1Level 2Level 3
Recurring fair value measurements:
Marketable securities held in trusts$881 $773 $108 $0 
Derivative assets241 0 241 0 
Derivative liabilities(98)0 (98)0 
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September 30, 2017 (Dollars in millions)Total Level 1 Level 2 Level 3
Recurring fair value measurements:       
Available-for-sale securities$120
 $120
 $—
 $—
Derivative assets390
 —
 390
 —
Derivative liabilities(90) —
 (90) —
December 31, 2016 (Dollars in millions)Total Level 1 Level 2 Level 3
Recurring fair value measurements:       
Available-for-sale securities$987
 $987
 $—
 $—
Derivative assets170
 —
 170
 —
Derivative liabilities(354) —
 (354) —
The reduction in value of available-for-sale securities as of September 30, 2017, as compared to December 31, 2016, is primarily the result of sales of these securities in the nine months ended September 30, 2017, including UTC Climate, Controls & Security's sale of investments in Watsco, Inc. during the quarter ended March 31, 2017.
Valuation Techniques. Our available-for-sale securities include equity investments that are traded in active markets, either domestically or internationally, and are measured at fair value using closing stock prices from active markets. Our derivative assets and liabilities include foreign exchange contracts and commodity derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties'counterparties’ credit risks.
As of September 30, 2017, there were no significant transfers in and out of Level 1 and Level 2.
As of September 30, 2017,March 31, 2021, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties'counterparties’ credit risks.
The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance Sheet at September 30, 2017March 31, 2021 and December 31, 2016:2020:
March 31, 2021December 31, 2020
(dollars in millions)(dollars in millions)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
September 30, 2017 December 31, 2016
(Dollars in millions)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Long-term receivables$147
 $139
 $127
 $121
Customer financing notes receivable430
 414
 437
 420
Customer financing notes receivable$313 $303 $271 $264 
Short-term borrowings(1,077) (1,077) (601) (601)Short-term borrowings(234)(234)(247)(247)
Long-term debt (excluding capitalized leases)(26,161) (28,052) (23,280) (25,110)
Long-term debt (excluding finance leases)Long-term debt (excluding finance leases)(31,200)(35,633)(31,512)(38,615)
Long-term liabilities(363) (331) (457) (427)Long-term liabilities(28)(27)(27)(25)
The following table provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance Sheet as of September 30, 2017:
(Dollars in millions)Total Level 1 Level 2 Level 3
Long-term receivables$139
 $—
 $139
 $—
Customer financing notes receivable414
 —
 414
 —
Short-term borrowings(1,077) —
 (943) (134)
Long-term debt (excluding capitalized leases)(28,052) —
 (27,827) (225)
Long-term liabilities(331) —
 (331) —

We had commercial aerospace financing and other contractual commitments totaling approximately $13.9 billion and $14.4 billion as of September 30, 2017 and Decemberat March 31, 2016, respectively, related to commercial aircraft and certain contractual rights to provide product on new aircraft platforms. Risks associated with changes in interest rates on these commitments are mitigated by the fact that interest rates are variable during the commitment term and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers. As a result, the fair value of these financings is expected to equal the amounts funded.
Note 11: Long-Term Financing Receivables
Our long-term financing receivables primarily represent balances related to our aerospace businesses, such as long-term trade accounts receivable, notes receivable, and leases receivable. We also have other long-term receivables related to our commercial businesses; however, both the individual and aggregate amounts of those other receivables are not significant.
Long-term trade accounts receivable, including unbilled receivables related to long-term aftermarket contracts, are principally amounts arising from the sale of goods and the delivery of services with a contractual maturity date or realization period of greater than one year, and are recognized as "Other assets" in our Condensed Consolidated Balance Sheet. Notes and leases receivable represent notes and lease receivables other than receivables related to operating leases, and are recognized as "Customer financing assets" in our Condensed Consolidated Balance Sheet. The following table summarizes the balance by class of aerospace business related long-term receivables as of September 30, 20172021 and December 31, 2016.2020:
March 31, 2021
(dollars in millions)TotalLevel 1Level 2Level 3
Customer financing notes receivable$303 $0 $303 $0 
Short-term borrowings(234)0 (160)(74)
Long-term debt (excluding finance leases)(35,633)0 (35,559)(74)
Long-term liabilities(27)0 (27)0 

December 31, 2020
(dollars in millions)TotalLevel 1Level 2Level 3
Customer financing notes receivable$264 $0 $264 $0 
Short-term borrowings(247)0 (160)(87)
Long-term debt (excluding finance leases)(38,615)0 (38,540)(75)
Long-term liabilities(25)0 (25)0 

(Dollars in millions)September 30, 2017 December 31, 2016
Long-term trade accounts receivable$1,101
 $926
Notes and leases receivable435
 430
Total long-term receivables$1,536
 $1,356
Customer credit ratings range from customers with an extremely strong capacity to meet financial obligations to customers whose uncollateralized receivables are in default. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to the allowance for credit losses on long-term receivables. Based upon the customer credit ratings, approximately 11% and 13% of our total long-term receivables were considered to bear high credit risk as of September 30, 2017 and December 31, 2016, respectively.
For long-term trade accounts receivable, we evaluate credit risk and collectability individually to determine if an allowance is necessary. Our long-term receivables reflected in the table above, which include reserves of $17 million as of September 30, 2017 and December 31, 2016, are individually evaluated for impairment. At September 30, 2017 and December 31, 2016, we did not have any significant balances that are considered to be delinquent, on non-accrual status, past due 90 days or more, or considered to be unrecoverable.

Note 12: Shareowners' Equity and Noncontrolling Interest
A summary of the changes in shareowners' equity and noncontrolling interest comprising total equity for the quarters and nine months ended September 30, 2017 and 2016 is provided below:
 Quarter Ended September 30,
 2017 2016
(Dollars in millions)
Share-owners'
Equity
 Non-controlling Interest 
Total
Equity
 Share-owners'
Equity		 Non-controlling Interest 
Total
Equity
Equity, beginning of period$28,442
 $1,713
 $30,155
 $29,090
 $1,558
 $30,648
Comprehensive income for the period:           
Net income1,330
 104
 1,434
 1,480
 91
 1,571
Total other comprehensive income (loss)637
 40
 677
 (245) 5
 (240)
Total comprehensive income for the period1,967
 144
 2,111
 1,235
 96
 1,331
Common Stock issued under employee plans86
 
 86
 54
 
 54
Common Stock repurchased(60) 
 (60) (649) 
 (649)
Dividends on Common Stock(533) 
 (533) (526) 
 (526)
Dividends on ESOP Common Stock(19) 
 (19) (19) 
 (19)
Dividends attributable to noncontrolling interest  (51) (51) 

 (129) (129)
Sale of subsidiary shares from noncontrolling interest, net5
 9
 14
 2
 22
 24
Acquisition of noncontrolling interest—
 14
 14
 
 29
 29
Redeemable noncontrolling interest fair value adjustment(4) —
 (4) —
 —
 —
Other(3) (19) (22) —
 1
 1
Equity, end of period$29,881
 $1,810
 $31,691
 $29,187
 $1,577
 $30,764
 Nine Months Ended September 30,
 2017 2016
(Dollars in millions)Share-owners'
Equity		 
Non-controlling
Interest
 
Total
Equity
 Share-owners'
Equity		 
Non-controlling
Interest
 
Total
Equity
Equity, beginning of period$27,579
 $1,590
 $29,169
 $27,358
 $1,486
 $28,844
Comprehensive income for the period:           
Net income4,155
 279
 4,434
 4,042
 271
 4,313
Total other comprehensive income (loss)1,007
 83
 1,090
 (110) 16
 (94)
Total comprehensive income for the period5,162
 362
 5,524
 3,932
 287
 4,219
Common Stock issued under employee plans256
 
 256
 200
 
 200
Common Stock repurchased(1,430) 

 (1,430) (685) 
 (685)
Dividends on Common Stock(1,541) 

 (1,541) (1,561) 
 (1,561)
Dividends on ESOP Common Stock(54) 
 (54) (56) 
 (56)
Dividends attributable to noncontrolling interest

 (120) (120) 
 (270) (270)
Sale of subsidiary shares from noncontrolling interest, net4
 4
 8
 (4) 21
 17
Acquisition of noncontrolling interest
 14
 14
 
 63
 63
Redeemable noncontrolling interest fair value adjustment(99) —
 (99) 

 —
 —
Other4
 (40) (36) 3
 (10) (7)
Equity, end of period$29,881
 $1,810
 $31,691
 $29,187
 $1,577
 $30,764
On November 11, 2015, we entered into accelerated share repurchase (ASR) agreements to repurchase an aggregate of $6 billion of our common stock utilizing the net after-tax proceeds from the sale of Sikorsky. Under the terms of the ASR

agreements, we made aggregate payments and received an initial delivery of approximately 51.9 million shares of our common stock in November 2015, representing approximately 85% of the shares expected to be repurchased. The shares associated with the remaining portion of the aggregate purchase were settled upon delivery to us of approximately 2.1 million additional shares of common stock in the quarter ended March 31, 2016 and approximately 8.0 million additional shares of common stock in the quarter ended September 30, 2016.
A summary of the changes in each component of Accumulated other comprehensive (loss) income, net of tax for the quarters and nine months ended September 30, 2017 and 2016 is provided below:
(Dollars in millions)
Foreign
Currency
Translation
 
Defined
Benefit
Pension and
Post-
retirement
Plans
 
Unrealized Gains
(Losses) on
Available-for-Sale
Securities
 
Unrealized
Hedging
(Losses)
Gains
 
Accumulated
Other
Comprehensive
(Loss) Income
Quarter Ended September 30, 2017         
Balance at June 30, 2017$(3,128) $(4,882) $100
 $(54) $(7,964)
Other comprehensive income (loss) before
reclassifications, net		474
 (37) 12
 232
 681
Amounts reclassified, pre-tax(3) 132
 (138) (24) (33)
Tax (benefit) expense reclassified—
 (66) 50
 5
 (11)
Balance at September 30, 2017$(2,657) $(4,853) $24
 $159
 $(7,327)
          
Nine Months Ended September 30, 2017         
Balance at December 31, 2016$(3,480) $(5,045) $353
 $(162) $(8,334)
Other comprehensive income (loss) before
reclassifications, net		826
 (39) 11
 332
 1,130
Amounts reclassified, pre-tax(3) 395
 (545) (14) (167)
Tax (benefit) expense reclassified—
 (164) 205
 3
 44
Balance at September 30, 2017$(2,657) $(4,853) $24
 $159
 $(7,327)
(Dollars in millions)
Foreign
Currency
Translation
 
Defined
Benefit
Pension and
Post-
retirement
Plans
 
Unrealized Gains
(Losses) on
Available-for-Sale
Securities
 
Unrealized
Hedging
(Losses)
Gains
 
Accumulated
Other
Comprehensive
(Loss) Income
Quarter Ended September 30, 2016         
Balance at June 30, 2016$(2,685) $(4,999) $317
 $(117) $(7,484)
Other comprehensive income (loss) before
reclassifications, net		(364) 4
 30
 (5) (335)
Amounts reclassified, pre-tax(1) 127
 (20) 32
 138
Tax (benefit) expense reclassified—
 (47) 8
 (9) (48)
Balance at September 30, 2016$(3,050) $(4,915) $335
 $(99) $(7,729)
          
Nine Months Ended September 30, 2016         
Balance at December 31, 2015$(2,438) $(5,135) $293
 $(339) $(7,619)
Other comprehensive income (loss) before
reclassifications, net		(612) (21) 87
 138
 (408)
Amounts reclassified, pre-tax—
 381
 (72) 139
 448
Tax (benefit) expense reclassified—
 (140) 27
 (37) (150)
Balance at September 30, 2016$(3,050) $(4,915) $335
 $(99) $(7,729)
Amounts reclassified that relate to our defined benefit pension and postretirement plans include the amortization of prior service costs and actuarial net losses recognized during each period presented. These costs are recorded as components of net periodic pension cost for each period presented (see Note 7 for additional details).

Amounts reclassified that relate to unrealized gains (losses) on available-for-sale securities, pre-tax includes approximately $500 million of previously unrealized gains reclassified to other income as a result of sales of significant investments in available-for-sale securities in the nine months ended September 30, 2017, including UTC Climate, Controls & Security's sale of investments in Watsco, Inc.
All noncontrolling interests with redemption features, such as put options, that are not solely within our control (redeemable noncontrolling interests) are reported in the mezzanine section of the Condensed Consolidated Balance Sheet, between liabilities and equity, at the greater of redemption value or initial carrying value. The increase in the value of redeemable noncontrolling interest in our Condensed Consolidated Balance Sheet as of September 30, 2017 is primarily attributable to the adjustment of the redemption value related to the acquisition of a majority interest in an Italian heating products and services company by UTC Climate, Controls & Security in 2016.
Note 13:15: Variable Interest Entities
Pratt & Whitney holds a 61% netprogram share interest in the IAE International Aero Engines AG (IAE) collaboration with MTU Aero Engines AG (MTU) and Japanese Aero Engines Corporation (JAEC) and a 49.5% ownership interest in IAE. IAE'sIAE’s business purpose is to coordinate the design, development, manufacturing and product support of the V2500 engine program through involvement with the collaborators. Additionally, Pratt & Whitney, JAEC and MTU are participants in International Aero Engines, LLC (IAE LLC), whose business purpose is to coordinate the design, development, manufacturing and product support for the PW1100G-JM engine for the Airbus A320neo aircraft and the PW1400G-JM engine for the Irkut MC21MC-21 aircraft. Pratt & Whitney holds a 59% netprogram share interest and a 59% ownership interest in IAE LLC. IAE and IAE LLC retain limited equity with the primary economics of the programs passed to the participants. As such, we have determined that IAE and IAE LLC are variable interest entities with Pratt & Whitney the primary beneficiary. IAE and IAE LLC have,
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therefore, been consolidated. The carrying amounts and classification of assets and liabilities for variable interest entities in our Condensed Consolidated Balance Sheet are as follows:
(dollars in millions)March 31, 2021December 31, 2020
Current assets$7,670 $6,652 
Noncurrent assets853 868 
Total assets$8,523 $7,520 
Current liabilities$8,372 $7,365 
Noncurrent liabilities83 89 
Total liabilities$8,455 $7,454 
(Dollars in millions)September 30, 2017 December 31, 2016
Current assets$4,317
 $2,722
Noncurrent assets1,675
 1,334
Total assets$5,992
 $4,056
    
Current liabilities$3,831
 $2,422
Noncurrent liabilities2,013
 1,636
Total liabilities$5,844
 $4,058

Note 14:16: Guarantees
We extend a variety of financial, market value and product performance guarantees to third parties. There have beenThese instruments expire on various dates through 2024. Additional guarantees of project performance for which there is no material changes to guarantees outstanding since stated value also remain outstanding. As of March 31, 2021 and December 31, 2016.2020, the following guarantees were outstanding:
March 31, 2021December 31, 2020
(dollars in millions)Maximum Potential PaymentCarrying Amount of LiabilityMaximum Potential PaymentCarrying Amount of Liability
Commercial aerospace financing arrangements$314 $6 $322 $6 
Third party guarantees379 2 386 3 
We have made residual value and other guarantees related to various commercial aerospace customer financing arrangements. The estimated fair market values of the guaranteed assets equal or exceed the value of the related guarantees, net of existing reserves. Collaboration partners’ share of these financing guarantees is $144 million and $142 million at March 31, 2021 and December 31, 2020, respectively.
We also have obligations arising from sales of certain businesses and assets, including those from representations and warranties and related indemnities for environmental, health and safety, tax and employment matters. The maximum potential payment related to these obligations is not a specified amount as a number of the obligations do not contain financial caps. The carrying amount of liabilities related to these obligations was $118 million and $120 million at March 31, 2021 and December 31, 2020, respectively. For additional information regarding the environmental indemnifications, see “Note 17: Commitments and Contingencies.”
We accrue for costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued.
We also provide service and warranty policies on our products and extend performance and operating cost guarantees beyond our normal service and warranty policies on some of our products, particularly commercial aircraft engines. In addition, we incur discretionary costs to service our products in connection with specific product performance issues. Liabilities for performance and operating cost guarantees are based upon future product performance and durability, and are largely estimated based upon historical experience. Adjustments are made to accruals as claims data and historical experience warrant. The changes in the carrying amount of service and product warranties and product performance guarantees for the nine monthsquarters ended September 30, 2017March 31, 2021 and 20162020 are as follows:
(dollars in millions)20212020
Balance as of January 1$1,057 $1,033 
Warranties and performance guarantees issued113 90 
Settlements(69)(87)
Other(1)(11)
Balance as of March 31$1,100 $1,025 

27
(Dollars in millions) 2017 2016
Balance as of January 1 $1,199
 $1,212
Warranties and performance guarantees issued 221
 218
Settlements made (194) (192)
Other 21
 —
Balance as of September 30 $1,247
 $1,238
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Note 15: Contingent Liabilities
Summarized below are the matters previously described in Note 18 of the Notes to the Consolidated Financial Statements in our 2016 Annual Report, incorporated by reference in our 2016 Form 10-K, updated as applicable.17: Commitments and Contingencies
Except as otherwise noted, while we are unable to predict the final outcome, based on information currently available, we do not believe that resolution of any of the following matters will have a material adverse effect upon our competitive position, financial condition, results of operations, cash flows or financial condition.liquidity.

Environmental. Our operations are subject to environmental regulation by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations. As described in Note 1 to the Consolidated Financial Statements in our 2016 Annual Report, weWe have accrued for the costs of environmental remediation activities, including but not limited to investigatory, remediation, operating and maintenance costs and performance guarantees, and periodically reassess these amounts. We believe that the likelihood of incurring losses materially in excess of amounts accrued is remote. Additional information pertainingAt March 31, 2021 and December 31, 2020, we had $834 million and $835 million, respectively, reserved for environmental remediation.
Commercial Aerospace Financing and Other Commitments. We had commercial aerospace financing commitments and other contractual commitments of approximately $13.9 billion and $13.4 billion as of March 31, 2021 and December 31, 2020, respectively, on a gross basis before reduction for our collaboration partners’ share. Aircraft financing commitments, in the form of debt or lease financing, are provided to environmental matterscertain commercial aerospace customers. The extent to which the financing commitments will be utilized is included in Note 1not currently known, since customers may be able to obtain more favorable terms from other financing sources. We may also arrange for third-party investors to assume a portion of these commitments. The majority of financing commitments are collateralized arrangements. We may also lease aircraft and subsequently sublease the aircraft to customers under long-term non-cancelable operating leases. Our financing commitments with customers are contingent upon maintenance of certain levels of financial condition by the customers. Associated risks on these commitments are mitigated due to the Consolidated Financial Statementsfact that interest rates are variable during the commitment term and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers. As a result, the fair value of these financing commitments is expected to equal the amounts funded.
In addition, in connection with our 2016 Annual Report.2012 agreement to acquire Rolls-Royce’s ownership and collaboration interests in IAE, additional payments are due to Rolls-Royce contingent upon each hour flown through June 2027 by the V2500-powered aircraft in service as of the acquisition date. These flight hour payments, which are considered in other contractual commitments, are being capitalized as collaboration intangible assets.
Government.Other Financing Arrangements. We have entered into standby letters of credit and surety bonds with financial institutions to meet various bid, performance, warranty, retention and advance payment obligations for us or our affiliates. We enter into these agreements to assist certain affiliates in obtaining financing on more favorable terms, making bids on contracts and performing their contractual obligations. The stated values of these letters of credit agreements and surety bonds totaled $4.4 billion as of March 31, 2021.
Offset Obligations. We have entered into industrial cooperation agreements, sometimes in the form of either offset agreements or ICIP agreements, as a condition to obtaining orders for our products and services from certain customers in foreign countries. At March 31, 2021, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately $11.0 billion. These agreements are designed to return economic value to the foreign country by requiring us to engage in activities supporting local defense or commercial industries, promoting a balance of trade, developing in-country technology capabilities or addressing other local development priorities. Offset agreements may be satisfied through activities that do not require a direct cash payment, including transferring technology, providing manufacturing, training and other consulting support to in-country projects, and the purchase by third parties (e.g., our vendors) of supplies from in-country vendors. These agreements may also be satisfied through our use of cash for activities such as subcontracting with local partners, purchasing supplies from in-country vendors, providing financial support for in-country projects and making investments in local ventures. Such activities may also vary by country depending upon requirements as dictated by their governments. We typically do not commit to offset agreements until orders for our products or services are definitive. The amounts ultimately applied against our offset agreements are based on negotiations with the customers and typically require cash outlays that represent only a fraction of the notional value in the offset agreements. Offset programs usually extend over several or more years and may provide for penalties in the event we fail to perform in accordance with offset requirements. Historically, we have not been required to pay any penalties of significance.
Government Oversight. In the ordinary course of business, the Company and its subsidiaries and our properties are subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations and threatened legal actions and proceedings. For example, we are now, and believe that, in light of the current U.S. Governmentgovernment contracting environment, we will continue to be the subject of one or more U.S. government investigations. Our contracts with the U.S. government are also subject to audits. Agencies that oversee contract performance include: the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), the Inspectors General of the U.S. Department of Defense (DoD) and other departments and agencies, the Government investigations.Accountability Office (GAO), the Department of Justice (DOJ), and Congressional
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Committees. Other areas of our business operations may also be subject to audit and investigation by these and other agencies. From time to time, agencies investigate or conduct audits to determine whether our operations are being conducted in accordance with applicable requirements. Such U.S. Government investigations often take yearsand audits may be initiated due to completea number of reasons, including as a result of a whistleblower complaint. Such investigations and audits could result in administrative, civil or criminal liabilities, including repayments, fines, treble andor other damages, forfeitures, restitution, or penalties being imposed upon us, the suspension of government export licenses or could lead tothe suspension or debarment offrom future U.S. Government contracting or of export privileges. For instance, if we or one of our business units were charged with wrongdoing as a result of any of these investigations or othergovernment contracting. U.S. government investigations (including violations of certain anti-bribery, environmental or export laws) the U.S. Government could suspend us from bidding on or receiving awards of new U.S. Government contracts pending the completion of legal proceedings. If convicted or found liable, the U.S. Government could fine and debar us from new U.S. Government contracting for a period generally notoften take years to exceed three years. complete. The U.S. Governmentgovernment also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal or other seriously improper conduct. The U.S. Governmentgovernment could also void any contracts found to be tainted by fraud.
Our contracts with the U.S. Government are also subject to audits. Like many defense contractors, we have received audit reports which recommend thatrecommending the reduction of certain contract prices should be reduced to comply with various government regulations, including because, for example, cost or pricing data we submitted in negotiation of the contract prices or cost accounting practices used to price and negotiate those contracts may not have conformed to government regulations, or that certain payments be delayed or withheld.regulations. Some of these audit reports involvedrecommend that certain payments be repaid, delayed, or withheld, and may involve substantial amounts. We have made voluntary refunds in those cases we believe appropriate, have settled some allegations and, in some cases, continue to litigate negotiate and/or challenge certain matters. litigate. The Company may be, and in some cases has been, required to make payments into escrow of disputed liabilities while the related litigation is pending. If the litigation is resolved in the Company’s favor, any such payments will be returned to the Company with interest. Our final allowable incurred costs for each year are also subject to audit and have, from time to time, resulted in disputes between us and the U.S. government, with litigation resulting at the Court of Federal Claims (COFC) or the Armed Services Board of Contract Appeals (ASBCA) or their related courts of appeals. In addition, the DOJ has, from time to time, convened grand juries to investigate possible irregularities by us. We also provide products and services to customers outside of the U.S., and those sales are subject to local government laws, regulations and procurement policies and practices. Our compliance with such local government regulations or any applicable U.S. government regulations (e.g., the Foreign Corrupt Practices Act (FCPA) and International Traffic in Arms Regulations (ITAR)) may also be investigated or audited. In addition, we accrue for liabilities associated with those matters that are probable and can be reasonably estimated. The most likely settlementliability amount to be incurred is accrued based upon a range of estimates. Where no amount within a range of estimates is more likely, then we accruedaccrue the minimum amount. Other than as specifically disclosed in this Form 10-Q, we do not expect these audits, investigations or disputes to have a material effect on our financial condition, results of operations or liquidity, either individually or in the aggregate.
Legal Proceedings.The Company and its subsidiaries are subject to various contract pricing disputes, government investigations and litigation matters across jurisdictions, updates to certain of which are set forth below.
Cost Accounting Standards ClaimClaims
As previously disclosed, in April 2019, a Divisional Administrative Contracting Officer (DACO) of the United States DCMA asserted a claim against Pratt & Whitney to recover overpayments of approximately $1.73 billion plus interest ($675 million at March 31, 2021). The claim is based on Pratt & Whitney’s alleged noncompliance with Cost Accounting Standards (CAS) from January 1, 2007 to March 31, 2019, due to its method of allocating independent research and development costs to government contracts. Pratt & Whitney believes that the claim is without merit and filed an appeal to the ASBCA on June 7, 2019.
As previously disclosed, in December 2013, a Divisional Administrative Contracting Officer of the United States Defense Contract Management AgencyDCMA DACO asserted a claim against Pratt & Whitney to recover overpayments of approximately $177 million plus interest (approximately $70($112 million through September 30, 2017)at March 31, 2021). The claim is based on Pratt & Whitney'sWhitney’s alleged noncompliance with cost accounting standardsCAS from January 1, 2005 to December 31, 2012, due to its method of determining the cost of collaborator parts used in the calculation of material overhead costs for government contracts. On March 18,In 2014, Pratt & Whitney filed an appeal to the Armed Services Board of Contract Appeals. Pratt & Whitney’s appeal is still pendingASBCA. An evidentiary hearing was held and wecompleted in June 2019. The parties concluded post-hearing briefing in January 2020, and now await a decision from the ASBCA. We continue to believe that the government’s claim is without merit.
German Tax Litigation
As previously disclosed, UTC has been involved in administrative review proceedings In December 2018, a DCMA DACO issued a second claim against Pratt & Whitney that similarly alleges that its method of determining the cost of collaborator parts does not comply with the German Tax Office,CAS for calendar years 2013 through 2017. This second claim demands payment of $269 million plus interest ($72 million at March 31, 2021), which concern approximately €215 million (approximately $256 million) of tax benefits that we have claimed related to a 1998 reorganization of the corporate structure of Otis operations in Germany. Upon audit, these tax benefits were disallowed by the German Tax Office. UTC estimates interest associated with the aforementioned tax benefitsalso believe is an additional approximately €118 million (approximately $140 million). On August 3, 2012, we filed suit in the local German Tax Court (Berlin-Brandenburg). In March 2016, the local German Tax Court dismissed our suit,without merit and we havewhich Pratt & Whitney appealed this decision to the German Federal Tax Court (FTC). In 2015, UTC made tax and interest payments to German tax authorities of €275 million (approximately $300 million)ASBCA in order to avoid additional interest accruals pending final resolution of this matter. In the meantime, we continue vigorously to litigate this matter.January 2019.
Asbestos MattersThales-Raytheon Systems Matter
As previously disclosed, like many other industrial companies,in 2019, Raytheon Company received a subpoena from the Securities and Exchange Commission (SEC) seeking information in connection with an investigation into whether there were improper payments made by Thales-Raytheon Systems (TRS) or anyone acting on their behalf in connection with TRS or Raytheon Company contracts in certain Middle East countries since 2014. In the first quarter of 2020, the DOJ advised Raytheon Company it had opened a parallel investigation. In the third quarter of 2020, Raytheon Company received an additional subpoena from the SEC, seeking information and documents as part of its ongoing investigation. Raytheon Company maintains a rigorous anti-corruption compliance program, is cooperating fully with the SEC’s inquiry, and is examining whether there has been any conduct that is in violation of Raytheon Company policy. At this time, the Company is unable to predict the outcome of the SEC’s or DOJ’s
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inquiry. Based on the information available to date, however, we do not believe the results of this inquiry will have a material adverse effect on our financial condition, results of operations or liquidity.
DOJ Investigation, Contract Pricing Disputes and our subsidiaries have been named as defendantsRelated Civil Litigation
As previously disclosed, on October 8, 2020, the Company received a criminal subpoena from the DOJ seeking information and documents in lawsuits alleging personal injury asconnection with an investigation relating to financial accounting, internal controls over financial reporting, and cost reporting regarding Raytheon Company’s Missiles & Defense business (RMD) since 2009. The investigation includes potential civil defective pricing claims for three RMD contracts entered into between 2011 and 2013. As part of the same investigation, on March 24, 2021, the Company received a result of exposuresecond criminal subpoena from the DOJ seeking documents relating to asbestos integrateda different RMD contract entered into certain of our products or business premises. Whilein 2017. We are cooperating fully with the DOJ’s ongoing investigation. Although we believe we have never manufactured asbestos and no longer incorporate it in any currently-manufactured products, certain of our historical products, like those of many other manufacturers, have contained components incorporating asbestos. A substantial majority of these asbestos-relateddefenses to the potential claims, have been dismissed without payment or were covered in full or in part by insurance

or other forms of indemnity. Additional cases were litigated and settled without any insurance reimbursement. The amounts involved in asbestos related claims were not material individually or in the aggregate in any year.
Our estimated total liability to resolve all pending and unasserted potential future asbestos claims through 2059 is approximately $349 million and is principally recorded in Other long-term liabilities on our Condensed Consolidated Balance Sheet as of September 30, 2017. This amount is on a pre-tax basis, not discounted, and excludes the Company’s legal fees to defend the asbestos claims (which will continue to be expensed by the Company as they are incurred). In addition, the Company has an insurance recovery receivabledetermined that there is a meaningful risk of civil liability for probable asbestosdamages, interest and potential penalties. At this time, the Company is unable to predict either the outcome of the criminal investigation or the outcome of any potential civil claims based on facts revealed in, or related recoveriesto, the investigation. Based on the information available to date, however, we do not believe the results of approximately $121 million, which is included primarily in Other assetsthe investigation or of any potential civil litigation will have a material adverse effect on our Condensed Consolidated Balance Sheet asfinancial condition, results of September 30, 2017.operations or liquidity.
Four shareholder lawsuits were filed against the Company after the DOJ investigation was first disclosed. A putative securities class action lawsuit was filed in the United States District Court for the District of Arizona against the Company and certain of its executives alleging that the defendants violated federal securities laws by making material misstatements in regulatory filings regarding internal controls over financial reporting in RMD. Three shareholder derivative lawsuits were filed in the United States District Court for the District of Delaware against the former Raytheon Company Board of Directors, the Company and certain of its executives, each alleging that defendants violated federal securities laws and breached their fiduciary duties by engaging in improper accounting practices, failing to implement sufficient internal financial and compliance controls, and making a series of false and misleading statements in regulatory filings. We believe that each of these lawsuits lacks merit.
Darnis, et al.
As previously disclosed, August 12, 2020, several former employees of UTC or its subsidiaries filed a putative class action complaint in the United States District Court for the District of Connecticut against the Company, Otis, Carrier, the former members of the UTC Board of Directors, and the members of the Carrier and Otis Boards of Directors (Geraud Darnis, et al. v. Raytheon Technologies Corporation, et al.). The amountscomplaint challenges the method by which UTC equity awards were converted to Company, Otis, and Carrier equity awards following the separation of UTC into three independent, publicly-traded companies on April 3, 2020. The complaint claims that the defendants are liable for breach of certain equity compensation plans and for breach of fiduciary duty, and also asserts claims under certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA). We believe that the Company has meritorious defenses to these claims. At this time, the Company is unable to predict the outcome, or the possible range of loss, if any, which could result from this action.
Where appropriate, we have recorded by UTCloss contingency accruals for asbestos-related liabilitiesthe above-referenced matters, and insurance recoveries are based on currently available information and assumptions that we believe are reasonable. Our actual liabilities or insurance recoveries could be higher or lower than those recorded if actual results vary significantly from the assumptions. Key variables in these assumptions include the number and type of new claims to be filed each year, the outcomes or resolution of such claims, the average cost of resolution of each new claim, the amount of insurance available, allocation methodologies, the contractual terms with each insurer with whom we have reached settlements, the resolution of coverage issues with other excess insurance carriers with whom we havein aggregate is not yet achieved settlements, and the solvency risk with respect to our insurance carriers. Other factors that may affect our future liability include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, legal rulings that may be made by state and federal courts, and the passage of state or federal legislation. At least annually, the Company evaluates all of these factors and, with input from an outside actuarial expert, makes any necessary adjustments to both our estimated asbestos liabilities and insurance recoveries.material.
Other.
As described in Note 14 of this Form 10-Q and Note 17 to the Consolidated Financial Statements in our 2016 Annual Report,“Note 16: Guarantees,” we extend performance and operating cost guarantees beyond our normal warranty and service policies for extended periods on some of our products. We have accrued our estimate of the liability that may result under these guarantees and for service costs that are probable and can be reasonably estimated.
We also have other commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising out of the normal course of business. We accrue contingencies based upon a range of possible outcomes. If no amount within this range is a better estimate than any other, then we accrue the minimum amount.
In the ordinary course of business, the Company and its subsidiaries are also routinely defendants in, parties to or otherwise subject to many pending and threatened legal actions, claims, disputes and proceedings. These matters are often based on alleged violations of contract, product liability, warranty, regulatory, environmental, health and safety, employment, intellectual property, tax and other laws. In some instances, claims for substantial monetary damages are asserted against the Company and its subsidiaries and could result in fines, penalties, compensatory or treble damages or non-monetary relief. We do not believe that these matters will have a material adverse effect upon our competitive position, financial condition, results of operations, cash flows or financial condition.liquidity.
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Note 18: Accumulated Other Comprehensive Loss
A summary of the changes in each component of Accumulated other comprehensive loss, net of tax for the quarters ended March 31, 2021 and 2020 is provided below:
(dollars in millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansUnrealized Hedging (Losses) GainsAccumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020$710 $(4,483)$39 $(3,734)
Other comprehensive income (loss) before
reclassifications, net		(176)(10)(46)(232)
Amounts reclassified, pre-tax0 64 (14)50 
Tax benefit (expense)(5)(12)12 (5)
Balance at March 31, 2021$529 $(4,441)$(9)$(3,921)

(dollars in millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansUnrealized Hedging (Losses) GainsAccumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019$(3,211)$(6,772)$(166)$(10,149)
Other comprehensive income (loss) before
reclassifications, net		(1,445)8 (403)(1,840)
Amounts reclassified, pre-tax0 102 29 131 
Tax expense (benefit)9 (31)92 70 
Balance at March 31, 2020$(4,647)$(6,693)$(448)$(11,788)

Note 16:19: Segment Financial Data
Our operations, for the periods presented herein, are classified into four principal segments: Otis, UTC Climate, Controls & Security,Collins Aerospace, Pratt & Whitney, RIS and UTC Aerospace Systems.RMD. The segments are generally based on the management structure of the businesses and the grouping of similar operating companies, where each management organization has general operating autonomy over diversified products and services. The results of RIS and RMD reflect the period subsequent to the completion of the Raytheon Merger on April 3, 2020.
As previously announced, effective January 1, 2021, we reorganized certain product areas of our Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD) businesses to more efficiently leverage our capabilities. The amounts and presentation of our business segments, including intersegment activity, set forth in this Form 10-Q reflect this reorganization. The reorganization does not impact our previously reported consolidated balance sheets, statements of operations or statements of cash flows.
As a result of the Raytheon Merger, we now present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and PRB expense under the Financial Accounting Standards (FAS) requirements of U.S. Generally Accepted Accounting Principles (GAAP) and our pension and PRB expense under U.S. government Cost Accounting Standards (CAS) primarily related to our RIS and RMD segments. While the ultimate liability for pension and PRB costs under FAS and CAS is similar, the pattern of cost recognition is different. We generally expect to recover the related RIS and RMD pension and PRB liabilities over time through the pricing of our products and services to the U.S. government. Because the Collins Aerospace and Pratt & Whitney segments generally record pension and PRB expense on a FAS basis, historical results were not impacted by this change in segment reporting.
Total sales and operating profit by segment include inter-segment sales which are generally recorded at prices approximating those that the selling entity is able to obtain on external sales for our Collins Aerospace and Pratt & Whitney segments, and at
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cost-plus a specified fee, which may differ from what the selling entity would be able to obtain on sales to external customers, for our RIS and RMD segments. Results for the quarters ended September 30, 2017March 31, 2021 and 20162020 are as follows:
Net SalesOperating ProfitOperating Profit Margins
(dollars in millions)202120202021202020212020
Collins Aerospace Systems$4,370 $6,438 $314 $1,246 7.2 %19.4 %
Pratt & Whitney4,030 5,353 20 475 0.5 %8.9 %
Raytheon Intelligence & Space3,765 0 388 0 10.3 %0 %
Raytheon Missiles & Defense3,793 0 496 0 13.1 %0 %
Total segment15,958 11,791 1,218 1,721 7.6 %14.6 %
Eliminations and other(1)
(707)(431)(31)(25)
Corporate expenses and other unallocated items (2)
0 0 (81)(130)
FAS/CAS operating adjustment0 0 423 0 
Acquisition accounting adjustments0 0 (516)(271)
Consolidated$15,251 $11,360 $1,013 $1,295 6.6 %11.4 %
 Net Sales Operating Profits Operating Profit Margins
(Dollars in millions)2017 2016 2017 2016 2017 2016
Otis$3,156
 $3,018
 $555
 $584
 17.6% 19.4%
UTC Climate, Controls & Security4,688
 4,415
 828
 801
 17.7% 18.1%
Pratt & Whitney3,871
 3,501
 229
 340
 5.9% 9.7%
UTC Aerospace Systems3,637
 3,646
 616
 600
 16.9% 16.5%
Total segments15,352
 14,580
 2,228
 2,325
 14.5% 15.9%
Eliminations and other(290) (226) 40
 18
    
General corporate expenses—
 —
 (105) (92)    
Consolidated$15,062
 $14,354
 $2,163
 $2,251
 14.4% 15.7%
(1)    Includes the operating results of certain smaller non-reportable business segments.

(2)    The net expenses related to the U.S. Army’s Lower Tier Air and Missile Defense Sensor (LTAMDS) project of $58 million in the quarter ended March 31, 2021 are included in Corporate operating profit as they are not included in management’s evaluation of business segment results. NaN amounts were recorded in the quarter ended March 31, 2020.
ResultsWe disaggregate our contracts from customers by geographic location based on customer location, by customer and by sales type. Our geographic location based on customer location uses end user customer location where known or practical to determine, or in instances where the end user customer is not known or not practical to determine, we utilize “ship to” location as the customer location. In addition, for our RIS and RMD segments, we disaggregate our contracts from customers by contract type. We believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Historical results have been recast to reflect the presentation of this disaggregation.
Segment sales disaggregated by geographic region for the nine monthsquarters ended September 30, 2017March 31, 2021 and 20162020 are as follows:
20212020
(dollars in millions)Collins Aerospace SystemsPratt & WhitneyRaytheon Intelligence & SpaceRaytheon Missiles & DefenseOtherTotalCollins Aerospace SystemsPratt & WhitneyRaytheon Intelligence & SpaceRaytheon Missiles & DefenseOtherTotal
United States$2,242 $2,159 $2,965 $2,357 $7 $9,730 $3,144 $2,355 $0 $0 $5 $5,504 
Asia Pacific405 793 204 370 0 1,772 604 1,421 0 0 0 2,025 
Middle East and North Africa95 104 133 660 0 992 143 172 0 0 0 315 
Europe1,079 626 114 327 1 2,147 1,745 1,017 0 0 0 2,762 
Canada and All Other217 348 29 16 0 610 372 382 0 0 0 754 
Consolidated net sales4,038 4,030 3,445 3,730 8 15,251 6,008 5,347 0 0 5 11,360 
Inter-segment sales332 0 320 63 (715)0 430 6 0 0 (436)0 
Business segment sales$4,370 $4,030 $3,765 $3,793 $(707)$15,251 $6,438 $5,353 $0 $0 $(431)$11,360 
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 Net Sales Operating Profits Operating Profit Margins
(Dollars in millions)2017 2016 2017 2016 2017 2016
Otis$9,091
 $8,830
 $1,551
 $1,631
 17.1% 18.5%
UTC Climate, Controls & Security13,292
 12,602
 2,664
 2,279
 20.0% 18.1%
Pratt & Whitney11,699
 10,902
 1,024
 1,136
 8.8% 10.4%
UTC Aerospace Systems10,888
 10,867
 1,771
 1,720
 16.3% 15.8%
Total segments44,970
 43,201
 7,010
 6,766
 15.6% 15.7%
Eliminations and other(813) (616) 25
 47
    
General corporate expenses—
 —
 (315) (280)    
Consolidated$44,157
 $42,585
 $6,720
 $6,533
 15.2% 15.3%
Segment sales disaggregated by customer for the quarters ended March 31, 2021 and 2020 are as follows:
See
20212020
(dollars in millions)Collins Aerospace SystemsPratt & WhitneyRaytheon Intelligence & SpaceRaytheon Missiles & DefenseOtherTotalCollins Aerospace SystemsPratt & WhitneyRaytheon Intelligence & SpaceRaytheon Missiles & DefenseOtherTotal
U.S. government (1)
$1,222 $1,262 $2,900 $2,357 $7 $7,748 $1,289 $1,239 $0 $0 $0 $2,528 
Foreign military sales through the U.S. government40 242 208 805 0 1,295 55 271 0 0 0 326 
Foreign government direct commercial sales245 139 229 567 0 1,180 225 138 0 0 0 363 
Commercial aerospace and other commercial2,531 2,387 108 1 1 5,028 4,439 3,699 0 0 5 8,143 
Consolidated net sales4,038 4,030 3,445 3,730 8 15,251 6,008 5,347 0 0 5 11,360 
Inter-segment sales332 0 320 63 (715)0 430 6 0 0 (436)0 
Business segment sales$4,370 $4,030 $3,765 $3,793 $(707)$15,251 $6,438 $5,353 $0 $0 $(431)$11,360 
(1)    Excludes foreign military sales through the U.S. government.
Segment sales disaggregated by sales type for the quarters ended March 31, 2021 and 2020 are as follows:
20212020
(dollars in millions)Collins Aerospace SystemsPratt & WhitneyRaytheon Intelligence & SpaceRaytheon Missiles & DefenseOtherTotalCollins Aerospace SystemsPratt & WhitneyRaytheon Intelligence & SpaceRaytheon Missiles & DefenseOtherTotal
Product$3,182 $2,423 $2,676 $3,375 $8 $11,664 $4,905 $3,255 $0 $0 $5 $8,165 
Service856 1,607 769 355 0 3,587 1,103 2,092 0 0 0 3,195 
Consolidated net sales4,038 4,030 3,445 3,730 8 15,251 6,008 5,347 0 0 5 11,360 
Inter-segment sales332 0 320 63 (715)0 430 6 0 0 (436)0 
Business segment sales$4,370 $4,030 $3,765 $3,793 $(707)$15,251 $6,438 $5,353 $0 $0 $(431)$11,360 
RIS and RMD segment sales disaggregated by contract type for the quarter ended March 31, 2021 are as follows:
2021
(dollars in millions)Raytheon Intelligence & SpaceRaytheon Missiles & Defense
Fixed-price$1,471 $2,251 
Cost-type1,974 1,479 
Consolidated net sales$3,445 $3,730 

Note 820: Remaining Performance Obligations (RPO)
RPO represent the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. Total RPO was $147.4 billion and $150.1 billion as of March 31, 2021 and December 31, 2020, respectively. Of the total RPO as of March 31, 2021, we expect approximately 30% will be recognized as sales over the next 12 months. This percentage of RPO to be recognized as sales over the next 12 months depends on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the scope, severity and duration of the COVID-19
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pandemic, as well as any worsening of the pandemic, the effect of mutating strains and whether additional outbreaks of the pandemic will continue to occur, actions to contain the pandemic’s spread or treat its impact, continued availability of vaccines, and their distribution, acceptance and efficacy, and governmental, business and individual personal actions taken in response to the Condensed Consolidated Financial Statements for a discussion of restructuring costs includedpandemic, which may result in segment operating results.customer delays or order cancellations.
Note 17:21: Accounting Pronouncements
In June 2016, the Financial Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers:
In May 2014, the FASBBoard (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. In 2015 and 2016, the FASB issued various updates to this2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU as follows:
ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date - delays the effective date of ASU 2014-09 by one year.
ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net) - clarifies how an entity should identify the unit of accounting (i.e. the specified good or service) for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements.
ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing - clarifies the guidance surrounding licensing arrangements and the identification of performance obligations.
ASU 2016-12, Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients - addresses implementation issues raised by stakeholders concerning collectability, noncash consideration, presentation of sales tax, and transition.
ASU 2016-20, Revenue from Contracts with Customers (Topic 606), Technical Corrections and Improvements - addresses loan guarantee fees, impairment testing of contract costs, provisions for losses on certain contracts, and various disclosures.
ASU 2014-09 and its related amendments (collectively, the New RevenueCredit Loss Standard) are effective for reporting periods beginning after December 15, 2017, and interim periods therein, using eithermodifies the impairment model to utilize an expected loss methodology in place of the following transition methods; (i)incurred loss methodology for financial instruments, including trade receivables, contract assets and off-balance sheet credit exposures. The Credit Loss Standard requires consideration of a full retrospective adoption reflectingbroader range of information to estimate expected credit losses, including historical information, current economic conditions and a reasonable forecast period. This ASU requires that the applicationstatement of operations reflect estimates of expected credit losses for newly recognized financial assets as well as changes in the estimate of expected credit losses that have taken place during the period, which may result in earlier recognition of certain losses. We adopted this standard in each prior reporting period, or (ii)effective January 1, 2020 utilizing a modified retrospective approach with the cumulative effect of adopting recognized throughapproach. A cumulative-effect non-cash adjustment to retained earnings atas of January 1, 2020 was recorded in the dateamount of adoption.$59 million. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The New Revenue Standardamendments in this update remove certain exceptions of Topic 740 including the exception to the incremental approach for intraperiod tax allocation when there is expecteda loss from continuing operations and income from other items; the exception to change the revenue recognition practicesrequirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; the exception to the ability to reverse a deferred tax liability for a numberforeign subsidiary when a foreign equity method investment becomes a subsidiary; and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. There are also additional areas of revenue streams across our businesses, although the most significant impacts will be concentrated within our aerospace units. Several businesses, which currently account for revenue on a “point-in-time basis,” will be requiredguidance related to use an “over time” model as they meet one or more of the mandatory criteria established in the New Revenue Standard. Revenue will be recognizedfranchise and other taxes partially based on percentage-of-completion for certain U.S. Government aerospace contracts;income and aerospace aftermarket service work performed on a timethe interim recognition of enactment of tax laws and materials basis. For these businesses, unrecognized salesrate changes. We adopted the new standard effective January 1, 2021. The adoption of this standard did not, and operating profits related to the satisfied portion of the performance obligations of contracts in process as of the date of adoption will be recorded through retained earnings. The ongoing effect of recording revenue on a percentage-of-completion basis within these businesses is not expected to, be material.have an impact on the Company’s Condensed Consolidated Financial Statements.
In addition to the forgoing, our aerospace businesses will also incur changes related to the timing of manufacturing cost recognition and certain engineering and development costs. In most circumstances, our commercial aerospace businesses will identify the performance obligation, or the unit of accounting, as the individual original equipment (OEM) unit; revenues and costs to manufacture each unit will be recognized upon OEM unit delivery. Under current practice, the unit of accounting is the contract, and early-contract OEM unit costs in excess of the average expected over the contract are capitalized and amortized

over lower-cost units later in the contract. With the adoption of the New Revenue Standard, any deferred unit costs in excess of the contract average will be eliminated through retained earnings and willOther new pronouncements issued but not be amortized into future earnings. As of September 30, 2017, capitalized deferred unit costs in excess of the contract average are $357 million, which is expected to increase prior to adoption of the New Revenue Standard.
With regard to costs incurred for the engineering and development of aerospace products under contract with customers, we generally expense as incurred unless there is a contractually guaranteed right of recovery. Any customer funding received for such efforts is recognized when earned, with the corresponding costs recognized as cost of sales. The New Revenue Standard requires customer funding of OEM product engineering and development to be deferred and recognized as revenue as the OEM products are delivered to the customer.   The New Revenue Standard also requires product engineering and development costs to be capitalized as contract fulfillment costs, to the extent recoverable from the associated contract margin, and subsequently amortized as the OEM products are delivered to the customer.  For contracts that are open as of the adoption date, previously recognized customer funding will be established as a contract liability.
We continue to evaluate the implications of the standard change. We intend to adopt the New Revenue Standard effective January 1, 2018 using the modified retrospective approach.
Other Accounting Pronouncements:
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Upon adoption, investments that do not result in consolidation anduntil after March 31, 2021 are not accounted for under the equity method generally must be carried at fair value, with changes in fair value recognized in net income. As discussed in Note 12, we have approximately $24 million of unrealized gains on these securities recorded in Accumulated other comprehensive loss in our Condensed Consolidated Balance Sheet as of September 30, 2017. To the extent currently unrealized gains or losses on these investments are not realized through sale or other actions prior to the date of adoption, these amounts would be recorded directly to retained earnings upon adoption. The provisions of this ASU are effective for years beginning after December 15, 2017.
In February 2016, the FASB issued ASU 2016- 02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Condensed Consolidated Statement of Operations. In addition, this standard requires a lessor to classify leases as either sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor doesn’t convey risks and rewards or control, the lease is treated as operating.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases and lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We expect that upon adoption we will recognize ROU assets and lease liabilities and that the amounts could be material. We do not expect the ASUexpected to have a material impact on our cash flows or results of operations.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU provides a new framework that will assist in the evaluation of whether business combination transactions should be accounted as acquisition of a business or a group of assets, as well as specifying the minimum required inputs and processes necessary to be a business. The provisions of this ASU are effective for years beginning after December 15, 2017, with early adoption permitted. We plan to adopt the new standard effective January 1, 2018.
In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires an employer to report the service cost component of net periodic pension benefit cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period, with other cost components presented separately from the service cost component and outside of income from operations. This ASU also allows only the service cost component of net periodic pension benefit cost to be eligible for capitalization when applicable. The provisions of this ASU are effective for years beginning after December 15, 2017. Provisions related to presentation of the service cost components versus other cost components must be applied retrospectively, while provisions related to service cost component eligibility for capitalization must be applied prospectively. This ASU primarily impacts the presentation of net periodic pension cost/benefit and therefore we do not expect this ASU to have a material impact on net income, however it will result in changes to reported operating profit.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. This ASU will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The provisions of this ASU are effective for years beginning after December 15, 2018, with early adoption permitted for any interim period after issuance of the ASU. In the case of early adoption, the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We do not expect this ASU to have a significant impact on ourcondition, results of operations or financial position.liquidity.

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With respect to the unaudited condensed consolidated financial information of UTCRaytheon Technologies for the quarters ended March 31, 2021 and nine months ended September 30, 2017 and 2016,2020, PricewaterhouseCoopers LLP (PricewaterhouseCoopers)(PwC) reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated OctoberApril 27, 2017,2021, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information. PricewaterhouseCoopersPwC has not carried out any significant or additional audit tests beyond those that would have been necessary if their report had not been included. Accordingly, the degree of reliance on its report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopersPwC is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the Act) for its report on the unaudited condensed consolidated financial information because that report is not a "report"“report” or a "part"“part” of a registration statement prepared or certified by PricewaterhouseCoopersPwC within the meaning of Sections 7 and 11 of the Act.

Report of Independent Registered Public Accounting Firm

To the Shareowners and Board of Directors and Shareowners of UnitedRaytheon Technologies Corporation:Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of UnitedRaytheon Technologies Corporation and its subsidiaries (the “Company”) as of September 30, 2017,March 31, 2021, and the related condensed consolidated statements of operations, and condensed consolidated statements of comprehensive income for the three-month(loss), of changes in equity, and nine-month periods ended September 30, 2017 and 2016 and the condensed consolidated statement of cash flows for the nine-monththree-month periods ended September 30, 2017March 31, 2021 and 2016. This2020, including the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information isfor it to be in conformity with accounting principles generally accepted in the responsibilityUnited States of the Corporation’s management.America.


We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)., the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 8, 2021, which included a paragraph describing a change in the manner of accounting for leases in the 2020 financial statements, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States),PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheet as of December 31, 2016, and the related consolidated statements of operations, of comprehensive income, of cash flows, and of changes in equityfor the year then ended (not presented herein), and in our report dated February 9, 2017, which included a paragraph that described the change in the presentation and classification of certain cash receipts and cash payments and the presentation of restricted cash in the statement of cash flows, as well as the classification and presentation of certain employee share-based payment transactions and the tax-related cash flows resulting from these payments, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
OctoberBoston, Massachusetts
April 27, 20172021

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
BUSINESS OVERVIEW
We are a global premier systems provider of high technology products and services to the building systemsaerospace and aerospacedefense industries. Our operationsOn April 3, 2020, United Technologies Corporation (UTC) completed the separation of its business into three independent, publicly traded companies – UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis) (the Separation Transactions). UTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the periods presented herein are classified intodistributions (the Distributions) effective at 12:01 a.m., Eastern Time, on April 3, 2020. Immediately following the Separation Transactions and Distributions, on April 3, 2020, UTC and Raytheon Company completed their all-stock merger of equals transaction (the Raytheon Merger), pursuant to which Raytheon Company became a wholly-owned subsidiary of UTC and UTC was renamed Raytheon Technologies Corporation. As a result of these transactions, we now operate in four principal business segments: Otis, UTC Climate, Controls & Security,Collins Aerospace Systems (Collins Aerospace), Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).
UTC was determined to be the accounting acquirer in the Raytheon Merger, and, as a result, the financial statements of Raytheon Technologies include Raytheon Company’s financial position and results of operations for all periods subsequent to the completion of the Raytheon Merger on April 3, 2020. RIS and RMD follow a 4-4-5 fiscal calendar with a quarter end of April 4, 2021 while Collins Aerospace Systems. Otis and UTC Climate, Controls & Security are referred to as the "commercial businesses," while Pratt & Whitney continue to use a quarter calendar end of March 31, 2021. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarter ended March 31 with respect to RIS or RMD, we are referring to their April 4, 2021 fiscal quarter end. The historical results of Carrier and UTC Aerospace SystemsOtis are referredpresented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. See “Note 3: Discontinued Operations” within Item 1 of this Form 10-Q for additional information. Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.
Unless the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” “Raytheon Technologies,” and “RTC” mean United Technologies Corporation and its subsidiaries when referring to asperiods prior to the "aerospace businesses."Raytheon Merger and to the combined company, Raytheon Technologies Corporation, when referring to periods after the Raytheon Merger. Unless the context otherwise requires, the terms “Raytheon Company,” or “Raytheon” mean Raytheon Company and its subsidiaries prior to the Raytheon Merger.
The current status of significant factors affecting our business environment in 20172021 is discussed below. For additional discussion, refer to the "Business Overview"“Business Overview” section in Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in our 20162020 Annual Report which is incorporated by reference in our 2016on Form 10-K.
GeneralIndustry Considerations
Our worldwide operations can be affected by industrial, economic and political factors on both a regional and global level. To limit the impact of any one industry, or the economy of any single country on our consolidated operating results, our strategy has been, and continues to be, the maintenance of a balanced and diversified portfolio of businesses. Our operations include original equipment manufacturingmanufacturer (OEM) and extensive related aftermarket parts and services inrelated to our aerospace operations. Our defense business serves both our commercialdomestic and aerospace businesses.international customers primarily as a prime contractor or subcontractor on a broad portfolio of defense and related programs for government customers. Our business mix also reflects the combination of shorter cycles at UTC Climate, Controls & Security and inon our commercial aerospace spares businesses,contracts and certain service contracts in our defense business primarily at RIS, and longer cycles at Otis and in our aerospace OEM and aftermarket maintenance businesses.contracts and on our defense contracts to design, develop, manufacture or modify complex equipment. Our customers include companiesare in the public and private sector and governments,sectors, and our businesses reflect an extensive geographic diversification that has evolved with the continued globalization of world economies.
Our military businesses' sales are affected by U.S. Department of Defense budget and spending levels. Total sales to the U.S. Government were $1.4 billion in each of the quarters ended September 30, 2017 and 2016, 9% and 10% of total UTC sales for those periods, respectively. The defense portion of our aerospace business is affected by changes in market demand and the global political environment. Our participation in long-term production and development programs for the U.S. Government has and is expected to contribute positively to our results in 2017.
Discontinued Operations
In the nine months ended September 30, 2016, we recognized approximately $1 million of income from discontinued operations, primarily reflecting the final purchase price adjustment for the sale of Sikorsky, and the net effects of filing Sikorsky's 2015 tax returns. We had net cash outflows from discontinued operations of approximately $2.5 billion in the nine months ended September 30, 2016, primarily related to the payment of taxes related to the 2015 gain.
Acquisition Activity
Our growth strategy contemplates acquisitions. Our operations and results can be affected by the rate and extent to which appropriate acquisition opportunities are available, acquired businesses are effectively integrated, and anticipated synergies or cost savings are achieved. During the nine months ended September 30, 2017, our investment in business acquisitions was $196 million, which includes a number of small acquisitions primarily in our commercial businesses. We expect cash investment in acquisitions to be approximately $500 million to $1 billion in 2017. However, actual acquisition spending may vary depending upon the timing, availability and value of acquisition opportunities.
On September 4, 2017, we announced that we had entered into a merger agreement with Rockwell Collins, under which we will acquire Rockwell Collins. Under the terms of the merger agreement, each Rockwell Collins shareowner will receive $93.33 per share in cash and a fraction of a share of UTC common stock equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock on the NYSE on each of the 20 consecutive trading days ending with the trading day immediately prior to the closing date (the “UTC Stock Price”), subject to adjustment based on a two-way collar mechanism as described below (the “Stock Consideration”). The cash and UTC stock payable in exchange for each such share of Rockwell Collins common stock are collectively the “Merger Consideration.” The fraction of a share of UTC common stock into which each such share of Rockwell Collins common stock will be converted is the “Exchange Ratio.” The Exchange Ratio will be determined based upon the UTC Stock Price. If the UTC Stock Price is greater than $107.01 but less than $124.37, the Exchange Ratio will be equal to the quotient of (i) $46.67 divided by (ii) the UTC Stock Price, which, in each case, will result in the Stock Consideration having a value equal to $46.67. If the UTC Stock Price is less than or equal to $107.01 or greater than or equal to $124.37, then a two-way collar mechanism will apply, pursuant to which, (x) if the UTC Stock Price is greater than or equal to $124.37, the Exchange Ratio will be fixed at 0.37525 and the value of the Stock Consideration will be greater than $46.67, and (y) if the UTC Stock Price is less than or equal to $107.01, the

Exchange Ratio will be fixed at 0.43613 and the value of the Stock Consideration will be less than $46.67. We currently expect that the merger will be completed in the third quarter of 2018, subject to approval by Rockwell Collins’ shareowners, as well as other customary closing conditions, including the receipt of required regulatory approvals.
We anticipate that approximately $15 billion will be required to pay the aggregate cash portion of the Merger Consideration. We expect to fund the cash portion of the Merger Consideration through debt issuances and cash on hand. We have entered into a $6.5 billion 364-day unsecured bridge loan credit agreement that would be funded only to the extent some or all of the anticipated debt issuances are not completed prior to the completion of the merger. Additionally, we expect to assume approximately $7 billion of existing Rockwell Collins long-term debt upon completion of the merger. To manage the cash flow and liquidity impacts of these actions, we have suspended share repurchases, excluding activity required under our equity award programs and employee savings plans.
Otherglobalization.
Government legislation, policies and regulations, including regulations related to global warming, carbon footprint and fuel efficiency, can have a negative impact on our worldwide operations. Government regulation of refrigerants and energy efficiency standards, elevator safety codes and fire protection regulations are important to our commercial businesses. Government and market-drivenindustry-driven safety and performance regulations, restrictions on aircraft engine noise and emissions, government imposed travel restrictions, and government procurement practices can impact our businesses.
Collins Aerospace and Pratt & Whitney serve both commercial and government aerospace customers. Revenue passenger miles (RPMs), available seat miles and the general economic health of airline carriers are key barometers for our commercial aerospace operations. Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits. Many of our aerospace operations’ customers are covered under long-term aftermarket service agreements at both Collins Aerospace and Pratt & Whitney, which are inclusive of both spare parts and services.
RIS, RMD, and the defense operations of Collins Aerospace and Pratt & Whitney are affected by U.S. Department of Defense (DoD) budget and spending levels, changes in demand, changes in policy positions or priorities from a new U.S. Administration and the global political environment. Total sales to the U.S. government, excluding foreign military sales, were $7.7 billion and $2.5 billion for the quarters ended March 31, 2021 and 2020, or 51% and 22% of total net sales for those periods, respectively.
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Impact of the COVID-19 Pandemic
In 2020, the coronavirus disease 2019 (COVID-19) negatively impacted both the U.S. and global economy and our business and operations and the industries in which we operate. The continued disruption to air travel and commercial activities and the significant restrictions and limitations on businesses, particularly within the aerospace and defensecommercial airline industries, have negatively impacted global supply, demand and distribution capabilities. In particular, the unprecedented decrease in air travel resulting from the COVID-19 pandemic has adversely affected our airline and airframer customers, and their demand for the products and services of our Collins Aerospace and Pratt & Whitney businesses. We continue to monitor these trends and are working closely with our customers to actively mitigate costs and adjust production schedules to accommodate these declines in demand. Our RIS and RMD businesses, although experiencing minor impacts, have not experienced significant business disruptions as a result of the COVID-19 pandemic.
Given the significant reduction in business and leisure passenger air travel, the number of planes temporarily grounded, and continued travel restrictions that have resulted from the ongoing COVID-19 pandemic, and the resulting impacts on our customers and their business activities, we expect our future operating results, particularly those of our Collins Aerospace and Pratt & Whitney businesses, to continue to be negatively impacted when compared to pre-COVID-19 results. Our expectations regarding the COVID-19 pandemic and its potential financial impact are based on available information and assumptions that we believe are reasonable at this time; however, the actual financial impact is highly uncertain and subject to a wide range of factors and future developments. While we believe that the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, there is significant uncertainty with respect to the point at which commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels. While we have begun to see some indications that commercial air travel is recovering in certain areas of demand, other areas continue to lag. As a result, we continue to estimate that a full recovery may occur in 2023 or 2024. New information may emerge concerning the scope, severity and duration of the COVID-19 pandemic, as well as any worsening of the pandemic, the effect of mutating strains and whether additional outbreaks of the pandemic will continue to occur, actions to contain the pandemic’s spread or treat its impact, continued availability of vaccines, and their distribution, acceptance and efficacy, and governmental, business and individual personal actions taken in response to the pandemic (including restrictions and limitations on travel and transportation, and changes in leisure and business travel patterns and work environments) among others. Some of these actions and related impacts may be trends that continue in the future even after the pandemic no longer poses a significant public health risk.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains numerous provisions which may impact us. We continue to refine our understanding of the impact of the CARES Act on our business, and ongoing government guidance related to COVID-19 that may be issued. In addition, Congress passed the American Rescue Plan Act of 2021 (ARPA) in March 2021, which included pension funding relief provisions. For further discussion, refer to the “FAS/CAS operating adjustment” subsection under the “Segment Review” section below.
Other Matters
Global economic and political conditions, changes in raw material and commodity prices, interest rates, foreign currency exchange rates, energy costs, levels of end market demand in construction, 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 earnings outlookbusiness for the remainder of 2017. 2021. With regard to political conditions, in July 2019, the U.S. government suspended Turkey’s participation in the F-35 Joint Strike Fighter program because Turkey accepted delivery of the Russian-built S-400 air and missile defense system. The U.S. has imposed, and may impose additional, sanctions on Turkey as a result of this or other political disputes. Turkish companies supply us with components, some of which are sole-sourced, primarily in our aerospace operations for commercial and military engines and aerospace products. Depending upon the scope and timing of U.S. sanctions on Turkey and potential reciprocal actions, if any, such sanctions or actions could impact our sources of supply and could have a material adverse effect on our results of operations, cash flows or financial condition. In addition, in October 2020, the People’s Republic of China (China) announced that it may sanction RTC in connection with a possible Foreign Military Sale to Taiwan of six MS-110 Reconnaissance Pods and related equipment manufactured by Collins Aerospace. Foreign Military Sales are government-to-government transactions that are initiated by, and carried out at the direction of, the U.S. government. To date, the Chinese government has not imposed sanctions on RTC or indicated the nature or timing of any future potential sanctions or other actions. If China were to impose sanctions or take other regulatory action against RTC, our suppliers, teammates or partners, it could potentially disrupt our business operations. The impact of potential sanctions or other actions by China cannot be determined at this time.
The recent change in the U.S. administration could result in changes to the U.S. government’s foreign policies that may impact regulatory approval for direct commercial sales contracts for certain of our products and services to certain foreign customers. Likewise, regulatory approvals previously granted for prior sales can be paused or revoked if the products and services have not yet been delivered to the customer. If we ultimately do not receive all of the regulatory approvals, or those approvals are revoked, it could have a material effect on our financial results. In particular, as of March 31, 2021, our contract liabilities
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include approximately $440 million of advance payments received from a certain Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated.
See Part I,II, Item 1A, "Risk Factors"“Risk Factors” in our 20162020 Annual Report on Form 10-K for further discussion.discussion of these items.
CRITICAL ACCOUNTING ESTIMATES
Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, salesrevenues and expenses. We believeManagement believes the most complex and sensitive judgments, because of their significance to the Condensed Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management's DiscussionSee “Critical Accounting Estimates” within Item 7 and Analysis“Note 1: Basis of Financial ConditionPresentation and ResultsSummary of Operations and Note 1 to the Consolidated Financial Statements inAccounting Principles” within Item 8 of our 20162020 Annual Report incorporated by reference in our 2016on Form 10-K, which describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management'smanagement’s estimates. There have been no significant changes in our critical accounting estimates during the nine monthsquarter ended September 30, 2017.March 31, 2021.
RESULTS OF OPERATIONS
As described in our “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q, our interim period results of operations and period-to-period comparisons of such 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. As discussed further above in “Business Overview,” the results of RIS and RMD reflect the period subsequent to the completion of the Raytheon Merger on April 3, 2020. In addition, as a result of the Separation Transactions and the Distributions, the historical results of Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.
Net Sales
 Quarter Ended March 31,
(dollars in millions)20212020
Net Sales$15,251 $11,360 
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Net Sales$15,062
 $14,354
 $44,157
 $42,585
The factors contributing to the total percentage change year-over-year in total net sales for the quarter and nine months ended September 30, 2017March 31, 2021 are as follows:
(dollars in millions)Quarter Ended March 31, 2021
Organic(1)
$(3,180)
Acquisitions and divestitures, net7,039
Other32
Total change$3,891
 Quarter Ended September 30, 2017 Nine Months Ended September 30, 2017
Organic change6 % 4%
Foreign currency translation1 % —
Other(2)% —
Total % Change5 % 4%
(1)    We provide the organic change in net sales for our consolidated results of operations. We believe that this measure is useful to investors because it provides transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic change excludes acquisitions and divestitures, net and the effect of foreign currency exchange rate fluctuations and other significant non-recurring and non-operational items (“Other”). A reconciliation of this measure to reported U.S Generally Accepted Accounting Principles (GAAP) amounts is provided in the table above.
DuringNet sales decreased $3,180 million organically in the quarter ended September 30, 2017, Pratt & Whitney (15%March 31, 2021 compared to the quarter ended March 31, 2020. This decrease reflects lower organic sales growth), UTC Climate, Controls & Security (4%) and Otis (2%) all experienced organic sales growth, while UTCof $2.0 billion at Collins Aerospace, Systems sales were consistent with the prior year. The organic sales growth at Pratt & Whitney was driven by higher commercial aftermarket sales, higher commercial engines volume and mix, and higher military sales. The organic growth at UTC Climate, Controls & Security was driven by growth in global refrigeration, North America residential HVAC, and global commercial HVAC, while growth at Otis

was primarily driven by higher service sales in Asia and North America and new equipment sales growth in Europe and North America, partially offset by a decline in China. Organic sales at UTC Aerospace Systems were consistent with the prior year as an increase inlower commercial aerospace aftermarket volume was offset bysales and lower commercial aerospace OEM sales volume.
All four segments experiencedprimarily due to the current economic environment principally driven by the COVID-19 pandemic which has resulted inlower flight hours, aircraft fleet utilization and commercial OEM deliveries. The decrease in net sales also reflects lower organic sales growth during the nine months ended September 30, 2017.of $1.4 billion at Pratt & Whitney sales were up 8% organically, reflecting higherprimarily driven by lower commercial aftermarket sales, primarily due to a significant reduction in shop visits and higher military sales. Organicrelated spare part sales, at UTC Climate, Controls & Security increased 4%,and lower commercial OEM sales, primarily due to a significant reduction in commercial engine deliveries, all principally driven by growththe current economic environment primarily due to the COVID-19 pandemic. The $7,039 million increase in North America residential HVAC, global commercial HVAC,net sales related to Acquisitions and commercial refrigeration. Otisdivestitures, net for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020, is primarily driven by the Raytheon Merger on April 3, 2020. Included in the change in Acquisitions and divestitures, net is the impact of the sale of the Collins Aerospace military GPS and space-based precision optics businesses sold in the third quarter of 2020.
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Quarter Ended March 31,% of Total Net Sales
(dollars in millions)2021202020212020
Net Sales
Products$11,664 $8,165 76.5 %71.9 %
Services3,587 3,195 23.5 %28.1 %
Total net sales$15,251 $11,360 100 %100 %
Refer to “Note 19: Segment Financial Data” within Item 1 of this Form 10-Q for the composition of external net sales by products and services by segment.
Net products sales increased 2% organically, reflecting higher service$3,499 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 primarily due to an increase in external product sales in North America and Asia while new equipment sales growth in North America and Europe wasof $6.1 billion due to the Raytheon Merger on April 3, 2020, partially offset by a declinedecreases in China. Organicexternal product sales of $1.7 billion at UTCCollins Aerospace Systems grew 1%,and $0.8 billion at Pratt & Whitney.
Net services sales increased $392 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 primarily driven bydue to an increase in commercial aerospace aftermarketexternal services sales of $1.1 billion due to the Raytheon Merger on April 3, 2020, partially offset by lower commercial aerospace OEM sales.decreases in external services sales of $0.5 billion at Pratt & Whitney and $0.2 billion at Collins Aerospace.
Our sales to major customers were as follows:
Quarter Ended March 31,% of Total Net Sales
(dollars in millions)2021202020212020
Sales to the U.S. government(1)
$7,748 $2,528 50.8 %22.3 %
Foreign military sales through the U.S. government1,295 326 8.5 %2.9 %
Foreign government direct commercial sales1,180 363 7.7 %3.2 %
Commercial aerospace and other commercial sales5,028 8,143 33.0 %71.7 %
Total net sales$15,251 $11,360 100 %100 %
(1)    Excludes foreign military sales through the U.S. government.
Cost of Products and Services SoldSales
 Quarter Ended March 31,
(dollars in millions)20212020
Total cost of sales$12,537 $8,572 
Percentage of net sales82.2 %75.5 %
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Cost of products sold$7,750
 $7,522
 $22,920
 $22,542
Percentage of product sales74.7% 73.8% 74.7% 74.5%
Cost of services sold$3,293
 $2,820
 $9,300
 $8,195
Percentage of service sales70.3% 67.8% 69.0% 66.4%
Total cost of products and services sold$11,043
 $10,342
 $32,220
 $30,737
The factors contributing to the percentage change year-over-year for the quarter and nine months ended September 30, 2017 in total cost of products and services soldsales for the quarter ended March 31, 2021 are as follows:
(dollars in millions)Quarter Ended March 31, 2021
Organic(1)
$(1,677)
Acquisitions and divestitures, net5,672
Restructuring14
FAS/CAS operating adjustment(375)
Acquisition accounting adjustments284
Other47
Total change$3,965
 Quarter Ended September 30, 2017 Nine Months Ended September 30, 2017
Organic change7 % 5%
Foreign currency translation1 % —
Other(1)% —
Total % Change7 % 5%
(1)    We provide the organic change in cost of sales for our consolidated results of operations. We believe that this measure is useful to investors because it provides transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic increasechange excludes acquisitions and divestitures, net; restructuring costs; the FAS/CAS operating adjustment; costs related to certain acquisition accounting adjustments; and the effect of foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”). A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above.
The organic decrease in total cost of products and services soldsales of $1,677 million for the quarter ended September 30, 2017March 31, 2021 compared to the quarter ended March 31, 2020 was primarily driven by the organic sales increasesdecreases noted above and higher negative engine margin at Pratt & Whitney.above. The organic increase in total cost of productssales related to Acquisitions and services solddivestitures, net of $5,672 million for the nine monthsquarter ended September 30, 2017 wasMarch 31, 2021 compared to the quarter ended March 31, 2020 is primarily driven by the organicRaytheon Merger on April 3, 2020. Included in the change in Acquisitions and divestitures, net is the impact of the sale of the Collins Aerospace military GPS and space-based precision optics businesses sold in the third quarter of 2020.
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For further discussion on Restructuring costs see the “Restructuring Costs” section below. For further discussion on FAS/CAS operating adjustment see the “FAS/CAS operating adjustment” subsection under the “Segment Review” section below. For further discussion on Acquisition accounting adjustments, see the “Acquisition accounting adjustments” subsection under the “Segment Review” section below.
Quarter Ended March 31,% of Total Net Sales
(dollars in millions)2021202020212020
Cost of sales
Products$9,974 $6,629 65.4 %58.4 %
Services2,563 1,943 16.8 %17.1 %
Total cost of sales$12,537 $8,572 82.2 %75.5 %
Net products cost of sales increasesincreased $3,345 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 primarily due to an increase in external product cost of sales due to the Raytheon Merger on April 3, 2020, partially offset by decreases in external product cost of sales at Collins Aerospace and Pratt & Whitney principally driven by the products sales decreases noted above, higher negative engine marginabove.
Net services cost of sales increased $620 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 primarily due to an increase in external services cost of sales due to the Raytheon Merger on April 3, 2020, partially offset by decreases in external services cost of sales at Pratt & Whitney and unfavorable contract adjustments related to a large commercial project at UTC Climate, Controls & Security.
Gross Margin
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Gross margin$4,019
 $4,012
 $11,937
 $11,848
Percentage of net sales26.7% 28.0% 27.0% 27.8%
The decrease in gross margin as a percentage of sales for the quarter ended September 30, 2017 primarily reflects a 280 basis point decline in Pratt & Whitney's gross marginCollins Aerospace principally driven by the unfavorable year-over-year impact of customer contract mattersservices sales decreases noted above.
Research and higher negative engine margin, a 180 basis point declineDevelopment
 Quarter Ended March 31,
(dollars in millions)20212020
Company-funded$589$535
Percentage of net sales3.9 %4.7 %
Customer-funded (1)
$1,132$627
Percentage of net sales7.4 %5.5 %
(1)    Customer-funded research and development costs are included in gross margin at Otis driven by price/mix pressure, primarily in China, and a 60 basis point decline in gross margin at UTC Climate, Controls & Security driven by unfavorable mix and price, partially offset by a 90 basis point improvement in gross margin at UTC Aerospace Systems as the benefit of higher commercial aftermarket volumes was partially offset by adverse commercial OEM mix.
The decrease in gross margin as a percentagecost of sales for the nine months ended September 30, 2017 primarily reflects a 160 basis point decline in gross margin at Otis driven by price/mix pressure, primarily in China; a 100 basis point decline in gross margin at UTC Climate, Controls & Security primarily driven by unfavorable contract adjustments related to a large commercial project; and a 70 basis points decline in Pratt & Whitney's gross margin driven by the unfavorable year-over-year impactour Condensed Consolidated Statement of customer contract matters and higher negative engine margin. These decreases were partially offset by a 40 basis

point improvement in gross margin at UTC Aerospace Systems as the benefit of higher commercial aftermarket volumes was partially offset by adverse commercial OEM mix.

Research and Development
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Company-funded$582
 $582
 $1,768
 $1,711
Percentage of net sales3.9% 4.1% 4.0% 4.0%
Customer-funded$350
 $350
 $1,068
 $1,065
Percentage of net sales2.3% 2.4% 2.4% 2.5%
Operations.
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 majority of theincrease in company-funded spending is incurred by the aerospace businesses. Company-funded research and development of $54 million for the quarter ended September 30, 2017March 31, 2021 compared to the quarter ended March 31, 2020 was consistent withprimarily driven by $0.2 billion related to the prior year asRaytheon Merger on April 3, 2020, partially offset by lower spendingexpenses of $0.1 billion across various programs at UTC Aerospace Systems (2%) was offset by continued investment in new products at UTC Climate, Controls & Security (1%); and increased spending on strategic initiatives at Otis (1%). For the nine months ended September 30, 2017, company-funded research and development increased 3% with increased spending across all segments. The growth consisted of continued investment in new products at UTC Climate, Controls & Security (2%), increased spending on strategic initiatives at Otis (1%), an increase at Pratt & Whitney (1%) driven by higher spending on various Pratt & Whitney Canada programs and Pratt & Whitney military development programs, and higher spending across various programs at UTC Aerospace Systems (1%).
Customer-funded research and development for the quarter and nine months ended September 30, 2017 was consistent with the prior year as higher research and development spending on military developmentcommercial programs at Pratt & Whitney and Collins Aerospace, which includes the impact of cost reduction initiatives.
The increase in customer-funded research and development of $505 million for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020, was offsetprimarily driven by lower spending across various programs at UTC Aerospace Systems.$0.6 billion related to the Raytheon Merger on April 3, 2020.

Selling, General and Administrative
Quarter Ended March 31,
Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
(dollars in millions)(dollars in millions)20212020
Selling, general and administrative expenses$1,524
 $1,390
 $4,544
 $4,204
Selling, general and administrative expenses$1,220$977
Percentage of net sales10.1% 9.7% 10.3% 9.9%Percentage of net sales8.0 %8.6 %
Selling, general and administrative expenses increased 10%$243 million in the quarter ended September 30, 2017, and reflectMarch 31, 2021 compared to the impact of higher restructuring expenses (2%), transaction costsquarter ended March 31, 2020 primarily driven by $0.4 billion related to the merger agreement with Rockwell Collins (1%), and an increase resulting from the impactRaytheon Merger on April 3, 2020, partially offset by lower expenses of foreign exchange (1%). The increase also reflects higher expenses$0.1 billion at Pratt & Whitney (3%) driven by increased headcount and employee compensation related expenses, as well as a charge related to a customer insolvency; higher expenses at Otis (1%) resulting from higher labor and information technology costs; and higher expenses at UTCCollins Aerospace, Systems (1%) primarily driven by prior year charges related to increased headcountestimates of expected credit losses due to customer bankruptcies and employee compensation related expenses.additional allowances for credit losses, and includes the impact of cost reduction initiatives.
We are continuously evaluating our cost structure and have implemented restructuring actions in an effort to keep our cost structure competitive. As appropriate, the amounts reflected above include the beneficial impact of previous restructuring actions on Selling, general and administrative expenses increased 8% in the nine months ended September 30, 2017expenses. See “Note 12: Restructuring Costs” within Item 1 of this Form 10-Q and reflect an increase in expenses related to recent acquisitions (2%) and the impactRestructuring Costs, below, for further discussion.
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Table of higher restructuring expenses (1%). The increase also reflects higher expenses at Pratt & Whitney (2%) driven by increased headcount and employee compensation related expenses, as well as a charge related to a customer insolvency; higher expenses at Otis (1%) resulting from higher labor and information technology costs; and higher expenses at UTC Aerospace Systems (1%) and UTC Climate, Controls & Security (1%) primarily driven by employee compensation related expenses.Contents
Other Income, Net
Quarter Ended March 31,
Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
(dollars in millions)(dollars in millions)20212020
Other income, net$250
 $211
 $1,095
 $600
Other income, net$108 $19 
Other income, net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, as well as other ongoing and nonrecurring items. The year-over-year increase in otherOther income, net ($39of $89 million 18%) for the quarter ended September 30, 2017 isMarch 31, 2021 compared to the quarter ended March 31, 2020 was primarily due to a prior year impairment of a Collins Aerospace tradename of $40 million resulting from the projected impact of COVID-19 and $29 million related to foreign government wage subsidies due to COVID-19 at Pratt & Whitney in the quarter ended March 31, 2021.
Operating Profit
 Quarter Ended March 31,
(dollars in millions)20212020
Operating profit$1,013$1,295
Operating profit margin6.6 %11.4 %
The decrease in Operating profit of $282 million for the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily driven by gains on the saleoperating performance at our segments as described below in the individual segment results and an increase in acquisition accounting adjustments of securities (46%),$245 million primarily related to the Raytheon Merger, partially offset by an increase in our FAS/CAS operating adjustment of $423 million due to the absenceRaytheon Merger. Included in the decrease in Operating profit was an increase in restructuring costs of prior year gains recognized from the sale of non-core assets$35 million primarily related to restructuring actions taken at UTCour Collins Aerospace Systems (12%), the absence of prior year gains on fixed asset disposals (5%), lower year-over-year foreign exchange gains and losses (4%), and lower joint venture income (3%).Pratt & Whitney segments.
Non-service Pension (Income) Expense
 Quarter Ended March 31,
(dollars in millions)20212020
Non-service pension (income) expense$(491)$(168)
The year-over-year increasechange in other income, net ($495Non-service pension (income) expense of $323 million 83%) infor the nine monthsquarter ended September 30, 2017 isMarch 31, 2021 compared to the quarter ended March 31, 2020 was primarily driven by $379 millionthe inclusion of gains resulting from UTC Climate, Controls & Security's salethe Raytheon Company plans as a result of investmentsthe Raytheon Merger, and to a lesser extent, a decrease in Watsco, Inc. (63%), gainsthe discount rate and prior year pension asset returns exceeding our expected return on the sale of securities (12%), and higher year-over-year foreign exchange gains and losses (6%).assets (EROA) assumption.
Interest Expense, Net
Quarter Ended March 31,
Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
(dollars in millions)(dollars in millions)20212020
Interest expense$258
 $252
 $745
 $741
Interest expense$357$339
Interest income(35) (27) (83) (68)Interest income(11)(7)
Interest expense, net$223
 $225
 $662
 $673
Interest expense, net$346$332
Average interest expense rate3.6% 4.0% 3.6% 4.1%Average interest expense rate4.1 %3.8 %
Interest expense, net was down 1% forin the quarter ended September 30, 2017March 31, 2021, was relatively consistent with the quarter ended March 31, 2020. Included in the increase in interest expense was a $45 million change in the mark-to-market fair value of marketable securities held in trusts associated with certain of our nonqualified deferred compensation and down 2% for the nine months ended September 30, 2017 relativeemployee benefit plans, which was partially offset by a decrease in interest expense primarily due to the prior year. The unfavorable impactrepayment of the May 4, 2017 and November 1, 2016 issuance of notes representing $8 billion in aggregate principal was more than offset by the favorable impact of the significantly lower interest rates on these notes as compared to the 5.375% and 6.125% notes redeemed on December 1, 2016, representing $2.25 billion in aggregate principal, and the favorable impact of these early redemptions and the repayment at maturity of our 1.800% notes due 2017, representing $1.5 billion in aggregate principal.long-term debt. The average maturity of ourcertain long-term debt at September 30, 2017March 31, 2021 is approximately twelve14 years.
Income Taxes
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Effective tax rate26.1% 24.3% 26.8% 26.4%
The increase in the effective tax rate for the quarter ended September 30, 2017 is due to an increase to the estimated full year forecasted effective tax rate. As a result, the tax expense recorded in the quarter ended September 30, 2017 reflects the cumulative year to date impact.
 Quarter Ended March 31,
 20212020
Effective income tax rate29.8 %56.5 %
The effective tax rate for the quarter ended September 30, 2017 included non-cashMarch 31, 2021 includes a $148 million tax gains associated with certain federal, state and non-U.S. tax year closures duecharge related to audit resolutions and the expirationsale of applicable statutes of limitation during the quarter, including expiration of the U.S. federal income tax statute of limitations for UTC’s 2013 tax year.  our Forcepoint business.
The effective tax rate for the quarter ended September 30, 2016 similarly included a non-cashMarch 31, 2020 includes $415 million of deferred tax gaincharges resulting from the Separation Transactions, primarily related to the conclusionimpairment of separate audit activity.  The non-cashdeferred tax gains recognized in the quarters ended September 30, 2017 and September 30, 2016 have equal impacts on the effective tax rates for those quarters. assets.
As shown in the table above, the effective tax rate for the nine months ended September 30, 2017 is 26.8%. We estimate our full year 2017 annual effective income tax rate to be approximately 27.5%, excluding restructuring and non-operational nonrecurring items.
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Net Income from Continuing Operations Attributable to Common Shareowners 
Quarter Ended March 31,
Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per share amounts)2017 2016 2017 2016
(dollars in millions, except per share amounts)(dollars in millions, except per share amounts)20212020
Net income from continuing operations attributable to common shareowners$1,330
 $1,443
 $4,155
 $4,041
Net income from continuing operations attributable to common shareowners$772 $438 
Diluted earnings per share from continuing operations$1.67
 $1.74
 $5.20
 $4.86
Diluted earnings per share from continuing operations$0.51 $0.50 
Net income from continuing operations attributable to common shareowners for the quarter ended September 30, 2017March 31, 2021 includes restructuring charges,the following:
•acquisition accounting adjustments primarily related to the Raytheon Merger of $398 million, net of tax, benefit, of $45 million as well as a net charge for significant non-operational and/or nonrecurring items, net of tax, of $5 million. The effect of restructuring charges and significant non-operational and/or nonrecurring itemswhich had an unfavorable impact on diluted earnings per share for(EPS) from continuing operations of $0.26;
•tax expense of $148 million related to the quarter ended September 30, 2017 was $0.06 per share while the effectsale of foreign currency translationour Forcepoint business, which had an unfavorable impact on diluted EPS from continuing operations of $0.10; and Pratt &Whitney Canada hedging generated a favorable
•restructuring charges of $33 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.04 per diluted share.$0.02.
Net income from continuing operations attributable to common shareowners for the quarter ended September 30, 2016March 31, 2020 includes restructuring charges,the following:
•acquisition accounting adjustments of $179 million, net of tax, benefit,which had an unfavorable impact on diluted EPS from continuing operations of $8$0.21;
•net deferred tax charges of $415 million as well as a net chargeresulting from the Separation Transactions primarily related to the impairment of deferred tax assets, which had an unfavorable impact on diluted EPS from continuing operations of $0.48;
•increased estimates of expected credit losses driven by customer bankruptcies and additional allowances for significant non-operational and/or nonrecurring items,credit losses of $55 million, net of tax, of $11 million. The effect of restructuring charges and nonrecurring itemswhich had an unfavorable impact on diluted earnings per share for the quarter ended September 30, 2016 was $0.02 per share while the effect of foreign currency translation and hedging generated a favorable impact of $0.02 per diluted share.
Net incomeEPS from continuing operations attributable to common shareowners for of $0.06; and
•the nine months ended September 30, 2017 includes restructuring charges,impairment of a Collins Aerospace tradename of $31 million, net of tax, benefit, of $119 million as well as the net favorablewhich had an unfavorable impact of significant non-operational and/or nonrecurring items, net of tax, of $233 million. The effect of restructuring charges and nonrecurring items on diluted earnings per share for the nine months ended September 30, 2017 was $0.14 per share while the effect of foreign currency translation and Pratt &Whitney Canada hedging generated a favorable impact of $0.11 per diluted share.
Net incomeEPS from continuing operations attributable to common shareowners for the nine months ended September 30, 2016 includes restructuring charges, net of tax benefit, of $128 million as well as a net charge for significant non-operational and/or nonrecurring items, net of tax, of $21 million. The effect of restructuring charges and nonrecurring items on diluted earnings per share for the nine months ended September 30, 2016 was $0.18 per share. The effect of foreign currency translation and hedging generated a favorable impact of $0.02 on earnings per diluted share.$0.04.
Net IncomeLoss from Discontinued Operations Attributable to Common Shareowners
 Quarter Ended March 31,
(dollars in millions, except per share amounts)20212020
Net loss from discontinued operations attributable to common shareowners$(19)$(521)
Diluted loss per share from discontinued operations$(0.01)$(0.60)
 Quarter Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per share amounts)2017 2016 2017 2016
Net income from discontinued operations attributable to common shareowners$—
 $37
 $—
 $1
Diluted earnings per share from discontinued operations$—
 $0.04
 $—
 $—
On April 3, 2020, we completed the separation of our commercial businesses, Carrier and Otis. Effective as of such date, the historical results of the Carrier and Otis segments have been reclassified to discontinued operations for all periods presented. See “Note 3: Discontinued Operations” within Item 1 of this Form 10-Q for additional information.
Net incomeThe decrease in net loss from discontinued operations attributable to common shareowners of $502 million and the related change in diluted loss per share from discontinued operations of $0.59 in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily due to higher prior year costs associated with the separation of our commercial businesses, including debt extinguishment costs of $577 million, net of tax in connection with the early repayment of outstanding principal, partially offset by prior year Carrier and Otis operating activity, as the Separation Transactions occurred on April 3, 2020.
Net Income (Loss) Attributable to Common Shareowners 
 Quarter Ended March 31,
(dollars in millions, except per share amounts)20212020
Net income (loss) attributable to common shareowners$753 $(83)
Diluted earnings (loss) per share from operations$0.50 $(0.10)
The increase in net income (loss) attributable to common shareowners and diluted earnings (loss) per share from operations for the quarter ended September 30, 2016 reflects approximately $40 million of income tax benefit, includingMarch 31, 2021 was driven by the impacts related to filing Sikorsky's 2015 tax returns. Net incomechange from discontinued operations, attributable to common shareowners for the nine months ended September 30, 2016 reflects the final purchase price adjustment for the sale of Sikorsky,as discussed above in Net Loss from Discontinued Operations and the net effectsincrease in continuing operations, as discussed above in Net Income from Continuing Operations Attributable to Common Shareowners.
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Table of filing Sikorsky's 2015 tax returns.
Contents
Restructuring Costs
 Nine Months Ended September 30,
(Dollars in millions)2017 2016
Restructuring costs$177
 $201
RESTRUCTURING COSTS
 Quarter Ended March 31,
(dollars in millions)20212020
Restructuring costs$43 $8 
Restructuring actions are an essential component of our operating margin improvement efforts and relate to both existing operations and those recently acquired.recent mergers and acquisitions. Charges generally arise from severance related to workforce reductions and facility exit and lease termination costs associated with the consolidation of field and manufacturing operations and costs to exit legacy programs. We expect to incur restructuring costs in 2017 of approximately $300 million, including trailing costs related to prior actions associated with our continuing cost reduction efforts and the integration of acquisitions. We continue to closely monitor the economic environment and may undertake further restructuring actions to keep our cost structure aligned with the demands of the prevailing market conditions.
2017 Actions.2021 Actions. During the nine monthsquarter ended September 30, 2017,March 31, 2021, we recorded net pre-tax restructuring charges of $114$36 million, relatingprimarily related to ongoing cost reduction actionsefforts including workforce reductions and the consolidation of facilities initiated in 2017.2021. We expect to incur additional restructuring charges of $104$33 million to complete these actions. We are targeting to complete in 2017 and 2018 the majority of the remaining workforce and facility related cost reduction actions initiated in 2017.2021 by 2022. We expect recurring pre-tax savings in continuing operationsrelated to increase over the two-year period subsequent to initiating thethese actions to reach approximately $150$40 million annually.annually within one to two years. Approximately 75%65% of the total expected pre-tax chargesrestructuring costs will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During the nine monthsquarter ended September 30, 2017,March 31, 2021, we had cash outflows of approximately $39$2 million related to the 20172021 actions.

2016 Actions.2020 Actions. During the nine monthsquarters ended September 30, 2017March 31, 2021 and 2016,2020, we recorded $4 million and $2 million respectively, of net pre-tax restructuring charges of $48 million and $143 million, respectively, for actions initiated in 2016.2020. We expect to incur additional restructuring charges of $50$8 million to complete these actions. We are targeting to complete in 20172021 the majority of the remaining workforce and facility related cost reduction actions initiated in 2016.2020. We expect annual recurring pre-tax savings in continuing operationsrelated to increase over the two-year period subsequent to initiating thethese actions to reach approximately $180 million$1.2 billion annually within two years of which, approximately $74 million was realized during the nine months ended September 30, 2017.initiating these actions. Approximately 64%85% of the total expected pre-tax chargerestructuring costs will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During the nine monthsquarter ended September 30, 2017,March 31, 2021, we had cash outflows of approximately $70$132 million related to the 20162020 actions.
In addition, during the nine monthsquarters ended September 30, 2017,March 31, 2021 and 2020, we recorded $3 million and $6 million, respectively, of net pre-tax restructuring costs totaling $15 millioncharges for restructuring actions initiated in 20152019 and prior. For additional discussion of restructuring, see Note 8“Note 12: Restructuring Costs” within Item 1 of this Form 10-Q.
SEGMENT REVIEW
As discussed further above in Business Overview, on April 3, 2020, we completed the Separation Transactions, Distributions and the Raytheon Merger.The results of RIS and RMD reflect the period subsequent to the Condensed Consolidatedcompletion of the Raytheon Merger on April 3, 2020. The historical results of Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.
As previously announced, effective January 1, 2021, we reorganized certain product areas of our Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD) businesses to more efficiently leverage our capabilities. The amounts and presentation of our business segments, including intersegment activity, set forth in this Form 10-Q reflect this reorganization. The reorganization does not impact our previously reported consolidated balance sheets, statements of operations or statements of cash flows.
As a result of the Raytheon Merger, we now present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and PRB expense under the Financial Statements.
Segment ReviewAccounting Standards (FAS) requirements of U.S. Generally Accepted Accounting Principles (GAAP) and our pension and postretirement benefit (PRB) expense under U.S. government Cost Accounting Standards (CAS) primarily related to our RIS and RMD segments. While the ultimate liability for pension and PRB costs under FAS and CAS is similar, the pattern of cost recognition is different. We generally expect to recover the related RIS and RMD pension and PRB liabilities over time through the pricing of our products and services to the U.S. government. Because the Collins Aerospace and Pratt & Whitney segments generally record pension and PRB expense on a FAS basis, historical results were not impacted by this change in segment reporting.
Segments are generally based on the management structure of the businesses and the grouping of similar operating companies,operations, based on capabilities and technologies, where each management organization has general operating autonomy over diversified products and services. Adjustments to reconcile segment reporting to the consolidated results for the quartersSegment total net sales and nine months ended September 30, 2017operating profit include intercompany sales and 2016profit, which are included in "Eliminationsultimately eliminated within Eliminations and other" below,other, which also includes certain smaller subsidiaries. We attemptnon-reportable segments. For our defense contracts, where the primary customer is the U.S. government subject to quantify material cited factorsFederal Acquisition Regulation (FAR) part 12, our intercompany sales and profit is generally recorded at cost-plus a specified fee, which may differ from what the selling entity would be able to
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obtain on sales to external customers. Segment results exclude certain acquisition accounting adjustments, the FAS/CAS operating adjustment and certain corporate expenses, as further discussed below.
Given the nature of our business, we believe that total net sales and operating profit (and the related operating profit margin percentage), which we disclose and discuss at the segment level, are most relevant to an understanding of management’s view of our segment performance, as described below.
Total Net Sales. Total net sales by segment were as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Collins Aerospace Systems$4,370 $6,438 
Pratt & Whitney4,030 5,353 
Raytheon Intelligence & Space3,765 — 
Raytheon Missiles & Defense3,793 — 
Total segment15,958 11,791 
Eliminations and other(707)(431)
Consolidated$15,251 $11,360 
Operating Profit. Operating profit by segment was as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Collins Aerospace Systems$314 $1,246 
Pratt & Whitney20 475 
Raytheon Intelligence & Space388 — 
Raytheon Missiles & Defense496 — 
Total segment1,218 1,721 
Eliminations and other(31)(25)
Corporate expenses and other unallocated items(81)(130)
FAS/CAS operating adjustment423 — 
Acquisition accounting adjustments(516)(271)
Consolidated$1,013 $1,295 
Included in segment operating profit are Estimate at Completion (EAC) adjustments, which relate to changes in operating profit and margin due to revisions to total estimated revenues and costs at completion. These changes reflect improved or deteriorated operating performance or award fee rates. For a full description of our EAC process, refer to “Note 5: Changes in Contract Estimates at Completion” within our discussionItem 1 of this Form 10-Q. Given that we have thousands of individual contracts and given the types and complexity of the results of each segment whenever those factors are determinable. However, in some instances,assumptions and estimates we must make on an on-going basis, we have both favorable and unfavorable EAC adjustments.
We had the factors we cite within our segment discussion are based upon input measures or qualitative information that does not lend itself to quantification when discussed infollowing aggregate EAC adjustments for the contextperiods presented:
Quarter Ended March 31,
(dollars in millions)20212020
Gross favorable$312 $137 
Gross unfavorable(300)(116)
Total net EAC adjustments$12 $21 
As a result of the financial results measuredRaytheon Merger, RIS’s and RMD’s long-term contracts that are accounted for on a percentage of completion basis, were reset to zero percent complete as of the merger date because only the unperformed portion of the contract at the merger date represents an output basis and are not, therefore, quantifiedobligation of the Company. The decrease in the below discussions.
Commercial Businesses
Our commercial businesses generally serve customers in the worldwide commercial and residential property industries, and UTC Climate, Controls & Security also serves customers in the commercial and transport refrigeration industries. Sales in the commercial businesses are influenced by a numbernet EAC adjustments of external factors, including fluctuations in residential and commercial construction activity, regulatory changes, interest rates, labor costs, foreign currency exchange rates, customer attrition, raw material and energy costs, credit markets and other global and political factors. UTC Climate, Controls & Security's financial performance can also be influenced by production and utilization of transport equipment and, in the case of its residential business, weather conditions. To ensure adequate supply of products in the distribution channel, UTC Climate, Controls & Security customarily offers its customers incentives to purchase products. The principal incentive program provides reimbursements to distributors for offering promotional pricing on UTC Climate, Controls & Security products. We account for incentive payments made as a reduction to sales.
At constant currency and excluding the effect of acquisitions and divestitures, UTC Climate, Controls & Security equipment orders$9 million in the quarter ended September 30, 2017 increased 2% in comparisonMarch 31, 2021 compared to the same periodquarter ended March 31, 2020 was primarily due to an unfavorable change in net EAC adjustments of the prior year driven by increases in global commercial HVAC (7%) and commercial refrigeration (9%),$63 million at Collins Aerospace spread across numerous individual programs with no individual or common significant driver, partially offset by declines in transport refrigeration (10%)net favorable EAC adjustments of $35 million at RMD and North America residential HVAC orders (3%). At constant currency, within the Otis segment, new equipment orders$29 million at RIS in the quarter were down 4% in comparisonended March 31, 2021 due to the prior yearRaytheon Merger. Significant EAC adjustments, when they occur, are discussed in each business segment’s discussion below.
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Backlog and Defense Bookings. Total backlog was approximately $147.4 billion and $150.1 billion as a decreaseof March 31, 2021 and December 31, 2020, respectively, which includes defense backlog of $65.2 billion and $67.3 billion as of March 31, 2021 and December 31, 2020, respectively. Our defense operations consist primarily of our RIS and RMD businesses and operations in orders in North America (24%)the defense businesses within our Collins Aerospace and Asia (6%),Pratt & Whitney segments. Defense bookings were partially offset by order growth in Europe (25%)approximately $8.5 billion and the Middle East (42%).
Summary performance for each of the commercial businesses$3.2 billion for the quarters ended September 30, 2017March 31, 2021 and 2016 was as follows:2020, respectively.
Defense bookings are impacted by the timing and amounts of awards in a given period, which are subject to numerous factors, including: (1) the desired capability by the customer and urgency of customer needs, (2) customer budgets and other fiscal constraints, (3) political and economic and other environmental factors, (4) the timing of customer negotiations, (5) the timing of governmental approvals and notifications, and (6) the timing of option exercises or increases in scope. In addition, due to these factors, quarterly bookings tend to fluctuate from period to period, particularly on a segment basis. As a result, we believe comparing bookings on a quarterly basis or for periods less than one year is less meaningful than for longer periods and that shorter term changes in bookings may not necessarily indicate a material trend.
Collins Aerospace Systems
 Otis UTC Climate, Controls & Security
(Dollars in millions)2017 2016 Change 2017 2016 Change
Net Sales$3,156
 $3,018
 5 % $4,688
 $4,415
 6%
Cost of Sales2,173
 2,025
 7 % 3,286
 3,067
 7%
 983
 993
 (1)% 1,402
 1,348
 4%
Operating Expenses and Other428
 409
 5 % 574
 547
 5%
Operating Profits$555
 $584
 (5)% $828
 $801
 3%
Quarter Ended March 31,
(dollars in millions)20212020Change
Net Sales$4,370$6,438(32)%
Operating Profit3141,246(75)%
Operating Profit Margins7.2 %19.4 %
Operating Profit Margins17.6% 19.4%   17.7% 18.1%  

Summary performance for each of the commercial businesses for the nine months ended September 30, 2017 and 2016 was as follows:
 Otis UTC Climate, Controls & Security
(Dollars in millions)2017 2016 Change 2017 2016 Change
Net Sales$9,091
 $8,830
 3 % $13,292
 $12,602
 5 %
Cost of Sales6,287
 5,972
 5 % 9,322
 8,708
 7 %
 2,804
 2,858
 (2)% 3,970
 3,894
 2 %
Operating Expenses and Other1,253
 1,227
 2 % 1,306
 1,615
 (19)%
Operating Profits$1,551
 $1,631
 (5)% $2,664
 $2,279
 17 %
Operating Profit Margins17.1% 18.5%   20.0% 18.1%  
Otis –
Quarter Ended September 30, 2017March 31, 2021 Compared with Quarter Ended September 30, 2016March 31, 2020
 Factors Contributing to Total Change
 
Organic(1)
Acquisitions /
Divestitures, net		Restructuring
Costs		OtherTotal Change
Net Sales$(1,964)$(136)$— $32 $(2,068)
Operating Profit(859)(45)(12)(16)(932)
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales2 % 1% 1% — 1 %
Cost of Sales5 % 1% —
 — 1 %
Operating Profits(4)% 1% —
 — (2)%
(1)    We provide the organic change in net sales and operating profit for our segments. We believe that these measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic change excludes acquisitions and divestitures, net; restructuring costs; and the effect of foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”). A reconciliation of these measures to reported U.S. GAAP amounts is provided in the table above.
The organic sales increasedecrease of 2%$2.0 billion in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 primarily reflects higher servicerelates to lower commercial aerospace aftermarket sales (1%),of $1.0 billion, including declines across all aftermarket sales channels, and lower commercial aerospace OEM sales of $1.0 billion. These reductions were primarily due to the current economic environment principally driven by growththe COVID-19 pandemic which has resulted in Asialower flight hours, aircraft fleet utilization and North America, and higher new equipment sales (1%) driven by growth in Europe and North America, partially offset by a decline in China.
The operational profitcommercial OEM deliveries. This decrease of 4% was driven by:
unfavorable price and mix (10%), primarily in China
higher selling, general and administrative expenses (2%), including higher labor and information technology costs
These decreases were partially offset by:
profit contribution from the higher sales volumes noted above (5%)
favorable productivity (4%)

Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales2 % (1)% 1% —
 1%
Cost of Sales5 % (1)% —
 —
 1%
Operating Profits(6)% —
 —
 1% —
The organic sales increase of 2% primarily reflects higher service sales (1%) driven by growth in North America and Asia. New equipment sales growth in North America (1%) and Europe (1%) was partially offset by a declinean increase in China (2%).military sales of $0.1 billion.
The operationalorganic profit decrease of 6%$0.9 billion in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily due to lower commercial aerospace operating profit of $1.0 billion principally driven by:
unfavorable price and mix (11%), primarily in China
higher selling, generalby the lower commercial aerospace aftermarket sales volume discussed above. This decrease was partially offset by lower Selling, general and administrative expenses (2%),andResearch and development costs of $0.1 billion in total, which includes the impact of cost reduction initiatives.
The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily laborrelates to the sale of our Collins Aerospace military GPS and information technology costsspace-based precision optics businesses in the third quarter of 2020.
These decreases were partially offset by:
profit contribution from the higher sales volumes noted above (4%)Pratt & Whitney
favorable productivity (4%)
Quarter Ended March 31,
(dollars in millions)20212020Change
Net Sales$4,030$5,353(25)%
Operating Profit20475(96)%
Operating Profit Margins0.5 %8.9 %

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UTC Climate, Controls & Security –
Quarter Ended September 30, 2017March 31, 2021 Compared with Quarter Ended September 30, 2016March 31, 2020
 Factors Contributing to Total Change
 
Organic(1)
Acquisitions /
Divestitures, net		Restructuring
Costs		OtherTotal Change
Net Sales$(1,352)$— $— $29 $(1,323)
Operating Profit(448)— (20)13 (455)
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales4% 2% —
 —
 —
Cost of Sales5% 2% —
 —
 —
Operating Profits3% 1% (1)% (3)% 3%
(1)    We provide the organic change in net sales and operating profit for our segments. We believe that these measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic sales increase of 4% was driven by growth in global refrigeration (2%), North America residential HVAC (1%),change excludes acquisitions and global commercial HVAC (1%).

The 3% operational profit increase was primarily driven by productivity anddivestitures, net; restructuring savings (combined 3%). The profit contribution from the higher sales volumes noted above was offset by the impact of unfavorable mix and pricing. The 3% increase in “Other” primarily reflects a gain on the sale of an investment (2%)costs; and the absenceeffect of prior year acquisitionforeign currency exchange rate translation fluctuations and integration costs (1%).

Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales4 % (1)% 2% —
 —
Cost of Sales5 % —
 2% —
 —
Operating Profits(2)% —
 —
 (1)% 20%
The organic sales increase of 4% was driven by growth in North America residential HVAC (1%), global commercial HVAC (1%),other significant non-recurring and commercial refrigeration (1%).
The 2% operational profit decrease was primarily driven by unfavorable contract adjustments related to a large commercial project (3%), partly offset by the beneficial impact from restructuring savings (1%non-operational items (“Other”). The profit contribution from the higher sales volumes noted above was offset by the impactA reconciliation of unfavorable mix and pricing. The 20% increase in “other” primarily reflects a gain on the sale of investments in Watsco, Inc.these measures to reported U.S. GAAP amounts is provided in the first quarter of 2017.
Aerospace Businesses
The aerospace businesses serve both commercial and government aerospace customers. Revenue passenger miles (RPMs), U.S. Government military and space spending, and the general economic health of airline carriers are all barometers for our aerospace businesses. Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits.
We continue to see growth in a strong commercial airline industry which is benefiting from traffic growth, lower airfares, and stronger economic conditions. Airline traffic, as measured by RPMs, grew approximately 8% in the first eight months of 2017.
Our commercial aftermarket businesses continue to evolve as an increasing proportion of our aerospace businesses' customers are covered under Fleet Management Programs (FMPs) at Pratt & Whitney and long-term aftermarket service agreements at UTC Aerospace Systems. FMPs are comprehensive long-term spare part and service agreements with our customers. We expect a continued shift to FMPs and long-term aftermarket service agreements in lieu of transactional spare part sales as new aerospace product offerings enter our customers' fleets under long-term service agreements and legacy fleets are retired. For the first nine months of 2017, as compared with 2016, total commercial aerospace aftermarket sales increased 10% at UTC Aerospace Systems and 7% at Pratt & Whitney.
We record changes in contract estimates using the cumulative catch-up method in accordance with the Revenue Recognition Topic of the FASB ASC. Operating profit in the quarter and nine months ended September 30, 2017 included significant net unfavorable changes in aerospace contract estimates totaling $21 million and $50 million, respectively, primarily reflecting unfavorable net contract adjustments recorded at Pratt & Whitney. Operating profit in the quarter and nine months

ended September 30, 2016 included significant net unfavorable changes in aerospace contract estimates of $24 million and $20 million, respectively, primarily representing unfavorable contract adjustments recorded at Pratt & Whitney.
As previously disclosed, Pratt & Whitney's PurePower PW1500G engine models have been selected by Bombardier to power the new CSeries passenger aircraft, which entered into service on July 15, 2016. There have been multi-year delays in the development of the CSeries aircraft. Notwithstanding these delays, Bombardier reports that they have received over 300 orders for the aircraft and that both the CS100 and CS300 aircraft models have been certified and have entered into revenue service.  We have made various investments in support of the production and delivery of our PW1500G engines and systems for the CSeries program, which we currently expect to recover through future deliveries of PW1500G powered CSeries aircraft. On October 16, 2017, Bombardier and Airbus announced an agreement to become partners on the CSeries aircraft program. We will continue to monitor the progress of the program and our ability to recover our investments, which we believe would be strengthened by this partnership.
Summary performance for each of the aerospace businesses for the quarters ended September 30, 2017 and 2016 was as follows:
 Pratt & Whitney UTC Aerospace Systems
(Dollars in millions)2017 2016 Change 2017 2016 Change
Net Sales$3,871
 $3,501
 11 % $3,637
 $3,646
 —
Cost of Sales3,179
 2,778
 14 % 2,640
 2,681
 (2)%
 692
 723
 (4)% 997
 965
 3 %
Operating Expenses and Other463
 383
 21 % 381
 365
 4 %
Operating Profits$229
 $340
 (33)% $616
 $600
 3 %
Operating Profit Margins5.9% 9.7%   16.9% 16.5%  
Summary performance for each of the aerospace businesses for the nine months ended September 30, 2017 and 2016 was as follows:
 Pratt & Whitney UTC Aerospace Systems
(Dollars in millions)2017 2016 Change 2017 2016 Change
Net Sales$11,699
 $10,902
 7 % $10,888
 $10,867
 —
Cost of Sales9,381
 8,668
 8 % 7,945
 7,976
 —
 2,318
 2,234
 4 % 2,943
 2,891
 2 %
Operating Expenses and Other1,294
 1,098
 18 % 1,172
 1,171
 —
Operating Profits$1,024
 $1,136
 (10)% $1,771
 $1,720
 3 %
Operating Profit Margins8.8% 10.4%   16.3% 15.8%  
Pratt & Whitney –
Quarter Ended September 30, 2017 Compared with Quarter Ended September 30, 2016
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation*
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales15% 2% —
 —
 (6)%
Cost of Sales18% —
 —
 —
 (4)%
Operating Profits3% 10% (1)% (6)% (39)%
* table above.For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada has been netted against the translational foreign exchange impact for presentation purposes in the above tables. For all other segments, these foreign exchange transactional impacts are included within the organic/operational caption in their respective tables. Duedue to its potential significance to Pratt & Whitney'sWhitney’s overall operating results, we believe it is useful to segregate the foreign exchange transactional impact in order to clearly identify the underlying financial performance.


results.
The organic sales increasedecrease of 15%$1.4 billion in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 primarily reflects higherlower commercial aftermarket sales (7%) higherof $0.9 billion, primarily due to a significant reduction in shop visits and related spare part sales, and lower commercial OEM sales of $0.5 billion, primarily due to a significant reduction in commercial engine volume and mix (4%), and higher militarydeliveries, all principally driven by the current economic environment primarily due to the COVID-19 pandemic. Military sales (4%). were up slightly in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020.
The 6%organic profit decrease of $0.4 billion in Other reflects the year-over-year impact of customer contract matters.
The operational profit increase of 3%quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily driven by:
higherby lower commercial aerospace operating profit of $0.6 billion principally due to the aftermarket profit contribution (37%) driven by increases in both commercialsales volume decrease discussed above and military aftermarket sales
lower pension expense (3%)

These increases were partially offset by:
lower OEM profit contribution (29%), reflecting higher negative engine margin and other ramp-related costs,unfavorable mix. This decrease was partially offset by lower Research and development costs of $0.1 billion, which includes the profit contribution from higher military sales
higher selling, generalimpact of cost reduction initiatives, and lower Selling, general and administrative expenses and research and development costs (7%)
The 39% decrease in Otherof $0.1 billion primarily reflects the year-over-year impact of customer contract matters.
Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation*
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales8 % 1% — —
 (2)%
Cost of Sales10 % —
 — (1)% (1)%
Operating Profits(8)% 9% — 4 % (15)%


The organic sales increase of 8% primarily reflects higher commercial aftermarket sales (6%) and higher military sales (4%), partially offsetdriven by the absence of prior year contract settlements (1%)a $62 million charge related to increased estimates of expected credit losses due to customer bankruptcies and unfavorable year-over-year salesadditional allowances for credit losses in the quarter ended March 31, 2020. Included in organic profit in the quarter ended March 31, 2021 was other income of legacy hardware (1%). The 2% decrease in Other reflects$29 million related to foreign government wage subsidies due to COVID-19.
In the year-over-year impact of customer contract matters.

The operational profit decrease of 8% was primarily driven by:
lower OEM profit contribution (18%) reflecting higher negative engine margin and other ramp-related costs and lower volume atquarter ended March 31, 2021, Pratt & Whitney Canada partially offset by the profit contribution from higher military saleshad two notable defense bookings for $593 million in total for F-135 sustainment services.
unfavorable year-over-year contract settlements (7%)
higher selling, general and administrative expenses and research and development costs (6%)Raytheon Intelligence & Space
the absence of prior year sales of legacy hardware (4%)
Quarter Ended March 31,
(dollars in millions)20212020Change
Net Sales$3,765— NM
Operating Profit388— NM
Operating Profit Margins10.3 %— NM
Bookings$3,726— NM

These decreases were partially offset by:
higher aftermarket profit contribution (24%) driven by increases in both commercial and military aftermarket sales
lower pension expense (2%)
The 15% decrease in Other primarily reflects the year-over-year impact of customer contract matters.
UTC Aerospace Systems –
Quarter Ended September 30, 2017 Compared with Quarter Ended September 30, 2016
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales—
 —
 —
 —
 —
Cost of Sales(1)% —
 (1)% —
 —
Operating Profits10 % (1)% —
 (1)% (5)%
Organic sales for the quarter were consistent with the prior year as an increase in commercial aerospace aftermarket volume (3%) was offset by lower commercial aerospace OEM sales volume (3%). Military sales for the quarter were consistent with the prior year.
The organic increase in operational profit (10%) primarily reflects:

higher commercial aerospace profit contribution (8%) driven by the commercial aftermarket sales growth noted above, partially offset by lower commercial aerospace OEM volume and adverse mix
the favorable impact of a customer settlement (3%)
lower pension expense (2%)
These increases were partially offset by:
lower military OEM and military aftermarket profit contribution (3%), primarily driven by adverse mix
The 5% decrease in Other reflects the absence of prior year gains recognized on the sale of non-core assets.
Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016
 Factors Contributing to Total % Change
 
Organic /
Operational
 
FX
Translation
 
Acquisitions /
Divestitures, net
 
Restructuring
Costs
 Other
Net Sales1% —
 (1)% —
 —
Cost of Sales1% —
 (1)% —
 —
Operating Profits5% 1% —
 (2)% (1)%
The organic sales growth of 1% primarily reflects an increase in commercial aerospace aftermarket sales (3%) partially offset by lower commercial aerospace OEM sales (2%).NM = Not meaningful
The increase in operationalnet sales of $3,765 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was due to the Raytheon Merger on April 3, 2020.
The increase in operating profit of 5% primarily reflects:$388 million and the related increase in operating profit margins in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was due to the Raytheon Merger.
higher commercial aerospaceBacklog and Bookings– Backlog was $19,225 million at March 31, 2021 and $19,166 million at December 31, 2020. In the quarter ended March 31, 2021, RIS booked $1,427 million on a number of classified contracts, $227 million on a missile warning and defense contract, $199 million on an international tactical airborne radar sustainment contract and $185 million on an international training contract with the U.K. Royal Navy.
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Raytheon Missiles & Defense
Quarter Ended March 31,
(dollars in millions)20212020Change
Net Sales$3,793— NM
Operating Profit496— NM
Operating Profit Margins13.1 %— NM
Bookings$2,532— NM
NM = Not meaningful
The increase in net sales of $3,793 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was due to the Raytheon Merger on April 3, 2020.
The increase in operating profit contribution (6%) driven byof $496 million and the commercial aftermarket sales growth noted above partially offset by lower commercial aerospace OEMrelated increase in operating profit contributionmargins in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020, was due to the Raytheon Merger.
lower pension costs (2%)Backlog and Bookings– Backlog was $27,710 million at March 31, 2021 and $29,103 million at December 31, 2020. In the quarter ended March 31, 2021, RMD booked $518 million for Advanced Medium-Range Air-to-Air Missile (AMRAAM) for the U.S. Air Force and Navy and international customers and $247 million to provide Patriot engineering services support for the U.S. Army and international customers.
the favorable impact of a customer settlement (1%)
These increases were partially offset by:
higher selling, general, and administrative expenses (2%)
lower military OEM and military aftermarket profit contribution (1%)
Eliminations and other –
 Net Sales Operating Profits
 Quarter Ended September 30, Quarter Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Eliminations and other$(290) $(226) $40
 $18
General corporate expenses—
 —
 (105) (92)
 Net Sales Operating Profits
 Nine Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions)2017 2016 2017 2016
Eliminations and other$(813) $(616) $25
 $47
General corporate expenses—
 —
 (315) (280)
Eliminations and other reflects the elimination of sales, other income and operating profit transacted between segments, as well as the operating results of certain smaller businesses. The year-over-year decreasenon-reportable business segments, including Forcepoint, LLC, which was acquired as part of the Raytheon Merger and subsequently disposed of on January 8, 2021, as further discussed in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.
 Net SalesOperating Profit
Quarter Ended March 31,Quarter Ended March 31,
(dollars in millions)2021202020212020
Inter segment eliminations$(715)$(436)$(25)$(13)
Other non-reportable segments8 5 (6)(12)
Eliminations and other$(707)$(431)$(31)$(25)
Other non-reportable segments sales for the quarter and nine months ended September 30, 2017, as compared to the same periods of 2016, reflects an increase in the amount of inter-segment eliminations, principally between our aerospace businesses. The increase in operating profitsprofit for the quarter ended September 30, 2017, reflects gains onMarch 31, 2021 was relatively consistent with the salequarter ended March 31, 2020.
Corporate expenses and other unallocated items
Corporate expenses and other unallocated items consists of securitiescosts and certain other unallowable corporate costs not considered part of $120 million in the current year, partially offset by transactionmanagement’s evaluation of reportable segment operating performance including restructuring and merger costs related to the merger agreementRaytheon Merger, net costs associated with Rockwell Collinscorporate research and development, including the Lower Tier Air and Missile Defense Sensor (LTAMDS) program which was acquired as part of $27 million,the Raytheon Merger, and an increasecertain reserves. See Restructuring Costs, above, for a more detailed discussion of our restructuring costs.
Quarter Ended March 31,
(dollars in millions)20212020
Corporate expenses and other unallocated items$(81)$(130)
Included in the amountchange in Corporate expenses and other unallocated items of inter-segment eliminations$49 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was $58 million of net expenses related to the LTAMDS project acquired as part of the Raytheon Merger, partially offset by other unallocated items with no individual or common significant driver.
FAS/CAS operating adjustment
The segment results of RIS and RMD include pension and PRB expense as determined under U.S. government CAS, which we generally recover through the pricing of our products and services to the U.S. government. The difference between our aerospace businesses.CAS expense and the FAS service cost attributable to these segments under U.S. GAAP is the FAS/CAS operating adjustment. The decreaseFAS/CAS operating adjustment results in consolidated pension expense in operating profitsprofit equal to the service cost component of FAS expense under U.S. GAAP. The segment results of Collins Aerospace and Pratt & Whitney generally include FAS service cost.
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The components of the FAS/CAS operating adjustment were as follows:
Quarter Ended March 31,
(dollars in millions)20212020
FAS service cost (expense)$(101)$— 
CAS expense524 — 
FAS/CAS operating adjustment$423 $— 
The change in our FAS/CAS operating adjustment of $423 million in the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was due to the Raytheon Merger on April 3, 2020.
In response to the economic environment resulting from the COVID-19 pandemic, Congress passed the American Rescue Plan Act of 2021 (ARPA) in March 2021, which included pension funding relief provisions. These provisions extend and expand upon existing pension funding relief, most notably by increasing the liability interest rates used to determine the required cash contributions for our U.S. qualified pension plans. As a result, we expect required cash contributions to our U.S. qualified pension plans to be reduced beginning in 2022.
The ARPA pension funding relief provisions are expected to result in decreases to CAS expense, and the related recovery under our contracts, for our U.S. qualified pension plans beginning in 2022 as the interest rates used to determine pension funding requirements for these plans are also used in determining CAS expense.
Acquisition accounting adjustments
Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions and the amortization of customer contractual obligations related to loss making or below market contracts acquired. These adjustments are not considered part of management’s evaluation of segment results.
The components of Acquisition accounting adjustments were as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Amortization of acquired intangibles$(587)$(340)
Amortization of property, plant and equipment fair value adjustment(19)(7)
Amortization of customer contractual obligations related to acquired loss-making and below-market contracts90 76 
Acquisition accounting adjustments$(516)$(271)
Acquisition accounting adjustments related to acquisitions in each segment were as follows:
Quarter Ended March 31,
(dollars in millions)20212020
Collins Aerospace Systems$(149)$(198)
Pratt & Whitney(22)(73)
Raytheon Intelligence & Space(139)— 
Raytheon Missiles & Defense(206)— 
Total segment(516)(271)
Eliminations and other— — 
Acquisition accounting adjustments$(516)$(271)
The change in the Acquisition accounting adjustments of $245 million for the nine monthsquarter ended September 30, 2017,March 31, 2021 compared to the quarter ended March 31, 2020, is primarily driven by an increase$345 million related to the Raytheon Merger, principally driven by the amortization of intangibles. Included in Acquisitions accounting adjustments in the amountquarter ended March 31, 2021 was $47 million of inter-segment eliminations between our aerospace businesses, partially offset by gains on the saleamortization of securities.
The year-over-year increase in general corporate expenses for the quarter and nine months ended September 30, 2017, as comparedcustomer contractual obligations due to the same periodsaccelerated liquidation of 2016, primarily reflects an increase in employee compensation related expenses.a below-market contract reserve at Collins Aerospace driven by the termination of a customer contract.

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LIQUIDITY AND FINANCIAL CONDITION
(Dollars in millions) September 30, 2017 December 31,
2016		 September 30,
2016
Cash and cash equivalents $8,523
 $7,157
 $7,107
Total debt 27,260
 23,901
 22,665
Net debt (total debt less cash and cash equivalents) 18,737
 16,744
 15,558
Total equity 31,691
 29,169
 30,764
Total capitalization (debt plus equity) 58,951
 53,070
 53,429
Net capitalization (debt plus equity less cash and cash equivalents) 50,428
 45,913
 46,322
Debt to total capitalization 46% 45% 42%
Net debt to net capitalization 37% 36% 34%
(dollars in millions)March 31, 2021December 31, 2020
Cash and cash equivalents$8,579 $8,802 
Total debt31,538 31,823 
Total equity73,308 73,852 
Total capitalization (total debt plus total equity)104,846 105,675 
Total debt to total capitalization30 %30 %
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is operating cash flows from continuing operations, which, after netting out capital expenditures, we generally target to approximate net income from continuing operations attributable to common shareowners. For 2017, we expect this to approximate $3.0 billion to $3.5 billion.operating activities. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: capital expenditures, customer financing requirements, investments in 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. We had $6.84 billion available under our various credit facilities at March 31, 2021.
Our domestic pension funds experienced a positive return on assets of 10.42% duringAlthough our business has been and will continue to be impacted by COVID-19, as discussed above in Business Overview, we currently believe we have sufficient liquidity to withstand the first nine months of 2017. Approximately 90% of these domestic pension plans' funds are invested in readily-liquid investments, including equity, fixed income, asset-backed receivables and structured products. The balance of these domestic pension plans' funds (10%) is invested in less-liquid but market-valued investments, including real estate and private equity. As part of our long-term strategy to de-risk our defined benefit pension plans, we made discretionary contributions of approximately $1.9 billion to our domestic defined benefit pension plans in the quarter ended September 30, 2017. Across our global pension plans, the impact of the continued recognition of prior pension investment gains, 2016 actual returns on plan assets, pension contributions and lower discount rates for interest costs, offset by the lower discount rates for pension obligations, will result in a net periodic pension benefit in 2017 that is approximately $100 million favorable to 2016 amounts.potential impacts.
Historically, our strong debt ratings and financial position have enabled us to issue long-term debt at favorable market rates. Our ability to obtain debt financing at comparable risk-based interest rates is partly a function of our existing debt-to-total-capitalization level as well as our credit standing. Our debt-to-total-capitalization increased to 46% at September 30, 2017, primarily reflecting additional borrowings in 2017 used to fund the discretionary contributions to our domestic defined benefit pension plans, share repurchases and other general corporate purposes. We use our commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, discretionary pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The need for commercial paper borrowings arises when the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S.
On September 4, 2017, we announced thatAt March 31, 2021, we had entered into a merger agreement with Rockwell Collins, under which we will acquire Rockwell Collins. Under the terms of the merger agreement, each Rockwell Collins shareowner will receive $93.33 per share in cash and a fractioncash equivalents of a share of UTC common stock equal to the quotient obtained by dividing $46.67 by the average of the volume-weighted average prices per share of UTC common stock on the NYSE on each of the 20 consecutive trading days ending with the trading day immediately prior to the closing date (the “UTC Stock Price”), subject to adjustment based on a two-way collar mechanism as described below (the “Stock Consideration”). The cash and UTC stock payable in exchange for each such share of Rockwell Collins common stock are collectively the “Merger Consideration.” The fraction of a share of UTC common stock into which each such share of Rockwell Collins common stock will be converted is the “Exchange Ratio.” The Exchange Ratio will be determined based upon the UTC Stock Price. If the UTC Stock Price is greater than $107.01 but less than $124.37, the Exchange Ratio will be equal to the quotient of (i) $46.67 divided by (ii) the UTC Stock Price, which, in each case, will result in the Stock Consideration having a value equal to $46.67. If the UTC Stock Price is less than or equal to $107.01 or greater than or equal to $124.37, then a two-way collar mechanism will apply, pursuant to which, (x) if the UTC Stock Price is greater than or equal to $124.37, the Exchange Ratio will be fixed at 0.37525 and the value of the Stock Consideration will be greater than $46.67, and (y) if the UTC Stock Price is less than or equal to $107.01, the Exchange Ratio will be fixed at 0.43613 and the value of the Stock Consideration will be less than $46.67. We currently expect

that the merger will be completed in the third quarter of 2018, subject to approval by Rockwell Collins’ shareowners, as well as other customary closing conditions, including the receipt of required regulatory approvals.
We anticipate that approximately $15 billion will be required to pay the aggregate cash portion of the Merger Consideration. We expect to fund the cash portion of the Merger Consideration through debt issuances and cash on hand. We have entered into a $6.5 billion 364-day unsecured bridge loan credit agreement that would be funded only to the extent some or all of the anticipated debt issuances are not completed prior to the completion of the merger. Additionally, we expect to assume approximately $7$8.6 billion, of existing Rockwell Collins long-term debt upon completion of the merger. To manage the cash flow and liquidity impacts of these actions, we have suspended share repurchases, excluding activity required under our equity award programs and employee savings plans.
At September 30, 2017, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $4.35 billion pursuant to a $2.20 billion revolving credit agreement and a $2.15 billion multicurrency revolving credit agreement, both of which expire in August 2021. As of September 30, 2017, there were no borrowings under these revolving credit agreements. The undrawn portions of these revolving credit agreements are also available to serve as backup facilities for the issuance of commercial paper. As of September 30, 2017, our maximum commercial paper borrowing limit was $4.35 billion.
On May 4, 2017, we issued $1.0 billion aggregate principal amount of 1.900% notes due 2020, $500 million aggregate principal amount of 2.300% notes due 2022, $800 million aggregate principal amount of 2.800% notes due 2024, $1.1 billion aggregate principal amount of 3.125% notes due 2027 and $600 million aggregate principal amount of 4.050% notes due 2047. The net proceeds received from these debt issuances were used to fund the repayment at maturity of our 1.800% notes due 2017, representing $1.5 billion in aggregate principal and other general corporate purposes.
On February 22, 2016, we issued €950 million aggregate principal amount of 1.125% notes due 2021, €500 million aggregate principal amount of 1.875% notes due 2026 and €750 million aggregate principal amount of floating rate notes due 2018. The net proceeds from these debt issuances were used for general corporate purposes.
On November 6, 2015, we completed the sale of Sikorsky to Lockheed Martin Corp. for approximately $9.1 billion in cash. In connection with the sale of Sikorsky, we made tax payments of approximately $2.5 billion in 2016, primarily during the nine months ended September 30, 2016. On November 11, 2015, we entered into ASR agreements to repurchase an aggregate of $6 billion of our common stock utilizing the net after-tax proceeds from the sale of Sikorsky. Under the terms of the ASR agreements, we made the aggregate payments and received an initial delivery of approximately 51.9 million shares of our common stock, representing approximately 85% of the shares expected to be repurchased. The shares associated with the remaining portion of the aggregate purchase were settled upon final delivery to us of approximately 2.1 million additional shares of common stock in the quarter ended March 31, 2016 and approximately 8.0 million additional shares of common stock in the quarter ended September 30, 2016.
At September 30, 2017, approximately 93% of our cash approximately 48% was held by UTC'sRTC’s foreign subsidiaries due to our extensive international operations.subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. The repatriation of cash balances fromCompany does not intend to reinvest certain of our subsidiaries could have adverse tax consequences or be subject to capital controls; however, those balances are generally available without legal restrictions to fund ordinary business operations. With few exceptions, U.S. income taxes have not been provided on undistributed earnings of its international subsidiaries. Our intention is to reinvestsubsidiaries that have been previously taxed in the U.S. Taxes associated with the future remittance of these earnings permanently or to repatriatehave been recorded. For the remainder of the Company’s undistributed international earnings, only when it isunless tax effective to do so.repatriate, RTC will continue to permanently reinvest these earnings. We did not repatriate cash in the quarter ended March 31, 2021.
Historically, our strong credit ratings and financial position have enabled us to issue long-term debt at favorable interest rates.
As of March 31, 2021, our maximum commercial paper borrowing limit was $5.0 billion as the commercial paper is backed by our $5.0 billion revolving credit agreement. We had $160 million of commercial paper borrowings as of March 31, 2021. The maximum amount of short-term commercial paper borrowings outstanding at any point in time during the quarter ended March 31, 2021 was $660 million. We use our commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The commercial paper notes outstanding have original maturities of not more than 90 days from the date of issuance.
As of March 31, 2021, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $7.0 billion consisting of a $5.0 billion revolving credit agreement that became available upon completion of the Raytheon Merger on April 3, 2020, and a $2.0 billion revolving credit agreement that we entered into in May 2020 and there were no borrowings outstanding under these agreements.
We continuehave an existing universal shelf registration statement, which we filed with the Securities and Exchange Commission (SEC) on September 27, 2019, for an indeterminate amount of debt and equity securities for future issuance, subject to our internal limitations on the amount of debt to be involvedissued under this shelf registration statement.
The Company has offered a voluntary supply chain finance (SCF) program with a global financial institution which enables our suppliers, at their sole discretion, to sell their receivables from the Company to the financial institution at a rate that leverages our credit rating, which might be beneficial to them. Our suppliers’ participation in litigationthe SCF program does not impact or change our terms and conditions with those suppliers, and therefore, we have no economic interest in a supplier’s decision to participate in the program. In addition, we provide no guarantees or otherwise pay for any of the costs of the program incurred by those suppliers that choose to participate, and have no direct financial relationship with the German Tax Officefinancial institution, as it relates to the program. As such, amounts due to suppliers that have elected to participate in the German Tax Court with respect to certain tax benefits that we have claimedSCF program are included in Accounts payable on our Condensed Consolidated Balance Sheet and all payment activity related to a 1998 reorganization ofamounts due to suppliers that elected to participate in the corporate structure of Otis operationsSCF program are reflected in Germany. We do not expect to make significant additional tax or interest payments pending final resolution of this matter. See Note 15 to thecash flows from operating activities in our Condensed Consolidated Financial Statements for a further discussionStatement of this German tax litigation.
On occasion, we are required to maintain cash deposits with certain banks because of contractual obligations related to acquisitions or divestitures or other legal obligations.Cash Flows. As of September 30, 2017March 31, 2021, and December 31, 2016,2020, the amount of such restricted cashdue to suppliers participating in the SCF program and included in Accounts payable was approximately $33$377 million and $32$394 million, respectively. The SCF program does not impact our overall liquidity.
We believe our future operating cash flows will be sufficient to meet our future operating cash needs. Further, we continue to have access to the commercial paper markets and our existing credit facilities, and our ability to obtain debt or equity financing, as well as the availability under committed credit lines, provides additional potential sources of liquidity should they be required or appropriate.

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Cash Flow - Operating Activities of
 Quarter Ended March 31,
(dollars in millions)20212020
Net cash flows provided by operating activities from continuing operations$723 $1,132 
Net cash used in operating activities from discontinued operations(5)(472)
Operating Activities - Continuing Operations
 Nine Months Ended September 30,
(Dollars in millions)2017 2016
Net cash flows provided by operating activities of continuing operations$3,110
 $4,567
As part of our long-term strategy to de-risk our defined benefit pension plans, we made discretionary contributions of approximately $1.9 billion to our domestic defined benefit pension plansOperations. Cash generated by operating activities from continuing operations in the quarter ended September 30, 2017. Including the effects of this contribution, cash generated from operating activities of continuing operations in the nine months ended September 30, 2017March 31, 2021 was $1,457$409 million lower than the same period in 2016. Cash outflows2020. This decrease was primarily due to the RIS and RMD segments as a result of the Raytheon Merger, which includes a cash outflow for working capital improved by $341 million in the nine months ended September 30, 2017 over the prior year period. In the nine months ended September 30, 2017, inventories increased approximately $1.2 billion, primarily in our aerospace businesses supporting an increase in forecasted OEM deliveries and related aftermarket demand, and at UTC Climate, Controls & Security driven primarily by seasonal demand in our North American HVAC business and installation projects in process in our refrigeration businesses. These increases were more than offset by increases in accounts payable and accrued liabilities primarilydue to the timing of incentive compensation payments. Included in the commercial engine business at Pratt & Whitney. Accountschange in cash generated by operating activities from continuing operations is an unfavorable change in accounts receivable increasedof $1.2 billion primarily driven by an increase in our aerospace businesses, and were partially offset by increased customer advancescollaborator receivables at Pratt & Whitney and Otis.largely offset by a related increase to collaborator payables.
The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables. Factoring activity providedresulted in an increase of approximately $400$260 million in cash generatedflows from operating activities of continuing operations induring the nine monthsquarter ended September 30, 2017,March 31, 2021, as compared to the prior year period. This increase in factoring was driven largely by Pratt & Whitney's temporary extension of contractual payment terms with certain commercial aerospace customers.year.
InWe made the nine months ended September 30, 2016, accounts receivable increased approximately $636 million, primarily in our aerospace businesses due to the growth in commercial aerospace OEM and aftermarket sales in the period. Factoring activity provided an increase of approximately $375 million in cash generated from operating activities of continuing operations in the quarter ended September 30, 2016, as compared to the prior year period, driven largely by Pratt & Whitney's temporary extension of contractual payment terms with certain commercial aerospace customers. Increases in inventories were primarily in our aerospace businesses supporting an increase in customers' platform deliveries and related aftermarket demand, and were partially offset by increased accounts payable at these businesses and increased customer advances at Pratt & Whitney and Otis. Increases in accrued liabilities were driven primarily by higher accruals related to taxes and interest due to the timing of payments.
Our domestic defined benefit pension plans are approximately 98% funded on a projected benefit obligation basis as of September 30, 2017, and we are not required to make additional contributions through the end of 2025. The funded status of our defined benefit pension plans is dependent upon many factors, including returns on invested assets, the level of market interest rates and actuarial mortality assumptions. We can contribute cash or UTC shares to our plans at our discretion, subject to applicable regulations. Total cashfollowing contributions to our globalU.S. qualified and international defined benefit pension plans during the nine months ended September 30, 2017 and 2016 werePRB plans:
 Quarter Ended March 31,
(dollars in millions)20212020
U.S. qualified defined benefit plans$— $— 
International defined benefit plans7 8 
PRB plans— — 
Total$7 $8 
We expect to make total contributions of approximately $2 billion and $125$50 million respectively. Contributions to our globalinternational defined benefit pension plans in 20172021, which are expected to meet or exceed the current funding requirements.
In response to the economic environment resulting from the COVID-19 pandemic, Congress passed ARPA in March 2021, which included pension funding relief provisions. These provisions extend and expand upon existing pension funding relief, most notably by increasing the liability interest rates used to determine the required cash contributions for our U.S. qualified pension plans. As a result, we expect required cash contributions to our U.S. qualified pension plans to be reduced beginning in 2022.
We made net tax payments of $113 million and $19 million in the quarters ended March 31, 2021 and 2020, respectively.
Operating Activities - Discontinued Operations. The $467 million increase in cash flows used in operating activities from discontinued operations in the quarter ended March 31, 2021 compared to March 31, 2020 was primarily driven by the absence of separation costs in 2021 as the Separation Transactions occurred on April 3, 2020.
Cash Flow - Investing Activities of Continuing Operations
 Quarter Ended March 31,
(dollars in millions)20212020
Net cash flows provided by (used in) investing activities from continuing operations$582 $(1,040)
Net cash used in investing activities from discontinued operations— (241)
 Nine Months Ended September 30,
(Dollars in millions)2017 2016
Net cash flows used in investing activities of continuing operations$(1,658) $(1,899)
Cash flows used inOur investing activities of continuing operations for the nine months ended September 30, 2017 and 2016 primarily reflectinclude capital expenditures, cash investments in businesses, cash investments in customer financing assets, andinvestments/dispositions of businesses, payments related to our collaboration intangible assets and contractual rights to provide product on new aircraft platforms. Inplatforms, and settlements of derivative contracts not designated as hedging instruments.
Investing Activities - Continuing Operations. The $1,622 million change in cash flows provided by (used in) investing activities from continuing operations in the nine monthsquarter ended September 30, 2017, we realized net proceedsMarch 31, 2021 compared to March 31, 2020 primarily relates to the sale of $596our Forcepoint business and the timing of our derivative contract settlements, both of which are described below.
Additions to property, plant and equipment were as follows:
 Quarter Ended March 31,
(dollars in millions)20212020
Additions to property, plant and equipment$(387)$(325)
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Capital expenditures for the quarter ended March 31, 2021 increased by $62 million from UTC Climate, Controlsthe quarter ended March 31, 2020. The reductions in capital expenditures at Collins Aerospace and Pratt & Security'sWhitney were more than offset by an increase in capital expenditures driven by the Raytheon Merger.
Dispositions of businesses in the quarter ended March 31, 2021 was $1.0 billion, net of cash transferred and related to the sale of investmentsour Forcepoint business. For additional detail, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.
Increases to customer financing assets is primarily driven by additional Geared Turbofan engines to support customer fleets and was a use of cash of $95 million and $107 million in Watsco, Inc.quarters ended March 31, 2021 and 2020, respectively. The decline within increases to customer financing assets is due to fewer engines added in the first quarter of 2021 compared to 2020. The decrease in customer financing assets, which provided a source of cash of $14 million in the quarter ended March 31, 2021 compared to $19 million in the quarter ended March 31, 2020, is driven by fewer sales of customer financing assets.
During the nine monthsquarter ended September 30, 2017,March 31, 2021, we increased our collaboration intangible assets increased by approximately $290$32 million, of which $252 million resulted fromprimarily relates to payments made under our 2012 agreement to acquire Rolls-Royce'sRolls-Royce’s collaboration interestinterests in IAE. Capital expenditures for the nine months ended September 30, 2017 ($1,214 million) primarily relate to investments in production capacity at Pratt & Whitney and UTC Aerospace Systems, as well as new facilities at Pratt & Whitney and UTC Climate, Controls & Security.
Cash investments in businesses in the nine months ended September 30, 2017 ($196 million) consisted of a number of small acquisitions, primarily in our commercial businesses. We expect total cash investments for acquisitions in 2017 to be approximately $500 million to $1 billion, including acquisitions completed during the nine months ended September 30, 2017.

However, actual acquisition spending may vary depending upon the timing, availability and appropriate value of acquisition opportunities.International Aero Engines AG (IAE).
As discussed in Note 9 to the Condensed Consolidated“Note 13: Financial Statements,Instruments” within Item 1 of this Form 10-Q, we enter into derivative instruments primarily for risk management purposes, only, including derivatives designated as hedging instruments under the Derivatives and Hedging Topic of the FASB ASC and those utilized as economic hedges. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, interest rate and commodity price exposures. TheDuring the quarters ended March 31, 2021 and 2020, we had net cash receipts of approximately $49 million and net cash payments of $524 million, respectively, from the settlement of these derivative instruments resultednot designated as hedging instruments.
Investing Activities - Discontinued Operations. The $241 million decrease in a net cash outflow of approximately $183 million and $29 million duringflows used in investing activities from discontinued operations in the nine monthsquarter ended September 30, 2017 and 2016, respectively.
Customer financing activities were a net use of cash of $525 million,March 31, 2021 compared to the quarter ended March 31, 2020 is primarily driven by additional Geared Turbofan engines to support customer fleets,outflows from short-term investment activity of $160 million and $128capital expenditures of $87 million for in 2020 which did not recur in 2021, as the nine months ended September 30, 2017 and 2016, respectively. While we expect that 2017 customer financing activity will be a net use of funds, actual funding is subject to usage under existing customer financing commitments during the remainder of the year. We may also arrange for third-party investors to assume a portion of our commitments. We had commercial aerospace financing and other contractual commitments of approximately $13.9 billion at September 30, 2017 related to commercial aircraft and certain contractual rights to provide productSeparation Transactions occurred on new aircraft platforms, of which up to $0.4 billion may be required to be disbursed during the remainder of 2017. We had commercial aerospace financing and other contractual commitments of approximately $14.4 billion at December 31, 2016.April 3, 2020.
Cash Flow - Financing Activities
 Quarter Ended March 31,
(dollars in millions)20212020
Net cash flows (used in) provided by financing activities from continuing operations$(1,544)$1,040 
Net provided by financing activities from discontinued operations5 322 
Our financing activities primarily include the issuance and repayment of short-term and long-term debt, payment of dividends and stock repurchases.
Financing Activities - Continuing Operations
 Nine Months Ended September 30,
(Dollars in millions)2017 2016
Net cash flows used in financing activities of continuing operations$(293) $(203)
The timingOperations. Financing activities were a cash outflow of $1.5 billion in the quarter ended March 31, 2021 compared to a cash inflow of $1.0 billion in the quarter ended March 31, 2020. This change is driven by the absence of distributions from discontinued operations of $17.2 billion in the quarter ended March 31, 2020 and levels of certain cash flow activities, such as acquisitions andan increase in share repurchases of our stock, have resulted$328 million, partially offset by a decrease in long-term debt repayments of $13.5 billion, a $1.0 billion change in net cash transfers to discontinued operations and a decrease in short-term borrowing repayments of $650 million.
We did not issue long-term debt during the quarter ended March 31, 2021.
In preparation for and in anticipation of the Separation Transactions and Distributions, the Company, Carrier and Otis issued and the Company repaid long-term debt in the issuancequarter ended March 31, 2020, which are included in the tables below.
We had the following issuances of both long-term and short-term debt, including approximately $2.5 billion and $2.3 billion of net long-term debt during the quarter ended March 31, 2020, which is inclusive of issuances made by Carrier and Otis prior to the Distributions, the proceeds of which were primarily used by the Company to extinguish Raytheon Technologies short-term and long-term debt, and therefore, these issuances were treated as a distribution from
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discontinued operations within financing activities from continuing operations on our Condensed Consolidated Statement of Cash Flows:
Issuance DateDescription of NotesAggregate Principal Balance (in millions)
March 27, 2020
Term Loan due 2023 (Otis) (1)
$1,000 
Term Loan due 2023 (Carrier) (1)
1,750 
February 27, 2020
1.923% notes due 2023 (1)
500 
LIBOR plus 0.450% floating rate notes due 2023 (1)
500 
2.056% notes due 2025 (1)
1,300 
2.242% notes due 2025 (1)
2,000 
2.293% notes due 2027 (1)
500 
2.493% notes due 2027 (1)
1,250 
2.565% notes due 2030 (1)
1,500 
2.722% notes due 2030 (1)
2,000 
3.112% notes due 2040 (1)
750 
3.377% notes due 2040 (1)
1,500 
3.362% notes due 2050 (1)
750 
3.577% notes due 2050 (1)
2,000 
(1)    The debt issuances and term loan draws reflect debt incurred by Carrier and Otis. The net proceeds of these issuances were primarily utilized to extinguish Raytheon Technologies short-term and long-term debt in order to not exceed the nine monthsmaximum applicable net indebtedness required by the Raytheon Merger Agreement.
We made the following repayments of long-term debt during the quarters ended September 30, 2017March 31, 2021 and 2016, respectively. Commercial paper borrowings and revolving credit facilities provide short-term liquidity to supplement operating cash flows and are used for general corporate purposes, including2020:
Repayment DateDescription of NotesAggregate Principal Balance (in millions)
March 1, 20218.750% notes due 2021$250
March 29, 2020
4.500% notes due 2020 (1)(2)
1,250 
1.125% notes due 2021 (€950 million principal value) (1)(2)
1,082 
1.250% notes due 2023 (€750 million principal value) (1)(2)
836 
1.150% notes due 2024 (€750 million principal value) (1)(2)
841 
1.875% notes due 2026 (€500 million principal value) (1)(2)
567 
March 3, 2020
1.900% notes due 2020 (1)(2)
1,000 
3.350% notes due 2021 (1)(2)
1,000 
LIBOR plus 0.650% floating rate notes due 2021 (1)(2)
750 
1.950% notes due 2021 (1)(2)
750 
2.300% notes due 2022 (1)(2)
500 
3.100% notes due 2022 (1)(2)
2,300 
2.800% notes due 2024 (1)(2)
800 
March 2, 2020
4.875% notes due 2020 (1)(2)
171 
February 28, 2020
3.650% notes due 2023 (1)(2)
1,669 
2.650% notes due 2026 (1)(2)
431 
(1)    In connection with the funding of potential acquisitions and repurchases of our stock. We had approximately $0.9 billionearly repayment of outstanding commercial paper at September 30, 2017.principal, Raytheon Technologies recorded debt extinguishment costs of $660 million for the quarter ended March 31, 2020, which are classified as discontinued operations in our Condensed Consolidated Statement of Operations as we would not have had to redeem the debt, except for the Separation Transactions.
(2)    Extinguishment of Raytheon Technologies short-term and long-term debt in order to not exceed the maximum net indebtedness required by the Raytheon Merger Agreement.
At September 30, 2017,March 31, 2021, management had remaining authority to repurchase approximately $2.3$4.6 billion of our common stock under the October 14, 2015December 7, 2020 share repurchase program. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.Act. We may also reacquire shares outside of the program from time to time in connection with the
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surrender of shares to cover taxes on vesting of restricted stock and as required under our employee savings plan. We made cash payments of approximately $1,430 millionOur ability to repurchase approximately 12.7 million shares of our common stock during the nine months ended September 30, 2017. We expect 2017 full yearis subject to applicable law.
Our share repurchases to be approximately $1.5 billion. In connection withwere as follows:
Quarter Ended March 31,
(dollars in millions; shares in thousands)20212020
$Shares$Shares
Shares of Common Stock repurchased$375 5,197 $47 330 
Our Board of Directors authorized the merger agreement with Rockwell Collins announced on September 4, 2017, we have suspended share repurchases, excluding activity required under our equity award programs and employee savings plans.following cash dividends:
We paid dividends on common stock of $0.66 per share in both the first quarter and second quarter of 2017 and $0.70 per share in the third quarter of 2017, totaling approximately $1,541 million in the aggregate for the nine months ended September 30, 2017.
 Quarter Ended March 31,
(dollars in millions, except per share amounts)20212020
Dividends per share of Common Stock$0.475 $0.735 
Total dividends paid$705 $614 
On October 11, 2017,April 26, 2021 the Board of Directors declared a dividend of $0.70$0.51 per share payable December 10, 2017June 17, 2021 to shareowners of record at the close of business on November 17, 2017.May 21, 2021.
We have an existing universal shelf registration statement filed withFinancing Activities - Discontinued Operations. The $317 million decrease in cash flows provided by financing activities from discontinued operations in the SEC for an indeterminate amountquarter ended March 31, 2021 compared to March 31, 2020 is driven by net transfer activity of $1.0 billion, partially offset by $660 million of debt and equity securities for future issuance, subjectextinguishment costs related to our internal limitations on the amountearly repayment of debt to be issued under this shelf registration statement.in the quarter ended March 31, 2020, none of which recurred in the first quarter of 2021.

Cash Flow - Discontinued Operations
(Dollars in millions)Nine Months Ended September 30, 2016
Net cash flows used in discontinued operations$(2,480)
Cash flows used in discontinued operations for the nine months ended September 30, 2016 primarily reflect the payment of taxes associated with the net gain realized on the sale of Sikorsky to Lockheed Martin Corp. in November 2015.
Off-Balance Sheet Arrangements and Contractual Obligations
In our 2016 Annual Report, incorporated by reference in our 2016 Form 10-K, we disclosed our off-balance sheet arrangements and contractual obligations. As of September 30, 2017, there have been no material changes to these off-balance sheet arrangements and contractual obligations outside the ordinary course of business.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
There has been no significant change in our exposure to market risk during the nine monthsquarter ended September 30, 2017.March 31, 2021. For discussion of our exposure to market risk, refer to Part II, Item 7A, "Quantitative“Quantitative and Qualitative Disclosures About Market Risk,"” contained in our 20162020 Form 10-K.
Item 4.Controls and Procedures
Item 4.    Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation under the supervision and with the participation of our management, including the Chairman, President and Chief Executive Officer (CEO), the Executive Vice President &and Chief Financial Officer (CFO) and the Corporate Vice President and Controller (Controller), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017.March 31, 2021. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, our CFO and our Controller have concluded that, as of September 30, 2017,March 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO, our CFO and our Controller, as appropriate, to allow timely decisions regarding required disclosure.
There has beenwere no changechanges in our internal control over financial reporting during the nine monthsquarter ended September 30, 2017,March 31, 2021 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.




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Cautionary Note Concerning Factors That May Affect Future Results
This Form 10-Q contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements"“forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident”“outlook,” “confident,” “on track” and other words of similar meaning in connection with a discussion of future operating or financial performance.meaning. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax payments and rates, research and development spending, other measures of financial performance, or potential future plans, strategies or transactions, of United Technologiescredit ratings and net indebtedness, the Raytheon Merger or the combined company following United Technologies’ proposed acquisition of Rockwell Collins,Separation Transactions, including estimated synergies and customer cost savings resulting from the Raytheon Merger and the anticipated benefits and costs of the proposed acquisition, including estimated synergies, the expected timing of completion of the transactionSeparation Transactions and other statements that are not solely historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation:
•the effect of economic conditions in the industries and marketscountries in which we and Rockwell Collins operateRaytheon Technologies Corporation (RTC) operates in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end marketend-customer demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of pandemic health issues (including the coronavirus disease 2019 (COVID-19) and its effects, among other things, on global supply, demand and distribution capabilities as the COVID-19 pandemic continues and results in an increasingly prolonged period of disruption to air travel and commercial activities generally, and significant restrictions and limitations on businesses, particularly within the aerospace and commercial airlines industries), aviation safety concerns, weather conditions and natural disasters, and the financial condition of our customers and suppliers;suppliers, and the risks associated with U.S. government sales (including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration or the allocation of funds to governmental responses to COVID-19, a government shutdown, or otherwise, and uncertain funding of programs);
•challenges in the development, production, delivery, support, performance, safety, regulatory compliance and realization of the anticipated benefits (including our expected returns under customer contracts) of advanced technologies and new products and services;
•the scope, nature, impact or timing of acquisition and divestiture activity, including among other things the integration of United Technologies Corporation (UTC) and Raytheon Company’s businesses and the integration of RTC with other businesses acquired businesses, includingbefore and after the proposed acquisition of Rockwell Collins, into UTC's existing businessesRaytheon Merger, and realization of synergies and opportunities for growth and innovation;innovation and incurrence of related costs and expenses, including the possibility that the anticipated benefits from the combination of UTC and Raytheon Company’s businesses or other acquired businesses cannot be realized in full or may take longer to realize than expected, or the possibility that costs or difficulties related to the integration of UTC’s businesses with Raytheon Company’s or other acquired businesses will be greater than expected or may not result in the achievement of estimated synergies within the contemplated time frame or at all;
future•RTC’s levels of indebtedness, including indebtedness expected to be incurred by UTC in connection with the proposed Rockwell Collins merger, and capital spending and research and development spending including in connection with the proposed Rockwell Collins merger;spending;
•future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure;
•the timing and scope of future repurchases by RTC of ourits common stock,stock, which are subject to a number of uncertainties and may be discontinued, accelerated, suspended or delayed at any time due to various factors, including market conditions and the level of other investing activities and uses of cash;
•delays and disruption in delivery of materials and services from suppliers;
•company and customer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof;thereof (including the potential termination of U.S. government contracts and performance under undefinitized contract actions and the potential inability to recover termination costs);
•new business and investment opportunities;
our•the ability to realize the intended benefits of organizational changes;
•the anticipated benefits of diversification and balance of operations across product lines, regions and industries;
•the outcome of legal proceedings, investigations and other contingencies;
•pension plan assumptions and future contributions;
•the impact of the negotiation of collective bargaining agreements and labor disputes;
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•the effect of changes in political conditions in the U.S. and other countries in which weRTC and Rockwell Collinsits businesses operate, including the effect of changes in U.S. trade policies, or the U.K.'s pending withdrawal from the EU, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; and
•potential changes in policy positions or priorities that emerge from a new U.S. Administration, including changes in the U.S. Department of Defense (DoD) policies or priorities;
•the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations (including, among other things, export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements, including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations) in the U.S. and other countries in which weRTC and Rockwell Collinsits businesses operate;

•the ability of UTC and Rockwell Collins to receive the required regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the merger) and approval by the Rockwell Collins shareowners and to satisfy the other conditions to the closing of the proposed merger on a timely basis or at all;
the occurrence of events that may give rise to a right of one or both of UTC or Rockwell Collins to terminate the merger agreement, including on circumstances that might require Rockwell Collins to pay a termination fee of $695 million to UTC or $50 million of expense reimbursement;
negative effects of the announcement or the completion of the merger on the market price of UTC’s and/or Rockwell Collins’ common stock and/or on their respective financial performance;
the risks related to Rockwell Collins and UTC being restricted in its operation of the business while the merger agreement is in effect;
risks relating to the value of the UTC’s shares to be issued in connection with the proposed Rockwell merger, significant merger costs and/or unknown liabilities;
risks associated with third-party contracts containing consent and/or other provisions that may be triggered by the Rockwell merger agreement;
risks associated with potential merger-related litigation or appraisal proceedings; and
the ability of UTC and Rockwell Collins, or the combined company,RTC to retain and hire key personnel.personnel and the ability of our personnel to continue to operate our facilities and businesses around the world in light of, among other factors, the COVID-19 pandemic; and
•the intended qualification of (1) the Raytheon Merger as a tax-free reorganization and (2) the Separation Transactions and other internal restructurings as tax-free to UTC and former UTC shareowners, in each case, for U.S. federal income tax purposes.
In addition, this Form 10-Q includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. See the "Notes to Condensed Consolidated Financial Statements" under the heading "Note 15: Contingent Liabilities," the section titled "Management's“Note 17: Commitments and Contingencies” within Item 1 of this Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” under the headings "Business Overview," "Results“Results of Operations," "Liquidity” “Restructuring Costs” and “Liquidity and Financial Condition," and "Critical Accounting Estimates," and the sections titled "Legal Proceedings" and "Risk Factors" in” within Item 2 of this Form 10-Q and in our 2016 Annual Report and 2016 Form 10-K.10-Q. Additional important information as to these factors is included in our 2016 Annual Report on Form 10-K in the sectionsections titled "Management'sItem 1, “Business” under the headings “General,” “Business Segments” and “Other Matters Relating to Our Business,” Item 1A, “Risk Factors,” Item 3, “Legal Proceedings,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” under the headings "Restructuring Costs," "Environmental Matters"“Business Overview,” “Critical Accounting Estimates,” “Environmental Matters” and "Governmental Matters", in our 2016 Form 10-K in the "Business" section under the headings "General," "Description of Business by Segment" and "Other Matters Relating to Our Business as a Whole" and in our Form S-4 Registration Statement (Registration No. 333-220883) under the heading "Risk Factors".“Governmental Matters.” The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC.Securities and Exchange Commission (SEC).
PART II – OTHER INFORMATION
Item 1.    Legal Proceedings
See Note 15: Contingent Liabilities,“Note 17: Commitments and Contingencies” within Item 1 of this Form 10-Q for a discussion regarding material legal proceedings.
Except as otherwise noted above, there have been no material developments in legal proceedings. For previously reported information about legal proceedings refer to Part I, Item 3, "Legal“Legal Proceedings,"” of our 20162020 Annual Report on Form 10-K and Part II, Item 1 "Legal Proceedings" of our 2017 Form 10-Q (Q1) and 2017 Form 10-Q (Q2). 10-K.
Item 1A.Risk Factors
Except as noted below, thereItem 1A.    Risk Factors
Risk Factors
You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results set forth under Item 1A. in our 2020 Annual Report on Form 10-K (2020 Form 10-K). There have been no material changes from the factors disclosed in the Company's riskour 2020 Form 10-K, although we may disclose changes to such factors or disclose additional factors from those disclosed in Part I, Item 1A, Risk Factors,time to time in our 2016 Form 10-K.
Risks Relating to our Pending Acquisition of Rockwell Collins

We may not complete the acquisition of Rockwell Collins or complete the acquisition within the time frame we anticipate; the acquired business may underperform relative to our expectations; the acquisition may cause our financial results to

differ from our expectations or the expectations of the investment community; we may not be able to achieve anticipated cost savings or other anticipated synergies.
The completion of the acquisition of Rockwell Collins is subject to a number of conditions. The failure to satisfy all of the required conditions could delay the completion of the acquisition for a significant period of time or prevent it from occurring at all. Any delay in completing the acquisition could cause UTC not to realize some or all of the benefits, or realize them on a different timeline than expected, that UTC expects to achieve if the acquisition is successfully completed within the expected timeframe. In addition, the terms and conditions of the required regulatory authorizations and consents for the acquisition that are granted, if any, may impose requirements, limitations or costs or place restrictions on the conduct of the combined company’s business or may materially delay the completion of the acquisition.
The success of the acquisition will depend, in part, on UTC’s ability to successfully combine and integrate the businesses of UTC and Rockwell Collins, and realize the anticipated benefits, including synergies, cost savings, innovation opportunities and operational efficiencies, from the acquisition. If UTC is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of UTC’s common stock may decline.
The integration of the two companies may result in material challenges, including, without limitation:
the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management’s attention to the acquisition;
managing a larger combined aerospace systems business;
maintaining employee morale and retaining key management and other employees;
retaining existing business and operational relationships, including customers, suppliers and employees and other counterparties, as may be impacted by contracts containing consent and/or other provisions that may be triggered by the acquisition, and attracting new business and operational relationships;
the possibility of faulty assumptions underlying expectations regarding the integration process;
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
coordinating geographically separate organizations;
unanticipated issues in integrating information technology, communications and other systems; and
unforeseen expenses or delays associatedfuture filings with the acquisition.Securities and Exchange Commission (SEC).

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table provides information about our purchases during the quarter ended September 30, 2017 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.Act during the quarter ended March 31, 2021.
2017 
Total Number of Shares Purchased
(000's)
 Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program
(000's)		 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(dollars in millions)
July 1 - July 31 277
 $119.48
 277
 $2,343
August 1 - August 31 168
 118.63
 168
 $2,323
September 1 - September 30 64
 114.04
 64
 $2,316
Total 509
 $118.51
 509
 

2021Total Number of Shares Purchased
(000’s)		Average Price Paid per ShareTotal Number of Shares Purchased as Part of a Publicly Announced Program
(000’s)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(dollars in millions)
January 1 - January 31589 $67.57 589 $4,960 
February 1 - February 283,655 71.92 3,655 $4,697 
March 1 - March 31953 75.93 953 $4,625 
Total5,197 $72.16 5,197 
On October 14, 2015,December 7, 2020, our Board of Directors authorized a share repurchase program for up to $12$5 billion of our common stock, replacing the previous program announced on July 19,October 14, 2015. At September 30, 2017, the maximum dollar value of shares that may yet be purchased under this current program was approximately $2,316 million. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase (ASR) programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.Act. We may also reacquire shares outside of the program from time to time in connection with the surrender of shares to cover taxes on vesting of restricted stock and as required under our employee savings plan. Our ability to repurchase shares is subject to applicable law. No shares were reacquired in transactions outside the program during the quarter ended September 30, 2017.March 31, 2021.    

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On September 4, 2017, we announced that we had entered into a merger agreement with Rockwell Collins, under which we will acquire Rockwell Collins. To manage the cash flow and liquidity impacts
Table of these actions, we have suspended share repurchases, excluding activity required under our equity award programs and employee savings plans.Contents
Item 6.    Exhibits
Item 6.Exhibit
Number		Exhibits
Exhibit Description
Exhibit
Number10.1
Exhibit Description
2.1
First Amendment, dated March 4, 2021, to Employment Agreement between Gregory J. Hayes and Plan of Merger, dated as of September 4, 2017, by and among UnitedRaytheon Technologies Corporation Riveter Merger Sub Corp. and Rockwell Collins, Inc., incorporated(incorporated by reference to UTC’sExhibit 10.1 of the Company’s Current reportReport on Form 8-K (Commission file number 1-812) filed with the SEC on September 6, 2017.March 5, 2021).
1210.2
Statement re: computationEmployment Agreement, dated as of ratio of earningsJune 9, 2019, between Thomas A. Kennedy and United Technologies Corporation, which supersedes Exhibit 10.46 to fixed charges.the Company’s Annual Report on Form 10-K (Commission file number 1-812) for the fiscal year ended December 31, 2020. This Exhibit 10.2 is being filed as an administrative correction to Exhibit 10.46 to the Company’s Annual Report on Form 10-K (Commission file number 1-812), which inadvertently contained formatting errors.*
10.3
First Amendment, dated March 4, 2021, to Employment Agreement between Thomas A. Kennedy and Raytheon Technologies Corporation (incorporated by reference to Exhibit 10.2 filed herein).*
10.4
Schedule of Terms for restricted stock unit awards relating to the Raytheon Technologies Corporation 2018 Long-Term Incentive Plan, as amended (referred to in Exhibit 10.22 to the Company’s Annual Report on Form 10-K (Commission file number 1-812) for the fiscal year ended December 31, 2020).*
10.5
Schedule of Terms for performance share unit awards relating to the Raytheon Technologies Corporation 2018 Long-Term Incentive Plan, as amended (referred to in Exhibit 10.22 to the Company’s Annual Report on Form 10-K (Commission file number 1-812) for the fiscal year ended December 31, 2020).*
10.6
Schedule of Terms for stock appreciation right awards relating to the Raytheon Technologies Corporation 2018 Long-Term Incentive Plan, as amended (referred to in Exhibit 10.22 to the Company’s Annual Report on Form 10-K (Commission file number 1-812) for the fiscal year ended December 31, 2020).*
10.7
Schedule of Terms for stock option awards relating to the Raytheon Technologies Corporation 2018 Long-Term Incentive Plan, as amended (referred to in Exhibit 10.22 to the Company’s Annual Report on Form 10-K (Commission file number 1-812) for the fiscal year ended December 31, 2020).*
15
Letter re: unaudited interim financial information.*
31.1
Rule 13a-14(a)/15d-14(a) Certification.*
31.2
Rule 13a-14(a)/15d-14(a) Certification.*
31.3
Rule 13a-14(a)/15d-14(a) Certification.*
32
Section 1350 Certifications.*
101.INS
Inline XBRL Instance Document.*
(Document - the instance document does not appear in the Interactive Data File name: utx-20170930.xml)
because its XBRL tags are embedded within the Inline XBRL document.*
101.SCH
Inline XBRL Taxonomy Extension Schema Document.*
(File name: utx-20170930.xsd)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
(File name: utx-20170930_cal.xml)
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.*
(File name: utx-20170930_def.xml)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.*
(File name: utx-20170930_lab.xml)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
(
104Cover Page Interactive Data File name: utx-20170930_pre.xml)- the cover page XBRL tags are embedded within the Inline XBRL document.
Notes to Exhibits List:
*Submitted electronically herewith.
*    Submitted electronically herewith.
Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated StatementsStatement of Operations for the quarters ended March 31, 2021 and nine months ended September 30, 2017 and 2016,2020, (ii) Condensed Consolidated StatementsStatement of Comprehensive Income for the quarters ended March 31, 2021 and nine months ended September 30, 2017 and 2016,2020, (iii) Condensed Consolidated Balance Sheets Sheet as of September 30, 2017March 31, 2021 and December 31, 2016,2020, (iv) Condensed Consolidated StatementsStatement of Cash Flows for the nine monthsquarters ended September 30, 2017March 31, 2021 and 2016,2020, (v) Condensed Consolidated Statement of Changes in Equity for the quarters ended March 31, 2021 and (v)2020 and (vi) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RAYTHEON TECHNOLOGIES CORPORATION
(Registrant)
Dated:April 27, 2021
UNITED TECHNOLOGIES CORPORATION
(Registrant)
By:		/s/ NEIL G. MITCHILL JR.
Neil G. Mitchill Jr.
Dated:October 27, 2017by:
/s/  AKHIL JOHRI        
Akhil Johri
Executive Vice President &and Chief Financial Officer
(on behalf of the Registrant and as the Registrant'sRegistrant’s Principal Financial Officer)
Dated:OctoberApril 27, 20172021by:By:
/s/ ROBERTMICHAEL J. BAILEY
WOOD
RobertMichael J. BaileyWood
Corporate Vice President and Controller
(on behalf of the Registrant and as the Registrant'sRegistrant’s Principal Accounting Officer)


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