UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

____________________________________

FORM 10-Q

____________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022


☐			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 001-00812

____________________________________

RAYTHEON TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________


Delaware						06-0570975
(State or other jurisdiction of ~~incorporation)~~incorporation or organization)						(I.R.S. Employer Identification No.)


1000 Wilson Boulevard,	Arlington,	Virginia	22209
(Address of principal executive offices)			(Zip Code)


(781)			522-3000

(Registrant’s telephone number, including area code)


870 Winter Street,			Waltham,			Massachusetts			02451

~~(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($1 par value)	RTX	New York Stock Exchange
(CUSIP 75513E 101)
2.150% Notes due 2030	RTX 30	New 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 ☒. No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§~~232.405)~~232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒. No ☐.

Table of Contents

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 accelerated filer,” “accelerated filer,”

~~Table of Contents~~

~~“smaller~~ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐

Non-accelerated Filer	☐	Smaller Reporting 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 ☒.

At June 30, ~~2021~~2022 there were ~~1,507,878,091~~1,476,514,046 shares of Common Stock outstanding.

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Quarter Ended June 30, ~~2021~~2022


			Page

PART I – FINANCIAL INFORMATION			4

Item 1. Unaudited Financial Statements:			4

Condensed Consolidated Statement of Operations for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021			4

Condensed Consolidated Statement of Comprehensive Income ~~(Loss)~~ for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021			5

Condensed Consolidated Balance Sheet at June 30, ~~2021~~2022 and December 31, ~~2020~~2021			6

Condensed Consolidated Statement of Cash Flows for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021			7

Condensed Consolidated Statement of Changes in Equity for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021			8

Notes to Condensed Consolidated Financial Statements			9

Report of Independent Registered Public Accounting Firm			4229

Item 2. Management ’s Discussion and Analysis of Financial Condition and Results of Operations			4330

Item 3. Quantitative and Qualitative Disclosures About Market Risk			6749

Item 4. Controls and Procedures			6849

PART II – OTHER INFORMATION			7052

Item 1. Legal Proceedings			7052

Item 1A. Risk Factors			7052

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			7153

Item 6. Exhibits			7153

SIGNATURES			7354

Raytheon Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and ~~product~~products and ~~service~~services designators are all either the registered or unregistered trademarks or tradenames of Raytheon Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and ~~service~~services designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. 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.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net Sales:
Product sales $ 12,179 $ 10,768 $ 23,843 $ 18,933
Service sales 3,701 3,293 7,288 6,488
Total Net Sales 15,880 14,061 31,131 25,421
Costs and Expenses:
Cost of sales - products 9,997 9,620 19,971 16,249
Cost of sales - services 2,658 2,594 5,221 4,537
Research and development 657 695 1,246 1,230
Selling, general and administrative 1,368 1,811 2,588 2,788
Total Costs and Expenses 14,680 14,720 29,026 24,804
Goodwill impairment 0 (3,183) 0 (3,183)
Other income, net 82 82 190 101
Operating profit (loss) 1,282 (3,760) 2,295 (2,465)
Non-operating expense (income), net
Non-service pension benefit (490) (237) (981) (405)
Interest expense, net 342 335 688 667
Total non-operating expense (income), net (148) 98 (293) 262
Income (loss) from continuing operations before income taxes 1,430 (3,858) 2,588 (2,727)
Income tax expense (benefit) 342 (38) 687 601
Net income (loss) from continuing operations 1,088 (3,820) 1,901 (3,328)
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations 48 24 89 78
Income (loss) from continuing operations attributable to common shareowners 1,040 (3,844) 1,812 (3,406)
Discontinued operations (Note 3):
Loss from discontinued operations, before tax (10) (56) (30) (232)
Income tax (benefit) expense from discontinued operations (2) (65) (3) 237
Net income (loss) from discontinued operations (8) 9 (27) (469)
Less: Noncontrolling interest in subsidiaries’ earnings from discontinued operations 0 0 0 43
Income (loss) from discontinued operations attributable to common shareowners (8) 9 (27) (512)
Net income (loss) attributable to common shareowners $ 1,032 $ (3,835) $ 1,785 $ (3,918)
Earnings (loss) Per Share attributable to common shareowners - Basic:
Income (loss) from continuing operations $ 0.69 $ (2.56) $ 1.20 $ (2.78)
Income (loss) from discontinued operations 0 0.01 (0.02) (0.42)
Net income (loss) attributable to common shareowners $ 0.69 $ (2.55) $ 1.18 $ (3.20)
Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income (loss) from continuing operations $ 0.69 $ (2.56) $ 1.20 $ (2.78)
Income (loss) from discontinued operations (0.01) 0.01 (0.02) (0.42)
Net income (loss) attributable to common shareowners $ 0.68 $ (2.55) $ 1.18 $ (3.20)


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Net Sales:
Products sales	$	12,258	$	12,179	$	24,120	$	23,843
Services sales	4,056		3,701		7,910		7,288
Total Net Sales	16,314		15,880		32,030		31,131
Costs and Expenses:
Cost of sales - products	10,040		9,997		19,860		19,971
Cost of sales - services	2,816		2,658		5,556		5,221
Research and development	698		657		1,333		1,246
Selling, general and administrative	1,424		1,368		2,893		2,588
Total Costs and Expenses	14,978		14,680		29,642		29,026

Other income, net	17		82		45		190
Operating profit	1,353		1,282		2,433		2,295
Non-operating expense (income), net
Non-service pension income	(474)		(490)		(954)		(981)
Interest expense, net	329		342		647		688
Total non-operating expense (income), net	(145)		(148)		(307)		(293)
Income from continuing operations before income taxes	1,498		1,430		2,740		2,588
Income tax expense	160		342		276		687
Net income from continuing operations	1,338		1,088		2,464		1,901
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations	34		48		57		89
Income from continuing operations attributable to common shareowners	1,304		1,040		2,407		1,812






Loss from discontinued operations attributable to common shareowners	—		(8)		(19)		(27)
Net income attributable to common shareowners	$	1,304	$	1,032	$	2,388	$	1,785

Earnings (loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations	$	0.88	$	0.69	$	1.62	$	1.20
Loss from discontinued operations	—		—		(0.01)		(0.02)
Net income attributable to common shareowners	$	0.88	$	0.69	$	1.61	$	1.18
Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations	$	0.88	$	0.69	$	1.61	$	1.20
Loss from discontinued operations	—		(0.01)		(0.01)		(0.02)
Net income attributable to common shareowners	$	0.88	$	0.68	$	1.60	$	1.18

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Net income (loss) from continuing and discontinued operations		$	1,080	$	(3,811)	$	1,874	$	(3,797)
Net income from continuing and discontinued operations										Net income from continuing and discontinued operations	$	1,338	$	1,080	$	2,445	$	1,874
Other comprehensive income (loss), before tax:	Other comprehensive income (loss), before tax:									Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	258		665		82		(780)		Foreign currency translation adjustments	(708)		258		(948)		82
Pension and postretirement benefit plans adjustments	Pension and postretirement benefit plans adjustments	50		(2,286)		104		(2,176)		Pension and postretirement benefit plans adjustments	47		50		68		104
Change in unrealized cash flow hedging	Change in unrealized cash flow hedging	88		215		28		(159)		Change in unrealized cash flow hedging	(182)		88		(145)		28
Other comprehensive income (loss), before tax	Other comprehensive income (loss), before tax	396		(1,406)		214		(3,115)		Other comprehensive income (loss), before tax	(843)		396		(1,025)		214
Income tax (expense) benefit related to items of other comprehensive income (loss)	Income tax (expense) benefit related to items of other comprehensive income (loss)	(30)		519		(35)		589		Income tax (expense) benefit related to items of other comprehensive income (loss)	27		(30)		9		(35)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	366		(887)		179		(2,526)		Other comprehensive income (loss), net of tax	(816)		366		(1,016)		179
Comprehensive income (loss)		1,446		(4,698)		2,053		(6,323)
Comprehensive income										Comprehensive income	522		1,446		1,429		2,053
Less: Comprehensive income attributable to noncontrolling interest	Less: Comprehensive income attributable to noncontrolling interest	48		30		89		121		Less: Comprehensive income attributable to noncontrolling interest	34		48		57		89
Comprehensive income (loss) attributable to common shareowners		$	1,398	$	(4,728)	$	1,964	$	(6,444)
Comprehensive income attributable to common shareowners										Comprehensive income attributable to common shareowners	$	488	$	1,398	$	1,372	$	1,964

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	8,051	$	8,802	Cash and cash equivalents	$	4,767	$	7,832
Accounts receivable, net	Accounts receivable, net	8,912		9,254		Accounts receivable, net	10,394		9,661
Contract assets	Contract assets	10,485		9,931		Contract assets	11,836		11,361
Inventory, net	Inventory, net	9,548		9,411		Inventory, net	10,142		9,178

Other assets, current	Other assets, current	3,883		5,978		Other assets, current	4,323		4,018
Total Current Assets	Total Current Assets	40,879		43,376		Total Current Assets	41,462		42,050
Customer financing assets	Customer financing assets	3,063		3,144		Customer financing assets	2,675		2,848
Fixed assets	Fixed assets	26,959		26,346		Fixed assets	27,990		27,637
Accumulated depreciation	Accumulated depreciation	(12,294)		(11,384)		Accumulated depreciation	(13,249)		(12,665)
Fixed assets, net	Fixed assets, net	14,665		14,962		Fixed assets, net	14,741		14,972
Operating lease right-of-use assets	Operating lease right-of-use assets	1,900		1,880		Operating lease right-of-use assets	1,866		1,958
Goodwill	Goodwill	54,394		54,285		Goodwill	53,806		54,436
Intangible assets, net	Intangible assets, net	39,523		40,539		Intangible assets, net	37,562		38,516
Other assets	Other assets	4,414		3,967		Other assets	6,905		6,624
Total Assets	Total Assets	$	158,838	$	162,153	Total Assets	$	159,017	$	161,404
Liabilities, Redeemable Noncontrolling Interest and Equity	Liabilities, Redeemable Noncontrolling Interest and Equity					Liabilities, Redeemable Noncontrolling Interest and Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-term borrowings	Short-term borrowings	$	196	$	247	Short-term borrowings	$	113	$	134
Accounts payable	Accounts payable	8,043		8,639		Accounts payable	9,732		8,751
Accrued employee compensation	Accrued employee compensation	2,233		3,006		Accrued employee compensation	2,028		2,658
Other accrued liabilities	Other accrued liabilities	10,361		10,517		Other accrued liabilities	12,459		10,162
Contract liabilities	Contract liabilities	12,591		12,889		Contract liabilities	13,430		13,720

Long-term debt currently due	Long-term debt currently due	1,370		550		Long-term debt currently due	26		24
Total Current Liabilities	Total Current Liabilities	34,794		35,848		Total Current Liabilities	37,788		35,449
Long-term debt	Long-term debt	29,916		31,026		Long-term debt	31,274		31,327
Operating lease liabilities, non-current	Operating lease liabilities, non-current	1,563		1,516		Operating lease liabilities, non-current	1,593		1,657
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	9,929		10,342		Future pension and postretirement benefit obligations	7,543		7,855
Other long-term liabilities	Other long-term liabilities	9,885		9,537		Other long-term liabilities	8,791		10,417
Total Liabilities	Total Liabilities	86,087		88,269		Total Liabilities	86,989		86,705
Commitments and contingencies (Note 17)		0		0
Commitments and contingencies (Note 15)						Commitments and contingencies (Note 15)	0		0
Redeemable noncontrolling interest	Redeemable noncontrolling interest	30		32		Redeemable noncontrolling interest	38		35
Shareowners’ Equity:	Shareowners’ Equity:					Shareowners’ Equity:
Common Stock	Common Stock	37,183		36,930		Common Stock	37,673		37,483
Treasury Stock	Treasury Stock	(11,424)		(10,407)		Treasury Stock	(14,539)		(12,727)
Retained earnings	Retained earnings	48,954		49,423		Retained earnings	50,271		50,265
Unearned ESOP shares	Unearned ESOP shares	(43)		(49)		Unearned ESOP shares	(33)		(38)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,555)		(3,734)		Accumulated other comprehensive loss	(2,931)		(1,915)
Total Shareowners’ Equity	Total Shareowners’ Equity	71,115		72,163		Total Shareowners’ Equity	70,441		73,068
Noncontrolling interest	Noncontrolling interest	1,606		1,689		Noncontrolling interest	1,549		1,596
Total Equity	Total Equity	72,721		73,852		Total Equity	71,990		74,664
Total Liabilities, Redeemable Noncontrolling Interest and Equity	Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	158,838	$	162,153	Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	159,017	$	161,404

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Operating Activities:	Operating Activities:					Operating Activities:
Net income (loss) from continuing operations		$	1,901	$	(3,328)
Adjustments to reconcile net income (loss) from continuing operations to net cash flows provided by operating activities:
Net income from continuing operations						Net income from continuing operations	$	2,464	$	1,901
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 amortization	Depreciation and amortization	2,255		1,839		Depreciation and amortization	2,013		2,255
Deferred income tax provision		175		118
Deferred income tax (benefit) provision						Deferred income tax (benefit) provision	(1,147)		175
Stock compensation cost	Stock compensation cost	227		135		Stock compensation cost	212		227
Net periodic pension and other postretirement income	Net periodic pension and other postretirement income	(715)		(223)		Net periodic pension and other postretirement income	(714)		(715)
Goodwill impairment charge		0		3,183

Change in:	Change in:					Change in:
Accounts receivable	Accounts receivable	293		1,163		Accounts receivable	(790)		293
Contract assets	Contract assets	(557)		376		Contract assets	(525)		(557)
Inventory	Inventory	(133)		(550)		Inventory	(1,033)		(133)
Other current assets	Other current assets	(258)		(180)		Other current assets	(353)		(258)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(733)		(1,395)		Accounts payable and accrued liabilities	2,109		(733)
Contract liabilities	Contract liabilities	(45)		201		Contract liabilities	(309)		(45)

Global pension contributions		(25)		(42)

Other operating activities, net	Other operating activities, net	(336)		45		Other operating activities, net	(165)		(361)
Net cash flows provided by operating activities from continuing operations	Net cash flows provided by operating activities from continuing operations	2,049		1,342		Net cash flows provided by operating activities from continuing operations	1,762		2,049
Investing Activities:	Investing Activities:					Investing Activities:
Capital expenditures	Capital expenditures	(747)		(783)		Capital expenditures	(918)		(747)
Investments in businesses	Investments in businesses	(6)		0		Investments in businesses	—		(6)
Dispositions of businesses, net of cash transferred (Note 2)	Dispositions of businesses, net of cash transferred (Note 2)	1,074		234		Dispositions of businesses, net of cash transferred (Note 2)	88		1,074
Cash acquired in Raytheon Merger		0		3,208
Increase in customer financing assets, net		(102)		(129)

Customer financing assets payments, net						Customer financing assets payments, net	(7)		(102)
Increase in collaboration intangible assets	Increase in collaboration intangible assets	(60)		(106)		Increase in collaboration intangible assets	(91)		(60)
Receipts (payments) from settlements of derivative contracts, net		50		(286)
(Payments) receipts from settlements of derivative contracts, net						(Payments) receipts from settlements of derivative contracts, net	(151)		50
Other investing activities, net	Other investing activities, net	30		(82)		Other investing activities, net	(57)		30
Net cash flows provided by investing activities from continuing operations		239		2,056
Net cash flows (used in) provided by investing activities from continuing operations						Net cash flows (used in) provided by investing activities from continuing operations	(1,136)		239
Financing Activities:	Financing Activities:					Financing Activities:
Issuance of long-term debt		0		1,984
Distribution from discontinued operations		0		17,207

Repayment of long-term debt	Repayment of long-term debt	(307)		(15,038)		Repayment of long-term debt	(2)		(307)
Decrease in short-term borrowings, net		(51)		(2,045)
Proceeds from Common Stock issued under employee stock plans		2		10

Change in short-term borrowings, net						Change in short-term borrowings, net	(17)		(51)
Dividends paid on Common Stock	Dividends paid on Common Stock	(1,461)		(1,338)		Dividends paid on Common Stock	(1,543)		(1,461)
Repurchase of Common Stock	Repurchase of Common Stock	(1,007)		(47)		Repurchase of Common Stock	(1,779)		(1,007)
Net transfers to discontinued operations	Net transfers to discontinued operations	(24)		(1,966)		Net transfers to discontinued operations	—		(24)
Other financing activities, net	Other financing activities, net	(271)		(99)		Other financing activities, net	(286)		(269)
Net cash flows used in financing activities from continuing operations	Net cash flows used in financing activities from continuing operations	(3,119)		(1,332)		Net cash flows used in financing activities from continuing operations	(3,627)		(3,119)
Discontinued Operations:	Discontinued Operations:					Discontinued Operations:
Net cash used in operating activities	Net cash used in operating activities	(24)		(661)		Net cash used in operating activities	—		(24)
Net cash used in investing activities	Net cash used in investing activities	0		(241)		Net cash used in investing activities	—		—
Net cash provided by (used in) financing activities		24		(1,481)
Net cash provided by financing activities						Net cash provided by financing activities	—		24

Net cash used in discontinued operations	Net cash used in discontinued operations	0		(2,383)		Net cash used in discontinued operations	—		—
Effect of foreign exchange rate changes on cash and cash equivalents from continuing operations		79		(10)
Effect of foreign exchange rate changes on cash and cash equivalents from discontinued operations		0		(76)
Effect of foreign exchange rate changes on cash and cash equivalents						Effect of foreign exchange rate changes on cash and cash equivalents	(20)		79

Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(752)		(403)		Net decrease in cash, cash equivalents and restricted cash	(3,021)		(752)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	8,832		4,961		Cash, cash equivalents and restricted cash, beginning of period	7,853		8,832
Cash, cash equivalents and restricted cash within assets related to discontinued operations, beginning of period		0		2,459

Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	8,080		7,017		Cash, cash equivalents and restricted cash, end of period	4,832		8,080
Less: Restricted cash, included in Other assets	Less: Restricted cash, included in Other assets	29		42		Less: Restricted cash, included in Other assets	65		29

Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	8,051	$	6,975	Cash and cash equivalents, end of period	$	4,767	$	8,051

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in thousands)	(dollars in millions, except per share amounts; shares in thousands)	2021		2020		2021		2020		(dollars in millions, except per share amounts; shares in thousands)	2022		2021		2022		2021
Equity beginning balance	Equity beginning balance	$	73,308	$	41,935	$	73,852	$	44,231	Equity beginning balance	$	73,986	$	73,308	$	74,664	$	73,852
Common Stock	Common Stock									Common Stock
Beginning balance	Beginning balance	36,997		23,099		36,930		23,019		Beginning balance	37,504		36,997		37,483		36,930
Common Stock plans activity	Common Stock plans activity	186		140		253		221		Common Stock plans activity	169		186		203		253
Common Stock issued for Raytheon Company outstanding common stock and equity awards		0		10,897		0		10,897
Adjustment to Common Stock for the Otis Distribution		0		2,598		0		2,598
Sale of subsidiary shares from noncontrolling interest, net		0		1		0		0
Purchase of subsidiary shares from noncontrolling interest, net										Purchase of subsidiary shares from noncontrolling interest, net	—		—		(13)		—
Ending balance	Ending balance	37,183		36,735		37,183		36,735		Ending balance	37,673		37,183		37,673		37,183
Treasury Stock	Treasury Stock									Treasury Stock
Beginning balance	Beginning balance	(10,780)		(32,665)		(10,407)		(32,626)		Beginning balance	(13,483)		(10,780)		(12,727)		(10,407)
Common Stock plans activity		0		(2)		0		2

Common Stock repurchased	Common Stock repurchased	(645)		0		(1,020)		(43)		Common Stock repurchased	(1,056)		(645)		(1,812)		(1,020)
Common Stock issued for Raytheon Company outstanding common stock and equity awards		0		22,269		0		22,269
Other	Other	1		0		3		0		Other	—		1		—		3
Ending balance	Ending balance	(11,424)		(10,398)		(11,424)		(10,398)		Ending balance	(14,539)		(11,424)		(14,539)		(11,424)
Retained Earnings	Retained Earnings									Retained Earnings
Beginning balance	Beginning balance	49,460		60,826		49,423		61,594		Beginning balance	50,592		49,460		50,265		49,423
Net income (loss)		1,032		(3,835)		1,785		(3,918)
Adjustment to retained earnings for the Carrier Distribution		0		(5,805)		0		(5,805)
Net income										Net income	1,304		1,032		2,388		1,785
Dividends on Common Stock	Dividends on Common Stock	(1,510)		(1,427)		(2,215)		(2,041)		Dividends on Common Stock	(1,597)		(1,510)		(2,342)		(2,215)
Dividends on ESOP Common Stock	Dividends on ESOP Common Stock	(26)		(10)		(37)		(27)		Dividends on ESOP Common Stock	(27)		(26)		(40)		(37)
Redeemable noncontrolling interest fair value adjustment		0		(1)		0		0

Other, including the adoption impact of ASU 2016-13 (Note 21)		(2)		(4)		(2)		(59)

Other										Other	(1)		(2)		—		(2)
Ending balance	Ending balance	48,954		49,744		48,954		49,744		Ending balance	50,271		48,954		50,271		48,954
Unearned ESOP Shares	Unearned ESOP Shares									Unearned ESOP Shares
Beginning balance	Beginning balance	(46)		(61)		(49)		(64)		Beginning balance	(36)		(46)		(38)		(49)
Common Stock plans activity	Common Stock plans activity	3		5		6		8		Common Stock plans activity	3		3		5		6
Ending balance	Ending balance	(43)		(56)		(43)		(56)		Ending balance	(33)		(43)		(33)		(43)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Loss										Accumulated Other Comprehensive Loss
Beginning balance	Beginning balance	(3,921)		(11,788)		(3,734)		(10,149)		Beginning balance	(2,115)		(3,921)		(1,915)		(3,734)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	366		(887)		179		(2,526)		Other comprehensive income (loss), net of tax	(816)		366		(1,016)		179
Separation of Carrier and Otis		0		3,875		0		3,875

Ending balance	Ending balance	(3,555)		(8,800)		(3,555)		(8,800)		Ending balance	(2,931)		(3,555)		(2,931)		(3,555)
Noncontrolling Interest	Noncontrolling Interest									Noncontrolling Interest
Beginning balance	Beginning balance	1,598		2,524		1,689		2,457		Beginning balance	1,524		1,598		1,596		1,689
Net Income	Net Income	48		24		89		121		Net Income	34		48		57		89
Less: Redeemable noncontrolling interest net income	Less: Redeemable noncontrolling interest net income	(1)		(1)		(3)		(1)		Less: Redeemable noncontrolling interest net income	(2)		(1)		(3)		(3)
Other comprehensive income (loss), net of tax		0		6		0		0

Dividends attributable to noncontrolling interest	Dividends attributable to noncontrolling interest	(39)		(22)		(169)		(80)		Dividends attributable to noncontrolling interest	(11)		(39)		(75)		(169)
Sale of subsidiary shares from noncontrolling interest, net		0		66		0		66

Purchase of subsidiary shares from noncontrolling interest, net										Purchase of subsidiary shares from noncontrolling interest, net	—		—		(19)		—
Disposition of noncontrolling interest, net										Disposition of noncontrolling interest, net	(2)		—		(13)		—
Capital contributions	Capital contributions	0		(65)		0		(31)		Capital contributions	6		—		6		—
Separation of Carrier and Otis		0		(865)		0		(865)

Ending balance	Ending balance	1,606		1,667		1,606		1,667		Ending balance	1,549		1,606		1,549		1,606
Equity at June 30	Equity at June 30	$	72,721	$	68,892	$	72,721	$	68,892	Equity at June 30	$	71,990	$	72,721	$	71,990	$	72,721
Supplemental share information	Supplemental share information									Supplemental share information
Shares of Common Stock issued under employee plans, net	Shares of Common Stock issued under employee plans, net	223		(142)		1,276		1,907		Shares of Common Stock issued under employee plans, net	463		223		2,280		1,276
Shares of Common Stock repurchased	Shares of Common Stock repurchased	7,445		0		12,642		330		Shares of Common Stock repurchased	11,163		7,445		19,046		12,642
Shares of Common Stock issued for Raytheon Company outstanding common stock & equity awards		0		652,638		0		652,638
Dividends declared per share of Common Stock	Dividends declared per share of Common Stock	$	1.020	$	0.950	$	1.495	$	1.685	Dividends declared per share of Common Stock	$	1.100	$	1.020	$	1.610	$	1.495
Dividends paid per share of Common Stock		0.510		0.475		0.985		1.210

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The Condensed Consolidated Financial Statements at June 30, ~~2021~~2022 and for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are unaudited, and in the opinion of management include adjustments of a normal recurring 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 ~~2020~~2021 Annual Report on Form 10-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~~ ~~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 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 while Collins Aerospace (Collins) and Pratt & Whitney ~~continue to~~ use a quarter calendar ~~end of June 30, 2021.~~end. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended June 30, ~~2021~~2022 and June 30, ~~2020~~2021 with respect to RIS or RMD, we are referring to their July 3, 2022 and July 4, 2021 ~~and June 28, 2020~~ fiscal quarter ends, respectively. 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. 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~~Raytheon Technologies Corporation and its ~~subsidiaries when referring to periods prior~~subsidiaries.

Russia Sanctions. In response to the ~~Raytheon Merger~~Russian military’s invasion of Ukraine on February 24, 2022, the U.S. government and the governments of various jurisdictions in which we operate, including Canada, the United Kingdom, the European Union, and others, have imposed broad economic sanctions and export controls targeting specific industries, entities and individuals in Russia. The Russian government has implemented similar counter-sanctions and export controls targeting specific industries, entities and individuals in the U.S. and other jurisdictions in which we operate. These government measures, among other limitations, restrict transactions involving various Russian banks and financial institutions and impose enhanced export controls limiting transfers of various goods, software and technologies to and from Russia, including broadened export controls specifically targeting the ~~combined company, Raytheon Technologies Corporation, when referring~~aerospace sector. These measures have adversely affected and could continue to ~~periods after~~adversely affect the ~~Raytheon Merger. Unless~~Company and/or our supply chain, business partners or customers. As a result of these sanctions on Russia and export controls, in the ~~context otherwise requires,~~first quarter of 2022, we recorded pretax charges of $290 million, $210 million net of tax and the ~~terms “Raytheon~~impact of noncontrolling interest, within our Collins and Pratt & Whitney businesses primarily related to increased estimates for credit losses on both our accounts receivables and contract assets, inventory reserves and purchase order obligations, impairment of customer financing assets for products under lease, impairment of contract fulfillment costs that are no longer recoverable, and a loss on the exit of our investment in a Russia-based joint venture. Additionally, we reversed approximately $1.3 billion of remaining performance obligations (RPO) in the quarter ended March 31, 2022 related to our sales contracts in Russia at Pratt & Whitney and Collins. We will continue to monitor future developments, including additional sanctions and other measures, that could adversely affect the Company” and/or ~~“Raytheon” mean Raytheon Company and its subsidiaries prior to the Raytheon Merger.~~our supply chain, business partners or customers.

COVID-19 Pandemic. ~~Beginning in 2020, the~~The coronavirus disease 2019 (COVID-19) pandemic continues to negatively ~~impacted both~~affect the ~~U.S. and~~ global economy, ~~and~~ our business and operations, supply chains, and the industries in which we operate. ~~The continued disruption~~However, we continue to see that commercial air travel ~~and commercial activities and~~is recovering in certain areas of demand. While we believe that the ~~significant restrictions and limitations on businesses, particularly within~~long-term outlook for 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.

In the six months ended June 30, 2020 we recorded write-downs of assets and significant unfavorable Estimate at Completion (EAC) adjustments in our Collins Aerospace and Pratt & Whitney businesses primarily related to:

•Goodwill impairment charges of $3.2 billion in the quarter ended June 30, 2020 related to two of our Collins Aerospace reporting units. Refer to “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” for additional information,

•~~increased estimated credit losses on both our receivables and contract assets of $237 million and $309 million in the quarter and six months ended June 30, 2020, respectively,~~

•~~contract asset and inventory impairments at Collins Aerospace~~industry remains positive due to the ~~impact~~fundamental drivers of lower estimated future customer activity resulting from the expected acceleration of fleet retirements of a commercial aircraft of $122 million and $133 million in the quarter and six months ended June 30, 2020, respectively,

•~~unfavorable EAC adjustments on commercial aftermarket contracts at Pratt & Whitney based on a change in estimated future customer activity of $57 million in the quarter ended June 30, 2020,~~

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•~~the impairment of a Collins Aerospace trade name of $17 million and $57 million, in the quarter and six months ended June 30, 2020, respectively, and~~

•~~an unfavorable EAC adjustment at Pratt & Whitney related to a shift in overhead costs to military contracts of $44 million in the quarter ended June 30, 2020.~~

~~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 continuedemand, there continues to be ~~negatively impacted~~uncertainty with respect to when ~~compared~~commercial air traffic capacity will fully return to and/or exceed pre-COVID-19 ~~(2019) results.~~levels. Our expectations regarding the COVID-19 pandemic and ~~its~~ongoing recovery and their 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 continues to be uncertainty with respect to the point at which commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels. We have begun to see indications that commercial air travel is recovering in certain areas of demand; however, 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. As our commercial aerospace business begins to recover, we expect certain employee-related and discretionary costs, which were subject to prior year cost reduction actions, to return in 2021 and beyond. A recovery may also impact our judgments around credit risk related to estimated credit losses.

Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets

~~Business Acquisitions.~~ ~~As described above, on April 3, 2020, pursuant~~During the six months ended June 30, 2022 and 2021, cash inflows related to ~~the Agreement~~dispositions were $88 million and ~~Plan~~$1.1 billion, respectively.

Our dispositions 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 completion 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 convertedbusinesses in the ~~merger into the right to receive 2.3348 shares~~six months ended June 30, 2022, consisted of ~~UTC common stock previously traded on the NYSE under the ticker symbol “UTX.” Upon closing~~immaterial dispositions in our aerospace businesses.

Dispositions 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~~businesses 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 awards~~	99
~~Total merger consideration~~	$	~~33,166~~

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~~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, 2020~~	~~277.3~~
~~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 consideration~~	~~277.7~~
~~Exchange ratio~~ ~~(2)~~	~~2.3348~~
~~Shares of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards~~	~~648.4~~
~~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 2.3348 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 RTC 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 acquiree (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.

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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 receivable, net~~	~~1,997~~
~~Contract assets~~	~~6,023~~
~~Inventory, net~~	~~705~~
~~Other assets, current~~	~~940~~
~~Fixed assets, net~~	~~4,745~~
~~Operating lease right-of-use assets~~	~~950~~
~~Intangible assets, net:~~	~~19,130~~
~~Customer relationships~~	~~12,900~~
~~Tradenames/trademarks~~	~~5,430~~
~~Developed technology~~	~~800~~
~~Other assets~~	~~1,218~~
~~Total identifiable assets acquired~~	~~38,916~~
~~Accounts payable~~	~~1,477~~
~~Accrued employee compensation~~	~~1,492~~
~~Other accrued liabilities~~	~~1,921~~
~~Contract liabilities~~	~~3,002~~
~~Long-term debt, including current portion~~	~~4,700~~
~~Operating lease liabilities, non-current portion~~	~~738~~
~~Future pension and postretirement benefit obligation~~	~~11,607~~
~~Other long-term liabilities~~	~~2,368~~
~~Total liabilities acquired~~	~~27,305~~
~~Total identifiable net assets~~	~~11,611~~
~~Goodwill~~	~~21,589~~
~~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 underlying 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 risk profile of the net cash flows utilized in the valuation. The probability-adjusted future cash flows are then discounted to present 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 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

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~~tradename 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.~~

~~The intangible assets included above consist of the following:~~


~~(dollars in millions)~~	~~Fair Value~~		~~Useful Life~~
~~Acquired customer relationships~~	$	~~12,900~~	~~25 years~~
~~Acquired tradenames~~	~~5,430~~		~~Indefinite~~
~~Acquired developed technology~~	~~800~~		~~5 to 7 years~~
~~Total identifiable intangible assets~~	$	~~19,130~~

We also identified customer contractual obligations on loss making programs and recorded liabilities of $222 million related to these programs based on the difference between the actual expected operating loss and a normalized operating profit. These liabilities will be liquidated based on the expected pattern of expenses incurred on these contracts.

We recorded $21.6 billion of goodwill as a result of the Raytheon Merger which primarily relates to expected synergies from combining operations and the value of the existing workforce. The goodwill generated as a result of the Raytheon Merger is nondeductible for tax purposes.

~~Merger-Related Costs.~~ ~~Merger-related costs have been expensed as incurred. In~~ the six months ended June 30, 2021 we recorded $17 million of transaction and integration costs. In the quarter and six months ended June 30, 2020 we recorded $70 million and $99 million, respectively, of transaction and integration costs. These costs are included in Selling, general and administrative expenses within the Condensed Consolidated Statement of Operations.

~~Supplemental Pro-Forma Data.~~ Raytheon Company’s results of operations have been included in RTC’s financial statements for the period subsequent to the completion of the Raytheon 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 account 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 Raytheon Technologies after completion of the Separation Transactions, the Distributions and the Raytheon Merger.

Quarter Ended Six Months Ended
(dollars in millions, except per share amounts) June 30, 2020 June 30, 2020
Net sales $ 14,470 $ 32,921
Loss from continuing operations attributable to common shareowners (3,732) (3,014)
Basic earnings (loss) per share of common stock from continuing operations $ (2.49) $ (2.08)
Diluted earnings (loss) per share of common stock from continuing operations (2.49) (2.07)

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

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~~tax impact. As the merger was completed on April 3, 2020, the pro-forma adjustments in the table below only include the required adjustments through April 3, 2020.~~

Quarter Ended Six Months Ended
(dollars in millions) June 30, 2020 June 30, 2020
Amortization of acquired Raytheon Company intangible assets, net (1)
$ 0 $ (270)
Amortization of fixed asset fair value adjustment (2)
0 (9)
Utilization of contractual customer obligation (3)
0 8
Deferred revenue fair value adjustment (4)
0 (4)
Adjustment to non-service pension (income) expense (5)
0 239
RTC/Raytheon fees for advisory, legal, accounting services (6)
61 96
Adjustment to interest expense related to the Raytheon Merger, net (7)
0 9
Elimination of deferred commission amortization (8)
0 5
$ 61 $ 74

(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.~~

(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 May 2020, in order to meet the requirements for regulatory approval of the Raytheon Merger, we completed the~~8, 2021 sale of our airborne tactical radios business within our RIS segment for $234 million in cash, net of transaction-related costs. As the transaction occurred subsequent to the Raytheon Merger, the gain of $210 million was not recorded in the Condensed Consolidated Statement of Operations, but rather was recorded as an adjustment to the fair value of net assets acquired in the allocation of consideration transferred to net assets acquired in the Raytheon Merger, as discussed further above. Income before taxes related to the disposed business for the period from the closing of the Raytheon Merger to disposal date was not material.

~~In October 2020, we entered into a definitive agreement to sell our~~ Forcepoint business, ~~which we completed on January 8, 2021,~~ for proceeds of $1.1 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.~~

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Goodwill. Changes in our goodwill balances for the six months ended June 30, ~~2021~~2022 were as follows:

(dollars in millions) Balance as of January 1, 2021 Acquisitions and Divestitures Foreign Currency Translation and Other Balance as of June 30, 2021
Collins Aerospace Systems $ 31,571 $ 0 $ 26 $ 31,597
Pratt & Whitney 1,563 0 0 1,563
Raytheon Intelligence & Space(1)
9,522 30 5 9,557
Raytheon Missiles & Defense(1)
11,608 52 0 11,660
Total Segments 54,264 82 31 54,377
Eliminations and other 21 0 (4) 17
Total $ 54,285 $ 82 $ 27 $ 54,394

(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. We did not have a triggering event in the six months ended June 30, 2021.

We considered the deterioration in general economic and market conditions primarily due to the COVID-19 pandemic to be a triggering event in the first and second quarters of 2020, requiring an impairment evaluation of goodwill, intangible assets and other assets in our commercial aerospace businesses, Collins Aerospace and Pratt & Whitney. Beginning in the second quarter of 2020, we observed several airline customer bankruptcies, delays and cancellations of aircraft purchases by airlines, fleet retirements and repositioning of original equipment manufacturer (OEM) production schedules and we experienced significant unfavorable EAC adjustments at our Collins Aerospace and Pratt & Whitney businesses due to a decline in flight hours, aircraft fleet utilization, shop visits and commercial OEM deliveries. These factors contributed to a deterioration of our expectations regarding the timing of a return to pre-COVID-19 commercial flight activity, which further reduced our future sales and cash flows expectations.

In the second quarter of 2020, we evaluated the Collins Aerospace and Pratt & Whitney reporting units for goodwill impairment and determined that the carrying values of two of the six Collins Aerospace reporting units exceeded the sum of discounted future cash flows, resulting in aggregate goodwill impairments of $3.2 billion. For additional discussion, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 8 of our 2020 Annual Report on Form 10-K.

The Company continuously monitors and evaluates relevant 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, 2022		Acquisitions and Divestitures		Foreign Currency Translation and Other		Balance as of June 30, 2022
Collins Aerospace Systems	$	31,384	$	(36)	$	(614)	$	30,734
Pratt & Whitney	1,563		—		—		1,563
Raytheon Intelligence & Space	9,813		23		(1)		9,835
Raytheon Missiles & Defense	11,659		—		(2)		11,657
Total Segments	54,419		(13)		(617)		53,789
Eliminations and other	17		—		—		17
Total	$	54,436	$	(13)	$	(617)	$	53,806

Intangible Assets. Identifiable intangible assets are comprised of the following:

June 30, 2021 December 31, 2020
(dollars in millions) Gross Amount Accumulated
Amortization Gross Amount Accumulated
Amortization
Amortized:
Patents and trademarks $ 49 $ (36) $ 48 $ (35)
Collaboration assets 5,081 (1,069) 5,021 (1,024)
Exclusivity assets 2,633 (316) 2,541 (295)
Developed technology and other 943 (387) 906 (316)
Customer relationships 30,264 (6,360) 30,241 (5,262)
38,970 (8,168) 38,757 (6,932)
Unamortized:
Trademarks and other 8,721 — 8,714 —
Total $ 47,691 $ (8,168) $ 47,471 $ (6,932)

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 in the first and second quarters of 2020 and recorded charges of $17 million and $57 million in the quarter and six months ended June 30, 2020, respectively related to the impairment of a Collins Aerospace indefinite-lived tradename intangible assets. We will continue to evaluate the impact on our customers and our business in future periods which may result in a different conclusion.


	June 30, 2022				December 31, 2021
(dollars in millions)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Amortized:


Collaboration assets	$	5,414	$	(1,265)	$	5,319	$	(1,173)
Exclusivity assets	2,772		(324)		2,673		(318)
Developed technology and other	1,194		(506)		1,214		(466)
Customer relationships	29,798		(8,168)		29,982		(7,411)
	39,178		(10,263)		39,188		(9,368)
Unamortized:
Trademarks and other	8,647		—		8,696		—
Total	$	47,825	$	(10,263)	$	47,884	$	(9,368)

Amortization of intangible assets for the quarters and six months ended June 30, 2022 and 2021 were $467 million and ~~2020 were~~$954 million and $602 million and $1,198 ~~million and $600 million and $907~~ million, respectively. The following is the expected amortization of intangible assets for the ~~years 2021~~remainder of 2022 through ~~2026.~~2027.

(dollars in millions) Remaining 2021 2022 2023 2024 2025 2026
Amortization expense $ 1,257 $ 1,955 $ 2,080 $ 2,130 $ 2,037 $ 1,977

~~Note 3: Discontinued Operations~~

As discussed above, the Separation Transactions and Distributions were completed on April 3, 2020 resulting in, among other things, UTC (since renamed Raytheon Technologies Corporation), being separated into three independent, publicly traded companies – UTC, Carrier and Otis.

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. Income (loss) from discontinued operations attributable to common shareowners is as follows:

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Otis $ 0 $ 0 $ 0 $ 187
Carrier 0 0 0 196
Separation related transactions (1)
(8) 9 (27) (895)
Income (loss) from discontinued operations attributable to common shareowners $ (8) $ 9 $ (27) $ (512)

(1) Reflects debt extinguishment costs in the quarter and six months ended June 30, 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.


(dollars in millions)	Remaining 2022		2023		2024		2025		2026		2027
Amortization expense	$	1,008	$	2,096	$	2,219	$	2,101	$	2,013	$	1,860

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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 Income (loss) from discontinued operations attributable to common shareowners:

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Otis
Product sales $ 0 $ 0 $ 0 $ 1,123
Service sales 0 0 0 1,843
Cost of products sold 0 0 0 913
Cost of services sold 0 0 0 1,157
Research and development 0 0 0 38
Selling, general and administrative expense 0 0 0 450
Other income (expense), net 0 0 0 (65)
Non-operating (income) expense, net 0 0 0 3
Income from discontinued operations, before tax 0 0 0 340
Income tax expense from discontinued operations 0 0 0 116
Net income from discontinued operations 0 0 0 224
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations 0 0 0 37
Income from discontinued operations attributable to common shareowners $ 0 $ 0 $ 0 $ 187
Carrier
Product sales $ 0 $ 0 $ 0 $ 3,144
Service sales 0 0 0 740
Cost of products sold 0 0 0 2,239
Cost of services sold 0 0 0 527
Research and development 0 0 0 98
Selling, general and administrative expense 0 0 0 669
Other income (expense), net 0 0 0 (30)
Non-operating (income) expense, net 0 0 0 17
Income from discontinued operations, before tax 0 0 0 304
Income tax expense from discontinued operations 0 0 0 102
Net income from discontinued operations 0 0 0 202
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations 0 0 0 6
Income from discontinued operations attributable to common shareowners $ 0 $ 0 $ 0 $ 196
Separation related transactions (1)
Selling, general and administrative expense $ 10 $ 13 30 $ 167
Non-operating expense, net 0 43 0 709
Loss from discontinued operations, before tax (10) (56) (30) (876)
Income tax (benefit) expense from discontinued operations (2) (65) (3) 19
Net income (loss) from discontinued operations (8) 9 (27) (895)
Total income (loss) from discontinued operations attributable to common shareowners $ (8) $ 9 $ (27) $ (512)

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~~Selected financial information related to cash flows from discontinued operations is as follows:~~

Six Months Ended June 30,
(dollars in millions) 2021 2020
Net cash used in operating activities $ (24) $ (661)
Net cash used in investing activities 0 (241)
Net cash provided by (used in) financing activities 24 (1,481)

Net cash used in operating activities for the six months ended June 30, 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 used in financing activities for the six months ended June 30, 2020 primarily consists of cash distributed by the Company to Carrier and Otis upon separation and debt extinguishment costs related to the early repayment of debt.

Note 4:3: Earnings Per Share
Quarter Ended June 30, Six Months Ended June 30,
(dollars and shares in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) attributable to common shareowners:
Income (loss) from continuing operations $ 1,040 $ (3,844) $ 1,812 $ (3,406)
Income (loss) from discontinued operations (8) 9 (27) (512)
Net income (loss) attributable to common shareowners $ 1,032 $ (3,835) $ 1,785 $ (3,918)
Basic weighted average number of shares outstanding 1,506.4 1,501.3 1,508.7 1,225.4
Stock awards and equity units (share equivalent) 7.1 0 5.0 0
Diluted weighted average number of shares outstanding 1,513.5 1,501.3 1,513.7 1,225.4
Earnings (Loss) Per Share attributable to common shareowners - Basic:
Income (loss) from continuing operations $ 0.69 $ (2.56) $ 1.20 $ (2.78)
Income (loss) from discontinued operations 0 0.01 (0.02) (0.42)
Net income (loss) attributable to common shareowners $ 0.69 $ (2.55) $ 1.18 $ (3.20)
Earnings (Loss) Per Share attributable to common shareowners - Diluted:
Income (loss) from continuing operations $ 0.69 $ (2.56) $ 1.20 $ (2.78)
Income (loss) from discontinued operations (0.01) 0.01 (0.02) (0.42)
Net income (loss) attributable to common shareowners $ 0.68 $ (2.55) $ 1.18 $ (3.20)


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars and shares in millions, except per share amounts)	2022		2021		2022		2021
Net income attributable to common shareowners:
Income from continuing operations	$	1,304	$	1,040	$	2,407	$	1,812
Loss from discontinued operations	—		(8)		(19)		(27)
Net income attributable to common shareowners	$	1,304	$	1,032	$	2,388	$	1,785
Basic weighted average number of shares outstanding	1,479.2		1,506.4		1,482.9		1,508.7
Stock awards and equity units (share equivalent)	10.4		7.1		10.8		5.0
Diluted weighted average number of shares outstanding	1,489.6		1,513.5		1,493.7		1,513.7
Earnings (Loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations	$	0.88	$	0.69	$	1.62	$	1.20
Loss from discontinued operations	—		—		(0.01)		(0.02)
Net income attributable to common shareowners	$	0.88	$	0.69	$	1.61	$	1.18
Earnings (Loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations	$	0.88	$	0.69	$	1.61	$	1.20
Loss from discontinued operations	—		(0.01)		(0.01)		(0.02)
Net income attributable to common shareowners	$	0.88	$	0.68	$	1.60	$	1.18

The computation of diluted earnings per share (EPS) 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 quarter and six months ended June 30, 2022, the number of stock awards excluded from the computation was 3.4 million and 5.4 million, respectively. For the quarter and six months ended June 30, 2021, the number of stock awards excluded from the computation was 11.2 million and 19.0 million, respectively. For the quarter and six months ended June 30, 2020, all stock awards were excluded from the computation of diluted EPS because their effect was antidilutive due to the loss from continuing operations, and amounted to 36.6 million and 53.3 million stock awards, respectively.

Note 5:4: Changes in Contract Estimates at Completion

We review our Estimates at Completion (EACs) ~~on significant contracts on a periodic basis and for others, no less than~~at least annually or when a change in circumstances ~~warrant~~warrants a modification to a previous estimate. For significant contracts, we review our EACs more frequently. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment by management on a contract by contract basis. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related

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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 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 ~~contracts primarily within our RIS and RMD segments.~~contracts. 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 and changes to loss provisions for our contracts accounted for on a percentage of completion basis.

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

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Operating profit (loss) $ 27 $ (151) $ 39 $ (130)
Income (loss) from continuing operations attributable to common shareowners(1)
22 (119) 31 (103)
Diluted earnings (loss) per share from continuing operations attributable to common shareholders (1)
$ 0.01 $ (0.08) $ 0.02 $ (0.08)


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Total Net Sales	$	(19)	$	73	$	78	$	125
Operating profit	(41)		27		(5)		39
Income from continuing operations attributable to common shareowners(1)	(32)		22		(4)		31
Diluted earnings per share from continuing operations attributable to common shareholders (1)	$	(0.02)	$	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 June 30, 2021 and 2020, revenue was increased by $73 million and reduced by $218 million, respectively, for performance obligations satisfied (or partially satisfied) in previous periods. In the six months ended June 30, 2021 and 2020, revenue was increased by $125 million and reduced by $201 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 merger date, since only the unperformed portion of the contract at such date represents the obligation of the Company. For additional information related to the Raytheon Merger, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets.”

Note 6:5: Accounts Receivable, Net

Accounts receivable, net consisted of the following:
(dollars in millions) June 30, 2021 December 31, 2020
Accounts receivable $ 9,431 $ 9,800
Allowance for expected credit losses (519) (546)
Total accounts receivable, net $ 8,912 $ 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 $3.4 billion and $3.8 billion during the six months ended June 30, 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 June 30, 2021 and December 31, 2020, the Company had $7 million and $10 million, respectively, that was collected on behalf of the financial institutions and recorded as restricted cash and accrued liabilities. The net cash flows relating to these collections are reported 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 Accounts receivable were as follows:~~

Six Months Ended June 30,
(dollars in millions) 2021 2020
Balance as of January 1 $ 546 $ 254
Current period provision for expected credit losses, net of recoveries (1)
(16) 225
Write-offs charged against the allowance for expected credit losses (11) (3)
Other, net(2)
0 18
Balance as of June 30 $ 519 $ 494

(1) The current provision for expected credit losses for the six months ended June 30, 2020 includes $194 million of reserves driven by customer bankruptcies and additional reserves for credit losses primarily due to the current economic environment primarily caused by the COVID-19 pandemic.

(2) Other, net for the six months ended June 30, 2020 includes a $34 million impact related to the January 1, 2020 adoption of Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.


(dollars in millions)	June 30, 2022		December 31, 2021
Accounts receivable	$	10,897	$	10,136
Allowance for expected credit losses	(503)		(475)
Total accounts receivable, net	$	10,394	$	9,661

Note 7:6: 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 terms established in our contracts. Total contract assets and contract liabilities ~~as of June 30, 2021 and December 31, 2020 are~~were as follows:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Contract assets	Contract assets	$	10,485	$	9,931	Contract assets	$	11,836	$	11,361
Contract liabilities	Contract liabilities	(12,591)		(12,889)		Contract liabilities	(13,430)		(13,720)
Net contract liabilities	Net contract liabilities	$	(2,106)	$	(2,958)	Net contract liabilities	$	(1,594)	$	(2,359)

Contract assets increased ~~$554~~$475 million during the six months ended June 30, ~~2021~~2022 primarily due to sales in excess of billings at RIS and Pratt & Whitney. Contract liabilities decreased ~~$298~~$290 million during the six months ended June 30, 2022 compared to December 31, 2021 primarily due to ~~$364 million of contract liability reduction related to a contract termination at Collins Aerospace and~~ revenue recognized on certain ~~international~~ contracts with ~~advances~~milestone and performance based payments at ~~RMD, partially offset by billings in excess of sales at Pratt & Whitney.~~RMD. We recognized revenue of ~~$1,021 million~~$1.2 billion and ~~$2,726 million~~$3.0 billion during the quarter and six months ended June 30, 2022, related to contract liabilities as of January 1, 2022 and $1.0 billion and $2.7 billion during the quarter and six months ended June 30, 2021, ~~respectively,~~ related to contract liabilities as of January 1, ~~2021 and $625 million and $1,808 million during the quarter and six months ended June 30, 2020, respectively, related to contract liabilities as of January 1, 2020.~~2021.

As of June 30, ~~2021,~~2022, our ~~contract~~Contract liabilities include approximately ~~$440~~$380 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. In addition, as of June 30, 2022, our Contract liabilities include advance payments, in immaterial amounts, received from Russian customers on contracts we are currently unable to perform on due to global sanctions on Russia and export controls. Depending on the contractual terms and as allowed by sanctions, certain of these advance payments may become refundable.

Contract assets include an allowance for credit losses of ~~$247~~$318 million and ~~$177~~$251 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Note 8:7: Inventory, net
(dollars in millions) June 30, 2021 December 31, 2020
Raw materials $ 2,973 $ 3,015
Work-in-process 3,307 2,924
Finished goods 3,268 3,472
Total inventory, net $ 9,548 $ 9,411

~~Raw materials, work-in-process and finished goods are net of total valuation reserves of $1,878 million and $1,788 million as of June 30, 2021 and December 31, 2020, respectively.~~


(dollars in millions)	June 30, 2022		December 31, 2021
Raw materials	$	3,210	$	3,024
Work-in-process	3,628		3,085
Finished goods	3,304		3,069
Total inventory, net	$	10,142	$	9,178

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Note 9:8: Borrowings and Lines of Credit
(dollars in millions) June 30, 2021 December 31, 2020
Commercial paper $ 160 $ 160
Other borrowings 36 87
Total short-term borrowings $ 196 $ 247

~~As of June 30, 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~~From time to time, 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.

~~In May 2021, we renewed our $2.0 billion revolving credit agreement, which now expires in May 2022.~~ As of June 30, ~~2021,~~2022, 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 no commercial paper outstanding at June 30, 2022 or December 31, 2021.

As of June 30, 2022, 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~~which expires in April ~~3, 2020,~~2025, and ~~the~~a $2.0 billion revolving credit agreement, ~~that we~~which was renewed in May ~~2021~~2022 and expires in May 2023. As of June 30, 2022, there were 0no borrowings outstanding under these agreements.

~~We did 0t issue long-term debt during the six months ended June 30, 2021.~~

In June 2020, we completed an exchange offer of outstanding subsidiary notes with an aggregate principal amount of approximately $8.2 billion in exchange for approximately $8.2 billion of Raytheon Technologies notes with identical interest rates, maturity dates, and redemption provisions.

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 six months ended June 30, 2020, which are included in the tables below.

We had ~~the following~~no issuances of long-term debt during the six months ended June 30, ~~2020, which is inclusive of issuances made by Carrier~~2022 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 discontinued operations within financing activities from continuing operations on our Condensed Consolidated Statement of Cash Flows:


~~Issuance Date~~	~~Description of Notes~~	~~Aggregate Principal Balance (in millions)~~
~~May 18, 2020~~	~~2.250% notes due 2030~~	$	~~1,000~~
	~~3.125% notes due 2050~~	~~1,000~~
~~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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2021.

We made the following repayments of long-term debt during the six months ended June 30, ~~2021 and 2020:~~2021:


Repayment Date	Description of Notes	Aggregate Principal Balance (in millions)












March 1, 2021	8.750% notes due 2021	$	250
~~May 19, 2020~~	~~3.650% notes due 2023~~ ~~(1)(2)~~	~~410~~
~~May 15, 2020~~	~~EURIBOR plus 0.20% floating rate notes due 2020 (€750 million principal value)(2)~~	~~817~~
~~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 early repayment of outstanding principal, Raytheon Technologies recorded debt extinguishment costs of $43 million and $703 million for the quarter and six months ended June 30, 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. No proceeds of the notes issued May 18, 2020 were used to fund the May 19, 2020 redemption.

~~(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.~~

Long-term debt consisted of the following:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
8.750% notes due 2021		$	0	$	250
3.100% notes due 2021		250		250
2.800% notes due 2022		1,100		1,100
2.500% notes due 2022 (2)		1,100		1,100

3.650% notes due 2023 (1)	3.650% notes due 2023 (1)	171		171		3.650% notes due 2023 (1)	$	171	$	171
3.700% notes due 2023(1)	3.700% notes due 2023(1)	400		400		3.700% notes due 2023(1)	400		400
3.200% notes due 2024(1)	3.200% notes due 2024(1)	950		950		3.200% notes due 2024(1)	950		950
3.150% notes due 2024 ~~(2)~~(1)	3.150% notes due 2024 ~~(2)~~(1)	300		300		3.150% notes due 2024 ~~(2)~~(1)	300		300
3.950% notes due 2025 (1)	3.950% notes due 2025 (1)	1,500		1,500		3.950% notes due 2025 (1)	1,500		1,500
2.650% notes due 2026 (1)	2.650% notes due 2026 (1)	719		719		2.650% notes due 2026 (1)	719		719
3.125% notes due 2027 (1)	3.125% notes due 2027 (1)	1,100		1,100		3.125% notes due 2027 (1)	1,100		1,100
3.500% notes due 2027(1)	3.500% notes due 2027(1)	1,300		1,300		3.500% notes due 2027(1)	1,300		1,300
7.200% notes due 2027 ~~(2)~~(1)	7.200% notes due 2027 ~~(2)~~(1)	382		382		7.200% notes due 2027 ~~(2)~~(1)	382		382
7.100% notes due 2027	7.100% notes due 2027	141		141		7.100% notes due 2027	135		135
6.700% notes due 2028	6.700% notes due 2028	400		400		6.700% notes due 2028	285		285
7.000% notes due 2028 ~~(2)~~(1)	7.000% notes due 2028 ~~(2)~~(1)	185		185		7.000% notes due 2028 ~~(2)~~(1)	185		185
4.125% notes due 2028 (1)	4.125% notes due 2028 (1)	3,000		3,000		4.125% notes due 2028 (1)	3,000		3,000
7.500% notes due 2029 (1)	7.500% notes due 2029 (1)	550		550		7.500% notes due 2029 (1)	414		414
2.150% notes due 2030 (€500 million principal value) (1)	2.150% notes due 2030 (€500 million principal value) (1)	598		612		2.150% notes due 2030 (€500 million principal value) (1)	526		565
2.250% notes due 2030 (1)						2.250% notes due 2030 (1)	1,000		1,000
1.900% notes due 2031 (1)						1.900% notes due 2031 (1)	1,000		1,000
2.375% notes due 2032 (1)						2.375% notes due 2032 (1)	1,000		1,000
5.400% notes due 2035 (1)						5.400% notes due 2035 (1)	446		446
6.050% notes due 2036 (1)						6.050% notes due 2036 (1)	410		410
6.800% notes due 2036 (1)						6.800% notes due 2036 (1)	117		117
7.000% notes due 2038						7.000% notes due 2038	148		148
6.125% notes due 2038 (1)						6.125% notes due 2038 (1)	575		575
4.450% notes due 2038 (1)						4.450% notes due 2038 (1)	750		750
5.700% notes due 2040 (1)						5.700% notes due 2040 (1)	553		553
4.875% notes due 2040 (1)						4.875% notes due 2040 (1)	600		600
4.700% notes due 2041 (1)						4.700% notes due 2041 (1)	425		425
4.500% notes due 2042 (1)						4.500% notes due 2042 (1)	3,500		3,500
4.800% notes due 2043 (1)						4.800% notes due 2043 (1)	400		400
4.200% notes due 2044 (1)						4.200% notes due 2044 (1)	300		300
4.150% notes due 2045 (1)						4.150% notes due 2045 (1)	850		850

2213

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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
7.000% notes due 2038 159 159
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 2043 400 400
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 2047 1,000 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)
273 292
Total principal long-term debt 31,187 31,470
Other (fair market value adjustments, (discounts)/premiums, and debt issuance costs) 99 106
Total long-term debt 31,286 31,576
Less: current portion 1,370 550
Long-term debt, net of current portion $ 29,916 $ 31,026


3.750% notes due 2046 (1)	1,100		1,100
4.050% notes due 2047 (1)	600		600
4.350% notes due 2047 (1)	1,000		1,000
4.625% notes due 2048 (1)	1,750		1,750
3.125% notes due 2050 (1)	1,000		1,000
2.820% notes due 2051 (1)	1,000		1,000
3.030% notes due 2052 (1)	1,100		1,100
Other (including finance leases)	263		270
Total principal long-term debt	31,254		31,300
Other (fair value adjustments, (discounts)/premiums, and debt issuance costs)	46		51
Total long-term debt	31,300		31,351
Less: current portion	26		24
Long-term debt, net of current portion	$	31,274	$	31,327

(1) We may redeem these notes, in whole or in part, at our option pursuant to their ~~terms.~~

~~(2) Debt assumed in~~terms prior to the ~~Raytheon Merger.~~applicable maturity date.

The average maturity of our ~~long-term~~Long-term debt at June 30, ~~2021~~2022 is approximately 1415 years. ~~The average interest expense rate on our total borrowings for the quarters and six months ended June 30, 2021 and 2020 was as follows:~~

Quarter Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Average interest expense rate 4.2 % 3.8 % 4.1 % 3.8 %

Note ~~10:~~9: Employee Benefit Plans

Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined benefit pension and 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. Upon separation, the pension participants within Carrier and Otis were effectively terminated from Raytheon Technologies. The terminations triggered a mid-year remeasurement of the UTC domestic plans. The remeasurement, which was calculated using discount rates and asset values as of April 3, 2020 (using March 31, 2020 as a practical expedient), resulted in a $2.4 billion increase to our pension liability in the quarter ended June 30, 2020, primarily due to a decrease in the fair market value of the plans’ assets since December 31, 2019. 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

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(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.

Contributions to our plans were as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
U.S. qualified defined benefit plans	U.S. qualified defined benefit plans	$	0	$	0	$	0	$	0	U.S. qualified defined benefit plans	$	—	$	—	$	—	$	—
International defined benefit plans	International defined benefit plans	14		34		21		42		International defined benefit plans	18		14		30		21
PRB plans	PRB plans	4		0		4		0		PRB plans	4		4		9		4
Defined contribution plans	Defined contribution plans	238		227		509		440		Defined contribution plans	251		238		562		509

The amounts recognized in the Condensed Consolidated Balance Sheet consist of:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Noncurrent pension assets (included in Other assets)	Noncurrent pension assets (included in Other assets)	$	1,069	$	424	Noncurrent pension assets (included in Other assets)	$	3,869	$	3,214
Current pension and PRB liabilities (included in Accrued employee compensation)	Current pension and PRB liabilities (included in Accrued employee compensation)	314		314		Current pension and PRB liabilities (included in Accrued employee compensation)	309		310
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	9,929		10,342		Future pension and postretirement benefit obligations	7,543		7,855

The amounts recognized in Future pension and postretirement benefit obligations consist of:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Noncurrent pension liabilities	Noncurrent pension liabilities	$	8,805	$	9,131	Noncurrent pension liabilities	$	6,596	$	6,873
Noncurrent PRB liabilities	Noncurrent PRB liabilities	1,058		1,072		Noncurrent PRB liabilities	876		903
Other pension and PRB related items	Other pension and PRB related items	66		139		Other pension and PRB related items	71		79
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	$	9,929	$	10,342	Future pension and postretirement benefit obligations	$	7,543	$	7,855

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The ~~following table illustrates the~~ components of net periodic benefit (income) expense for our defined pension and PRB ~~plans:~~plans were as follows:


		Pension Benefits Quarter Ended June 30,				PRB Quarter Ended June 30,					Pension Benefits Quarter Ended June 30,				PRB Quarter Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Operating expense	Operating expense									Operating expense
Service cost	Service cost	$	131	$	142	$	2	$	2	Service cost	$	118	$	131	$	2	$	2
Non-operating expense	Non-operating expense									Non-operating expense
Interest cost	Interest cost	313		452		6		10		Interest cost	380		313		7		6
Expected return on plan assets	Expected return on plan assets	(871)		(814)		(5)		(4)		Expected return on plan assets	(888)		(871)		(6)		(5)
Amortization of prior service cost (credit)		(42)		13		(1)		(1)
Amortization of prior service credit										Amortization of prior service credit	(41)		(42)		—		(1)
Recognized actuarial net loss (gain)	Recognized actuarial net loss (gain)	109		83		(2)		(3)		Recognized actuarial net loss (gain)	77		109		(3)		(2)
Net settlement, curtailment and special termination benefit loss		3		27		0		0
Non-service pension (income) expense		(488)		(239)		(2)		2
Net settlement, curtailment and special termination benefit (gain) loss										Net settlement, curtailment and special termination benefit (gain) loss	—		3		—		—
Non-service pension income										Non-service pension income	(472)		(488)		(2)		(2)
Total net periodic benefit (income) expense	Total net periodic benefit (income) expense	$	(357)	$	(97)	$	0	$	4	Total net periodic benefit (income) expense	$	(354)	$	(357)	$	—	$	—

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		Pension Benefits Six Months Ended June 30,				PRB Six Months Ended June 30,					Pension Benefits Six Months Ended June 30,				PRB Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Operating expense	Operating expense									Operating expense
Service cost	Service cost	$	262	$	179	$	4	$	3	Service cost	$	236	$	262	$	4	$	4
Non-operating expense	Non-operating expense									Non-operating expense
Interest cost	Interest cost	625		705		12		16		Interest cost	762		625		14		12
Expected return on plan assets	Expected return on plan assets	(1,739)		(1,335)		(10)		(5)		Expected return on plan assets	(1,778)		(1,739)		(11)		(10)
Amortization of prior service cost (credit)		(84)		26		(2)		(2)
Amortization of prior service credit										Amortization of prior service credit	(83)		(84)		—		(2)
Recognized actuarial net loss (gain)	Recognized actuarial net loss (gain)	218		169		(4)		(6)		Recognized actuarial net loss (gain)	154		218		(6)		(4)
Net settlement, curtailment and special termination benefit loss		3		27		0		0
Non-service pension (income) expense		(977)		(408)		(4)		3
Net settlement, curtailment and special termination benefit (gain) loss										Net settlement, curtailment and special termination benefit (gain) loss	(6)		3		—		—
Non-service pension income										Non-service pension income	(951)		(977)		(3)		(4)
Total net periodic benefit (income) expense	Total net periodic benefit (income) expense	$	(715)	$	(229)	$	0	$	6	Total net periodic benefit (income) expense	$	(715)	$	(715)	$	1	$	—

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 in our Condensed Consolidated Balance Sheet. The fair value of marketable securities held in trusts was as follows:


(dollars in millions)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Marketable securities held in trusts	Marketable securities held in trusts	$	908	$	881	Marketable securities held in trusts	$	788	$	965

Note ~~11:~~10: Income Taxes

Our effective tax rate was 10.7% and 23.9% ~~and 1.0% in~~in the quarters ended June 30, 2022 and 2021, respectively. The effective tax rate in the quarter ended June 30, 2022 includes a benefit of approximately 4 percentage points primarily related to an incremental Foreign Derived Intangible Income (FDII) benefit and ~~2020, respectively.~~other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the quarter ended June 30, 2021 includes tax charges of $73 million incremental to the U.S. statutory rate associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% enacted in 2021 and effective in 2023. The loss from continuing operations before income taxes for the quarter ended June 30, 2020 includes the $3.2 billion goodwill impairment as described in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets,” most of which is non-deductible for tax purposes. Tax expense in the quarter ended June 30, 2020 includes tax charges of $60 million related to the June 2020 debt exchange, and tax charges of $46 million associated with a revaluation of certain international tax incentives.

Our effective tax rate was ~~26.5%~~10.1% and ~~(22.0)%~~26.5% in the six months ended June 30, 2022 and 2021, respectively. The effective tax rate in the six months ended June 30, 2022 includes a benefit of approximately 5 percentage points primarily related to an incremental FDII benefit and ~~2020, respectively.~~other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the six months ended June 30, 2021 includes tax charges incremental to the U.S. statutory rate of $148 million associated with the sale of the Forcepoint business, as described in “Note 2: Acquisitions, Dispositions, Goodwill and ~~the tax charges~~

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Intangible Assets,” and $73 million associated with the enactment of the U.K. corporate tax rate change discussed above. The loss from continuing operations before income taxes for the six months ended June 30, 2020 includes the $3.2 billion goodwill impairment as described in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets,” most of which is non-deductible for tax purposes. Tax expenseSubsequently, in the ~~six months ended June 30, 2020 includes~~fourth quarter of 2021, we recognized an incremental $104 million tax ~~charges of $415 million resulting from the Separation Transactions or the Raytheon Merger, primarily related~~benefit due to the ~~impairment of deferred tax assets, tax charges of $60 million related to the June 2020 debt exchange, and tax charges of $46 million associated with a~~ revaluation of ~~certain international~~the Forcepoint tax ~~incentives.~~benefit as a result of completing the divestiture of RIS’s global training and services business.

We conduct business globally and, as a result, Raytheon Technologies 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 Canada, China, France, Germany, India, 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 ~~$35~~$20 million to ~~$410~~$400 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of 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 recognized during~~statutes, or the ~~quarters ended June 30, 2021 and 2020 was $10 million and $11 million, respectively. Interest recognized during the six months ended June 30, 2021 and 2020 was~~

~~Table~~issuance of ~~Contents~~

~~$19 million and $22 million, respectively. Accrued interest on unrecognized tax benefits was $154 million and $141 million, at June 30, 2021 and December 31, 2020, respectively.~~legislation, regulatory or other guidance.

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 reporting 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.~~merger. The audit of each of these tax years is expected to continue into 2023.

The Examination Division of the IRS is ~~also~~currently auditing pre-acquisition Rockwell Collins fiscal tax years 2016 and 2017. During the second quarter of 2022, the IRS added fiscal tax year 2018 to their review. The audit of 2016, 2017, ~~which~~and 2018 is projected to close in the next six to nine months. As a result of the projected 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 $20 million to $100 million in the next six to nine months.during 2023.

~~Note 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 quarter and six months ended June 30, 2021, we recorded net pre-tax restructuring costs totaling $56 million and $99 million, respectively, for new and ongoing restructuring actions.

~~We recorded and reversed charges in the segments as follows:~~

(dollars in millions) Quarter Ended June 30, 2021 Six Months Ended June 30, 2021
Pratt & Whitney $ (16) $ 4
Collins Aerospace Systems 12 30
Corporate expenses and other unallocated items 60 65
Total $ 56 $ 99

~~Restructuring charges incurred during the quarter and six months ended June 30, 2021 primarily relate to actions initiated during 2021 and 2020, and were recorded as follows:~~

(dollars in millions) Quarter Ended June 30, 2021 Six Months Ended June 30, 2021
Cost of sales $ 1 $ 21
Selling, general and administrative 55 78
Total $ 56 $ 99

~~2021 Actions.~~ During the quarter ended June 30, 2021, we recorded net pre-tax restructuring costs of $65 million, comprised of $61 million in Selling, general and administrative expenses and $4 million in Cost of sales. During the six months ended June 30, 2021, we recorded net pre-tax restructuring costs of $101 million, comprised of $76 million in Selling, general and administrative expenses and $25 million in Cost of sales. The 2021 actions primarily relate to ongoing cost reduction efforts including workforce reductions and the consolidation of facilities.

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~~The following table summarizes the accrual balance and utilization for the 2021 restructuring actions for the quarter and six months ended June 30, 2021:~~

(dollars in millions) Severance Facility Exit and Other Costs Total
Quarter Ended June 30, 2021
Restructuring accruals at March 31, 2021 $ 23 $ 9 $ 32
Net pre-tax restructuring costs 63 2 65
Utilization, foreign exchange and other costs (25) (2) (27)
Balance at June 30, 2021 $ 61 $ 9 $ 70
Six Months Ended June 30, 2021
Restructuring accruals at December 31, 2020 $ 0 $ 0 $ 0
Net pre-tax restructuring costs 87 14 101
Utilization, foreign exchange and other costs (26) (5) (31)
Balance at June 30, 2021 $ 61 $ 9 $ 70

~~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, 2021 Costs Incurred Quarter Ended June 30, 2021 Remaining Costs at June 30, 2021
Pratt & Whitney $ 25 $ (20) $ (2) $ 3
Collins Aerospace Systems 62 (16) (3) 43
Corporate expenses and other unallocated items 60 0 (60) 0
Total $ 147 $ (36) $ (65) $ 46

~~We are targeting to complete the majority of the remaining workforce and facility related cost reduction actions during 2021 and 2022.~~

~~2020 Actions.~~ During the quarter ended June 30, 2021, we reversed a net $24 million of pre-tax restructuring costs for restructuring actions initiated in 2020, including a reversal of $18 million in Selling, general and administrative expenses and a reversal of $6 million in Cost of sales. During the six months ended June 30, 2021, we reversed $20 million net pre-tax restructuring costs for restructuring actions initiated in 2020, including a reversal of $12 million in Selling, general and administrative expenses and a reversal of $8 million in Cost of sales. The 2020 actions primarily relate to severance and restructuring actions at Pratt & Whitney and Collins Aerospace in response to the impact on our operating results related to the 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.

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~~The following table summarizes the accrual balances and utilization for the 2020 restructuring actions for the quarter and six months ended June 30, 2021:~~

(dollars in millions) Severance Facility Exit, and Other Costs Total
Quarter Ended June 30, 2021
Restructuring accruals at March 31, 2021 $ 205 $ 4 $ 209
Net pre-tax restructuring costs (27) 3 (24)
Utilization, foreign exchange and other costs (105) 46 (59)
Balance at June 30, 2021 $ 73 $ 53 $ 126
Six Months Ended June 30, 2021
Restructuring accruals at December 31, 2020 $ 334 $ 6 $ 340
Net pre-tax restructuring costs (26) 6 (20)
Utilization, foreign exchange and other costs (235) 41 (194)
Balance at June 30, 2021 $ 73 $ 53 $ 126

~~The following table summarizes expected, incurred, and remaining costs for the 2020 restructuring actions by segment:~~

(dollars in millions) Expected
Costs Costs Incurred in 2020 Costs (Incurred) Reversed Quarter Ended March 31, 2021 Costs (Incurred) Reversed Quarter Ended June 30, 2021 Remaining Costs at June 30, 2021
Pratt & Whitney $ 188 $ (205) $ 0 $ 17 $ 0
Collins Aerospace Systems 334 (333) 1 7 9
Corporate expenses and other unallocated items 237 (232) (5) 0 0
Total $ 759 $ (770) $ (4) $ 24 $ 9

~~2019 and Prior Actions.~~ During the quarter and six months ended June 30, 2021, we had net pre-tax restructuring costs of $15 million and $18 million, respectively, for restructuring actions initiated in 2019 and prior. As of June 30, 2021, we have approximately $31 million of accrual balances remaining related to 2019 and prior actions.

Note ~~13:~~11: Financial Instruments

We enter into derivative instruments primarily for risk management purposes, including derivatives designated as hedging instruments 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.

The aggregate notional amount of our outstanding foreign currency hedges was ~~$9.3~~$10.0 billion and ~~$11.6~~$8.5 billion at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. At June 30, 2022, all derivative contracts accounted for as cash flow hedges will mature by February 2030.

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheet for derivative ~~instruments as of June 30, 2021 and December 31, 2020:~~instruments:


(dollars in millions)	(dollars in millions)	Balance Sheet Location	June 30, 2021		December 31, 2020		(dollars in millions)	Balance Sheet Location	June 30, 2022		December 31, 2021
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Foreign exchange contracts	Foreign exchange contracts	Other assets, current	$	224	$	197	Foreign exchange contracts	Other assets, current	$	44	$	59
		Other accrued liabilities	70		66			Other accrued liabilities	344		202
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Foreign exchange contracts	Foreign exchange contracts	Other assets, current	$	23	$	44	Foreign exchange contracts	Other assets, current	$	14	$	11
		Other accrued liabilities	25		32			Other accrued liabilities	23		11

The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Condensed Consolidated Statement of Operations ~~for~~in the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are presented in ~~the table~~“Note 16:

2816

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~~below.~~Accumulated Other Comprehensive Loss.” The amounts of gain or loss are attributable to foreign exchange contract activity and are ~~generally~~primarily recorded as a component of ~~Product~~Products sales when reclassified from Accumulated other comprehensive ~~income (loss).~~

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Gain (loss) recorded in Accumulated other comprehensive loss $ 108 $ 188 $ 62 $ (215)
(Gain) loss reclassified from Accumulated other comprehensive loss into Product sales (20) 27 (34) 56
loss.

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 of June 30, ~~2021,~~2022, we have €500 million of euro-denominated long-term debt outstanding, which qualifies as a net investment hedge against our investments in European businesses, which is deemed to be effective.

Assuming current market conditions continue, $53 million of pre-tax gains are 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 June 30, 2021, all derivative contracts accounted for as cash flow hedges will m~~ature by January 2028.~~

The effect of derivatives not designated as hedging instruments is included within Other income, net, on the Condensed Consolidated Statement of ~~Operations was as follows:~~

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Gain (loss) on non-designated foreign exchange contracts $ 0 $ 10 $ (8) $ (29)

Operations.

Note ~~14:~~12: Fair Value Measurements

The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring basis in our Condensed Consolidated Balance ~~Sheet as of June 30, 2021 and December 31, 2020:~~Sheet:


		June 30, 2021									June 30, 2022
(dollars in millions)	(dollars in millions)	Total		Level 1		Level 2		Level 3		(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:	Recurring fair value measurements:									Recurring fair value measurements:
Marketable securities held in trusts	Marketable securities held in trusts	$	908	$	837	$	71	$	0	Marketable securities held in trusts	$	788	$	725	$	63	$	—
Derivative assets	Derivative assets	247		0		247		0		Derivative assets	58		—		58		—
Derivative liabilities	Derivative liabilities	(95)		0		(95)		0		Derivative liabilities	367		—		367		—


		December 31, 2020									December 31, 2021
(dollars in millions)	(dollars in millions)	Total		Level 1		Level 2		Level 3		(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:	Recurring fair value measurements:									Recurring fair value measurements:
Marketable securities held in trusts	Marketable securities held in trusts	$	881	$	773	$	108	$	0	Marketable securities held in trusts	$	965	$	890	$	75	$	—
Derivative assets	Derivative assets	241		0		241		0		Derivative assets	70		—		70		—
Derivative liabilities	Derivative liabilities	(98)		0		(98)		0		Derivative liabilities	213		—		213		—

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 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’ credit risks.

As of June 30, ~~2021,~~2022, 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’ credit risks.

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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 June 30, 2021 and December 31, 2020:~~Sheet:


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(dollars in millions)	(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Customer financing notes receivable	Customer financing notes receivable	$	312	$	302	$	271	$	264	Customer financing notes receivable	$	198	$	187	$	195	$	192
Short-term borrowings		(196)		(196)		(247)		(247)

Long-term debt (excluding finance leases)	Long-term debt (excluding finance leases)	(31,185)		(36,794)		(31,512)		(38,615)		Long-term debt (excluding finance leases)	31,204		29,505		31,250		35,828
Long-term liabilities		(32)		(30)		(27)		(25)

The following ~~table~~tables provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance ~~Sheet at June 30, 2021 and December 31, 2020:~~Sheet:


		June 30, 2021									June 30, 2022
(dollars in millions)	(dollars in millions)	Total		Level 1		Level 2		Level 3		(dollars in millions)	Total		Level 1		Level 2		Level 3

Customer financing notes receivable	Customer financing notes receivable	$	302	$	0	$	302	$	0	Customer financing notes receivable	$	187	$	—	$	187	$	—
Short-term borrowings		(196)		0		(160)		(36)

Long-term debt (excluding finance leases)	Long-term debt (excluding finance leases)	(36,794)		0		(36,740)		(54)		Long-term debt (excluding finance leases)	29,505		—		29,457		48
Long-term liabilities		(30)		0		(30)		0

December 31, 2020
(dollars in millions) Total Level 1 Level 2 Level 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

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	December 31, 2021
(dollars in millions)	Total		Level 1		Level 2		Level 3

Customer financing notes receivable	$	192	$	—	$	192	$	—

Long-term debt (excluding finance leases)	35,828		—		35,778		50

The fair value of our Short-term borrowings approximates the carrying value due to their short-term nature, with commercial paper classified as level 2 and other short-term borrowings classified as level 3 within the fair value hierarchy.

Note ~~15:~~13: Variable Interest Entities

Pratt & Whitney holds a 61% program share interest in the 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’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 the International Aero Engines, LLC (IAE LLC), collaboration, 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 MC-21~~ aircraft. Pratt & Whitney holds a 59% program 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 as the primary beneficiary. IAE and IAE LLC have, 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)	(dollars in millions)	June 30, 2021		December 31, 2020		(dollars in millions)	June 30, 2022		December 31, 2021
Current assets	Current assets	$	5,989	$	6,652	Current assets	$	8,130	$	7,081
Noncurrent assets	Noncurrent assets	834		868		Noncurrent assets	795		825
Total assets	Total assets	$	6,823	$	7,520	Total assets	$	8,925	$	7,906
Current liabilities	Current liabilities	$	7,002	$	7,365	Current liabilities	$	9,185	$	7,965
Noncurrent liabilities	Noncurrent liabilities	61		89		Noncurrent liabilities	22		54
Total liabilities	Total liabilities	$	7,063	$	7,454	Total liabilities	$	9,207	$	8,019

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Note ~~16:~~14: Guarantees

We extend a variety of financial, market value and product performance guarantees to third parties. These instruments expire on various dates through ~~2024.~~2028. Additional guarantees of project performance for which there is no stated value also remain outstanding. A portion of our third party guarantees are subject to indemnification for our benefit for any liabilities that could arise. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the following financial guarantees were outstanding:


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(dollars in millions)	(dollars in millions)	Maximum Potential Payment		Carrying Amount of Liability		Maximum Potential Payment		Carrying Amount of Liability		(dollars in millions)	Maximum Potential Payment		Carrying Amount of Liability		Maximum Potential Payment		Carrying Amount of Liability
Commercial aerospace financing arrangements	Commercial aerospace financing arrangements	$	314	$	6	$	322	$	6	Commercial aerospace financing arrangements	$	304	$	—	$	309	$	3
Third party guarantees	Third party guarantees	386		2		386		3		Third party guarantees	486		1		511		5

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~~$140 million and ~~$142~~$141 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 ~~$116~~$110 million and $120 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~For additional information regarding the~~These primarily relate to environmental ~~indemnifications, see~~liabilities, which are included in our total environmental liabilities as further discussed in “Note ~~17:~~15: 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.

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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 six months ended June 30, 2022 and 2021 ~~and 2020 are~~were as follows:


(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Balance as of January 1	Balance as of January 1	$	1,057	$	1,033	Balance as of January 1	$	1,157	$	1,057
Warranties and performance guarantees issued	Warranties and performance guarantees issued	176		149		Warranties and performance guarantees issued	128		176
Settlements	Settlements	(128)		(154)		Settlements	(131)		(128)
Other	Other	(3)		(20)		Other	(11)		(3)
Balance as of June 30	Balance as of June 30	$	1,102	$	1,008	Balance as of June 30	$	1,143	$	1,102

Note ~~17:~~15: 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, financial condition or 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. We 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~~do not expect any additional liability to have a material adverse effect on our results of ~~incurring losses materially in excess~~operations, financial condition or liquidity. As of ~~amounts accrued is remote. At~~ June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$834~~$824 million and ~~$835~~$834 million, respectively, reserved for environmental remediation.

Commercial Aerospace Financing and Other Commitments. We had commercial aerospace financing commitments and other contractual commitments of approximately ~~$13.3~~$15.4 billion and ~~$13.4~~$15.6 billion as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, on a gross basis before reduction for our collaboration partners’ share. Aircraft financing commitments, in the

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form of debt or lease financing, are provided to certain commercial aerospace customers. The extent to which the financing commitments will be utilized is not 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.~~leases, or pay deposits on behalf of our customers to secure production slots with the airframers (pre-delivery payments). 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 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 financing commitments is expected to equal the amounts funded.

We also have other contractual commitments to make payments to secure certain contractual rights to provide product on new aircraft platforms. The estimated amount and timing of these payments are generally based on future sales or engine flight hours. Payments made on these contractual commitments are included within intangible assets as exclusivity assets and are amortized over the term of underlying economic benefit. We have entered into certain collaboration arrangements, which may include participation by our collaboration partners in these commitments. In addition, in connection with our 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.~~assets as payments are made.

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 ~~$4.1~~$3.4 billion as of June 30, ~~2021.~~2022.

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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 June 30, ~~2021,~~2022, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately ~~$10.8~~$11.7 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. government 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 Accountability Office (GAO), the Department of Justice (DOJ), and Congressional 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 investigations and audits may be initiated due to a 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 or other damages, forfeitures, restitution, or penalties being imposed upon us, the suspension of government export licenses or the suspension or debarment from future U.S. government contracting. U.S. government investigations often take years to complete. The U.S. government also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal or other seriously improper conduct. The U.S. government could void any contracts found to be tainted by fraud. Like many defense contractors, we have received audit reports recommending the reduction of certain contract prices because, for example, cost or pricing data or cost accounting practices used to price and negotiate those contracts may not have conformed to government regulations. Some of these audit reports recommend 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 negotiate and/or litigate. The Company may be, and in some cases has been, required to make payments into escrow of disputed liabilities while the related

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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 liability 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 accrue 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, financial condition 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 Claims

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 alleged overpayments of approximately $1.73 billion plus interest ($~~693~~ 773

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million at June 30, ~~2021)~~2022). 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 DCMA DACO asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $177 million plus interest ($~~114~~124 million at June 30, ~~2021)~~2022). The claim is based on Pratt & Whitney’s alleged noncompliance with CAS 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. In 2014, Pratt & Whitney filed an appeal to the ASBCA. An evidentiary hearing was held and completed in June 2019. On November 22, 2021, the ASBCA issued its written decision sustaining in part and denying in part Pratt & Whitney’s appeal. The ASBCA rejected the DCMA’s asserted measure of the cost of collaborator parts, and ruled substantially in Pratt & Whitney’s favor on other liability issues. The ASBCA remanded the appeal to the parties ~~concluded post-hearing briefing in January 2020, and now await a decision from~~for resolution of damages issues, which could require further proceedings at the ASBCA. ~~We continue~~On December 23, 2021, the DCMA filed a motion with the ASBCA seeking partial reconsideration of the November 22, 2021 decision. Although the ASBCA decision may also be subject to further appellate review, we believe that the ~~claim~~ASBCA’s rejection of the DCMA’s asserted measure of the cost of collaborator parts is ~~without merit.~~well supported in fact and law and likely will be sustained. 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 CAS for calendar years 2013 through 2017. This second claim, which asserts the same measure of the cost of collaborator parts rejected by the ASBCA’s recent decision, demands payment of $269 million plus interest ($7586 million at June 30, ~~2021), which we also believe is without merit and which~~2022). Pratt & Whitney appealed this second claim to the ASBCA in January 2019. Although subject to further litigation at the ASBCA and potentially further appellate proceedings, we believe that the November 22, 2021 decision in the first claim will apply with equal legal effect to the second claim. Accordingly, we believe that the amounts demanded by the DCMA as set forth in the two claims are without legal basis and that any damages owed to the U.S. government for the two claims will not have a material adverse effect on our results of operations, financial condition or liquidity.

Thales-Raytheon Systems Matter

As previously disclosed, 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 criminal 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~~The Company maintains a rigorous anti-corruption compliance program, is cooperating fully with the SEC’s and DOJ’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 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, financial condition or liquidity.

DOJ Investigation, Contract Pricing Disputes and Related Civil Litigation

As previously disclosed, on October 8, 2020, the Company received a criminal subpoena from the DOJ seeking information and documents in connection with an investigation relating to financial accounting, internal controls over financial reporting, and cost reporting regarding Raytheon Company’s Missiles & Defense (RMD) business ~~(RMD)~~ since 2009. The investigation ~~includes~~involves multi-year contracts subject to governmental regulation, including 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 second criminal subpoena from the DOJ seeking documents relating to a different RMD contract entered into in 2017. We are cooperating fully with, and will continue to review the issues raised by, the DOJ’s ongoing investigation. We have made substantial progress in our internal review of the issues raised by the DOJ investigation. Although we continue to believe we have defenses to the potential claims, the Company has determined that there is a ~~meaningful~~probable risk of ~~civil~~ liability for damages, interest and potential ~~penalties. At~~penalties and has accrued approximately $290 million for this ~~time, the Company is~~matter. We are currently unable to ~~predict either~~estimate an incremental loss, if any, which may result following the ~~outcome~~completion of our internal review and resolution of the ~~criminal investigation or the outcome of any potential civil claims based on facts revealed in, or related to, the~~DOJ investigation. Based on

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the information available to date, ~~however,~~ we do not believe the results of the investigation or of any potential civil litigation will have a material adverse effect on our ~~financial condition,~~ results of operations, financial condition 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

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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, on August 12, 2020, several former employees of ~~UTC~~United Technologies Corporation (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 complaint ~~challenges~~challenged 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~~also claimed that the defendants are liable for breach of certain equity compensation plans and also ~~asserts~~asserted claims under certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA). On September 13, 2021, Plaintiffs filed an amended complaint which supersedes the initial complaint and continues to assert claims for breach of the equity compensation plans against the Company, Otis and Carrier, but no longer asserts ERISA claims. Further, no claim is made in the amended complaint against any current or former director of any of the three companies. Plaintiffs seek money damages, attorneys’ fees and other relief. We continue to believe that the Company has meritorious defenses to these claims. At this time, the Company is unable to predict the ~~outcome,~~outcome; however, based on the information available to date, we do not believe that this matter will have a material adverse effect on our results of operations, financial condition or liquidity.

DOJ Grand Jury Investigation and Related Civil Litigation

The Company received a grand jury subpoena in late 2019, as part of a DOJ criminal investigation into purported agreements not to solicit or hire employees in violation of the ~~possible range~~federal antitrust laws. While the investigation has focused on alleged hiring restrictions between and among Pratt & Whitney and certain of ~~loss, if any, which could result from~~its suppliers of outsourced engineering services, the subpoena also included requests regarding Collins. Since receipt of the subpoena, the Company has been cooperating with the DOJ investigation. On December 15, 2021, a criminal indictment was filed in the United States District Court for the District of Connecticut, against a former Pratt & Whitney employee and other employees of certain outsourced engineering suppliers charging each of them with one count of violating the federal antitrust laws. No current or former Collins employees were named in the indictment. We have been advised that the Company is a target of the DOJ investigation, and we continue to cooperate with the investigation. No criminal charge has been filed against the Company or its affiliates.

After the criminal charges against the individuals were filed, numerous civil class action antitrust lawsuits have been filed against Pratt & Whitney and other corporate and individual defendants in the United States District Court for the District of Connecticut. The allegations in each of the civil lawsuits track the factual assertions in the criminal indictment and generally allege that Pratt & Whitney and the other defendants agreed to restrict the hiring and recruiting of certain engineers and skilled laborers in a manner that violated federal antitrust laws. Plaintiffs in each of the civil lawsuits seek to represent different purported classes of engineers and skilled laborers employed by Pratt & Whitney and other supplier-defendants since 2011. Plaintiffs in each of the lawsuits seek treble damages in an undetermined amount, plus attorneys’ fees and costs of suit. All of the lawsuits have been consolidated, and a single amended class action complaint was filed. We believe that the claims asserted lack merit. Based on the information available to date, we do not believe that this ~~action.~~matter will have a material adverse effect on our results of operations, financial condition or liquidity.

Where appropriate, we have recorded loss contingency accruals for the above-referenced matters, and the ~~amount~~amounts individually, or in the aggregate, isare not material.

Other. As described in “Note ~~16:~~14: 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, financial condition or liquidity.

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Note ~~18:~~16: Accumulated Other Comprehensive Loss

A summary of the changes in each component of Accumulated other comprehensive loss, net of tax for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 is provided below:

(dollars in millions) Foreign Currency Translation Defined Benefit Pension and Post-retirement Plans Unrealized Hedging (Losses) Gains Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2021
Balance at March 31, 2021 $ 529 $ (4,441) $ (9) $ (3,921)
Other comprehensive income (loss) before
reclassifications, net 258 (14) 108 352
Amounts reclassified, pre-tax 0 64 (20) 44
Tax benefit (expense) 2 (11) (21) (30)
Balance at June 30, 2021 $ 789 $ (4,402) $ 58 $ (3,555)
Six Months Ended June 30, 2021
Balance at December 31, 2020 $ 710 $ (4,483) $ 39 $ (3,734)
Other comprehensive income (loss) before
reclassifications, net 82 (24) 62 120
Amounts reclassified, pre-tax 0 128 (34) 94
Tax benefit (expense) (3) (23) (9) (35)
Balance at June 30, 2021 $ 789 $ (4,402) $ 58 $ (3,555)


(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2022
Balance at March 31, 2022	$	(194)	$	(1,811)	$	(110)	$	(2,115)
Other comprehensive income (loss) before reclassifications, net	(708)		14		(199)		(893)
Amounts reclassified, pre-tax	—		33		17		50
Tax benefit (expense)	(6)		(8)		41		27
Balance at June 30, 2022	$	(908)	$	(1,772)	$	(251)	$	(2,931)

Six Months Ended June 30, 2022
Balance at December 31, 2021	$	49	$	(1,828)	$	(136)	$	(1,915)
Other comprehensive income (loss) before reclassifications, net	(950)		3		(168)		(1,115)
Amounts reclassified, pre-tax	2		65		23		90
Tax benefit (expense)	(9)		(12)		30		9
Balance at June 30, 2022	$	(908)	$	(1,772)	$	(251)	$	(2,931)

(dollars in millions) Foreign Currency Translation Defined Benefit Pension and Post-retirement Plans Unrealized Hedging (Losses) Gains Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2020
Balance at March 31, 2020 $ (4,647) $ (6,693) $ (448) $ (11,788)
Other comprehensive income (loss) before
reclassifications, net 665 (2,371) 188 (1,518)
Amounts reclassified, pre-tax 0 85 27 112
Tax benefit (expense) 3 568 (52) 519
Separation of Carrier and Otis, net of tax 3,287 584 4 3,875
Balance at June 30, 2020 $ (692) $ (7,827) $ (281) $ (8,800)
Six Months Ended June 30, 2020
Balance at December 31, 2019 $ (3,211) $ (6,772) $ (166) $ (10,149)
Other comprehensive income (loss) before
reclassifications, net (780) (2,363) (215) (3,358)
Amounts reclassified, pre-tax 0 187 56 243
Tax benefit (expense) 12 537 40 589
Separation of Carrier and Otis, net of tax 3,287 584 4 3,875
Balance at June 30, 2020 $ (692) $ (7,827) $ (281) $ (8,800)


(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2021
Balance at March 31, 2021	$	529	$	(4,441)	$	(9)	$	(3,921)
Other comprehensive income (loss) before reclassifications, net	258		(14)		108		352
Amounts reclassified, pre-tax	—		64		(20)		44
Tax benefit (expense)	2		(11)		(21)		(30)

Balance at June 30, 2021	$	789	$	(4,402)	$	58	$	(3,555)

Six Months Ended June 30, 2021
Balance at December 31, 2020	$	710	$	(4,483)	$	39	$	(3,734)
Other comprehensive income (loss) before reclassifications, net	82		(24)		62		120
Amounts reclassified, pre-tax	—		128		(34)		94
Tax benefit (expense)	(3)		(23)		(9)		(35)

Balance at June 30, 2021	$	789	$	(4,402)	$	58	$	(3,555)

Note ~~19:~~17: Segment Financial Data

Our operations, for the periods presented herein, are classified into four principal segments: Collins, ~~Aerospace,~~ Pratt & Whitney, RIS and 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

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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 RIS and 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 Collins Aerospace Systems and Pratt & Whitney segment results, or our consolidated balance sheets, statements of operations or statements of cash flows.

~~Revised financial results for the fiscal quarters and year ended 2020 were as follows:~~

2020
(dollars in millions) Q1 Q2 Q3 Q4 FY
Revised Net Sales
Collins Aerospace Systems $ 6,438 $ 4,202 $ 4,274 $ 4,374 $ 19,288
Pratt & Whitney 5,353 3,487 3,494 4,465 16,799
Raytheon Intelligence & Space 0 3,387 3,749 3,933 11,069
Raytheon Missiles & Defense 0 3,506 3,706 4,184 11,396
Total segments 11,791 14,582 15,223 16,956 58,552
Eliminations and other (431) (521) (476) (537) (1,965)
Consolidated $ 11,360 $ 14,061 $ 14,747 $ 16,419 $ 56,587
Revised Operating Profit (Loss)
Collins Aerospace Systems $ 1,246 $ (317) $ 526 $ 11 $ 1,466
Pratt & Whitney 475 (457) (615) 33 (564)
Raytheon Intelligence & Space 0 309 350 361 1,020
Raytheon Missiles & Defense 0 398 449 33 880
Total segments 1,721 (67) 710 438 2,802
Eliminations and other (25) (27) (49) (6) (107)
Corporate expenses and other unallocated items (130) (277) (84) (99) (590)
FAS/CAS operating adjustment 0 356 380 370 1,106
Acquisition accounting adjustments (271) (3,745) (523) (561) (5,100)
Consolidated $ 1,295 $ (3,760) $ 434 $ 142 $ (1,889)
Revised Segment Operating Profit (Loss) Margin
Collins Aerospace Systems 19.4 % (7.5) % 12.3 % 0.3 % 7.6 %
Pratt & Whitney 8.9 % (13.1) % (17.6) % 0.7 % (3.4) %
Raytheon Intelligence & Space NM 9.1 % 9.3 % 9.2 % 9.2 %
Raytheon Missiles & Defense NM 11.4 % 12.1 % 0.8 % 7.7 %
Total segment 14.6 % (0.5) % 4.7 % 2.6 % 4.8 %

~~As a result of the Raytheon Merger, we now~~We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and PRB expense under the 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

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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. WeOver time, 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~~basis.

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 ~~impacted by this change in~~considered part of management’s evaluation of segment ~~reporting.~~results.

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~~or at a negotiated fixed price. These pricing arrangements may ~~differ from~~result in margins different than what the ~~selling entity would be able to obtain~~purchasing segment realizes on ~~sales to external customers, for our RIS and RMD segments.~~the ultimate third-party sale. Results for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Net Sales				Operating Profit				Operating Profit Margins					Net Sales				Operating Profit				Operating Profit Margins
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	4,545	$	4,202	$	506	$	(317)	11.1	%	(7.5)	%	Collins Aerospace Systems	$	5,011	$	4,545	$	546	$	506	10.9	%	11.1	%
Pratt & Whitney	Pratt & Whitney	4,280		3,487		112		(457)		2.6	%	(13.1)	%	Pratt & Whitney	4,969		4,280		302		112		6.1	%	2.6	%
Raytheon Intelligence & Space	Raytheon Intelligence & Space	3,805		3,387		415		309		10.9	%	9.1	%	Raytheon Intelligence & Space	3,570		3,805		315		415		8.8	%	10.9	%
Raytheon Missiles & Defense	Raytheon Missiles & Defense	3,985		3,506		532		398		13.4	%	11.4	%	Raytheon Missiles & Defense	3,558		3,985		348		532		9.8	%	13.4	%
Total segment	Total segment	16,615		14,582		1,565		(67)		9.4	%	(0.5)	%	Total segment	17,108		16,615		1,511		1,565		8.8	%	9.4	%
Eliminations and other(1)	Eliminations and other(1)	(735)		(521)		(40)		(27)						Eliminations and other(1)	(794)		(735)		(47)		(40)
Corporate expenses and other unallocated items (2)	Corporate expenses and other unallocated items (2)	0		0		(149)		(277)						Corporate expenses and other unallocated items (2)	—		—		(42)		(149)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	0		0		425		356						FAS/CAS operating adjustment	—		—		379		425
Acquisition accounting adjustments	Acquisition accounting adjustments	0		0		(519)		(3,745)						Acquisition accounting adjustments	—		—		(448)		(519)
Consolidated	Consolidated	$	15,880	$	14,061	$	1,282	$	(3,760)	8.1	%	(26.7)	%	Consolidated	$	16,314	$	15,880	$	1,353	$	1,282	8.3	%	8.1	%

(1) Includes the operating results of certain smaller non-reportable business segments. ~~2020 amounts include Forcepoint, which was acquired as part of the Raytheon Merger and subsequently disposed of on January 8, 2021.~~

(2) ~~Corporate expenses and other unallocated items include~~Includes the net expenses related to the U.S. Army’s Lower Tier Air and Missile Defense Sensor (LTAMDS) project.

Results for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		Net Sales				Operating Profit				Operating Profit Margins					Net Sales				Operating Profit				Operating Profit Margins
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	8,915	$	10,640	$	820	$	929	9.2	%	8.7	%	Collins Aerospace Systems	$	9,835	$	8,915	$	986	$	820	10.0	%	9.2	%
Pratt & Whitney	Pratt & Whitney	8,310		8,840		132		18		1.6	%	0.2	%	Pratt & Whitney	9,498		8,310		453		132		4.8	%	1.6	%
Raytheon Intelligence & Space	Raytheon Intelligence & Space	7,570		3,387		803		309		10.6	%	9.1	%	Raytheon Intelligence & Space	7,142		7,570		693		803		9.7	%	10.6	%
Raytheon Missiles & Defense	Raytheon Missiles & Defense	7,778		3,506		1,028		398		13.2	%	11.4	%	Raytheon Missiles & Defense	7,085		7,778		735		1,028		10.4	%	13.2	%
Total segment	Total segment	32,573		26,373		2,783		1,654		8.5	%	6.3	%	Total segment	33,560		32,573		2,867		2,783		8.5	%	8.5	%
Eliminations and other (1)	Eliminations and other (1)	(1,442)		(952)		(71)		(52)						Eliminations and other (1)	(1,530)		(1,442)		(81)		(71)
Corporate expenses and other unallocated items (2)	Corporate expenses and other unallocated items (2)	0		0		(230)		(407)						Corporate expenses and other unallocated items (2)	—		—		(178)		(230)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	0		0		848		356						FAS/CAS operating adjustment	—		—		757		848
Acquisition accounting adjustments	Acquisition accounting adjustments	0		0		(1,035)		(4,016)						Acquisition accounting adjustments	—		—		(932)		(1,035)
Consolidated	Consolidated	$	31,131	$	25,421	$	2,295	$	(2,465)	7.4	%	(9.7)	%	Consolidated	$	32,030	$	31,131	$	2,433	$	2,295	7.6	%	7.4	%

(2) ~~Corporate expenses and other unallocated items include~~Includes the net expenses related to the U.S. Army’s LTAMDS project.

We disaggregate our contracts from customers by geographic ~~location~~region based on customer location, by customer and by sales type. Our geographic ~~location~~region 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.~~

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Segment sales disaggregated by geographic region for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021												2020													2022												2021
(dollars in millions)	(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
United States	United States	$	2,323	$	2,139	$	3,020	$	2,385	$	4	$	9,871	$	2,505	$	1,892	$	2,628	$	2,087	$	49	$	9,161	United States	$	2,458	$	2,562	$	2,852	$	2,313	$	—	$	10,185	$	2,323	$	2,139	$	3,020	$	2,385	$	4	$	9,871
Europe																										Europe	1,270		1,057		103		248		—		2,678		1,062		807		118		325		4		2,316
Asia Pacific	Asia Pacific	470		971		205		356		0		2,002		388		787		200		346		13		1,734		Asia Pacific	455		825		190		338		—		1,808		470		971		205		356		—		2,002
Middle East and North Africa	Middle East and North Africa	115		85		132		835		0		1,167		99		122		137		705		8		1,071		Middle East and North Africa	119		112		62		576		—		869		115		85		132		835		—		1,167
Europe		1,062		807		118		325		4		2,316		787		512		102		291		66		1,758
Canada and All Other	Canada and All Other	203		278		26		17		0		524		114		177		24		14		8		337		Canada and All Other	305		413		38		18		—		774		203		278		26		17		—		524
Consolidated net sales	Consolidated net sales	4,173		4,280		3,501		3,918		8		15,880		3,893		3,490		3,091		3,443		144		14,061		Consolidated net sales	4,607		4,969		3,245		3,493		—		16,314		4,173		4,280		3,501		3,918		8		15,880
Inter-segment sales	Inter-segment sales	372		0		304		67		(743)		0		309		(3)		296		63		(665)		0		Inter-segment sales	404		—		325		65		(794)		—		372		—		304		67		(743)		—
Business segment sales	Business segment sales	$	4,545	$	4,280	$	3,805	$	3,985	$	(735)	$	15,880	$	4,202	$	3,487	$	3,387	$	3,506	$	(521)	$	14,061	Business segment sales	$	5,011	$	4,969	$	3,570	$	3,558	$	(794)	$	16,314	$	4,545	$	4,280	$	3,805	$	3,985	$	(735)	$	15,880

Segment sales disaggregated by geographic region for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021												2020													2022												2021
(dollars in millions)	(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
United States	United States	$	4,565	$	4,298	$	5,985	$	4,742	$	11	$	19,601	$	5,649	$	4,247	$	2,628	$	2,087	$	47	$	14,658	United States	$	4,707	$	4,874	$	5,718	$	4,612	$	4	$	19,915	$	4,565	$	4,298	$	5,985	$	4,742	$	11	$	19,601
Europe																										Europe	2,584		1,936		210		520		—		5,250		2,141		1,433		232		652		5		4,463
Asia Pacific	Asia Pacific	875		1,764		409		726		0		3,774		992		2,208		200		346		13		3,759		Asia Pacific	952		1,698		353		662		—		3,665		875		1,764		409		726		—		3,774
Middle East and North Africa	Middle East and North Africa	210		189		265		1,495		0		2,159		242		294		137		705		8		1,386		Middle East and North Africa	231		190		143		1,134		—		1,698		210		189		265		1,495		—		2,159
Europe		2,141		1,433		232		652		5		4,463		2,532		1,529		102		291		66		4,520
Canada and All Other	Canada and All Other	420		626		55		33		0		1,134		486		559		24		14		15		1,098		Canada and All Other	598		800		74		30		—		1,502		420		626		55		33		—		1,134
Consolidated net sales	Consolidated net sales	8,211		8,310		6,946		7,648		16		31,131		9,901		8,837		3,091		3,443		149		25,421		Consolidated net sales	9,072		9,498		6,498		6,958		4		32,030		8,211		8,310		6,946		7,648		16		31,131
Inter-segment sales	Inter-segment sales	704		0		624		130		(1,458)		0		739		3		296		63		(1,101)		0		Inter-segment sales	763		—		644		127		(1,534)		—		704		—		624		130		(1,458)		—
Business segment sales	Business segment sales	$	8,915	$	8,310	$	7,570	$	7,778	$	(1,442)	$	31,131	$	10,640	$	8,840	$	3,387	$	3,506	$	(952)	$	25,421	Business segment sales	$	9,835	$	9,498	$	7,142	$	7,085	$	(1,530)	$	32,030	$	8,915	$	8,310	$	7,570	$	7,778	$	(1,442)	$	31,131

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Segment sales disaggregated by type of customer for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021												2020													2022												2021
(dollars in millions)	(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
U.S. government (1)	U.S. government (1)	$	1,147	$	1,191	$	2,944	$	2,384	$	4	$	7,670	$	1,353	$	1,283	$	2,560	$	2,078	$	54	$	7,328	U.S. government (1)	$	1,023	$	1,417	$	2,805	$	2,314	$	—	$	7,559	$	1,147	$	1,191	$	2,944	$	2,384	$	4	$	7,670
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	25		397		209		866		0		1,497		77		281		218		766		0		1,342		Foreign military sales through the U.S. government	53		304		149		675		—		1,181		25		397		209		866		—		1,497
Foreign government direct commercial sales	Foreign government direct commercial sales	301		127		217		668		0		1,313		204		122		213		565		0		1,104		Foreign government direct commercial sales	263		116		212		504		—		1,095		301		127		217		668		—		1,313
Commercial aerospace and other commercial	Commercial aerospace and other commercial	2,700		2,565		131		0		4		5,400		2,259		1,804		100		34		90		4,287		Commercial aerospace and other commercial	3,268		3,132		79		—		—		6,479		2,700		2,565		131		—		4		5,400
Consolidated net sales	Consolidated net sales	4,173		4,280		3,501		3,918		8		15,880		3,893		3,490		3,091		3,443		144		14,061		Consolidated net sales	4,607		4,969		3,245		3,493		—		16,314		4,173		4,280		3,501		3,918		8		15,880
Inter-segment sales	Inter-segment sales	372		0		304		67		(743)		0		309		(3)		296		63		(665)		0		Inter-segment sales	404		—		325		65		(794)		—		372		—		304		67		(743)		—
Business segment sales	Business segment sales	$	4,545	$	4,280	$	3,805	$	3,985	$	(735)	$	15,880	$	4,202	$	3,487	$	3,387	$	3,506	$	(521)	$	14,061	Business segment sales	$	5,011	$	4,969	$	3,570	$	3,558	$	(794)	$	16,314	$	4,545	$	4,280	$	3,805	$	3,985	$	(735)	$	15,880

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

Segment sales disaggregated by type of customer for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021												2020													2022												2021
(dollars in millions)	(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
U.S. government (1)	U.S. government (1)	$	2,369	$	2,453	$	5,844	$	4,741	$	11	$	15,418	$	2,642	$	2,522	$	2,560	$	2,078	$	54	$	9,856	U.S. government(1)	$	2,074	$	2,591	$	5,617	$	4,611	$	4	$	14,897	$	2,369	$	2,453	$	5,844	$	4,741	$	11	$	15,418
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	65		639		417		1,671		0		2,792		132		552		218		766		0		1,668		Foreign military sales through the U.S. government	107		501		309		1,440		—		2,357		65		639		417		1,671		—		2,792
Foreign government direct commercial sales	Foreign government direct commercial sales	546		266		446		1,235		0		2,493		429		260		213		565		0		1,467		Foreign government direct commercial sales	514		219		416		905		—		2,054		546		266		446		1,235		—		2,493
Commercial aerospace and other commercial	Commercial aerospace and other commercial	5,231		4,952		239		1		5		10,428		6,698		5,503		100		34		95		12,430		Commercial aerospace and other commercial	6,377		6,187		156		2		—		12,722		5,231		4,952		239		1		5		10,428
Consolidated net sales	Consolidated net sales	8,211		8,310		6,946		7,648		16		31,131		9,901		8,837		3,091		3,443		149		25,421		Consolidated net sales	9,072		9,498		6,498		6,958		4		32,030		8,211		8,310		6,946		7,648		16		31,131
Inter-segment sales	Inter-segment sales	704		0		624		130		(1,458)		0		739		3		296		63		(1,101)		0		Inter-segment sales	763		—		644		127		(1,534)		—		704		—		624		130		(1,458)		—
Business segment sales	Business segment sales	$	8,915	$	8,310	$	7,570	$	7,778	$	(1,442)	$	31,131	$	10,640	$	8,840	$	3,387	$	3,506	$	(952)	$	25,421	Business segment sales	$	9,835	$	9,498	$	7,142	$	7,085	$	(1,530)	$	32,030	$	8,915	$	8,310	$	7,570	$	7,778	$	(1,442)	$	31,131

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

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Segment sales disaggregated by sales type for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021												2020													2022												2021
(dollars in millions)	(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
Product		$	3,349	$	2,582	$	2,675	$	3,565	$	8	$	12,179	$	3,190	$	1,888	$	2,409	$	3,156	$	125	$	10,768
Service		824		1,698		826		353		0		3,701		703		1,602		682		287		19		3,293
Products																										Products	$	3,577	$	2,982	$	2,564	$	3,135	$	—	$	12,258	$	3,349	$	2,582	$	2,675	$	3,565	$	8	$	12,179
Services																										Services	1,030		1,987		681		358		—		4,056		824		1,698		826		353		—		3,701
Consolidated net sales	Consolidated net sales	4,173		4,280		3,501		3,918		8		15,880		3,893		3,490		3,091		3,443		144		14,061		Consolidated net sales	4,607		4,969		3,245		3,493		—		16,314		4,173		4,280		3,501		3,918		8		15,880
Inter-segment sales	Inter-segment sales	372		0		304		67		(743)		0		309		(3)		296		63		(665)		0		Inter-segment sales	404		—		325		65		(794)		—		372		—		304		67		(743)		—
Business segment sales	Business segment sales	$	4,545	$	4,280	$	3,805	$	3,985	$	(735)	$	15,880	$	4,202	$	3,487	$	3,387	$	3,506	$	(521)	$	14,061	Business segment sales	$	5,011	$	4,969	$	3,570	$	3,558	$	(794)	$	16,314	$	4,545	$	4,280	$	3,805	$	3,985	$	(735)	$	15,880

Segment sales disaggregated by sales type for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:

2021 2020
(dollars in millions) Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total
Product $ 6,531 $ 5,005 $ 5,351 $ 6,940 $ 16 $ 23,843 $ 8,094 $ 5,143 $ 2,409 $ 3,156 $ 130 $ 18,932
Service 1,680 3,305 1,595 708 0 7,288 1,807 3,694 682 287 19 6,489
Consolidated net sales 8,211 8,310 6,946 7,648 16 31,131 9,901 8,837 3,091 3,443 149 25,421
Inter-segment sales 704 0 624 130 (1,458) 0 739 3 296 63 (1,101) 0
Business segment sales $ 8,915 $ 8,310 $ 7,570 $ 7,778 $ (1,442) $ 31,131 $ 10,640 $ 8,840 $ 3,387 $ 3,506 $ (952) $ 25,421


	2022												2021
(dollars in millions)	Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace Systems		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
Products	$	7,059	$	5,615	$	5,168	$	6,274	$	4	$	24,120	$	6,531	$	5,005	$	5,351	$	6,940	$	16	$	23,843
Services	2,013		3,883		1,330		684		—		7,910		1,680		3,305		1,595		708		—		7,288
Consolidated net sales	9,072		9,498		6,498		6,958		4		32,030		8,211		8,310		6,946		7,648		16		31,131
Inter-segment sales	763		—		644		127		(1,534)		—		704		—		624		130		(1,458)		—
Business segment sales	$	9,835	$	9,498	$	7,142	$	7,085	$	(1,530)	$	32,030	$	8,915	$	8,310	$	7,570	$	7,778	$	(1,442)	$	31,131

RIS and RMD segment sales disaggregated by contract type for the quarters ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021				2020					2022				2021
(dollars in millions)	(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense		(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense
Fixed-price	Fixed-price	$	1,556	$	2,402	$	1,271	$	2,110	Fixed-price	$	1,353	$	2,043	$	1,556	$	2,402
Cost-type	Cost-type	1,945		1,516		1,820		1,333		Cost-type	1,892		1,450		1,945		1,516
Consolidated net sales	Consolidated net sales	$	3,501	$	3,918	$	3,091	$	3,443	Consolidated net sales	3,245		3,493		3,501		3,918
Inter-segment sales										Inter-segment sales	325		65		304		67
Business segment sales										Business segment sales	$	3,570	$	3,558	$	3,805	$	3,985

RIS and RMD segment sales disaggregated by contract type for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 are as follows:


		2021				2020					2022				2021
(dollars in millions)	(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense		(dollars in millions)	Raytheon Intelligence & Space		Raytheon Missiles & Defense		Raytheon Intelligence & Space		Raytheon Missiles & Defense
Fixed-price	Fixed-price	$	3,027	$	4,653	$	1,271	$	2,110	Fixed-price	$	2,693	$	4,118	$	3,027	$	4,653
Cost-type	Cost-type	3,919		2,995		1,820		1,333		Cost-type	3,805		2,840		3,919		2,995
Consolidated net sales	Consolidated net sales	$	6,946	$	7,648	$	3,091	$	3,443	Consolidated net sales	6,498		6,958		6,946		7,648
Inter-segments sales										Inter-segments sales	644		127		624		130
Business segment sales										Business segment sales	$	7,142	$	7,085	$	7,570	$	7,778

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Note ~~20:~~18: Remaining Performance Obligations (RPO)

RPO represent the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. Total RPO was ~~$151.8 billion and $150.1~~$161 billion as of June 30, ~~2021~~2022. In the quarter ended March 31, 2022, we reversed approximately $1.3 billion of RPO related to our sales contracts in Russia due to global sanctions on and ~~December 31, 2020, respectively.~~export controls with respect to Russia, as further discussed in “Note 1: Basis of Presentation.” Of the total RPO as of June 30, ~~2021,~~2022, we expect approximately 30% will be recognized as sales over the next 12 months. ~~This percentage~~Approximately 40% of our RPO relates to long-term commercial aerospace maintenance contracts at Pratt & Whitney, which are generally expected to be ~~recognized as sales~~realized 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~~a span of ~~the COVID-19 pandemic, as well as any worsening of the pandemic, the effect of mutating strains and whether additional outbreaks of the~~

~~Table of Contents~~

~~pandemic will continue~~up 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, which may result in customer delays or order cancellations.15 years.

Note ~~21:~~19: Accounting Pronouncements

In ~~June 2016,~~October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-13, Financial Instruments - Credit Losses~~2021-08, Business Combinations (Topic ~~326)~~805): ~~Measurement of Credit Losses on Financial Instruments. This ASU~~Accounting for Contract Assets and ~~its related amendments (collectively,~~Contract Liabilities from Contracts with Customers, which requires an acquirer to apply the ~~Credit Loss Standard) modifies the impairment model~~guidance in ASC 606, Revenue from Contracts with Customers, to ~~utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables,~~recognize and measure contract assets and ~~off-balance sheet credit exposures.~~contract liabilities in a business combination, rather than using fair value. The ~~Credit Loss Standard requires consideration of a broader range of information to estimate expected credit losses, including historical information, current economic conditions~~new standard is effective for fiscal years, and a reasonable forecast period. This ASU requires that the statement 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 effectiveinterim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. Effective January 1, ~~2020 utilizing~~2022, we elected to early adopt the requirements of the new standard on a ~~modified retrospective approach. A cumulative-effect non-cash adjustment to retained earnings as of January 1, 2020 was recorded in the amount of $59 million.~~prospective basis. The adoption of ~~this~~the standard did not have an impact on our financial position, results of operations or liquidity.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to make specific annual disclosures about transactions with a government. The new standard is effective for fiscal years beginning after December 15, 2021. We are currently evaluating the impact of the standard, but we do not expect it to 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 amendments in this update remove certain exceptions of Topic 740 including the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income from other items; the exception to the requirement 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 foreign 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 guidance related to franchise and other taxes partially based on income and the interim recognition of enactment of tax laws and rate changes. We adopted the new standard effective January 1, 2021. The adoption of this standard did not, and is not expected to, have an impact on the Company’s Condensed Consolidated Financial Statements.our disclosures.

Other new pronouncements issued but not effective until after June 30, ~~2021~~2022 are not expected to have a material impact on our financial condition, results of operations or liquidity.

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With respect to the unaudited condensed consolidated financial information of Raytheon Technologies for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, PricewaterhouseCoopers LLP (PwC) reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated July ~~27, 2021,~~26, 2022, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information. PwC 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. PwC 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” or a “part” of a registration statement prepared or certified by PwC 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 of Raytheon Technologies Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Raytheon Technologies Corporation and its subsidiaries (the “Company”) as of June 30, ~~2021,~~2022, and the related condensed consolidated statements of operations, of comprehensive income, ~~(loss),~~ and of changes in equity for the three-month and six-month periods ended June 30, ~~2021~~2022 and ~~2020~~2021 and the condensed consolidated statement of cash flows for the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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 for it to be in conformity with accounting principles generally accepted in the United States of America.

We have 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,~~2021, 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 2019 financial statements,~~11, 2022, 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,~~2021, 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 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.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

July ~~27, 2021~~26, 2022

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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 aerospace and defense industries. ~~On 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 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~~

We operate in four principal business segments: Collins Aerospace Systems ~~(Collins Aerospace)~~(Collins), 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 while Collins Aerospace and Pratt & Whitney continue to use a quarter calendar end of June 30, 2021. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended June 30, 2021 and June 30, 2020 with respect to RIS or RMD, we are referring to their July 4, 2021 and June 28, 2020 fiscal quarter ends, respectively. 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. 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.

RIS and RMD follow a 4-4-5 fiscal calendar while Collins and Pratt & Whitney use a quarter calendar end. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended June 30, 2022 and June 30, 2021 with respect to RIS or RMD, we are referring to ~~periods prior to the Raytheon Merger~~their July 3, 2022 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.July 4, 2021 fiscal quarter ends, respectively.

The current status of significant factors affecting our business environment in ~~2021~~2022 is discussed below. For additional discussion, refer to the “Business Overview” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in our ~~2020~~2021 Annual Report on Form 10-K.

Industry Considerations

Our worldwide operations can be affected by industrial, economic and political factors on both a regional and global level. Our operations include original equipment manufacturer (OEM) and extensive related aftermarket parts and services related to our aerospace operations. Our defense business serves both domestic and 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 onin our commercial aerospace spares contracts and certain service contracts in our defense business primarily at RIS, and longer cycles in our aerospace OEM and aftermarket maintenance contracts and on our defense contracts to design, develop, manufacture or modify complex equipment. Our customers are in the public and private sectors, and our businesses reflect an extensive geographic diversification that has evolved with continued globalization.

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 and industry-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~~

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$7.3 billion for the quarters ended June 30, 2021 and 2020, or 48% and 52% of total net sales for those periods, respectively. Total sales to the U.S. government were $15.4 billion and $9.9 billion for the six months ended June 30, 2021 and 2020, or 50% and 39% of total sales for those periods, respectively.

Impact of the COVID-19 Pandemic

~~Beginning in 2020, the~~The coronavirus disease 2019 (COVID-19) pandemic continues to negatively ~~impacted both~~affect the ~~U.S. and~~ global economy, ~~and~~ our business and operations, supply chains, and the industries in which we operate. ~~The continued disruption~~However, we continue to see that commercial air travel ~~and commercial activities and~~is recovering in certain areas of demand. While we believe that the ~~significant restrictions and limitations on businesses, particularly within~~long-term outlook for 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.

•~~increased estimated credit losses on both our receivables and contract assets of $237 million and $309 million in the quarter and six months ended June 30, 2020, respectively,~~

•~~unfavorable EAC adjustments on commercial aftermarket contracts at Pratt & Whitney based on a change in estimated future customer activity of $57 million in the quarter ended June 30, 2020,~~

•~~the impairment of a Collins Aerospace trade name of $17 million and $57 million, in the quarter and six months ended June 30, 2020, respectively, and~~

•~~an unfavorable EAC adjustment at Pratt & Whitney related to a shift in overhead costs to military contracts of $44 million in the quarter ended June 30, 2020.~~

~~Our RIS and RMD businesses, although experiencing minor impacts, have not experienced significant business disruptions as a result of the COVID-19 pandemic.~~

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.

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Other Matters

Global economic and political conditions, changes in raw material and commodity prices, labor costs, interest rates, foreign currency exchange rates, energy costs, 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 ~~business for~~businesses.

In response to the ~~remainder~~Russian military’s invasion of ~~2021~~Ukraine on February 24, 2022, the U.S. government and the governments of various jurisdictions in which we operate, including Canada, the United Kingdom, the European Union, and others, have imposed broad economic sanctions and export controls targeting specific industries, entities and individuals in Russia. The Russian government has implemented similar counter-sanctions and export controls targeting specific industries, entities and individuals in the ~~future. With regard~~U.S. and other jurisdictions in which we operate. These government measures, among other limitations,

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restrict transactions involving various Russian banks and financial institutions and impose enhanced export controls limiting transfers of various goods, software and technologies to ~~political conditions,~~and from Russia, including broadened export controls specifically targeting the aerospace sector. These measures have adversely affected and could continue to adversely affect the Company and/or our supply chain, business partners or customers; however, based on information available to date, we do not currently expect these issues will have a material adverse effect on our financial results. In the quarter ended March 31, 2022, we reversed $1.3 billion of backlog, which would have been recognized over a span of approximately 10 years, and recorded certain impairment charges and increases to reserves related to operations at our Pratt & Whitney and Collins businesses, as discussed further in “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q. We will continue to monitor future developments, including additional sanctions and other measures, that could adversely affect the Company and/or our supply chain, business partners or customers.

In addition, in October 2020, the People’s Republic of China (China) announced that it may sanction Raytheon in connection with a possible Foreign Military Sale to Taiwan of six MS-110 Reconnaissance Pods and related equipment manufactured by Collins. Foreign Military Sales are government-to-government transactions that are initiated by, and carried out at the direction of, the U.S. government. Similarly, in February 2022, China announced that it plans to take countermeasures against RTC in connection with an approved Foreign Military Sale of Patriot missile system upgrade services to Taiwan. To date, the Chinese government has not imposed sanctions on RTC or indicated the nature or timing of any future potential sanctions or other countermeasures. If China were to impose sanctions or take other regulatory action against any RTC entity, our suppliers, affiliates 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.

Also, 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 well as contractual restrictions on the use of Turkish sources on certain military programs, 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 or contractual prohibitions 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, affiliates 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~~We have direct commercial sales contracts for ~~certain of our~~ products and services to certain foreign ~~customers.~~customers, for which U.S. government review and approval have been pending. The U.S. government’s approval of these sales is subject to a range of factors, including its foreign policies related to these customers, which are subject to continuing review and potential changes. 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 June 30, ~~2021,~~2022, our ~~contract~~Contract liabilities include approximately ~~$440~~$380 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 ~~II,~~I, Item 1A, “Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K for further 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, revenues and expenses. Management 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. See “Critical Accounting Estimates” within Item 7 and “Note 1: Basis of Presentation and Summary of Accounting Principles” within Item 8 of our ~~2020~~2021 Annual Report on 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’s estimates. There have been no significant changes in our critical accounting estimates during the six months ended June 30, ~~2021.~~2022.

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. As such, the results of RIS and RMD for the quarter ended June 30, 2020 exclude results prior to the merger date, the estimated impact of which is approximately $400 million of sales and approximately $45 million of operating profit. These amounts have been excluded from the organic changes disclosed throughout our Results of Operations discussion. 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.

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We provide the organic change in Net sales and Cost of sales for our consolidated results of operations as well as the organic change in Net sales and Operating profit for our segments. We believe that these non-Generally Accepted Accounting Principles (non-GAAP) measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability. The organic change in Net sales, Cost of sales and Operating profit excludes acquisitions and divestitures, net, and the effect of foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”). Additionally, the organic change in Cost of sales and Operating profit excludes restructuring costs, the FAS/CAS operating adjustment and costs related to certain acquisition accounting adjustments. Restructuring costs generally arise from severance related to workforce reductions and facility exit costs. 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.

Net Sales
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Net Sales $ 15,880 $ 14,061 $ 31,131 $ 25,421


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021
Net Sales	$	16,314	$	15,880	$	32,030	$	31,131

The factors contributing to the total change year-over-year in total net sales for the quarter and six months ended June 30, ~~2021~~2022 are as follows:
(dollars in millions) Quarter Ended June 30, 2021 Six Months Ended June 30, 2021
Organic(1)
$ 1,582 $ (1,598)
Acquisitions and divestitures, net 164 7,203
Other 73 105
Total change $ 1,819 $ 5,710


(dollars in millions)	Quarter Ended June 30, 2022		Six Months Ended June 30, 2022
Organic(1)	$	697	$	1,361
Acquisitions and divestitures, net	(186)		(354)
Other	(77)		(108)
Total change	$	434	$	899

(1) ~~We provide the organic change in net sales~~See “Results of Operations” for ~~our consolidated results~~definition 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”).organic. A reconciliation of this measure to the reported ~~U.S Generally Accepted Accounting Principles (GAAP) amounts~~U.S. GAAP amount is provided in the table above.

Net sales increased ~~$1,582~~$697 million organically in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 primarily due to higher organic sales of $0.7 billion at Pratt & Whitney and $0.5 billion at Collins, partially offset by lower organic sales of $0.4 billion at ~~Collins Aerospace and $0.3 billion at~~ RMD.

The increase at Pratt & Whitney was primarily driven by higher commercial aftermarket sales, primarily due to an increase in shop visits and related spare part sales, and higher commercial OEM sales, primarily due to an increase in commercial engine deliveries, all principally driven by recovery from the prior year’s unfavorable economic environment principally driven by the COVID-19 pandemic. The increase at Collins Aerospace was primarily driven by higher commercial aerospace aftermarket sales and higher commercial aerospace OEM sales primarily due to an increase in flight hours, aircraft fleet utilization and commercial OEM deliveries as commercial aerospace begins to recover from the prior year’s unfavorable economic environment principally driven by the COVID-19 pandemic. The increase at RMD was primarily driven by an international Patriot program due to a contract modification in the second quarter of 2021, which included the recognition of previously deferred precontract costs, and the StormBreaker program primarily due to the recognition of previously deferred precontract costs based on a contract award in the second quarter of 2021. The $164$186 million ~~increase~~decrease in net sales related to Acquisitions and divestitures, net for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020,~~2021, was primarily driven by the ~~Raytheon Merger on April 3, 2020, partially offset by the~~ sale of our ~~Forcepoint~~global training and services business within our RIS segment in the ~~first~~fourth quarter of ~~2021 and the sale of the Collins Aerospace military GPS and space-based precision optics businesses in the third quarter of 2020.~~2021.

The decrease in other net sales of $77 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily driven by the impact of foreign exchange.

Net sales ~~decreased $1,598~~increased $1,361 million organically ~~for~~in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020. This decrease reflects lower~~2021 primarily due to higher organic sales of $1.5 billion at Collins Aerospace, primarily driven by lower commercial aerospace OEM sales and lower commercial aerospace aftermarket sales, primarily due to the change in the economic environment principally driven by the COVID-19 pandemic, which has resulted in~~lower flight hours, aircraft fleet utilization and commercial OEM deliveries. The decrease in net sales also reflects lower organic sales of $0.6~~$1.2 billion at Pratt & Whitney ~~primarily driven~~and $1.0 billion at Collins, partially offset by lower ~~commercial aftermarket~~organic sales primarily due to a reduction in shop visits and related spare part sales, and lower commercial OEM sales, primarily due to a reduction in commercial engine deliveries, all principally driven by the change in the economic environment primarily due to the COVID-19 pandemic. of $0.7 billion at RMD.

The ~~$7,203~~$354 million ~~increase~~decrease in net sales related to Acquisitions and divestitures, net for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020,~~2021, was primarily driven by the sale of our global training and services business within our RIS segment in the fourth quarter of 2021.

The decrease in other net sales of $108 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, was primarily driven by the ~~Raytheon Merger on April 3, 2020,~~ ~~partially offset~~impact of foreign exchange.

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


	Quarter Ended June 30,				% of Total Net Sales
(dollars in millions)	2022		2021		2022		2021
Net Sales
Products	$	12,258	$	12,179	75.1	%	76.7	%
Services	4,056		3,701		24.9	%	23.3	%
Total net sales	$	16,314	$	15,880	100	%	100	%

Table of ~~the Collins Aerospace military GPS and space-based precision optics businesses in the third quarter of 2020~~.Contents

Quarter Ended June 30, % of Total Net Sales
(dollars in millions) 2021 2020 2021 2020
Net Sales
Products $ 12,179 $ 10,768 76.7 % 76.6 %
Services 3,701 3,293 23.3 % 23.4 %
Total net sales $ 15,880 $ 14,061 100 % 100 %

Refer to “Note ~~19:~~17: Segment Financial Data” within Item 1 of this Form 10-Q for the composition of external net sales by products and services by segment.

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Net products sales increased ~~$1,411~~$79 million in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020 primarily~~2021 due to ~~an increase~~increases in external ~~product~~products sales of ~~$0.7~~$0.4 billion at Pratt & Whitney and $0.2 billion at Collins, partially offset by decreases in external products sales of $0.4 billion at ~~RMD.~~RMD and $0.1 billion at RIS.

Net services sales increased ~~$408~~$355 million in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 primarily due to ~~an increase~~increases in external services sales of ~~$0.1~~$0.3 billion at ~~RIS~~Pratt & Whitney and ~~$0.1~~$0.2 billion at Collins, ~~Aerospace.~~

Six Months Ended June 30, % of Total Net Sales
(dollars in millions) 2021 2020 2021 2020
Net Sales
Products $ 23,843 $ 18,933 76.6 % 74.5 %
Services 7,288 6,488 23.4 % 25.5 %
Total net sales $ 31,131 $ 25,421 100 % 100 %

Net products sales increased $4,910 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to an increase in external product sales of $3.8 billion at RMD and $2.9 billion at RIS, both primarily due to the Raytheon Merger on April 3, 2020, partially offset by a decrease in external product sales of $1.6 billion at Collins Aerospace.

Net services sales increased $800 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to an increase in external services sales of $0.9 billion at RIS and $0.4 billion at RMD, both primarily due to the Raytheon Merger on April 3, 2020, partially offset by a decrease in external services sales of ~~$0.4~~$0.1 billion at RIS.


	Six Months Ended June 30,				% of Total Net Sales
(dollars in millions)	2022		2021		2022		2021
Net Sales
Products	$	24,120	$	23,843	75.3	%	76.6	%
Services	7,910		7,288		24.7	%	23.4	%
Total net sales	$	32,030	$	31,131	100	%	100	%

Net products sales increased $277 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to increases in external products sales of $0.6 billion at Pratt & ~~Whitney.~~Whitney and $0.5 billion at Collins, partially offset by decreases in external products sales of $0.7 billion at RMD and $0.2 billion at RIS.

Net services sales increased $622 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to increases in external services sales of $0.6 billion at Pratt & Whitney and $0.3 billion at Collins, partially offset by a decrease in external services sales of $0.3 billion at RIS.

Our sales to major customers were as follows:


		Quarter Ended June 30,				% of Total Net Sales					Quarter Ended June 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Sales to the U.S. government(1)	Sales to the U.S. government(1)	$	7,670	$	7,328	48.3	%	52.1	%	Sales to the U.S. government(1)	$	7,559	$	7,670	46.3	%	48.3	%
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	1,497		1,342		9.4	%	9.5	%	Foreign military sales through the U.S. government	1,181		1,497		7.2	%	9.4	%
Foreign government direct commercial sales	Foreign government direct commercial sales	1,313		1,104		8.3	%	7.9	%	Foreign government direct commercial sales	1,095		1,313		6.7	%	8.3	%
Commercial aerospace and other commercial sales	Commercial aerospace and other commercial sales	5,400		4,287		34.0	%	30.5	%	Commercial aerospace and other commercial sales	6,479		5,400		39.7	%	34.0	%
Total net sales	Total net sales	$	15,880	$	14,061	100	%	100	%	Total net sales	$	16,314	$	15,880	100	%	100	%

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


		Six Months Ended June 30,				% of Total Net Sales					Six Months Ended June 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Sales to the U.S. government(1)	Sales to the U.S. government(1)	$	15,418	$	9,856	49.5	%	38.8	%	Sales to the U.S. government(1)	$	14,897	$	15,418	46.5	%	49.5	%
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	2,792		1,668		9.0	%	6.6	%	Foreign military sales through the U.S. government	2,357		2,792		7.4	%	9.0	%
Foreign government direct commercial sales	Foreign government direct commercial sales	2,493		1,467		8.0	%	5.8	%	Foreign government direct commercial sales	2,054		2,493		6.4	%	8.0	%
Commercial aerospace and other commercial sales	Commercial aerospace and other commercial sales	10,428		12,430		33.5	%	48.9	%	Commercial aerospace and other commercial sales	12,722		10,428		39.7	%	33.5	%
Total net sales	Total net sales	$	31,131	$	25,421	100	%	100	%	Total net sales	$	32,030	$	31,131	100	%	100	%

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

Cost of Sales


		Quarter Ended June 30,						Six Months Ended June 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021			2020			2021			2020			(dollars in millions)	2022			2021			2022			2021
Total cost of sales	Total cost of sales	$	12,655		$	12,214		$	25,192		$	20,786		Total cost of sales	$	12,856		$	12,655		$	25,416		$	25,192
Percentage of net sales	Percentage of net sales	79.7		%	86.9		%	80.9		%	81.8		%	Percentage of net sales	78.8		%	79.7		%	79.4		%	80.9		%

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The factors contributing to the change year-over-year in total cost of sales for the quarter and six months ended June 30, ~~2021~~2022 are as follows:


(dollars in millions)	(dollars in millions)	Quarter Ended June 30, 2021		Six Months Ended June 30, 2021		(dollars in millions)	Quarter Ended June 30, 2022		Six Months Ended June 30, 2022
Organic(1)	Organic(1)	$	439	$	(1,234)	Organic(1)	$	453	$	506

Acquisitions and divestitures, net	Acquisitions and divestitures, net	236		5,907		Acquisitions and divestitures, net	(150)		(293)
Restructuring	Restructuring	(182)		(167)		Restructuring	2		(18)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	(69)		(448)		FAS/CAS operating adjustment	39		76
Acquisition accounting adjustments	Acquisition accounting adjustments	(24)		259		Acquisition accounting adjustments	(81)		(122)
Other	Other	41		89		Other	(62)		75
Total change	Total change	$	441	$	4,406	Total change	$	201	$	224

(1) ~~We provide the organic change in cost~~See “Results of ~~sales~~Operations” for ~~our consolidated results~~definition 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; 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”).organic. A reconciliation of this measure to the reported U.S. GAAP ~~amounts~~amount is provided in the table above.

The organic increase in total cost of sales of ~~$439~~$453 million for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 was primarily driven by the organic sales increases at Pratt & Whitney and Collins, partially offset by the organic sales decrease at RMD noted above.

The ~~increase~~$150 million decrease in cost of sales related to Acquisitions and divestitures, net for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily driven by the sale of ~~$236~~our global training and services business within our RIS segment in the fourth quarter of 2021.

The decrease in other cost of sales of $62 million for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020 is~~2021, was primarily driven by the ~~Raytheon Merger on April 3, 2020,~~ ~~partially offset by the sale~~impact of ~~the Collins Aerospace military GPS and space-based precision optics businesses in the third quarter of 2020 and the sale of our Forcepoint business in the first quarter of 2021~~.foreign exchange.

The organic ~~decrease~~increase in total cost of sales of ~~$1,234~~$506 million for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020,~~2021, was primarily driven by the organic sales ~~decreases~~increases at ~~Collins Aerospace and~~ Pratt & Whitney and Collins, partially offset by the organic sales decrease at RMD noted above.

The ~~increase~~$293 million decrease in cost of sales related to Acquisitions and divestitures, net for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, was primarily driven by the sale of ~~$5,907~~our global training and services business within our RIS segment in the fourth quarter of 2021.

The increase in other cost of sales of $75 million for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020 is~~2021, was primarily driven by charges recorded during the ~~Raytheon Merger~~first quarter of 2022 at Pratt & Whitney and Collins related to impairment of customer financing assets for products under lease, inventory reserves, purchase order obligations, and the impairment of contract fulfillment costs that are no longer recoverable, all due to global sanctions on ~~April 3, 2020,~~ and export controls with respect to Russia. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional information. These charges were partially offset by the ~~sale~~impact of ~~the Collins Aerospace military GPS and space-based precision optics businesses in the third quarter of 2020~~.foreign exchange.

~~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 June 30,				% of Total Net Sales					Quarter Ended June 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Cost of sales	Cost of sales									Cost of sales
Products	Products	$	9,997	$	9,620	63.0	%	68.4	%	Products	$	10,040	$	9,997	61.5	%	63.0	%
Services	Services	2,658		2,594		16.7	%	18.4	%	Services	2,816		2,658		17.3	%	16.7	%
Total cost of sales	Total cost of sales	$	12,655	$	12,214	79.7	%	86.9	%	Total cost of sales	$	12,856	$	12,655	78.8	%	79.7	%

Net products cost of sales increased ~~$377~~$43 million in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 primarily due to ~~an increase in external product cost of sales~~increases at Collins and Pratt & Whitney, ~~and RMD principally driven by the product sales increases noted above. These increases are~~ partially offset by ~~a decrease in product cost of sales~~decreases at ~~Collins Aerospace primarily due to favorable mix on commercial aftermarket programs, the impact of the sale of the~~ ~~military GPS~~RMD and ~~space-based precision optics businesses in the third quarter of 2020~~RIS and a decrease in ~~restructuring costs~~Acquisition Accounting Adjustments. .The changes at Collins, Pratt & Whitney, RMD and RIS were related to the changes in products sales noted above.

Net services cost of sales increased ~~$64~~$158 million in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 primarily due to ~~an increase in external services cost of sales at RIS and Collins Aerospace principally driven by the services sales~~ increases ~~noted above.~~

~~Table of Contents~~

Six Months Ended June 30, % of Total Net Sales
(dollars in millions) 2021 2020 2021 2020
Cost of sales
Products $ 19,971 $ 16,249 64.2 % 63.9 %
Services 5,221 4,537 16.8 % 17.8 %
Total cost of sales $ 25,192 $ 20,786 80.9 % 81.8 %

Net products cost of sales increased $3,722 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to an increase in external product cost of sales at RMD and RIS principally due to the Raytheon Merger on April 3, 2020, partially offset by decreases in external product cost of sales at Collins Aerospace, principally driven by the product sales decreases noted above.

Net services cost of sales increased $684 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to an increase in external services cost of sales at RIS and RMD principally due to the Raytheon Merger on April 3, 2020, partially offset by a decrease in external services cost of sales at Pratt & Whitney ~~principally~~and Collins, partially offset by a decrease in external services sales at RIS, all driven by the services sales ~~decreases~~changes noted above.

Table of Contents


	Six Months Ended June 30,				% of Total Net Sales
(dollars in millions)	2022		2021		2022		2021
Cost of sales
Products	$	19,860	$	19,971	62.0	%	64.2	%
Services	5,556		5,221		17.3	%	16.8	%
Total cost of sales	$	25,416	$	25,192	79.4	%	80.9	%

Net products cost of sales decreased $111 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to decreases at RMD and RIS and in Acquisition Accounting Adjustments, partially offset by increases at Collins and Pratt & Whitney. The changes at RMD, RIS, Collins, and Pratt & Whitney were related to the changes in products sales noted above.

Net services cost of sales increased $335 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, partially offset by a decrease in external services sales at RIS, all driven by the services sales changes noted above.

Research and Development


		Quarter Ended June 30,						Six Months Ended June 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021			2020			2021			2020			(dollars in millions)	2022			2021			2022			2021
Company-funded	Company-funded	$	657		$	695		$	1,246		$	1,230		Company-funded	$	698		$	657		$	1,333		$	1,246
Percentage of net sales	Percentage of net sales	4.1		%	4.9		%	4.0		%	4.8		%	Percentage of net sales	4.3		%	4.1		%	4.2		%	4.0		%
Customer-funded (1)	Customer-funded (1)	$	1,157		$	1,198		$	2,289		$	1,825		Customer-funded (1)	$	1,089		$	1,157		$	2,175		$	2,289
Percentage of net sales	Percentage of net sales	7.3		%	8.5		%	7.4		%	7.2		%	Percentage of net sales	6.7		%	7.3		%	6.8		%	7.4		%

(1) ~~Customer-funded research and development costs are included~~Included in cost of sales in our Condensed Consolidated Statement of 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 decrease in company-funded~~Company-funded research and development as a percentage of ~~$38 million~~net sales for the quarter ended June 30, ~~2021 compared to~~2022 was relatively consistent with the quarter ended June 30, ~~2020 was primarily~~2021, with the increase principally driven by ~~lower expenses of $37 million~~an increase in research and development spending at ~~Collins Aerospace across~~Pratt & Whitney on various commercial ~~programs and includes the impact of cost reduction initiatives.~~programs.

The decrease in customer-funded research and development of ~~$41~~$68 million for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020,~~2021, was primarily driven by lower expenses ~~of $30 million~~ on ~~commercial~~various military and ~~military~~commercial programs at ~~Pratt & Whitney.~~Collins, and lower expenses on next generation technologies at RMD, partially offset by an increase in expenses on the Next Generation Interceptor (NGI) program awarded in the second quarter of 2021 at RMD.

~~Company-funded~~Company-funded research and development as a percentage of net sales for the six months ended June 30, ~~2021~~2022 was relatively consistent with the six months ended June 30, ~~2020. Included~~2021 with the increase principally driven by an increase in ~~the change in company-funded~~ research and development ~~was $0.2 billion related to the Raytheon Merger on April 3, 2020, partially offset by lower expenses of $0.1 billion across various commercial programs~~spending at Pratt & Whitney ~~and Collins Aerospace, which includes the impact of cost reduction initiatives.~~on various commercial programs.

The ~~increase~~decrease in customer-funded research and development of ~~$464~~$114 million for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020,~~2021 was primarily driven by ~~$0.6 billion related to~~lower expenses on various military programs at Collins, and lower expenses on next generation technologies at RMD, partially offset by an increase in expenses on the ~~Raytheon Merger on April 3, 2020.~~NGI program awarded in the second quarter of 2021 at RMD.

Selling, General and Administrative


		Quarter Ended June 30,						Six Months Ended June 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021			2020			2021			2020			(dollars in millions)	2022			2021			2022			2021
Selling, general and administrative expenses	Selling, general and administrative expenses	$	1,368		$	1,811		$	2,588		$	2,788		Selling, general and administrative expenses	$	1,424		$	1,368		$	2,893		$	2,588
Percentage of net sales	Percentage of net sales	8.6		%	12.9		%	8.3		%	11.0		%	Percentage of net sales	8.7		%	8.6		%	9.0		%	8.3		%

Selling, general and administrative expenses ~~decreased $443 million in~~as a percentage of net sales for the quarter ended June 30, ~~2021 compared to~~2022 was relatively consistent with the quarter ended June 30, ~~2020 primarily~~2021. Included in the increase were higher expenses of $0.1 billion at Collins principally driven by $237 million of prior year charges related to increased estimates of expected credit losses due to customer bankruptcies and additional allowances for credit losses at our Pratt & Whitney and Collins Aerospace segments, and lower general and administrative restructuring costs of $189 million related to restructuring actions taken at our Collins Aerospace and Pratt & Whitney segments in the prior year. The decrease also includes the benefit of cost reduction initiatives.

~~Table of Contents~~

higher employee-related costs.

Selling, general and administrative expenses ~~decreased $200~~increased $305 million in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 primarily driven by ~~$309 million~~higher expenses of ~~prior year charges related to increased estimates of expected credit losses due to customer bankruptcies and additional allowances for credit losses~~$0.3 billion at ~~our Pratt & Whitney and~~ Collins ~~Aerospace segments and lower general and administrative restructuring costs of $169 million related to restructuring actions taken at our Collins Aerospace~~ and Pratt & Whitney ~~segments in the prior year, partially offset~~principally

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driven by ~~$0.4 billion~~$71 million of charges related to ~~the Raytheon Merger~~ increased estimates for credit losses due to global sanctions on ~~April 3, 2020. The decrease also includes the benefit~~and export controls with respect to Russia, and higher employee-related costs. See “Note 1: Basis of ~~cost reduction initiatives.~~Presentation” within Item 1 of this Form 10-Q for additional information on Russia sanctions.

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. ~~See “Note 12: Restructuring Costs” within Item 1 of this Form 10-Q and Restructuring Costs, below, for further discussion.~~

Other Income, Net


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Other income, net	Other income, net	$	82	$	82	$	190	$	101	Other income, net	$	17	$	82	$	45	$	190

Other income, net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, ~~as well as~~and other ongoing and nonrecurring items.

The decrease in Other income, net inof $65 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was ~~relatively consistent~~primarily due to $69 million of charges associated with the ~~quarter ended June 30, 2020. Included~~disposition of two non-core businesses at Collins in the ~~change in Other income, net were prior year foreign government wage subsidies~~second quarter of $83 million due to COVID-19 primarily at Pratt & Whitney, which were partially offset by favorable year-over-year impact of foreign exchange gains and losses, with the remaining increase spread across multiple items with no common or significant driver.2022.

The ~~increase~~decrease in Other income, net of ~~$89~~$145 million for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 was primarily due to $69 million of charges associated with the disposition of two non-core businesses at Collins in the second quarter of 2022, the absence of a prior year ~~impairment of a Collins Aerospace tradename of $57 million resulting from the projected impact of COVID-19, partially offset by a $39 million decrease in~~ foreign government wage subsidies ~~due~~related to COVID-19 ~~consisting of prior year subsidies~~ at ~~Collins Aerospace and~~ Pratt & Whitney ~~with~~of $44 million, and a loss resulting from the ~~remaining increase spread across multiple items with no common or significant driver.~~exit of our investment in a Russia-based joint venture at Collins in the first quarter of 2022.

Operating Profit ~~(Loss)~~
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Operating profit (loss) $ 1,282 $ (3,760) $ 2,295 $ (2,465)
Operating profit (loss) margin 8.1 % (26.7) % 7.4 % (9.7) %


	Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2022			2021			2022			2021
Operating profit	$	1,353		$	1,282		$	2,433		$	2,295
Operating profit margin	8.3		%	8.1		%	7.6		%	7.4		%

The ~~change~~increase in Operating profit ~~(loss)~~ of ~~$5,042~~$71 million for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 was primarily driven by ~~the absence of the prior year goodwill impairment loss related to two Collins Aerospace reporting units of $3,183 million~~a decrease in Corporate expenses and other unallocated items and Acquisition accounting adjustments, partially offset by the operating performance atof our segments, asall of which are described below in ~~the individual segment results. Included in the~~“Segment Review.”

The increase in Operating profit ~~was a decrease in restructuring costs~~ of ~~$371 million primarily related to restructuring actions taken at our Collins Aerospace and Pratt & Whitney segments in the prior year.~~

~~The change in Operating profit (loss) of $4,760~~$138 million for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 was primarily driven by ~~the absence of the prior year goodwill impairment loss related to two Collins Aerospace reporting units of $3,183 million,~~a decrease in Acquisition accounting adjustments and the operating performance atof our ~~RIS and RMD~~ segments, ~~primarily due to the Raytheon Merger, an increase in~~partially offset by our FAS/CAS operating adjustment, all of ~~$492 million primarily due to the Raytheon Merger and a decrease~~which are described below in restructuring costs of $336 million primarily related to restructuring actions taken at our Collins Aerospace and Pratt & Whitney segments in the prior year partially offset by an increase in acquisition accounting adjustments of $259 million primarily related to the Raytheon Merger.“Segment Review.”

Non-service Pension ~~(Income) Expense~~Income


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Non-service pension (income) expense		$	(490)	$	(237)	$	(981)	$	(405)
Non-service pension income										Non-service pension income	$	(474)	$	(490)	$	(954)	$	(981)

The change in Non-service pension ~~(income) expense~~income of ~~$253~~$16 million for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020 was primarily driven by a decrease~~2021 included the impact of an increase in the discount rate, ~~the Raytheon domestic defined benefit pension plan amendment, as described below and~~partially offset by prior ~~year~~years’ pension asset returns exceeding our expected return on assets (EROA) assumption.

~~Table of Contents~~

The change in Non-service pension ~~(income) expense~~income of ~~$576~~$27 million for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020 was primarily driven by~~2021 included the ~~inclusion~~impact of ~~the Raytheon Company plans as a result of the Raytheon Merger, and to a lesser extent, a decrease~~an increase in the discount rate, partially offset by prior ~~year~~years’ pension asset returns exceeding our ~~expected return on assets (EROA) assumption and the Raytheon domestic defined benefit pension plan amendment, as described below.~~EROA assumption.

~~In December 2020, we approved a change to the Raytheon domestic defined benefit pension plans for non-union participants to cease future benefit accruals based on an employee’s years~~

Table of service and compensation effective December 31, 2022. The plan change does not impact participants’ historical benefit accruals. Benefits for service after December 31, 2022 will be based on a cash balance formula.Contents

Interest Expense, Net


		Quarter Ended June 30,						Six Months Ended June 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021			2020			2021			2020			(dollars in millions)	2022			2021			2022			2021
Interest expense	Interest expense	$	346		$	346		$	703		$	685		Interest expense	$	320		$	330		$	642		$	672
Interest income	Interest income	(4)			(11)			(15)			(18)			Interest income	(13)			(4)			(44)			(15)
Other non-operating expense (income)(1)														Other non-operating expense (income)(1)	22			16			49			31
Interest expense, net	Interest expense, net	$	342		$	335		$	688		$	667		Interest expense, net	$	329		$	342		$	647		$	688
Average interest expense rate	Average interest expense rate	4.2		%	3.8		%	4.1		%	3.8		%	Average interest expense rate	4.0		%	4.2		%	4.0		%	4.1		%

~~Interest expense, net in~~(1) Primarily consists of the quarter ended June 30, 2021, was relatively consistent with the quarter ended June 30, 2020. Included in interest expense was a $39 million favorable change in the mark-to-market fair value of marketable securities held in trustsgains or losses on assets associated with certain of our nonqualified deferred compensation and employee benefit plans, ~~which was offset by an increase~~as well as the gains or losses on liabilities associated with certain of our nonqualified deferred compensation plans.

The decrease in interest expense, net of $13 million and $41 million in the quarter and six months ended June 30, 2022 compared to the quarter and six months ended June 30, 2021, respectively, was primarily due to ~~the increase in the average~~repayments of higher interest ~~rate. The average maturity of~~rate long-term debt ~~at June 30,~~during 2021, ~~is approximately 14 years.~~

partially offset by debt issuances with lower interest rates during 2021. Interest ~~expense, net~~income in the six months ended June 30, ~~2021, was relatively consistent with~~2022 includes adjustments of certain tax-related interest reserves in the ~~six months ended June 30, 2020.~~first quarter of 2022.

Income Taxes
Quarter Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Effective income tax rate 23.9 % 1.0 % 26.5 % (22.0) %


	Quarter Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Effective income tax rate	10.7	%	23.9	%	10.1	%	26.5	%

The effective tax rate in the quarter ended June 30, 2022 includes a benefit of approximately 4 percentage points primarily related to an incremental Foreign Derived Intangible Income (FDII) benefit and other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the quarter ended June 30, 2021 includes tax charges incremental to the U.S. tax rate of $73 million associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% enacted in 2021 and effective in 2023.

The ~~loss from continuing operations before income taxes for~~effective tax rate in the ~~quarter~~six months ended June 30, ~~2020~~2022 includes a benefit of approximately 5 percentage points primarily related to an incremental FDII benefit and other effects created by the ~~$3.2 billion goodwill impairment~~capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the six months ended June 30, 2021 includes tax charges incremental to the U.S. statutory rate of $148 million associated with the sale of the Forcepoint business, as described in “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q, most of which is non-deductible for tax purposes. The effective tax rate for the quarter ended June 30, 2020 includes tax charges of $60 million related to the June 2020 debt exchange, and tax charges of $46 million associated with a revaluation of certain international tax incentives.

~~The effective tax rate for the six months ended June 30, 2021 includes tax charges of $148 million associated with the sale of our Forcepoint business~~ and $73 million associated with the enactment of the U.K. corporate tax rate ~~change. The loss from continuing operations before income taxes for~~change discussed above. Subsequently, in the six months ended June 30, 2020 includes the $3.2 billion goodwill impairment, most of which is non-deductible for tax purposes. The effective tax rate for the six months ended June 30, 2020 also includes tax charges of $415 million resulting from the Separation Transactions or the Raytheon Merger, primarily related to the impairment of deferred tax assets, tax charges of $60 million related to the June 2020 debt exchange, and tax charges of $46 million associated with a revaluation of certain international tax incentives.

~~In the third~~fourth quarter of 2021, we ~~expect to realize a deferred~~recognized an incremental $104 million tax benefit ~~associated with legal entity and operational reorganizations anticipated~~due to ~~be implemented in~~ the ~~third quarter. As~~revaluation of the Forcepoint tax benefit as a result ~~we currently expect our full year 2021 annual effective income tax rate to be approximately 16%, excluding restructuring~~of completing the divestiture of RIS’s global training and ~~non-operational nonrecurring items.~~services business.

Net Income ~~(Loss)~~ from Continuing Operations Attributable to Common Shareowners

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) from continuing operations attributable to common shareowners $ 1,040 $ (3,844) $ 1,812 $ (3,406)
Diluted earnings (loss) per share from continuing operations $ 0.69 $ (2.56) $ 1.20 $ (2.78)

~~Table of Contents~~


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Net income from continuing operations attributable to common shareowners	$	1,304	$	1,040	$	2,407	$	1,812
Diluted earnings per share from continuing operations	$	0.88	$	0.69	$	1.61	$	1.20

Net income ~~(loss)~~from continuing operations attributable to common shareowners for the quarter ended June 30, 2022 includes the following:

•acquisition accounting adjustments of $349 million, net of tax, which had an unfavorable impact on diluted earnings per share (EPS) from continuing operations of $0.23; and

•income of $58 million related to the capitalization of research or experimental expenditures for tax purposes, which had a net favorable impact on diluted EPS from continuing operations of $0.04.

Net income from continuing operations attributable to common shareowners for the quarter ended June 30, 2021 includes the following:

•acquisition accounting adjustments ~~primarily related to the Raytheon Merger~~ of $403 ~~million, net of tax, which had an unfavorable impact on diluted earnings per share (EPS) from continuing operations of $0.26;~~

•~~restructuring charges of $49~~ million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.03; and~~$0.26.

•

~~tax expense~~Table of $73 million associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% effective in 2023, which had an unfavorable impact on diluted EPS from continuing operations of $0.05.Contents

Net income ~~(loss)~~ from continuing operations attributable to common shareowners for the ~~quarter~~six months ended June 30, ~~2020~~2022 includes the following:

•~~$3,200 million of goodwill and intangibles impairment charges related to our Collins Aerospace segment, which had an unfavorable impact on diluted EPS from continuing operations of $2.13;~~

•acquisition accounting adjustments of ~~$424~~$727 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.28;~~$0.49;

•~~restructuring~~impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of ~~$322~~$210 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.21;~~$0.14; and

•~~increased estimates~~income of ~~expected credit losses driven by customer bankruptcies and additional allowances~~$94 million related to the capitalization of research or experimental expenditures for ~~credit losses of $189 million, net of~~ tax purposes, which had ~~an unfavorable~~a net favorable impact on diluted EPS from continuing operations of ~~$0.13; and~~

•~~significant unfavorable contract adjustments at Collins Aerospace and Pratt & Whitney of $183 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.12.~~$0.06.

Net income ~~(loss)~~ from continuing operations attributable to common shareowners for the six months ended June 30, 2021 includes the following:

•acquisition accounting adjustments ~~primarily related to the Raytheon Merger~~ of $802 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.53; and

•tax expense of $148 million related to the sale of our Forcepoint business, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.10;~~$0.10.

•tax expense of $73 million associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% effective in 2023, which had an unfavorable impact on diluted EPS from continuing operations of $0.05; and

•~~restructuring charges of $81 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.05.~~

~~Net income (loss) from continuing operations attributable to common shareowners for the six months ended June 30, 2020 includes the following:~~

•$3,240 million of goodwill and intangibles impairment charges related to our Collins Aerospace segment, which had an unfavorable impact on diluted earnings per share from continuing operations of $2.63;

•~~acquisition accounting adjustments of $603 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.49;~~

•$415 million of tax charges in connection with the Separation Transactions, including the impairment of deferred tax assets not expected to be utilized, which had an unfavorable impact on diluted EPS from continuing operations of $0.34;

•~~restructuring charges of $328 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.27;~~

•increased estimates of expected credit losses driven by customer bankruptcies and additional general allowances for credit losses of $244 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.16; and

•~~significant unfavorable contract adjustments at Collins Aerospace and Pratt & Whitney of $200 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.13.~~

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~~Net Income (Loss) from Discontinued Operations Attributable to Common Shareowners~~
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) from discontinued operations attributable to common shareowners $ (8) $ 9 $ (27) $ (512)
Diluted earnings (loss) per share from discontinued operations $ (0.01) $ 0.01 $ (0.02) $ (0.42)

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 income (loss) from discontinued operations attributable to common shareowners and the related change in diluted earnings (loss) per share from discontinued operations in the quarter ended June 30, 2021 was relatively consistent with the quarter ended June 30, 2020.

The change in net income (loss) from discontinued operations attributable to common shareowners of $485 million and the related change in diluted earnings (loss) per share from discontinued operations of $0.40 in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to higher prior year costs associated with the separation of our commercial businesses, including debt extinguishment costs of $611 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 June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) attributable to common shareowners $ 1,032 $ (3,835) $ 1,785 $ (3,918)
Diluted earnings (loss) per share from operations $ 0.68 $ (2.55) $ 1.18 $ (3.20)


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Net income attributable to common shareowners	$	1,304	$	1,032	$	2,388	$	1,785
Diluted earnings per share from operations	$	0.88	$	0.68	$	1.60	$	1.18

The increase in net income ~~(loss)~~ attributable to common shareowners and diluted earnings ~~(loss)~~ per share from operations for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 and for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily driven by the ~~increase~~increases in continuing operations, as discussed above in Net Income ~~(Loss)~~ from Continuing Operations Attributable to Common Shareowners.

~~The increase in net income (loss) attributable to common shareowners and diluted earnings (loss) per share from~~

SEGMENT REVIEW

Our operations, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was driven by the increase in continuing operations, as discussed above in Net Income (Loss) from Continuing Operations Attributable to Common Shareowners and the change from discontinued operations, as discussed above in Net Income (Loss) from Discontinued Operations Attributable to Common Shareholders.

~~RESTRUCTURING COSTS~~
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Restructuring costs $ 56 $ 427 $ 99 $ 435

~~Restructuring actions~~periods presented herein, are an essential component of our operating margin improvement efforts and relate to both existing operations and recent mergers and acquisitions. Charges generally arise from severance related to workforce reductions and facility exit costs associated with the consolidation of field and manufacturing operations and costs to exit legacy programs. 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.

~~2021 Actions.~~ During the quarter and six months ended June 30, 2021, we recorded net pre-tax restructuring charges of $65 million and $101 million, respectively, primarily related to ongoing cost reduction efforts including workforce reductions and the consolidation of facilities initiated in 2021. We expect to incur additional restructuring charges of $46 million to complete these actions. We are targeting to complete the majority of the remaining workforce and facility related cost reduction actions initiated in 2021 by 2022. We expect recurring pre-tax savings related to these actions to reach approximately $115 million annually within one to two years. Approximately 70% of the restructuring costs will require cash payments, which we

~~Table of Contents~~

~~have funded and expect to continue to fund with cash generated from operations. During the six months ended June 30, 2021, we had cash outflows of $6 million related to the 2021 actions.~~

~~2020 Actions.~~ During the quarters ended June 30, 2021 and 2020, we reversed $24 million and recorded $444 million, respectively, of net pre-tax restructuring charges for actions initiated in 2020. During the six months ended June 30, 2021 and 2020, we reversed $20 million and recorded $446 million, respectively, of net pre-tax restructuring charges for actions initiated in 2020. We expect to incur additional restructuring charges of $9 million to complete these actions. We are targeting to complete in 2021 the majority of the remaining workforce and facility related cost reduction actions initiated in 2020. We expect annual recurring pre-tax savings related to these actions to reach approximately $1.2 billion annually within two years of initiating these actions. Approximately 85% of the restructuring costs will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. During the six months ended June 30, 2021 and 2020, we had cash outflows of $161 million and $50 million, respectively, related to the 2020 actions.

In addition, during the quarters ended June 30, 2021 and 2020, we recorded $15 million and reversed $17 million, respectively, of net pre-tax restructuring charges for restructuring actions initiated in 2019 and prior. During the six months ended June 30, 2021 and 2020, we recorded $18 million and reversed $11 million, respectively, of net pre-tax restructuring charges for restructuring actions initiated in 2019 and prior. For additional discussion of restructuring, see “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 completion 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 RIS and 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 reportedclassified into four principal segments: Collins, ~~Aerospace Systems and~~ Pratt & Whitney, segment results, or our consolidated balance sheets, statements of operations or statements of cash flows. Refer to “Note 19: Segment Financial Data” within Item 1 of this Form 10-Q for revised financial results for the fiscal quarters and year ended 2020.

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 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.

RMD. Segments are generally based on the management structure of the businesses and the grouping of similar operations, based on capabilities and technologies, where each management organization has general operating autonomy over diversified products and services. Segment total net sales and operating profit include intercompany sales and profit, which are ultimately eliminated within Eliminations and other, which also includes certain smaller non-reportable segments. For our defense contracts, where the primary customer is the U.S. government subject to Federal 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 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.

We provide the organic change in Net sales and Operating profit for our segments as discussed above in “Results of Operations.” We believe that these non-GAAP measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability. For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada due to its significance to Pratt & Whitney’s overall operating results.

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Total Net Sales. Total net sales by segment were as follows:
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Collins Aerospace Systems $ 4,545 $ 4,202 $ 8,915 $ 10,640
Pratt & Whitney 4,280 3,487 8,310 8,840
Raytheon Intelligence & Space 3,805 3,387 7,570 3,387
Raytheon Missiles & Defense 3,985 3,506 7,778 3,506
Total segment 16,615 14,582 32,573 26,373
Eliminations and other (735) (521) (1,442) (952)
Consolidated $ 15,880 $ 14,061 $ 31,131 $ 25,421


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021
Collins Aerospace Systems	$	5,011	$	4,545	$	9,835	$	8,915
Pratt & Whitney	4,969		4,280		9,498		8,310
Raytheon Intelligence & Space	3,570		3,805		7,142		7,570
Raytheon Missiles & Defense	3,558		3,985		7,085		7,778
Total segment	17,108		16,615		33,560		32,573
Eliminations and other	(794)		(735)		(1,530)		(1,442)



Consolidated	$	16,314	$	15,880	$	32,030	$	31,131

Operating Profit. Operating profit by segment was as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	506	$	(317)	$	820	$	929	Collins Aerospace Systems	$	546	$	506	$	986	$	820
Pratt & Whitney	Pratt & Whitney	112		(457)		132		18		Pratt & Whitney	302		112		453		132
Raytheon Intelligence & Space	Raytheon Intelligence & Space	415		309		803		309		Raytheon Intelligence & Space	315		415		693		803
Raytheon Missiles & Defense	Raytheon Missiles & Defense	532		398		1,028		398		Raytheon Missiles & Defense	348		532		735		1,028
Total segment	Total segment	1,565		(67)		2,783		1,654		Total segment	1,511		1,565		2,867		2,783
Eliminations and other	Eliminations and other	(40)		(27)		(71)		(52)		Eliminations and other	(47)		(40)		(81)		(71)
Corporate expenses and other unallocated items	Corporate expenses and other unallocated items	(149)		(277)		(230)		(407)		Corporate expenses and other unallocated items	(42)		(149)		(178)		(230)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	425		356		848		356		FAS/CAS operating adjustment	379		425		757		848
Acquisition accounting adjustments	Acquisition accounting adjustments	(519)		(3,745)		(1,035)		(4,016)		Acquisition accounting adjustments	(448)		(519)		(932)		(1,035)
Consolidated	Consolidated	$	1,282	$	(3,760)	$	2,295	$	(2,465)	Consolidated	$	1,353	$	1,282	$	2,433	$	2,295

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 may reflect improved or deteriorated operating performance, oras well as changes in facts and assumptions related to contract options, contract modifications, incentive and award ~~fee rates.~~fees associated with program performance, customer activity levels, and other customer-directed changes. For a full description of our EAC process, refer to “Note 5:4: Changes in Contract Estimates at Completion” within Item 1 of this Form 10-Q. Given that we have thousands of individual contracts and given the types and complexity of the assumptions and estimates we must make on an on-going basis and the nature of the work required to perform under our contracts, we have both favorable and unfavorable EAC ~~adjustments.~~adjustments in the ordinary course.

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Gross favorable	Gross favorable	$	309	$	151	$	621	$	288	Gross favorable	$	289	$	309	$	663	$	621
Gross unfavorable	Gross unfavorable	(282)		(302)		(582)		(418)		Gross unfavorable	(330)		(282)		(668)		(582)
Total net EAC adjustments	Total net EAC adjustments	$	27	$	(151)	$	39	$	(130)	Total net EAC adjustments	$	(41)	$	27	$	(5)	$	39

As a result of the Raytheon 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 obligation of the Company. This had the impact of reducing gross favorable and unfavorable EAC adjustments for these segments in the prior year. The ~~increase~~change in net EAC adjustments of ~~$178~~$68 million in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 was primarily due to ~~a favorable change~~unfavorable changes in net EAC adjustments of ~~$98~~$80 million at ~~Pratt & Whitney principally driven by the absence of unfavorable EAC adjustments in the quarter ended June 30, 2020 based on a portfolio review of our commercial aftermarket programs~~RMD and a benefit resulting from a favorable contract modification on a commercial aftermarket program in the quarter ended June 30, 2021, both due to changes in estimated flight hours, number of shop visits and the related amount of costs. The increase was also due to a favorable change in net EAC adjustments of $53$61 million at RIS, including the impact of acquisitions and $43 million at RMD, which was spread across numerous programs and primarily a result of the Raytheon Merger and the associated reset to zero percent complete for contracts accounted for on a percentage of completion basis discussed above.

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The increase in net EAC adjustments of $169 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to a favorable change in net EAC adjustments of $81 million at RIS and $78 million at RMD, primarily due to the Raytheon Merger, and a favorable change in net EAC adjustments of $88 million at Pratt & Whitney principally driven by the absence of unfavorable EAC adjustments in the quarter ended June 30, 2020 based on a portfolio review of our commercial aftermarket programs and a benefit resulting from a favorable contract modification on a commercial aftermarket program in the quarter ended June 30, 2021,dispositions, both due to changes in estimated flight hours, number of shop visits and the related amount of costs. This was partially offset by an unfavorable change in net EAC adjustments of $78 million at Collins Aerospace spread across numerous individual programs with no individual or common significant driver. These unfavorable changes were partially offset by a favorable change in net EAC adjustments of $46 million at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments of $27 million at Pratt & Whitney primarily due to a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.

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The change in net EAC adjustments of $44 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to unfavorable changes in net EAC adjustments of $122 million at RMD and $56 million at RIS, including the impact of acquisitions and dispositions, both spread across numerous individual programs with no individual or common significant driver. These unfavorable changes were partially offset by a favorable change in net EAC adjustments of $104 million at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments of $30 million at Pratt & Whitney primarily due to a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.

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

Backlog and Defense Bookings. Total backlog was approximately ~~$151.8~~$161 billion and ~~$150.1~~$156 billion as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which includes defense backlog of ~~$66.1~~$65 billion and ~~$67.3~~$63 billion as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. In the quarter ended March 31, 2022, we reversed $1.3 billion of backlog at our Pratt & Whitney and Collins businesses, as discussed further in “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q. Our defense operations consist primarily of our RIS and RMD businesses and operations in the defense businesses within our Collins ~~Aerospace~~ and Pratt & Whitney segments. Defense bookings were approximately ~~$11.9~~$13 billion and ~~$10.2~~$12 billion for the quarters ended June 30, 2022 and 2021, ~~and 2020,~~respectively, and approximately ~~$20.4~~$22 billion and ~~$13.4~~$20 billion for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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)~~and the timing of governmental approvals and ~~notifications, and (6) the timing of option exercises or increases in scope.~~notifications. 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
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 4,545 $ 4,202 8 % $ 8,915 $ 10,640 (16) %
Operating Profit 506 (317) NM 820 929 (12) %
Operating Profit Margins 11.1 % (7.5) % 9.2 % 8.7 %

~~NM = Not Meaningful~~


	Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net Sales	$	5,011		$	4,545		10	%	$	9,835		$	8,915		10	%
Operating Profit	546			506			8	%	986			820			20	%
Operating Profit Margins	10.9		%	11.1		%			10.0		%	9.2		%

Quarter Ended June 30, ~~2021~~2022 Compared with Quarter Ended June 30, ~~2020~~2021


		Factors Contributing to Total Change								Factors Contributing to Total Change
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other			Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net Sales	Net Sales	$	444	$	(135)	$	—	$	34		$	343	Net Sales	$	515	$	(3)	$	—	$	(46)	$	466

Operating Profit	Operating Profit	723		(31)		139		(8)			823		Operating Profit	93		(4)		10		(59)		40

(1) See “Segment Review” above for definition of organic. ~~We provide~~A reconciliation of these measures to reported U.S. GAAP amounts is provided in the table above.

The organic ~~change~~sales increase of $0.5 billion in ~~net~~the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily relates to higher commercial aerospace aftermarket sales of $0.4 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of $0.2 billion, both principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization and narrow-body commercial OEM volume growth. This was partially offset by lower military sales of $0.1 billion in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 primarily due to lower material receipts and expected declines in F-35 volume.

The organic profit increase of $0.1 billion in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily due to higher commercial aerospace operating profit ~~for our segments. We believe that these measures are useful~~of $0.2 billion principally driven by the higher commercial aerospace aftermarket sales discussed above, slightly offset by the absence of a $33 million favorable impact from a contract related matter in the quarter ended June 30, 2021. This increase in commercial aerospace operating profit was partially offset by higher selling, general and administrative expenses of $0.1 billion primarily due to ~~investors because they provide transparency~~higher employee-related costs, and slightly lower military operating profit principally driven by the lower military sales volume discussed above.

The decrease in Other operating profits of $59 million in the quarter ended June 30, 2022 compared to the ~~underlying performance~~quarter ended June 30, 2021 was primarily due to $69 million of ~~our business, which allows~~charges associated with the disposition of two non-core businesses.

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Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021



	Factors Contributing to Total Change
(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net Sales	$	989	$	—	$	—	$	(69)	$	920

Operating Profit	340		(7)		25		(192)		166

(1) See “Segment Review” above for ~~better year-over-year comparability. The organic change excludes acquisitions and divestitures, net; restructuring costs; and the effect~~definition of ~~foreign currency exchange rate translation fluctuations and other significant non-recurring and non-operational items (“Other”).~~ organic. A reconciliation of these measures to reported U.S. GAAP amounts is provided in the table above.

The organic sales increase of ~~$0.4~~$1.0 billion in the ~~quarter~~six months ended June 30, ~~2021~~2022 compared to the ~~quarter~~six months ended June 30, ~~2020~~2021 primarily relates to higher commercial aerospace aftermarket sales of ~~$0.3~~$0.9 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of ~~$0.2 billion. These increases were primarily due to~~$0.4 billion, both principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization and narrow-body commercial OEM ~~deliveries as commercial aerospace begins to recover from the prior year’s unfavorable economic environment principally driven~~volume growth. This was partially offset by ~~the COVID-19 pandemic. Military~~lower military sales ~~were down slightly~~of $0.3 billion in the ~~quarter~~six months ended June 30, 2022 compared to the six months ended June 30, 2021, ~~compared~~primarily due to ~~the quarter ended June 30, 2020.~~expected declines in F-35 volume and lower material receipts.

The organic profit increase of ~~$0.7~~$0.3 billion in the ~~quarter~~six months ended June 30, 2022 compared to the six months ended June 30, 2021 ~~compared to the quarter ended June 30, 2020 was~~is primarily due to higher commercial aerospace operating profit of ~~$0.5~~$0.6 billion principally driven by the higher commercial aerospace aftermarket sales discussed ~~above. Included in the higher commercial aerospace operating profit was $122 million of significant unfavorable contract adjustments in the quarter ended June 30, 2020 principally driven~~above, partially offset by the ~~expected acceleration~~absence of ~~fleet retirements of a certain aircraft and~~ a $33 million favorable impact from a contract related matter in the quarter ended June 30, 2021. ~~Also contributing to~~This increase in commercial aerospace operating profit was partially offset by lower military operating profit of $0.1 billion principally driven by the ~~organic profit increase was~~ lower ~~Selling, general~~military sales volume discussed above, and higher selling, general and administrative expenses ~~and Research and development costs~~ of ~~$0.2~~$0.1 billion ~~in total,~~ primarily ~~driven by the absence of an $89 million charge related to~~

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~~increased estimates of expected credit losses~~ due to ~~customer bankruptcies and additional allowances for credit losses in the quarter ended June 30, 2020 and the impact of cost reduction initiatives.~~higher employee-related costs.

The decrease in ~~net sales and~~Other operating ~~profit due to acquisitions / divestitures, net primarily relates to the sale~~profits of ~~our Collins Aerospace military GPS and space-based precision optics businesses in the third quarter of 2020.~~

~~Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020~~
Factors Contributing to Total Change
(dollars in millions)
Organic(1)
Acquisitions /
Divestitures, net Restructuring
Costs Other Total Change
Net Sales $ (1,520) $ (271) $ — $ 66 $ (1,725)
Operating Profit (136) (76) 127 (24) (109)

~~(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 decrease of $1.5 billion~~$192 million in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, 2020 primarily relates to lower commercial aerospace OEM sales of $0.8 billion and lower commercial aerospace aftermarket sales of $0.7 billion, including declines across all aftermarket sales channels. These decreases were2021 was primarily due to ~~the change in the economic environment principally driven by the COVID-19 pandemic, which has resulted inlower flight hours, aircraft fleet utilization and commercial OEM deliveries. This decrease was partially offset by higher military sales of $0.1 billion.~~

The organic profit decrease of $0.1 billion in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 is primarily due to lower commercial aerospace operating profit of $0.4 billion principally driven by the lower commercial aerospace aftermarket sales discussed above, partially offset by the absence of $144$141 million of significant unfavorable adjustments in the six months ended June 30, 2020 principally driven by the expected acceleration of fleet retirements of a certain aircraft and a $33 million favorable impact from a contract related matter in the quarter ended June 30, 2021. The organic profit decrease was also partially offset by lower Selling, general and administrative expenses of $0.2 billion primarily driven by the absence of a $99 million chargepretax charges related to increased estimates ~~of expected credit losses due to customer bankruptcies and additional allowances~~ for credit losses, inventory reserves, recognition of purchase order obligations and a loss resulting from the exit of our investment in a Russia-based joint venture, all due to global sanctions on and export controls with respect to Russia in the ~~six months ended June 30, 2020, and lower Research and development expenses~~first quarter of ~~$0.1 billion, which includes~~2022. In addition, we recognized $69 million of charges associated with the ~~impact~~disposition of ~~cost reduction initiatives.~~

~~The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the sale of our Collins Aerospace military GPS and space-based precision optics~~two non-core businesses in the ~~third~~second quarter of ~~2020.~~2022. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional information on Russia sanctions.

Pratt & Whitney
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 4,280 $ 3,487 23 % $ 8,310 $ 8,840 (6) %
Operating Profit 112 (457) NM 132 18 633 %
Operating Profit Margins 2.6 % (13.1) % 1.6 % 0.2 %

~~NM = Not Meaningful~~


	Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net Sales	$	4,969		$	4,280		16	%	$	9,498		$	8,310		14	%
Operating Profit	302			112			170	%	453			132			243	%
Operating Profit Margins	6.1		%	2.6		%			4.8		%	1.6		%

Quarter Ended June 30, ~~2021~~2022 Compared with Quarter Ended June 30, ~~2020~~2021


		Factors Contributing to Total Change								Factors Contributing to Total Change
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other			Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net Sales	Net Sales	$	744	$	—	$	—	$	49		$	793	Net Sales	$	720	$	—	$	—	$	(31)	$	689

Operating Profit	Operating Profit	437		—		123		9			569		Operating Profit	218		—		(17)		(11)		190

(1) See “Segment Review” above for definition of organic. 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. ~~For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada due to its significance to Pratt & Whitney’s overall operating results.~~

The organic sales increase of $0.7 billion in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020 primarily~~2021 reflects higher commercial aftermarket sales of ~~$0.6~~$0.4 billion primarily due to an increase in shop visits and related

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spare part sales ~~and~~as the commercial aerospace environment continues to recover. The increase also includes higher commercial OEM sales of $0.2 billion primarily driven by favorable mix and higher volume on large commercial engine shipments, and higher military sales of $0.1 billion primarily due to the timing of an F135 production contract award, resulting in the recognition of previously inventoried costs, and higher F135 sustainment volume.

The organic profit increase in commercial engine deliveries, all principally driven by recovery from the prior year’s unfavorable economic environment principally driven by the COVID-19 pandemic. Military sales were down slightlyof $0.2 billion in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020.~~

~~The organic profit increase of $0.4 billion in the quarter ended June 30,~~ 2021 ~~compared to the quarter ended June 30, 2020~~ was primarily driven by higher commercial aerospace operating profit of $0.3 billion principally due to the aftermarket sales volume increase discussed above and favorable ~~year-over-year EAC adjustments of $70 million, principally~~OEM mix. The increase also includes higher military operating profit primarily driven by ~~$71 million~~the military sales volume increase discussed above. This increase was partially offset by an increase in selling, general and administrative expenses and research and development costs of ~~net unfavorable EAC adjustments in~~$0.1 billion combined, which includes higher employee-related

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costs. In the quarter ended June 30, ~~2020 based on~~2022, our organic profit included a ~~portfolio review of our commercial aftermarket programs and a benefit~~$50 million favorable contract adjustment resulting from a ~~favorable~~ contract modification on a commercial aftermarket program, in the quarter ended June 30, 2021, both due to changes in estimated flight hours, number of shop visits and the related amount of costs, partially offset by an unfavorable net change in other EAC adjustments. The higherwhich impacted our commercial aerospace operating ~~profit was also driven by favorable mix. The organic profit increase also includes lower~~ ~~Selling, g~~eneral and administrative expenses of $0.1 billion primarily driven by the absence of a $148 million charge related to increased estimates of expected credit losses due to customer bankruptcies and additional allowances for credit losses in the quarter ended June 30, 2020. Included in organic profit in the quarter ended June 30, 2020 was other income of $59 million related to foreign government wage subsidies due to COVID-19 and an unfavorable EAC adjustment of $44 million on a military program primarily driven by a shift in estimated overhead costs due to lower commercial engine activity.profit.

Six Months Ended June 30, ~~2021~~2022 Compared with Six Months Ended June 30, ~~2020~~2021


		Factors Contributing to Total Change											Factors Contributing to Total Change
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Restructuring Costs		Other		Total Change
Net Sales	Net Sales	$	(608)	$	—	$	—	$	78	$	(530)	Net Sales	$	1,227	$	—	$	—	$	(39)	$	1,188

Operating Profit	Operating Profit	(11)		—		103		22		114		Operating Profit	487		—		1		(167)		321

(1) See “Segment Review” above for definition of organic. 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.~~For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada due to its significance to Pratt & Whitney’s overall operating results.~~

The organic sales ~~decrease~~increase of ~~$0.6~~$1.2 billion in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020 primarily~~2021 reflects ~~lower~~higher commercial aftermarket sales of ~~$0.3~~$1.0 billion primarily due to ~~a reduction~~an increase in shop visits and related spare part sales ~~and lower~~as the commercial aerospace environment continues to recover. The increase also includes higher commercial OEM sales of $0.3 billion primarily ~~due to a reduction in~~driven by favorable mix on large commercial engine ~~deliveries, all principally driven~~shipments. These increases were partially offset by ~~the change in the economic environment~~lower military sales of $0.1 billion primarily due to ~~the COVID-19 pandemic. Military~~lower sales ~~were up slightly~~on F135 production volume, partially offset by higher F135 sustainment volume.

The organic profit increase of $0.5 billion in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020.~~

2021 was primarily driven by higher commercial aerospace operating profit of $0.7 billion principally due to the aftermarket sales volume increase discussed above~~The~~ and favorable OEM mix. This increase was partially offset by an increase in selling, general and administrative expenses and research and development costs of $0.1 billion combined, which includes higher employee-related costs. This increase was also offset by slightly lower military operating profit. In the quarter ended June 30, 2022, our organic profit included a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program, which impacted our commercial aerospace operating profit. In the six months ended June 30, 2021, our organic profit included other income of $44 million related to foreign government wage subsidies due to COVID-19.

The decrease in Other operating profit of ~~$11~~$167 million in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 was primarily ~~driven by lower commercial aerospace operating profit of $0.3 billion principally~~ due to ~~the aftermarket sales volume decrease discussed above and unfavorable mix, partially offset by favorable year-over-year EAC adjustments of $73 million principally driven by $71~~$155 million of ~~net unfavorable EAC adjustments~~pretax charges related to impairment of customer financing assets for products under lease, increased estimates for credit losses, inventory reserves and recognition of purchase order obligations, all due to global sanctions on and export controls with respect to Russia in the first quarter of 2022. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional information.

Defense Bookings – In addition to a number of smaller bookings, in the quarter ended June 30, ~~2020 based on a portfolio review of our commercial aftermarket programs~~2022, Pratt & Whitney booked $4.0 billion for F135 production Lots 15 and ~~a benefit resulting from a favorable contract modification on a commercial aftermarket program in the quarter ended June 30, 2021, both due~~16 and $408 million for F135 sustainment. In addition to changes in estimated flight hours, number of shop visits and the related amount of costs, partially offset by an unfavorable net change in other EAC adjustments. This decrease was partially offset by lower Selling, general and administrative expenses of $0.2 billion primarily driven by the absence of a $210 million charge related to increased estimates of expected credit losses due to customer bankruptcies and additional allowances for credit loss~~es. Included in the change in organic profit was other income of $44 million~~these bookings, in the six months ended June 30, 2021 and $59 million in the six months ended June 30, 2020 related to foreign government wage subsidies due to COVID-19 and an unfavorable EAC adjustment of $44 million in the quarter ended June 30, 2020 on a military program primarily driven by a shift in estimated overhead costs due to lower commercial engine activity.

~~In the six months ended June 30, 2021,~~2022 Pratt & Whitney ~~had two notable defense bookings~~booked $251 million for ~~$593 million in total for F-135 sustainment services.~~

tanker production Lots 7 and 8.

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Raytheon Intelligence & Space
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 3,805 $ 3,387 12 % $ 7,570 $ 3,387 NM
Operating Profit 415 309 34 % 803 309 NM
Operating Profit Margins 10.9 % 9.1 % 10.6 % 9.1 %
Bookings $ 3,952 $ 3,712 6 % $ 7,678 $ 3,712 NM

~~NM = Not Meaningful~~


	Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net Sales	$	3,570		$	3,805		(6)	%	$	7,142		$	7,570		(6)	%
Operating Profit	315			415			(24)	%	693			803			(14)	%
Operating Profit Margins	8.8		%	10.9		%			9.7		%	10.6		%
Bookings	$	2,980		$	3,952		(25)	%	$	5,572		$	7,678		(27)	%

Quarter Ended June 30, ~~2021~~2022 Compared with Quarter Ended June 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales	Net Sales	$	165	$	230		$	23	$	418	Net Sales	$	(36)	$	(183)	$	(16)	$	(235)

(1) See “Segment Review” above for definition of organic. We provide the organic change in net sales for our segments. 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 translation fluctuations and other significant non-recurring and non-operational items (“Other”). A reconciliation of this measure to the reported U.S. GAAP amount is provided in the table above.


		Factors Contributing to Change in Operating Profit											Factors Contributing to Change in Operating Profit
(dollars in millions)	(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change		(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating Profit	Operating Profit	$	11	$	53	$	20	$	22	$	106	Operating Profit	$	4	$	(54)	$	(36)	$	(14)	$	(100)

~~The organic sales increase~~

Table of ~~$165 million~~Contents

Organic sales in the quarter ended June 30, ~~2021 compared to~~2022 were relatively consistent with the quarter ended June 30, ~~2020 was~~2021. Included in the organic change in sales were lower Command, Control and Communications sales of $0.1 billion primarily driven by ~~higher net sales of $64 million~~an anticipated decrease in production volumes on certain ~~Airborne Intelligence, Surveillance~~tactical communications systems programs, and ~~Reconnaissance (ISR) programs within sensing~~lower Sensing and ~~effects primarily~~Effects sales driven by a decrease in surveillance and targeting systems due to ~~increased~~lower production ~~driven~~volume, partially offset by ~~customer demand,~~an increase in Cyber, Training and ~~higher volume of $45 million~~Services sales on certain classified cyber ~~programs within cyber, training and services primarily due to increases in customer-determined activity levels.~~programs.

The ~~increase~~decrease in operating profit of ~~$106~~$100 million, and the related ~~increase~~decrease in operating profit margins, in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020, was~~2021, were primarily due to the net unfavorable change in EAC adjustments of ~~$53~~$54 million, which was spread across numerous programs and ~~primarily a result of the Raytheon Merger and the associated reset to zero percent complete for contracts accounted for~~includes unfavorable adjustments on ~~a percentage of completion basis.~~certain development programs, as well as acquisitions / divestitures, net. Included in mix and other performance is aan $18 million gain on a real estate transaction in the quarter ended June 30, 2021.

The ~~increase~~decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the ~~Raytheon Merger on April 3, 2020.~~sale of the global training and services business in the fourth quarter of 2021.

Six Months Ended June 30, ~~2021~~2022 Compared with Six Months Ended June 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales	Net Sales	$	165	$	3,995		$	23	$	4,183	Net Sales	$	(53)	$	(354)	$	(21)	$	(428)

Factors Contributing to Change in Operating Profit
(dollars in millions) Volume Net change in EAC adjustments Acquisitions /
Divestitures, net Mix and other performance Total Change
Operating Profit $ 11 $ 53 $ 408 $ 22 $ 494
~~The organic~~


	Factors Contributing to Change in Operating Profit
(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating Profit	$	3	$	(38)	$	(64)	$	(11)	$	(110)

Organic sales ~~increase of $165 million~~ in the six months ended June 30, ~~2021 compared to~~2022 were relatively consistent with the six months ended June 30, ~~2020 was primarily driven by higher net~~2021. Included in the organic change in sales were lower Command, Control and Communications sales of ~~$64 million on certain Airborne Intelligence, Surveillance~~$0.1 billion, lower Sensing and ~~Reconnaissance (ISR) programs within sensing~~Effects sales of $0.1 billion, and ~~effects primarily due to increased production driven by customer demand,~~higher Cyber, Training and ~~higher~~

~~Table~~Services sales of ~~Contents~~

~~volume of $45 million~~$0.1 billion on certain classified cyber programs. The lower Command, Control and Communications sales were primarily driven by an anticipated decrease in production volumes on certain tactical communications systems programs. The lower Sensing and Effects sales includes an increase in certain classified programs ~~within cyber, training~~ and ~~services primarily~~a decrease in surveillance and targeting systems due to ~~increases in customer-determined activity levels.~~lower production volume, with the remaining change spread across numerous programs.

The ~~increase~~decrease in operating profit of ~~$494~~$110 million, and the related ~~increase~~decrease in operating profit margins, in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020, was~~2021, were primarily ~~the change in acquisitions~~due to acquisition / divestitures, net described below, and the net unfavorable change in EAC adjustments of ~~$408 million.~~$38 million, which was spread across numerous programs and includes unfavorable adjustments on certain development programs. Included in mix and other performance is an $18 million gain on a real estate transaction in the quarter ended June 30, 2021.

Backlog and Bookings– Backlog was ~~$19,442 million~~$16 billion at June 30, ~~2021~~2022 and ~~$19,166 million~~$18 billion at December 31, ~~2020.~~2021. In addition to a number of smaller bookings, in the quarter ended June 30, ~~2021,~~2022, RIS booked ~~$1,112 million~~$1.2 billion on a number of classified contracts ~~$365~~and $253 million on the ~~Standard Terminal Automation Replacement System (STARS)~~Development, Operations and Maintenance (DOMino) cyber program for the Federal Aviation Administration (FAA), $211 million to provide additional upgrades to the Global Positioning System Next Generation Operational Control System (GPS OCX) program for the U.S. Air Force and $172 million on the Next Generation Jammer (NGJ) Mid-Band Low Rate Initial Production (LRIP) contract with the U.S. Navy.Department of Homeland Security (DHS). In addition to ~~the~~these bookings, ~~noted above,~~ in the six months ended June 30, ~~2021,~~2022, 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.

~~In the six months ended June 30, 2020, RIS booked $1,418 million~~$1.1 billion on a number of classified contracts and ~~$166~~$311 million on the ~~Global Aircrew Strategic Network Terminal (Global ASNT) program~~Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) GEO missile warning and defense contract for the U.S. ~~Air~~Space Force.

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Raytheon Missiles & Defense
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net Sales $ 3,985 $ 3,506 14 % $ 7,778 $ 3,506 NM
Operating Profit 532 398 34 % 1,028 398 NM
Operating Profit Margins 13.4 % 11.4 % 13.2 % 11.4 %
Bookings $ 6,054 $ 4,109 47 % $ 8,586 $ 4,109 NM

~~NM = Not Meaningful~~


	Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			Change		2022			2021			Change
Net Sales	$	3,558		$	3,985		(11)	%	$	7,085		$	7,778		(9)	%
Operating Profit	348			532			(35)	%	735			1,028			(29)	%
Operating Profit Margins	9.8		%	13.4		%			10.4		%	13.2		%
Bookings	$	4,537		$	6,054		(25)	%	$	8,637		$	8,586		1	%

Quarter Ended June 30, ~~2021~~2022 Compared with Quarter Ended June 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales	Net Sales	$	259	$	206		$	14	$	479	Net Sales	$	(414)	$	—	$	(13)	$	(427)


		Factors Contributing to Change in Operating Profit											Factors Contributing to Change in Operating Profit
(dollars in millions)	(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change		(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating Profit	Operating Profit	$	21	$	43	$	25	$	45	$	134	Operating Profit	$	(34)	$	(80)	$	—	$	(70)	$	(184)

The organic sales ~~increase~~decrease of ~~$259~~$414 million in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 was primarily due to lower net sales of $0.3 billion on our Land Warfare and Air Defense programs, primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production. Included in the decrease in organic sales were higher net sales of ~~$92~~$75 million on ~~an international Patriot program driven by a contract modification in the second quarter~~SPY-6 programs and higher net sales of ~~2021, which included the recognition of previously deferred precontract costs, and~~ $66 million on the ~~StormBreaker program primarily due to the recognition~~NGI program.

The decrease in operating profit of ~~previously deferred precontract costs based on a contract award in the second quarter of 2021. The change in organic sales also includes a decrease of $54~~$184 million ~~related to sales on our direct commercial sales contracts for precision guided munitions with a certain Middle East customer that had been recognized~~ in the quarter ended June 30, ~~2020, but subsequently reversed in~~2022 compared to the ~~fourth~~ quarter ~~of 2020. We have not yet obtained regulatory~~

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~~approval on these contracts, and we subsequently reversed these sales because we determined,~~ended June 30, 2021, was due to ~~then-current events, that it was no longer probable that we will be able to obtain regulatory approvals for these contracts.~~

~~The increase~~a net unfavorable change in ~~operating profit~~EAC adjustments of ~~$134~~$80 million, a change in mix and other performance of $70 million, and a change in volume of $34 million. The net unfavorable change in EAC adjustments was spread across numerous programs and includes the ~~related increase~~impact of continued supply chain constraints. The changes in mix and other performance and volume were principally driven by the lower net sales on the Land Warfare and Air Defense programs discussed above. The decrease in operating profit margins in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020,~~2021, was primarily due to athe net change in EAC adjustments and change in mix and other performance of $45 million, a net change in EAC adjustments of $43 million and a change in acquisitions / divestitures, net of $25 million. The change in mix and other performance was principally driven by activity on an international Patriot program as described above in organic sales. The net change in EAC adjustments was spread across numerous programs and primarily a result of the Raytheon Merger and the associated reset to zero percent complete for contracts accounted for on a percentage of completion basis.

~~The increase in net sales and operating profit due to acquisitions / divestitures, net relates to the Raytheon Merger on April 3, 2020.~~performance.

Six Months Ended June 30, ~~2021~~2022 Compared with Six Months Ended June 30, ~~2020~~2021


		Factors Contributing to Total Change in Net Sales				Factors Contributing to Total Change in Net Sales
(dollars in millions)	(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net			Other		Total Change		(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net Sales	Net Sales	$	259	$	3,999		$	14	$	4,272	Net Sales	$	(674)	$	—	$	(19)	$	(693)


		Factors Contributing to Change in Operating Profit											Factors Contributing to Change in Operating Profit
(dollars in millions)	(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change		(dollars in millions)	Volume		Net change in EAC adjustments		Acquisitions / Divestitures, net		Mix and other performance		Total Change

Operating Profit	Operating Profit	$	21	$	43	$	521	$	45	$	630	Operating Profit	$	(58)	$	(122)	$	—	$	(113)	$	(293)

The organic sales ~~increase~~decrease of ~~$259~~$674 million in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 was primarily due to lower net sales of $0.5 billion on our Land Warfare and Air Defense programs, primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production. Included in the total decrease in organic sales were lower net sales of $122 million on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program, higher net sales of ~~$92 million on an international Patriot program driven by a contract modification in the second quarter of 2021, which included the recognition of previously deferred precontract costs, and $66~~$146 million on the ~~StormBreaker~~NGI program ~~primarily due to the recognition~~and higher net sales of ~~previously deferred precontract costs based~~$122 million on a contract award in the second quarter of 2021. The change in organic sales also includes a decrease of $54 million related to sales on our direct commercial sales contracts for precision guided munitions with a certain Middle East customer as discussed above.SPY-6 programs.

The ~~increase~~decrease in operating profit of ~~$630~~$293 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to a net unfavorable change in EAC adjustments of $122 million, a change in mix and other performance of $113 million, and a change in volume of $58 million. The net unfavorable change in EAC adjustments was spread across numerous programs and includes the ~~related increase~~impact of continued supply chain constraints. The changes in mix and other performance and volume were principally driven by the lower net sales on the Land Warfare and Air Defense programs

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discussed above. The decrease in operating profit margins in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021, was primarily due to athe net change in ~~acquisitions / divestitures, net of $521 million.~~

~~The increase~~EAC adjustments and change in ~~net sales~~mix and ~~operating profit due to acquisitions / divestitures, net relates to the Raytheon Merger on April 3, 2020.~~other performance.

Backlog and Bookings– Backlog was ~~$29,656 million~~$30 billion at June 30, ~~2021~~2022 and ~~$29,103 million~~$29 billion at December 31, ~~2020.~~2021. In addition to a number of smaller bookings, in the quarter ended June 30, ~~2021,~~2022, RMD booked ~~approximately $2 billion for the Long Range Standoff (LRSO) Weapon System Engineering and Manufacturing Development (EMD) contract~~$662 million on Stinger for the U.S. ~~Air Force, $1,315~~Army, $648 million for ~~the Next Generation Interceptor (NGI)~~Standard Missile-3 (SM-3) for the Missile Defense Agency (MDA), ~~$327~~$423 million on the SPY-6 Hardware Production and Sustainment contract for the U.S. Navy, and $217 million on Tomahawk for the U.S. Navy. In addition to these bookings, in the six months ended June 30, 2022, RMD booked $1.2 billion on a number of classified contracts, including a strategic competitive award. RMD also booked $651 million for ~~AIM-9X~~the SPY-6 Hardware Production and Sustainment contract for the U.S. Navy, $384 million for Excalibur Rapid Demonstration Phase 2 for the U.S. Army, $219 million for Air Intercept Missile (AIM-9X) Sidewinder short-range air-to-air missiles for the U.S. Navy and Air Force and international customers ~~$242 million on the Army Navy/Transportable Radar Surveillance-Model 2 (AN/TPY-2) radar program for the MDA,~~ and $213 million for StormBreaker for the U.S. Air Force and Navy. In addition to the bookings noted above, in the six months ended June 30, 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$218 million to provide Patriot engineering support services ~~support~~ for the U.S. Army and international customers.

~~In the six months ended June 30, 2020, RMD booked $2,253 million on the AN/TPY-2 radar program for the Kingdom of Saudi Arabia (KSA)~~

Corporate and ~~$299 million for Standard Missile-3 (SM-3) for the MDA and an international customer.~~

Eliminations and other

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 non-reportable business ~~segments, including Forcepoint, which was acquired as part~~

~~Table of Contents~~

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 Sales Operating Profit
Quarter Ended June 30, Quarter Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Inter segment eliminations $ (743) $ (665) $ (31) $ (23)
Other non-reportable segments 8 144 (9) (4)
Eliminations and other $ (735) $ (521) $ (40) $ (27)

~~The decrease in other non-reportable segment sales for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020, was primarily related to~~ ~~the sale of our Forcepoint business in the first quarter of 2021~~.

~~Other non-reportable segment operating profit for the quarter ended June 30, 2021 was relatively consistent with the quarter ended June 30, 2020.~~

Net Sales Operating Profit
Six Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Inter segment eliminations $ (1,458) $ (1,101) $ (56) $ (36)
Other non-reportable segments 16 149 (15) (16)
Eliminations and other $ (1,442) $ (952) $ (71) $ (52)

~~The decrease in other non-reportable segment sales for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, was primarily related to~~ ~~the sale of our Forcepoint business in the first quarter of 2021~~.

~~Other non-reportable segments operating profit for the six months ended June 30, 2021 was relatively consistent with the six months ended June 30, 2020.~~

~~Corporate expenses and other unallocated items~~

segments. Corporate expenses and other unallocated items consists of costs and certain other unallowable corporate costs not considered part of management’s evaluation of reportable segment operating performance including restructuring ~~and merger~~ costs related to the Raytheon ~~Merger,~~merger, net costs associated with corporate research and development, including the Lower Tier Air and Missile Defense Sensor (LTAMDS) program ~~which was acquired as part of the Raytheon Merger,~~ and certain reserves. ~~See Restructuring Costs, above,~~


	Net Sales				Operating Profit
	Quarter Ended June 30,				Quarter Ended June 30,
(dollars in millions)	2022		2021		2022		2021
Eliminations and other	$	(794)	$	(735)	$	(47)	$	(40)
Corporate expenses and other unallocated items	—		—		(42)		(149)

The increase in eliminations and other sales of $59 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Eliminations and other operating profit in the quarter ended June 30, 2022 was relatively consistent with the quarter ended June 30, 2021.

The decrease in Corporate expenses and other unallocated items of $107 million in the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021, was primarily due to lower restructuring costs of $51 million, the allocation of $30 million of state taxes to the segments related to the impact of capitalization of research or experimental expenditures for tax-purposes and a ~~more detailed discussion~~decrease in expenses related to the LTAMDS project.


	Net Sales				Operating Profit
	Six months ended June 30,				Six months ended June 30,
(dollars in millions)	2022		2021		2022		2021
Eliminations and other	$	(1,530)	$	(1,442)	$	(81)	$	(71)
Corporate expenses and other unallocated items	—		—		(178)		(230)

The increase in eliminations and other sales of ~~our restructuring costs.~~$88 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins.

Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2021 2020 2021 2020
Corporate expenses and other unallocated items $ (149) $ (277) $ (230) $ (407)
Eliminations and other operating profit in the six months ended June 30, 2022 was relatively consistent with the six months ended June 30, 2021.

The decrease in Corporate expenses and other unallocated items of ~~$128~~$52 million ~~for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020 was primarily driven by lower restructuring costs of $109 million and a decrease~~ in ~~merger-related costs related to the Raytheon Merger of $70 million, partially offset by other unallocated items with no individual or common significant driver.~~

~~The decrease in Corporate expenses and other unallocated items of $177 million for~~ the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021, was primarily ~~driven by lower restructuring costs of $106 million and~~due to a decrease in ~~merger-related costs related to the Raytheon Merger of $82 million, partially offset by an increase in net~~ expenses related to the LTAMDS project.

FAS/CAS operating adjustment

~~The~~We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of ~~RIS~~our pension and ~~RMD include~~postretirement benefit (PRB) expense under the Financial Accounting Standards (FAS) requirements of U.S. Generally Accepted Accounting Principles (GAAP) and our pension and PRB expense ~~as determined~~ 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 ~~which~~is similar, the pattern of cost recognition is different. Over time, we generally

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expect to recover the related RIS and RMD pension and PRB liabilities through the pricing of our products and services to the U.S. government. The difference between our CAS expense and the FAS service cost attributable to these segments under U.S. GAAP is the FAS/CAS operating adjustment. The FAS/CAS operating adjustment results in consolidated pension expense in operating profit equal to the service cost component of FAS expense under U.S. GAAP. The segment results of Collins ~~Aerospace~~ and Pratt & Whitney generally ~~include~~record pension and PRB expense on a FAS ~~service cost.~~

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basis.

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
FAS service cost (expense)	FAS service cost (expense)	$	(101)	$	(109)	$	(202)	$	(109)	FAS service cost (expense)	$	(92)	$	(101)	$	(183)	$	(202)
CAS expense	CAS expense	526		465		1,050		465		CAS expense	471		526		940		1,050
FAS/CAS operating adjustment	FAS/CAS operating adjustment	$	425	$	356	$	848	$	356	FAS/CAS operating adjustment	$	379	$	425	$	757	$	848

The change in our FAS/CAS operating adjustment of ~~$69~~$46 million in the quarter ended June 30, ~~2021~~2022 compared to the quarter ended June 30, ~~2020~~2021 was driven by a ~~$61~~$55 million ~~increase~~decrease in CAS expense, ~~as well as~~partially offset by a $8$9 million decrease in FAS service cost. The ~~increase~~decrease in CAS expense was primarily due to an increase in applicable discount rates as a result of U.S. qualified pension plan funding relief included in the ~~Raytheon Merger on April 3, 2020, and to a lesser extent, changes in actuarial assumptions.~~American Rescue Plan Act of 2021 (ARPA).

The change in our FAS/CAS operating adjustment of ~~$492~~$91 million in the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 was driven by a ~~$585~~$110 million ~~increase~~decrease in CAS expense, partially offset by a ~~$93~~$19 million ~~increase~~decrease in FAS service ~~cost both~~cost. The decrease in CAS expense was primarily due to ~~the inclusion of the Raytheon Company plans~~an increase in applicable discount rates as a result of ~~the Raytheon Merger.~~

~~In response to the economic environment resulting from the COVID-19 pandemic, Congress passed~~U.S. qualified pension plan funding relief included in 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 June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Goodwill impairment charge		$	—	$	(3,183)	$	—	$	(3,183)

Amortization of acquired intangibles	Amortization of acquired intangibles	(592)		(611)		(1,179)		(951)		Amortization of acquired intangibles	$	(458)	$	(592)	(935)		(1,179)
Amortization of property, plant and equipment fair value adjustment	Amortization of property, plant and equipment fair value adjustment	(44)		(20)		(63)		(27)		Amortization of property, plant and equipment fair value adjustment	(21)		(44)		(53)		(63)
Amortization of customer contractual obligations related to acquired loss-making and below-market contracts	Amortization of customer contractual obligations related to acquired loss-making and below-market contracts	117		69		207		145		Amortization of customer contractual obligations related to acquired loss-making and below-market contracts	31		117		56		207
Acquisition accounting adjustments	Acquisition accounting adjustments	$	(519)	$	(3,745)	$	(1,035)	$	(4,016)	Acquisition accounting adjustments	$	(448)	$	(519)	$	(932)	$	(1,035)

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		2021		2020		(dollars in millions)	2022		2021		2022		2021
Collins Aerospace Systems	Collins Aerospace Systems	$	(121)	$	(3,381)	$	(270)	$	(3,579)	Collins Aerospace Systems	$	(197)	$	(121)	$	(403)	$	(270)
Pratt & Whitney	Pratt & Whitney	(29)		(11)		(51)		(84)		Pratt & Whitney	(39)		(29)		(96)		(51)
Raytheon Intelligence & Space	Raytheon Intelligence & Space	(162)		(128)		(301)		(128)		Raytheon Intelligence & Space	(74)		(162)		(158)		(301)
Raytheon Missiles & Defense	Raytheon Missiles & Defense	(207)		(200)		(413)		(200)		Raytheon Missiles & Defense	(138)		(207)		(275)		(413)
Total segment	Total segment	(519)		(3,720)		(1,035)		(3,991)		Total segment	(448)		(519)		(932)		(1,035)
Eliminations and other	Eliminations and other	—		(25)		—		(25)		Eliminations and other	—		—		—		—
Acquisition accounting adjustments	Acquisition accounting adjustments	$	(519)	$	(3,745)	$	(1,035)	$	(4,016)	Acquisition accounting adjustments	$	(448)	$	(519)	$	(932)	$	(1,035)

The change in the Acquisition accounting adjustments of ~~$3,226~~$71 million for the quarter ended June 30, ~~2021~~2022 compared to ~~the~~

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quarter ended June 30, 2020, was primarily driven by the $3.2 billion goodwill impairment loss in the second quarter of 2020 related to two Collins Aerospace reporting units. Included in Acquisitions accounting adjustments in the quarter ended June 30, 2021, was primarily driven by a decrease in RIS and RMD intangibles amortization related to the Raytheon merger in 2020, partially offset by the absence of $69 million of amortization of customer contractual obligations due to the accelerated liquidation of a below-market contract reserve at Collins ~~Aerospace~~ driven by the termination of a customer contract ~~and $19 million~~recognized in the quarter ended June 30, 2021.

Table of amortization of the property, plant and equipment fair value adjustment related to the sale of real estate at RIS. Refer to “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q for additional information on the goodwill impairment loss.Contents

The change in the Acquisition accounting adjustments of ~~$2,981~~$103 million for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020,~~2021, is primarily driven by ~~the $3.2 billion goodwill impairment loss~~a decrease in ~~the second quarter of 2020 related to two Collins Aerospace reporting units, partially offset by an increase of $361 million for acquisition accounting adjustments~~RIS and RMD intangibles amortization related to the Raytheon ~~Merger, primarily due to the timing of the~~ merger in 2020, partially offset by the ~~prior year. Included in Acquisition accounting adjustments in the six months ended June 30, 2021 was~~absence of $116 million of amortization of customer contractual obligations due to the accelerated liquidation of a below-market contract ~~reserves~~reserve at Collins ~~Aerospace~~ driven by the termination of two customer ~~contracts.~~contracts recognized in the six months ended June 30, 2021.

LIQUIDITY AND FINANCIAL CONDITION


(dollars in millions)	(dollars in millions)	June 30, 2021			December 31, 2020			(dollars in millions)	June 30, 2022			December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	8,051		$	8,802		Cash and cash equivalents	$	4,767		$	7,832
Total debt	Total debt	31,482			31,823			Total debt	31,413			31,485
Total equity	Total equity	72,721			73,852			Total equity	71,990			74,664
Total capitalization (total debt plus total equity)	Total capitalization (total debt plus total equity)	104,203			105,675			Total capitalization (total debt plus total equity)	103,403			106,149
Total debt to total capitalization	Total debt to total capitalization	30		%	30		%	Total debt to total capitalization	30		%	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 cash flows from 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 and divestitures of businesses, dividends, common stock repurchases, pension funding, access to the commercial paper markets, adequacy of available bank lines of credit, redemptions of debt, and the ability to attract long-term capital at satisfactory terms. ~~We had $6.84 billion available under our various credit facilities at June 30, 2021.~~

Although 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 potential impacts.

At June 30, ~~2021,~~2022, we had cash and cash equivalents of ~~$8.1~~$4.8 billion, of which approximately ~~54%~~47% was held by RTC’s foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. The Company does not intend to reinvest certain undistributed earnings of its international subsidiaries that have been previously taxed in the U.S. Taxes associated with the future remittance of these earnings have been recorded. For the remainder of the Company’s undistributed international earnings, unless tax effective to repatriate, RTC will continue to permanently reinvest these earnings. ~~We did not repatriate cash in the six months ended June 30, 2021.~~

Historically, our strong credit ratings and financial position have enabled us to issue long-term debt at favorable interest rates.

As of June 30, 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 June 30, 2021. The maximum amount of short-term commercial paper borrowings outstanding at any point inFrom time ~~during the six months ended June 30, 2021 was $660 million. We~~to time, 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.

~~In May 2021, we renewed our $2.0 billion revolving credit agreement, which now expires in May 2022.~~ As of June 30, ~~2021,~~2022, our maximum commercial paper borrowing limit was $5.0 billion as the commercial paper is backed by our $5.0 billion revolving credit agreement. The daily average amount of short-term commercial paper borrowings outstanding during the six months ended June 30, 2022 was $150 million. We had no commercial paper outstanding at June 30, 2022.

We have 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 issued under this shelf registration statement.

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The Company ~~has offered~~offers 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 the 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 financial institution, as it relates to the program. As such, ~~amounts due to suppliers that have elected to participate in~~ the SCF program are included in Accounts payable on our Condensed Consolidated Balance Sheet and all payment activity related to amounts due to suppliers that elected to participate in the SCF program are reflected in cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows. As of June 30, 2021, and December 31, 2020, the amount due to suppliers participating in the SCF program and included in Accounts payable was approximately $406 million and $394 million, respectively. The SCF program does not impact our overall liquidity.

We believe our cash on hand and future operating cash flows will be sufficient to meet our future operating cash needs. Further, we continue to have access to the commercial paper markets and our existing credit facilities, and our ability to obtain debt or equity financing, as well as the availability under committed credit lines, provides additional potential sources of liquidity should they be required or appropriate.

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Cash Flow - Operating Activities


		Six Months Ended June 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Net cash flows provided by operating activities from continuing operations	Net cash flows provided by operating activities from continuing operations	$	2,049	$	1,342	Net cash flows provided by operating activities from continuing operations	$	1,762	$	2,049
Net cash used in operating activities from discontinued operations		(24)		(661)

~~Operating Activities - Continuing Operations.~~ Cash generated by operating activities from continuing operations in the six months ended June 30, ~~2021~~2022 was ~~$707 million higher~~$0.3 billion lower than the same period in ~~2020.~~ ~~This increase was~~2021, primarily driven by an unfavorable impact to cash flow from inventory principally due to higher net income after adjustments for depreciation and amortization, deferred income tax provision, stock compensation costs, net periodic pension and other postretirement benefit and the goodwill impairment charge, totaling $2.1 billion,current year increases to support sales volume growth, partially offset by ~~an unfavorable change in working capital at the RIS and RMD segments in the first quarter of 2021, with no comparable activity in the first quarter of 2020 as~~ a ~~result of the Raytheon Merger. This unfavorable change in working capital at RIS and RMD includes a~~favorable impact to cash ~~outflow for~~flow from accounts payable and accrued liabilities primarily driven by advances. The remaining favorable impact from accounts payable and accrued liabilities was primarily driven by an increase in collaborator payables at Pratt & Whitney, which was mostly offset by an increase in collaborator receivables due to the timing of ~~incentive compensation payments. Included in the increase in cash flows provided by operating activities was a reduction of accounts receivables and~~settlements. In addition, accounts payable inand accrued liabilities also reflects a $1.0 billion increase related to the ~~prior year at Collins Aerospace~~impact of the capitalization of research and ~~Pratt & Whitney due~~experimental expenditures for tax purposes, with a related $1.0 billion reduction to a decline in volume principally driven by the current economic environment primarily driven by COVID-19, and an increase in current year contract assets principally driven by the timing of billings at Pratt & Whitney.our deferred tax liability.

The Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables. Factoring activity resulted in an increase of approximately $1.5 billion in cash provided by operating activities during the six months ended June 30, 2022, compared to an increase in cash flows provided by operating activities of approximately $0.8 billion during the six months ended June 30, ~~2021, as compared to a decrease in cash flows provided by operating activities of $1.2 billion during the six months ended June 30, 2020. The year over year increase in factoring~~2021. Factoring activity ~~was primarily due to the higher sales volume in 2021 as compared to 2020, and~~ includes amounts factored on certain aerospace receivables ~~performed~~ at the ~~customer~~customers’ request for which we ~~are~~may be compensated by the ~~customer for the extended collection cycle.~~

~~We made the following contributions to our U.S. qualified and international defined benefit plans and PRB plans:~~

Six Months Ended June 30,
(dollars in millions) 2021 2020
U.S. qualified defined benefit plans $ — $ —
International defined benefit plans 21 42
PRB plans 4 —
Total $ 25 $ 42

~~We expect to make total contributions of approximately $50 million to our international defined benefit plans in 2021, which are expected to meet or exceed the current funding requirements.~~

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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.customer.

We made net tax payments of ~~$618~~$530 million and ~~$37~~$618 million in the six months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

~~Operating Activities - Discontinued Operations.~~ ~~The $637 million change in cash used in operating activities from discontinued operations~~ A provision enacted in the ~~six months ended June 30, 2021 compared~~Tax Cuts and Jobs Act of 2017 related to ~~June 30, 2020 was primarily driven~~the capitalization of research and experimental expenditures for tax purposes became effective on January 1, 2022. If this provision is not deferred legislatively, our full year 2022 tax payments are expected to increase by an estimated $2 billion. Payments on the ~~absence~~increased taxes may begin in the third quarter of ~~separation costs in 2021 as the Separation Transactions occurred~~2022, using cash on ~~April 3, 2020.~~hand or other sources of liquidity.

Cash Flow - Investing Activities
Six Months Ended June 30,
(dollars in millions) 2021 2020
Net cash flows provided by investing activities from continuing operations $ 239 $ 2,056
Net cash used in investing activities from discontinued operations — (241)


	Six Months Ended June 30,
(dollars in millions)	2022		2021
Net cash flows (used in) provided by investing activities from continuing operations	$	(1,136)	$	239

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

~~Investing Activities - Continuing Operations.~~ The ~~$1,817 million~~$1.4 billion change in cash flows (used in) provided by investing activities from continuing operations in the six months ended June 30, ~~2021~~2022 compared to June 30, ~~2020~~2021 primarily relates to the absence of the prior year ~~Raytheon Merger in which cash of $3.2 billion was acquired on April 3, 2020, partially offset by the~~ sale of our 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:~~

Six Months Ended June 30,
(dollars in millions) 2021 2020
Additions to property, plant and equipment $ (747) $ (783)

Capital expenditures ~~for~~in the six months ended June 30, ~~2021 decreased~~2022 increased by ~~$36~~$171 million from the six months ended June 30, ~~2020. The reductions~~2021 primarily due to investments in ~~capital expenditures~~production facilities at ~~Collins Aerospace and~~ Pratt & ~~Whitney were partially offset by an increase in capital expenditures driven by the Raytheon Merger.~~Whitney.

Dispositions of businesses were $88 million and $1.1 billion in six months ended June 30, 2022 and 2021, respectively. In the six months ended June 30, 2022, dispositions of businesses consisted of immaterial dispositions in our aerospace businesses. In the six months ended June 30, 2021, ~~was $1.1 billion, net~~dispositions of ~~cash transferred and~~businesses primarily related to the sale of our Forcepoint ~~business. Dispositions of businesses in the six months ended June 30, 2020 were $234 million and related to the sale of our airborne tactical radios~~ business. For additional detail, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.

~~Increases to customer~~Customer financing assets ~~was a use of cash of $133~~payments, net were $7 million and ~~$188~~$102 million in six months ended June 30, 2022 and 2021, respectively, and ~~2020, respectively. This decline is due to fewer~~include purchases and sales of engines ~~added~~ in ~~the six months ended 2021 compared to 2020. These increases were partially offset by decreases~~our leased asset pool as well as customer financing. The decrease in customer financing assets ~~which provided a source of cash of $31 million in the six months ended June 30, 2021 compared~~payments, net was primarily due to ~~$59 million in the six months ended June 30, 2020, driven by fewer sales of~~decreased customer financing ~~assets.~~payments, the absence of a payment on a prior year sale and leaseback transaction for the sale of equipment, and fewer engines added to our leased asset pool.

During the six months ended June 30, 2022 and 2021, we increased our collaboration intangible assets by $91 million and $60 million, respectively, which primarily relates to payments made under our 2012 agreement to acquire Rolls-Royce’s collaboration interests in International Aero Engines AG (IAE).

As discussed in “Note ~~13:~~11: Financial Instruments” within Item 1 of this Form 10-Q, we enter into derivative instruments primarily for risk management purposes, including derivatives designated as hedging instruments 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

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the business. We have used derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, interest rate and commodity price exposures. During the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, we had net cash ~~receipts~~payments of ~~$50~~$151 million and net cash ~~payments~~receipts of ~~$286~~$50 million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.

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~~Investing Activities - Discontinued Operations.~~ The $241 million decrease in cash used in investing activities from discontinued operations in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 is primarily driven by outflows from short-term investment activity of $160 million and capital expenditures of $87 million in 2020 which did not recur in 2021, as the Separation Transactions occurred on April 3, 2020.

Cash Flow - Financing Activities


		Six Months Ended June 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2021		2020		(dollars in millions)	2022		2021
Net cash flows used in financing activities from continuing operations	Net cash flows used in financing activities from continuing operations	$	(3,119)	$	(1,332)	Net cash flows used in financing activities from continuing operations	$	(3,627)	$	(3,119)
Net cash provided by (used in) financing activities from discontinued operations		24		(1,481)

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.~~ Financing activities were a cash outflow of $3.6 billion in the six months ended June 30, 2022 compared to a cash outflow of $3.1 billion in the six months ended June 30, ~~2021 compared to a cash outflow of $1.3 billion in the six months ended June 30, 2020.~~2021. This change iswas primarily driven by the absence of distributions from discontinued operations, net of repayments of long-term debt related to the Spin Transactions of $2.2 billion in the six months ended June 30, 2020, the absence of the issuance of long-term debt of $2.0 billion in the six months ended June 30, 2020 and an increase in share repurchases of ~~$960 million, a decrease in short-term borrowing repayments~~$0.8 billion, partially offset by the absence of ~~$2.0 billion and a $1.9 billion change in net cash transfers to discontinued operations.~~the prior year repayment of long-term debt of $0.3 billion.

Refer to “Note 9:8: Borrowings and Lines of Credit” within Item 1 of this Form 10-Q for additional information on debt issuances and repayments.

At June 30, ~~2021,~~2022, management had remaining authority to repurchase approximately ~~$4.0~~$4.1 billion of our common stock under the December 7, ~~2020~~2021 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.~~Act of 1934, as amended. 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.

Our share repurchases were as follows:


		Six Months Ended June 30,							Six Months Ended June 30,
(dollars in millions; shares in thousands)	(dollars in millions; shares in thousands)	2021			2020			(dollars in millions; shares in thousands)	2022			2021
		$		Shares	$		Shares		$		Shares	$		Shares
Shares of Common Stock repurchased (1)	Shares of Common Stock repurchased (1)	$	1,020	12,642	$	47	330	Shares of Common Stock repurchased (1)	$	1,779	18,697	$	1,007	12,488

(1) ~~Share repurchases of $1,020 million in the~~ ~~six months ended June 30, 2021 includes $13 million of~~Relates to share repurchases that were settled in cash during the ~~third quarter of 2021.~~period.

Our Board of Directors authorized the following cash dividends:


		Six Months Ended June 30,					Six Months Ended June 30,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	2021		2020		(dollars in millions, except per share amounts)	2022		2021
Dividends paid per share of Common Stock	Dividends paid per share of Common Stock	$	0.985	$	1.210	Dividends paid per share of Common Stock	$	1.060	$	0.985
Total dividends paid	Total dividends paid	$	1,461	$	1,338	Total dividends paid	$	1,543	$	1,461

On June ~~21, 2021~~6, 2022, the Board of Directors declared a dividend of ~~$0.51~~$0.55 per share payable September ~~9, 2021~~8, 2022 to shareowners of record at the close of business on August ~~20, 2021.~~

~~Financing Activities - Discontinued Operations.~~ The $1,505 million increase in cash provided by (used in) financing activities from discontinued operations in the six months ended June 30, 2021 compared to June 30, 2020 is driven by a $1.9 billion change in net transfer activity, partially offset by $703 million of debt extinguishment costs related to the early repayment of debt in the six months ended June 30, 2020 which did not recur in the six months ended June 30, 2021.19, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in our exposure to market risk during the six months ended June 30, ~~2021.~~2022. For discussion of our exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our ~~2020~~2021 Form 10-K.

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Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, we carried out an evaluation under the supervision and with the participation of our management, including the President and Chief Executive Officer (CEO), the Executive Vice President and Chief Financial Officer (CFO) and the Corporate Vice President and ~~Assistant~~ Controller ~~(Acting Controller)~~(Controller), of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, ~~2021.~~2022. 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, CFO and ~~Acting~~ Controller concluded that, as of June 30, ~~2021,~~2022, our disclosure controls and procedures were effective to provide

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reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, 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, CFO and ~~Acting~~ Controller, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended June 30, ~~2021~~2022 that have materially affected, or are 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” 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.~~valid, and are not statements of historical fact. 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,” “outlook,” “goals,” “objectives,” “confident,” “on track” and other words of similar 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, costs savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, the Raytheon Merger or the Separation Transactions, including estimated synergies and customer cost savings resulting from the Raytheon Merger and the anticipated benefits and costs of the Separation 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 changes in economic, ~~conditions in the industries~~capital market and ~~countries in which Raytheon Technologies Corporation (RTC) operates~~political conditions in the U.S. and globally, such as from the global sanctions and export controls with respect to Russia, and any changes therein, including related to financial market conditions, fluctuations in commodity prices, inflation, interest rates and foreign currency exchange rates, ~~levels of end-customer demand~~disruptions in ~~both the commercial~~global supply chain and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, the impact of pandemic health issues (including the impact of the coronavirus disease 2019 (COVID-19) pandemic on global air travellabor markets, and commercial and business activities which have not yet fully recovered to pre-pandemic levels, and that the timing and extent of such recovery may be impacted by factors including the distributions, acceptance and efficacy of vaccines, emerging coronavirus variants and additional outbreaks), aviation safety concerns, weather conditions and natural disasters, the financial condition of our customers and suppliers, and the geopolitical risks;

•risks associated with U.S. government sales, ~~(including~~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,~~the coronavirus disease 2019 (COVID-19) pandemic, a continuing resolution, a government shutdown, or otherwise, and uncertain funding of ~~programs);~~programs;

•challenges in the development, production, delivery, and support ~~performance, safety, regulatory compliance and realization~~ of ~~the anticipated benefits (including our expected returns under customer contracts) of~~Raytheon Technologies Corporation (RTC) advanced technologies and new products and ~~services;~~services, as well as the challenges of operating in RTC’s highly-competitive industries;

•the effect of and risks relating to COVID-19 on RTC’s business, supply chain, operations and the industries in which it operates, including the decrease in global air travel, and the timing and extent of the recovery from COVID-19;

•risks relating to RTC international operations from, among other things, changes in trade policies and implementation of sanctions, foreign currency fluctuations, economic conditions, political factors, sales methods, and U.S. or local government regulations;

•the condition of the aerospace industry;

•risks relating to RTC’s reliance on U.S. and non-U.S. suppliers and commodity markets, including the effect of sanctions, delays and disruptions in the delivery of materials and services to RTC or its suppliers and price increases;

•the scope, nature, ~~impact or~~ timing and challenges of ~~acquisition~~managing acquisitions, investments, divestitures and ~~divestiture activity,~~other transactions, 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 before and after the Raytheon Merger, and~~ realization of synergies and opportunities for growth and innovation, the assumption of liabilities and other risks 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;expenses;

•compliance with legal, environmental, regulatory and other requirements, including, among other things, export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anticorruption requirements, such as the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations in the U.S. and other countries in which RTC and its businesses operate;

•the outcome of pending, threatened and future legal proceedings, investigations and other contingencies, including those related to U.S. government audits and disputes or otherwise;

•factors that could impact RTC’s ability to engage in desirable capital-raising or strategic transactions, including its capital structure, levels of indebtedness, capital ~~spending~~expenditures and research and development ~~spending;~~

•~~future~~spending, and the availability of credit, ~~and factors that may affect such availability, including~~ credit market conditions and ~~our capital structure;~~other factors;

•uncertainties associated with the timing and scope of future repurchases by RTC of its common stock ~~which are subject to a number~~or declarations of ~~uncertainties and~~cash dividends, which 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~~risks relating to realizing expected benefits from RTC strategic initiatives such as cost reduction, restructuring, digital transformation and ~~disruption in delivery of materials and services from suppliers;~~other operational initiatives;

•~~company~~risks relating to the integration of the legacy businesses of United Technologies Corporation (UTC) and ~~customer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof (including~~Raytheon Company in connection with the ~~potential termination of U.S. government contracts and performance under undefinitized contract actions~~Raytheon merger, and the ~~potential inability to recover termination costs);~~

•~~new business and investment opportunities;~~

•~~the ability to realize the intended benefits~~realization of ~~organizational changes;~~

•the anticipated benefits of ~~diversification and balance of operations across product lines, regions and industries;~~those transactions;

•~~the outcome~~risks of ~~legal proceedings, investigations and~~additional tax exposures due to new tax legislation or other ~~contingencies;~~

•~~pension plan assumptions and future contributions;~~

•~~the impact of the negotiation of collective bargaining agreements and labor disputes;~~

•~~the effect of changes in political conditions in the U.S. and other countries in which RTC and its businesses operate,~~

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~~including the effect of changes in U.S. trade policies, on general market conditions, global trade policies and currency exchange rates in the near term and beyond;~~

•~~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 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)developments in the U.S. and other countries in which RTC and its businesses operate;

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•the ability of RTC to attract, train and retain ~~and hire key~~qualified personnel and ~~the~~maintain its culture and high ethical standards, and ability of our personnel to continue to operate our facilities and businesses around the ~~world~~world;

•risks relating to a RTC product safety failure or other failure affecting RTC’s or its customers’ or suppliers’ products or systems;

•risks relating to cyber-attacks on RTC’s information technology infrastructure, products, suppliers, customers and partners, threats to RTC facilities and personnel, as well as other events outside of RTC’s control such as public health crises, damaging weather or other acts of nature;

•the effect of changes in ~~light~~accounting estimates for our programs on our financial results;

•the effect of ~~among~~changes in pension and other ~~factors,~~ postretirement plan estimates and assumptions and contributions;

•risks relating to an impairment of goodwill and other intangible assets;

•the ~~COVID-19 pandemic;~~effects of climate change and changing or new climate-related regulations, customer and market demands, products and technologies; and

•the intended qualification of (1) the Raytheon ~~Merger~~merger as a tax-free reorganization and (2) the ~~Separation Transactions~~Carrier and Otis 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 “Note ~~17:~~15: Commitments and Contingencies” within Item 1 of this Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Results of Operations,” ~~“Restructuring Costs”~~ and “Liquidity and Financial Condition,” within Item 2 of this Form 10-Q. Additional important information as to these factors is included in our Annual Report on Form 10-K in the sections titled Item 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” under the headings “Business Overview,” “Critical Accounting Estimates,” ~~“Environmental Matters”~~ and ~~“Governmental~~“Government 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 Securities and Exchange Commission (SEC).

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See “Note ~~17:~~15: 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 Proceedings,” of our ~~2020~~2021 Annual Report on Form 10-K.

Item 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~~2021 Annual Report on Form 10-K ~~(2020~~(2021 Form 10-K). There have been no material changes from the factors disclosed in our ~~2020~~2021 Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission (SEC).

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the quarter ended June 30, ~~2021.~~2022.


2021		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)
2022								2022	Total Number of Shares Purchased (000’s)	Average Price Paid per Share (dollars)		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)
April 1 - April 30	April 1 - April 30	723	$	82.96	723	$	4,565	April 1 - April 30	2,050	$	99.79	2,050	$	5,000
May 1 - May 31	May 1 - May 31	3,564	85.58		3,564	$	4,260	May 1 - May 31	5,307	93.20		5,307	4,505
June 1 - June 30	June 1 - June 30	3,158	88.60		3,158	$	3,980	June 1 - June 30	3,807	93.86		3,807	4,148
Total	Total	7,445	$	86.61	7,445			Total	11,164	$	94.64	11,164

On December 7, ~~2020,~~2021, our Board of Directors authorized a share repurchase program for up to $5$6 billion of our common stock, replacing the previous program announced on ~~October 14, 2015.~~December 7, 2020. 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.~~Act of 1934, as amended. 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 June 30, ~~2021.~~2022.

Item 6. Exhibits


Exhibit Number						Exhibit Description

~~10.1~~						Separation Agreement, dated as of May 24, 2021, between Thomas A. Kennedy and Raytheon Technologies Corporation.*

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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*

101.SCH						Inline XBRL Taxonomy Extension Schema Document.*

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

Notes to Exhibits List:

* Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (ii) Condensed Consolidated Statement of Comprehensive Income for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (iii) Condensed Consolidated Balance Sheet as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, (iv) Condensed Consolidated Statement of Cash Flows for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (v) Condensed Consolidated Statement of Changes

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in Equity for the quarters and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 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:	July ~~27, 2021~~26, 2022	By:	/s/ NEIL G. MITCHILL, JR.
			Neil G. Mitchill, Jr.
			Executive Vice President and Chief Financial Officer

			(on behalf of the Registrant and as the Registrant’s Principal Financial Officer)

Dated:	July ~~27, 2021~~26, 2022	By:	/s/ ~~STEVEN A. FORREST~~AMY L. JOHNSON
			~~Steven A. Forrest~~Amy L. Johnson
			Corporate Vice President and ~~Acting~~ Controller

			(on behalf of the Registrant and as the Registrant’s Principal Accounting Officer)

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	Quarter Ended		Six Months Ended
(dollars in millions, except per share amounts)	June 30, 2020		June 30, 2020
Net sales	$	14,470	$	32,921
Loss from continuing operations attributable to common shareowners	(3,732)		(3,014)


Basic earnings (loss) per share of common stock from continuing operations	$	(2.49)	$	(2.08)


Diluted earnings (loss) per share of common stock from continuing operations	(2.49)		(2.07)


(dollars in millions)	Balance as of January 1, 2021		Acquisitions and Divestitures		Foreign Currency Translation and Other		Balance as of June 30, 2021
Collins Aerospace Systems	$	31,571	$	0	$	26	$	31,597
Pratt & Whitney	1,563		0		0		1,563
Raytheon Intelligence & Space(1)	9,522		30		5		9,557
Raytheon Missiles & Defense(1)	11,608		52		0		11,660
Total Segments	54,264		82		31		54,377
Eliminations and other	21		0		(4)		17
Total	$	54,285	$	82	$	27	$	54,394


(dollars in millions)	Remaining 2021		2022		2023		2024		2025		2026
Amortization expense	$	1,257	$	1,955	$	2,080	$	2,130	$	2,037	$	1,977


(dollars in millions)	Severance		Facility Exit and Other Costs		Total
Quarter Ended June 30, 2021
Restructuring accruals at March 31, 2021	$	23	$	9	$	32
Net pre-tax restructuring costs	63		2		65
Utilization, foreign exchange and other costs	(25)		(2)		(27)
Balance at June 30, 2021	$	61	$	9	$	70

Six Months Ended June 30, 2021
Restructuring accruals at December 31, 2020	$	0	$	0	$	0
Net pre-tax restructuring costs	87		14		101
Utilization, foreign exchange and other costs	(26)		(5)		(31)
Balance at June 30, 2021	$	61	$	9	$	70


(dollars in millions)	Expected Costs		Costs Incurred Quarter Ended March 31, 2021		Costs Incurred Quarter Ended June 30, 2021		Remaining Costs at June 30, 2021
Pratt & Whitney	$	25	$	(20)	$	(2)	$	3
Collins Aerospace Systems	62		(16)		(3)		43
Corporate expenses and other unallocated items	60		0		(60)		0

Total	$	147	$	(36)	$	(65)	$	46


(dollars in millions)	Severance		Facility Exit, and Other Costs		Total
Quarter Ended June 30, 2021
Restructuring accruals at March 31, 2021	$	205	$	4	$	209
Net pre-tax restructuring costs	(27)		3		(24)
Utilization, foreign exchange and other costs	(105)		46		(59)
Balance at June 30, 2021	$	73	$	53	$	126

Six Months Ended June 30, 2021
Restructuring accruals at December 31, 2020	$	334	$	6	$	340
Net pre-tax restructuring costs	(26)		6		(20)
Utilization, foreign exchange and other costs	(235)		41		(194)
Balance at June 30, 2021	$	73	$	53	$	126


(dollars in millions)	Expected Costs		Costs Incurred in 2020		Costs (Incurred) Reversed Quarter Ended March 31, 2021		Costs (Incurred) Reversed Quarter Ended June 30, 2021		Remaining Costs at June 30, 2021
Pratt & Whitney	$	188	$	(205)	$	0	$	17	$	0
Collins Aerospace Systems	334		(333)		1		7		9
Corporate expenses and other unallocated items	237		(232)		(5)		0		0
Total	$	759	$	(770)	$	(4)	$	24	$	9


(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Post-retirement Plans		Unrealized Hedging (Losses) Gains		Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2021
Balance at March 31, 2021	$	529	$	(4,441)	$	(9)	$	(3,921)
Other comprehensive income (loss) before reclassifications, net	258		(14)		108		352
Amounts reclassified, pre-tax	0		64		(20)		44
Tax benefit (expense)	2		(11)		(21)		(30)
Balance at June 30, 2021	$	789	$	(4,402)	$	58	$	(3,555)

Six Months Ended June 30, 2021
Balance at December 31, 2020	$	710	$	(4,483)	$	39	$	(3,734)
Other comprehensive income (loss) before reclassifications, net	82		(24)		62		120
Amounts reclassified, pre-tax	0		128		(34)		94
Tax benefit (expense)	(3)		(23)		(9)		(35)
Balance at June 30, 2021	$	789	$	(4,402)	$	58	$	(3,555)


	2020
(dollars in millions)	Q1			Q2			Q3			Q4			FY
Revised Net Sales
Collins Aerospace Systems	$	6,438		$	4,202		$	4,274		$	4,374		$	19,288
Pratt & Whitney	5,353			3,487			3,494			4,465			16,799
Raytheon Intelligence & Space	0			3,387			3,749			3,933			11,069
Raytheon Missiles & Defense	0			3,506			3,706			4,184			11,396
Total segments	11,791			14,582			15,223			16,956			58,552
Eliminations and other	(431)			(521)			(476)			(537)			(1,965)
Consolidated	$	11,360		$	14,061		$	14,747		$	16,419		$	56,587

Revised Operating Profit (Loss)
Collins Aerospace Systems	$	1,246		$	(317)		$	526		$	11		$	1,466
Pratt & Whitney	475			(457)			(615)			33			(564)
Raytheon Intelligence & Space	0			309			350			361			1,020
Raytheon Missiles & Defense	0			398			449			33			880
Total segments	1,721			(67)			710			438			2,802
Eliminations and other	(25)			(27)			(49)			(6)			(107)
Corporate expenses and other unallocated items	(130)			(277)			(84)			(99)			(590)
FAS/CAS operating adjustment	0			356			380			370			1,106
Acquisition accounting adjustments	(271)			(3,745)			(523)			(561)			(5,100)
Consolidated	$	1,295		$	(3,760)		$	434		$	142		$	(1,889)

Revised Segment Operating Profit (Loss) Margin
Collins Aerospace Systems	19.4		%	(7.5)		%	12.3		%	0.3		%	7.6		%
Pratt & Whitney	8.9		%	(13.1)		%	(17.6)		%	0.7		%	(3.4)		%
Raytheon Intelligence & Space	NM			9.1		%	9.3		%	9.2		%	9.2		%
Raytheon Missiles & Defense	NM			11.4		%	12.1		%	0.8		%	7.7		%
Total segment	14.6		%	(0.5)		%	4.7		%	2.6		%	4.8		%