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 ~~September~~June 30, ~~2022~~2023


☐			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~~RTX CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________


Delaware						06-0570975
(State or other jurisdiction of 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)


Raytheon Technologies Corporation

(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 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒. No ☐.

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “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 ~~September~~June 30, ~~2022~~2023 there were ~~1,470,060,775~~1,455,514,944 shares of Common Stock outstanding.

Table of Contents

~~RAYTHEON TECHNOLOGIES~~RTX CORPORATION

AND SUBSIDIARIES

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Quarter Ended ~~September~~June 30, ~~2022~~2023


			Page

PART I – FINANCIAL INFORMATION			4

Item 1. Unaudited Financial Statements:			4

Condensed Consolidated Statement of Operations for the quarters and ~~nine~~six months ended ~~September 30,~~June 3 0 , 2023 and 2022 ~~and 2021~~			4

Condensed Consolidated Statement of Comprehensive Income for the quarters and ~~nine months~~ six mon ths ended ~~September 30,~~June 3 0 , 2023 and 2022 ~~and 2021~~			5

Condensed Consolidated Balance Sheet at ~~September 30, 2022~~June 3 0 , 2023 and December 31, ~~2021~~2022			6

Condensed Consolidated Statement of Cash Flows for the ~~nine~~six months ended ~~September 30, 2022~~ June 3 0 , 2023 and ~~2021~~2022			7

Condensed Consolidated Statement of Changes in Equity for the quarters and ~~nine~~six months ended ~~September~~ June 30 ~~2022~~, 2023 and ~~2021~~2022			8

Notes to Condensed Consolidated Financial Statements			9

Report of Independent Registered Public Accounting Firm			30

Item 2. Management ’s Discussion and Analysis of Financial Condition and Results of Operations			31

Item 3. Quantitative and Qualitative Disclosures About Market Risk			51

Item 4. Controls and Procedures			51

PART II – OTHER INFORMATION			53

Item 1. Legal Proceedings			53

Item 1A. Risk Factors			53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			55

Item 5. Other Information			55

Item 6. Exhibits			56

SIGNATURES			57

~~Raytheon Technologies~~RTX Corporation and its subsidiaries’ names, abbreviations thereof, logos, and products and services designators are all either the registered or unregistered trademarks or tradenames of ~~Raytheon Technologies~~RTX Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and 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.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

~~RAYTHEON TECHNOLOGIES~~RTX CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	2022		2021		2022		2021		(dollars in millions, except per share amounts)	2023		2022		2023		2022
Net Sales:	Net Sales:									Net Sales:
Products sales	Products sales	$	12,756	$	12,331	$	36,876	$	36,174	Products sales	$	13,411	$	12,258	$	26,198	$	24,120
Services sales	Services sales	4,195		3,882		12,105		11,170		Services sales	4,904		4,056		9,331		7,910
Total net sales	Total net sales	16,951		16,213		48,981		47,344		Total net sales	18,315		16,314		35,529		32,030
Costs and Expenses:	Costs and Expenses:									Costs and Expenses:
Cost of sales - products	Cost of sales - products	10,493		10,296		30,353		30,267		Cost of sales - products	11,089		10,040		21,789		19,860
Cost of sales - services	Cost of sales - services	2,971		2,793		8,527		8,014		Cost of sales - services	3,429		2,816		6,374		5,556
Research and development	Research and development	662		676		1,995		1,922		Research and development	729		698		1,336		1,333
Selling, general and administrative	Selling, general and administrative	1,391		1,229		4,284		3,817		Selling, general and administrative	1,635		1,424		3,033		2,893
Total costs and expenses	Total costs and expenses	15,517		14,994		45,159		44,020		Total costs and expenses	16,882		14,978		32,532		29,642

Other income, net	Other income, net	46		124		91		314		Other income, net	25		17		113		45
Operating profit	Operating profit	1,480		1,343		3,913		3,638		Operating profit	1,458		1,353		3,110		2,433
Non-operating expense (income), net
Non-operating expense (income), net:										Non-operating expense (income), net:
Non-service pension income	Non-service pension income	(468)		(491)		(1,422)		(1,472)		Non-service pension income	(447)		(474)		(891)		(954)
Interest expense, net	Interest expense, net	311		358		958		1,046		Interest expense, net	333		329		648		647
Total non-operating expense (income), net	Total non-operating expense (income), net	(157)		(133)		(464)		(426)		Total non-operating expense (income), net	(114)		(145)		(243)		(307)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	1,637		1,476		4,377		4,064		Income from continuing operations before income taxes	1,572		1,498		3,353		2,740
Income tax expense	Income tax expense	242		3		518		690		Income tax expense	213		160		513		276
Net income from continuing operations	Net income from continuing operations	1,395		1,473		3,859		3,374		Net income from continuing operations	1,359		1,338		2,840		2,464
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations	Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations	8		73		65		162		Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations	32		34		87		57
Income from continuing operations attributable to common shareowners		1,387		1,400		3,794		3,212
Net income from continuing operations attributable to common shareowners										Net income from continuing operations attributable to common shareowners	1,327		1,304		2,753		2,407

Loss from discontinued operations attributable to common shareowners	Loss from discontinued operations attributable to common shareowners	—		(7)		(19)		(34)		Loss from discontinued operations attributable to common shareowners	—		—		—		(19)
Net income attributable to common shareowners	Net income attributable to common shareowners	$	1,387	$	1,393	$	3,775	$	3,178	Net income attributable to common shareowners	$	1,327	$	1,304	$	2,753	$	2,388

Earnings (loss) Per Share attributable to common shareowners - Basic:	Earnings (loss) Per Share attributable to common shareowners - Basic:									Earnings (loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations	Income from continuing operations	$	0.94	$	0.93	$	2.57	$	2.13	Income from continuing operations	$	0.91	$	0.88	$	1.89	$	1.62
Loss from discontinued operations	Loss from discontinued operations	—		—		(0.02)		(0.02)		Loss from discontinued operations	—		—		—		(0.01)
Net income attributable to common shareowners	Net income attributable to common shareowners	$	0.94	$	0.93	$	2.55	$	2.11	Net income attributable to common shareowners	$	0.91	$	0.88	$	1.89	$	1.61
Earnings (loss) Per Share attributable to common shareowners - Diluted:	Earnings (loss) Per Share attributable to common shareowners - Diluted:									Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations	Income from continuing operations	$	0.94	$	0.93	$	2.55	$	2.13	Income from continuing operations	$	0.90	$	0.88	$	1.87	$	1.61
Loss from discontinued operations	Loss from discontinued operations	—		—		(0.01)		(0.03)		Loss from discontinued operations	—		—		—		(0.01)
Net income attributable to common shareowners	Net income attributable to common shareowners	$	0.94	$	0.93	$	2.54	$	2.10	Net income attributable to common shareowners	$	0.90	$	0.88	$	1.87	$	1.60

See accompanying Notes to Condensed Consolidated Financial Statements

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~~RAYTHEON TECHNOLOGIES~~RTX CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Net income from continuing and discontinued operations	Net income from continuing and discontinued operations	$	1,395	$	1,466	$	3,840	$	3,340	Net income from continuing and discontinued operations	$	1,359	$	1,338	$	2,840	$	2,445
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	(1,050)		(321)		(1,998)		(239)		Foreign currency translation adjustments	404		(708)		526		(948)
Pension and postretirement benefit plans adjustments	Pension and postretirement benefit plans adjustments	48		86		116		190		Pension and postretirement benefit plans adjustments	(183)		47		(329)		68
Change in unrealized cash flow hedging	Change in unrealized cash flow hedging	(251)		(167)		(396)		(139)		Change in unrealized cash flow hedging	285		(182)		297		(145)
Other comprehensive income (loss), before tax	Other comprehensive income (loss), before tax	(1,253)		(402)		(2,278)		(188)		Other comprehensive income (loss), before tax	506		(843)		494		(1,025)
Income tax (expense) benefit related to items of other comprehensive income (loss)	Income tax (expense) benefit related to items of other comprehensive income (loss)	62		18		71		(17)		Income tax (expense) benefit related to items of other comprehensive income (loss)	(19)		27		22		9
Other comprehensive loss, net of tax		(1,191)		(384)		(2,207)		(205)
Other comprehensive income (loss), net of tax										Other comprehensive income (loss), net of tax	487		(816)		516		(1,016)
Comprehensive income	Comprehensive income	204		1,082		1,633		3,135		Comprehensive income	1,846		522		3,356		1,429
Less: Comprehensive income attributable to noncontrolling interest	Less: Comprehensive income attributable to noncontrolling interest	8		73		65		162		Less: Comprehensive income attributable to noncontrolling interest	32		34		87		57
Comprehensive income attributable to common shareowners	Comprehensive income attributable to common shareowners	$	196	$	1,009	$	1,568	$	2,973	Comprehensive income attributable to common shareowners	$	1,814	$	488	$	3,269	$	1,372

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

~~RAYTHEON TECHNOLOGIES~~RTX CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


(dollars in millions)	(dollars in millions)	September 30, 2022		December 31, 2021		(dollars in millions)	June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	5,381	$	7,832	Cash and cash equivalents	$	5,391	$	6,220
Accounts receivable, net	Accounts receivable, net	9,233		9,661		Accounts receivable, net	9,903		9,108
Contract assets	Contract assets	12,297		11,361		Contract assets	12,970		11,534
Inventory, net	Inventory, net	10,443		9,178		Inventory, net	11,997		10,617

Other assets, current	Other assets, current	4,467		4,018		Other assets, current	5,654		4,964
Total current assets	Total current assets	41,821		42,050		Total current assets	45,915		42,443
Customer financing assets	Customer financing assets	2,618		2,848		Customer financing assets	2,457		2,603
Fixed assets	Fixed assets	28,201		27,637		Fixed assets	30,175		29,116
Accumulated depreciation	Accumulated depreciation	(13,533)		(12,665)		Accumulated depreciation	(14,880)		(13,946)
Fixed assets, net	Fixed assets, net	14,668		14,972		Fixed assets, net	15,295		15,170
Operating lease right-of-use assets	Operating lease right-of-use assets	1,802		1,958		Operating lease right-of-use assets	1,812		1,829
Goodwill	Goodwill	53,168		54,436		Goodwill	54,122		53,840
Intangible assets, net	Intangible assets, net	37,046		38,516		Intangible assets, net	36,234		36,823
Other assets	Other assets	7,102		6,624		Other assets	6,326		6,156
Total assets	Total assets	$	158,225	$	161,404	Total assets	$	162,161	$	158,864
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	$	2,195	$	134	Short-term borrowings	$	1,076	$	625
Accounts payable	Accounts payable	9,017		8,751		Accounts payable	10,128		9,896
Accrued employee compensation	Accrued employee compensation	2,390		2,658		Accrued employee compensation	2,121		2,401
Other accrued liabilities	Other accrued liabilities	11,210		10,162		Other accrued liabilities	11,719		10,999
Contract liabilities	Contract liabilities	13,368		13,720		Contract liabilities	15,162		14,598

Long-term debt currently due	Long-term debt currently due	193		24		Long-term debt currently due	1,554		595
Total current liabilities	Total current liabilities	38,373		35,449		Total current liabilities	41,760		39,114
Long-term debt	Long-term debt	31,059		31,327		Long-term debt	32,723		30,694
Operating lease liabilities, non-current	Operating lease liabilities, non-current	1,539		1,657		Operating lease liabilities, non-current	1,570		1,586
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	7,362		7,855		Future pension and postretirement benefit obligations	4,579		4,807
Other long-term liabilities	Other long-term liabilities	8,124		10,417		Other long-term liabilities	7,442		8,449
Total liabilities	Total liabilities	86,457		86,705		Total liabilities	88,074		84,650
Commitments and contingencies (Note 15)	Commitments and contingencies (Note 15)					Commitments and contingencies (Note 15)
Redeemable noncontrolling interest	Redeemable noncontrolling interest	33		35		Redeemable noncontrolling interest	31		36
Shareowners’ Equity:	Shareowners’ Equity:					Shareowners’ Equity:
Common stock	Common stock	37,829		37,483		Common stock	38,228		37,939
Treasury stock	Treasury stock	(15,141)		(12,727)		Treasury stock	(16,713)		(15,530)
Retained earnings	Retained earnings	51,652		50,265		Retained earnings	52,489		52,269
Unearned ESOP shares	Unearned ESOP shares	(31)		(38)		Unearned ESOP shares	(22)		(28)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(4,122)		(1,915)		Accumulated other comprehensive loss	(1,502)		(2,018)
Total shareowners’ equity	Total shareowners’ equity	70,187		73,068		Total shareowners’ equity	72,480		72,632
Noncontrolling interest	Noncontrolling interest	1,548		1,596		Noncontrolling interest	1,576		1,546
Total equity	Total equity	71,735		74,664		Total equity	74,056		74,178
Total liabilities, redeemable noncontrolling interest and equity	Total liabilities, redeemable noncontrolling interest and equity	$	158,225	$	161,404	Total liabilities, redeemable noncontrolling interest and equity	$	162,161	$	158,864

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

~~RAYTHEON TECHNOLOGIES~~RTX CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		(dollars in millions)	2023		2022
Operating Activities:	Operating Activities:					Operating Activities:
Net income from continuing operations	Net income from continuing operations	$	3,859	$	3,374	Net income from continuing operations	$	2,840	$	2,464
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 (used in) provided by operating activities:						Adjustments to reconcile net income from continuing operations to net cash flows (used in) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	3,060		3,413		Depreciation and amortization	2,078		2,013
Deferred income tax benefit	Deferred income tax benefit	(1,681)		(142)		Deferred income tax benefit	(700)		(1,147)
Stock compensation cost	Stock compensation cost	318		343		Stock compensation cost	212		212
Net periodic pension and other postretirement income	Net periodic pension and other postretirement income	(1,062)		(1,073)		Net periodic pension and other postretirement income	(778)		(714)

Change in:	Change in:					Change in:
Accounts receivable	Accounts receivable	321		(397)		Accounts receivable	(699)		(790)
Contract assets	Contract assets	(999)		(1,117)		Contract assets	(1,430)		(525)
Inventory	Inventory	(1,434)		(57)		Inventory	(1,322)		(1,033)
Other current assets	Other current assets	(584)		(275)		Other current assets	(634)		(353)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	1,298		425		Accounts payable and accrued liabilities	(149)		2,109
Contract liabilities	Contract liabilities	(284)		83		Contract liabilities	255		(309)

Other operating activities, net	Other operating activities, net	(272)		(596)		Other operating activities, net	183		(165)
Net cash flows provided by operating activities from continuing operations		2,540		3,981
Net cash flows (used in) provided by operating activities from continuing operations						Net cash flows (used in) provided by operating activities from continuing operations	(144)		1,762
Investing Activities:	Investing Activities:					Investing Activities:
Capital expenditures	Capital expenditures	(1,433)		(1,180)		Capital expenditures	(1,046)		(918)
Investments in businesses		(66)		(6)
Dispositions of businesses, net of cash transferred (Note 2)		94		1,074

Customer financing assets receipts, net		25		24
Increase in collaboration intangible assets		(169)		(138)
(Payments) receipts from settlements of derivative contracts, net		(259)		42
Dispositions of businesses, net of cash transferred						Dispositions of businesses, net of cash transferred	—		88
Customer financing assets receipts (payments), net						Customer financing assets receipts (payments), net	42		(7)
Increase in other intangible assets						Increase in other intangible assets	(314)		(185)
Receipts (payments) from settlements of derivative contracts, net						Receipts (payments) from settlements of derivative contracts, net	45		(151)
Other investing activities, net	Other investing activities, net	(83)		45		Other investing activities, net	71		37
Net cash flows used in investing activities from continuing operations	Net cash flows used in investing activities from continuing operations	(1,891)		(139)		Net cash flows used in investing activities from continuing operations	(1,202)		(1,136)
Financing Activities:	Financing Activities:					Financing Activities:
Issuance of long-term debt	Issuance of long-term debt	—		1,981		Issuance of long-term debt	2,974		—
Repayment of long-term debt	Repayment of long-term debt	(2)		(2,547)		Repayment of long-term debt	(3)		(2)

Change in commercial paper, net (Note 8)	Change in commercial paper, net (Note 8)	2,067		—		Change in commercial paper, net (Note 8)	470		—
Change in other short-term borrowings, net	Change in other short-term borrowings, net	(14)		(41)		Change in other short-term borrowings, net	(24)		(17)

Dividends paid on common stock	Dividends paid on common stock	(2,337)		(2,212)		Dividends paid on common stock	(1,634)		(1,543)
Repurchase of common stock	Repurchase of common stock	(2,395)		(2,000)		Repurchase of common stock	(1,158)		(1,779)
Net transfers to discontinued operations		—		(27)

Other financing activities, net	Other financing activities, net	(329)		(336)		Other financing activities, net	(157)		(286)
Net cash flows used in financing activities from continuing operations		(3,010)		(5,182)
Discontinued Operations:
Net cash used in operating activities		—		(27)
Net cash used in investing activities		—		—
Net cash provided by financing activities		—		27
Net cash flows provided by (used in) financing activities from continuing operations						Net cash flows provided by (used in) financing activities from continuing operations	468		(3,627)

Net cash used in discontinued operations		—		—

Effect of foreign exchange rate changes on cash and cash equivalents	Effect of foreign exchange rate changes on cash and cash equivalents	(57)		10		Effect of foreign exchange rate changes on cash and cash equivalents	19		(20)

Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(2,418)		(1,330)		Net decrease in cash, cash equivalents and restricted cash	(859)		(3,021)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	7,853		8,832		Cash, cash equivalents and restricted cash, beginning of period	6,291		7,853

Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	5,435		7,502		Cash, cash equivalents and restricted cash, end of period	5,432		4,832
Less: Restricted cash, included in other assets		54		26
Less: Restricted cash, included in Other assets, current and Other assets						Less: Restricted cash, included in Other assets, current and Other assets	41		65

Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	5,381	$	7,476	Cash and cash equivalents, end of period	$	5,391	$	4,767

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

~~RAYTHEON TECHNOLOGIES~~RTX CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)


		Quarter Ended September 30,				Nine Months Ended September 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)	2022		2021		2022		2021		(dollars in millions, except per share amounts; shares in thousands)	2023		2022		2023		2022
Equity beginning balance	Equity beginning balance	$	71,990	$	72,721	$	74,664	$	73,852	Equity beginning balance	$	74,347	$	73,986	$	74,178	$	74,664
Common Stock	Common Stock									Common Stock
Beginning balance	Beginning balance	37,673		37,183		37,483		36,930		Beginning balance	38,031		37,504		37,939		37,483
Common stock plans activity	Common stock plans activity	156		160		359		413		Common stock plans activity	198		169		290		203
Purchase of subsidiary shares from noncontrolling interest, net	Purchase of subsidiary shares from noncontrolling interest, net	—		—		(13)		—		Purchase of subsidiary shares from noncontrolling interest, net	(1)		—		(1)		(13)
Ending balance	Ending balance	37,829		37,343		37,829		37,343		Ending balance	38,228		37,673		38,228		37,673
Treasury Stock	Treasury Stock									Treasury Stock
Beginning balance	Beginning balance	(14,539)		(11,424)		(12,727)		(10,407)		Beginning balance	(16,112)		(13,483)		(15,530)		(12,727)

Common stock repurchased	Common stock repurchased	(602)		(982)		(2,414)		(2,002)		Common stock repurchased	(601)		(1,056)		(1,183)		(1,812)
Other		—		8		—		11

Ending balance	Ending balance	(15,141)		(12,398)		(15,141)		(12,398)		Ending balance	(16,713)		(14,539)		(16,713)		(14,539)
Retained Earnings	Retained Earnings									Retained Earnings
Beginning balance	Beginning balance	50,271		48,954		50,265		49,423		Beginning balance	52,891		50,592		52,269		50,265
Net income	Net income	1,387		1,393		3,775		3,178		Net income	1,327		1,304		2,753		2,388
Dividends on common stock	Dividends on common stock	5		3		(2,337)		(2,212)		Dividends on common stock	(1,687)		(1,597)		(2,477)		(2,342)
Dividends on ESOP common stock	Dividends on ESOP common stock	—		—		(40)		(37)		Dividends on ESOP common stock	(29)		(27)		(42)		(40)

Other	Other	(11)		(7)		(11)		(9)		Other	(13)		(1)		(14)		—
Ending balance	Ending balance	51,652		50,343		51,652		50,343		Ending balance	52,489		50,271		52,489		50,271
Unearned ESOP Shares	Unearned ESOP Shares									Unearned ESOP Shares
Beginning balance	Beginning balance	(33)		(43)		(38)		(49)		Beginning balance	(26)		(36)		(28)		(38)
Common stock plans activity	Common stock plans activity	2		2		7		8		Common stock plans activity	4		3		6		5
Ending balance	Ending balance	(31)		(41)		(31)		(41)		Ending balance	(22)		(33)		(22)		(33)
Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss									Accumulated Other Comprehensive Loss
Beginning balance	Beginning balance	(2,931)		(3,555)		(1,915)		(3,734)		Beginning balance	(1,989)		(2,115)		(2,018)		(1,915)
Other comprehensive loss, net of tax		(1,191)		(384)		(2,207)		(205)
Other comprehensive income (loss), net of tax										Other comprehensive income (loss), net of tax	487		(816)		516		(1,016)

Ending balance	Ending balance	(4,122)		(3,939)		(4,122)		(3,939)		Ending balance	(1,502)		(2,931)		(1,502)		(2,931)
Noncontrolling Interest	Noncontrolling Interest									Noncontrolling Interest
Beginning balance	Beginning balance	1,549		1,606		1,596		1,689		Beginning balance	1,552		1,524		1,546		1,596
Net income	Net income	8		73		65		162		Net income	32		34		87		57
Less: Redeemable noncontrolling interest net income	Less: Redeemable noncontrolling interest net income	(3)		(2)		(6)		(5)		Less: Redeemable noncontrolling interest net income	(1)		(2)		(3)		(3)

Dividends attributable to noncontrolling interest	Dividends attributable to noncontrolling interest	(6)		(47)		(81)		(216)		Dividends attributable to noncontrolling interest	(7)		(11)		(51)		(75)
Purchase of subsidiary shares from noncontrolling interest, net	Purchase of subsidiary shares from noncontrolling interest, net	—		—		(19)		—		Purchase of subsidiary shares from noncontrolling interest, net	—		—		—		(19)
Disposition of noncontrolling interest, net	Disposition of noncontrolling interest, net	—		(1)		(13)		(1)		Disposition of noncontrolling interest, net	—		(2)		(3)		(13)
Capital contributions	Capital contributions	—		—		6		—		Capital contributions	—		6		—		6

Ending balance	Ending balance	1,548		1,629		1,548		1,629		Ending balance	1,576		1,549		1,576		1,549
Equity at September 30		$	71,735	$	72,937	$	71,735	$	72,937
Equity at June 30										Equity at June 30	$	74,056	$	71,990	$	74,056	$	71,990
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	189		240		2,469		1,516		Shares of common stock issued under employee plans, net	410		463		1,230		2,280
Shares of common stock repurchased	Shares of common stock repurchased	6,642		11,535		25,688		24,177		Shares of common stock repurchased	6,036		11,163		11,954		19,046
Dividends declared per share of common stock	Dividends declared per share of common stock	$	—	$	—	$	1.610	$	1.495	Dividends declared per share of common stock	$	1.180	$	1.100	$	1.730	$	1.610

See accompanying Notes to Condensed Consolidated Financial Statements

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~~RAYTHEON TECHNOLOGIES~~RTX CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The Condensed Consolidated Financial Statements at ~~September~~June 30, ~~2022~~2023 and for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 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 ~~2021~~2022 Annual Report on Form 10-K.

We reclassified certain immaterial prior period amounts within the Condensed Consolidated Statement of Cash Flows to conform to our current period presentation.

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

Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD) follow a 4-4-5 fiscal calendar while Collins Aerospace ~~Systems~~ (Collins) and Pratt & Whitney use a quarter calendar end. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended ~~September~~June 30, ~~2022~~2023 and ~~September 30, 2021~~2022 with respect to RIS or RMD, we are referring to their ~~October~~July 2, ~~2022~~2023 and ~~October~~July 3, ~~2021~~2022 fiscal quarter ends, respectively.

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

Effective July 1, 2023, we streamlined the structure of our core businesses from four principal business segments to three principal business segments: Collins Aerospace, Pratt & Whitney, and Raytheon. All segment information included in this Form 10-Q is reflective of the four segments of Collins, Pratt & Whitney, RIS, and RMD in accordance with the management structure in place as of June 30, 2023. See “Note 20: Subsequent Events” for additional information.

Russia Sanctions. In response to the 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.~~operate, including certain members of the Company’s management team and Board of Directors. 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 aerospace sector. These measures have adversely affected, and could continue to adversely affect, the Company and/or our supply chain, business partners, or customers. As a result of these sanctions on Russia and export controls, in the first quarter of 2022, we recorded pretax charges of $290 million, $210 million net of tax, and the impact of noncontrolling interest, within our Collins and Pratt & Whitney businesses primarily related to increased estimates for credit losses on both our accounts ~~receivables~~receivable 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 our supply chain, business partners, or customers.

~~COVID-19~~Coronavirus Disease 2019 (COVID-19) Pandemic. The ~~coronavirus disease 2019 (COVID-19)~~COVID-19 pandemic ~~continues to negatively affect~~caused continuing negative effects on the global economy, our business and operations, the labor market, supply chains, inflation, and the industries in which we operate. ~~However, we continue to see signs of ongoing recovery in commercial air travel. While we~~We believe ~~that~~ the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, ~~there continues~~and expect to ~~be uncertainty with respect to when commercial air traffic capacity will~~ fully return to and/or exceed ~~pre-COVID-19 levels.~~pre-pandemic levels as we exit 2023. Our expectations regarding the negative effects of the COVID-19 pandemic and 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.

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Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets

~~Acquisitions.~~ ~~During the nine months ended September 30, 2022 and 2021, our investment in business acquisitions were $66 million and $6 million, respectively, and consisted of immaterial acquisitions.~~

~~Dispositions.~~ ~~During the nine months ended September 30, 2022 and 2021, cash inflows related to dispositions were $94 million and $1.1 billion, respectively.~~

~~Our dispositions of businesses in the nine months ended September 30, 2022 consisted of immaterial dispositions.~~

Dispositions of businesses in the nine months ended September 30, 2021 reflect the January 8, 2021 sale of our Forcepoint business, for proceeds of $1.1 billion, net of cash transferred. We did not recognize a pre-tax gain or loss within the Condensed Consolidated Statement of Operations related to the sale of Forcepoint.

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Goodwill. Changes in our goodwill balances for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 were as follows:


(dollars in millions)	(dollars in millions)	Balance as of January 1, 2022		Acquisitions and Divestitures		Foreign Currency Translation and Other		Balance as of September 30, 2022		(dollars in millions)	Balance as of December 31, 2022		Acquisitions and Divestitures		Foreign Currency Translation and Other		Balance as of June 30, 2023
Collins Aerospace Systems		$	31,384	$	(36)	$	(1,293)	$	30,055
Collins Aerospace										Collins Aerospace	$	30,719	$	—	$	282	$	31,001
Pratt & Whitney	Pratt & Whitney	1,563		—		—		1,563		Pratt & Whitney	1,563		—		—		1,563
Raytheon Intelligence & Space	Raytheon Intelligence & Space	9,813		26		(2)		9,837		Raytheon Intelligence & Space	9,841		—		—		9,841
Raytheon Missiles & Defense	Raytheon Missiles & Defense	11,659		41		(4)		11,696		Raytheon Missiles & Defense	11,700		—		—		11,700
Total Segments	Total Segments	54,419		31		(1,299)		53,151		Total Segments	53,823		—		282		54,105
Eliminations and other	Eliminations and other	17		—		—		17		Eliminations and other	17		—		—		17
Total	Total	$	54,436	$	31	$	(1,299)	$	53,168	Total	$	53,840	$	—	$	282	$	54,122

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


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
(dollars in millions)	(dollars in millions)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization		(dollars in millions)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Amortized:	Amortized:									Amortized:

Collaboration assets	Collaboration assets	$	5,480	$	(1,335)	$	5,319	$	(1,173)	Collaboration assets	$	5,663	$	(1,531)	$	5,536	$	(1,408)
Exclusivity assets	Exclusivity assets	2,807		(320)		2,673		(318)		Exclusivity assets	3,151		(343)		2,911		(323)
Developed technology and other	Developed technology and other	1,186		(510)		1,214		(466)		Developed technology and other	1,220		(593)		1,202		(544)
Customer relationships	Customer relationships	29,649		(8,510)		29,982		(7,411)		Customer relationships	29,839		(9,836)		29,775		(8,967)
		39,122		(10,675)		39,188		(9,368)			39,873		(12,303)		39,424		(11,242)
Unamortized:
Indefinite-lived:										Indefinite-lived:
Trademarks and other	Trademarks and other	8,599		—		8,696		—		Trademarks and other	8,664		—		8,641		—
Total	Total	$	47,721	$	(10,675)	$	47,884	$	(9,368)	Total	$	48,537	$	(12,303)	$	48,065	$	(11,242)

Amortization of intangible assets for the quarters and ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 ~~and 2021 were $497~~was $510 million and ~~$1,451~~$1,019 million and ~~$622~~$467 million and ~~$1,820~~$954 million, respectively. The following is the expected amortization of intangible assets for the remainder of ~~2022~~2023 through ~~2027:~~2028:


(dollars in millions)	(dollars in millions)	Remaining 2022		2023		2024		2025		2026		2027		(dollars in millions)	Remaining 2023		2024		2025		2026		2027		2028
Amortization expense	Amortization expense	$	487	$	2,084	$	2,206	$	2,090	$	2,007	$	1,868	Amortization expense	$	973	$	2,203	$	2,089	$	2,007	$	1,891	$	1,776

On July 20, 2023, we entered into a definitive agreement to sell our actuation systems portfolio within our Collins segment for approximately $1.8 billion in cash. The closing of the transaction is subject to regulatory approvals and other customary closing conditions.

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Note 3: Earnings Per Share


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars and shares in millions, except per share amounts)	(dollars and shares in millions, except per share amounts)	2022		2021		2022		2021		(dollars and shares in millions, except per share amounts)	2023		2022		2023		2022
Net income attributable to common shareowners:	Net income attributable to common shareowners:									Net income attributable to common shareowners:
Income from continuing operations	Income from continuing operations	$	1,387	$	1,400	$	3,794	$	3,212	Income from continuing operations	$	1,327	$	1,304	$	2,753	$	2,407
Loss from discontinued operations	Loss from discontinued operations	—		(7)		(19)		(34)		Loss from discontinued operations	—		—		—		(19)
Net income attributable to common shareowners	Net income attributable to common shareowners	$	1,387	$	1,393	$	3,775	$	3,178	Net income attributable to common shareowners	$	1,327	$	1,304	$	2,753	$	2,388
Basic weighted average number of shares outstanding	Basic weighted average number of shares outstanding	1,470.1		1,497.9		1,478.7		1,505.0		Basic weighted average number of shares outstanding	1,457.5		1,479.2		1,459.9		1,482.9
Stock awards and equity units (share equivalent)	Stock awards and equity units (share equivalent)	9.2		8.0		10.2		6.0		Stock awards and equity units (share equivalent)	11.2		10.4		11.6		10.8
Diluted weighted average number of shares outstanding	Diluted weighted average number of shares outstanding	1,479.3		1,505.9		1,488.9		1,511.0		Diluted weighted average number of shares outstanding	1,468.7		1,489.6		1,471.5		1,493.7
Earnings (Loss) Per Share attributable to common shareowners - Basic:	Earnings (Loss) Per Share attributable to common shareowners - Basic:									Earnings (Loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations	Income from continuing operations	$	0.94	$	0.93	$	2.57	$	2.13	Income from continuing operations	$	0.91	$	0.88	$	1.89	$	1.62
Loss from discontinued operations	Loss from discontinued operations	—		—		(0.02)		(0.02)		Loss from discontinued operations	—		—		—		(0.01)
Net income attributable to common shareowners	Net income attributable to common shareowners	$	0.94	$	0.93	$	2.55	$	2.11	Net income attributable to common shareowners	$	0.91	$	0.88	$	1.89	$	1.61
Earnings (Loss) Per Share attributable to common shareowners - Diluted:	Earnings (Loss) Per Share attributable to common shareowners - Diluted:									Earnings (Loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations	Income from continuing operations	$	0.94	$	0.93	$	2.55	$	2.13	Income from continuing operations	$	0.90	$	0.88	$	1.87	$	1.61
Loss from discontinued operations	Loss from discontinued operations	—		—		(0.01)		(0.03)		Loss from discontinued operations	—		—		—		(0.01)
Net income attributable to common shareowners	Net income attributable to common shareowners	$	0.94	$	0.93	$	2.54	$	2.10	Net income attributable to common shareowners	$	0.90	$	0.88	$	1.87	$	1.60

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 release or exercise of stock awards when the awards’ assumed proceeds exceed the average market price of the common shares during the period. For both the quarter and ~~nine~~six months ended ~~September~~June 30, 2023, the number of stock awards excluded from the computation was 4.0 million. For the quarter and six months ended June 30, 2022, the number of stock awards excluded from the computation was ~~10.4~~3.4 million and ~~7.1 million, respectively. For the quarter and nine months ended September 30, 2021, the number of stock awards excluded from the computation was 8.0 million and 15.3~~5.4 million, respectively.

Note 4: Changes in Contract Estimates at Completion

We review our Estimates at Completion (EACs) at least annually or when a change in circumstances 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 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 must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials including any impact from changing costs or inflation, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer, overhead cost rates, and current and past maintenance cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among others. In particular, fixed-price development programs involve significant management judgment, as development contracts by nature have elements that have not been done before and thus, are highly subject to future unexpected cost changes. 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. 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

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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 September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	2022		2021		2022		2021		(dollars in millions, except per share amounts)	2023		2022		2023		2022
Total net sales	Total net sales	$	72	$	82	$	150	$	207	Total net sales	$	(29)	$	(19)	$	(69)	$	78
Operating profit	Operating profit	7		25		2		64		Operating profit	(30)		(41)		(154)		(5)
Income from continuing operations attributable to common shareowners(1)	Income from continuing operations attributable to common shareowners(1)	6		20		2		51		Income from continuing operations attributable to common shareowners(1)	(24)		(32)		(122)		(4)
Diluted earnings per share from continuing operations attributable to common shareholders (1)		$	—	$	0.01	$	—	$	0.03
Diluted earnings per share from continuing operations attributable to common shareowners (1)										Diluted earnings per share from continuing operations attributable to common shareowners (1)	$	(0.02)	$	(0.02)	$	(0.08)	$	—

(1) Amounts reflect a U.S. statutory tax rate of 21%, which approximates our tax rate on our EAC adjustments.

Note 5: Accounts Receivable, Net

Accounts receivable, net consisted of the following:
(dollars in millions) September 30, 2022 December 31, 2021
Accounts receivable $ 9,717 $ 10,136
Allowance for expected credit losses (484) (475)
Total accounts receivable, net $ 9,233 $ 9,661


(dollars in millions)	June 30, 2023		December 31, 2022
Accounts receivable	$	10,289	$	9,560
Allowance for expected credit losses	(386)		(452)
Total accounts receivable, net	$	9,903	$	9,108

Note 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 were as follows:


(dollars in millions)	(dollars in millions)	September 30, 2022		December 31, 2021		(dollars in millions)	June 30, 2023		December 31, 2022
Contract assets	Contract assets	$	12,297	$	11,361	Contract assets	$	12,970	$	11,534
Contract liabilities	Contract liabilities	(13,368)		(13,720)		Contract liabilities	(15,162)		(14,598)
Net contract liabilities	Net contract liabilities	$	(1,071)	$	(2,359)	Net contract liabilities	$	(2,192)	$	(3,064)

Contract assets increased ~~$936~~$1,436 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 primarily due to sales in excess of billings on certain contracts at RMD and Pratt & Whitney, partially offset by a decrease in contract assets driven by a customer insolvency charge at Pratt & ~~Whitney, RMD and RIS.~~Whitney. Contract liabilities ~~decreased $352~~increased $564 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 primarily due to ~~the effect~~billings in excess of ~~foreign currency exchange rate translation fluctuations at RMD and revenue recognized~~sales on certain contracts ~~associated with performance~~ at ~~RMD and RIS.~~Pratt & Whitney. We recognized revenue of ~~$1.1~~$1.5 billion and ~~$4.1~~$3.4 billion during the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, related to contract liabilities as of January 1, ~~2022~~2023 and ~~$1.0~~$1.2 billion and ~~$3.7~~$3.0 billion during the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, related to contract liabilities as of January 1, ~~2021.~~2022.

As of ~~September~~June 30, ~~2022,~~2023, our Contract liabilities include approximately ~~$355~~$405 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated. In addition, as of September 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 expected credit losses of ~~$315~~$256 million and ~~$251~~$318 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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Note 7: Inventory, net

(dollars in millions) September 30, 2022 December 31, 2021
Raw materials $ 3,387 $ 3,024
Work-in-process 3,747 3,085
Finished goods 3,309 3,069
Total inventory, net $ 10,443 $ 9,178
Inventory, net consisted of the following:


(dollars in millions)	June 30, 2023		December 31, 2022
Raw materials	$	3,931	$	3,477
Work-in-process	4,186		3,839
Finished goods	3,880		3,301
Total inventory, net	$	11,997	$	10,617

Note 8: Borrowings and Lines of Credit

As of ~~September~~June 30, ~~2022,~~2023, 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, which expires in April 2025, and a $2.0 billion revolving credit agreement, which ~~was renewed in September 2022 and~~ expires in September 2023. As of ~~September~~June 30, ~~2022,~~2023, there were no borrowings outstanding under these agreements.

From time to time, we use commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments, and repurchases of our common stock. The commercial paper notes have original maturities of not more than 364 days from the date of issuance. As of ~~September~~June 30, ~~2022,~~2023, 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 ~~$2.1~~$1.0 billion and $0.5 billion of commercial paper borrowings outstanding at ~~September~~June 30, 2023 and December 31, 2022, respectively, which is reflected in Short-term borrowings in our Condensed Consolidated Balance Sheet. At ~~September~~June 30, 2023 and December 31, 2022, short-term commercial paper borrowings outstanding had a weighted-average interest rate of ~~3.6%. There was~~5.5% and 4.4%, respectively.

During the six months ended June 30, 2023, we had no new commercial paper ~~outstanding at December 31, 2021.~~

~~Proceeds from issuance of commercial paper~~borrowings with maturities greater than 90 ~~days were $1.4 billion during~~days. During the ~~nine~~six months ended ~~September~~June 30, ~~2022. There were no~~2023, we made $200 million in repayments of commercial paper with maturities greater than 90 ~~days during~~days. During the ~~nine~~six months ended ~~September~~June 30, ~~2022. During the nine months ended September 30, 2021~~2022, we had no commercial paper borrowings ~~had~~or repayments with original maturities ~~of not~~ more than 90 days from the date of issuance.

We had ~~no issuances of long-term debt during the nine months ended September 30, 2022. We had~~ the following issuances of long-term debt during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2023:


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


~~August 10, 2021~~February 27, 2023	~~1.900%~~5.000% notes due ~~2031~~ ~~(1)~~ 2026	$	~~1,000~~500
	~~2.820%~~5.150% notes due ~~2051~~ ~~(1)~~ 2033	~~1,000~~1,250
	5.375% notes due 2053














	1,250

~~(1) The net proceeds received from these debt issuances, along with cash on hand, were used to fund the repayment of our 2.800% and 2.500% notes due in 2022.~~

~~We made the following repayments of long-term debt during the nine months ended September 30, 2021:~~


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










~~August 26, 2021~~	~~2.800% notes due 2022~~	$	~~1,100~~
	~~2.500% notes due 2022~~	~~1,100~~
~~March 1, 2021~~	~~8.750% notes due 2021~~	~~250~~

Long-term debt consisted of the following:


(dollars in millions)	(dollars in millions)	September 30, 2022		December 31, 2021		(dollars in millions)	June 30, 2023		December 31, 2022

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 (1)	3.150% notes due 2024 (1)	300		300		3.150% notes due 2024 (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
5.000% notes due 2026 (1)						5.000% notes due 2026 (1)	500		—
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 (1)						7.200% notes due 2027 (1)	382		382
7.100% notes due 2027						7.100% notes due 2027	135		135
6.700% notes due 2028						6.700% notes due 2028	285		285
7.000% notes due 2028 (1)						7.000% notes due 2028 (1)	185		185
4.125% notes due 2028 (1)						4.125% notes due 2028 (1)	3,000		3,000

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7.200% notes due 2027 (1)		382		382
7.100% notes due 2027		135		135
6.700% notes due 2028		285		285
7.000% notes due 2028 (1)		185		185
4.125% notes due 2028 (1)		3,000		3,000
7.500% notes due 2029 (1)	7.500% notes due 2029 (1)	414		414		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)	488		565		2.150% notes due 2030 (€500 million principal value) (1)	544		531
2.250% notes due 2030 (1)	2.250% notes due 2030 (1)	1,000		1,000		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		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		2.375% notes due 2032 (1)	1,000		1,000
5.150% notes due 2033 (1)						5.150% notes due 2033 (1)	1,250		—
5.400% notes due 2035 (1)	5.400% notes due 2035 (1)	446		446		5.400% notes due 2035 (1)	446		446
6.050% notes due 2036 (1)	6.050% notes due 2036 (1)	410		410		6.050% notes due 2036 (1)	410		410
6.800% notes due 2036 (1)	6.800% notes due 2036 (1)	117		117		6.800% notes due 2036 (1)	117		117
7.000% notes due 2038	7.000% notes due 2038	148		148		7.000% notes due 2038	148		148
6.125% notes due 2038 (1)	6.125% notes due 2038 (1)	575		575		6.125% notes due 2038 (1)	575		575
4.450% notes due 2038 (1)	4.450% notes due 2038 (1)	750		750		4.450% notes due 2038 (1)	750		750
5.700% notes due 2040 (1)	5.700% notes due 2040 (1)	553		553		5.700% notes due 2040 (1)	553		553
4.875% notes due 2040 (1)	4.875% notes due 2040 (1)	600		600		4.875% notes due 2040 (1)	600		600
4.700% notes due 2041 (1)	4.700% notes due 2041 (1)	425		425		4.700% notes due 2041 (1)	425		425
4.500% notes due 2042 (1)	4.500% notes due 2042 (1)	3,500		3,500		4.500% notes due 2042 (1)	3,500		3,500
4.800% notes due 2043 (1)	4.800% notes due 2043 (1)	400		400		4.800% notes due 2043 (1)	400		400
4.200% notes due 2044 (1)	4.200% notes due 2044 (1)	300		300		4.200% notes due 2044 (1)	300		300
4.150% notes due 2045 (1)	4.150% notes due 2045 (1)	850		850		4.150% notes due 2045 (1)	850		850
3.750% notes due 2046 (1)	3.750% notes due 2046 (1)	1,100		1,100		3.750% notes due 2046 (1)	1,100		1,100
4.050% notes due 2047 (1)	4.050% notes due 2047 (1)	600		600		4.050% notes due 2047 (1)	600		600
4.350% notes due 2047 (1)	4.350% notes due 2047 (1)	1,000		1,000		4.350% notes due 2047 (1)	1,000		1,000
4.625% notes due 2048 (1)	4.625% notes due 2048 (1)	1,750		1,750		4.625% notes due 2048 (1)	1,750		1,750
3.125% notes due 2050 (1)	3.125% notes due 2050 (1)	1,000		1,000		3.125% notes due 2050 (1)	1,000		1,000
2.820% notes due 2051 (1)	2.820% notes due 2051 (1)	1,000		1,000		2.820% notes due 2051 (1)	1,000		1,000
3.030% notes due 2052 (1)	3.030% notes due 2052 (1)	1,100		1,100		3.030% notes due 2052 (1)	1,100		1,100
5.375% notes due 2053 (1)						5.375% notes due 2053 (1)	1,250		—
Other (including finance leases)	Other (including finance leases)	256		270		Other (including finance leases)	262		253
Total principal long-term debt	Total principal long-term debt	31,209		31,300		Total principal long-term debt	34,271		31,249
Other (fair value adjustments, (discounts)/premiums, and debt issuance costs)		43		51
Other (fair market value adjustments, (discounts)/premiums, and debt issuance costs)						Other (fair market value adjustments, (discounts)/premiums, and debt issuance costs)	6		40
Total long-term debt	Total long-term debt	31,252		31,351		Total long-term debt	34,277		31,289
Less: current portion	Less: current portion	193		24		Less: current portion	1,554		595
Long-term debt, net of current portion	Long-term debt, net of current portion	$	31,059	$	31,327	Long-term debt, net of current portion	$	32,723	$	30,694

(1) We may redeem these notes, in whole or in part, at our option pursuant to their terms prior to the applicable maturity date.

The average maturity of our ~~Long-term~~long-term debt at ~~September~~June 30, ~~2022~~2023 is approximately 14 years.

Note 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.

Contributions to our plans were as follows:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2023		2022		2023		2022
U.S. qualified defined benefit plans	$	—	$	—	$	—	$	—
International defined benefit plans	20		18		28		30
PRB plans	8		4		12		9
Defined contribution plans	317		251		689		562

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~~Contributions~~In December 2020, we approved a change to ~~our~~the Raytheon Company domestic defined benefit pension plans ~~were as follows:~~

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2022 2021 2022 2021
U.S. qualified defined benefit plans $ — $ — $ — $ —
International defined benefit plans 18 8 48 29
PRB plans 8 5 18 9
Defined contribution plans 230 221 792 730
for non-union participants to cease future benefit accruals based on an employee’s years of service and compensation under the historical formula effective December 31, 2022. The plan change does not impact participants’ historical benefit accruals. Benefits for service after December 31, 2022 are based on a cash balance formula. This plan change resulted in lower pension service cost beginning January 1, 2023.

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


(dollars in millions)	(dollars in millions)	September 30, 2022		December 31, 2021		(dollars in millions)	June 30, 2023		December 31, 2022
Noncurrent pension assets (included in Other assets)	Noncurrent pension assets (included in Other assets)	$	4,175	$	3,214	Noncurrent pension assets (included in Other assets)	$	3,770	$	3,301
Current pension and PRB liabilities (included in Accrued employee compensation)	Current pension and PRB liabilities (included in Accrued employee compensation)	309		310		Current pension and PRB liabilities (included in Accrued employee compensation)	307		307
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	7,362		7,855		Future pension and postretirement benefit obligations	4,579		4,807

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


(dollars in millions)	(dollars in millions)	September 30, 2022		December 31, 2021		(dollars in millions)	June 30, 2023		December 31, 2022
Noncurrent pension liabilities	Noncurrent pension liabilities	$	6,440	$	6,873	Noncurrent pension liabilities	$	3,914	$	4,133
Noncurrent PRB liabilities	Noncurrent PRB liabilities	852		903		Noncurrent PRB liabilities	605		611
Other pension and PRB related items	Other pension and PRB related items	70		79		Other pension and PRB related items	60		63
Future pension and postretirement benefit obligations	Future pension and postretirement benefit obligations	$	7,362	$	7,855	Future pension and postretirement benefit obligations	$	4,579	$	4,807

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


		Pension Benefits Quarter Ended September 30,				PRB Quarter Ended September 30,					Pension Benefits Quarter Ended June 30,				PRB Quarter Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Operating expense	Operating expense									Operating expense
Service cost	Service cost	$	118	$	131	$	2	$	2	Service cost	$	56	$	118	$	1	$	2
Non-operating expense	Non-operating expense									Non-operating expense
Interest cost	Interest cost	380		312		7		6		Interest cost	627		380		12		7
Expected return on plan assets	Expected return on plan assets	(883)		(869)		(5)		(5)		Expected return on plan assets	(938)		(888)		(5)		(6)
Amortization of prior service credit	Amortization of prior service credit	(40)		(42)		—		(1)		Amortization of prior service credit	(40)		(41)		—		—
Recognized actuarial net loss (gain)	Recognized actuarial net loss (gain)	76		109		(3)		(2)		Recognized actuarial net loss (gain)	(95)		77		(8)		(3)
Net settlement, curtailment and special termination benefit (gain) loss	Net settlement, curtailment and special termination benefit (gain) loss	—		1		—		—		Net settlement, curtailment and special termination benefit (gain) loss	—		—		—		—
Non-service pension income	Non-service pension income	(467)		(489)		(1)		(2)		Non-service pension income	(446)		(472)		(1)		(2)
Total net periodic benefit (income) expense	Total net periodic benefit (income) expense	$	(349)	$	(358)	$	1	$	—	Total net periodic benefit (income) expense	$	(390)	$	(354)	$	—	$	—

Table of Contents


		Pension Benefits Nine Months Ended September 30,				PRB Nine Months Ended September 30,					Pension Benefits Six Months Ended June 30,				PRB Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Operating expense	Operating expense									Operating expense
Service cost	Service cost	$	354	$	393	$	6	$	6	Service cost	$	111	$	236	$	2	$	4
Non-operating expense	Non-operating expense									Non-operating expense
Interest cost	Interest cost	1,142		937		21		18		Interest cost	1,253		762		24		14
Expected return on plan assets	Expected return on plan assets	(2,661)		(2,608)		(16)		(15)		Expected return on plan assets	(1,875)		(1,778)		(10)		(11)
Amortization of prior service credit		(123)		(126)		—		(3)
Amortization of prior service cost (credit)										Amortization of prior service cost (credit)	(79)		(83)		—		—
Recognized actuarial net loss (gain)	Recognized actuarial net loss (gain)	230		327		(9)		(6)		Recognized actuarial net loss (gain)	(190)		154		(16)		(6)
Net settlement, curtailment and special termination benefit (gain) loss		(6)		4		—		—
Non-service pension income		(1,418)		(1,466)		(4)		(6)
Net settlement, curtailment and special termination benefit loss										Net settlement, curtailment and special termination benefit loss	2		(6)		—		—
Non-service pension (income) expense										Non-service pension (income) expense	(889)		(951)		(2)		(3)
Total net periodic benefit (income) expense	Total net periodic benefit (income) expense	$	(1,064)	$	(1,073)	$	2	$	—	Total net periodic benefit (income) expense	$	(778)	$	(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)	September 30, 2022		December 31, 2021		(dollars in millions)	June 30, 2023		December 31, 2022
Marketable securities held in trusts	Marketable securities held in trusts	$	740	$	965	Marketable securities held in trusts	$	719	$	774

Note 10: Income Taxes

Our effective tax rate for the quarter and six months ended June 30, 2023 was ~~14.8%~~13.5% and ~~0.2% i~~15.3%n, respectively, as compared to 10.7% and 10.1% for the ~~quarters~~quarter and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ respectively. The increase in the 2023 effective tax rates for both the quarter and year to date periods as compared to respective prior year periods is primarily driven by a higher forecasted annualized effective tax rate ~~in the quarter ended September 30, 2022 includes~~for 2023 principally due to a ~~benefit of approximately 4 percentage points primarily related to an incremental~~lower forecasted Foreign Derived Intangible Income (FDII) ~~benefit and other effects created by~~benefit. In addition, 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 September 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter of 2021.

~~Our~~ effective tax rate ~~was 11.8% and 17.0% in~~for the ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively. The effective~~2023 reflects a lower tax ~~rate in~~benefit from stock based compensation as compared to the ~~nine~~six months ended ~~September~~June 30, 2022 includes a benefit of approximately 5 percentage points primarily related to an incremental 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 nine months ended September 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter of 2021, 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,” and $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. Subsequently, in the fourth quarter of 2021, we recognized an incremental $104 million tax benefit due to the revaluation of the Forcepoint tax 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~~RTX 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.~~2013.

The Examination Division of the Internal Revenue Service (IRS) is currently auditing RTX (formerly United Technologies Corporation) tax years 2017 and 2018, pre-acquisition Rockwell Collins tax years 2016, 2017, and 2018, and pre-merger Raytheon Company tax years 2017, 2018, and 2019 as well as certain refund claims of Raytheon Company for tax years 2014, 2015, and 2016 filed prior to the Raytheon merger. The examination phase of these audits is expected to close in 2023.

The Company currently believes that it is reasonably possible that the closure of the RTX 2017 and 2018 audit and Rockwell Collins years 2016, 2017, and 2018 audit will result in a net income benefit in the range of $225 million to $315 million. This range includes the effects of adjusting interest accruals and certain tax related indemnity receivables related to the separation and distributions of Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis). The tax components of this range are included in the revaluation range included below. Given the current examination status of the Raytheon Company audit, there is currently insufficient information to estimate the potential net income impact of that audit.

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 ~~$20~~$250 million to ~~$400~~$350 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of uncertain tax positions arising from developments in examinations, in appeals, or in the courts, or the closure of tax ~~statutes, or the issuance of legislation, regulatory or other guidance.~~statutes.

Table of Contents

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

~~The Examination Division of the IRS is also auditing pre-acquisition Rockwell Collins fiscal tax years 2016, 2017 and 2018. The audit of each of these tax years is projected to close during 2023.~~

Note 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 present value of aggregate notional ~~amount~~principal of our outstanding foreign currency hedges was ~~$10.3~~$12.7 billion and ~~$8.5~~$11.2 billion at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. At ~~September~~June 30, ~~2022,~~2023, 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:


(dollars in millions)	(dollars in millions)	Balance Sheet Location	September 30, 2022		December 31, 2021		(dollars in millions)	Balance Sheet Location	June 30, 2023		December 31, 2022
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Foreign exchange contracts	Foreign exchange contracts	Other assets, current	$	41	$	59	Foreign exchange contracts	Other assets, current	$	197	$	67
		Other accrued liabilities	578		202			Other accrued liabilities	172		347
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	$	19	$	11	Foreign exchange contracts	Other assets, current	$	42	$	17
		Other accrued liabilities	128		11			Other accrued liabilities	28		39

The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Condensed Consolidated Statement of Operations in the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are presented in “Note 16: Accumulated Other Comprehensive Loss.” The amounts of gain or loss are attributable to foreign exchange contract activity and are primarily recorded as a component of Products sales when reclassified from Accumulated other comprehensive 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 ~~September~~June 30, ~~2022, we have~~2023, our €500 million principal value 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.

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

Operations and is not significant.

~~Table of Contents~~

Note 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:


		September 30, 2022									June 30, 2023
(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	$	740	$	682	$	58	$	—	Marketable securities held in trusts	$	719	$	658	$	61	$	—
Derivative assets	Derivative assets	60		—		60		—		Derivative assets	239		—		239		—
Derivative liabilities	Derivative liabilities	706		—		706		—		Derivative liabilities	200		—		200		—


		December 31, 2021									December 31, 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	$	965	$	890	$	75	$	—	Marketable securities held in trusts	$	774	$	713	$	61	$	—
Derivative assets	Derivative assets	70		—		70		—		Derivative assets	84		—		84		—
Derivative liabilities	Derivative liabilities	213		—		213		—		Derivative liabilities	386		—		386		—

Valuation Techniques. 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.

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As of ~~September~~June 30, ~~2022,~~2023, 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.

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:


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
(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	$	183	$	174	$	195	$	192	Customer financing notes receivable	$	103	$	99	$	169	$	161

Long-term debt (excluding finance leases)	Long-term debt (excluding finance leases)	31,161		27,277		31,250		35,828		Long-term debt (excluding finance leases)	34,180		31,583		31,201		28,049

The following tables provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance Sheet:


		September 30, 2022									June 30, 2023
(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	$	174	$	—	$	174	$	—	Customer financing notes receivable	$	99	$	—	$	99	$	—

Long-term debt (excluding finance leases)	Long-term debt (excluding finance leases)	27,277		—		27,230		47		Long-term debt (excluding finance leases)	31,583		—		31,537		46


		December 31, 2021									December 31, 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	$	192	$	—	$	192	$	—	Customer financing notes receivable	$	161	$	—	$	161	$	—

Long-term debt (excluding finance leases)	Long-term debt (excluding finance leases)	35,828		—		35,778		50		Long-term debt (excluding finance leases)	28,049		—		28,003		46

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 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

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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 family of 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)	September 30, 2022		December 31, 2021		(dollars in millions)	June 30, 2023		December 31, 2022
Current assets	Current assets	$	7,274	$	7,081	Current assets	$	7,895	$	7,609
Noncurrent assets	Noncurrent assets	780		825		Noncurrent assets	821		779
Total assets	Total assets	$	8,054	$	7,906	Total assets	$	8,716	$	8,388
Current liabilities	Current liabilities	$	8,632	$	7,965	Current liabilities	$	9,191	$	9,154
Noncurrent liabilities	Noncurrent liabilities	21		54		Noncurrent liabilities	24		19
Total liabilities	Total liabilities	$	8,653	$	8,019	Total liabilities	$	9,215	$	9,173

Note 14: Guarantees

We extend a variety of financial, market value and product performance guarantees to third parties. These instruments expire on various dates through ~~2028.~~2036. Additional guarantees of project performance for which there is no stated value also remain

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outstanding. A portion of our third party guarantees are subject to indemnification for our benefit for any liabilities that could arise. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the following financial guarantees were outstanding:


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
(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	$	304	$	—	$	309	$	3	Commercial aerospace financing arrangements	$	304	$	—	$	304	$	—
Third party guarantees	Third party guarantees	310		1		511		5		Third party guarantees	405		1		335		1

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 iswere $140 million ~~and $141 million~~ at ~~September~~both June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022.

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 ~~$108~~$95 million and ~~$120~~$97 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. These primarily relate to environmental liabilities, which are included in our total environmental liabilities as further discussed in “Note 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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows:


(dollars in millions)	(dollars in millions)	2022		2021		(dollars in millions)	2023		2022
Balance as of January 1	Balance as of January 1	$	1,157	$	1,057	Balance as of January 1	$	1,109	$	1,157
Warranties and performance guarantees issued	Warranties and performance guarantees issued	203		247		Warranties and performance guarantees issued	124		128
Settlements	Settlements	(196)		(212)		Settlements	(160)		(131)
Other	Other	(21)		(3)		Other	6		(11)
Balance as of September 30		$	1,143	$	1,089
Balance as of June 30						Balance as of June 30	$	1,079	$	1,143

Product and service guarantees incurred in connection with long term production contracts and certain aftermarket arrangements are generally accounted for within the contract estimates at completion.

Note 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, 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 do not expect any additional liability to have a material adverse effect on our results of operations, financial condition, or liquidity. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had ~~$821~~$773 million and ~~$834~~$798 million, respectively, reserved for environmental remediation.

Commercial Aerospace Financing and Other Commitments. We had commercial aerospace financing commitments and other contractual commitments of approximately ~~$15.3~~$14.8 billion and ~~$15.6~~$15.3 billion as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, on a gross basis before reduction for our collaboration partners’ share. Aircraft financing commitments, in the form of debt or lease financing, are provided to certain commercial aerospace customers. The extent to which the financing

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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, 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~~our 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~~our 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 capitalized as collaboration intangible 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 ~~$3.3~~$3.2 billion as of ~~September~~June 30, ~~2022.~~2023.

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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 ~~September~~June 30, ~~2022,~~2023, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately ~~$12.2~~$12.8 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

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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 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 results of operations, financial condition, or liquidity, either individually or in the aggregate.

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

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 $1.73 billion plus interest ($~~805~~

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934 million at ~~September~~June 30, ~~2022)~~2023). 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 $177 million plus interest ($~~127~~143 million at ~~September~~June 30, ~~2022)~~2023). 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 for resolution of damages issues, which could require further proceedings at the ASBCA. On December 23, 2021, the DCMA filed a motion with the ASBCA seeking partial reconsideration of the November 22, 2021 decision. The motion for reconsideration was denied on August 29, 2022. ~~Although~~On December 23, 2022, the ~~ASBCA decision may also be subject~~DCMA filed an appeal to ~~further appellate review, we~~the United States Court of Appeals for the Federal Circuit. We continue to believe that the ASBCA’s rejection of the DCMA’s asserted measure of the cost of collaborator parts is 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 ($90109 million at ~~September~~June 30, ~~2022)~~2023). 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 continue to 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.

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Thales-Raytheon Systems ~~Matter~~and Related Matters

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 Raytheon Company, our joint venture known as 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. The Company maintains a rigorous anti-corruption compliance program, ~~is cooperating~~and continues to cooperate fully with the SEC’s and DOJ’s ~~inquiry,~~inquiries and ~~is examining~~to examine through our own investigation whether there ~~has been~~were any improper payments or any such conduct that iswas 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.~~inquiries. Based on the information available to date, however, we cannot reasonably estimate the range of any potential loss or impact to the business that may result, but do not believe that the results of ~~this inquiry~~these inquiries will have a material adverse effect on our 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 since 2009. The investigation 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~~continue to make 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 probable risk of liability for damages, interest and potential penalties and has accrued approximately ~~$290~~$295 million for this matter. We are currently unable to estimate an incremental loss, if any, which may result ~~following the completion of our internal review and resolution of~~when the DOJ ~~investigation.~~investigation is complete. Based on the information available to date, we do not believe the results of the DOJ investigation or of any pending or potential civil litigation will have a material adverse effect on our 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. That lawsuit was recently dismissed with prejudice. No appeal was filed so the case is concluded. Three shareholder derivative lawsuits were also 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. Those shareholder derivative lawsuits were consolidated and remain pending. We continue to believe that ~~each of these lawsuits~~the consolidated action lacks merit.

Darnis, et al. and Related Matter

As previously disclosed, on August 12, 2020, several former employees of 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.).~~Directors. The complaint 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 also claimed that the defendants are liable for breach of certain equity compensation plans and also 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. On September 30, 2022, in response to motions to dismiss filed by the Company, Otis and Carrier, the Court dismissed the class action in its entirety with prejudice. ~~Plaintiffs’ time to file~~On October 26, 2022, Plaintiffs filed an appeal ~~from~~to the ~~judgment dismissing~~United States Court of Appeals for the ~~case has not yet lapsed. Based on the information available~~Second Circuit. We continue to ~~date, including the Court’s recent ruling, we do not~~ believe that this matter will not have a material adverse effect on our results of operations, financial condition, or liquidity. On December 6, 2022, a shareholder derivative lawsuit was filed in the Delaware Court of Chancery against the Company and certain current and former members of its Board of Directors, alleging that defendants breached their fiduciary duties in May 2020 by amending the method by which UTC equity

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awards were converted to certain Company equity awards following the separation of UTC into three independent, publicly-traded companies. We believe that the lawsuit lacks merit.

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 federal antitrust laws. While the investigation has focused on alleged hiring restrictions between and among Pratt & Whitney and certain of 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~~

On April 28, 2023, during a jury trial, the Court entered a judgment of acquittal in favor of the former Pratt & Whitney employee and all other defendants, finding that the ~~Company~~DOJ did not prove the charges set forth in the indictment. The judgment of acquittal cannot be appealed and is a ~~target~~final resolution of the criminal indictment. On June 29, 2023, the DOJ advised the Company in writing that it no longer regards the Company, its divisions and affiliates, and any current or former employees of the Company and its divisions and affiliates, as targets of the DOJ ~~investigation, and~~investigation. While we will continue to cooperate with any ongoing investigation, we believe in light of the ~~investigation. No~~DOJ’s June 29th letter that no criminal ~~charge has been~~charges will be filed against the Company, its divisions or ~~its affiliates.~~affiliates, or any current or former employees.

After the criminal charges against the individuals were first filed, numerous civil class action antitrust lawsuits ~~have been~~were 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 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 amounts individually, or in the aggregate, are not material.

Other. As described in “Note 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.

Pratt & Whitney has determined that a rare condition in powdered metal used to manufacture certain engine parts will require accelerated fleet inspection. This does not impact engines currently being produced. As a result, the business anticipates that a significant portion of the PW1100G-JM fleet, which powers the A320neo, will require engine removals and inspections within the next nine to twelve months, including approximately 200 accelerated removals by mid-September of this year. The financial impact associated with these removals and inspections is subject to a wide range of factors. The Company is performing additional engineering analysis and fleet management planning that will further inform those factors which includes evaluating the timing and results of required inspections, workscope and impact on our customers. These removals and inspections may have the effect of increasing cost estimates in our long-term contracts. Potential cost growth related to this matter could have a material effect on the Company’s results of operations for the periods in which it is recognized.

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

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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 results of operations, financial condition, or liquidity.

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Note 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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 is provided below:


(dollars in millions)	(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)		(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended September 30, 2022
Balance at June 30, 2022		$	(908)	$	(1,772)	$	(251)	$	(2,931)
Quarter Ended June 30, 2023										Quarter Ended June 30, 2023
Balance at March 31, 2023										Balance at March 31, 2023	$	(882)	$	(890)	$	(217)	$	(1,989)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	(1,050)		15		(285)		(1,320)		Other comprehensive income (loss) before reclassifications, net	404		(40)		260		624
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	—		33		34		67		Amounts reclassified, pre-tax	—		(143)		25		(118)
Tax benefit (expense)	Tax benefit (expense)	4		(6)		64		62		Tax benefit (expense)	2		38		(59)		(19)
Balance at September 30, 2022		$	(1,954)	$	(1,730)	$	(438)	$	(4,122)
Balance at June 30, 2023										Balance at June 30, 2023	$	(476)	$	(1,035)	$	9	$	(1,502)

Nine Months Ended September 30, 2022
Balance at December 31, 2021		$	49	$	(1,828)	$	(136)	$	(1,915)
Six Months Ended June 30, 2023										Six Months Ended June 30, 2023
Balance at December 31, 2022										Balance at December 31, 2022	$	(1,005)	$	(782)	$	(231)	$	(2,018)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	(2,000)		18		(453)		(2,435)		Other comprehensive income (loss) before reclassifications, net	526		(44)		233		715
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	2		98		57		157		Amounts reclassified, pre-tax	—		(285)		64		(221)
Tax benefit (expense)	Tax benefit (expense)	(5)		(18)		94		71		Tax benefit (expense)	3		76		(57)		22
Balance at September 30, 2022		$	(1,954)	$	(1,730)	$	(438)	$	(4,122)
Balance at June 30, 2023										Balance at June 30, 2023	$	(476)	$	(1,035)	$	9	$	(1,502)


(dollars in millions)	(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)		(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended September 30, 2021
Balance at June 30, 2021		$	789	$	(4,402)	$	58	$	(3,555)
Quarter Ended June 30, 2022										Quarter Ended June 30, 2022
Balance at March 31, 2022										Balance at March 31, 2022	$	(194)	$	(1,811)	$	(110)	$	(2,115)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	(321)		22		(175)		(474)		Other comprehensive income (loss) before reclassifications, net	(708)		14		(199)		(893)
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	—		64		8		72		Amounts reclassified, pre-tax	—		33		17		50
Tax benefit (expense)	Tax benefit (expense)	(5)		(16)		39		18		Tax benefit (expense)	(6)		(8)		41		27

Balance at September 30, 2021		$	463	$	(4,332)	$	(70)	$	(3,939)
Balance at June 30, 2022										Balance at June 30, 2022	$	(908)	$	(1,772)	$	(251)	$	(2,931)

Nine Months Ended September 30, 2021
Balance at December 31, 2020		$	710	$	(4,483)	$	39	$	(3,734)
Six Months Ended June 30, 2022										Six Months Ended June 30, 2022
Balance at December 31, 2021										Balance at December 31, 2021	$	49	$	(1,828)	$	(136)	$	(1,915)
Other comprehensive income (loss) before reclassifications, net	Other comprehensive income (loss) before reclassifications, net	(239)		(2)		(113)		(354)		Other comprehensive income (loss) before reclassifications, net	(950)		3		(168)		(1,115)
Amounts reclassified, pre-tax	Amounts reclassified, pre-tax	—		192		(26)		166		Amounts reclassified, pre-tax	2		65		23		90
Tax benefit (expense)	Tax benefit (expense)	(8)		(39)		30		(17)		Tax benefit (expense)	(9)		(12)		30		9

Balance at September 30, 2021		$	463	$	(4,332)	$	(70)	$	(3,939)
Balance at June 30, 2022										Balance at June 30, 2022	$	(908)	$	(1,772)	$	(251)	$	(2,931)

Note 17: Segment Financial Data

Our operations, for the periods presented herein, are classified into four principal segments: Collins, 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 and services. Effective July 1, 2023, we streamlined the structure of our core businesses from four principal business segments to three principal business segments: Collins Aerospace, Pratt & Whitney, and Raytheon. All segment information included in this Form 10-Q is reflective of the four segments of Collins, Pratt & Whitney, RIS, and RMD in accordance with the management structure in place as of June 30, 2023. See “Note 20: Subsequent Events” for additional information.

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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 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. Over time, we generally 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. Collins and Pratt & Whitney generally record pension and PRB expense on a FAS 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.~~acquired, and goodwill impairment. These adjustments are not considered part of management’s evaluation of segment ~~results.~~results.

Total sales and operating profit by segment include inter-segment sales which are generally recorded at cost-plus a specified fee or at a negotiated fixed price. These pricing arrangements may result in margins different than what the purchasing segment realizes on the ultimate third-party sale. Results for the quarters ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		Net Sales				Operating Profit				Operating Profit Margins					Net Sales				Operating Profit				Operating Profit Margins
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022		2023		2022
Collins Aerospace Systems		$	5,100	$	4,592	$	616	$	478	12.1	%	10.4	%
Collins Aerospace														Collins Aerospace	$	5,850	$	5,011	$	821	$	546	14.0	%	10.9	%
Pratt & Whitney	Pratt & Whitney	5,380		4,725		316		187		5.9	%	4.0	%	Pratt & Whitney	5,701		4,969		230		302		4.0	%	6.1	%
Raytheon Intelligence & Space	Raytheon Intelligence & Space	3,626		3,740		371		391		10.2	%	10.5	%	Raytheon Intelligence & Space	3,655		3,570		291		315		8.0	%	8.8	%
Raytheon Missiles & Defense	Raytheon Missiles & Defense	3,678		3,902		408		490		11.1	%	12.6	%	Raytheon Missiles & Defense	4,000		3,558		415		348		10.4	%	9.8	%
Total segment	Total segment	17,784		16,959		1,711		1,546		9.6	%	9.1	%	Total segment	19,206		17,108		1,757		1,511		9.1	%	8.8	%
Eliminations and other(1)	Eliminations and other(1)	(833)		(746)		(50)		(27)						Eliminations and other(1)	(891)		(794)		(60)		(47)
Corporate expenses and other unallocated items (2)	Corporate expenses and other unallocated items (2)	—		—		(77)		(89)						Corporate expenses and other unallocated items(2)	—		—		(59)		(42)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	—		—		378		499						FAS/CAS operating adjustment	—		—		309		379
Acquisition accounting adjustments	Acquisition accounting adjustments	—		—		(482)		(586)						Acquisition accounting adjustments	—		—		(489)		(448)
Consolidated	Consolidated	$	16,951	$	16,213	$	1,480	$	1,343	8.7	%	8.3	%	Consolidated	$	18,315	$	16,314	$	1,458	$	1,353	8.0	%	8.3	%

(1) Includes the operating results of certain smaller non-reportable business segments.

(2) ~~Includes~~2022 included the net expenses related to the U.S. Army’s Lower Tier Air and Missile Defense Sensor (LTAMDS) project. Beginning in 2023, LTAMDS results are included in the RMD segment.

Results for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:

Net Sales Operating Profit Operating Profit Margins
(dollars in millions) 2022 2021 2022 2021 2022 2021
Collins Aerospace Systems $ 14,935 $ 13,507 $ 1,602 $ 1,298 10.7 % 9.6 %
Pratt & Whitney 14,878 13,035 769 319 5.2 % 2.4 %
Raytheon Intelligence & Space 10,768 11,310 1,064 1,194 9.9 % 10.6 %
Raytheon Missiles & Defense 10,763 11,680 1,143 1,518 10.6 % 13.0 %
Total segment 51,344 49,532 4,578 4,329 8.9 % 8.7 %
Eliminations and other (1)
(2,363) (2,188) (131) (98)
Corporate expenses and other unallocated items (2)
— — (255) (319)
FAS/CAS operating adjustment — — 1,135 1,347
Acquisition accounting adjustments — — (1,414) (1,621)
Consolidated $ 48,981 $ 47,344 $ 3,913 $ 3,638 8.0 % 7.7 %


	Net Sales				Operating Profit				Operating Profit Margins
(dollars in millions)	2023		2022		2023		2022		2023		2022
Collins Aerospace	$	11,431	$	9,835	$	1,615	$	986	14.1	%	10.0	%
Pratt & Whitney	10,931		9,498		645		453		5.9	%	4.8	%
Raytheon Intelligence & Space	7,220		7,142		615		693		8.5	%	9.7	%
Raytheon Missiles & Defense	7,671		7,085		743		735		9.7	%	10.4	%
Total segment	37,253		33,560		3,618		2,867		9.7	%	8.5	%
Eliminations and other (1)	(1,724)		(1,530)		(47)		(81)
Corporate expenses and other unallocated items (2)	—		—		(102)		(178)
FAS/CAS operating adjustment	—		—		623		757
Acquisition accounting adjustments	—		—		(982)		(932)
Consolidated	$	35,529	$	32,030	$	3,110	$	2,433	8.8	%	7.6	%

(1) Includes the operating results of certain smaller non-reportable business segments.

(2) ~~Includes~~2022 included the net expenses related to the U.S. Army’s LTAMDS project. Beginning in 2023, LTAMDS results are included in the RMD segment.

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

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believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Segment sales disaggregated by geographic region for the quarters ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		2022												2021													2023												2022
(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		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
United States	United States	$	2,455	$	2,756	$	2,922	$	2,285	$	4	$	10,422	$	2,334	$	2,367	$	2,977	$	2,414	$	4	$	10,096	United States	$	2,785	$	2,847	$	2,867	$	2,727	$	1	$	11,227	$	2,458	$	2,562	$	2,852	$	2,313	$	—	$	10,185
Europe	Europe	1,231		1,074		102		256		—		2,663		1,066		943		107		297		(5)		2,408		Europe	1,506		1,345		109		326		—		3,286		1,270		1,057		103		248		—		2,678
Asia Pacific	Asia Pacific	533		1,028		187		412		—		2,160		465		1,007		199		335		—		2,006		Asia Pacific	568		972		214		355		—		2,109		455		825		190		338		—		1,808
Middle East and North Africa	Middle East and North Africa	132		160		48		638		—		978		136		127		105		772		—		1,140		Middle East and North Africa	176		104		44		527		—		851		119		112		62		576		—		869
Canada and All Other		310		360		31		27		—		728		226		281		39		17		—		563
Other																										Other	361		433		29		19		—		842		305		413		38		18		—		774
Consolidated net sales	Consolidated net sales	4,661		5,378		3,290		3,618		4		16,951		4,227		4,725		3,427		3,835		(1)		16,213		Consolidated net sales	5,396		5,701		3,263		3,954		1		18,315		4,607		4,969		3,245		3,493		—		16,314
Inter-segment sales	Inter-segment sales	439		2		336		60		(837)		—		365		—		313		67		(745)		—		Inter-segment sales	454		—		392		46		(892)		—		404		—		325		65		(794)		—
Business segment sales	Business segment sales	$	5,100	$	5,380	$	3,626	$	3,678	$	(833)	$	16,951	$	4,592	$	4,725	$	3,740	$	3,902	$	(746)	$	16,213	Business segment sales	$	5,850	$	5,701	$	3,655	$	4,000	$	(891)	$	18,315	$	5,011	$	4,969	$	3,570	$	3,558	$	(794)	$	16,314

Segment sales disaggregated by geographic region for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		2022												2021													2023												2022
(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		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
United States	United States	$	7,162	$	7,630	$	8,640	$	6,897	$	8	$	30,337	$	6,899	$	6,665	$	8,962	$	7,156	$	15	$	29,697	United States	$	5,433	$	5,478	$	5,673	$	5,186	$	5	$	21,775	$	4,707	$	4,874	$	5,718	$	4,612	$	4	$	19,915
Europe	Europe	3,815		3,010		312		776		—		7,913		3,207		2,376		339		949		—		6,871		Europe	2,964		2,465		217		630		—		6,276		2,584		1,936		210		520		—		5,250
Asia Pacific	Asia Pacific	1,485		2,726		540		1,074		—		5,825		1,340		2,771		608		1,061		—		5,780		Asia Pacific	1,124		1,877		427		731		—		4,159		952		1,698		353		662		—		3,665
Middle East and North Africa	Middle East and North Africa	363		350		191		1,772		—		2,676		346		316		370		2,267		—		3,299		Middle East and North Africa	332		214		80		988		—		1,614		231		190		143		1,134		—		1,698
Canada and All Other		908		1,160		105		57		—		2,230		646		907		94		50		—		1,697
Other																										Other	706		896		60		43		—		1,705		598		800		74		30		—		1,502
Consolidated net sales	Consolidated net sales	13,733		14,876		9,788		10,576		8		48,981		12,438		13,035		10,373		11,483		15		47,344		Consolidated net sales	10,559		10,930		6,457		7,578		5		35,529		9,072		9,498		6,498		6,958		4		32,030
Inter-segment sales	Inter-segment sales	1,202		2		980		187		(2,371)		—		1,069		—		937		197		(2,203)		—		Inter-segment sales	872		1		763		93		(1,729)		—		763		—		644		127		(1,534)		—
Business segment sales	Business segment sales	$	14,935	$	14,878	$	10,768	$	10,763	$	(2,363)	$	48,981	$	13,507	$	13,035	$	11,310	$	11,680	$	(2,188)	$	47,344	Business segment sales	$	11,431	$	10,931	$	7,220	$	7,671	$	(1,724)	$	35,529	$	9,835	$	9,498	$	7,142	$	7,085	$	(1,530)	$	32,030

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Segment sales disaggregated by type of customer for the quarters ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		2022												2021													2023												2022
(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		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
U.S. government (1)		$	1,066	$	1,324	$	2,877	$	2,284	$	4	$	7,555	$	1,101	$	1,295	$	2,923	$	2,414	$	4	$	7,737
Sales to the U.S. government (1)																										Sales to the U.S. government (1)	$	1,112	$	1,313	$	2,809	$	2,723	$	1	$	7,958	$	1,023	$	1,417	$	2,805	$	2,314	$	—	$	7,559
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	57		295		135		788		—		1,275		54		322		210		778		—		1,364		Foreign military sales through the U.S. government	41		352		144		704		—		1,241		53		304		149		675		—		1,181
Foreign government direct commercial sales	Foreign government direct commercial sales	205		116		204		539		—		1,064		258		126		216		642		—		1,242		Foreign government direct commercial sales	259		102		206		522		—		1,089		263		116		212		504		—		1,095
Commercial aerospace and other commercial		3,333		3,643		74		7		—		7,057		2,814		2,982		78		1		(5)		5,870
Commercial aerospace and other commercial sales																										Commercial aerospace and other commercial sales	3,984		3,934		104		5		—		8,027		3,268		3,132		79		—		—		6,479
Consolidated net sales	Consolidated net sales	4,661		5,378		3,290		3,618		4		16,951		4,227		4,725		3,427		3,835		(1)		16,213		Consolidated net sales	5,396		5,701		3,263		3,954		1		18,315		4,607		4,969		3,245		3,493		—		16,314
Inter-segment sales	Inter-segment sales	439		2		336		60		(837)		—		365		—		313		67		(745)		—		Inter-segment sales	454		—		392		46		(892)		—		404		—		325		65		(794)		—
Business segment sales	Business segment sales	$	5,100	$	5,380	$	3,626	$	3,678	$	(833)	$	16,951	$	4,592	$	4,725	$	3,740	$	3,902	$	(746)	$	16,213	Business segment sales	$	5,850	$	5,701	$	3,655	$	4,000	$	(891)	$	18,315	$	5,011	$	4,969	$	3,570	$	3,558	$	(794)	$	16,314

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

Segment sales disaggregated by type of customer for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		2022												2021													2023												2022
(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		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
U.S. government(1)		$	3,140	$	3,915	$	8,494	$	6,895	$	8	$	22,452	$	3,470	$	3,748	$	8,767	$	7,155	$	15	$	23,155
Sales to the U.S. government (1)																										Sales to the U.S. government (1)	$	2,244	$	2,535	$	5,551	$	5,180	$	5	$	15,515	$	2,074	$	2,591	$	5,617	$	4,611	$	4	$	14,897
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	164		796		444		2,228		—		3,632		119		961		627		2,449		—		4,156		Foreign military sales through the U.S. government	94		684		305		1,420		—		2,503		107		501		309		1,440		—		2,357
Foreign government direct commercial sales	Foreign government direct commercial sales	719		335		620		1,444		—		3,118		804		392		662		1,877		—		3,735		Foreign government direct commercial sales	499		220		407		967		—		2,093		514		219		416		905		—		2,054
Commercial aerospace and other commercial		9,710		9,830		230		9		—		19,779		8,045		7,934		317		2		—		16,298
Commercial aerospace and other commercial sales																										Commercial aerospace and other commercial sales	7,722		7,491		194		11		—		15,418		6,377		6,187		156		2		—		12,722
Consolidated net sales	Consolidated net sales	13,733		14,876		9,788		10,576		8		48,981		12,438		13,035		10,373		11,483		15		47,344		Consolidated net sales	10,559		10,930		6,457		7,578		5		35,529		9,072		9,498		6,498		6,958		4		32,030
Inter-segment sales	Inter-segment sales	1,202		2		980		187		(2,371)		—		1,069		—		937		197		(2,203)		—		Inter-segment sales	872		1		763		93		(1,729)		—		763		—		644		127		(1,534)		—
Business segment sales	Business segment sales	$	14,935	$	14,878	$	10,768	$	10,763	$	(2,363)	$	48,981	$	13,507	$	13,035	$	11,310	$	11,680	$	(2,188)	$	47,344	Business segment sales	$	11,431	$	10,931	$	7,220	$	7,671	$	(1,724)	$	35,529	$	9,835	$	9,498	$	7,142	$	7,085	$	(1,530)	$	32,030

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

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Segment sales disaggregated by sales type for the quarters ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		2022												2021													2023												2022
(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		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
Products	Products	$	3,669	$	3,183	$	2,637	$	3,263	$	4	$	12,756	$	3,336	$	2,877	$	2,613	$	3,506	$	(1)	$	12,331	Products	$	4,162	$	3,199	$	2,503	$	3,546	$	1	$	13,411	$	3,577	$	2,982	$	2,564	$	3,135	$	—	$	12,258
Services	Services	992		2,195		653		355		—		4,195		891		1,848		814		329		—		3,882		Services	1,234		2,502		760		408		—		4,904		1,030		1,987		681		358		—		4,056
Consolidated net sales	Consolidated net sales	4,661		5,378		3,290		3,618		4		16,951		4,227		4,725		3,427		3,835		(1)		16,213		Consolidated net sales	5,396		5,701		3,263		3,954		1		18,315		4,607		4,969		3,245		3,493		—		16,314
Inter-segment sales	Inter-segment sales	439		2		336		60		(837)		—		365		—		313		67		(745)		—		Inter-segment sales	454		—		392		46		(892)		—		404		—		325		65		(794)		—
Business segment sales	Business segment sales	$	5,100	$	5,380	$	3,626	$	3,678	$	(833)	$	16,951	$	4,592	$	4,725	$	3,740	$	3,902	$	(746)	$	16,213	Business segment sales	$	5,850	$	5,701	$	3,655	$	4,000	$	(891)	$	18,315	$	5,011	$	4,969	$	3,570	$	3,558	$	(794)	$	16,314

Segment sales disaggregated by sales type for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:
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 $ 10,728 $ 8,798 $ 7,805 $ 9,537 $ 8 $ 36,876 $ 9,867 $ 7,882 $ 7,964 $ 10,446 $ 15 $ 36,174
Services 3,005 6,078 1,983 1,039 — 12,105 2,571 5,153 2,409 1,037 — 11,170
Consolidated net sales 13,733 14,876 9,788 10,576 8 48,981 12,438 13,035 10,373 11,483 15 47,344
Inter-segment sales 1,202 2 980 187 (2,371) — 1,069 — 937 197 (2,203) —
Business segment sales $ 14,935 $ 14,878 $ 10,768 $ 10,763 $ (2,363) $ 48,981 $ 13,507 $ 13,035 $ 11,310 $ 11,680 $ (2,188) $ 47,344


	2023												2022
(dollars in millions)	Collins Aerospace		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total		Collins Aerospace		Pratt & Whitney		Raytheon Intelligence & Space		Raytheon Missiles & Defense		Other		Total
Products	$	8,162	$	6,251	$	5,013	$	6,767	$	5	$	26,198	$	7,059	$	5,615	$	5,168	$	6,274	$	4	$	24,120
Services	2,397		4,679		1,444		811		—		9,331		2,013		3,883		1,330		684		—		7,910
Consolidated net sales	$	10,559	$	10,930	$	6,457	$	7,578	$	5	$	35,529	$	9,072	$	9,498	$	6,498	$	6,958	$	4	$	32,030
Inter-segment sales	872		1		763		93		(1,729)		—		763		—		644		127		(1,534)		—
Business segment sales	$	11,431	$	10,931	$	7,220	$	7,671	$	(1,724)	$	35,529	$	9,835	$	9,498	$	7,142	$	7,085	$	(1,530)	$	32,030

RIS and RMD segment sales disaggregated by contract type for the quarters ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		2022				2021					2023				2022
(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	$	1,369	$	2,127	$	1,506	$	2,401	Fixed-price	$	1,368	$	2,258	$	1,353	$	2,043
Cost-type	Cost-type	1,921		1,491		1,921		1,434		Cost-type	1,895		1,696		1,892		1,450
Consolidated net sales	Consolidated net sales	3,290		3,618		3,427		3,835		Consolidated net sales	3,263		3,954		3,245		3,493
Inter-segment sales	Inter-segment sales	336		60		313		67		Inter-segment sales	392		46		325		65
Business segment sales	Business segment sales	$	3,626	$	3,678	$	3,740	$	3,902	Business segment sales	$	3,655	$	4,000	$	3,570	$	3,558

RIS and RMD segment sales disaggregated by contract type for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


		2022				2021					2023				2022
(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	$	4,062	$	6,245	$	4,533	$	7,054	Fixed-price	$	2,755	$	4,353	$	2,693	$	4,118
Cost-type	Cost-type	5,726		4,331		5,840		4,429		Cost-type	3,702		3,225		3,805		2,840
Consolidated net sales	Consolidated net sales	9,788		10,576		10,373		11,483		Consolidated net sales	6,457		7,578		6,498		6,958
Inter-segments sales	Inter-segments sales	980		187		937		197		Inter-segments sales	763		93		644		127
Business segment sales	Business segment sales	$	10,768	$	10,763	$	11,310	$	11,680	Business segment sales	$	7,220	$	7,671	$	7,142	$	7,085

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Note 18: Remaining Performance Obligations (RPO)

RPO represent the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. Total RPO was ~~$168~~$185 billion as of ~~September~~June 30, 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 export controls with respect to Russia, as further discussed in “Note 1: Basis of Presentation.”2023. Of the total RPO as of ~~September~~June 30, ~~2022,~~2023, we expect approximately 30% will be recognized as ~~sales~~revenue over the next 12 months. Approximately ~~40%~~45% of our RPO relates to long-term commercial aerospace maintenance contracts at Pratt & Whitney, which are generally expected to be realized over a span of up to 15 years.

Note 19: Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose the key terms of supplier finance programs, the amount of obligations outstanding at the end of the reporting period that the entity has confirmed as valid to the finance provider, where these obligations are recorded in the balance sheet, and a roll forward of the obligations. The new standard is effective for fiscal years beginning after December 15, 2022, on a retrospective basis, including interim periods within those fiscal years. ~~We are currently evaluating the impact of adopting this new pronouncement.~~

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 our disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to apply the guidance in ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities in a business combination, rather than using fair value. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. Effective January 1, 2022, we elected to early adopt the requirements of the new standard on a prospective basis. The adoption of ~~the~~this standard did not have an impact on our ~~financial position, results~~disclosures as we have determined impact of ~~operations or liquidity.~~supplier finance programs is not material.

Other new pronouncements issued but not effective until after ~~September~~June 30, ~~2022~~2023 are not expected to have a material impact on our ~~financial condition,~~ results of operations, financial condition, or liquidity.

Note 20: Subsequent Events

Segment Realignment. Effective July 1, 2023, the Company streamlined the structure of its core businesses from four principal business segments into three principal business segments as follows:

•Collins Aerospace. Collins is a leading global provider of technologically advanced aerospace and defense products and aftermarket service solutions for aircraft manufacturers, airlines, and regional, business and general aviation, as well as for defense and commercial space operations;

•Pratt & Whitney. Pratt & Whitney is among the world’s leading suppliers of aircraft engines for commercial, defense, business jet and general aviation customers; and

•Raytheon. Raytheon is a leading provider of advanced air and missile defense systems, effectors, hypersonics, sensors and radars, cybersecurity services, and integrated space solutions for government and commercial customers.

As a result of the segment realignment, the RIS and RMD segments have been eliminated as business segments effective July 1, 2023.

Definitive Agreement. See “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” for information related to a definitive agreement executed by the Company on July 20, 2023.

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With respect to the unaudited condensed consolidated financial information of ~~Raytheon Technologies~~RTX for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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 ~~October~~July 25, ~~2022,~~2023, 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~~RTX Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of ~~Raytheon Technologies~~RTX Corporation and its subsidiaries (the “Company”) as of ~~September~~June 30, ~~2022,~~2023, and the related condensed consolidated statements of operations, of comprehensive income, and of changes in equity, for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022, and the condensed consolidated statement of cash flows for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, ~~2021,~~2022, 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 ~~11, 2022,~~6, 2023, 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, ~~2021,~~2022, 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”)~~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

~~October~~July 25, ~~2022~~2023

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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.

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

We operate in four principal business segments: Collins Aerospace ~~Systems~~ (Collins), Pratt & Whitney, Raytheon Intelligence & Space (RIS), and Raytheon Missiles & Defense (RMD). Unless the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” ~~“Raytheon Technologies,”~~ and ~~“RTC”~~“RTX” mean ~~Raytheon Technologies~~RTX Corporation and its subsidiaries.

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 ~~September~~June 30, ~~2022~~2023 and ~~September 30, 2021~~2022 with respect to RIS or RMD, we are referring to their ~~October~~July 2, ~~2022~~2023 and ~~October~~July 3, ~~2021~~2022 fiscal quarter ends, respectively.

The current status of significant factors affecting our business environment in ~~2022~~2023 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 ~~2021~~2022 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 in 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 can impact our business and operations. Changes in environmental and climate change-related laws or regulations, including regulations ~~related~~on greenhouse gas emissions, carbon pricing, and energy taxes, could lead to ~~global warming, carbon footprint~~new or additional investment in product designs and ~~fuel efficiency, can have a negative impact on~~facility upgrades and could increase our ~~worldwide operations. Government~~operational and environmental compliance expenditures, including increased energy and raw materials costs and costs associated with manufacturing changes. In addition, 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 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 and Pratt & Whitney, which are inclusive of both spare parts and services.

~~RIS, RMD, and the~~Our defense operations ~~of Collins 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, the domestic and global political and economic environment, and the evolving nature of the global ~~political~~and national security threat environment. In addition, our defense businesses engage in both direct commercial sales, which generally require U.S. government licenses and approvals, as well as foreign military sales, which are government-to-government transactions initiated by, and carried out at the direction of, the U.S. government. Changes in these budget and spending levels, policies, or priorities, which are subject to U.S. domestic and foreign geopolitical risks and threats, may impact our defense businesses, including the timing of and delays in U.S. government licenses and approvals for sales, the risk of sanctions, or other restrictions.

~~Impact of the COVID-19 Pandemic~~

The coronavirus disease 2019 (COVID-19) pandemic continues to negatively affect the global economy, our business and operations, supply chains, and the industries in which we operate. However, we continue to see signs of ongoing recovery in commercial air travel. 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 when commercial air traffic capacity will fully return to and/or exceed pre-COVID-19 levels. Our expectations regarding the COVID-19 pandemic and 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.

Other Matters

Global economic and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, international and domestic tax law changes, foreign currency exchange rates, energy costs ~~levels of air travel, the financial condition of~~and

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supply, levels of air travel, the financial condition of commercial airlines, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.

~~During August 2022,~~Pratt & Whitney Geared TurboFan Matter. As described further in “Note 15: Commitments and Contingencies,” within Item 1 of this Form 10-Q, Pratt & Whitney has determined that a rare condition in powdered metal used to manufacture certain engine parts will require accelerated fleet inspection. This does not impact engines currently being produced. As a result, the ~~Creating Helpful Incentives~~business anticipates that a significant portion of the PW1100G-JM fleet, which powers the A320neo, will require engine removals and inspections within the next nine to ~~Produce Semiconductors (CHIPS)~~twelve months, including approximately 200 accelerated removals by mid-September of this year. Please refer to “Note 15: Commitments and ~~Sciences Act~~Contingencies” for additional information.

Global Supply Chain and Labor Markets. Ongoing global supply chain and labor market constraints continue to include materials and parts shortages, including raw material, microelectronics and commodity shortages, as well as delivery delays, labor shortages, distribution problems, and price increases. Current geopolitical conditions, including sanctions and other trade restrictive activities and strained intercountry relations, are contributing to these issues. We have had difficulties procuring necessary materials, including raw materials, components, and other supplies, and services on a timely basis or at all. We have also had difficulties hiring qualified personnel, particularly personnel with specialized engineering experience and security clearances. Our suppliers and subcontractors have been impacted by the ~~Inflation Reduction Act were signed into law, each effective~~same issues, compounding the shortages for us because we rely on them, sometimes as sole-source providers. In addition, the ongoing recovery in commercial air travel has increased demand for our products and services and added to these supply chain and labor market challenges. We work continuously to mitigate the effects of ~~January 1, 2023. This new legislation includes~~these supply chain and labor constraints through a number of targeted activities and ongoing programs. However, the ~~implementation~~timing as to when our supply chain and labor challenges will abate is uncertain and subject to a wide range of ~~a new corporate alternative minimum tax, an excise tax on stock buybacks,~~factors and tax incentives for energy and climate initiatives, among other provisions. We do not currently expect the legislation will have a material effect on our results of operations, financial condition or liquidity.future developments.

Geopolitical Matters.In response to the 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.~~operate, including certain members of the Company’s management team and Board of Directors. 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 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, the People’s Republic of~~ China ~~(China)~~ previously announced that it may take measures against ~~RTC~~RTX in connection with certain foreign military sales to Taiwan. On February 16, 2023, China’s Ministry of Commerce announced that it has added RMD to its “unreliable entities list” in connection with certain foreign military sales to Taiwan involving RMD’s products and services, and that it would impose certain sanctions against RMD, including a fine equal to twice the value of the arms that RMD has sold to Taiwan since September 2020. In addition, on September 16, 2022, China ~~has~~ indicated that it decided to sanction our Chairman and Chief Executive Officer Gregory Hayes, in connection with another ~~potential~~ foreign military sale to Taiwan involving ~~RTC~~RTX products and services. ~~RTC~~RTX is not aware of any specific sanctions against Mr. ~~Hayes or RTC, or the nature or timing of any future potential sanctions or countermeasures.~~Hayes. If China were to impose additional sanctions, enforce announced sanctions, or take other regulatory action against ~~RTC,~~RTX, our suppliers, affiliates, or partners, it could potentially disrupt our business operations. ~~The~~Any impact of these or other 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.is uncertain.

We have direct commercial sales contracts for products and services to certain foreign 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. In addition, certain programs require approvals by foreign governments and those approvals may not be obtained or may be revoked. 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 ~~September~~June 30, ~~2022,~~2023, our Contract liabilities include approximately ~~$355~~$405 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated.

Coronavirus Disease 2019 (COVID-19) Pandemic. The COVID-19 pandemic caused continuing negative effects on the global economy, our business and operations, the labor market, supply chains, inflation, and the industries in which we operate. We believe the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel

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demand, and expect to fully return to and/or exceed pre-pandemic levels as we exit 2023. Our expectations regarding the negative effects of the COVID-19 pandemic and 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.

See Part I, Item 1A, “Risk Factors” in our ~~2021~~2022 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 ~~2021~~2022 Annual Report on Form 10-K, which

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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 ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

RESULTS OF OPERATIONS

As described in our “Cautionary Note Concerning Factors That May Affect Future Results” inof this Form 10-Q, our interim period results of operations and period-to-period comparisons of ~~such~~our results, particularly at a segment level, may not be indicative of our future operating results. The following discussions of comparative results among periods, including the discussion of segment results, should be viewed in this context.

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

Net Sales


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Net sales	Net sales	$	16,951	$	16,213	$	48,981	$	47,344	Net sales	$	18,315	$	16,314	$	35,529	$	32,030

The factors contributing to the change year-over-year in total net sales for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are as follows:


(dollars in millions)	(dollars in millions)	Quarter Ended September 30, 2022		Nine Months Ended September 30, 2022		(dollars in millions)	Quarter Ended June 30, 2023		Six Months Ended June 30, 2023
Organic(1)	Organic(1)	$	1,021	$	2,382	Organic(1)	$	2,047	$	3,609
Acquisitions and divestitures, net	Acquisitions and divestitures, net	(185)		(539)		Acquisitions and divestitures, net	(48)		(82)
Other	Other	(98)		(206)		Other	2		(28)
Total change	Total change	$	738	$	1,637	Total change	$	2,001	$	3,499

(1) See “Results of Operations” for definition of organic. A reconciliation of this measure to the reported U.S. GAAP amount is provided in the table above.

Net sales increased ~~$1,021 million~~$2.0 billion organically in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 primarily due to higher organic sales of $0.9 billion at Collins, $0.7 billion at Pratt & Whitney, and ~~$0.6~~$0.5 billion at ~~Collins, partially offset by lower organic sales of $0.2 billion at~~ RMD.

The $185 million decrease in net sales related to Acquisitions and divestitures, net for the quarter ended September 30, 2022 compared to the quarter ended September 30, 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 $98 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021, was primarily driven by the impact of foreign exchange.~~

Net sales increased $2,382 million organically in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to higher organic sales of $1.9 billion at Pratt & Whitney and $1.6 billion at Collins, partially offset by lower organic sales of $0.9 billion at RMD.

The $539 million decrease in net sales related to Acquisitions and divestitures, net for the nine months ended September 30, 2022 compared to the nine months ended September 30, 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 $206 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, was primarily driven by the impact of foreign exchange.

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Net sales increased $3.6 billion organically in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to higher organic sales of $1.7 billion at Collins, $1.4 billion at Pratt & Whitney, and $0.6 billion at RMD.

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


		Quarter Ended September 30,				% of Total Net Sales					Quarter Ended June 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Net Sales	Net Sales									Net Sales
Products	Products	$	12,756	$	12,331	75.3	%	76.1	%	Products	$	13,411	$	12,258	73.2	%	75.1	%
Services	Services	4,195		3,882		24.7	%	23.9	%	Services	4,904		4,056		26.8	%	24.9	%
Total net sales	Total net sales	$	16,951	$	16,213	100	%	100	%	Total net sales	$	18,315	$	16,314	100	%	100	%

Refer to “Note 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.

Net products sales increased ~~$425 million~~$1.2 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 primarily due to increases in external products sales of ~~$0.3~~$0.6 billion at Collins, $0.4 billion at RMD, and $0.2 billion at Pratt & Whitney.

Net services sales increased $0.8 billion in the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022 primarily due to increases in external services sales of $0.5 billion at Pratt & Whitney and ~~$0.3~~$0.2 billion at Collins.


	Six Months Ended June 30,				% of Total Net Sales
(dollars in millions)	2023		2022		2023		2022
Net Sales
Products	$	26,198	$	24,120	73.7	%	75.3	%
Services	9,331		7,910		26.3	%	24.7	%
Total net sales	$	35,529	$	32,030	100	%	100	%

Net products sales increased $2.1 billion in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 due to increases in external products sales of $1.1 billion at Collins, $0.6 billion at Pratt & Whitney, and $0.5 billion at RMD, partially offset by a decrease in external products sales of $0.2 billion at ~~RMD.~~RIS.

Net services sales increased ~~$313 million~~$1.4 billion in the ~~quarter~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~quarter~~six months ended ~~September~~June 30, ~~2021 primarily~~2022 due to increases in external services sales of ~~$0.3~~$0.8 billion at Pratt & Whitney, $0.4 billion at Collins, $0.1 billion at RMD, and $0.1 billion at ~~Collins, partially offset by a decrease in external services sales of $0.2 billion at RIS primarily driven by~~ ~~the sale of the global training and services business in the fourth quarter of 2021~~.

Nine Months Ended September 30, % of Total Net Sales
(dollars in millions) 2022 2021 2022 2021
Net Sales
Products $ 36,876 $ 36,174 75.3 % 76.4 %
Services 12,105 11,170 24.7 % 23.6 %
Total net sales $ 48,981 $ 47,344 100 % 100 %

Net products sales increased $702 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due to increases in external products sales of $0.9 billion at Pratt & Whitney and $0.9 billion at Collins, partially offset by decreases in external products sales of $0.9 billion at RMD and $0.2 billion at RIS.

Net services sales increased $935 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to increases in external services sales of $0.9 billion at Pratt & Whitney and $0.4 billion at Collins, partially offset by a decrease in external services sales of $0.4 billion at RIS primarily driven by ~~the sale of the global training and services business in the fourth quarter of 2021~~.

Our sales to major customers were as follows:


		Quarter Ended September 30,				% of Total Net Sales					Quarter Ended June 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Sales to the U.S. government(1)	Sales to the U.S. government(1)	$	7,555	$	7,737	44.6	%	47.7	%	Sales to the U.S. government(1)	$	7,958	$	7,559	43.5	%	46.3	%
Foreign military sales through the U.S. government	Foreign military sales through the U.S. government	1,275		1,364		7.5	%	8.4	%	Foreign military sales through the U.S. government	1,241		1,181		6.8	%	7.2	%
Foreign government direct commercial sales	Foreign government direct commercial sales	1,064		1,242		6.3	%	7.7	%	Foreign government direct commercial sales	1,089		1,095		5.9	%	6.7	%
Commercial aerospace and other commercial sales	Commercial aerospace and other commercial sales	7,057		5,870		41.6	%	36.2	%	Commercial aerospace and other commercial sales	8,027		6,479		43.8	%	39.7	%
Total net sales	Total net sales	$	16,951	$	16,213	100	%	100	%	Total net sales	$	18,315	$	16,314	100	%	100	%

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


	Six Months Ended June 30,				% of Total Net Sales
(dollars in millions)	2023		2022		2023		2022
Sales to the U.S. government(1)	$	15,515	$	14,897	43.7	%	46.5	%
Foreign military sales through the U.S. government	2,503		2,357		7.0	%	7.4	%
Foreign government direct commercial sales	2,093		2,054		5.9	%	6.4	%
Commercial aerospace and other commercial sales	15,418		12,722		43.4	%	39.7	%
Total net sales	$	35,529	$	32,030	100	%	100	%

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

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Nine Months Ended September 30, % of Total Net Sales
(dollars in millions) 2022 2021 2022 2021
Sales to the U.S. government(1)
$ 22,452 $ 23,155 45.8 % 48.9 %
Foreign military sales through the U.S. government 3,632 4,156 7.4 % 8.8 %
Foreign government direct commercial sales 3,118 3,735 6.4 % 7.9 %
Commercial aerospace and other commercial sales 19,779 16,298 40.4 % 34.4 %
Total net sales $ 48,981 $ 47,344 100 % 100 %

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

Cost of Sales


		Quarter Ended September 30,						Nine Months Ended September 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			2022			2021			(dollars in millions)	2023			2022			2023			2022
Total cost of sales	Total cost of sales	$	13,464		$	13,089		$	38,880		$	38,281		Total cost of sales	$	14,518		$	12,856		$	28,163		$	25,416
Percentage of net sales	Percentage of net sales	79.4		%	80.7		%	79.4		%	80.9		%	Percentage of net sales	79.3		%	78.8		%	79.3		%	79.4		%

The factors contributing to the change year-over-year in total cost of sales for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are as follows:


(dollars in millions)	(dollars in millions)	Quarter Ended September 30, 2022		Nine Months Ended September 30, 2022		(dollars in millions)	Quarter Ended June 30, 2023		Six Months Ended June 30, 2023
Organic(1)	Organic(1)	$	650	$	1,156	Organic(1)	$	1,536	$	2,803

Acquisitions and divestitures, net	Acquisitions and divestitures, net	(155)		(448)		Acquisitions and divestitures, net	(48)		(73)
Restructuring	Restructuring	13		(5)		Restructuring	20		42
FAS/CAS operating adjustment	FAS/CAS operating adjustment	105		181		FAS/CAS operating adjustment	61		118
Acquisition accounting adjustments	Acquisition accounting adjustments	(113)		(235)		Acquisition accounting adjustments	42		50
Other	Other	(125)		(50)		Other	51		(193)
Total change	Total change	$	375	$	599	Total change	$	1,662	$	2,747

(1) See “Results of Operations” for definition of organic. A reconciliation of this measure to the reported U.S. GAAP amount is provided in the table above.

The organic increase in total cost of sales of ~~$650 million~~$1.5 billion for the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022, was primarily driven by the organic sales increases at Pratt & Whitney, ~~and~~ Collins, ~~partially offset by the organic sales decrease at~~and RMD noted above.

The $155 million decrease in cost of sales related to Acquisitions and divestitures, net for the quarter ended September 30, 2022 compared to the quarter ended September 30, 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~~increase in other cost of sales of ~~$125 million~~$0.1 billion for the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021,~~2022, was primarily driven by charges at Pratt & Whitney related to a customer insolvency in the ~~impact of foreign exchange.~~quarter ended June 30, 2023.

The organic increase in total cost of sales of ~~$1,156 million~~$2.8 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was primarily driven by the organic sales increases at Pratt & Whitney, ~~and~~ Collins, ~~partially offset by the organic sales decrease at~~and RMD noted above.

The $448 million decrease in cost of sales related to Acquisitions and divestitures, net for the nine months ended September 30, 2022 compared to the nine months ended September 30, 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 cost of sales of ~~$50 million~~$0.2 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was primarily driven by the ~~impact~~absence of ~~foreign exchange, partially offset by~~ charges recorded during the first quarter of 2022 at Pratt & Whitney and Collins related to ~~impairment of customer financing assets for products under lease,~~ ~~inventory reserves, purchase order obligations, and the~~ ~~impairment of contract fulfillment costs that are no longer recoverable, all due~~ to global sanctions on and export controls with respect to ~~Russia.~~Russia and the impacts of foreign exchange, partially offset by charges at Pratt & Whitney related to a customer insolvency in the quarter ended June 30, 2023. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional ~~information.~~

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information with respect to Russia.

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 September 30,				% of Total Net Sales					Quarter Ended June 30,				% of Total Net Sales
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Cost of sales	Cost of sales									Cost of sales
Products	Products	$	10,493	$	10,296	61.9	%	63.5	%	Products	$	11,089	$	10,040	60.5	%	61.5	%
Services	Services	2,971		2,793		17.5	%	17.2	%	Services	3,429		2,816		18.7	%	17.3	%
Total cost of sales	Total cost of sales	$	13,464	$	13,089	79.4	%	80.7	%	Total cost of sales	$	14,518	$	12,856	79.3	%	78.8	%

Net products cost of sales increased ~~$197 million~~$1.0 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022, primarily due to increases in external products cost of sales at Collins, RMD, and Pratt & Whitney, ~~partially offset~~all driven by ~~decreases at RMD and a decrease in Acquisition accounting adjustments.~~ ~~The changes at~~ ~~Collins, Pratt & Whitney, and RMD were related to~~ the ~~changes in~~ products sales changes noted above.

Net services cost of sales increased ~~$178 million~~$0.6 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, 2021 primarily due to an increase in external services cost of sales at Pratt & Whitney, partially offset by a decrease in external services sales at RIS, both driven by the services sales changes noted above.

Nine Months Ended September 30, % of Total Net Sales
(dollars in millions) 2022 2021 2022 2021
Cost of sales
Products $ 30,353 $ 30,267 62.0 % 63.9 %
Services 8,527 8,014 17.4 % 16.9 %
Total cost of sales $ 38,880 $ 38,281 79.4 % 80.9 %

~~Net products cost of sales increased $86 million in the nine months ended September 30,~~ 2022, ~~compared to the nine months ended September 30, 2021 primarily due to increases at Collins and Pratt & Whitney, partially offset by decreases at RMD and RIS and in Acquisition Accounting Adjustments.~~ ~~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 $513 million in the nine months ended September 30, 2022 compared to the nine months ended September 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.

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	Six Months Ended June 30,				% of Total Net Sales
(dollars in millions)	2023		2022		2023		2022
Cost of sales
Products	$	21,789	$	19,860	61.3	%	62.0	%
Services	6,374		5,556		17.9	%	17.3	%
Total cost of sales	$	28,163	$	25,416	79.3	%	79.4	%

Net products cost of sales increased $1.9 billion in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to increases in external products cost of sales at Collins, Pratt & Whitney, and RMD all driven by the products sales changes noted above.

Net services cost of sales increased $0.8 billion in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to increases in external services cost of sales at Pratt & Whitney, Collins, RIS, and RMD all driven by the services sales changes noted above.

Research and Development


		Quarter Ended September 30,						Nine Months Ended September 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			2022			2021			(dollars in millions)	2023			2022			2023			2022
Company-funded	Company-funded	$	662		$	676		$	1,995		$	1,922		Company-funded	$	729		$	698		$	1,336		$	1,333
Percentage of net sales	Percentage of net sales	3.9		%	4.2		%	4.1		%	4.1		%	Percentage of net sales	4.0		%	4.3		%	3.8		%	4.2		%
Customer-funded (1)	Customer-funded (1)	$	1,125		$	1,125		$	3,300		$	3,414		Customer-funded (1)	$	1,188		$	1,089		$	2,310		$	2,175
Percentage of net sales	Percentage of net sales	6.6		%	6.9		%	6.7		%	7.2		%	Percentage of net sales	6.5		%	6.7		%	6.5		%	6.8		%

(1) 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.

~~Company-funded and customer-funded research and development~~The increase in ~~the quarter ended September 30, 2022 were relatively consistent with the quarter ended September 30, 2021.~~

~~Company-funded research and development as a percentage of net sales for the nine months ended September 30, 2022 was relatively consistent with the nine months ended September 30, 2021. The~~ company-funded research and development ~~increase~~of $31 million for the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022 was ~~principally~~primarily driven by ~~increased~~higher program expenses at Collins, and an increase in research and development spending at Pratt & Whitney on various commercial and military programs, partially offset by a decrease in net expenses related to the Lower Tier Air and Missile Defense Sensor (LTAMDS) project, and lower research and development spending at RIS across various programs.

The ~~decrease~~increase in customer-funded research and development of ~~$114~~$99 million for the ~~nine months~~quarter ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~quarter ended June 30, 2022, was primarily driven by higher expenses on various military and commercial programs at Collins and increased spending at Pratt & Whitney on military programs.

Company-funded research and development for the six months ended ~~September~~June 30, ~~2021~~2023 was relatively consistent with the six months ended June 30, 2022. Included in the change in company-funded research and development were higher program expenses at Collins, and an increase in research and development spending at Pratt & Whitney on various commercial and military programs, mostly offset by a decrease in net expenses related to the LTAMDS project, and lower research and development spending at RIS across various programs.

The increase in customer-funded research and development of $135 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily driven by higher expenses on various military and commercial programs at Collins and increased spending at Pratt & Whitney on military programs, partially offset by lower expenses on various ~~military~~ programs at RIS.

Selling, General and Administrative


	Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2023			2022			2023			2022
Selling, general and administrative	$	1,635		$	1,424		$	3,033		$	2,893
Percentage of net sales	8.9		%	8.7		%	8.5		%	9.0		%

Selling, general and administrative expenses increased $0.2 billion in the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022, primarily driven by a $0.1 billion charge at our Pratt & Whitney segment related to a customer insolvency in the quarter ended June 30, 2023 and increased employee-related costs.

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at Collins and lower expenses spread across various programs 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.

~~Selling, General and Administrative~~

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2022 2021 2022 2021
Selling, general and administrative expenses $ 1,391 $ 1,229 $ 4,284 $ 3,817
Percentage of net sales 8.2 % 7.6 % 8.7 % 8.1 %

Selling, general and administrative expenses increased ~~$162 million~~$0.1 billion in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by a $0.1 billion charge at our Pratt & Whitney segment related to a customer insolvency in the quarter ended ~~September~~June 30, ~~2022 compared to the quarter ended September 30, 2021 primarily driven by higher combined expenses of $0.1 billion at Collins~~2023 and ~~Pratt & Whitney principally driven by higher~~increased employee-related costs, ~~and~~partially offset by ~~higher information technology (IT)-related costs at Corporate.~~

~~Selling, general and administrative expenses increased $467 million in~~ the ~~nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily driven by higher combined expenses~~absence of ~~$0.4 billion at Collins and Pratt & Whitney principally driven by higher employee-related costs and by~~ $71 million of charges recorded in the first quarter of 2022 related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia. See “Note 1: Basis of 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.

Other Income, Net

Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2022 2021 2022 2021
Other income, net $ 46 $ 124 $ 91 $ 314


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2023		2022		2023		2022
Other income, net	$	25	$	17	$	113	$	45

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

~~The decrease in~~ Other income, net ~~of $78 million~~ for the quarter ended ~~September~~June 30, ~~2022 compared to~~2023 was relatively consistent with the quarter ended ~~September~~June 30, ~~2021~~2022. Included in the change in other income was ~~spread across multiple items with no common or significant driver.~~

~~The decrease in Other income, net~~the absence of ~~$223 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 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 prior year foreign government wage subsidies related to COVID-19 at Pratt & Whitney of $52 million and a $23 million loss resulting from the exit of our investment in a Russia-based joint venture at Collins in the first quarter of 2022. The above items werewhich was partially offset by a net ~~favorable~~unfavorable year-over-year impact of foreign exchange gains and losses of ~~$38~~$27 million, with ~~the~~ remaining change spread across multiple items with no common or significant driver.

The increase in Other income, net of $68 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to the absence of $69 million of charges associated with the disposition of two non-core businesses at Collins in the second quarter of 2022 and a $68 million gain on sale of land during the first quarter of 2023, partially offset by a net unfavorable year-over-year impact of foreign exchange gains and losses of $44 million, with remaining change spread across multiple items with no common or significant driver.

Operating Profit


		Quarter Ended September 30,						Nine Months Ended September 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			2022			2021			(dollars in millions)	2023			2022			2023			2022
Operating profit	Operating profit	$	1,480		$	1,343		$	3,913		$	3,638		Operating profit	$	1,458		$	1,353		$	3,110		$	2,433
Operating profit margin	Operating profit margin	8.7		%	8.3		%	8.0		%	7.7		%	Operating profit margin	8.0		%	8.3		%	8.8		%	7.6		%

The increase in Operating profit of ~~$137 million~~$0.1 billion for the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 was primarily driven by the operating performance of our segments, ~~and a decrease in Acquisition accounting adjustments,~~ partially offset by the change in our FAS/CAS operating adjustment, ~~all~~both of which are described below in “Segment ~~Review.”~~Review”.

The increase in Operating profit of ~~$275 million~~$0.7 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was primarily driven by the operating performance of our segments, ~~and a decrease in Acquisition accounting adjustments,~~ partially offset by the change in our FAS/CAS operating adjustment, ~~all~~both of which are described below in “Segment Review.”

Non-service Pension Income


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2023		2022		2023		2022
Non-service pension income	$	(447)	$	(474)	$	(891)	$	(954)

The change in Non-service pension income of $27 million for the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022 was primarily driven by an increase in interest rates during 2022 and prior years’ pension asset returns less than our expected return on plan assets (EROA) assumption, partially offset by an increase in our 2023 EROA assumption.

The change in Non-service pension income of $63 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily driven by an increase in interest rates during 2022 and prior years’ pension asset returns less than our EROA assumption, partially offset by an increase in our 2023 EROA assumption.

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~~Non-service Pension Income~~
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in millions) 2022 2021 2022 2021
Non-service pension income $ (468) $ (491) $ (1,422) $ (1,472)

The change in Non-service pension income of $23 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021 included the impact of an increase in the discount rate, partially offset by prior years’ pension asset returns exceeding our expected return on assets (EROA) assumption.

The change in Non-service pension income of $50 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 included the impact of an increase in the discount rate, partially offset by prior years’ pension asset returns exceeding our EROA assumption.

Interest Expense, Net


		Quarter Ended September 30,						Nine Months Ended September 30,							Quarter Ended June 30,						Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			2022			2021			(dollars in millions)	2023			2022			2023			2022
Interest expense	Interest expense	$	326		$	336		$	968		$	1,008		Interest expense	$	372		$	320		$	711		$	642
Interest income	Interest income	(10)			(9)			(54)			(24)			Interest income	(17)			(13)			(27)			(44)
Other non-operating expense (income)(1)	Other non-operating expense (income)(1)	(5)			31			44			62			Other non-operating expense (income)(1)	(22)			22			(36)			49
Interest expense, net	Interest expense, net	$	311		$	358		$	958		$	1,046		Interest expense, net	$	333		$	329		$	648		$	647
Average interest expense rate	Average interest expense rate	4.0		%	4.2		%	4.0		%	4.1		%	Average interest expense rate	4.2		%	4.0		%	4.1		%	4.0		%

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

~~The decrease in interest~~Interest expense, net ~~of $47 million~~ in the quarter ended ~~September~~June 30, ~~2022 compared to~~2023 was relatively consistent with the quarter ended ~~September~~June 30, ~~2021~~2022. The increase in Interest expense of $52 million was primarily due to the ~~absence of $32 million of net debt extinguishment costs in connection with the early repayment of outstanding principal in the prior year.~~

The decrease in interest expense, net of $88 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to a $40 million decrease in Interest expense, a $30 million increase in Interest income, and an $18 million decrease in Other non-operating expenses. The decrease in Interest expense was primarily due to repayments of higher interest rate long-term debt ~~during 2021, partially offset by debt issuances with lower interest rates during 2021. The increase in Interest income was primarily due to adjustments of certain tax-related interest reserves~~issuance in the first quarter of ~~2022.~~2023 and the increase in commercial paper activity in 2023. The ~~decrease~~change in Other non-operating expense (income) of $44 million was primarily driven by a change in the mark-to-market fair value of marketable securities held in trusts associated with certain of our nonqualified deferred compensation and employee benefit plans, and an increase in non-operating dividend income.

Interest expense, net in the six months ended June 30, 2023 was relatively consistent with the six months ended June 30, 2022. The change in Other non-operating expense (income) of $85 million was primarily driven by a change in the mark-to-market fair value of marketable securities held in trusts associated with certain of our nonqualified deferred compensation and employee benefit plans, and an increase in non-operating dividend income. The increase in Interest expense of $69 million was primarily due to the ~~absence of $32 million of net~~long-term debt ~~extinguishment costs~~issuance in the ~~prior year.~~first quarter of 2023 and the increased commercial paper activity in 2023.

Income Taxes
Quarter Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Effective income tax rate 14.8 % 0.2 % 11.8 % 17.0 %


	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Effective income tax rate	13.5	%	10.7	%	15.3	%	10.1	%

~~The~~Our effective tax rate for the quarter and six months ended June 30, 2023 was 13.5% and 15.3%, respectively, as compared to 10.7% and 10.1% for the quarter and six months ended June 30, 2022, respectively. The increase in the 2023 effective tax rates for both the quarter ~~ended September 30, 2022 includes~~and year to date periods as compared to respective prior year periods is primarily driven by a ~~benefit of approximately 4 percentage points primarily related~~higher forecasted annualized effective tax rate for 2023 principally due to ~~an incremental~~a lower forecasted Foreign Derived Intangible Income (FDII) ~~benefit and other effects created by~~benefit. In addition, 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 September 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter of 2021.

~~The~~ effective tax rate infor the ~~nine~~six months ended ~~September~~June 30, ~~2022 includes~~2023 reflects a lower tax benefit ~~of approximately 5 percentage points primarily related~~from stock based compensation as compared to ~~an incremental 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 ninesix months ended ~~September~~June 30, 2021 includes deferred tax benefits of $244 million associated with legal entity and operational reorganizations implemented in the third quarter of 2021, 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, and $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. Subsequently, in the fourth quarter of 2021, we recognized an incremental $104 million tax benefit due to the revaluation of the Forcepoint tax benefit as a result of completing the divestiture of RIS’s global training and services business.

2022.

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Net Income from Continuing Operations Attributable to Common Shareowners


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	2022		2021		2022		2021		(dollars in millions, except per share amounts)	2023		2022		2023		2022
Net income from continuing operations attributable to common shareowners	Net income from continuing operations attributable to common shareowners	$	1,387	$	1,400	$	3,794	$	3,212	Net income from continuing operations attributable to common shareowners	$	1,327	$	1,304	$	2,753	$	2,407
Diluted earnings per share from continuing operations	Diluted earnings per share from continuing operations	$	0.94	$	0.93	$	2.55	$	2.13	Diluted earnings per share from continuing operations	$	0.90	$	0.88	$	1.87	$	1.61

Net income from continuing operations attributable to common shareowners for the quarter ended ~~September~~June 30, ~~2022~~2023 includes the following:

•acquisition accounting adjustments of ~~$379~~$384 million, net of tax, which had an unfavorable impact on diluted earnings per share (EPS) from continuing operations of $0.26; and

•~~income of $65 million~~charges on our contract assets and customer financing assets related to ~~the capitalization~~a customer insolvency of ~~research or experimental expenditures for~~$114 million, net of tax ~~purposes,~~and noncontrolling interest, which had ~~a net favorable~~an unfavorable impact on diluted EPS from continuing operations of ~~$0.04.~~$0.08.

Net income from continuing operations attributable to common shareowners for the quarter ended ~~September~~June 30, ~~2021~~2022 includes the following:

•acquisition accounting adjustments of ~~$456~~$349 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.30; and~~$0.23.

•

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

Net income from continuing operations attributable to common shareowners for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 includes the following:

•acquisition accounting adjustments of ~~$1,107~~$769 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of ~~$0.74;~~$0.52; and

•charges on our contract assets and customer financing assets related to a customer insolvency of $114 million, net of tax and noncontrolling interest, which had an unfavorable impact on diluted EPS from continuing operations of $0.08.

Net income from continuing operations attributable to common shareowners for the six months ended June 30, 2022 includes the following:

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

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

•~~income of $159 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 $0.11.~~

~~Net income from continuing operations attributable to common shareowners for the nine months ended September 30, 2021 includes the following:~~

•~~acquisition accounting adjustments of $1,257 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.83;~~

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

Net Income Attributable to Common Shareowners


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	2022		2021		2022		2021		(dollars in millions, except per share amounts)	2023		2022		2023		2022
Net income attributable to common shareowners	Net income attributable to common shareowners	$	1,387	$	1,393	$	3,775	$	3,178	Net income attributable to common shareowners	$	1,327	$	1,304	$	2,753	$	2,388
Diluted earnings per share from operations	Diluted earnings per share from operations	$	0.94	$	0.93	$	2.54	$	2.10	Diluted earnings per share from operations	$	0.90	$	0.88	$	1.87	$	1.60

The ~~decrease~~increase in net income attributable to common shareowners and diluted earnings per share from operations for the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 and for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was primarily driven by the ~~decreases~~increases in continuing operations, as discussed ~~above in Net Income from Continuing Operations Attributable to Common Shareowners.~~above.

SEGMENT REVIEW

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

~~Table of Contents~~

eliminated within Eliminations and other, which also includes certain smaller non-reportable segments. Segment results exclude certain acquisition accounting adjustments, the FAS/CAS operating adjustment, and certain corporate expenses, as further discussed below. Effective July 1, 2023, we streamlined the structure of our core businesses from four principal business segments to three principal business segments: Collins Aerospace, Pratt & Whitney, and Raytheon. All segment information included in this Form 10-Q is reflective of the four segments of Collins, Pratt & Whitney, RIS, and RMD in accordance with the management structure in place as of June 30, 2023. See “Note 20: Subsequent Events” within Item 1 of this Form 10-Q for additional information.

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 September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Collins Aerospace Systems		$	5,100	$	4,592	$	14,935	$	13,507
Collins Aerospace										Collins Aerospace	$	5,850	$	5,011	$	11,431	$	9,835
Pratt & Whitney	Pratt & Whitney	5,380		4,725		14,878		13,035		Pratt & Whitney	5,701		4,969		10,931		9,498
Raytheon Intelligence & Space	Raytheon Intelligence & Space	3,626		3,740		10,768		11,310		Raytheon Intelligence & Space	3,655		3,570		7,220		7,142
Raytheon Missiles & Defense	Raytheon Missiles & Defense	3,678		3,902		10,763		11,680		Raytheon Missiles & Defense	4,000		3,558		7,671		7,085
Total segment	Total segment	17,784		16,959		51,344		49,532		Total segment	19,206		17,108		37,253		33,560
Eliminations and other	Eliminations and other	(833)		(746)		(2,363)		(2,188)		Eliminations and other	(891)		(794)		(1,724)		(1,530)

Consolidated	Consolidated	$	16,951	$	16,213	$	48,981	$	47,344	Consolidated	$	18,315	$	16,314	$	35,529	$	32,030

Operating Profit. Operating profit by segment was as follows:


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Collins Aerospace Systems		$	616	$	478	$	1,602	$	1,298
Collins Aerospace										Collins Aerospace	$	821	$	546	$	1,615	$	986
Pratt & Whitney	Pratt & Whitney	316		187		769		319		Pratt & Whitney	230		302		645		453
Raytheon Intelligence & Space	Raytheon Intelligence & Space	371		391		1,064		1,194		Raytheon Intelligence & Space	291		315		615		693
Raytheon Missiles & Defense	Raytheon Missiles & Defense	408		490		1,143		1,518		Raytheon Missiles & Defense	415		348		743		735
Total segment	Total segment	1,711		1,546		4,578		4,329		Total segment	1,757		1,511		3,618		2,867
Eliminations and other	Eliminations and other	(50)		(27)		(131)		(98)		Eliminations and other	(60)		(47)		(47)		(81)
Corporate expenses and other unallocated items(1)	Corporate expenses and other unallocated items(1)	(77)		(89)		(255)		(319)		Corporate expenses and other unallocated items(1)	(59)		(42)		(102)		(178)
FAS/CAS operating adjustment	FAS/CAS operating adjustment	378		499		1,135		1,347		FAS/CAS operating adjustment	309		379		623		757
Acquisition accounting adjustments	Acquisition accounting adjustments	(482)		(586)		(1,414)		(1,621)		Acquisition accounting adjustments	(489)		(448)		(982)		(932)
Consolidated	Consolidated	$	1,480	$	1,343	$	3,913	$	3,638	Consolidated	$	1,458	$	1,353	$	3,110	$	2,433

(1) 2022 included the net expenses related to the U.S. Army’s LTAMDS project. Beginning in 2023, LTAMDS results are included in the RMD segment.

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, as well as changes in facts and assumptions related to contract options, contract modifications, incentive and award fees associated with program performance, customer activity levels, and other customer-directed changes. For a full description of our EAC process, refer to “Note 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~~be performed under our contracts, we have both favorable and unfavorable EAC adjustments in the ordinary course.

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


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Gross favorable	Gross favorable	$	339	$	334	$	1,002	$	955	Gross favorable	$	301	$	289	$	604	$	663
Gross unfavorable	Gross unfavorable	(332)		(309)		(1,000)		(891)		Gross unfavorable	(331)		(330)		(758)		(668)
Total net EAC adjustments	Total net EAC adjustments	$	7	$	25	$	2	$	64	Total net EAC adjustments	$	(30)	$	(41)	$	(154)	$	(5)

~~The~~Net EAC adjustments in the quarter ended June 30, 2023 were relatively consistent with the quarter ended June 30, 2022. Included in the change in net EAC adjustments were favorable changes in net EAC adjustments of ~~$18~~$63 million ~~in the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021~~at RMD which was ~~primarily due to~~spread across numerous individual programs, partially offset by unfavorable changes in net EAC adjustments of ~~$21 million at RMD spread across numerous individual programs with no individual or common significant driver and includes the impact of continued supply chain and labor market constraints.~~

The change in net EAC adjustments of $62 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to unfavorable changes in net EAC adjustments of $143 million at RMD and $59 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 $105 million at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments of $35$64 million at Pratt & Whitney ~~primarily due to~~principally driven by the absence of a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.

The change in net EAC adjustments of $149 million in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to unfavorable changes in net EAC adjustments of $95 million at Pratt & Whitney principally driven by the absence of a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022, and unfavorable changes in net EAC adjustments of $30 million at RIS spread across numerous individual programs.

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

Backlog and ~~Defense~~ Bookings. Total backlog was approximately ~~$168~~$185 billion and ~~$156~~$175 billion as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, which includes defense backlog of ~~$67~~$73 billion and ~~$63~~$69 billion as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 and Pratt & Whitney segments. Defense bookings were approximately ~~$12~~$13 billion for both the quarters ended June 30, 2023 and 2022, and approximately $25 billion and ~~$10~~$22 billion for the ~~quarters ended September 30, 2022 and 2021, respectively, and approximately $34 billion and $30 billion for the nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Defense bookings~~Bookings are impacted by the timing and amounts of awards in a given period, which are subject to numerous factors, including: the desired capability by the customer and urgency of customer needs, customer budgets and other fiscal constraints, political and economic and other environmental factors, the timing of customer negotiations, and the timing of customer and governmental approvals and notifications. In addition, due to these factors, quarterly bookings tend to fluctuate from period to period, particularly on a segment basis.

Collins Aerospace ~~Systems~~


		Quarter Ended September 30,								Nine Months Ended September 30,									Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			Change		2022			2021			Change		(dollars in millions)	2023			2022			Change		2023			2022			Change
Net sales	Net sales	$	5,100		$	4,592		11	%	$	14,935		$	13,507		11	%	Net sales	$	5,850		$	5,011		17	%	$	11,431		$	9,835		16	%
Operating profit	Operating profit	616			478			29	%	1,602			1,298			23	%	Operating profit	821			546			50	%	1,615			986			64	%
Operating profit margins	Operating profit margins	12.1		%	10.4		%			10.7		%	9.6		%			Operating profit margins	14.0		%	10.9		%			14.1		%	10.0		%

Quarter Ended ~~September~~June 30, ~~2022~~2023 Compared with Quarter Ended ~~September~~June 30, ~~2021~~2022


		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	$	587	$	(21)	$	—	$	(58)		$	508	Net sales	$	859	$	(19)	$	—	$	(1)	$	839

Operating profit	Operating profit	158		(3)		(12)		(5)			138		Operating profit	219		(1)		(3)		60		275

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

The organic sales increase of ~~$0.6~~$0.9 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 primarily relates to higher commercial aerospace aftermarket sales of ~~$0.4~~$0.6 billion, including increases across all aftermarket sales ~~channels, and higher commercial aerospace OEM sales of $0.2 billion.~~channels. These increases were principally driven by the continued recovery of commercial air traffic which has resulted in an increase in flight ~~hours, aircraft fleet~~

~~Table of Contents~~

~~utilization~~hours. Commercial aerospace OEM sales increased $0.2 billion in the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022 due to increased production rates within wide-body, narrow-body, and ~~narrow-body commercial OEM volume growth. This was partially offset by lower military~~business jets. Military sales ofincreased $0.1 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~ 2022 primarily due to ~~lower material receipts and decreased~~increased development program volume.

The organic operating profit increase of $0.2 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 was primarily due to higher commercial aerospace operating profit of $0.3 billion, principally driven by the higher ~~commercial aerospace aftermarket~~ sales volume discussed ~~above.~~above as well as favorable mix, which was partially offset by higher production costs. This increase in commercial aerospace operating profit was ~~partially~~further offset by ~~lower military~~higher research and development costs primarily due tohigher program expenses, and higher selling, general and administrative expenses, primarily due to increased employee-related costs.

The increase in Other operating profit of $0.1 billion ~~principally driven by lower military sales volume, and higher combined selling, general and administrative expenses and research and development costs~~in the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022 was primarily due to the absence of ~~$0.1 billion.~~$69 million of charges associated with the disposition of two non-core businesses in the second quarter of 2022.

~~Nine~~Table of Contents

Six Months Ended ~~September~~June 30, ~~2022~~2023 Compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022


		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	$	1,576	$	(21)	$	—	$	(127)	$	1,428	Net sales	$	1,670	$	(46)	$	—	$	(28)	$	1,596

Operating profit	Operating profit	498		(10)		13		(197)		304		Operating profit	431		(2)		(3)		203		629

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

The organic sales increase of ~~$1.6~~$1.7 billion in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 primarily relates to higher commercial aerospace aftermarket sales of ~~$1.3~~$1.1 billion, including increases across all aftermarket sales ~~channels, and higher commercial aerospace OEM sales of $0.6 billion, both~~channels. These increases were principally driven by the continued recovery of commercial air traffic which has resulted in an increase in flight ~~hours, aircraft fleet utilization~~hours. Commercial aerospace OEM sales increased $0.4 billion in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 due to increased production rates in narrow-body, wide-body, and ~~narrow-body commercial OEM~~business jets. Military sales increased $0.2 billion in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to increased development program volume ~~growth. These increases were partially offset by lower military sales~~and higher material receipts.

The organic profit increase of $0.4 billion in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September 30, 2021, primarily due to lower material receipts and expected declines in F-35 volume.~~

~~The organic profit increase of $0.5 billion in the nine months ended September~~June 30, 2022 ~~compared to the nine months ended September 30, 2021 is~~was primarily due to higher commercial aerospace operating profit of ~~$1.0~~$0.6 billion, principally driven by the higher ~~commercial aerospace aftermarket~~ sales volume discussed above as well as favorable mix, partially offset by ~~the absence of a $33 million favorable impact from a contract related matter in the nine months ended September 30, 2021.~~ higher production costs. This increase in commercial aerospace operating profit was ~~partially~~further offset by ~~lower military operating profit of $0.2 billion principally driven by the lower military sales discussed above, and~~ higher selling, general and administrative expenses, ~~of $0.2 billion.~~primarily due to increased employee-related costs, and higher research and development costs, primarily due tohigher program expenses.

The ~~decrease~~increase in Other operating profits of ~~$197 million~~$0.2 billion in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was primarily due to the absence of $141 million of pretax charges recorded in the first quarter of 2022 related to increased estimates for credit losses, inventory reserves, recognition of purchase order obligations, and a loss resulting from the exit of our investment in a Russia-based joint venture, all due to global sanctions on and export controls with respect to Russia inand the ~~first quarter~~absence of ~~2022. In addition, we recognized~~ $69 million of charges associated with the disposition of two non-core businesses in the second quarter of 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 September 30,								Nine Months Ended September 30,									Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			Change		2022			2021			Change		(dollars in millions)	2023			2022			Change		2023			2022			Change
Net sales	Net sales	$	5,380		$	4,725		14	%	$	14,878		$	13,035		14	%	Net sales	$	5,701		$	4,969		15	%	$	10,931		$	9,498		15	%
Operating profit	Operating profit	316			187			69	%	769			319			141	%	Operating profit	230			302			(24)	%	645			453			42	%
Operating profit margins	Operating profit margins	5.9		%	4.0		%			5.2		%	2.4		%			Operating profit margins	4.0		%	6.1		%			5.9		%	4.8		%

Quarter Ended ~~September~~June 30, ~~2022~~2023 Compared with Quarter Ended ~~September~~June 30, ~~2021~~2022


		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	$	686	$	—	$	—	$	(31)		$	655	Net sales	$	729	$	—	$	—	$	3	$	732

Operating profit	Operating profit	137		—		—		(8)			129		Operating profit	122		—		(24)		(170)		(72)

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

The organic sales increase of $0.7 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 reflects higher commercial aftermarket sales of ~~$0.5~~$0.6 billion, primarily due to an increase in ~~shop visits~~volume and

~~Table of Contents~~

~~related spare part sales~~ favorable mix as the commercial aerospace environment continues to recover. The increase also includes higher commercial OEM sales of $0.2 billion, primarily driven by volume and favorable mix ~~and higher volume~~ on commercial engine shipments. These increases ~~were~~are partially offset by a ~~slight~~ decline in military sales ~~reflecting expected lower~~of $0.1 billion primarily driven by the absence of a benefit in the second quarter of 2022 resulting from the timing of an F135 production ~~volume,~~contract award which resulted in the recognition of previously inventoried cost, which was partially offset by higher F135 sustainment ~~volume.~~volume in the second quarter of 2023.

The organic operating profit increase of $0.1 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 was primarily driven by higher commercial aerospace operating profit of $0.2 billion, principally due to the aftermarket sales volume increase and favorable mix discussed above, ~~and favorable commercial OEM mix. The increase also includes slightly higher military operating profit primarily driven by favorable mix. These increases were~~ partially offset by higher production costs. Included in the organic operating profit is a ~~combined increase~~favorable contract matter of approximately $60 million, which offsets a prior year $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket contract in ~~selling, general and administrative expenses and research and development costs~~the second quarter of ~~$0.1 billion.~~2022.

~~Nine~~Table of Contents

The decrease in Other operating profit of $0.2 billion in the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022 reflects a $181 million charge related to a customer insolvency during the second quarter of 2023. The charge primarily relates to Contract assets and Customer financing assets exposures with the customer.

Six Months Ended ~~September~~June 30, ~~2022~~2023 Compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022


		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	$	1,913	$	—	$	—	$	(70)	$	1,843	Net sales	$	1,439	$	—	$	—	$	(6)	$	1,433

Operating profit	Operating profit	624		—		1		(175)		450		Operating profit	233		—		(41)		—		192

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

The organic sales increase of ~~$1.9~~$1.4 billion in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 reflects higher commercial aftermarket sales of ~~$1.5~~$0.9 billion, primarily due to an increase in ~~shop visits~~volume and ~~related spare part sales~~favorable mix as the commercial aerospace environment continues to recover. The increase also includes higher commercial OEM sales of ~~$0.5~~$0.4 billion, primarily driven by volume and favorable ~~mix and higher volume on commercial engine shipments. These increases were partially offset by lower military~~mix. Military sales ofincreased $0.1 billion, primarily due to ~~lower sales on F135 production volume, partially offset by~~ higher F135 sustainment volume.

The organic profit increase of ~~$0.6~~$0.2 billion in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was primarily driven by higher commercial aerospace operating profit of ~~$1.0~~$0.3 billion, principally due to the aftermarket sales ~~volume~~ increase discussed above, ~~and~~ ~~favorable~~ partially offset by lower commercial OEM ~~mix. The organic profit increase also includes slightly higher military~~ operating profit ~~primarily~~ driven by the volume increases noted above and higher production costs. The six months ended June 30, 2023 also benefited from two favorable ~~mix. These increases were~~contract matters totaling approximately $120 million, which was partially offset by a ~~combined increase in selling, general and administrative expenses and research and development costs of $0.2 billion.~~ ~~In the nine months ended September 30, 2022, our organic profit included a~~prior year $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket ~~program~~contract in the second quarter of 2022, which impacted our commercial aerospace operating profit. In the nine months ended September 30, 2021 our organic profit included $52 million related to foreign government wage subsidies due to COVID-19.2022.

~~The decrease in~~ Other operating profit ~~of $175 million~~ in the ~~nine~~six months ended ~~September~~June 30, 2023 was consistent with the six months ended June 30, 2022 ~~compared~~and includes a $181 million charge related to a customer insolvency during the ~~nine months ended September 30, 2021 was primarily due to~~second quarter of 2023 as discussed above, partially offset by the absence of a $155 million charge recorded in the first quarter of ~~pretax charges~~2022 related to impairment of customer financing assets for products under lease, increased estimates for credit losses, inventory reserves, and recognition of purchase order obligations, all due to global sanctions on and export controls with respect to ~~Russia in the first quarter of 2022.~~Russia. See “Note 1: Basis of Presentation” within Item 1 of this Form 10-Q for additional information.

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

Defense Bookings – In addition to a number of smaller bookings, in the quarter ended ~~September~~June 30, ~~2022,~~2023, Pratt & Whitney booked $524 million for F135 sustainment and $278 million for expanded scope on F135 production Lots 15 and 16. In addition to these bookings, in the nine months ended September 30, 2022 Pratt & Whitney booked $4.0$2.0 billion for F135 production Lots 1515-17 and ~~16, $408 million~~$1.5 billion for ~~F135 sustainment, and $251 million for tanker production Lots 7 and 8.~~F117 sustainment.

Raytheon Intelligence & Space


		Quarter Ended September 30,								Nine Months Ended September 30,									Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			Change		2022			2021			Change		(dollars in millions)	2023			2022			Change		2023			2022			Change
Net sales	Net sales	$	3,626		$	3,740		(3)	%	$	10,768		$	11,310		(5)	%	Net sales	$	3,655		$	3,570		2	%	$	7,220		$	7,142		1	%
Operating profit	Operating profit	371			391			(5)	%	1,064			1,194			(11)	%	Operating profit	291			315			(8)	%	615			693			(11)	%
Operating profit margins	Operating profit margins	10.2		%	10.5		%			9.9		%	10.6		%			Operating profit margins	8.0		%	8.8		%			8.5		%	9.7		%
Bookings	Bookings	$	3,897		$	2,894		35	%	$	9,469		$	10,572		(10)	%	Bookings	$	3,148		$	2,980		6	%	$	7,443		$	5,572		34	%

~~Table of Contents~~

Quarter Ended ~~September~~June 30, ~~2022~~2023 Compared with Quarter Ended ~~September~~June 30, ~~2021~~

Factors Contributing to Total Change in Net Sales
(dollars in millions)
Organic(1)
Acquisitions /
Divestitures, net Other Total Change
Net sales $ 68 $ (164) $ (18) $ (114)
2022


	Factors Contributing to Total Change in Net Sales
(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net sales	$	89	$	—	$	(4)	$	85

(1) See “Segment Review” above for definition of organic. 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	$	5	$	9	$	(28)	$	(6)	$	(20)	Operating profit	$	9	$	19	$	—	$	(52)	$	(24)

Table of Contents

Organic sales in the quarter ended ~~September~~June 30, ~~2022~~2023 were relatively consistent with the quarter ended ~~September~~June 30, ~~2021.~~2022. Included in the organic change in sales were higher Sensing and Effects sales, ~~of $0.2 billion due to certain development programs transitioning into production~~higher Cyber and ~~an increase in~~Services sales ~~on classified programs, partially offset by~~and lower Command, Control and Communications ~~sales of $0.1 billion primarily driven by an anticipated decrease in production volumes on certain tactical communications systems programs.~~sales.

The decrease in operating profit of ~~$20~~$24 million, and the related decrease in operating profit margins, in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021,~~2022, were primarily due to ~~acquisitions / divestitures, net described below, partially offset by the net favorable~~a change in ~~EAC adjustments~~mix and other performance of $9$52 million ~~which was spread across numerous programs.~~principally driven by unfavorable program mix and higher operating expenses.

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

~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 Compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022


		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	$	15	$	(518)		$	(39)	$	(542)	Net sales	$	95	$	—	$	(17)	$	78

(1) See “Segment Review” above for definition of organic. 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	$	4	$	(29)	$	(92)	$	(13)	$	(130)	Operating profit	$	13	$	(30)	$	—	$	(61)	$	(78)

Organic sales in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 were relatively consistent with the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Included in the organic change in sales were higher ~~Sensing and Effects sales of $0.1 billion, and higher~~ Cyber ~~Training~~ and Services sales ~~of $0.1 billion on certain classified cyber programs, offset by~~and lower Command, Control and Communications sales of $0.2 billion. The higher Sensing and Effects sales includes an increase due to certain development programs transitioning into production, an increase in sales on classified programs, and a decrease in surveillance and targeting systems due to lower production volume. The lower Command, Control and Communications sales were primarily driven by an anticipated decrease in production volumes on certain tactical communications systems programs.sales.

The decrease in operating profit of ~~$130 million,~~$0.1 billion, and the related decrease in operating profit margins, in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, were primarily due to ~~acquisition / divestitures,~~an unfavorable change in mix and other performance of $61 million and an unfavorable net ~~described below and the net unfavorable~~ change in EAC adjustments of ~~$29 million, which~~$30 million. The change in mix and other performance was primarily due to unfavorable program mix and higher operating expenses. The net change in EAC adjustments was spread across numerous individual programs.

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

Backlog and Bookings– Backlog was $17 billion at ~~September~~June 30, ~~2022~~2023 and ~~$18~~$16 billion at December 31, ~~2021.~~2022. In addition to a number of smaller bookings, in the quarter ended ~~September~~June 30, ~~2022,~~2023, RIS booked ~~$1.6~~$1.1 billion on a number of classified ~~contracts.~~contracts and $332 million on cyber defense services contracts for certain federal and civil customers. In addition to these bookings, in the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 RIS booked ~~$2.3~~$1.9 billion on a number of classified contracts, ~~$311~~$650 million on Next Generation Jammer Mid-Band (NGJ-MB) for the ~~Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) GEO~~U.S. Navy and the government of Australia, $275 million on a seven-vehicle missile ~~warning~~tracking satellite constellation for the Space Development Agency, and $266 million to deliver airborne radars to an international customer.

Table of Contents

~~and defense contract for the U.S. Space Force, and $253 million on the Development, Operations and Maintenance (DOMino) cyber program for the Department of Homeland Security (DHS).~~

Raytheon Missiles & Defense


		Quarter Ended September 30,								Nine Months Ended September 30,									Quarter Ended June 30,								Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022			2021			Change		2022			2021			Change		(dollars in millions)	2023			2022			Change		2023			2022			Change
Net sales	Net sales	$	3,678		$	3,902		(6)	%	$	10,763		$	11,680		(8)	%	Net sales	$	4,000		$	3,558		12	%	$	7,671		$	7,085		8	%
Operating profit	Operating profit	408			490			(17)	%	1,143			1,518			(25)	%	Operating profit	415			348			19	%	743			735			1	%
Operating profit margins	Operating profit margins	11.1		%	12.6		%			10.6		%	13.0		%			Operating profit margins	10.4		%	9.8		%			9.7		%	10.4		%
Bookings	Bookings	$	5,415		$	3,901		39	%	$	14,052		$	12,487		13	%	Bookings	$	3,636		$	4,537		(20)	%	$	8,836		$	8,637		2	%

Quarter Ended ~~September~~June 30, ~~2022~~2023 Compared with Quarter Ended ~~September~~June 30, ~~2021~~

Factors Contributing to Total Change in Net Sales
(dollars in millions)
Organic(1)
Acquisitions /
Divestitures, net Other Total Change
Net sales $ (209) $ — $ (15) $ (224)
2022


	Factors Contributing to Total Change in Net Sales
(dollars in millions)	Organic(1)		Acquisitions / Divestitures, net		Other		Total Change
Net sales	$	473	$	(29)	$	(2)	$	442

(1) See “Segment Review” above for definition of organic. 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	$	(19)	$	(21)	$	—	$	(42)	$	(82)	Operating profit	$	53	$	63	$	2	$	(51)	$	67

The organic sales ~~decrease~~increase of ~~$209 million~~$0.5 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 was primarily due to ~~lower~~higher net sales of $0.2 billion from our Air Power programs, $0.1 billion from our Advanced Technology programs, and $0.1 billion from our Land Warfare and Air Defense programs. The increase in Air Power programs ~~including certain international air and missile defense programs,~~is primarily driven by lower material receipts as a result of supply chain constraints and anticipated decreases in production, and lower net sales of $0.1 billion from our Naval Power programs due to lower volumes across multiple programs, partially offset by higher net sales on ~~SPY-6 programs. These declines were partially offset~~the Advanced Medium Range Air-to-Air Missile (AMRAAM) program driven by ~~higher net sales~~the award in the second quarter of ~~$0.2 billion from our Strategic Missile Defense~~2023. The increase in Advanced Technology programs ~~which included~~includes higher net sales on ~~the NGI program.~~certain classified programs awarded in 2022. The increase in Land Warfare and Air Defense programs was due to higher volumes across multiple programs.

The ~~decrease~~increase in operating profit of ~~$82 million~~$0.1 billion in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021,~~2022, was primarily due to a favorable net change in EAC adjustments of $63 million and the impact of higher volume of $53 million, partially offset by an unfavorable change in mix and other performance of ~~$42 million, a net unfavorable change in EAC adjustments of $21 million, and lower volume of $19~~$51 million. 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 net unfavorable~~ change in EAC adjustments was spread across numerous individual programs. The increase in volume was principally driven by the higher net sales discussed above. The unfavorable change in mix and other performance was primarily due to higher relative volume of early stage production programs within Land Warfare and ~~includes the impact of continued supply chain~~Air Defense and ~~labor market constraints.~~ Air Power programs. The ~~decrease~~increase in operating profit margins in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021,~~2022, was primarily due to the net change in EAC adjustments, partially offset by the change in mix and other performance ~~and the net change in EAC adjustments.~~discussed above.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 Compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022


		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	$	(883)	$	—		$	(34)	$	(917)	Net sales	$	633	$	(36)	$	(11)	$	586

(1) See “Segment Review” above for definition of organic. 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	$	(77)	$	(143)	$	—	$	(155)	$	(375)	Operating profit	$	83	$	2	$	1	$	(78)	$	8

The organic sales ~~decrease~~increase of ~~$883 million~~$0.6 billion in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was primarily due to ~~lower~~higher net sales of ~~$0.7~~$0.2 billion from our Air Power programs, $0.2 billion from our Advanced Technology programs, and $0.1 billion from our Land Warfare and Air Defense programs. The increase in Air Power programs ~~including certain international air and missile defense programs,~~is primarily driven by ~~lower material receipts as a result of supply chain constraints and anticipated decreases in production; lower~~higher net sales on the AMRAAM program driven by the award in the second quarter of ~~$0.3 billion from our Air Power programs,~~2023. The

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~~including lower~~increase in Advanced Technology programs includes higher net sales on ~~the Paveway program~~certain classified programs awarded in 2022. The increase in Land Warfare and ~~the Advanced Medium Range Air-to-Air Missile (AMRAAM) program; and lower net sales of $0.3 billion on our Naval Power~~Air Defense programs was due to ~~lower~~higher volumes across multiple programs partially offset by higher net sales from SPY-6 programs. These decreases were partially offset by higher net sales of $0.3 billion from our Strategic Missile Defense programs which included higher net sales from.

Operating profit in the ~~NGI program.~~

~~The decrease~~six months ended June 30, 2023 was relatively consistent with the six months ended June 30, 2022. Included in the change in operating profit was higher volume of ~~$375~~$83 million ~~in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to a~~and an unfavorable change in mix and other performance of ~~$155 million, a~~$78 million. The increase in volume was principally driven by the higher net sales on the Advanced Technology and Air Power programs discussed above. The unfavorable change ~~in EAC adjustments of $143 million, and lower volume of $77 million. The changes~~ in mix and other performance ~~and~~was primarily due to higher relative volume ~~were principally driven by the lower net sales on the~~of early stage production programs within Land Warfare and Air Defense ~~programs discussed above. The~~and Air Power. Included in the net ~~unfavorable~~ change in EAC adjustments is an unfavorable impact related to a significant contract option exercised in the first quarter of 2023, which was more than offset by favorable changes in net EAC adjustments spread across numerous ~~programs and includes the impact of continued supply chain and labor market constraints.~~individual programs. The decrease in operating profit margins in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was primarily due to the change in mix and other performance ~~and the net change in EAC adjustments.~~discussed above.

Backlog and Bookings– Backlog was ~~$32~~$35 billion at ~~September~~June 30, ~~2022~~2023 and ~~$29~~$34 billion at December 31, ~~2021.~~2022. In addition to a number of smaller bookings, in the quarter ended ~~September~~June 30, ~~2022,~~2023, RMD booked $1$1.2 billion ~~for the first Hypersonic Attack Cruise Missile (HACM) for the U.S. Air Force, $972 million~~ for AMRAAM for the U.S. Air Force and Navy and international customers, ~~$353~~$294 million for the Lower Tier Air and Missile Defense Sensor (LTAMDS) Pre-planned Product Improvement program for the U.S. Army, $226 million for systems improvement program hardware for the Air Intercept Missile (AIM-9X) Sidewinder short-range air- to-air missiles for the U.S. Navy, and $207 million for integrated effectors and sensors for Counter-Unmanned Aircraft Systems (C-UAS) defense system for the U.S. Army. In addition to these bookings, in the nine months ended September 30, 2022, RMD booked $1.6 billion on a number of classified contracts, ~~including a strategic competitive award. RMD also booked $662~~$265 million ~~on Stinger~~for Javelin for the U.S. Army ~~$651 million for the SPY-6 Hardware Production~~ and Sustainment contract for the U.S. Navy, $648 million for Standard Missile-3 (SM-3) for the Missile Defense Agency (MDA), $423 million on 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, $219international customers, $251 million for AIM-9X Sidewinder short-range air-to-air missiles for the U.S. Navy and Air Force and international customers, ~~$218~~and $237 million for CLEAVAR, an integrated U.S. Army Counter- Unmanned Aircraft Systems (C-UAS) defense system. In addition to these bookings, in the six months ended June 30, 2023 RMD booked $1.2 billion to provide Patriot ~~engineering support services~~Air Defense system to Switzerland, $827 million on a number of classified contracts, $619 million on the SPY-6 Hardware Production and Sustainment contract for the U.S. Navy, $320 million on StormBreaker for the U.S. Air Force and Navy, $234 million on Naval Strike Missiles (NSM) for the U.S. Navy, and $212 million on Excalibur for the U.S. Army and international ~~customers, and $217 million on Tomahawk for the U.S. Navy.~~customers.

Corporate and 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.

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~~certain unallowable costs ~~related to the Raytheon merger,~~and reserves. In addition, in 2022, net costs associated with corporate research and development ~~including~~related to the LTAMDS program were included in Corporate expenses and ~~certain reserves.~~other unallocated items. Beginning in 2023, the remaining net costs associated with the LTAMDS program are within the RMD segment.


		Net Sales				Operating Profit					Net Sales				Operating Profit
		Quarter Ended September 30,				Quarter Ended September 30,					Quarter Ended June 30,				Quarter Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Eliminations and other	Eliminations and other	$	(833)	$	(746)	$	(50)	$	(27)	Eliminations and other	$	(891)	$	(794)	$	(60)	$	(47)
Corporate expenses and other unallocated items	Corporate expenses and other unallocated items	—		—		(77)		(89)		Corporate expenses and other unallocated items	—		—		(59)		(42)

The increase in eliminations and other sales of ~~$87~~$97 million in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 was primarily due to an increase in intersegment eliminations, principally driven by RIS and Collins.

Eliminations and other operating profit in the quarter ended ~~September~~June 30, ~~2022~~2023 was relatively consistent with the quarter ended ~~September~~June 30, ~~2021.~~2022.

Corporate expenses and other unallocated items operating profit in the quarter ended ~~September~~June 30, ~~2022 were~~2023 was relatively consistent with the quarter ended ~~September~~June 30, ~~2021. Included in the change in corporate expenses and other unallocated items were~~ a ~~decrease in expenses related to the LTAMDS project and lower restructuring costs, partially offset by an increase in IT-related costs.~~2022.


		Net Sales				Operating Profit					Net Sales				Operating Profit
		Nine months ended September 30,				Nine months ended September 30,					Six months ended June 30,				Six months ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Eliminations and other	Eliminations and other	$	(2,363)	$	(2,188)	$	(131)	$	(98)	Eliminations and other	$	(1,724)	$	(1,530)	$	(47)	$	(81)
Corporate expenses and other unallocated items	Corporate expenses and other unallocated items	—		—		(255)		(319)		Corporate expenses and other unallocated items	—		—		(102)		(178)

The increase in eliminations and other sales of ~~$175~~$194 million in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was primarily due to an increase in intersegment eliminations, principally driven by RIS and Collins.

The change in eliminations and other operating profit of $34 million in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily due to a gain on sale of land in the first quarter of 2023.

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~~Eliminations and other operating profit in the nine months ended September 30, 2022 was relatively consistent with the nine months ended September 30, 2021.~~

The decrease in Corporate expenses and other unallocated items of ~~$64~~$76 million in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was primarily due to a decrease in expenses related to the LTAMDS project, ~~and lower restructuring costs, partially offset by an increase~~which are included in ~~IT-related costs.~~the RMD segment beginning in 2023.

FAS/CAS operating adjustment

We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and postretirement benefit (PRB) expense under the Financial Accounting Standards (FAS) requirements of U.S. ~~Generally Accepted Accounting Principles (GAAP)~~GAAP and our pension and PRB expense under U.S. government Cost Accounting Standards (CAS) primarily related to our RIS and RMD segments. While the ultimate liability for pension and PRB costs under FAS and CAS is similar, the pattern of cost recognition is different. Over time, we generally 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. Collins and Pratt & Whitney generally record pension and PRB expense on a FAS basis.

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


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
FAS service cost (expense)	FAS service cost (expense)	$	(91)	$	(102)	$	(274)	$	(304)	FAS service cost (expense)	$	(39)	$	(92)	$	(79)	$	(183)
CAS expense	CAS expense	469		601		1,409		1,651		CAS expense	348		471		702		940
FAS/CAS operating adjustment	FAS/CAS operating adjustment	$	378	$	499	$	1,135	$	1,347	FAS/CAS operating adjustment	$	309	$	379	$	623	$	757

The change in our FAS/CAS operating adjustment of ~~$121~~$70 million in the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021~~2022 was driven by a ~~$132~~$123 million decrease in CAS expense, partially offset by ~~an $11~~a $53 million decrease in FAS service cost. The decrease in CAS expense was primarily due to ~~our 2021 actuarial estimate update~~changes to the Raytheon Company domestic pension plans announced in December 2020 that were effective December 31, 2022, and the ~~third quarter~~recognition of ~~2021 and an increase~~historical CAS gain/loss experience. The decrease in ~~applicable discount rates as a result~~FAS service cost was primarily due to changes to the Raytheon Company domestic pension plans announced in December 2020 that were effective December 31, 2022. Refer to “Note 9: Employee Benefit Plans” within Item 1 of ~~U.S. qualified~~this Form 10-Q for additional information on the Raytheon Company domestic pension plan ~~funding relief included in the American Rescue Plan Act of 2021 (ARPA).~~

change.

The change in our FAS/CAS operating adjustment of ~~$212~~$134 million in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was driven by a ~~$242~~$238 million decrease in CAS expense, partially offset by a ~~$30~~$104 million decrease in FAS service cost. The decrease in CAS expense was primarily due to ~~an increase~~changes to the Raytheon Company domestic pension plans announced in ~~applicable discount rates as a result~~December 2020 that were effective December 31, 2022, and the recognition of ~~U.S. qualified~~historical CAS gain/loss experience. The decrease in FAS service cost was primarily due to changes to the Raytheon Company domestic pension ~~plan funding relief included~~plans announced in ~~ARPA.~~December 2020 that were effective December 31, 2022.

Acquisition accounting adjustments

The components of Acquisition accounting adjustments were as follows:


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022

Amortization of acquired intangibles	Amortization of acquired intangibles	$	(486)	$	(610)	$	(1,421)	$	(1,789)	Amortization of acquired intangibles	$	(496)	$	(458)	$	(991)	$	(935)
Amortization of property, plant and equipment fair value adjustment	Amortization of property, plant and equipment fair value adjustment	(20)		(21)		(73)		(84)		Amortization of property, plant and equipment fair value adjustment	(15)		(21)		(31)		(53)
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	24		45		80		252		Amortization of customer contractual obligations related to acquired loss-making and below-market contracts	22		31		40		56
Acquisition accounting adjustments	Acquisition accounting adjustments	$	(482)	$	(586)	$	(1,414)	$	(1,621)	Acquisition accounting adjustments	$	(489)	$	(448)	$	(982)	$	(932)

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


		Quarter Ended September 30,				Nine Months Ended September 30,					Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		2022		2021		(dollars in millions)	2023		2022		2023		2022
Collins Aerospace Systems		$	(201)	$	(196)	$	(604)	$	(466)
Collins Aerospace										Collins Aerospace	$	(196)	$	(197)	$	(395)	$	(403)
Pratt & Whitney	Pratt & Whitney	(72)		(47)		(168)		(98)		Pratt & Whitney	(62)		(39)		(126)		(96)
Raytheon Intelligence & Space	Raytheon Intelligence & Space	(73)		(132)		(231)		(433)		Raytheon Intelligence & Space	(80)		(74)		(160)		(158)
Raytheon Missiles & Defense	Raytheon Missiles & Defense	(136)		(211)		(411)		(624)		Raytheon Missiles & Defense	(151)		(138)		(301)		(275)
Total segment	Total segment	(482)		(586)		(1,414)		(1,621)		Total segment	(489)		(448)		(982)		(932)
Eliminations and other	Eliminations and other	—		—		—		—		Eliminations and other	—		—		—		—
Acquisition accounting adjustments	Acquisition accounting adjustments	$	(482)	$	(586)	$	(1,414)	$	(1,621)	Acquisition accounting adjustments	$	(489)	$	(448)	$	(982)	$	(932)

The change in ~~the Acquisition~~acquisition accounting adjustments of ~~$104~~$41 million for the quarter ended ~~September~~June 30, ~~2022~~2023 compared to the quarter ended ~~September~~June 30, ~~2021,~~2022, was primarily driven by ~~a decrease~~an increase at Pratt & Whitney related to collaborator intangibles and an increase in ~~RIS~~intangibles amortization at RMD and ~~RMD intangibles amortization~~RIS related to the Raytheon ~~merger in 2020.~~merger.

The change in ~~the Acquisition~~acquisition accounting adjustments of ~~$207~~$50 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021, is~~2022, was primarily driven by ~~a decrease~~an increase at Pratt & Whitney related to collaborator intangibles and an increase in ~~RIS~~intangibles amortization at RMD and ~~RMD intangibles amortization~~RIS related to the Raytheon merger in 2020, partially offset by the absence of $116 million of amortization of customer contractual obligations due to the accelerated liquidation of a below-market contract reserve at Collins driven by the termination of two customer contracts recognized in the nine months ended September 30, 2021.merger.

LIQUIDITY AND FINANCIAL CONDITION


(dollars in millions)	(dollars in millions)	September 30, 2022			December 31, 2021			(dollars in millions)	June 30, 2023			December 31, 2022
Cash and cash equivalents	Cash and cash equivalents	$	5,381		$	7,832		Cash and cash equivalents	$	5,391		$	6,220
Total debt	Total debt	33,447			31,485			Total debt	35,353			31,914
Total equity	Total equity	71,735			74,664			Total equity	74,056			74,178
Total capitalization (total debt plus total equity)	Total capitalization (total debt plus total equity)	105,182			106,149			Total capitalization (total debt plus total equity)	109,409			106,092
Total debt to total capitalization	Total debt to total capitalization	32		%	30		%	Total debt to total capitalization	32		%	30		%

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities and the timing of such 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.

At ~~September~~June 30, ~~2022,~~2023, we had cash and cash equivalents of $5.4 billion, of which approximately ~~38%~~41% was held by ~~RTC’s~~RTX’s foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. 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~~RTX will continue to permanently reinvest these earnings.

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

From time to time, we use commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments, and repurchases of our common stock. The commercial paper notes have original maturities of not more than 364 days from the date of issuance. As of ~~September~~June 30, ~~2022,~~2023, 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 ~~$2.1~~$1.0 billion of commercial paper borrowings outstanding at ~~September~~June 30, ~~2022. The proceeds from these~~2023. At June 30, 2023 short-term commercial paper borrowings ~~have primarily been used to fund payments related to the impact~~outstanding had a weighted-average interest rate of ~~a provision enacted in the Tax Cuts and Jobs Act of 2017 requiring the capitalization of research and experimental expenditures for tax purposes. The daily average~~5.5%.

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~~amount~~We had the following issuances of ~~short-term commercial paper borrowings outstanding~~long-term debt during the ~~nine~~six months ended ~~September~~June 30, ~~2022 was $815 million. At September 30, 2022 short-term commercial paper borrowings outstanding had a weighted-average interest rate~~2023:


Issuance Date	Description of Notes	Aggregate Principal Balance (in millions)
February 27, 2023	5.000% notes due 2026 (1)	$	500
	5.150% notes due 2033 (1)	1,250
	5.375% notes due 2053 (1)	1,250

(1) The net proceeds from these issuances will be used to fund repayment at maturity of ~~3.6%.~~

~~Proceeds from issuance of commercial paper~~the 3.650% notes due August 16, 2023 and the 3.700% notes due December 15, 2023, with ~~maturities greater than 90 days were $1.4 billion during~~ the nine months ended September 30, 2022. There were no repayments of commercial paper with maturities greater than 90 days during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, commercial paper borrowings had original maturities of not more than 90 days from the date of issuance.remaining proceeds to be used for general corporate purposes.

We have an existing universal shelf registration statement, which we filed with the Securities and Exchange Commission (SEC) on September 22, 2022, for an indeterminate amount of debt and equity securities for future issuance, subject to our internal limitations on the amount of debt to be issued under this shelf registration statement.

The Company offers a voluntary supply chain finance (SCF) ~~program~~programs with a global financial ~~institution~~institutions which enables our suppliers, at their sole discretion, to sell their receivables from the Company to the financial ~~institution~~institutions at a rate that leverages our credit rating, which might be beneficial to them. Our suppliers’ participation in the SCF ~~program~~programs 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.~~programs. In addition, we ~~provide no guarantees or otherwise~~do not pay for any of the costs of the ~~program~~programs incurred by those suppliers that choose to participate, and have no direct financial relationship with the financial ~~institution,~~institutions, as it relates to ~~the program.~~sales of receivables made by those suppliers. As such, the SCF ~~program does~~programs do not impact our working capital, cash flows, or 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.

Cash Flow - Operating Activities


		Nine Months Ended September 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		(dollars in millions)	2023		2022
Net cash flows provided by operating activities from continuing operations		$	2,540	$	3,981
Net cash flows (used in) provided by operating activities from continuing operations						Net cash flows (used in) provided by operating activities from continuing operations	$	(144)	$	1,762

~~Cash generated~~The $1.9 billion change in cash flows (used in) provided by operating activities from continuing operations in the ~~nine~~six months ended ~~September~~June 30, 2023 compared to in the six months ended June 30, 2022, was ~~$1.4 billion lower than the same period in 2021,~~ primarily ~~driven by the net increase in~~due to higher tax payments discussed below, and an unfavorable impact to cash flow from inventory principally due to current year increases to support sales volume growth. These unfavorable impacts to cash flow were partially offset by increasesa reduction in accounts payable and accrued liabilities primarily driven by ~~deferred revenue~~timing of supplier and ~~advanced payments. Included~~collaborator payments, higher accounts receivable as a result of increased sales volume and related factoring activity, partially offset by the timing of collaborator receivables, and the impact of the net change in contract assets and contract liabilities driven by the timing of collections, primarily at RMD. The change in accounts payable and accrued liabilities isalso reflects a ~~decrease in collaborator payables at Pratt & Whitney, which was mostly offset by a decrease in collaborator receivables due~~$1.0 billion prior year increase related to the ~~timing~~impact of ~~settlements.~~the capitalization of research and experimental expenditures for tax purposes, with a related $1.0 billion prior year reduction in 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 a decrease of approximately $0.3 billion in cash provided by operating activities during the six months ended June 30, 2023, compared to an increase of approximately $1.5 billion in cash provided by operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2022, compared to a minimal impact on cash flows provided by operating activities during the nine months ended September 30, 2021.~~2022. Factoring activity includes amounts factored on certain aerospace receivables at the customers’ request for which we may be compensated by the customer.

We made net tax payments of ~~$2,168 million~~$1.4 billion and $906 million in the nine months ended September 30, 2022 and 2021, respectively. A provision enacted in the Tax Cuts and Jobs Act of 2017 related to the capitalization of research and experimental expenditures for tax purposes became effective on January 1, 2022. As this provision was not deferred legislatively, we have made incremental tax payments of $1.5$0.5 billion in the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and expect to pay an additional amount in the fourth quarter of 2022.~~respectively.

Cash Flow - Investing Activities


		Nine Months Ended September 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		(dollars in millions)	2023		2022
Net cash flows used in investing activities from continuing operations	Net cash flows used in investing activities from continuing operations	$	(1,891)	$	(139)	Net cash flows used in investing activities from continuing operations	$	(1,202)	$	(1,136)

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

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The ~~$1.8~~$0.1 billion change in cash flows used in investing activities from continuing operations in the ~~nine~~six months ended ~~September~~June 30, 2023 compared to the six months ended June 30, 2022 ~~compared~~primarily related to ~~September 30, 2021 primarily relates to the absence~~an increase in other intangible assets and capital expenditures, both of ~~the proceeds of the prior year sale of our Forcepoint business,~~which are described below, partially offset by the timing of our derivative contract ~~settlements, and an increase in capital expenditures, all of which are described below.~~settlements.

Capital expenditures in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 increased by ~~$253~~$128 million from the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 primarily due to investments in production facilities at Pratt & ~~Whitney.~~

~~Dispositions of businesses were $94 million~~Whitney and $1.1 billion in nine months ended September 30, 2022 and 2021, respectively. The nine months ended September 30, 2022 consisted of immaterial dispositions. In the nine months ended September 30, 2021, dispositions of businesses primarily related to the sale of our Forcepoint business. For additional detail, see “Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets” within Item 1 of this Form 10-Q.Collins.

Customer financing assets receipts (payments), net were receipts of ~~$25~~$42 million and ~~$24~~payments of $7 million in ~~nine~~the six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~include purchases and sales of engines in our~~includes leased asset pool activity as well as customer financing activity.

During the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ we ~~made payments which~~ increased ~~our collaboration~~other intangible assets by ~~$169~~approximately $314 million and ~~$138~~$185 million, respectively, primarily related to collaboration payment commitments made under our 2012 agreement to acquire Rolls-Royce’s collaboration interests in International Aero Engines AG (IAE). and exclusivity payments made on contractual commitments included within intangible assets.

As discussed in “Note 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 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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we had net cash ~~payments~~receipts of ~~$259~~$45 million and net cash ~~receipts~~payments of ~~$42~~$151 million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.

Cash Flow - Financing Activities


		Nine Months Ended September 30,					Six Months Ended June 30,
(dollars in millions)	(dollars in millions)	2022		2021		(dollars in millions)	2023		2022
Net cash flows used in financing activities from continuing operations		$	(3,010)	$	(5,182)
Net cash flows provided by (used in) financing activities from continuing operations						Net cash flows provided by (used in) financing activities from continuing operations	$	468	$	(3,627)

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

~~Financing~~The $4.1 billion change in cash flows provided by (used in) financing activities ~~were a cash outflow of $3.0 billion~~from continuing operations in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~a cash outflow of $5.2 billion~~ in the ~~nine~~six months ended ~~September~~June 30, ~~2021. This change~~2022 was primarily driven by ~~an increase in commercial paper borrowings, net of $2.1 billion, and the absence of the prior year repayments of~~ long-term debt ~~net~~issuances of ~~issuances~~$3.0 billion, lower share repurchases of $0.6 billion, ~~partially offset by an increase in share repurchases~~as discussed below, and issuance of ~~$0.4~~commercial paper, net, of $0.5 billion. Refer to “Note 8: Borrowings and Lines of Credit” within Item 1 of this Form 10-Q for additional information on ~~commercial paper and~~ debt issuances and ~~repayments.~~commercial paper.

At ~~September~~June 30, ~~2022,~~2023, management had remaining authority to repurchase approximately ~~$3.5~~$4.8 billion of our common stock under the December ~~7, 2021~~12, 2022 share repurchase program. Under ~~this~~the 2022 program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. We may also reacquire shares outside of the program 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:


		Nine Months Ended September 30,							Six Months Ended June 30,
(dollars in millions; shares in thousands)	(dollars in millions; shares in thousands)	2022			2021			(dollars in millions; shares in thousands)	2023			2022
		$		Shares	$		Shares		$		Shares	$		Shares
Shares of common stock repurchased (1)	Shares of common stock repurchased (1)	$	2,395	25,452	$	2,000	24,152	Shares of common stock repurchased (1)	$	1,158	11,821	$	1,779	18,697

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

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Our Board of Directors authorized the following cash dividends:


		Nine Months Ended September 30,					Six Months Ended June 30,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)	2022		2021		(dollars in millions, except per share amounts)	2023		2022
Dividends paid per share of common stock	Dividends paid per share of common stock	$	1.610	$	1.495	Dividends paid per share of common stock	$	1.140	$	1.060
Total dividends paid	Total dividends paid	$	2,337	$	2,212	Total dividends paid	$	1,634	$	1,543

On June ~~6, 2022,~~5, 2023, the Board of Directors declared a dividend of ~~$0.55~~$0.59 per share payable September ~~8, 2022~~7, 2023 to shareowners of record at the close of business on August ~~19, 2022. Also, on October 12, 2022, the Board of Directors declared a dividend of $0.55 per share payable December 15, 2022 to shareowners of record at the close of business on November~~ 18, ~~2022.~~2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in our exposure to market risk during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. For discussion of our exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our ~~2021~~2022 Form 10-K.

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 Controller (Controller), of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September~~June 30, ~~2022.~~2023. 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 Controller concluded that, as of ~~September~~June 30, ~~2022,~~2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the 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 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 ~~September~~June 30, ~~2022~~2023 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, 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,” “commit,” “commitment,” “anticipate,” “will,” “should,” “see,” “guidance,” “outlook,” “goals,” “objectives,” “confident,” “on ~~track”~~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~~cost savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, targets and commitments (including for share repurchases or otherwise), anticipated benefits to RTX of its segment realignment, 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, capital market, and 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, bank failures and other banking industry disruptions, fluctuations in commodity prices or supply (including energy supply), inflation, interest rates and foreign currency exchange rates, disruptions in global supply chain and labor markets, and geopolitical risks;

•risks associated with U.S. government sales, including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration, a continuing resolution, a government shutdown, the debt ceiling or measures taken to avoid a government default, or otherwise, and uncertain funding of programs;

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

•the effect of and risks relating to coronavirus disease 2019 (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~~RTX’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 RTX or its suppliers and price increases;

•risks relating to RTX 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;

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

•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~~developments in the ~~delivery of materials~~coronavirus disease 2019 (COVID-19) pandemic and ~~services to RTC or its suppliers~~the impact on RTX’s business, supply chain, operations, and ~~price increases;~~the industries in which it operates, including a decrease in global air travel and significant business disruption;

•the scope, nature, timing, and challenges of managing acquisitions, investments, divestitures, and other transactions, including the realization of synergies and opportunities for growth and innovation, the assumption of liabilities, and other risks and incurrence of related costs and 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~~RTX 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;~~disputes;

•factors that could impact ~~RTC’s~~RTX’s ability to engage in desirable capital-raising or strategic transactions, including its capital structure, levels of indebtedness, capital expenditures, and research and development spending, and the availability of credit, credit market conditions including the cost of debt, and other factors;

•uncertainties associated with the timing and scope of future repurchases by ~~RTC~~RTX of its common stock or declarations of 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;

•risks relating to realizing expected benefits from, ~~RTC~~incurring costs for, and successfully managing the Company’s segment realignment effective July 1, 2023, the legacy United Technologies Corporation (UTC) and Raytheon

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Company merger, and other RTX strategic initiatives such as cost reduction, restructuring, digital transformation, and other operational initiatives;

•risks relating to the integration of the legacy businesses of United Technologies Corporation (UTC) and Raytheon Company in connection with the Raytheon merger, and the realization of the anticipated benefits of those transactions;

•risks of additional tax exposures due to new tax legislation or other developments in the U.S. and other countries in which ~~RTC~~RTX and its businesses operate;

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•risks relating to addressing the ~~ability~~identified rare condition in powdered metal used to manufacture certain Pratt & Whitney engine parts that will require accelerated removals and inspections of ~~RTC to attract, train~~a significant portion of the PW1100G-JM fleet, including the timing and ~~retain qualified personnel and maintain its culture and high ethical standards, and ability of our personnel to continue to operate our facilities and businesses around the world;~~costs relating thereto, as well as issues that could impact RTX product performance, including quality, reliability, or durability;

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

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

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

•the effect of changes in pension and other postretirement plan estimates and assumptions and contributions;

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

•the 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 as a tax-free reorganization and (2) the 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 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 “Business Overview,” “Results of Operations,” 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”~~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,” “Results of Operations”, “Critical Accounting Estimates,” and “Government ~~Matters.~~Matters” and our Form 10-Q for the period ended March 31, 2023 in the section titled Item IA, “Risk Factors.” 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 15: Commitments and Contingencies” within Item 1 of this Form 10-Q for a discussion regarding material legal proceedings.

Except as otherwise noted, 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 ~~2021~~2022 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 ~~2021~~2022 Annual Report on Form 10-K ~~(2021~~(2022 Form 10-K). Except for the risk factors discussed below, there have been no material changes from the factors disclosed in our ~~2021~~2022 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).

~~Our international business is subject to economic, regulatory, competition and other risks.~~ Our international sales and operations are subject to risks associated with political and economic factors, regulatory requirements, competition and other risks. A significant portion of our sales are from international sales and include U.S. export sales. In addition, transactions in our non-U.S. operations may be denominated in local currencies. Fluctuations in foreign currency exchange rates may negatively affect demand for our products and our reported profits, as well as our operating margins due to changing supplier prices. In particular, a strengthening of the U.S. Dollar against other major foreign currencies could adversely affect our results of operations. The majority of our commercial aerospace sales are in U.S. Dollars, while the majority of their non-U.S. costs are incurred in the applicable local currency. Pratt & Whitney Canada is especially susceptible to fluctuations in exchange rates for this reason. In addition, because our financial statements are denominated in U.S. Dollars, currency fluctuations may cause

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translation gains or losses for non-U.S. operating unit financial statements. For the reasons above, currency fluctuations may adversely affect our results of operations. To manage certain exposures, we employ long-term hedging strategies associated with U.S. Dollar sales.

Our international sales are also subject to risks associated with local government laws, regulations and policies, including export-import controls, investments, taxation, exchange controls, capital controls, employment regulations and repatriation of earnings, and changes to these laws, regulations and policies. Differing legal systems, customs and contract laws and regulations pose additional risk. International transactions may include contractual terms that differ from those of similar contracts in the U.S. or that may be interpreted differently in foreign countries. Our international sales also require us to comply with U.S. laws, regulations and policies, including the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), the Foreign Corrupt Practices Act (FCPA), and other anti-corruption, sanctions and export laws and regulations. In addition, in certain foreign countries, we engage foreign non-employee representatives and consultants for international sales and teaming with international subcontractors, partners and suppliers for international programs. These engagements expose us to various challenges including risks associated with the FCPA and local antibribery laws and regulations. From time to time, we have disputes with such representatives regarding claimed commissions and other matters which can result in litigation or arbitration. In addition, we face risks related to the unintended or unauthorized use of our products.

Our international business faces substantial competition from both U.S. companies and foreign companies. In some instances, foreign companies may be owned by foreign governments or may receive loans, marketing subsidies and other assistance from their governments that may not be available to U.S. companies or our foreign subsidiaries. In addition, foreign companies may be subject to fewer restrictions on technology transfer than U.S. companies.

Our international contracts, particularly for sales of defense products and services, may include offset or industrial cooperation obligations requiring specific local purchases, manufacturing agreements, technology transfer agreements or financial support obligations, sometimes in the form of in-country industrial participation (ICIP) agreements. Approvals of offset or ICIP thresholds and requirements may be subjective and time-consuming and may delay contract awards. Certain customers’ demands are increasing for greater offset or ICIP commitment levels, higher-value content, including the transfer of technologies and capabilities, and local production and economic development.

As a result of the above factors, we could experience financial penalties and award and funding delays on international programs, our profitability on these programs could be negatively affected, and we could incur losses on these programs that could negatively impact our results of operations, financial condition and liquidity.

Geopolitical factors and changes in policies and regulations could adversely affect our business. Our international sales and operations are sensitive to changes in foreign national priorities, foreign government budgets, and regional and local political

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and economic factors, including volatility in energy prices or supply, political or civil unrest, changes in threat environments and political relations, geopolitical uncertainties, and changes in U.S. foreign policy. Our international sales and operations are also sensitive to changes in foreign government laws, regulations and policies, including those related to tariffs, sanctions, embargoes, export and import controls and other trade restrictions. ~~Government~~Events such as increased trade restrictions or retaliatory trade policies, ~~on international~~renegotiation of existing trade ~~and investments~~agreements, or regime change can affect demand for our products and services, the competitive position of our products, our supply chain, and our ability to manufacture or sell products in certain countries. The implementation of more restrictive trade policies, including tariffs, or the renegotiation of existing trade agreements in countries where we have a major customer or supplier presence could negatively affect us. Trends such as populism and economic nationalism, “buy national” policies, limiting exports of a material largely unavailable elsewhere (such as rare earth minerals), or subsequent retaliatory policies by another government (such as tariffs) could negatively affect us. Further, regime change in a major customer’s government could decrease or eliminate its demand for our products and services, as well as adversely affect our supply of materials or components from that county.

We conduct business in numerous countries that carry high levels of currency, political, compliance and economic risk. We expect that sales to customers in these countries will continue to account for a significant portion of our commercial aerospace sales as our businesses evolve and as these and other developing nations and regions around the world increase their demand for our products, particularly our aerospace products. Operationsoperations in emerging market countries ~~can present many~~are subject to additional risks, including volatility in gross domestic product and rates of economic growth, ~~economic and~~ government instability, cultural differences (such as employment and business practices), the imposition of exchange and capital controls, and risks associated with exporting components manufactured in those countries for incorporation into finished products completed in other countries. While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.

In addition, given the role of our defense businesses in the support of the national security interests of the ~~U. S.~~U.S. and its allies, we are subject to risks and uncertainties relating to policies of the U.S. and its allies, as well as other countries, including those ~~who~~that are or become regarded as potential adversaries or threats. We engage in both direct commercial sales, which generally require

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U.S. government licenses and approvals, as well as foreign military sales, which are government-to-government transactions initiated by, and carried out at the direction of, the U.S. government. Changes in ~~these budget~~budgets and spending levels, policies, or priorities, which are subject to geopolitical risks and threats, may impact our defense businesses, including the timing of and delays in U.S. government licenses and approvals for sales, the risk of sanctions or other restrictions, as well as potential human rights issues associated with the use of our defense products. These risks and uncertainties may directly or indirectly impact our commercial businesses as well.

Of note, ~~in 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~~China has announced sanctions against Raytheon Missiles & Defense (RMD), 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 for certain military programs, as a result of this or other political disputes. Turkish companies supply components, some of which are sole-sourced, to our aerospace businesses for commercial and military engines and aerospace products, as well as to our defense businesses. 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, financial condition or liquidity. In addition, the People’s Republic of China (China) previously announced it may take measures against ~~Raytheon Technologies~~RTX Corporation ~~(RTC)~~(RTX), in connection with certain foreign military sales to Taiwan. The Chinese sanctions against RMD include a fine equal to twice the value of the arms that RMD has sold to Taiwan ~~involving RTC products and services.~~since September 2020. In addition, China has indicated that it decided to sanction our Chairman and Chief Executive Officer Gregory Hayes, in connection with another ~~potential~~ foreign military sale to Taiwan involving ~~RTC~~RTX products and services. ~~RTC is not aware of any specific sanctions against Mr. Hayes or RTC, or the nature or timing of any future potential sanctions or countermeasures.~~ If China were to enforce sanctions, impose additional sanctions, or take other regulatory action against ~~RTC,~~RTX, our suppliers, affiliates, or partners, it could potentially disrupt our business operations. The impact of the announced sanctions or other potential sanctions, or other actions by China ~~cannot be determined at this time. From time to time, our~~is uncertain. Our businesses have sold, and are expected to sell in the future, additional defense products to Taiwan from time to time, and we are unable to determine the potential impact, if any, of any future sanctions or other actions by China in response to these sales. Moreover, the Chinese government has generally expanded its ability to restrict China-related import, export and investment activities, which may have an adverse impact on our ability to conduct business or sell our commercial aerospace products in China. In addition, in response to the 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.~~operate, including certain members of the Company’s management team and Board of Directors. 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 aerospace sector. These measures have adversely affected and could continue to adversely affect the Company and/or our supply chain, business partners or customers.

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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 ~~September~~June 30, ~~2022.~~2023.

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)
July 1 - July 31 3,726 $ 92.89 3,726 $ 3,802
August 1 - August 31 1,146 93.49 1,146 3,695
September 1 - September 30 1,771 84.06 1,771 3,546
Total 6,643 $ 90.64 6,643


2023	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	1,796	$	100.72	1,796	$	5,205
May 1 - May 31	2,769	95.75		2,769	4,940
June 1 - June 30	1,472	97.29		1,472	4,797
Total	6,037	$	97.60	6,037

On December ~~7, 2021,~~12, 2022, our Board of Directors authorized a share repurchase program for up to $6 billion of our common stock, replacing the previous program announced on December 7, ~~2020.~~2021. Under ~~this~~the 2022 program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. We may also reacquire shares outside of the program from time to time in connection with the surrender of shares to cover taxes on vesting of restricted stock and as required under our employee savings plan. Our ability to repurchase shares is subject to applicable law. No shares were reacquired in transactions outside the program during the quarter ended ~~September~~June 30, ~~2022.~~ 2023.

Item 5. Other Information

During the quarter ended June 30, 2023, no director or “officer” (as defined in Rule 16a-1(f)) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits


Exhibit Number						Exhibit Description

3.1						Amended and Restated Certificate of Incorporation of RTX Corporation, effective as of May 3, 2023 (incorporated by reference to Exhibit 3.1 of RTX Corporation's Current Report on Form 8-K filed with the SEC on May 4, 2023).

3.2						Certificate of Amendment of Amended and Restated Certificate of Incorporation of RTX Corporation, effective as of July 17, 2023 (incorporated by reference to Exhibit 3.1 of RTX Corporation’s Current Report on Form 8-K filed w ith the SEC on July 1 7, 2023 ).

3.3						Amended and Restated Bylaws of RTX Corporation, effective as of July 17, 2023 (incorporated by reference to Exhibit 3.2 of RTX Corporation's Current Report on Form 8-K filed with the SEC on July 17, 2023).

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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (ii) Condensed Consolidated Statement of Comprehensive Income for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (iii) Condensed Consolidated Balance Sheet as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, (iv) Condensed Consolidated Statement of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (v) Condensed Consolidated Statement of Changes in Equity for the quarters and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 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~~RTX CORPORATION (Registrant)

Dated:	~~October~~July 25, ~~2022~~2023	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:	~~October~~July 25, ~~2022~~2023	By:	/s/ AMY L. JOHNSON
			Amy L. Johnson
			Corporate Vice President and Controller

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