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What changed in RTX Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RTX Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+582 added−571 removedSource: 10-K (2024-02-05) vs 10-K (2023-02-07)

Top changes in RTX Corporation's 2023 10-K

582 paragraphs added · 571 removed · 406 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+19 added−34 removed34 unchanged
Biggest changeSuch 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, 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 default, or otherwise, and uncertain funding of programs; • challenges in the development, production, delivery, and support of RTC 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 highly-competitive industries; • risks relating to RTC’s reliance on U.S. and non-U.S. suppliers and commodity markets, including the effect of sanctions, delays and disruptions in the delivery of materials and services to RTC or its suppliers and price increases; • risks relating to RTC international operations from, among other things, changes in trade policies and implementation of sanctions, foreign currency fluctuations, economic conditions, political factors, sales methods, and U.S. or local government regulations; • the condition of the aerospace industry; • the ability of RTC 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; • the effect of and risks relating to the coronavirus disease 2019 (COVID-19) pandemic 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; • 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 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; • factors that could impact RTC’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; 11 Table of Contents • uncertainties associated with the timing and scope of future repurchases by RTC 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 strategic initiatives such as cost reduction, restructuring, digital transformation and other operational initiatives; • risks relating to the integration of the legacy businesses of 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 and its businesses operate; • risks relating to a RTC product safety failure or other failure affecting RTC’s or its customers’ or suppliers’ products or systems; • risks relating to cyber-attacks on RTC’s information technology infrastructure, products, suppliers, customers and partners, threats to RTC facilities and personnel, as well as other events outside of RTC’s control such as public health crises, damaging weather or other acts of nature; • the effect of changes in 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.
Biggest changeSuch 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 default, or otherwise, and uncertain funding of programs; • risks relating to our performance on our contracts and programs, including our ability to control costs, and our inability to pass some or all of our costs on fixed price contracts to the customer; 10 Table of Contents • challenges in the development, production, delivery, support, and performance of 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 RTX’s highly-competitive industries; • risks relating to 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 the ability of our personnel to continue to operate our facilities and businesses around the world; • 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, and risks related to completion of announced divestitures; • 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 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; • factors that could impact RTX’s ability to engage in desirable capital-raising or strategic transactions, including its credit rating, capital structure, levels of indebtedness and related obligations, capital expenditures, and research and development spending, and capital deployment strategy including with respect to share repurchases, and the availability of credit, borrowing costs, credit market conditions, and other factors; • uncertainties associated with the timing and scope of future repurchases by RTX of its common stock, including the ability to complete the accelerated share repurchase (ASR), the purchase price of the shares acquired pursuant to the ASR agreement, and the timing and duration of the ASR program, 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, incurring costs for, and successfully managing the Company’s segment realignment effective July 1, 2023, and other RTX strategic initiatives such as cost reduction, restructuring, digital transformation, and other operational initiatives; • risks of additional tax exposures due to new tax legislation or other developments in the U.S. and other countries in which RTX and its businesses operate; • risks relating to addressing the Powder Metal Matter, including, without limitation, the number and expected timing of shop visits, inspection results and scope of work to be performed, turnaround time, availability of parts, available capacity at overhaul facilities, outcomes of negotiations with impacted customers, and risks related to other engine models that may be impacted by the Powder Metal Matter, and in each case the timing and costs relating thereto, as well as other issues that could impact RTX product performance, including quality, reliability, or durability; • risks relating to a RTX product safety failure or other failure affecting RTX’s or its customers’ or suppliers’ products or systems; • risks relating to cybersecurity, including cyber-attacks on RTX’s information technology infrastructure, products, suppliers, customers and partners, and cybersecurity-related regulations; • risks relating to our intellectual property and certain third party intellectual property; • threats to RTX facilities and personnel, as well as other events outside of 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 separation transactions and other internal restructurings as tax-free to us (formerly known as United Technologies Corporation (UTC)) and former UTC shareowners, in each case, for U.S. federal income tax purposes.
At December 31, 2022, the interests of third-party collaboration participants in Pratt & Whitney-directed jet engine programs ranged, in the aggregate per program, from 13% to 49%. See “Note 1: Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for a description of our accounting for collaboration arrangements.
At December 31, 2023, the interests of third-party collaboration participants in Pratt & Whitney-directed jet engine programs ranged, in the aggregate per program, from 13% to 49%. See “Note 1: Basis of Presentation and Summary of Accounting Principles” within Item 8 of this Form 10-K for a description of our accounting for collaboration arrangements.
We rely on a combination of these rights, along with nondisclosure agreements, IT security systems, internal controls and compliance systems and other measures to protect our intellectual property. The U.S. government and foreign governments have licenses to certain of our intellectual property, including certain patents, which are developed or used in the performance of government contracts.
We rely on a combination of these rights, along with nondisclosure agreements, information technology (IT) security systems, internal controls and compliance systems, and other measures to protect our intellectual property. The U.S. government and foreign governments have licenses to certain of our intellectual property, including certain patents, which are developed or used in the performance of government contracts.
For further discussion of risks related to government contracting, including on-going litigation associated with U.S. government audits and investigations, see Item 1A. “Risk Factors” and Item 3. “Legal Proceedings” of this Form 10-K and “Note 18: Commitments and Contingencies” within Item 8 of this Form 10-K. Commercial Aerospace Product Regulation.
For further discussion of risks related to government contracting, including on-going litigation associated with U.S. government audits and investigations, see Item 1A. “Risk Factors” and Item 3. “Legal Proceedings” of this Form 10-K and “Note 17: Commitments and Contingencies” within Item 8 of this Form 10-K. Commercial Aerospace Product Regulation.
Pratt & Whitney’s small engine business, Pratt & Whitney Canada (P&WC), is among the world’s leading suppliers of engines powering regional airlines, general and business aviation, as well as helicopters. Pratt & Whitney also produces, sells and services military and commercial auxiliary power units.
Pratt & Whitney’s small engine business, Pratt & Whitney Canada, is among the world’s leading suppliers of engines powering regional airlines, general and business aviation, as well as helicopters. Pratt & Whitney also produces, sells, and services military and commercial auxiliary power units.
Environmental matters are further addressed in “Note 1: Basis of Presentation and Summary of Accounting Principles” and “Note 18: Commitments and Contingencies” within Item 8 of this Form 10-K. Most of the U.S. laws governing environmental matters include criminal provisions.
Environmental matters are further addressed in “Note 1: Basis of Presentation and Summary of Accounting Principles” and “Note 17: Commitments and Contingencies” within Item 8 of this Form 10-K. Most of the U.S. laws governing environmental matters include criminal provisions.
Backlog, which is equivalent to our remaining performance obligations (RPO) for our sales contracts, represents the aggregate dollar value of firm orders for which products have not been provided or service has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity (IDIQ) type contracts).
Backlog. Backlog, which is equivalent to our remaining performance obligations (RPO) for our sales contracts, represents the aggregate dollar value of firm orders for which products have not been provided or service has not been performed and 6 Table of Contents excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity (IDIQ) type contracts).
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.
Collins Aerospace is a leading global provider of technologically advanced aerospace and defense products and aftermarket service solutions for civil and military aircraft manufacturers, commercial airlines, and regional, business and general aviation, as well as for defense and commercial space operations.
We do not anticipate that compliance with current provisions or requirements relating to the protection of the environment or that any payments we may be required to make for cleanup liabilities will have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.
We do not anticipate that compliance with current provisions or requirements relating to the protection of the environment or that any 9 Table of Contents payments we may be required to make for cleanup liabilities will have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.
Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “outlook,” “goals,” “objectives,” “confident,” “on track” and other words of similar meaning.
Forward-looking statements 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,” and other words of similar meaning.
Total backlog was $175 billion and $156 billion as of December 31, 2022 and 2021, respectively. Of the total RPO as of December 31, 2022, we expect approximately 25% will be recognized as sales over the next 12 months. Competition All of our businesses are subject to significant competition.
Total backlog was $196 billion and $175 billion as of December 31, 2023 and 2022, respectively. Of the total RPO as of December 31, 2023, we expect approximately 25% will be recognized as sales over the next 12 months. Competition All of our businesses are subject to significant competition.
As a result, our businesses and operations are subject to both U.S. and non-U.S. government laws, regulations and procurement policies and 10 Table of Contents practices, including regulations relating to import-export controls, tariffs, taxes, investment, sanctions, exchange controls, anti-corruption, and cash repatriation. Our international sales are also subject to varying currency, political and economic risks.
As a result, our businesses and operations are subject to both U.S. and non-U.S. government laws, regulations, and procurement policies and practices, including regulations relating to export and import controls, tariffs, taxes, investment, sanctions, exchange controls, anti-corruption, privacy, and cash repatriation. Our international sales are also subject to varying currency, political, and economic risks.
See “Note 18: Commitments and Contingencies” within Item 8 of this Form 10-K, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Critical Accounting Estimates,” “Results of Operations,” and “Liquidity and Financial Condition,” within Item 7 of this Form 10-K, and the sections titled Item 1A.
See “Note 17: Commitments and 11 Table of Contents Contingencies” within Item 8 of this Form 10-K, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Business Overview,” “Critical Accounting Estimates,” “Results of Operations,” and “Liquidity and Financial Condition,” within Item 7 of this Form 10-K, and the sections titled Item 1A.
In the case of a termination for 9 Table of Contents convenience, we would normally be entitled to reimbursement for our allowable costs incurred, termination costs and a reasonable profit.
In the case of a termination for convenience, we would normally be entitled to reimbursement for our allowable costs incurred, termination costs, and a reasonable profit.
We solicit employee feedback on RTC’s performance as an employer via confidential surveys in the pre-hire, active and exit stages of employment, and use those results to improve our workplace and employee experience. These surveys cover various topics related to employee engagement and satisfaction.
We solicit employee feedback on RTX’s performance as an employer via confidential surveys in the pre-hire, active, and exit stages of employment, and use those results to improve our workplace and employee experience. These surveys cover various topics related to employee engagement, inclusion, and belonging.
We manufacture and service our products in over 229 manufacturing, production or overhaul facilities in approximately 30 countries, including the U.S. In addition, RTC has offices in approximately 10 other countries. Intellectual Property We maintain a portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to our businesses.
We manufacture and service our products in approximately 230 manufacturing, production or overhaul facilities in approximately 30 countries, including the U.S. In addition, RTX has offices in approximately 10 other countries. Intellectual Property We maintain a robust portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to our businesses.
We review diversity in talent development and promotion, employee compensation practices and succession planning, and embed DE&I training into our leadership development programs. We have published our U.S. Equal Employment Opportunity EEO-1 report data as part of our Environmental Social Governance Report.
We have a DE&I advisory board of senior leaders. We review diversity in talent development and promotion, employee compensation practices and succession planning, and embed DE&I training into our leadership development programs. We have published our U.S. Equal Employment Opportunity EEO-1 report data as part of our Environmental Social Governance (ESG) Report.
Commercial customers also have licenses to certain of our intellectual property largely in connection 8 Table of Contents with the sale of our products.
Commercial customers also have licenses to certain of our intellectual property largely in connection with the sale of our products.
Our U.S. government sales were as follows: (dollars in millions) 2022 2021 2020 Sales to the U.S. government (1) $ 30,317 $ 31,177 $ 25,962 Sales to the U.S. government as a percentage of Total Net Sales (1) 45 % 48 % 46 % (1) Excludes foreign military sales through the U.S. government.
Our U.S. government sales were as follows: (dollars in millions) 2023 2022 2021 Sales to the U.S. government (1) $ 31,628 $ 30,317 $ 31,177 Sales to the U.S. government as a percentage of total net sales (1) (2) 46 % 45 % 48 % (1) Excludes foreign military sales through the U.S. government.
Navy’s F-35C jets. F135 engines are also used on F-35 aircraft purchased by Joint Strike Fighter partner countries and other countries through foreign military sales arrangements. Pratt & Whitney is also under contract to build engines for the U.S. Air Force’s B-21 long-range strike bomber and to develop next-generation adaptive engines for the U.S. Air Force.
F135 engines are also used on F-35 aircraft purchased by Joint Strike Fighter partner countries and other countries through foreign military sales arrangements. Pratt & Whitney is also under contract to build engines for the U.S. Air Force’s B-21 long-range strike bomber.
In addition, in some cases, we must comply with specific procurement requirements, which may limit the suppliers and subcontractors we may utilize. Like other users in the U.S., we are largely dependent upon foreign sources for certain raw materials, such as cobalt, tantalum, chromium, rhenium, nickel and titanium. We also have some foreign suppliers as single-source suppliers of components.
In addition, in some cases, we must comply with specific procurement requirements, which may limit the suppliers and subcontractors we may utilize. We are largely dependent upon foreign sources for certain raw materials, such as cobalt, tantalum, chromium, rhenium, nickel, and titanium, and we rely on foreign suppliers as single-source suppliers of some components.
Pratt & Whitney also continues to enhance its programs through performance improvement measures and product base expansion, utilizing similar collaboration arrangements. In 2022, Pratt & Whitney reached significant milestones on the GTF engine program, including surpassing a billion gallons of fuel saved and 10 million metric tons of carbon emissions avoided since entry into service.
Pratt & Whitney also continues to enhance its programs through performance improvement measures and product base expansion, utilizing similar collaboration arrangements. In 2023, Pratt & Whitney continued to reach significant milestones on the GTF engine program, including surpassing 1.4 billion gallons of fuel saved and 14 million metric tons of carbon emissions avoided since entry into service.
ITEM 1. BUSINESS General Raytheon Technologies Corporation is an aerospace and defense company that provides advanced systems and services for commercial, military and government customers worldwide. The terms “we,” “us,” “our,” “Raytheon Technologies,” “RTC” and the “Company” mean Raytheon Technologies Corporation, unless the context indicates another meaning.
ITEM 1. BUSINESS General RTX Corporation is an aerospace and defense company that provides advanced systems and services for commercial, military, and government customers worldwide. The terms “we,” “us,” “our,” the “Company”, and “RTX” mean RTX Corporation and its subsidiaries, unless the context indicates another meaning.
Pratt & Whitney is under contract to produce and sustain the F135 engine for the U.S. government’s F-35 Joint Program Office to power the single-engine F-35 Lightning II aircraft (commonly known as the Joint Strike Fighter) produced by Lockheed Martin. F135 propulsion system configurations are used for the U.S Air Force’s F-35A, the U.S. Marine Corps’ F-35B and the U.S.
Pratt & Whitney produces and sustains the F135 engine for the U.S. government’s F-35 Joint Program Office to power the single-engine F-35 Lightning II aircraft (commonly known as the Joint Strike Fighter) produced by Lockheed Martin. F135 propulsion system configurations are used for the U.S Air Force’s F-35A, the U.S. Marine Corps’ F-35B, and the U.S. Navy’s F-35C jets.
Raytheon Technologies, formerly known as United Technologies Corporation (UTC), was incorporated in Delaware in 1934.
RTX Corporation, formerly known as Raytheon Technologies, was incorporated in Delaware in 1934.
We regularly pursue cost reductions through a number of mechanisms, including consolidating or re-sourcing our purchased parts, expanding use of long-term agreements, reducing the number of suppliers generally (except as described above for important supply alternatives), strategic sourcing in cost competitive regions, competitions among suppliers and other low-cost sourcing initiatives.
We regularly pursue cost reductions through a number of mechanisms, including consolidating or re-sourcing our purchases, expanding the use of long-term agreements, reducing the number of suppliers generally (except as described above for important supply alternatives), strategic sourcing in cost competitive regions, competitions among suppliers and other low-cost sourcing initiatives, and extending our contractually negotiated raw material pricing to higher-tier suppliers in our supply chain.
Suppliers and Raw Materials We are dependent upon the availability of materials and major components and the performance of our suppliers and subcontractors. Some of our products require relatively scarce raw materials. In some instances, we depend upon a single source of supply or participate in commodity markets that may be subject to allocations of limited supplies by suppliers.
Suppliers and Raw Materials We are dependent on a global supply chain for a wide range of raw materials, commodities, components, and services. Some of our products require relatively scarce raw materials. In some instances, we depend upon a single source of supply or participate in commodity markets that may be subject to allocations of limited supplies by suppliers.
Collins’ product lines include integrated avionics systems, aviation systems, communications systems, navigation systems, electric power generation, management and distribution systems, environmental control systems, flight control systems, air data and aircraft sensing systems, engine control systems, engine components, engine nacelle systems, including thrust reversers and mounting pylons, interior and exterior aircraft lighting, aircraft seating and cargo systems, evacuation systems, landing systems, including landing gear, wheels and braking systems, hoists and winches, fire and ice detection and protection systems, actuation systems, and propeller systems.
Collins designs, manufactures and supplies electric power generation, management and distribution systems, environmental control systems, flight control systems, air data and aircraft sensing systems, engine control systems, engine components, engine nacelle systems, including thrust reversers and mounting pylons, interior and exterior aircraft lighting, aircraft cargo systems, evacuation systems, landing systems (including landing gear, wheels and braking systems), communication, navigation, surveillance systems, fire and ice detection and protection systems, actuation systems, integrated avionics, and propeller systems.
Information on our website, including our Environmental Social Governance Report, is not incorporated by reference into this Form 10-K. For information on the risks related to our human capital resources, see Item 1A. “Risk Factors” of this Form 10-K. Research and Development and Operations Our innovative products and services incorporate advanced technologies.
For information on the risks related to our human capital resources, see Item 1A. “Risk Factors” of this Form 10-K. Research and Development and Operations Our innovative products and services incorporate advanced technologies.
Regulatory Matters Our businesses are subject to extensive regulation in the industries we serve. We deal with numerous U.S. government agencies and entities, including but not limited to all of the branches of the DoD, the FAA, and the Department of Homeland Security. Similar government authorities exist in all of the countries in which we do business. U.S. Government Contracts.
We deal with numerous U.S. government agencies and entities, including but not limited to all of the branches of the DoD, the Federal Aviation Administration (FAA), and the Department of Homeland Security. Similar government authorities exist in all of the countries in which we do business. U.S. Government Contracts.
As of December 31, 2022, our global employee population consisted of a total of approximately 182,000 employees, including approximately 55,000 engineering professionals and approximately 31,000 employees represented by labor unions and other employee representative bodies. Our employees are located in 52 countries, with 70% of our employees located in the U.S. Diversity, Equity and Inclusion (DE&I).
As of December 31, 2023, our global employee population consisted of a total of approximately 185,000 employees, including approximately 57,000 engineering professionals and approximately 32,000 employees represented by labor unions and other employee representative bodies. Our employees are located in 51 countries, with 70% of our employees located in the U.S.
We also provide health and wellness benefits and support flexible work arrangements for our employees. Additional information regarding our human capital strategy is available in our “People” section of our Environmental Social Governance Report that can be found on our company website.
We also provide health and wellness benefits and support flexible work arrangements for our employees. Additional information regarding our human capital strategy is available in our “People” section of our ESG Report that can be found on our company website. Information on our website, including our ESG Report, is not incorporated by reference into this Form 10-K.
Collins sells aerospace and defense products and services to aircraft manufacturers, airlines and other aircraft operators, the U.S. and foreign governments, defense contractors, maintenance, repair and overhaul providers, and independent distributors around the world.
Aftermarket services include spare parts, overhaul and repair, engineering and technical support, training and fleet management solutions, asset management services, and information management services. Collins sells aerospace and defense products and services to aircraft manufacturers, airlines and other aircraft operators, the U.S. and foreign governments, defense contractors, maintenance, repair and overhaul providers, and independent distributors around the world.
The following description of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within Item 7 of this Form 10-K, including the information contained therein under the heading “Business Overview.” Business Segments Our operations are classified into four principal business segments: Collins Aerospace (Collins), Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD), with each segment comprised of groups of similar operations.
The following description of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within Item 7 of this Form 10-K, including the information contained therein under the heading “Business Overview.” Business Segments As previously announced, effective July 1, 2023, we streamlined the structure of our core businesses to three principal business segments: Collins Aerospace (Collins), Pratt & Whitney, and Raytheon, with each segment comprised of groups of similar operations.
Individuals with technical, engineering, and science backgrounds, experience, or interests are particularly important for us to succeed in the industries in which we compete.
Attracting, developing, advancing, and retaining the best talent is critical for us to execute our strategy and grow our business. Individuals with technical, engineering, and science backgrounds, experience, or interests are particularly important for us to succeed in the industries in which we compete.
We strive to advance a diverse, equitable and inclusive work environment. We believe a work environment where all individuals are respected, valued and supported enables them to focus on developing the most innovative solutions to our industry’s greatest challenges. We have a DE&I advisory board of senior leaders.
We strive to advance a diverse, equitable, and inclusive work environment. We believe a work environment where all individuals are respected, valued, and supported enables them to focus on developing the most innovative solutions to our industry’s greatest challenges. Our RTX DE&I Pillars for Action framework is focused on workforce diversity, supplier diversity, community engagement, and DE&I public policy.
Our sales to international customers, based on customer end use location, were as follows: (dollars in millions) 2022 2021 2020 Total international sales (1) $ 25,884 $ 24,377 $ 22,027 Total international sales as a percentage of Total Net Sales (1) 39 % 38 % 39 % (1) Includes foreign military sales through the U.S. government.
Our sales to international customers, based on customer end use location, where known, were as follows: (dollars in millions) 2023 2022 2021 Total international sales $ 29,440 $ 25,884 $ 24,377 Total international sales as a percentage of total net sales (1) 43 % 39 % 38 % (1) 2023 total net sales includes the reduction in sales from the Powder Metal Matter.
We are also working to arrange second and third supply source alternatives and have increased our inventory of available materials and parts.
We have arranged second and third supply source alternatives and have increased our materials and parts inventory.
Further, some non-U.S. competitors receive government research and development assistance, marketing subsidies and other assistance for their products beyond the assistance that may be available to us as a U.S. company.
Further, some non-U.S. competitors receive government research and development assistance, marketing subsidies, and other assistance for their products beyond the assistance that may be available to us as a U.S. company. Our aerospace businesses compete with numerous domestic and foreign manufacturers, customers, and companies that obtain regulatory agency approval to manufacture spare parts.
Some competitors may offer substantial discounts and other financial incentives, performance and operating cost guarantees, and participation in financing arrangements in an effort to compete for the aftermarket associated with these products. Our defense businesses compete with numerous U.S. and foreign companies in most defense and government electronics, space, information technology and technical services and support segments.
Some competitors may offer substantial discounts and other financial incentives, performance and operating cost guarantees, and participation in financing arrangements in an effort to compete for the aftermarket associated with these products.
We recognize and reward performance during our annual review process. We regularly conduct succession planning to ensure that we continue to cultivate the leadership pipeline of talent needed to execute our business strategy.
We invest in our workforce through internal and external education, training and development programs, and tuition assistance benefits. We also provide market competitive compensation and benefits. We recognize and reward performance during our annual review process. We regularly conduct succession planning to ensure that we continue to cultivate the leadership pipeline of talent needed to execute our business strategy.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 1. “Cautionary Note Concerning Factors That May Affect Future Results,” and in Item 1A. “Risk Factors” of this Form 10-K. Coronavirus Disease 2019 (COVID-19) Pandemic.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 1. “Cautionary Note Concerning Factors That May Affect Future Results,” and in Item 1A. “Risk Factors” of this Form 10-K. Regulatory Matters Our businesses are subject to extensive regulation in the industries we serve.
However, we expect the current labor market conditions and highly competitive employee hiring and retention environment to continue. Governance. The Human Capital & Compensation Committee of the RTC Board of Directors oversees the Company’s human capital management. Workforce Demographics.
We continuously monitor labor market conditions and trends to mitigate hiring and retention issues. Governance. The Human Capital & Compensation Committee of the RTX Board of Directors oversees the Company’s human capital management. Workforce Demographics.
Collins’ largest commercial customers are Boeing and Airbus with combined sales, prior to discounts and incentives, of 20%, 18% and 21% of total Collins segment sales in 2022, 2021 and 2020, respectively.
Collins’ largest commercial customers are Boeing and Airbus with combined sales, prior to discounts and incentives, of 19%, 18%, and 15% of total Collins segment sales in 2023, 2022, and 2021, respectively. In 2023, Boeing selected Collins for key positions on their X-66A sustainable flight demonstrator aircraft.
In addition, Collins continued its significant product development activities, including for major systems on the Airbus A321XLR, the Boeing 777X and 737 MAX 10, the Dassault Falcon 6X and the Xian MA700, final certification on COMAC’s C919, and systems in support of the Boeing T-7A trainer and the Boeing VC-25B. 4 Table of Contents Pratt & Whitney.
In addition, Collins continued its significant product development activities, including for major systems on the Airbus A321XLR, the Boeing 777X and 737 MAX 10, the Dassault Falcon 6X, and systems in support of the Boeing T-7A trainer and the Boeing VC-25B. Collins achievements also include an order milestone of 6,000 routers enabling digital transformation for global airlines.
We have nine diverse global employee resource groups, which are volunteer-run organizations that are open to all employees and are intended to foster an inclusive culture.
We have nine global employee resource groups (ERGs), which are volunteer-run organizations that are open to all employees and are intended to foster an inclusive culture. Approximately 16% of our workforce across 25 of the countries in which we operate are members of one or more of these ERGs.
The GTF Advantage configuration extends the economic and environmental benefits of today’s GTF engine, as it reduces fuel consumption by an additional 1 percent, extending the engine's lead as the most efficient powerplant for the A320neo family.
The GTF Advantage configuration currently under testing is expected to extend the benefits of today’s GTF engine, increasing takeoff thrust up to 8 percent and reducing fuel consumption by up to an additional 1 percent, maintaining the engine’s lead as the most efficient powerplant for the A320neo family.
In addition, Pratt & Whitney received a significant number of contract awards for the F135 program, which powers all three variants of the F-35 Lightning II fighter aircraft including an undefinitized contract action for Lots 15-17 and funding to begin work on an F135 engine core upgrade.
In addition, Pratt & Whitney received a significant number of contract awards for the F135 program, including a supplemental contract for Lots 15-17 and funding to continue work on an F135 engine core upgrade. The F135 program also added the Czech Republic as a new customer.
We continuously monitor the hiring, retention and management of our employees by business and function with a focus to attract, develop, engage, advance and retain the best talent in the industry. We invest in our workforce through internal and external education, training and development programs and tuition assistance benefits. We also provide market competitive compensation and benefits.
We continuously monitor the hiring, retention, and management of our employees by business and function with a focus to attract, develop, engage, advance, and retain the best talent in the industry. We aim to identify and hire quality, diverse external talent with skills matched to our Company’s business needs.
See “Note 21: Segment Financial Data” within Item 8 of this Form 10-K for additional information. International Sales.
In addition, as a global company, all three of our business segments have substantial international sales. See “Note 20: Segment Financial Data” within Item 8 of this Form 10-K for additional information. U.S. Government Sales.
We also invest in a more diverse workforce by supporting science, technology, engineering and mathematics initiatives for women and people of color, and providing opportunities and support to military veterans, people with disabilities and the LGBTQ+ community.
We also support science, technology, engineering, and mathematics initiatives for women and people of color, and provide opportunities to attract, develop and engage military veterans, people with disabilities, and the LGBTQ+ community. 7 Table of Contents Talent Acquisition, Development, and Retention; Employee Health and Safety.
As of December 31, 2022, women represented 25% of our global workforce and 33% of our global executives, and people of color represented 32% of our U.S. employee population and 17% of our U.S. executives. In addition, based on those employees who self-identified, veterans represented 12% of our U.S. employee population. Talent Acquisition, Development and Retention; Employee Health and Safety.
As of December 31, 2023, women represented 25% of our global workforce and 33% of our global executives, and people of color represented 33% of our U.S. employee population and 17% of our U.S. executives. In addition, we had over 2,200 U.S. new hires who self-identified as veterans in 2023. Diversity, Equity, and Inclusion (DE&I).
The PW1000G GTF engine has demonstrated a significant reduction in fuel burn and noise levels and lower environmental emissions when compared to legacy engines. The PW1100G-JM engine is offered on the Airbus A320neo family of aircraft. PW1000G GTF engine models also power the Airbus A220 passenger aircraft and Embraer’s E-Jet E2 family of aircraft.
Pratt & Whitney produces the PW1000G Geared Turbofan (GTF) engine family, the first of which, the PW1100G-JM which powers the Airbus A320neo family of aircraft, entered into service in January 2016. The PW1000G GTF engine has demonstrated a significant reduction in fuel burn and noise levels and lower environmental emissions compared to prior-generation engines.
In addition, P&WC’s PW800 engine has been selected to exclusively power Gulfstream’s G400, G500 and G600 business jets, as well as to power Dassault’s Falcon 6X business jet, which is scheduled to enter into service in 2023.
GTF engine models also power the Airbus A220 and Embraer E-Jets E2 aircraft families. In addition, Pratt & Whitney Canada’s PW800 engine has been selected to exclusively power Gulfstream’s G400, G500, and G600 business jets. Moreover, Dassault’s Falcon 6X business jet entered into service in December 2023.
Collins also designs, manufactures, and supports cabin interior, oxygen systems, food and beverage preparation, storage and galley systems, lavatory and wastewater management systems.
Collins also designs, manufactures, and supports complete cabin interiors, including seating, oxygen systems, food and beverage preparation, storage and galley systems, lavatory, and wastewater management systems. Collins’ solutions support human space exploration with environmental control and power systems and extravehicular activity suits.
Pratt & Whitney’s largest commercial customer by sales is Airbus, with sales, prior to discounts and incentives, of 33%, 31% and 30% of total Pratt & Whitney segment sales in 2022, 2021 and 2020, respectively. Pratt & Whitney produces the PW1000G Geared Turbofan (GTF) engine family, the first of which, the PW1100G-JM, entered into service in January 2016.
Pratt & Whitney’s largest commercial customer by sales is Airbus, with sales, prior to discounts and incentives, of 48%, 33%, and 31% of total Pratt & Whitney segment sales in 2023, 2022, and 2021, respectively. Segment sales in 2023 includes the reduction in sales associated with the Powder Metal Matter discussed below.
RMD serves as a prime contractor or major subcontractor on numerous programs with the DoD, including the U.S. Navy, U.S. Army, Missile Defense Agency (MDA), and U.S. Air Force, and international governments.
Department of Defense (DoD), including the U.S. Navy, U.S. Army, Missile Defense Agency (MDA), U.S. Air Force, and U.S. Space Force, as well as programs with U.S federal civil customers, and other international and classified customers.
Due to macroeconomic, industry and labor market conditions, we have experienced and continue to experience a highly competitive environment with respect to hiring and retaining employees with relevant qualifications and experience, particularly personnel with specialized engineering experience and security clearances, which has negatively impacted our operating and financial performance.
In addition, our defense business in particular requires qualified personnel with security clearances due to our classified programs. Shifts in macroeconomic, industry and labor market conditions may affect the environment for hiring and retaining employees with relevant qualifications and experience, and we have experienced, and continue to experience, challenges hiring highly qualified personnel.
RMD’s Naval Power business provides advanced sensors, command and control and weapons to protect ships and sailors around the world, including AIM-9X Sidewinder, Tomahawk, Standard Missile 2 (SM-2) and Standard Missile 6 (SM-6) missiles, and the SPY-6 family of radars.
Raytheon also provides advanced naval sensors, command and control and weapons including classified naval radars, the Next Generation Jammer (NGJ), shipboard missiles including the Tomahawk and Standard Missile 6 (SM-6), air-to-air missiles such as the AIM-9X SIDEWINDER missile, and integrated systems such as the SPY-6 radar.
RMD’s Land Warfare and Air Defense business provides capabilities ranging from precision weapons including Excalibur, Javelin, Stinger and TOW to integrated air and missile defense, including the proven Patriot air and missile defense system, the Guidance Enhanced Missile (GEM-T), the National Advanced Surface-to-Air Missile System (NASAMS) and the GhostEye family of radars, including the Lower Tier Air and Missile Defense Sensor (LTAMDS).
In addition, Raytheon provides advanced systems and products that span layered land and integrated air and missile defense, including the proven Patriot air and missile defense system, the Lower Tier Air and Missile Defense Sensor (LTAMDS), the National Advanced Surface-to-Air Missile System (NASAMS), Javelin, Excalibur, Stinger, and High-Energy Lasers.
The GTF Advantage engine for the A320neo family began Federal Aviation Regulations Part 33 (FAR33) certification and development flight testing on the A320neo aircraft, and successfully ran on 100% sustainable aviation fuel (SAF).
The GTF family now powers more than 1,700 aircraft for 70 operators across three aircraft platforms: Airbus A320neo family, Airbus A220, and Embraer E-Jets E2. The GTF Advantage engine continues Federal Aviation Regulations Part 33 (FAR33) certification testing to operate with, and has successfully run on, 100% sustainable aviation fuel (SAF).
In addition, in 2022, Collins integrated the FlightAware Foresight portfolio of industry-leading machine learning based predictive analytics, following Collins’ acquisition of FlightAware in November 2021. Collins also received numerous commercial air transport contract awards for airline selected buyer-furnished equipment installation for interiors, avionics, and wheels and brakes, along with a number of long-term FlightSense airline maintenance agreements.
Collins also achieved long-term agreements with global airlines valued at $3.5 billion in the aggregate. Collins continued to receive numerous commercial air transport contract awards for airline selected buyer-furnished equipment installation for interiors, avionics, and wheels and brakes, and long-term FlightSense airline maintenance agreements.
RMD’s Air Power business provides air-to-air and air-to-ground weapons that deliver power and precision to fourth- and fifth-generation fighters including the Advanced Medium Range Air-to-Air Missile (AMRAAM) and StormBreaker smart weapon, and ground-based sensors for persistent wide-area defense and space surveillance including Early Warning Radar.
Raytheon provides air-to-air and air-to-ground sensors, command and control and weapons including the Advanced Medium Range Air-to-Air Missile (AMRAAM), StormBreaker smart weapon, Long Range Stand Off Weapon (LRSO), and the Early Warning Radar.
Pratt & Whitney is among the world’s leading suppliers of aircraft engines for commercial, military, business jet and general aviation customers.
Collins’ aircraft power and thermal management team demonstrated a full scale prototype cooling system which can deliver 2.5 times the current cooling capacity to enable potential F-35 block upgrades. 4 Table of Contents Pratt & Whitney is among the world’s leading suppliers of aircraft engines for commercial, military, business jet, and general aviation customers.
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, cost savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, other anticipated benefits to RTC of the Rockwell Collins acquisition, the Raytheon merger or the separation of UTC’s business into three independent, publicly traded companies (UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis)) (the Separation Transactions), including estimated synergies and customer cost savings resulting from the Raytheon merger and the anticipated benefits and costs of the Separation Transactions, and other statements that are not solely historical facts.
Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases (including the accelerated share repurchase program), tax payments and rates, research and development spending, cost savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, a rare condition in powder metal used to manufacture certain engine parts requiring accelerated inspection of the PW1100G-JM (PW1100) Geared Turbofan (GTF) fleet (herein referred to as the Powder Metal Matter) and related matters and activities, including without limitation other engine models that may be impacted, anticipated benefits to RTX of its segment realignment, pending dispositions of Raytheon’s Cybersecurity, Intelligence and Services business and Collins’ actuation and flight control business, targets and commitments (including for share repurchases or otherwise), and other statements which are not solely historical facts.
Significant activity continued on development programs including the Adaptive Engine Testing Program, as well as the rollout ceremony for the Northrop Grumman B-21 Raider, powered by Pratt & Whitney engines. Raytheon Intelligence & Space. RIS is a leading provider of integrated space, communication and sensor systems, and cyber and software solutions to intelligence, defense, federal and commercial customers.
In addition, significant activity continued on development programs including the Next Generation Adaptive Propulsion Program, as well as the first flight of the B-21 Raider, which is powered by Pratt & Whitney engines.
In addition, the competitive landscape in the industry segments we serve continues to evolve with trends such as increased vertical integration by competitors and customers and the emergence of more commercial competitors on defense development programs. Our aerospace businesses compete with numerous domestic and foreign manufacturers, customers and companies that obtain regulatory agency approval to manufacture spare parts.
In addition, the competitive landscape in the defense industry continues to evolve with trends such as the continued increase in commercial competitors and increased government, particularly foreign, sponsorship of competitors on defense development programs. People As a global technology and innovation-driven company, we depend on a highly skilled workforce.
Army and a contract for the SM-3 for the MDA. RMD also received a number of classified contract awards, including a strategic competitive award. Sales and Customers We have substantial U.S. government sales, which we conduct through all four of our business segments. RIS and RMD together represent a significant portion of those sales.
Army and international customers, a contract to provide the Next Generation Short Range Interceptor (NGSRI) for the U.S. Army, and a contract to develop and produce Hypersonic Attack Cruise Missiles (HACM) for the U.S. Air Force. Sales and Customers We have substantial U.S. government sales, which we conduct through all three of our business segments.
We work continuously to mitigate the effects of these supply chain issues through targeted activities as well as through our ongoing supply chain programs. We work with our suppliers and subcontractors to assess the causes of performance failures and delays.
We have implemented certain actions and programs to mitigate some of the impacts, but anticipate supply chain disruptions to continue into 2024. We work with our suppliers and subcontractors to assess the causes of performance failures and delays and 8 Table of Contents work to address them, including by providing suppliers with raw materials and technical support.
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The Company recently announced its intention to streamline the structure of its core businesses into three principal business segments: Collins Aerospace, Pratt & Whitney and Raytheon. The Company plans to determine the exact composition of each segment and implement the reorganization in the second half of 2023.
Added
All segment information included in this Form 10-K is reflective of this new structure and prior period information has been recast to conform to our current period presentation.
Removed
All segment information included in this Form 10-K is reflective of the existing four segments of Collins, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles & Defense in accordance with the management structure in place as of December 31, 2022. Collins Aerospace.
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Collins also provides connected aviation solutions and services through worldwide voice and data communication networks, airport systems and integrations, and air traffic management solutions. Collins supports government and defense customer missions by providing systems solutions for connected battlespace, test and training range systems, crew escape systems, and simulation and training.
Removed
Collins’ solutions support human space exploration with environmental control and power systems and extravehicular activity suits and support government and defense customer missions by providing airborne intelligence, surveillance and reconnaissance systems, test and training range systems, crew escape systems, and simulation and training solutions.
Added
Collins was selected to serve as a key supplier of Command and Control (C2) capabilities as part of the Australian Air6500 effort.
Removed
Collins also provides connected aviation solutions and services through worldwide voice and data communication networks and solutions. Aftermarket services include spare parts, overhaul and repair, engineering and technical support, training and fleet management solutions, asset management services and information management services.
Added
Collins also received a contract for a multi-system mobile Air Traffic Navigation Integration and Coordination System (ATNAVICS). Collins also continues to invest in sustainable technologies, such as opening an electric airborne power research center in Rockford, IL, where a prototype 1-megawatt motor was run at its design target limit in a ground test.
Removed
In 2022, Collins was awarded significant defense contracts for the electric power generation system on the B-52 modernization program, along with multiple awards related to enabling the Department of Defense’s Joint All Domain Command and Control (JADC2) initiatives for the connected battlespace , including a five-year contract by the U.S.
Added
In 2023, Pratt & Whitney announced it will supply two GTF engines to power the Boeing X-66A sustainable flight demonstrator aircraft.
Removed
Army for the Mounted Assured Positions, Navigation and Timing System (MAPS) Gen II and a contract for the mission system for the U.S. Army Air Launched Effects (ALE). Collins was also one of two companies selected to develop and produce NASA’s next-generation spacesuit for the International Space Station and for Artemis.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeUTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the distributions (the Distributions) effective at 12:01 a.m., Eastern Time, on April 3, 2020.We received (1) a private letter ruling from the Internal Revenue Service (IRS) regarding certain U.S. federal income tax matters relating to the Separation Transactions and Distributions and (2) an opinion of outside counsel regarding the qualification of certain elements of the Distributions under Section 355 of the Code.
Biggest changeWe received (1) a private letter ruling from the Internal Revenue Service (IRS) regarding certain U.S. federal income tax matters relating to the Separation Transactions and Distributions and (2) an opinion of outside counsel regarding the qualification of certain elements of the Distributions under Section 355 of the Code.
Foreign currency exchange rate fluctuations (including their impact on supplier prices) may negatively affect demand for our products and our reported profits, as well as our operating margins. 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.
Foreign currency exchange rate fluctuations (including their impact on supplier prices) may negatively affect demand for our products and our reported profits, as well as our operating margins. The majority of our commercial aerospace sales are in U.S. Dollars, while the majority of their non-U.S. operating costs are incurred in the applicable local currency.
Our aerospace businesses constitute a substantial portion of our financial results, and the performance of those businesses is directly tied to economic conditions in the commercial aerospace industry, which is cyclical in nature.
Our commercial aerospace businesses constitute a substantial portion of our financial results, and the performance of those businesses is directly tied to economic conditions in the commercial aerospace industry, which is cyclical in nature.
U.S. foreign policy or foreign policy of other licensing jurisdictions may affect the licensing process or otherwise prevent us from engaging in business dealings with certain individuals, entities or countries.
U.S. foreign policy or the foreign policy of other licensing jurisdictions may affect the licensing process or otherwise prevent us from engaging in business dealings with certain individuals, entities, or countries.
In addition, the FCPA and other anti-bribery and -corruption laws generally prohibit companies and their intermediaries from making improper payments to U.S. and non-U.S. officials for the purpose of obtaining or retaining business. These laws apply to companies, individual directors, officers, employees and agents.
In addition, the FCPA and other anti-bribery and anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to U.S. and non-U.S. officials for the purpose of obtaining or retaining business. These laws apply to companies, individual directors, officers, employees, and agents.
Certain of our customer relationships outside of the U.S. are with governmental entities and are, therefore, subject to the FCPA and other anti-bribery and -corruption laws, including the anti-bribery and -corruption laws of non-U.S. countries. Our policies mandate compliance with these anti-bribery and -corruption laws.
Certain of our customer relationships outside of the U.S. are with governmental entities and are, therefore, subject to the FCPA and other anti-bribery and anti-corruption laws, including the anti-bribery and anti-corruption laws of non-U.S. countries. Our policies mandate compliance with these anti-bribery and anti-corruption laws.
We have been subject to regulatory investigations for alleged violations of anti-bribery and -corruption laws, and could be subject to such investigations in the future, which could result in criminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes or other remedial actions.
We have been subject to regulatory investigations for alleged violations of anti-bribery and anti-corruption laws, and could be subject to such investigations in the future, which could result in criminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes, or other remedial actions.
A termination arising out of our default could expose us to liability and have a negative impact on our ability to obtain future contracts and orders. In addition, we are a subcontractor on some contracts, and the U.S. government could terminate the prime contract for convenience or otherwise, without regard to our performance as a subcontractor.
A termination arising out of our default could expose us to liability and have a negative impact on our ability to obtain future contracts and orders. In addition, we are a subcontractor on some programs, and the U.S. government could terminate the prime contract for convenience or otherwise, without regard to our performance as a subcontractor.
In addition, some products and services that we provide to customers, particularly those related to public security, may raise potential liabilities related to privacy and intellectual property. In some cases we must rely on the safeguards put in place by our customers, suppliers, subcontractors and other third parties to protect against and report cyber threats.
In addition, some products and services that we provide to customers, particularly those related to public security, may raise potential liabilities related to privacy and intellectual property. In some cases, we must rely on the safeguards put in place by our customers, suppliers, subcontractors and other third parties to protect against and report cyber threats and attacks.
Cybersecurity threats also include attacks targeting the security, integrity and/or availability of the hardware, software and information installed, stored or transmitted in our products, including after the purchase of those products and when they are incorporated into third-party products, facilities or infrastructure. We are also exposed to the risk of insider threat attacks.
Cybersecurity threats also include attacks targeting the security, confidentiality, integrity and/or availability of the hardware, software and information installed, stored or transmitted in our products, including after the purchase of those products and when they are incorporated into third-party products, facilities or infrastructure. We are also exposed to the risk of insider threat attacks.
Moreover, over the past several years, the DoD has increased its use of Other Transaction Authority (OTA) contracts, under which it awards certain prototypes, research and production contracts without all of the procurement requirements that typically apply to DoD contracts, including justification of sole source awards.
Moreover, over the past several years, the DoD has increased its use of Other Transaction Authority (OTA) agreements, under which it awards certain prototypes, research, and production contracts without all of the procurement requirements that typically apply to DoD contracts, including justification of sole source awards.
Moreover, we believe that a critical element of our ability to successfully attract, train and retain qualified personnel is our corporate culture, which we believe fosters innovation, collaboration, diversity and inclusion, and a focus on execution, all in an environment of high ethical standards.
Moreover, we believe that a critical element of our ability to successfully attract, train, and retain qualified personnel is our corporate culture, which we believe fosters innovation, collaboration, diversity, equity, and inclusion, and a focus on execution, all in an environment of high ethical standards.
In addition, we continue to see ever-increasing demands for offerings focused on addressing climate change, transitioning to lower emission technologies, including low to no carbon products and services, the use of alternative energy sources and other sustainable aviation technologies, and climate adaptation products and services.
In addition, we continue to see ever-increasing demands for offerings focused on addressing climate change, transitioning to lower emission technologies, including low to no carbon products and services, the use of alternative energy sources, and other sustainable aviation technologies, and climate monitoring and adaptation products and services.
The level of orders received for the Geared Turbofan family of engines, coupled with a requirement to achieve mature production levels in a very short time frame, require significant additional manufacturing and supply chain capacity.
The level of orders received for the Geared Turbofan family of engines, coupled with a requirement to achieve mature production levels in a very short time frame, require significant manufacturing and supply chain capacity.
Furthermore, the existing supply chain and labor market issues could be compounded by other events, such as an economic downturn; supplier capacity constraints for other reasons; supplier quality issues (for example, defects or fraudulent parts); supplier closing, bankruptcy or financial difficulties; price increases for various reasons; worsening shortages of raw materials or commodities; and energy supply constraints, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition and liquidity.
Furthermore, the existing supply chain issues could be compounded by other events, such as an economic downturn; supplier capacity constraints for other reasons; supplier quality issues (for example, defects or fraudulent parts); supplier closing, bankruptcy, or financial difficulties; price increases for various reasons; and worsening shortages of raw materials or commodities, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition, and liquidity.
While contracts for development programs with complex design and technical challenges are typically cost reimbursable, they can be FFP or FPI, which can significantly increase our risk of a potential negative profit adjustment, as development contracts by nature involve elements that have not been undertaken before and, thus, are highly subject to future unexpected cost growth.
While contracts for development programs with complex design and technical challenges are often cost reimbursable, they can be FFP or FPI, which can significantly increase our risk of a potential negative profit adjustment, as development contracts by nature involve elements that have not been undertaken before and, thus, are highly subject to future unexpected cost growth.
A product or system failure could lead to negative publicity, a diversion of management attention and damage to our reputation that could reduce demand for our products and services.
A product or system failure, or perceived failure, could lead to negative publicity, a diversion of management attention, and damage to our reputation that could reduce demand for our products and services.
Personal injury lawsuits may involve individual and purported class actions alleging that contaminants originating from our current or former products or operating facilities caused or contributed to medical conditions, including cancers incurred by employees, former employees, third-parties’ employees or residents in the area, and environmental damage or diminution of real estate values.
Personal injury lawsuits may involve individual and purported class actions alleging that contaminants originating from our current or former products or operating facilities caused or contributed to medical conditions, including cancers or other illnesses incurred by employees, former employees, third-parties’ employees, or residents in the area, and environmental damage or diminution of real estate values.
Any failure by us, our customers or our suppliers to comply with these laws and regulations could result in civil or criminal penalties, fines, seizure of our products, adverse publicity, restrictions on our ability to export or import our products, or the suspension or debarment from doing business with the U.S. government.
Any failure by us, our customers, or our suppliers to comply with these laws and regulations could result in civil or criminal penalties, fines, seizure of our products, adverse publicity, restrictions on our ability to engage in export or import transactions, or the suspension or debarment from doing business with the U.S. government.
STRATEGIC INITIATIVE AND TRANSACTION RISKS We may be unable to realize expected benefits from strategic initiatives. In order to operate more effectively and efficiently, from time to time we undertake strategic and other operational initiatives. For example, we are undergoing a significant, multi-year digital transformation initiative to improve our business and reduce costs.
STRATEGIC INITIATIVE AND TRANSACTION RISKS We may be unable to realize expected benefits from strategic initiatives. In order to operate more effectively and efficiently, from time to time we undertake strategic and other operational initiatives. For example, we are undergoing a significant, multi-year digital transformation initiative to improve our business, modernize operations, and reduce costs.
We could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromise of confidential information, intellectual property or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper use of our or third-party systems, networks or products, financial losses from remedial actions, loss of business, or potential liability, penalties, fines and/or damage to our reputation.
We could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or 18 Table of Contents ability to provide products and services to our customers, the compromise of confidential information, intellectual property or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper use of our or third-party systems, networks or products, financial losses from remedial actions, loss of business, or potential liability, penalties, fines and/or damage to our reputation.
The impact of a catastrophic product or system failure or similar event affecting our or our customers’ or suppliers’ products or services could be significant, and could result in injuries 18 Table of Contents or death, property damage, loss of strategic capabilities, loss of intellectual property, loss of reputation, and other significant negative effects.
The impact of a catastrophic product or system failure or similar event affecting our or our customers’ or suppliers’ products or services could 19 Table of Contents be significant, and could result in injuries or death, property damage, loss of strategic capabilities, loss of intellectual property, loss of reputation, and other significant negative effects.
Any of these factors could reduce the sales and margins of our aerospace businesses. Other factors, including future terrorist actions, aviation safety concerns, pandemic health issues or major natural disasters, could also dramatically reduce the demand for commercial air travel, which could negatively impact the sales and margins of our aerospace businesses.
Other factors, including future terrorist actions, aviation safety concerns, pandemic health issues, or major natural disasters, could also dramatically reduce the demand for commercial air travel, which could negatively impact the sales and margins of our aerospace businesses.
Our ability to realize the anticipated benefits of our investments depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; receiving regulatory approvals; execution of internal and external performance plans; achieving cost and production efficiencies; availability and quality of supplier- and internally-produced parts and materials; availability of supplier and internal facility capacity to perform maintenance, repair and overhaul services; availability of test equipment; development of complex software; hiring and training of qualified personnel; identification of emerging technological trends for our target end-customers; the level of customer interest in new technologies and products and customer acceptance of our products and technologies.
Our ability to realize the anticipated benefits of our investments depends on a variety of factors, including meeting development, production, certification, and regulatory approval schedules; receiving regulatory approvals; execution of internal and external performance plans; achieving cost and production efficiencies; availability and quality of supplier- and internally-produced parts and materials; availability of supplier and internal facility capacity to perform maintenance, repair, and overhaul services; availability of test equipment; development of complex software; hiring and training of qualified personnel; identification of emerging technological trends for our target end-customers; the level of customer interest in new technologies and products; customer acceptance of our products and technologies; and the level of competition as described below.
If one of our contracts is terminated for convenience, we would generally be entitled to payments for our allowable costs and would receive some allowance for profit on the work performed. If one of our contracts is terminated for default, we would generally be entitled to payments for work accepted by the U.S. government.
If one of our contracts is terminated for convenience, we would generally be entitled to payments for our allowable costs incurred, termination costs, and would receive some allowance for profit on the work performed. If one of our contracts is terminated for default, we would generally be entitled to payments for work accepted by the U.S. government.
We may not be able to offset lost revenues resulting from contract termination. Moreover, because the funding of U.S. government programs is subject to 13 Table of Contents congressional appropriations made on a fiscal year basis even for multi-year programs, programs are often only partially funded initially and may not continue to be funded in future years.
We may not be able to offset lost revenues resulting from contract termination. Moreover, because the funding of U.S. government programs is subject to congressional appropriations made on a fiscal year basis even for multi-year programs, programs are often only partially funded initially and may not continue to be funded in future years.
Cybersecurity threats are evolving and include, but are not limited to, both attacks on our IT infrastructure and attacks on the IT infrastructure of our customers, suppliers, subcontractors and other third parties with whom we do business routinely, both on premises and in the cloud, attempting to gain unauthorized access to our confidential or other proprietary information, classified information, or information relating to our employees, customers and other third parties, or to disrupt our systems or the systems of third parties.
Cybersecurity threats are continuously evolving and include, but are not limited to, both attacks on our IT infrastructure and attacks on the IT infrastructure of our customers, suppliers, subcontractors and other third parties with whom we do business routinely, both on premises and in the cloud, attempting to gain unauthorized access to our confidential, proprietary, or otherwise protected information, classified information, or information relating to our employees, customers and other third parties, or to disrupt our systems or the systems of third parties.
Further, operations in emerging market countries are subject to additional risks, including volatility in gross domestic product and rates of economic growth, government instability, cultural differences (such as employment and business practices), the imposition of exchange and capital controls, and risks associated with exporting components manufactured in those countries for incorporation into finished products completed in other countries.
Further, operations in emerging market countries are subject to additional risks, including volatility in rates of economic growth, government instability, cultural differences (such as employment and business practices), the imposition of exchange and capital controls, and risks associated with exporting components manufactured in those countries for incorporation into finished products completed in other countries.
We may not realize, on a timely basis or at all, the anticipated benefits of these investments and actions for a variety of reasons, including technological challenges, evolving government and customer requirements and our ability to anticipate them and develop in-demand technologies on a timely basis, and other risks related to the development of advanced technologies described above.
We may not realize, on a timely basis or at all, the anticipated benefits of these investments and 23 Table of Contents actions for a variety of reasons, including technological challenges, evolving government and customer requirements, and our ability to anticipate them and develop in-demand technologies on a timely basis, and other risks related to the development of advanced technologies described above.
Because of the significance of management’s judgments and estimation processes described above, it is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in 23 Table of Contents underlying assumptions, circumstances or estimates may adversely affect our future results of operations and financial condition.
Because of the significance of management’s judgments and estimation processes described above, it is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances, or estimates may adversely affect our future results of operations and financial condition.
We cannot be sure that our pending patent applications will result in the issuance of patents to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors, or that these patents will be found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications.
We cannot be sure that our pending patent applications will result in the issuance of patents to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors, or that these patents will be found to be valid or 21 Table of Contents sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications.
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. In addition, in certain foreign countries, we engage foreign non-employee representatives and consultants for 14 Table of Contents international sales and teaming with international subcontractors, partners and suppliers for international programs.
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. 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.
Changes in environmental and climate-related laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, mandatory disclosure obligations and U.S. government procurement requirements, could increase our operational and compliance expenditures and those of our suppliers, including increased energy and raw materials costs and costs associated with manufacturing changes, and lead to new or additional investments in product designs and facility upgrades.
Current and emerging environmental and climate-related laws, regulations, or other policies, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, mandatory disclosure obligations, and U.S. government procurement requirements, could increase our operational and compliance expenditures and those of our suppliers, including increased energy and raw materials costs, and costs associated with manufacturing changes, and lead to new or additional investments in product designs and facility upgrades.
Additionally, there can be no assurance that any share repurchases will enhance shareowner value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock, and short-term stock price fluctuations could reduce the program’s effectiveness.
Additionally, there can be no assurance that any share repurchases will enhance shareowner value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock, and short-term stock price fluctuations could reduce the program’s effectiveness. See Item 5.
Due to the nature of our products and services, a product safety failure or other failure affecting our or our customers’ or suppliers’ products or systems could seriously harm our business.
Due to the nature of our products and services, a product safety failure, quality issue or other failure affecting our or our customers’ or suppliers’ products or systems could seriously harm our business.
The impact of any such business disruption is difficult to predict. 20 Table of Contents We depend on our intellectual property and have access to certain third party intellectual property; infringement or failure to protect our intellectual property or access to third party intellectual property could adversely affect our future growth and success.
The impact of any such business disruption is difficult to predict. We depend on our intellectual property and have access to certain third party intellectual property; infringement or failure to protect our intellectual property or access to third party intellectual property could adversely affect our future growth and success.
Events such as increased trade restrictions or retaliatory trade policies, renegotiation of existing trade 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.
Events such as increased trade restrictions, retaliatory trade policies, 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.
Our ability to obtain required licenses and authorizations on a timely basis or at all is subject to risks and uncertainties, including changing U.S. government laws, regulations or foreign policies, delays in Congressional action, or geopolitical and other factors.
Our ability to obtain required licenses and authorizations on a timely basis, or at all, is subject to risks and uncertainties, including changing laws, regulations, or foreign policies, delays in Congressional action, or geopolitical and other factors.
We 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.
We 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 15 Table of Contents initiated by, and carried out at the direction of, the U.S. government.
Changes in our assumptions or actual experience that differs from these assumptions could impact our pension and postretirement net periodic benefit (income) expense, the plans’ funded status, and/or the required cash contributions to such plans, which could negatively impact our results of operations, financial condition or liquidity.
Changes in our assumptions or actual experience that differs from these assumptions, as well as management changes to retirement plans, could impact our pension and postretirement net periodic benefit (income) expense, the plans’ funded status, and/or the required cash contributions to such plans, which could negatively impact our results of operations, financial condition, or liquidity.
A reduction in spending in the commercial aviation industry could have a significant effect on the demand for our products, which could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.
A reduction in spending in the commercial 16 Table of Contents aviation industry could have a significant effect on the demand for our products, which could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.
Highly competitive activity within the commercial aerospace industry has included substantial discounts and other financial incentives, performance and operating cost guarantees, and participation in financing arrangements, in order to secure both new engine business and the aftermarket revenues associated with these products.
Highly competitive activity within the commercial aerospace industry has included substantial discounts and other financial incentives, performance and operating cost guarantees, and participation in financing arrangements, in order 17 Table of Contents to secure both new engine business and the aftermarket revenues associated with these products.
It could also result in product recalls and product liability and warranty claims (including claims related to the safety or reliability of our products) and related expenses, other service, repair and maintenance costs, significant damages and other costs, including fines and other remedies and regulatory and environmental liabilities.
It could also result in product recalls and product liability and warranty claims (including claims related to the safety or reliability of our products) and related expenses, other service, repair and maintenance costs, labor and material costs, customer support costs, significant damages, and other costs, including fines and other remedies, and regulatory and environmental liabilities.
In evaluating such transactions, we are required to make difficult judgments regarding the value of business opportunities, technologies and other assets, and the risks and cost of potential liabilities.
In evaluating such transactions, we are required to make difficult judgments 26 Table of Contents regarding the value of business opportunities, technologies and other assets, and the risks and cost of potential liabilities.
For instance, if we or one of our business units were charged with wrongdoing in connection with a U.S. government investigation (including fraud, or violation of certain environmental or export laws, as further described below), the U.S. government could suspend us from bidding on or receiving awards of new U.S. government contracts pending the completion of legal proceedings.
For instance, if we or one of our business units were charged with wrongdoing in connection with a U.S. government investigation (including fraud, or violation of certain environmental, FCPA, and other anti-bribery and anti-corruption laws, or export laws, as further described below), the U.S. government could suspend us from bidding on or receiving awards of new U.S. government contracts pending the completion of legal proceedings.
In some cases, the Department of Justice (DOJ) has convened grand juries to 21 Table of Contents investigate possible irregularities in our costs. Any costs found to be improperly allocated to a specific contract will not be reimbursed by the U.S. government or must be refunded by us to the U.S. government if already reimbursed.
In some cases, the Department of Justice (DOJ) has conducted investigations or convened grand juries to investigate possible irregularities in our costs. Any costs found to be improperly allocated to a specific contract will not be reimbursed by the U.S. government or must be refunded by us to the U.S. government if already reimbursed.
Significant changes in U.S. government defense spending or changes in U.S. government priorities, policies and requirements could have a material adverse effect on our results of operations, financial condition and liquidity. We face risks relating to our U.S. government contracts and the mix of our U.S. government contracts and programs.
Significant changes in U.S. government defense spending or changes in U.S. government priorities, policies, and requirements could have a material adverse effect on our results of operations, financial condition, and liquidity. We face risks relating to our U.S. government contracts and programs, including the mix of our U.S. government contracts and programs, our performance, and our ability to control costs.
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.
Our international sales and operations are also sensitive to changes in U.S. or foreign government laws, regulations, and policies, including those related to tariffs, sanctions, embargoes, export and import controls, other trade restrictions, and trade agreements.
In addition, certain existing personnel may be required to receive various security clearances and substantial training in order to work on certain programs or perform certain tasks. Necessary security clearances may be delayed, which may impact our ability to perform on our U.S. government contracts.
With respect to existing personnel, some may become required to receive various security clearances and substantial training in order to work on certain programs or perform certain tasks. Necessary security clearances may be delayed, which may impact our ability to perform on our U.S. government contracts.
The reduction or elimination of our cash dividend, or suspension or elimination of our share repurchase 24 Table of Contents program could adversely affect the market price of our common stock.
The reduction or elimination of our cash dividend, or suspension or elimination of our share repurchase program could adversely affect the market price of our common stock.
Munitions Import List and we are required to obtain licenses and authorizations from the appropriate U.S. government agencies before selling these products outside of the U.S. or importing these products into the U.S.
Munitions Import List, and we are required to obtain licenses and authorizations from the appropriate U.S. government agencies before exporting these products out of the U.S. or importing these products into the U.S.
Our international sales and operations are sensitive to changes in foreign national priorities, foreign government budgets, and regional and local political 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 sensitive to changes in foreign national priorities, foreign government budgets, and regional and local political and economic factors, including wars and armed conflicts, political or civil unrest, volatility in energy prices or supply, inflation, interest rates, changes in threat environments and political relations, geopolitical uncertainties, and changes in U.S. foreign policy.
Any such business disruption could subject us to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, financial losses from remedial actions, the diversion of management’s attention and resources, or loss of business, any of which could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.
Any such business disruption could subject us to production downtimes, operational delays, supply chain challenges, other detrimental impacts on our operations or ability to provide products and services to our customers, decreased demand for our products, decreased defense budgets, financial losses from remedial actions, the diversion of management’s attention and resources, or loss of business, any of which could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.
From time to time, our businesses have sold, and are expected to sell in the future, additional defense products to Taiwan, 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.
Our businesses have sold, and are expected to sell in the future, additional defense products to Taiwan from time to time in alignment with our U.S. government policy, 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.
If either distribution of the stock of Carrier or Otis, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free, including as a result of subsequent acquisitions of our stock (including pursuant to the Raytheon merger), we could be subject to significant tax liabilities. On April 3, 2020, UTC completed the Separation Transactions.
If either distribution of the stock of Carrier or Otis, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free, including as a result of subsequent acquisitions of our stock (including pursuant to the Raytheon merger), we could be subject to significant tax liabilities.
Uncertainty relating to laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights. We use hazardous substances and generate hazardous wastes in our operations.
Uncertainty relating to laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights. 22 Table of Contents We use hazardous substances and generate hazardous wastes in certain of our operations.
OTAs may use fixed-price contracting during all phases of the contract, or mandated contract cost sharing (e.g., one-third of program costs). They may also require non-traditional subcontractor participation and impose other requirements that differ from our other DoD contracts. Our business may be negatively impacted if we are unable to perform on our OTA contracts, including any applicable non-traditional requirements.
OTAs may use fixed-price contracting during all phases of the contract, or mandated contract cost sharing. They may also require non-traditional subcontractor participation and impose other requirements that differ from our other DoD contracts. Our business may be negatively impacted if we are unable to bid for OTA work and/or perform on our OTA agreements, including any applicable non-traditional requirements.
Capital spending and demand for aircraft engines, aerospace products and component aftermarket parts and services by commercial airlines, lessors, other aircraft operators and aircraft manufacturers are influenced by a wide variety of factors, including current and predicted traffic levels, load factors, aircraft fuel prices, labor issues, airline consolidation, bankruptcies and restructuring activities, competition, the retirement of older aircraft, regulatory changes, terrorism and related safety concerns, general economic conditions, tightening of credit in financial markets, corporate profitability, cost reduction efforts and remaining performance obligations levels.
Capital spending and demand for aircraft engines, aerospace products, and component aftermarket parts and services is limited to commercial airlines, lessors, other aircraft operators and aircraft manufacturers that are influenced by a wide variety of factors, including current and predicted traffic levels, load factors, aircraft fuel prices, labor issues, airline consolidation, bankruptcies and restructuring activities, competition, the retirement of older aircraft, corporate profitability and financial health, cost reduction efforts, tightening of credit in financial markets and the availability of aircraft leasing and financing alternatives, remaining performance obligations levels, the satisfaction of certification or other regulatory requirements for aircraft in various jurisdictions, regulatory changes, terrorism and related safety concerns, and general economic conditions.
The termination of one or more of our U.S. government contracts, or the occurrence of performance delays, cost overruns (due to inflation or otherwise), product failures, shortages in materials, components or labor, or contract definitization delays, could negatively impact our competitive position, results of operations, financial condition and liquidity.
The termination of one or more of our U.S. government 13 Table of Contents contracts, or the occurrence of performance delays, cost overruns (due to inflation or otherwise), product failures, shortages in materials, components, or labor, contract definitization delays, or other failures to perform to customer expectations and contract requirements, could negatively impact our reputation and competitive position, results of operations, financial condition, and liquidity.
Our U.S. government contracts also require us to comply with extensive and evolving procurement rules and regulations and subject us to potential U.S. government audits, investigations, and disputes.
Our U.S. government contracts also require us to comply with extensive and evolving procurement rules and regulations and subject us to potential U.S. government surveillance, audits, investigations, 14 Table of Contents and disputes.
We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cybersecurity threats.
We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cybersecurity threats, as well as to comply with evolving regulations.
In addition, our business, and the businesses of our suppliers, subcontractors and service providers and customers, could be disrupted by public health crises, such as pandemics and epidemics (including the COVID-19 pandemic), damaging weather or other acts of nature, cyber-attacks on IT infrastructure and products or other events outside of our control.
In addition, our business, and the businesses of our suppliers, subcontractors, service providers, and customers, could be disrupted by public health crises, such as pandemics and epidemics (including a resurgence of the Coronavirus Disease 2019 (COVID-19) pandemic), and governmental, business, and individual actions taken in response, damaging weather or other acts of nature, cyber-attacks on IT infrastructure and products, or other events outside of our control.
Further, these transactions involve certain other risks and uncertainties including: (1) the risks involved with entering new markets; (2) the difficulty in integrating newly-acquired businesses and managing or monitoring other collaborative business arrangements; (3) the complexity of separating a portion of our business to enable a divestiture; (4) challenges and failures in achieving strategic objectives and other expected benefits, which may result in certain liabilities to us for guarantees and other commitments; (5) unidentified issues not discovered in RTC’s due diligence; (6) the diversion of our attention and resources from our operations and other initiatives; (7) the potential impairment of acquired assets; (8) the performance of underlying products, capabilities or technologies; and (9) the potential loss of key employees and customers of acquired businesses.
Further, these transactions involve certain other risks and uncertainties including: (1) the risks involved with entering new markets; (2) the difficulty in integrating newly-acquired businesses and managing or monitoring other collaborative business arrangements; (3) the complexity of separating a portion of our business to enable a divestiture; (4) challenges and failures in achieving strategic objectives and other expected benefits, which may result in certain liabilities to us for guarantees and other commitments; (5) the risk that regulatory authorities may deny our proposed transactions, or may impose on those transactions conditions that undermine the strategic rationale, reduce the financial benefit of, or jeopardize the consummation of those transactions; (6) unidentified issues not discovered in RTX’s due diligence; (7) the diversion of our attention and resources from our operations and other initiatives; (8) the potential impairment of acquired assets; (9) the performance of underlying products, capabilities, or technologies; and (10) the potential loss of key employees and customers of acquired businesses.
Customers, shareholders and institutional investors continue to increase their focus on ESG, including our environmental sustainability practices and commitments with respect to our operations, products and suppliers. As a result, we anticipate that we will need to make additional investments in new technologies and capabilities and devote additional management and other resources in response to the foregoing.
Customers, shareholders, and institutional investors are focused on ESG, including our environmental sustainability practices and commitments with respect to our operations, products, and suppliers. As a result, we continue to make additional investments in new technologies and capabilities, and devote management and other resources in response to the foregoing.
Quarterly cash dividends and share repurchases under our share repurchase program generally constitute components of our capital allocation strategy, which we fund through a combination of operating free cash flow, borrowings and proceeds from divestitures. However, we are not required to declare dividends or make any share repurchases under our share repurchase program.
Quarterly cash dividends and share repurchases under our share repurchase program generally constitute components of our capital allocation strategy, which we fund through a combination of operating free cash flow, borrowings, and proceeds from divestitures.
If we fail to manage potential future acquisitions, investments, divestitures, joint ventures and other transactions successfully, these activities could adversely affect our future financial results. In pursuing our business strategies, we continually review, evaluate and consider potential investments, acquisitions, divestitures, joint ventures and other teaming and 25 Table of Contents collaborative arrangements.
Failure to successfully manage potential future acquisitions, investments, divestitures, joint ventures, and other transactions, and other risks associated with these activities could adversely affect our future financial results. In pursuing our business strategies, we continually review, evaluate, and consider potential investments, acquisitions, divestitures, joint ventures, and other teaming and collaborative arrangements.
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.
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, financial support obligations, or other local investments, sometimes in the form of in-country industrial participation (ICIP) agreements.
The global and diverse nature of our operations means that these risks will continue to exist and additional examinations, proceedings and contingencies will arise from time to time. Our competitive position, results of operation, financial condition or liquidity may be affected by the outcome of examinations, proceedings and other contingencies that cannot be predicted with certainty.
The global and diverse nature of our operations means that these risks will continue to exist and additional examinations, proceedings, and contingencies will arise from time to time. Our results of operations, financial condition, or liquidity could be negatively impacted by any of the above factors, the outcome of any one of which cannot be predicted with certainty.
Technical, mechanical and other failures may occur from time to time, whether as a result of manufacturing or design defect, operational process or production issue attributable to us, our customers, suppliers, third party integrators or others.
Technical, mechanical, quality, electronic, and other failures may occur from time to time, whether as a result of manufacturing or design defect, operational process, or production issue attributable to us, our customers, suppliers, partners, third party integrators, or others. Product design changes and updates could also have associated cost and schedule impacts.
Spare parts sales and aftermarket service trends are affected by similar factors, including usage, pricing, technological improvements, regulatory changes and the retirement of older aircraft.
Spare parts sales and aftermarket services, particularly under long-term aftermarket contracts are also affected by similar factors, including usage, pricing, technological improvements, regulatory changes, and the retirement of older aircraft.
The current global supply chain and labor market challenges and inflationary pressures have negatively affected, and we expect will continue to negatively affect, our performance as well as the performance of our suppliers and subcontractors.
The current global supply chain challenges and inflationary pressures have negatively affected, and we expect will continue to negatively affect, our performance as well as the performance of our suppliers and subcontractors. High inflation levels have increased material and component prices, labor rates, and supplier costs.
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.
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.
Our business and financial performance may be adversely affected by climate change, including changes in regulations, customer demand, technologies and extreme weather. Our business may be impacted by climate change and governmental and industry actions taken in response, which present short, medium and long-term risks to our business and financial condition.
Our business may be impacted by climate change and governmental and industry actions taken in response, which present short, medium, and long-term risks to our business and financial condition.
If China were to impose sanctions or take other regulatory action against RTC, our suppliers, affiliates or partners, it could potentially disrupt our business operations. The impact of potential sanctions or other actions by China cannot be determined at this time.
If China were to enforce sanctions, impose additional sanctions, or take other regulatory action against 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 is uncertain.
Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. Changes in laws or regulations could result in higher expenses.
As a global business, we are subject to complex laws and regulations in the U.S. and in other countries in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. Changes in laws or regulations could result in higher expenses.
In some instances, we depend upon a single source of supply, manufacturing, services support or assembly, or participate in commodity markets that may be subject to allocations of limited supplies by suppliers. In addition, our defense businesses are subject to specific procurement requirements that limit the types of materials they use.
In some instances, we depend upon a single source of supply, manufacturing, services support, or assembly, or participate in commodity markets that may be subject to allocations of limited supplies by suppliers.
Delays and/or 16 Table of Contents suspension of production could result in increased development costs or deflect resources from other projects. Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity. In particular, Pratt & Whitney is currently producing and delivering the Geared Turbofan engine to power various aircraft.
Delays and/or suspension of production could result in increased development costs or deflect resources from other projects. Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity. In particular, Pratt & Whitney’s Geared Turbofan family of engines incorporates advanced technologies.
Additionally, some customers, including the DoD, are increasingly turning to commercial contractors, rather than traditional defense contractors, for space-related technologies and for information technology and other support work.
Additionally, some customers, including the DoD, are increasingly turning to commercial contractors, rather than traditional defense contractors, for space-related technologies and for information technology and other support work. Moreover, we are seeing increased government, particularly foreign, sponsorship of competitors on defense development programs.
Any such attacks could disrupt our systems or those of third parties (including 19 Table of Contents mission critical systems), impact business operations, result in unauthorized release of confidential or otherwise protected information, and corrupt our data or that of third parties.
Any such attacks could disrupt our systems or those of third parties (including mission critical systems), impact business operations, result in unauthorized release of confidential, proprietary, or otherwise protected information, and corrupt our data or that of third parties. The threats we face are continuous and evolving, and vary in degree of severity and sophistication.
We depend, in part, upon the issuance of debt to fund our business requirements. If we require additional funding in order to meet our business requirements, a number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt.
In addition, if we require additional funding in order to fund outstanding financing commitments or meet other business requirements, a number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt, any of which may adversely affect our ability to fund our business requirements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeApproximately 60% of our square footage related to our significant properties is located in the United States. 26 Table of Contents Our fixed assets as of December 31, 2022 include manufacturing facilities and non-manufacturing facilities such as warehouses, laboratories, office space, and a substantial quantity of machinery and equipment, including general purpose machinery and equipment using special jigs, tools and fixtures and in many instances having automatic control features and special adaptations.
Biggest changeOur fixed assets as of December 31, 2023 include manufacturing facilities and non-manufacturing facilities such as warehouses, laboratories, office space, and a substantial quantity of machinery and equipment, including general purpose machinery and equipment using special jigs, tools, and fixtures and in many instances having automatic control features and special adaptations.
ITEM 2. PROPERTIES We have significant properties in approximately 25 countries, with approximately 515 significant properties comprising approximately 75 million square feet of productive space. Approximately 30% of our square footage related to our significant properties is leased, and 70% is owned.
ITEM 2. PROPERTIES We have significant properties in approximately 25 countries, with approximately 500 significant properties comprising approximately 75 million square feet of productive space. Approximately 30% of our square footage related to our significant properties is leased, and 70% is owned. Approximately 70% of our square footage related to our significant properties is located in the United States.
The facilities, warehouses, machinery and equipment in use as of December 31, 2022 are in good operating condition, are well-maintained and substantially all are generally in regular use.
The facilities, warehouses, machinery and equipment in use as of December 31, 2023 are in good operating condition and are well-maintained.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeA further discussion of government contracts and related investigations, as well as a discussion of our environmental liabilities, can be found under the heading “Other Matters Relating to Our Business – Regulatory matters” within Item 1. “Business” of this Form 10-K and in Item 1A.
Biggest changeA further discussion of government contracts and related investigations, as well as a discussion of our environmental liabilities, can be found under the heading “Other Matters Relating to Our Business” within Item 1. “Business” of this Form 10-K and in Item 1A.
ITEM 3. LEGAL PROCEEDINGS We are subject to a number of lawsuits, investigations and claims (some of which involve substantial amounts). For a discussion of contingencies related to certain legal proceedings, see “Note 18: Commitments and Contingencies” within Item 8 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS We are subject to a number of lawsuits, investigations, and claims (some of which involve substantial amounts). For a discussion of contingencies related to certain legal proceedings, see “Note 17: Commitments and Contingencies” within Item 8 of this Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of Cumulative Five Year Total Return Annual Return Percentage Years Ending Company/Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Raytheon Technologies Common Stock (14.66) 43.82 (16.73) 23.27 20.01 S&P 500 Index (4.38) 31.49 18.40 28.71 (18.11) S&P Aerospace & Defense Index (8.07) 30.33 (16.06) 13.22 17.37 Indexed Returns Years Ending Company/Index Base Period 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Raytheon Technologies Common Stock $ 100.00 $ 85.34 $ 122.74 $ 102.21 $ 125.99 $ 151.21 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 S&P Aerospace & Defense Index 100.00 91.93 119.81 100.56 113.86 133.64 28 Table of Contents Issuer Purchases of Equity Securities The following table provides information about our purchases during the quarter ended December 31, 2022 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act. 2022 Total Number of Shares Purchased (000’s) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program (000’s) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions) October 1 - October 31 2,134 $ 85.81 2,134 $ 3,363 November 1 - November 30 1,244 95.87 1,244 3,244 December 1 - December 31 869 99.59 869 5,968 Total 4,247 $ 91.58 4,247 On December 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, 2021.
Biggest changeComparison of Cumulative Five Year Total Return Annual Return Percentage Years Ending Company/Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 RTX Common Stock 43.82 (16.73) 23.27 20.01 (14.44) S&P 500 Index 31.49 18.40 28.71 (18.11) 26.29 S&P Aerospace & Defense Index 30.33 (16.06) 13.22 17.37 6.77 Indexed Returns Years Ending Company/Index Base Period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 RTX Common Stock $ 100.00 $ 143.82 $ 119.77 $ 147.63 $ 177.18 $ 151.60 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P Aerospace & Defense Index 100.00 130.33 109.39 123.86 145.37 155.21 31 Table of Contents Issuer Purchases of Equity Securities The following table provides information about our purchases during the quarter ended December 31, 2023 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act. 2023 Total Number of Shares Purchased (000’s) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program (000’s) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions) October 1 - October 31 111,620 $ 78.22 111,456 $ 976 November 1 - November 30 149 81.13 — 976 December 1 - December 31 173 82.20 — 976 Total 111,942 $ 78.23 111,456 On October 21, 2023, our Board of Directors authorized a share repurchase program for up to $11 billion of our common stock, replacing the previous program announced on December 12, 2022.
Under 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.
Under the 2023 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.
We may also reacquire shares outside of the program 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.
Stock Performance Graph The following graph presents the cumulative total shareowner return for the five years ending December 31, 2022 for our common stock as compared to the Standard & Poor’s 500 Stock Index and the S&P Aerospace & Defense (A&D) Index.
Stock Performance Graph The following graph presents the cumulative total shareowner return for the five years ending December 31, 2023 for our common stock as compared to the Standard & Poor’s 500 Stock Index and the S&P Aerospace & Defense (A&D) Index.
These figures assume that all dividends paid over the five-year period were reinvested, and that the starting value of each index and the investment in common stock was $100.00 on December 31, 2017.
These figures assume that all dividends paid over the five-year period were reinvested, and that the starting value of each index and the investment in common stock was $100.00 on December 31, 2018.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Raytheon Technologies’ common stock is listed on the New York Stock Exchange under the ticker symbol “RTX.” There were 41,554 registered shareowners at December 31, 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES RTX Corporation’s common stock is listed on the New York Stock Exchange under the ticker symbol “RTX.” There were 39,627 registered shareowners at December 31, 2023.
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No shares were reacquired in transactions outside the program during the quarter ended December 31, 2022.
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On October 24, 2023, we entered into accelerated share repurchase (ASR) agreements with certain financial institution counterparties to repurchase shares of our common stock for an aggregate purchase price of $10 billion.
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Pursuant to the ASR agreements, we made aggregate payments of $10 billion on October 26, 2023, and received initial deliveries of approximately 108.4 million shares of our common stock at a price of $78.38 per share, representing approximately 85% of the shares expected to be repurchased.
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We funded the payments with borrowings under a bridge credit agreement, which was repaid with the proceeds from term loan facilities, proceeds from issuances of long-term debt in the fourth quarter of 2023 and cash on hand.
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The final number of shares to be repurchased will be based on the average of the daily volume-weighted average prices of our common stock during the term of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements.
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Upon final settlement of the ASR, under certain circumstances, each of the counterparties may be required to deliver additional shares of common stock, or we may be required to deliver shares of common stock or to make a cash payment to the counterparties, at our election.
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The final settlement of each transaction under the ASR agreements is scheduled to occur no later than the third quarter of 2024 and in each case may be accelerated at the option of the applicable counterparty.
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During the quarter ended December 31, 2023, we repurchased 486 thousand shares outside of the program related to our employee savings plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating Profit (Loss) (dollars in millions) 2022 2021 2020 Operating profit (loss) $ 5,414 $ 4,958 $ (1,889) Operating profit (loss) margin 8.1 % 7.7 % (3.3) % The increase in Operating profit (loss) of $0.5 billion in 2022 compared to 2021 was primarily driven by a decrease in Acquisition accounting adjustments, the operating performance at our operating segments and a decrease in Corporate and Eliminations and other, partially offset by the change in our FAS/CAS operating adjustment, all of which are described below in “Segment Review.” The change in Operating profit (loss) of $6.8 billion in 2021 compared to 2020 was primarily driven by the operating performance at our operating segments, including the impact of the Raytheon merger, the absence of the $3.2 billion goodwill impairment in the second quarter of 2020 related to two Collins reporting units, and an increase in our FAS/CAS operating adjustment of $690 million primarily as a result of the Raytheon merger.
Biggest changeOperating Profit (dollars in millions) 2023 2022 2021 Operating profit $ 3,561 $ 5,504 $ 5,136 Operating profit margin 5.2 % 8.2 % 8.0 % The decrease in Operating profit of $1.9 billion in 2023 compared to 2022 was primarily driven by a decrease at Pratt & Whitney primarily driven by the $2.9 billion charge associated with the Powder Metal Matter and a decrease in the change in our FAS/CAS operating adjustment, partially offset by an increase in Operating profit at Collins and Raytheon, all of which are described below in “Segment Review.” The increase in Operating profit of $0.4 billion in 2022 compared to 2021 was primarily driven by a decrease in Acquisition accounting adjustments, the operating performance at our operating segments, and a decrease in Corporate and Eliminations and other, partially offset by the change in our FAS/CAS operating adjustment, all of which are described below in “Segment Review.” 39 Table of Contents Non-service Pension Income (dollars in millions) 2023 2022 2021 Non-service pension income $ (1,780) $ (1,889) $ (1,944) The change in Non-service pension income of $0.1 billion in 2023 compared to 2022 was primarily driven by an increase in interest rates during 2022 and prior years’ pension asset returns performing below our expected return on plan assets (EROA) assumption, partially offset by an increase in our 2023 EROA assumption.
A reconciliation of these measures to reported U.S.
A reconciliation of these measures to reported U.S.
The decrease in Other operating profit of $0.1 billion in 2022 compared to 2021 primarily relates to $141 million of pretax charges 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 in the first quarter of 2022.
The decrease in Other operating profit of $0.1 billion in 2022 compared to 2021 primarily relates to $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.
See Results of Operations below for our definition of the organic change in Net sales and Operating profit (loss), which are not defined measures under U.S. Generally Accepted Accounting Principles (GAAP) and may be calculated differently by other companies. We also focus on backlog as a key financial performance measure of our forward-looking sales growth.
See Results of Operations below for our definition of the organic change in Net sales and Operating profit, which are not defined measures under U.S. Generally Accepted Accounting Principles (GAAP) and may be calculated differently by other companies. We also focus on backlog as a key financial performance measure of our forward-looking sales growth.
If the carrying value exceeds the fair value, then the carrying value is reduced to fair value. In testing our reporting units and indefinite-lived intangible assets for impairment, we may perform both qualitative and quantitative assessments. For the quantitative assessments that are performed for goodwill, we utilize a combination of discounted cash flows (DCF) and market-based valuation methodologies.
If the carrying value exceeds the fair value, then the carrying value is reduced to fair value. In testing our reporting units and indefinite-lived intangible assets for impairment, we may perform both qualitative and quantitative assessments. For the quantitative assessments that are performed for goodwill, we primarily utilize a combination of discounted cash flows (DCF) and market-based valuation methodologies.
Changes in environmental and climate change laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, and energy taxes, could lead to new or additional investment in product designs and facility upgrades and could increase our operational and environmental compliance expenditures, including increased energy and raw materials costs and costs associated with manufacturing changes.
Changes in environmental and climate change-related laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, and energy taxes, could lead to new or additional investment in product designs and facility upgrades and could increase our operational and environmental compliance expenditures, including increased energy and raw materials costs and costs associated with manufacturing changes.
The increase in commercial aerospace operating profit was partially 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, which includes the benefits of cost reduction initiatives.
The increase in commercial aerospace operating profit was partially offset by lower military operating profit of $0.4 billion, principally driven by the lower military sales discussed above, and higher selling, general, and administrative expenses of $0.2 billion, which includes the benefits of cost reduction initiatives.
The organic change in Net sales, Cost of sales and Operating profit (loss) excludes Acquisitions and divestitures, net, and the effect of foreign currency exchange rate translation fluctuations and other significant non-operational items and/or significant operational items that may occur at irregular intervals (Other).
The organic change in Net sales, Cost of sales, and Operating profit excludes acquisitions and divestitures, net, the effect of foreign currency exchange rate translation fluctuations, and other significant non-operational items and/or significant operational items that may occur at irregular intervals (Other).
Additionally, the organic change in Cost of sales and Operating profit (loss) 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.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide information to the reader in understanding our consolidated financial statements and notes thereto included in Item 8.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide information to the reader in understanding our consolidated financial statements and notes thereto included in Item 8.
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 rising 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.
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.
Net income from continuing operations attributable to common shareowners for 2021 includes the following: • acquisition accounting adjustments primarily related to the Raytheon merger of $1.7 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $1.13; • net debt extinguishment costs of $524 million, net of tax, in connection with the early repayment of outstanding principal, which had an unfavorable impact on diluted EPS from continuing operations of $0.35; • 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; • tax expense of $148 million related to the sale of our Forcepoint business in the first quarter of 2021, which had an unfavorable impact on diluted EPS from continuing operations of $0.10, and the subsequent revaluation of that tax benefit of $104 million in the fourth quarter of 2021, due to the completion of the divestiture of RIS’s global training and services business for a gain, which had an favorable impact on diluted EPS from continuing operations of $0.07; • accrual of $147 million related to the ongoing DOJ investigation into contract pricing matters at RMD, which had an unfavorable impact on diluted EPS from continuing operations of $0.10; • restructuring charges of $121 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.08; and • gain on the sale of our global training and services business within our RIS segment of $126 million, net of tax, which had a favorable impact on diluted EPS from continuing operations of $0.08.
Net income from continuing operations attributable to common shareowners for 2021 includes the following: • acquisition accounting adjustments primarily related to the Raytheon merger of $1.7 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $1.13; • net debt extinguishment costs of $524 million, net of tax, in connection with the early repayment of outstanding principal, which had an unfavorable impact on diluted EPS from continuing operations of $0.35; • 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; • tax expense of $148 million related to the sale of our Forcepoint business in the first quarter of 2021, which had an unfavorable impact on diluted EPS from continuing operations of $0.10, and the subsequent revaluation of that tax benefit of $104 million in the fourth quarter of 2021, due to the completion of the divestiture of Raytheon’s global training and services business for a gain, which had a favorable impact on diluted EPS from continuing operations of $0.07; • accrual of $147 million related to the ongoing DOJ investigation into contract pricing matters at Raytheon, which had an unfavorable impact on diluted EPS from continuing operations of $0.10; • restructuring charges of $121 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.08; and • gain on the sale of our global training and services business within our Raytheon segment of $126 million, net of tax, which had a favorable impact on diluted EPS from continuing operations of $0.08.
As discussed in “Note 14: Financial Instruments” within Item 8 of this Form 10-K, 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.
As discussed in “Note 13: Financial Instruments” within Item 8 of this Form 10-K, 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.
See “Note 1: Basis of Presentation and Summary of Accounting Principles” and “Note 13: Income Taxes” within Item 8 of this Form 10-K for further discussion. Management has determined that the distributions of Carrier and Otis on April 3, 2020, and certain related internal business separation transactions, qualified as tax-free under applicable law.
See “Note 1: Basis of Presentation and Summary of Accounting Principles” and “Note 12: Income Taxes” within Item 8 of this Form 10-K for further discussion. Management has determined that the distributions of Carrier and Otis on April 3, 2020, and certain related internal business separation transactions, qualified as tax-free under applicable law.
We believe defense bookings are an important measure of future performance for our defense operations and are an indicator of potential future changes in these operations’ Total Net Sales, because we cannot record revenues under a new contract without first having a booking in the current or a preceding period.
We believe defense bookings are an important measure of future performance for our defense operations and are an indicator of potential future changes in these operations’ Total net sales, because we cannot recognize revenues under a new contract without first having a booking in the current or a preceding period.
The organic profit increase of $0.7 billion in 2022 compared to 2021 was primarily due to higher commercial aerospace operating profit of $1.2 billion principally driven by the higher commercial aerospace aftermarket sales discussed above, partially offset by the absence of a favorable $52 million impact from a contract-related matter in 2021.
The organic operating profit increase of $0.6 billion in 2022 compared to 2021 was primarily due to higher commercial aerospace operating profit of $1.2 billion, principally driven by the higher commercial aerospace aftermarket sales discussed above, partially offset by the absence of a favorable $52 million impact from a contract-related matter in 2021.
In particular, the design, development, production and support of aerospace technologies is inherently complex and subject to risk. Technical issues associated with these technologies may arise in the normal course and may result in financial impacts, including increased warranty provisions, customer contract settlements, and changes in contract performance e stimates.
In particular, the design, development, production, and support of aerospace technologies is inherently complex and subject to risk. Technical issues associated with these technolog ies may arise in the normal course and may result in financial impacts, including increased warranty provisions, customer contract settlements, and changes in contract performance e stimates.
Included in cash flows from operating activities are payments related to our operating lease obligations. See “Note 12: Leases” within Item 8 of this Form 10-K for actual and expected payments on operating lease obligations. In addition, the majority of our cash flows for purchase obligations are classified as cash flows from operating activities.
Included in cash flows from operating activities are payments related to our operating lease obligations. See “Note 11: Leases” within Item 8 of this Form 10-K for actual and expected payments on operating lease obligations. In addition, the majority of our cash flows for purchase obligations are classified as cash flows from operating activities.
The organic profit increase of $0.8 billion in 2022 compared to 2021 was primarily driven by higher commercial aerospace operating profit of $1.1 billion principally due to the aftermarket sales volume increase discussed above and favorable OEM mix. The organic profit increase also includes slightly higher military operating profit primarily driven by favorable mix.
The organic operating profit increase of $0.8 billion in 2022 compared to 2021 was primarily driven by higher commercial aerospace operating profit of $1.1 billion principally due to the aftermarket sales volume increase and favorable OEM mix. The organic profit increase also includes slightly higher military operating profit primarily driven by favorable mix.
Net services cost of sales increased $0.7 billion in 2022 compared to 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.
Net services cost of sales increased $0.7 billion in 2022 compared to 2021, primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, partially offset by a decrease in external services cost of sales at Raytheon, all driven by the services sales changes noted above.
In 2021, our organic profit included approximately $50 million related to foreign government wage subsidies due to COVID-19.
In 2021, organic profit included approximately $50 million related to foreign government wage subsidies due to COVID-19.
Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.
Under the 2023 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.
We may also reacquire shares outside of the program 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.
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. 31 Table of Contents 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.
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.
Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment.
Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment, if applicable.
The decrease related to Acquisitions and divestitures, net of $0.6 billion in 2022 compared to 2021 was primarily driven by t he sale of our global training and services business within our RIS segment in the fourth quarter of 2021.
The decrease related to Acquisitions and divestitures, net of $0.6 billion in 2022 compared to 2021 was primarily driven by t he sale of our global training and services business within our Raytheon segment in the fourth quarter of 2021.
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.
Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many inputs, and requires significant judgment by management on a contract-by-contract basis.
The $0.7 billion decrease in net sales related to Acquisitions and divestitures, net in 2022 compared to 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 $0.7 billion decrease in net sales related to Acquisitions and divestitures, net in 2022 compared to 2021, was primarily driven by the sale of our global training and services business within our Raytheon segment in the fourth quarter of 2021 .
We provide the organic change in Net sales and Operating profit (loss) 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.
We provide the organic change in Net sales and Operating profit (loss) 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.
The fair value of the trademark and tradename intangible assets are determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value using an appropriate discount rate.
The fair value of the trademark and tradename intangible assets are determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a 56 Table of Contents royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value using an appropriate discount rate.
As described in “Note 18: Commitments and Contingencies” within Item 8 of this Form 10-K, contractual, regulatory and other matters in the normal course of business may arise that subject us to claims or litigation, including with respect to matters relating to technical issues on programs, government contracts, performance and operating cost guarantees, employee benefit plans, legal, and environmental, health and safety matter s.
As described in “Note 17: Commitments and Contingencies” within Item 8 of this Form 10-K, contractual, regulatory, and other matters in the normal course of business may arise that subject us to claims or litigation, including with respect to matters relating to technical issues on programs, government contracts, performance and operating cost guarantees, employee benefit plans, legal, and environmental, health and safety matters.
The decrease in other operating profit of $0.1 billion in 2022 compared to 2021 was primarily due to $155 million of pretax charges related to impairment of customer financing assets for products under lease, increased estimates for credit losses, 43 Table of Contents 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.
The decrease in Other operating profit of $0.1 billion in 2022 compared to 2021 was primarily due to $155 million of pretax charges recorded in the first quarter of 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.
For our significant plans, we utilize a full yield curve approach in the estimation of the service cost and interest cost components of net periodic benefit expense by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant discounted projected cash flows.
For our significant plans, we utilize a full yield curve approach in the estimation of the service cost and interest cost 58 Table of Contents components of net periodic benefit expense by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant discounted projected cash flows.
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.
Further, we continue to have access to the commercial paper markets and our existing credit facilities, and our ability to obtain debt or 51 Table of Contents equity financing, as well as the availability under committed credit lines, provides additional potential sources of liquidity should they be required or appropriate.
We reflect contract cancellations and terminations, as well as the impact of changes in foreign exchange rates, 41 Table of Contents directly as an adjustment to backlog in the period in which the cancellation or termination occurs and the impact is determinable. Contract cancellations and terminations also include contract underruns on cost-type programs.
We reflect contract cancellations and terminations, as well as the impact of changes in foreign exchange rates, directly as an adjustment to backlog in the period in which the cancellation or termination occurs and the impact is determinable. Contract cancellations and terminations also include contract underruns on cost-type programs.
These increases were partially offset by lower military sales of $0.3 billion in 2022 compared to 2021 primarily due to lower material receipts and decreased volume.
These increases were partially offset by lower military sales of $0.6 billion in 2022 compared to 2021, primarily due to lower material receipts and decreased volume.
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 business mix also reflects the combination of shorter cycles in our commercial aerospace spares contracts and certain service contracts in our defense business, and longer cycles in our aerospace OEM and aftermarket maintenance contracts and on our defense contracts to design, develop, manufacture, or modify complex equipment.
Higher sales volume in the current year supported increased factoring activity that resulted in approximately $2.3 billion of increased cash flows provided by operating activities during 2022 , compared to a decrease in cash flows provided by operating activities of $0.2 billion during 2021 .
Higher sales volume in 2022 supported increased factoring activity that resulted in approximately $2.3 billion of increased cash flows provided by operating activities during 2022, compared to a decrease in cash flows provided by operating activities of approximately $0.2 billion in cash provided by operating activities during 2021.
Net services sales increased $1.2 billion in 2022 compared to 2021 primarily due to increases in external services sales of $1.2 billion at Pratt & Whitney and $0.5 billion at Collins, partially offset by a decrease in external services sales of $0.5 billion at RIS primarily driven by the sale of the global training and services business in the fourth quarter of 2021 .
Net services sales increased $1.2 billion in 2022 compared to 2021 primarily due to increases in external services sales of $1.2 billion at Pratt & Whitney and $0.4 billion at Collins, partially offset by a decrease in external services sales of $0.4 billion at Raytheon, primarily driven by the sale of the global training and services business in the fourth quarter of 2021 .
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 39 Table of Contents and services.
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.
The change in corporate expenses and other unallocated items of $234 million in 2022 compared to 2021 was primarily driven by the absence of an accrual of $147 million in the fourth quarter of 2021 related to the ongoing DOJ investigation into contract pricing matters at RMD, a decrease in expenses related to the LTAMDS project and lower restructuring costs, partially offset by an increase in information technology-related costs.
The change in corporate expenses and other unallocated items of $234 million in 2022 compared to 2021 was primarily driven by an accrual of $147 million in the fourth quarter of 2021 related to the ongoing DOJ investigation into contract pricing matters at Raytheon, a decrease in expenses related to the LTAMDS program and lower restructuring costs, partially offset by an increase in information technology-related costs.
The change in working capital also included a favorable impact from contract assets compared to 2021 primarily due to the timing of billings and collections, and increases in accounts payable and accrued liabilities primarily driven by higher inventory purchasing activity, deferred revenue and advanced payments.
The change in working capital also included a favorable impact from contract assets in 2022 compared to 2021 primarily due to the timing of billings and collections, and increases in accounts payable and accrued liabilities primarily driven by higher inventory receipts, deferred revenue, and advanced payments.
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. Government legislation, policies and regulations can impact our business and operations.
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.
The increased sales in Strategic Missile Defense programs included higher net sales from the Next Generation Interceptor (NGI) program.
The increase in strategic missile defense programs included higher net sales from the Next Generation Interceptor (NGI) program.
We regularly assess the recoverability of these intangibles, which is dependent upon our 55 Table of Contents assumptions around the future success and profitability of the underlying aircraft platforms including the associated aftermarket revenue streams, and the related future cash flows.
We assess the recoverability of these intangibles, which is dependent upon our assumptions around the future success and profitability of the underlying aircraft platforms, including the associated aftermarket revenue streams, and the related future cash flows.
The Company continuously monitors and evaluates relevant events and circumstances that could unfavorably impact the significant assumptions noted above, including changes to U.S. treasury rates and equity risk premiums, tax rates, recent market valuations from transactions by comparable companies, volatility in the Company’s market capitalization, and general industry, market and macro-economic conditions.
The Company continuously monitors and evaluates relevant events and circumstances that could unfavorably impact our significant assumptions used in testing goodwill, including changes to U.S. treasury rates and equity risk premiums, tax rates, recent market valuations from transactions by comparable companies, volatility in the Company’s market capitalization, and general industry, market, and macro-economic conditions.
The change in net EAC adjustments of $147 million in 2022 compared 2021 was primarily due to unfavorable changes in net EAC adjustments of $183 million at RMD and $108 million at RIS, including the impact of acquisitions and dispositions, both 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 $147 million in 2022 compared 2021 was primarily due to unfavorable changes in net EAC adjustments at Raytheon, including the impact of acquisitions and dispositions, spread across numerous individual programs, with no individual or common significant driver, and includes the impact of continued supply chain and labor market constraints.
In particular, as of December 31, 2022, our Contract liabilities include approximately $385 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated. See Item 1A.
In particular, as of December 31, 2023, our Contract liabilities include approximately $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.
FINANCIAL SUMMARY We use the following key financial performance measures to manage our business on a consolidated basis and by business segment, and to monitor and assess our results of operations: • Net Sales: a growth metric that measures our revenue for the current year; • Operating Profit (Loss): a measure of our profit (loss) for the year, before non-operating expenses, net and income taxes; and • Operating Profit (Loss) Margin: a measure of our Operating profit (loss) as a percentage of Total Net Sales.
FINANCIAL SUMMARY We use the following key financial performance measures to manage our business on a consolidated basis and by business segment, and to monitor and assess our results of operations: • Net sales: a growth metric that measures our revenue for the current year; • Operating profit: a measure of our profit for the year, before non-operating expenses, net and income taxes; • Operating profit margin: a measure of our Operating profit as a percentage of Total net sales; and • Operating cash flow from continuing operations: a measure of the amount of cash generated by our business operations.
These unfavorable changes were partially offset by a favorable change in net EAC adjustments of $119 million at Collins, spread across numerous individual programs, with no individual or common significant driver, and a favorable change in net EAC adjustments of $26 million at Pratt & Whitney primarily due to a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.
This unfavorable change was partially offset by a favorable change in net EAC adjustments at Collins, spread across numerous individual programs with no individual or common significant driver, and a favorable change in net EAC adjustments at Pratt & Whitney primarily due to a $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket program in the second quarter of 2022.
In addition, we have entered into certain internal legal entity restructuring transactions necessary to effectuate the Separation Transactions. We have accrued tax on these transactions based on our interpretation of the applicable tax laws and our determination of appropriate entity valuations.
In addition, we have entered into certain internal legal entity restructuring transactions necessary to effectuate the separation of Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis). We have accrued tax on these transactions based on our interpretation of the applicable tax laws and our determination of appropriate entity valuations.
Our CAS pension expense is comprised primarily of CAS service cost, as well as amortization amounts resulting from demographic or economic experience different than expected, changes in assumptions, or changes in plan provisions. Unlike FAS, CAS expense is only recognized for plans that are not fully funded.
Our CAS pension expense is comprised primarily of CAS service cost and amortization amounts resulting from demographic or economic experience different than expected, changes in assumptions, or changes in plan provisions. Unlike FAS, CAS expense is only recognized for plans that are not fully funded on a CAS basis.
The Company does not intend to reinvest certain undistributed earnings of its international subsidiaries that have been previously taxed in the U.S. Taxes associated with the future remittance of these earnings have been recorded. For the remainder of the Company’s undistributed international earnings, unless tax effective to repatriate, RTC will continue to permanently reinvest these earnings.
The Company intends to repatriate 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, RTX will continue to permanently reinvest these earnings.
The following table shows the sensitivity of our pension and PRB plan liabilities and net periodic benefit income to a 25 basis point change in the discount rates for benefit obligations, interest cost and service cost as of December 31, 2022: (dollars in millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Projected benefit obligation increase (decrease) $ (1,144) $ 1,194 Net periodic benefit income increase (decrease) (23) 28 The discount rate sensitivities assume no change in the shape of the yield curve that will be applied to the projected cash outflows for future benefit payments in order to calculate interest and service cost.
The following table shows the sensitivity of our pension and PRB plan liabilities and net periodic benefit income to a 25 basis point change in the discount rates for benefit obligations, interest cost, and service cost as of December 31, 2023: (dollars in millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Projected benefit obligation increase (decrease) $ (1,173) $ 1,226 Net periodic benefit income increase (decrease) (13) 12 The discount rate sensitivities assume no change in the shape of the yield curve that will be applied to the projected cash outflows for future benefit payments in order to calculate interest and service cost.
Our Board of Directors authorized the following cash dividends for the years ended December 31: (dollars in millions, except per share amounts) 2022 2021 2020 Dividends paid per share of common stock $ 2.160 $ 2.005 $ 2.160 Total dividends paid $ 3,128 $ 2,957 $ 2,732 On February 3, 2023, the Board of Directors declared a dividend of $0.55 per share payable March 23, 2023 to shareowners of record at the close of business on February 24, 2023.
Our Board of Directors authorized the following cash dividends for the years ended December 31: (dollars in millions, except per share amounts) 2023 2022 2021 Dividends paid per share of common stock $ 2.320 $ 2.160 $ 2.005 Total dividends paid $ 3,239 $ 3,128 $ 2,957 On February 2, 2024, the Board of Directors declared a dividend of $0.59 per share payable March 21, 2024 to shareowners of record at the close of business on February 23, 2024.
At December 31, 2022, we had cash and cash equivalents of $6.2 billion, of which approximately 34% was held by RTC’s foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed.
At December 31, 2023, we had cash and cash equivalents of $6.6 billion, of which approximately 32% was held by 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.
At December 31, 2022, we had commercial aerospace financing and other contractual commitments, including exclusivity and collaboration payment commitments, of approximately $15.3 billion, on a gross basis before reduction for our collaboration partners’ share. Refer to “Note 18: Commitments and Contingencies” within Item 8 of this Form 10-K for further details on our commercial aerospace financing and other contractual commitments.
At December 31, 2023, we had commercial aerospace financing and other contractual commitments, including exclusivity and collaboration payment commitments, of approximately $14.6 billion, on a gross basis before reduction for our collaboration partners’ share. Refer to “Note 17: Commitments and Contingencies” within Item 8 of this Form 10-K for further details on our commercial aerospace financing and other contractual commitments.
A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above. The organic increase in total Cost of sales in 2022 compared to 2021 of $2.4 billion was primarily due to the organic sales increases at Collins and Pratt & Whitney noted above.
A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above. The organic increase in Total cost of sales in 2023 compared to 2022 of $5.7 billion was primarily due to the organic sales increases at Pratt & Whitney, Collins, and Raytheon noted above.
During 2022, 2021, and 2020 we had net cash payments of $205 million, $16 million, and $32 million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.
During 2023 we had net cash receipts of $14 million, and during 2022 and 2021 we had net cash payments of $205 million and $16 million, respectively, from the settlement of these derivative instruments not designated as hedging instruments.
We expect future payments related to our purchase obligations to be $27.6 billion, of which $19.4 billion is payable in 2023. Purchase obligations include current amounts committed for the purchase of goods and services under legally enforceable contracts or purchase orders, and do not represent our entire anticipated purchases in the future.
We expect future payments related to our purchase obligations to be $30.6 billion, of which $20.1 billion is payable in 2024. Purchase obligations include current amounts committed for the purchase of goods and services under legally enforceable contracts or purchase orders, and do not represent our entire anticipated purchases in the future.
Research and Development (dollars in millions) 2022 2021 2020 Company-funded $ 2,711 $ 2,732 $ 2,582 Percentage of net sales 4.0 % 4.2 % 4.6 % Customer-funded (1) $ 4,376 $ 4,485 $ 4,111 Percentage of net sales 6.5 % 7.0 % 7.3 % (1) Included in Cost of sales in our Consolidated Statement of Operations.
Research and Development (dollars in millions) 2023 2022 2021 Company-funded $ 2,805 $ 2,711 $ 2,732 Percentage of net sales 4.1 % 4.0 % 4.2 % Customer-funded (1) $ 4,456 $ 4,376 $ 4,485 Percentage of net sales 6.5 % 6.5 % 7.0 % (1) Included in Cost of sales in our Consolidated Statement of Operations.
FAS/CAS operating adjustment The segment results of RIS and RMD include pension and PRB expense as determined under U.S. government Cost Accounting Standards (CAS), which we generally recover through the pricing of our products and services to the U.S. government. The difference between our CAS expense and the Financial Accounting Standards (FAS) service cost attributable to these segments under U.S.
FAS/CAS operating adjustment The segment results of Raytheon include pension and PRB expense as determined under U.S. government CAS, which we generally recover through the pricing of our products and services to the U.S. government. The difference between our CAS expense and the FAS service cost attributable to these segments under U.S. GAAP is the FAS/CAS operating adjustment.
Receipts from customer financing assets were $179 million, $389 million and $368 million in 2022, 2021 and 2020, respectively. The decrease in receipts in 2022 compared to 2021 was primarily driven by the absence of the prior year sale and leaseback transaction.
Receipts from customer financing assets were $212 million, $179 million, and $389 million in 2023, 2022, and 2021, respectively. The decrease in receipts in 2022 compared to 2021 was primarily driven by the absence of the 2021 sale and leaseback transaction.
The commercial paper notes have original maturities of not more than 364 days from the date of issuance. As of December 31, 2022, our maximum commercial paper borrowing limit was $5.0 billion as the commercial paper is backed by our $5.0 billion revolving credit agreement.
The commercial paper notes have original maturities of not more than 364 days from the date of issuance. As of December 31, 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 no commercial paper borrowings outstanding at December 31, 2023.
Interest Expense, Net (dollars in millions) 2022 2021 2020 Interest expense $ 1,300 $ 1,330 $ 1,430 Interest income (70) (36) (42) Other non-operating expense (income) (1) 46 28 (22) Interest expense, net $ 1,276 $ 1,322 $ 1,366 Total average interest expense rate - average outstanding borrowings during the year: 4.0 % 4.1 % 4.0 % Total average interest expense rate - outstanding borrowings as of December 31: 4.0 % 4.0 % 4.2 % (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.
Interest Expense, Net (dollars in millions) 2023 2022 2021 Interest expense $ 1,653 $ 1,300 $ 1,330 Interest income (100) (70) (36) Other non-operating expense (income) (1) (48) 46 28 Interest expense, net $ 1,505 $ 1,276 $ 1,322 Total average interest expense rate - average outstanding borrowings during the year: 4.3 % 4.0 % 4.1 % Total average interest expense rate - outstanding borrowings as of December 31: 4.6 % 4.0 % 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 and non-operating dividend income.
Our sales to major customers were as follows: % of Total Net Sales (dollars in millions) 2022 2021 2020 2022 2021 2020 Sales to the U.S. government (1) $ 30,317 $ 31,177 $ 25,962 45 % 48 % 46 % Foreign military sales through the U.S. government 5,042 5,546 4,585 8 % 9 % 8 % Foreign government direct commercial sales 4,327 4,993 3,974 6 % 8 % 7 % Commercial aerospace and other commercial sales 27,388 22,672 22,066 41 % 35 % 39 % Total net sales $ 67,074 $ 64,388 $ 56,587 100 % 100 % 100 % (1) Excludes foreign military sales through the U.S. government.
Our sales to major customers were as follows: % of Total Net Sales (dollars in millions) 2023 2022 2021 2023 2022 2021 Sales to the U.S. government (1) $ 31,628 $ 30,317 $ 31,177 46 % 45 % 48 % Foreign military sales through the U.S. government 4,974 5,042 5,546 7 % 8 % 9 % Foreign government direct commercial sales 4,249 4,327 4,993 6 % 6 % 8 % Commercial aerospace and other commercial sales (2) 28,069 27,388 22,672 41 % 41 % 35 % Total net sales $ 68,920 $ 67,074 $ 64,388 100 % 100 % 100 % (1) Excludes foreign military sales through the U.S. government.
Other Income, Net (dollars in millions) 2022 2021 2020 Other income, net $ 120 $ 423 $ 885 Other income, net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, and other ongoing and nonrecurring items.
Other Income, Net (dollars in millions) 2023 2022 2021 Other income, net $ 86 $ 120 $ 423 Other income, net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, and other ongoing and non-recurring items.
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 $47 billion, $40 billion and $31 billion for 2022, 2021 and 2020 respectively.
Our defense operations consist primarily of our Raytheon business and operations in the defense businesses within our Collins and Pratt & Whitney segments. Defense bookings were approximately $51 billion, $47 billion, and $40 billion for 2023, 2022, and 2021 respectively.
Total backlog was $175 billion and $156 billion as of December 31, 2022 and 2021, respectively.
Total backlog was $196 billion and $175 billion as of December 31, 2023 and 2022, 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 $1.6 billion in 2022.
A provision enacted in the Tax Cuts and Jobs Act of 2017 related to the capitalization of research and experimental expenditures for tax purposes became effective on January 1, 2022. As such, we made incremental income tax payments of $1.6 billion in 52 Table of Contents 2022.
Acquisition accounting adjustments Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment. These adjustments are not considered part of management’s evaluation of segment results.
Acquisition accounting adjustments Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant, and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment, if applicable.
It is possible that future changes in such circumstances or in the inputs and assumptions used in estimating the fair value of our reporting units, could require the Company to record a non-cash impairment charge. In 2020, we recognized goodwill impairments of $3.2 billion related to two Collins reporting units.
It is possible that future changes in such circumstances, or in the inputs and assumptions used in estimating the fair value of our reporting units, could require the Company to record a non-cash impairment charge.
GAAP amounts is provided in the table above. 2022 Compared with 2021 The organic sales increase of $2.4 billion in 2022 compared to 2021 primarily relates to higher commercial aerospace aftermarket sales of $1.7 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of $1.0 billion, both principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization and narrow-body commercial OEM volume growth.
Restructuring actions relate to ongoing cost reduction efforts driven by various workforce reductions. 2022 Compared with 2021 The organic sales increase of $2.1 billion in 2022 compared to 2021 primarily relates to higher commercial aerospace aftermarket sales of $1.7 billion, including increases across all aftermarket sales channels, and higher commercial aerospace OEM sales of $1.0 billion, both principally driven by the recovery of commercial air traffic which has resulted in an increase in flight hours, aircraft fleet utilization, and narrow-body commercial OEM volume growth.
(dollars in millions) 2022 2021 2020 Total net sales $ 67,074 $ 64,388 $ 56,587 Operating profit (loss) 5,414 4,958 (1,889) Operating profit (loss) margins 8.1 % 7.7 % (3.3) % Operating cash flow from continuing operations $ 7,168 $ 7,142 $ 4,334 In order to better assess the underlying performance of our business, we also focus on the change in organic net sales on both a consolidated basis and business segment basis, and the change in organic operating profit (loss) on a business segment basis, which allows for better year-over-year comparability.
(dollars in millions) 2023 2022 2021 Total net sales $ 68,920 $ 67,074 $ 64,388 Operating profit 3,561 5,504 5,136 Operating profit margins 5.2 % 8.2 % 8.0 % Operating cash flow from continuing operations $ 7,883 $ 7,168 $ 7,142 In order to better assess the underlying performance of our business, we also focus on the change in organic net sales on both a consolidated basis and business segment basis, and the change in organic operating profit on a business segment basis, which allows for better year-over-year comparability.
Backlog generally increases with bookings and generally decreases as sales are recognized on these bookings and is affected by changes in foreign exchange rates, as well as contract cancellations and terminations as discussed further below.
Backlog generally increases with bookings and/or orders and 43 Table of Contents generally decreases as sales are recognized on these bookings and is affected by changes in foreign exchange rates, as well as contract cancellations and terminations, and cost underruns on cost-type contracts as discussed further below.
The decrease in operating profit of $0.5 billion and the related decrease in operating profit margins in 2022 compared to 2021 were primarily due to a change in mix and other performance of $0.3 billion and a net unfavorable change in EAC adjustments of $0.2 billion.
The organic operating profit decrease of $0.5 billion in 2022 compared to 2021 was primarily due to an unfavorable change in mix and other performance of $0.3 billion, due to unfavorable program mix, and an unfavorable net change in EAC adjustments of $0.3 billion.
A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above. Net sales increased $3.7 billion organically in 2022 compared to 2021 primarily due to higher organic sales of $2.5 billion at Pratt & Whitney and $2.4 billion at Collins, partially offset by lower organic sales of $0.6 billion at RMD.
A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above. Net sales increased $7.3 billion organically in 2023 compared to 2022, primarily due to higher organic sales of $3.2 billion at Collins, $3.1 billion at Pratt & Whitney, and $1.3 billion at Raytheon.
Net Income (Loss) from Continuing Operations Attributable to Common Shareowners (dollars in millions, except per share amounts) 2022 2021 2020 Net income (loss) from continuing operations attributable to common shareowners $ 5,216 $ 3,897 $ (3,109) Diluted earnings (loss) per share from continuing operations $ 3.51 $ 2.58 $ (2.29) Net income from continuing operations attributable to common shareowners for 2022 includes the following: • acquisition accounting adjustments of $1.5 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.99; • impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of $210 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.14; • combined charges associated with disposition of businesses at Collins and RMD of $102 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.07; and • restructuring charges of $91 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.06.
Net income from continuing operations attributable to common shareowners for 2022 includes the following: • acquisition accounting adjustments of $1.5 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.99; • impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of $210 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.14; • combined charges associated with disposition of businesses at Collins and Raytheon of $102 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.07; and • restructuring charges of $91 million, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.06.
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 research and development in 2022 was relatively consistent with 2021.
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.
Business Environment 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 and 30 Table of Contents 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.
Other Matters Global economic and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, geopolitical conflicts and strained intercountry relations, U.S. and non U.S. tax law changes, foreign currency exchange rates, energy costs and supply, levels of air travel, the financial condition of commercial airlines, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+3 added−0 removed5 unchanged
Biggest changeThe majority of this hedging activity occurs at P&WC and Collins, and hedging activity also occurs to a lesser extent at the remainder of Pratt & Whitney. At P&WC and Collins, firm and forecasted sales for both original equipment and spare parts are hedged at varying amounts for up to 49 months on the U.S.
Biggest changeAt P&WC and Collins Aerospace, firm and forecasted sales for both original equipment and spare parts are hedged at varying amounts on the U.S. Dollar sales exposure as represented by the excess of U.S. Dollar sales over U.S. Dollar denominated purchases.
While the objective of the hedging program is to minimize the foreign currency exchange impact on operating results, there are typically variances between the hedging gains or losses and the translational impact due to the length of hedging contracts, changes in the sales profile, volatility in the exchange rates and other such operational considerations. Interest Rate Risk.
While the objective of the hedging program is to minimize the foreign curren cy exchange impact on operating results, there are typically variances between the hedging gains or losses and the translational impact due to the length of hedging contracts, changes in the sales profile, volatility in the exchange rates and other such operational considerations. Interest Rate Risk.
We actively manage foreign currency exposures that are associated with commi tted foreign currency purchases and sales, and other assets and liabilities created in the normal course of business at the operating unit level. More than insignificant exposures that cannot be naturally offset within an operating unit are hedged with foreign currency derivatives.
We actively manage foreign currency exposures that are 59 Table of Contents associated with commi tted foreign currency purchases and sales, and other assets and liabilities created in the normal course of business at the operating unit level. More than insignificant exposures that cannot be naturally offset within an operating unit are hedged with foreign currency derivatives.
We believe these foreign currency forward exchange contracts and the offsetting underlying commitments, when taken together, do not create material market risk. Within our aerospace business, our sales are typically denominated in U.S. Dollars. However, for our non-U.S. based entities, such as Pratt & Whitney Canada (P&WC), a substantial portion of their costs are incurred in local currencies.
We believe these foreign currency forward exchange contracts and the offsetting underlying commitments, when taken together, do not create material market risk. Our sales are typically denominated in U.S. Dollars. However, for our non-U.S. based entities, such as Pratt & Whitney Canada Corp. (P&WC), a substantial portion of their costs are incurred in local currencies.
Currently, we do not hold any derivative contracts that hedge our interest exposures, but may consider such strategies in the future. 58 Table of Contents
Currently, we do not hold any derivative contracts that hedge our interest exposures, but may consider such strategies in the future. 60 Table of Contents
A 10% unfavorable exchange rate movement in our portfolio of foreign currency contracts would have resulted in an increase in unrealized losses of $0.9 billion and $0.6 billion at December 31, 2022 and 2021, respectively. Such losses or gains would be offset by corresponding gains or losses in the remeasurement of the underlying transactions being hedged.
A 10% unfavorable exchange rate movement in our portfolio of foreign currency contracts would have resulted in an increase in unrealized losses of $1.0 billion and $0.9 billion at December 31, 2023 and 2022, respectively. Such losses or gains would be offset by corresponding gains or losses in the remeasurement of the underlying transactions being hedged.
Foreign exchange exposures arising from intercompany loan and deposit transactions are also hedged regularly. The aggregate notional amount of our outstanding foreign currency hedges was $11.2 billion and $8.5 billion at December 31, 2022 and 2021, respectively . Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
Foreign exchange exposures arising from intercompany loan and deposit transactions are also hedged regularly. The aggregate notional amount of our outstanding foreign currency hedges was $15.8 billion and $11.2 billion at December 31, 2023 and 2022, respectively . Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
Refer to “Note 1: Basis of Presentation and Summary of Accounting Principles,” “Note 10: Borrowings and Lines of Credit” and “Note 14: Financial Instruments” within Item 8 of this Form 10-K for additional discussion of foreign currency exchange, interest rates and financial instruments. Foreign Currency Exchange Rate Risk.
Refer to “Note 1: Basis of Presentation and Summary of Accounting Principles,” “Note 9: Borrowings and Lines of Credit,” and “Note 13: Financial Instruments” within Item 8 of this Form 10-K for additional discussion of foreign currency exchange, interest rates, and financial instruments. Foreign Currency Exchange Rate Risk.
We have financial instruments that are subject to interest rate risk, principally fixed-rate debt obligations. A 100 basis points unfavorable interest rate movement would have had an approximate $3 billion and $4 billion i mpact on the fair value of our fixed-rate debt at December 31, 2022 and 2021.
We have financial instruments that are subject to interest rate risk, principally fixed-rate debt obligations. A 100 basis point unfavorable interest rate movement would have had an approximate $3 billion i mpact on the fair value of our fixed-rate debt at both December 31, 2023 and 2022.
Dollar sales exposure as represented by the excess of U.S. Dollar sales over U.S. Dollar denominated purchases. Hedging gains and losses resulting from movements in foreign currency exchange rates are partially offset by the foreign currency translation impacts that are generated on the translation of local currency operating results into U.S. Dollars for reporting purposes.
Hedging gains and losses resulting from movements in foreign currency exchange rates are partially offset by the foreign currency translation impacts that are generated on the translation of local currency operating results into U.S. Dollars for reporting purposes.
The investors in our fixed-rate debt obligations generally do not have the right to demand we pay off these obligations prior to maturity. Therefore, we believe our exposure to interest rate risk on our fixed-rate debt is not material. From time to time, we may hedge to floating rates using interest rate swaps.
The investors in our fixed-rate debt obligations generally do not have the right to demand we pay off these obligations prior to maturity. Therefore, we believe our exposure to interest rate risk on our fixed-rate debt is not material. We also have variable-rate debt, including $4 billion of term loans outstanding, which is affected by changes in market interest rates.
Added
At Raytheon, portions of the cost to deliver a program may be denominated in a currency other than the currency of sale, and forecasts of such costs are frequently hedged to reduce foreign exchange exposures that can impact the cost of delivery of such programs.
Added
Where sales of a Raytheon program are denominated in a currency other than the functional currency of the contracting affiliate, forecasted sales for that program may be hedged to minimize the resulting foreign exchange exposure for that affiliate.
Added
A 100 basis point unfavorable interest rate movement on variable debt would not be expected to have a material effect on our operations or cash flows. From time to time, we may hedge to floating rates using interest rate swaps.

Other RTX 10-K year-over-year comparisons