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What changed in RTX Corporation's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RTX Corporation's 2023 and 2024 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 2024 report.

+588 added−508 removedSource: 10-K (2025-02-03) vs 10-K (2024-02-05)

Top changes in RTX Corporation's 2024 10-K

588 paragraphs added · 508 removed · 418 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

64 edited+36 added−20 removed38 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, 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.
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, and including changes related to financial market conditions, 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, levels of consumer and business confidence, the imposition of tariffs, and geopolitical risks, including, without limitation, in the Middle East and Ukraine; • 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, the mix of our contracts and programs, and our inability to pass some or all of our costs on fixed price contracts to the customer, and risks related to our dependence on U.S. government approvals for international contracts; • challenges in the development, certification, 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 both domestically and abroad; • risks relating to RTX’s reliance on U.S. and non-U.S. suppliers and commodity markets, including the effect of sanctions, tariffs, delays, and disruptions in the delivery of materials and services to RTX or its suppliers and cost increases; • risks relating to RTX’s international operations from, among other things, changes in trade policies and implementation of sanctions, foreign currency fluctuations, economic conditions, political factors, sales methods, U.S. or local government regulations, and our dependence on U.S. government approvals for international contracts; • the condition of the aerospace industry; 11 Table of Contents • potential changes in U.S. government policy positions, including changes in DoD policies or priorities; • the ability of RTX to attract, train, qualify, 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 (including the pending disposition of Collins' actuation and flight control business), 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, obtaining regulatory approvals for new technologies and products, and export and import requirements such as ITAR and EAR, anti-bribery and anticorruption requirements, such as the Foreign Corrupt Practices Act (FCPA), 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 and the potential for suspension or debarment of U.S. government contracting or export privileges as a result thereof; • risks related to the Deferred Prosecution Agreements, SEC Administrative Order, the Consent Agreement; and the related investigations by the SEC and the DOJ; • 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, 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 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; • changes in production volumes of one or more of our significant customers as a result of business, labor, or other challenges, and the resulting effect on its or their demand for our products and services; • risks relating to an RTX product safety failure, quality issue, or other failure affecting RTX’s or its customers’ or suppliers’ products or systems; • risks relating to cybersecurity, including cyber-attacks on RTX’s IT infrastructure, products, suppliers, customers and partners, and cybersecurity-related regulations; • risks related to insufficient indemnity or insurance coverage; • risks related to artificial intelligence; • 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 such facilities, environmental compliance and remediation costs have historically been primarily the responsibility of the U.S. government, and we have relied upon the U.S. government funding to pay such costs.
At such facilities, environmental compliance and remediation costs have historically been primarily the responsibility of the U.S. government, and we have relied upon U.S. government funding to pay such costs.
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.
In addition, Raytheon provides advanced systems and products that span layered land and integrated air and missile defense, including the 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.
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.
Department of Defense (DoD), including the U.S. Navy, U.S. Army, Missile Defense Agency, 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.
Our commercial aerospace products are subject to regulations by the FAA, foreign aviation administration authorities, and international regulatory bodies, including on production and quality systems, airworthiness and installation approvals, repair procedures, and continuing operational safety. In addition, commercial aerospace regulations and regulator approaches differ across jurisdictions and changes in such regulations and implementing legislation can impact our operations. Environmental Regulation.
Our commercial aerospace products are subject to regulations by the FAA, foreign aviation administration authorities, and international regulatory bodies, including on production and quality systems, airworthiness and installation approvals, repair procedures, and continuing operational safety. In addition, commercial aerospace regulations and regulator approaches differ across jurisdictions and changes in such regulations and implementing legislation can impact our operations.
Changes in environmental and climate-related laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, and mandatory disclosure obligations 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-related laws or regulations, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, global chemical regulations, and mandatory disclosure obligations 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.
As a result, we invest substantial amounts in research and development (R&D) activities using our own funds and under contractual arrangements with our customers, to enhance existing products and services and develop future technologies to meet our customers’ changing needs and requirements, as well as to address new business opportunities.
As a result, we invest substantial amounts in research and development activities using our own funds and under contractual arrangements with our customers, to enhance existing products and services and develop future technologies to meet our customers’ changing needs and requirements, as well as to address new business opportunities.
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).
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).
Our businesses compete on a variety of factors such as price, delivery schedule, past performance, reliability, customer service, product development, innovation, and technology. Many of our competitors have substantial financial resources and significant technological capabilities.
Our businesses compete on a variety of factors such as price, delivery schedule, past performance, reliability, customer service, innovation, and technology. Many of our competitors have substantial financial resources and significant technological capabilities.
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.
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.
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.
See “Note 17: 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.
Cautionary Note Concerning Factors That May Affect Future Results This Form 10-K contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public.
Cautionary Note Concerning Factors That May Affect Future Results and Risk Factor Summary This Form 10-K contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public.
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.
We regularly pursue cost 8 Table of Contents 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, capitalizing on 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.
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.
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 U.S. and foreign businesses that obtain regulatory agency approval to manufacture products and spare parts.
“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.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in “Cautionary Note Concerning Factors That May Affect Future Results and Risk Factor Summary,” 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.
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.
The GTF Advantage configuration currently under certification testing is expected to extend the benefits of the current GTF engine, increasing takeoff thrust by 4 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.
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.
We continuously monitor the hiring, retention, and management of our employees by business and function with a focus to attract, develop, engage, advance, and 7 Table of Contents retain the best talent in the industry. We aim to identify and hire quality external talent with skills matched to our Company’s business needs.
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.
Collins Aerospace is a leading global provider of technologically advanced aerospace and defense products. Collins’ solutions include aftermarket services for civil and military aircraft manufacturers, commercial airlines, and regional, business, and general aviation, as well as for defense and commercial space operations.
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 manufacture and service our products in approximately 230 manufacturing, production, or overhaul facilities in approximately 30 countries, including the U.S. Intellectual Property We maintain a robust portfolio of patents, trademarks, copyrights, trade secrets, licenses, and franchises related to our businesses.
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.
Total backlog was $218 billion and $196 billion as of December 31, 2024 and 2023, respectively. Of the total RPO as of December 31, 2024, we expect approximately 25% will be recognized as revenue over the next 12 months. Competition All of our businesses are subject to significant competition.
Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the Securities and Exchange Commission (SEC) . 12 Table of Contents
Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC . 13 Table of Contents
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.
In addition, our defense business in particular requires qualified personnel with security clearances due to our classified programs. Macroeconomic, industry, and labor market conditions continue to affect the environment for hiring and retaining employees with relevant qualifications and experience.
We have arranged second and third supply source alternatives and have increased our materials and parts inventory.
We have arranged second and third supply source alternatives in some cases and have increased our materials and parts inventory.
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.
Our U.S. government sales were as follows: (dollars in millions) 2024 2023 2022 Sales to the U.S. government (1) $ 32,246 $ 31,628 $ 30,317 Sales to the U.S. government as a percentage of total net sales (1) (2) 40 % 46 % 45 % (1) Excludes foreign military sales through the U.S. government.
“Risk Factors” and Item 3. “Legal Proceedings,” of this Form 10-K.
“Risk 12 Table of Contents Factors” and Item 3. “Legal Proceedings,” of this Form 10-K.
Our operations are subject to and affected by environmental regulation by federal, state, and local authorities in the U.S. and regulatory authorities with jurisdiction over our international operations, including with respect to the generation, treatment, storage, disposal, and remediation of hazardous substances and wastes.
Our operations are subject to and affected by environmental regulation by federal, state, and local authorities in the U.S. and regulatory authorities with jurisdiction over our international operations, including with respect to chemical substances in our products, manufacturing processes, and the operation of our facilities, as well as the generation, treatment, storage, disposal, and remediation of hazardous substances and wastes.
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.
Our sales to international customers, based on customer end use location, where known, were as follows: (dollars in millions) 2024 2023 2022 Total international sales $ 34,651 $ 29,440 $ 25,884 Total international sales as a percentage of total net sales (1) 43 % 43 % 39 % (1) 2023 total net sales includes the reduction in sales from the Powder Metal Matter. 6 Table of Contents Backlog.
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.
We have implemented certain actions and programs which have mitigated some of the impacts, but we anticipate that supply chain disruptions will continue. We work with our suppliers and subcontractors to assess and address the causes of performance failures and delays, including by providing suppliers with raw materials and technical support.
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.
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 three principal business segments: Collins Aerospace (Collins), Pratt & Whitney, and Raytheon, with each segment comprised of groups of similar operations.
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.
Information on our website, including our ESG 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.
In 2023, we continued to experience supply chain disruptions that impacted our ability to procure raw materials, microelectronics, and certain commodities, and resulted in delays and increased costs. These disruptions were driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.
In recent years, we have experienced supply chain disruptions that have impacted our ability to procure raw materials, microelectronics, and certain commodities, resulting in delays and increased costs. These disruptions have been driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.
We have industry-leading health and safety programs to help maintain a safe work environment for all employees and mitigate workplace incidents, risks, and hazards. We review and monitor our performance and encourage employee input to identify opportunities to reduce incidents. Moreover, we have industry-leading ethics and compliance programs to help mitigate associated employee risks.
These surveys cover various topics related to employee engagement and culture. We have industry-leading health and safety programs to help maintain a safe work environment for all employees and mitigate workplace incidents, risks, and hazards. We review and monitor our performance and encourage employee input to identify opportunities to reduce incidents.
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.
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, and helicopters. Pratt & Whitney also produces, sells, and services military and commercial auxiliary power units. Pratt & Whitney provides fleet management services and aftermarket maintenance, repair, and overhaul services in all of these segments.
Customer selections of aircraft engines, components, and systems can also have a significant impact on future sales of parts and services. In addition, the U.S. government’s and other governments’ policies of purchasing parts from suppliers other than the original equipment manufacturer affect military spare parts sales.
Customer selections of aircraft engines, components, and systems can also have a significant impact on future sales of parts and services. In addition, customers (including the U.S. government and other governments) may purchase parts from suppliers other than the original equipment manufacturer, which affects spare parts sales.
High inflation increased material and component prices, labor rates and supplier costs, and put pressure on our margins. Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, are contributing to these supply chain issues.
The high inflationary environment has increased material and component prices, labor rates and supplier costs, which has negatively impacted our costs. Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, are continuing to contribute to these supply chain issues.
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.
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, the Powder Metal Matter and related matters and activities, including without limitation other engine models that may be impacted, the pending disposition of Collins’ actuation and flight control business, targets and commitments (including for share repurchases or otherwise), and other statements which are not solely historical facts.
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.
Workforce Demographics. As of December 31, 2024, our global employee population consisted of a total of approximately 186,000 employees, including approximately 57,000 engineering professionals and approximately 34,000 employees represented by labor unions and other employee representative bodies. Our employees were located in 52 countries, with 68% of our employees located in the U.S. We have published our U.S.
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.
Collins sells aerospace and defense products and services to aircraft manufacturers, airlines, airports and other aircraft operators, the U.S. and foreign governments, defense contractors, maintenance, repair, and overhaul providers, and independent distributors around the world.
In 2023, Raytheon achieved key advancements in, or received contract awards for, the following programs: Naval Strike Missile (NSM), the StormBreaker smart weapon, AIM-9X and the AMRAAM program, and certain advanced technologies, including classified programs and an advanced development program.
In 2024, Raytheon achieved key advancements in, or received contract awards for, the following programs: Global Patriot program; LTAMDS program; SM-3 program; AIM-9X and the AMRAAM programs; and certain advanced technologies, including classified programs and an advanced development program.
If we were convicted of a violation of the federal Clean Air Act or Clean Water Act, the facility or facilities involved in the violation could be deemed ineligible to be used in performing any U.S. government contract we are awarded until the Environmental Protection Agency thereafter certifies that the condition giving rise to the violation has been corrected.
If we were convicted of a violation of the federal Clean Air Act or Clean Water Act, the facility or facilities involved in the violation could be deemed ineligible to be used in performing any U.S. government contract we are awarded until the Environmental Protection Agency (EPA) thereafter certifies that the condition giving rise to the violation has been corrected. 10 Table of Contents In addition, we could be affected by future foreign or domestic laws or regulations imposed in response to concerns over climate change, and we monitor developments in environmental and climate-related laws and regulations and their potential impact to our business and financial condition.
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.
Collins’ largest commercial customers are Boeing and Airbus with combined sales, prior to discounts and incentives, of 16%, 19%, and 18% of total Collins segment sales in 2024, 2023, and 2022, respectively.
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.
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.
Major new awards in 2023 include a NATO contract to provide Guidance Enhanced Missiles (GEM-T) for the NATO Support and Procurement Agency (NSPA), AMRAAM for the U.S. Air Force and Navy and international customers; a contract to provide Patriot Air Defense systems to Switzerland, a contract to provide StormBreaker for the U.S.
Navy and international customers; a contract to provide Guidance Enhanced Missiles (GEM-T) tactical ballistic missiles for NATO Support and Procurement Agency (NSPA); a contract to provide AMRAAM missiles to the U.S. Navy, 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 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.
Moreover, we have industry-leading ethics and compliance programs to help mitigate associated employee risks. 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.
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.
See “Note 20: Segment Financial Data” within Item 8 of this Form 10-K for additional information. U.S. Government Sales.
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.
We deal with numerous U.S. government agencies and entities, including but not limited to all of the branches of the DoD and the FAA. Similar government authorities exist in all of the countries in which we do business. U.S. Government Contracts. As previously discussed, the U.S. government is our largest customer, representing a substantial majority of our total defense sales.
We serve commercial and government customers in both the original equipment and aftermarket parts and services segments of the aerospace industry. Our defense business serves both domestic and international customers as a prime contractor or subcontractor on a broad portfolio of defense and related programs for military and government customers.
Our defense business serves both domestic and international customers as a prime contractor or subcontractor on a broad portfolio of defense and related programs for military and government customers. RTX Corporation was incorporated in Delaware in 1934.
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.
U.S. government contracts are subject to termination by the government, either for convenience or for default in the event of our failure to perform under the applicable contract. 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 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 regularly conduct talent reviews and develop succession plans to ensure that we continue to cultivate the leadership pipeline of talent needed to execute our business strategy. 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.
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.
In addition, Collins continued its significant product development activities, including for major systems on the Airbus A321XLR, the Boeing 777X and 737 MAX 10, and systems in support of the Boeing T-7A trainer and the Bell V 280 (FLRAA).
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.
While competition for talent has softened, we continue to experience challenges hiring highly qualified personnel for some of our most critical roles and in specific locations. 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.
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.
Pratt & Whitney sells products and services principally to aircraft manufacturers, airlines and other aircraft operators, aircraft leasing companies, and the U.S. and foreign governments. Pratt & Whitney’s largest commercial customer by sales is Airbus, with sales, prior to discounts and incentives, of 31%, 48%, and 33% of total Pratt & Whitney segment sales in 2024, 2023, and 2022, respectively.
Pratt & Whitney also secured substantial awards for sustainment of the F117, F119, and F100 engine fleets. 5 Table of Contents Raytheon is a leading provider of defensive and offensive threat detection, tracking and mitigation capabilities for U.S. and foreign government and commercial customers.
Pratt & Whitney also continues to enhance its programs through performance improvement measures and product base expansion, utilizing similar collaboration arrangements. 5 Table of Contents Raytheon is a leading provider of defensive and offensive threat detection, tracking and mitigation capabilities for U.S. and foreign government and commercial customers.
The development of new engines and improvements to current production engines present important growth opportunities for Pratt & Whitney. In view of the risks and costs associated with developing new engines, Pratt & Whitney has entered into collaboration arrangements in which revenues, costs, and risks are shared with third parties.
In view of the risks and costs associated with developing new engines, Pratt & Whitney has entered into collaboration arrangements in which revenues, costs, and risks are shared with third parties. At December 31, 2024, the interests of third-party collaboration participants in Pratt & Whitney-directed jet engine programs ranged, in the aggregate per program, from 13% to 49%.
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.
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.
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.
In 2024, RTX announced it had completed the preliminary design review of the hybrid-electric GTF engine demonstrator for the Clean Aviation SWITCH project. Pratt & Whitney produces and sustains the F135 engine for the U.S. government’s F-35 Joint Program Office to exclusively power the single-engine F-35 Lightning II aircraft (commonly known as the Joint Strike Fighter) produced by Lockheed Martin.
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.
Pratt & Whitney produces and services the PW1000G Geared Turbofan (GTF) engine family. GTF engine models have demonstrated a significant reduction in fuel burn and noise levels and lower environmental emissions compared to prior-generation engines. The GTF aftermarket network expanded to 18 facilities worldwide, increasing PW1100G-JM shop visit output by approximately 30% year over year in 2024.
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.
F135 engines are also used on all F-35 aircraft purchased by Joint Strike Fighter partner countries and other countries through foreign military sales arrangements. 2024 marked the 50th anniversary since the F-16 Fighting Falcon’s first flight, which was powered by the Pratt & Whitney F100 engine.
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.
In addition, the competitive landscape in the defense industry continues to evolve with trends such as the continued increase in commercial competitors, new entrants with different technology approaches and business models, governmental bid evaluation processes requesting expanded intellectual property disclosures and rights sharing that may risk the loss of competitively sensitive information, and increased government, particularly foreign government, sponsorship of competitors on defense development programs.
Air Force and Navy, a contract to provide Next Generation Jammer Mid-Band (NGJ-MB) for the U.S. Navy and the government of Australia, a contract for the SPY-6 Hardware Production and Sustainment base for the U.S. Navy, a contract to provide Excalibur guided munitions for the U.S.
Air Force and international customers; a contract to provide Patriot Air Defense systems, including GEM-T missiles, to Romania; a contract to provide AIM-9X Sidewinder short-range air-to-air missiles for the U.S. Navy, U.S. Air Force, and international customers; a contract to produce AN/SPY-6(V) radars for the U.S. Navy; a contract to provide Next Generation Jammer Mid-Band (NGJ-MB) for the U.S.
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.
Approximately 19% of our workforce across 31 of the countries in which we operate are members of one or more of our nine global employee resource groups (ERGs). We also support science, technology, engineering, and mathematics initiatives to inspire the workforce of the next generation and build talent pipelines. Talent Acquisition, Development, and Retention; Employee Health and Safety.
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.
Equal Employment Opportunity EEO-1 report data as part of our Environmental Social and Governance (ESG) Report. We strive to build high-performing teams. We believe a work environment where all individuals are seen, respected, valued, and protected enables them to focus on developing the most innovative solutions to our industry’s greatest challenges.
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).
The GTF family now powers more than 2,200 aircraft for 85 operators across three aircraft platforms: Airbus A320neo family, Airbus A220, and Embraer E-Jets E2. In 2024, Pratt & Whitney received FAA certification for the GTF engine that will power the Airbus A321XLR aircraft.
The Hybrid Electric Flight Demonstrator program, targeting a 30% fuel efficiency improvement and CO2 emissions reduction compared to existing advanced regional turboprops, successfully completed a rated power test of the demonstrator's 1 megawatt electric motor, developed by Collins. Textron Aviation announced that the PW545D engine was selected to power the new Cessna Citation Ascend business jet.
Pratt & Whitney Canada continues to progress testing of the propulsion system for the RTX Hybrid Electric Flight Demonstrator program, which targets a 30% fuel efficiency improvement and CO2 emissions reduction compared to existing advanced regional turboprops.
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RTX Corporation, formerly known as Raytheon Technologies, was incorporated in Delaware in 1934.
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References to “Raytheon Company” mean Raytheon Company, which became a wholly owned subsidiary of RTX on April 3, 2020 through an all-stock merger transaction between United Technologies Corporation and Raytheon Company (the surviving company of which is RTX Corporation). We serve commercial and government customers in both the original equipment and aftermarket parts and services segments of the aerospace industry.
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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.
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Aftermarket services include spare parts, overhaul and repair, engineering and technical support, training and fleet management solutions, asset management services, and information management services.
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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.
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In 2024, Collins was awarded expanded contract scope for the Federal Aviation Administration (FAA) air traffic control automation system to implement technical refresh updates aimed at improving the air traffic controller work environment and system security.
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Collins was selected to serve as a key supplier of Command and Control (C2) capabilities as part of the Australian Air6500 effort.
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Collins was also awarded contracts to supply spare parts for the Army Tactical Navigation System and to design, develop, and deliver systems and products for a new aircraft under the United States Air Force Survivable Airborne Operations Center program.
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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.
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Collins was also awarded $2 billion in the aggregate for new maintenance, repair and overhaul, and spares long-term contracts with several airlines.
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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.
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Collins continues to invest in sustainable technologies, such as electrical power architectures, advanced thermoplastic materials, digital trajectory optimizers, highly efficient cooling systems, and numerous other technologies that provide lower weight, drag, and carbon footprint solutions on aircraft. Collins is also investing in higher efficiency build processes, that reduce chemical and power usage and increase the use of recycling.
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Pratt & Whitney provides fleet management services and aftermarket maintenance, repair, and overhaul services in all of these segments. Pratt & Whitney sells products and services principally to aircraft manufacturers, airlines and other aircraft operators, aircraft leasing companies, and the U.S. and foreign governments.
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Collins composite structural technology supports optimization of the design of aircraft components and equipment to minimize weight, maximize energy efficiency and reduce fuel burn. Collins works closely with numerous other industry organizations and airframers to explore alternative energy solutions such as sustainable 4 Table of Contents aviation fuel, hydrogen, and hybrid electric power sources.
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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.
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Collins also continues to invest in operational capacity in strategic locations, including in the United States, India, Mexico, Singapore, and Puerto Rico. Pratt & Whitney is among the world’s leading suppliers of aircraft engines for commercial, military, business jet, and general aviation customers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis determination and corresponding fleet actions have significantly increased both the incremental number of PW1100 GTF engines that will need to be removed and the incremental number of shop visits necessary to perform the inspections as compared to estimates prior to this determination. Actual and future estimated aircraft on ground levels for the A320neo family of aircraft have therefore increased.
Biggest changeThis determination and corresponding fleet actions have resulted in, and are expected to continue to result in, an elevated level of aircraft on ground for the A320neo family of aircraft and significant incremental shop visits necessary to perform inspections on PW1100 GTF engines through the end of 2026.
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.
Our international contracts, particularly for sales of defense products and services, may include offset obligations 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.
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.
Our businesses have sold, and are expected to sell in the future, additional defense products to Taiwan from time to time in alignment with 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.
The financial impact of the powder metal issue is based on historical experience and is subject to various assumptions and judgments, 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, and outcomes of negotiations with impacted customers, and these assumptions are subject to variability.
The expected financial impact of the powder metal issue is based on historical experience and is subject to various assumptions and judgments, 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, and outcomes of negotiations with impacted customers, and these assumptions are subject to variability.
An adverse outcome of any audit or investigation could result in civil and criminal penalties and fines, which could negatively impact our results of operations, financial condition, and liquidity. In addition, if allegations of impropriety were made against us, we could suffer serious reputational harm, which could negatively affect our financial position, results of operations, and liquidity.
An adverse outcome of any audit or investigation could result in civil and criminal penalties and fines, which could negatively impact our results of operations, financial condition, and liquidity. In addition, if allegations of impropriety were made against us, we could suffer serious reputational harm, which could negatively affect our results of operations, financial position, and liquidity.
The financial impact of the powder metal issue is based on historical experience and is subject to various assumptions and judgments, 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, and outcomes of negotiations with impacted customers, and these assumptions are subject to variability.
The expected financial impact of the powder metal issue is based on historical experience and is subject to various assumptions and judgments, 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, and outcomes of negotiations with impacted customers, and these assumptions are subject to variability.
In recent years, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation, and the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions (CRs) providing only enough funds for U.S. government agencies to continue operating at prior-year levels.
In recent years, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation, and the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions providing only enough funds for U.S. government agencies to continue operating at prior-year levels.
We are also subject to laws and regulations that: (1) impose requirements for the proper management, treatment, storage, and disposal of hazardous substances and wastes; (2) restrict air and water emissions from our operations (including U.S. government-owned facilities we manage); and (3) require maintenance of a safe workplace.
We are also subject to laws and regulations that: (1) impose requirements for chemical substances and the proper management, treatment, storage, and disposal of hazardous substances and wastes; (2) restrict air and water emissions from our operations (including U.S. government-owned facilities we manage); and (3) require maintenance of a safe workplace.
The negative impacts to our company arising from the Powder Metal matter could increase if any other engine models are found to be materially impacted by this rare condition. We depend on the recruitment and retention of qualified personnel, and our failure to attract, train, and retain such personnel could seriously harm our business.
The negative impacts arising from the Powder Metal Matter could increase if any other engine models are found to be materially impacted by this rare condition. We depend on the recruitment and retention of qualified personnel, and our failure to attract, train, and retain such personnel could seriously harm our business.
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.
Any such attacks could disrupt our systems or those of third parties (including mission and safety 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.
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.
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 (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.
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.
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, political stability, and general economic conditions.
Of note, in February 2023, China announced sanctions against Raytheon Missiles & Defense (RMD) (a former RTX Corporation (RTX) business segment, which became part of Raytheon as a result of the July 1, 2023 RTX segment realignment), and previously announced it may take measures against RTX, in connection with certain foreign military sales to Taiwan.
In February 2023, China announced sanctions against Raytheon Missiles & Defense (RMD) (a former RTX Corporation (RTX) business segment, which became part of Raytheon as a result of the July 1, 2023 RTX segment realignment), and previously announced it may take measures against RTX, in connection with certain foreign military sales to Taiwan.
In some, but not all, circumstances, we may be entitled to indemnification from our customers through contractual provisions, and we may obtain limitations of liability and additional defenses for various reasons including the qualification of our products and services by the Department of Homeland Security (DHS) under the SAFETY Act provisions of the Homeland Security Act of 2002.
In some, but not all, circumstances, we may be entitled to indemnification from our customers through contractual provisions, and we may obtain limitations of liability and additional defenses for various reasons including the qualification of our products and services by the Department of Homeland Security under the SAFETY Act provisions of the Homeland Security Act of 2002.
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.
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 significant, multi-year digital transformation initiatives to improve our business, modernize operations, and reduce costs.
Our international sales and operations are also subject to risks associated with local government laws, regulations, and policies, including with respect to investments, taxation, exchange controls, capital controls, employment regulations, and repatriation of earnings. Differing legal systems, customs, and contract laws and regulations pose additional risk.
Our international sales and operations are also subject to risks associated with local government laws, regulations, and policies, including with respect to investments, taxation, exchange controls, capital controls, employment regulations, repatriation of earnings, and tariffs. Differing legal systems, customs, and contract laws and regulations pose additional risk.
Furthermore, under the Fiscal Responsibility Act of 2023, which imposes limits on discretionary spending for defense and non-defense programs in exchange for the lifting of the debt ceiling in June 2023, if Congress fails to enact all appropriation bills by April 30, 2024, then the budget caps will be reduced and corresponding automatic reductions to agency budget accounts will be enforced through sequestration.
Furthermore, under the Fiscal Responsibility Act of 2023, which imposes limits on discretionary spending for defense and non-defense programs in exchange for the lifting of the debt ceiling in June 2023, if Congress fails to enact all appropriation bills by April 30, 2025, then the budget caps will be reduced and corresponding automatic reductions to agency budget accounts will be enforced through sequestration.
OPERATIONAL RISKS Our business and financial performance may be adversely affected by cyber-attacks on information technology infrastructure and products, as well as changes in cybersecurity regulations.
OPERATIONAL RISKS Our business and financial performance may be adversely affected by cyber-attacks on information technology (IT) infrastructure and products, as well as changes in cybersecurity regulations.
We also anticipate companies continuing to enhance their competitive position against our defense businesses as a result of continued domestic and cross-border defense industry consolidation and the expansion of competitors’ capabilities throughout the supply chain through vertical integration. We are also facing heightened competition domestically and internationally from foreign and multinational firms.
We also anticipate companies continuing to enhance their competitive position against our defense businesses as a result of continued domestic and cross-border defense industry consolidation and the expansion of competitors’ capabilities throughout the supply chain through vertical integration. We are also facing increased competition domestically and internationally from foreign and multinational firms.
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.
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.
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.
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 23 Table of Contents 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.
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, public 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.
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.
Furthermore, the existing supply chain issues could be compounded by other events, such as an economic downturn; changes in trade policies, such as tariffs; 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.
If any of our production or maintenance, repair, and overhaul ramp-up efforts are delayed, if suppliers cannot timely deliver or perform to our standards, if any other engine models are found to be materially impacted by the powder metal issue, and/or if we identify or experience other issues with in-service engines in the Geared Turbofan family of engines (or other engines), whether for manufacturing reasons or otherwise, we may not meet customer requirements, which could result in material additional costs, including liquidated damages or other liabilities.
If any of our production or maintenance, repair, and overhaul ramp-up efforts are delayed, if suppliers cannot timely deliver or perform to our standards, if any other engine models are found to be materially impacted by the powder metal issue, and/or if we identify or experience other issues, including durability issues, with in-service engines in the GTF family of engines (or other engines), whether for manufacturing reasons or otherwise, we may not meet customer requirements, which could result in material additional costs, including liquidated damages or other liabilities.
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.
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, 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.
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.
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 26 Table of Contents public and private markets for debt, any of which may adversely affect our ability to fund our business requirements.
Our global business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, air travel, the financial strength of airlines and business jet operators, and government procurement.
Our global business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, air travel, the financial strength and performance of airframers, airlines and business jet operators, and government procurement.
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.
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.
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.
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 19 Table of Contents incorporated into third-party products, facilities, or infrastructure. We are also exposed to the risk of insider threat attacks.
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.
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. 14 Table of Contents 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.
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.
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.
As a result of these procurement issues, the production flow in our factories has been negatively impacted, which has, in turn, hindered our ability to perform on our commitments to customers and negatively affected our results of operations, financial condition, and liquidity. Our supply costs have increased due to the above factors.
As a result of these procurement issues, the production flow in our factories has been negatively impacted, which has, in turn, hindered our ability to perform on our commitments to customers and negatively 20 Table of Contents affected our results of operations, financial condition, and liquidity. Our supply costs have increased due to the above factors.
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.
We have been subject to regulatory investigations for alleged violations of anti-bribery and anti-corruption laws, and could be subject to such 25 Table of Contents 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.
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.
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, and geopolitical uncertainties.
These risks relate to, among other things, product safety and reliability, personal injuries, intellectual property rights, contract-related claims, government contracts, taxes, environmental matters, export control, sanctions, employment matters, securities laws, competition laws, and laws governing improper business practices. We or one of our businesses could be charged with wrongdoing as a result of such matters.
These risks relate to, among other things, product safety and reliability, personal injuries, intellectual property rights, contract-related claims, government contracts, taxes, environmental matters, the use of artificial intelligence, export control, sanctions, employment matters, securities laws, competition laws, and laws governing improper business practices. We or one of our businesses could be charged with wrongdoing as a result of such matters.
These include shifting significant cash flow from operations to debt principal and interest payments and ASR transactions costs, which will reduce funds we have available for other purposes, such as acquisitions, research and development, and other reinvestments in our businesses, and dividends and common stock repurchases.
These include shifting significant cash flow from operations to debt principal and interest payments, which will reduce funds we have available for other purposes, such as acquisitions, research and development, and other reinvestments in our businesses, and dividends and common stock repurchases.
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.
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 or death, property damage, loss of strategic capabilities, loss of intellectual property, loss of reputation, and other significant negative effects.
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.
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, and a focus on execution, all in an environment of high ethical standards.
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.
If China were to impose additional sanctions, enforce announced sanctions, or take other regulatory action against RTX, our suppliers, affiliates, or partners, it could potentially disrupt our business operations. Any impact of these or other potential sanctions, or other actions by China, is uncertain.
Identifying and qualifying second- or third- source suppliers can be difficult, time-consuming, and may result in increased costs. In 2023, global supply chain disruptions impacted our ability to procure raw materials, microelectronics, and certain commodities. These disruptions were driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.
Identifying and qualifying second- or third- source suppliers can be difficult, time-consuming, and may result in increased costs. In recent years, global supply chain disruptions have impacted our ability to procure raw materials, microelectronics, and certain commodities. These disruptions were driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.
Due to the specialized nature of our business, our future performance is highly dependent upon the continued services of our key technical personnel and executive officers, and the hiring, development, and retention of qualified technical, engineering, manufacturing, marketing, sales, and management personnel for our operations.
Due to the specialized nature of our business, our future performance is highly 21 Table of Contents dependent upon the continued services of our key technical personnel and executive officers, and the hiring, development, and retention of qualified technical, engineering, manufacturing, marketing, sales, and management personnel for our operations.
Restructuring activities include or may result in workforce reductions, global facility reductions, procurement cost reduction activities, legal entity and operational reorganizations, and other cost reduction initiatives. These strategic activities are complex and require the investment of resources including in personnel and systems.
Restructuring activities include or may result in workforce reductions, global facility reductions, procurement cost reduction 28 Table of Contents activities, legal entity and operational reorganizations, and other cost reduction initiatives. These strategic activities are complex and require the investment of resources including in personnel and systems.
Additionally, because a substantial portion of product deliveries to commercial aerospace customers are scheduled for delivery in the future, changes in economic conditions may cause customers to request that firm orders be rescheduled or canceled.
Additionally, because a substantial portion of product deliveries to commercial aerospace customers are scheduled for delivery in the future, changes in economic conditions may cause customers to request that firm 17 Table of Contents orders be rescheduled or canceled.
Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely basis or meet the needs of our customers as fully as competitive offerings.
Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely basis or meet the needs of our customers as fully as alternative investments.
Our business, operating results, financial condition, and liquidity may be adversely affected by changes in global economic conditions, international relations, and geopolitical events and actions, including inflation, credit market conditions, levels of consumer and business confidence, commodity (including energy) prices and supply, trade policies, exchange rates, changing policy positions or priorities, levels of government spending and deficits, the threat environment, political conditions, and actual or anticipated default on sovereign debt.
Our business, operating results, financial condition, and liquidity may be adversely affected by changes in global economic conditions, international relations, and geopolitical events and actions, including inflation, credit market conditions, levels of consumer and business confidence, commodity (including energy) prices and supply, trade policies (including tariffs), exchange rates, levels of government spending and deficits, the threat environment, political conditions, and actual or anticipated default on sovereign debt.
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.
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.
Our global operations may present challenges in maintaining these important aspects of our corporate culture, and a failure to maintain our corporate culture could negatively impact us. Further, we rely on our key personnel to lead with integrity and to meet our high ethical standards that promote excellent performance and cultivate diversity, equity, and inclusion.
Our global operations may present challenges in maintaining these important aspects of our corporate culture, and a failure to maintain our corporate culture could negatively impact us. Further, we rely on our key personnel to lead with integrity and to meet our high ethical standards that promote excellent performance.
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.
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 certain of our operations.
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.
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.
Notwithstanding the receipt of such tax rulings and opinions, there can be no assurance that the relevant taxing authorities will not assert that the tax treatment of the relevant Separation Transactions differs from the conclusions reached therein.
Notwithstanding the receipt of such tax rulings and opinions, there can be no assurance that the relevant taxing authorities will not assert that the tax treatment of the relevant Separation 29 Table of Contents Transactions differs from the conclusions reached therein.
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.
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.
This competition could cause our existing technologies and offerings to become obsolete or otherwise decrease demand for our offerings. In addition, the possibility exists that competitors or customers will develop aftermarket services and parts for our products that attract customers and adversely impact our return on investment on new products.
This competition could cause our existing technologies and offerings to become obsolete or otherwise decrease demand for our offerings. In addition, the possibility exists that competitors or customers will develop aftermarket services and parts for our products that attract customers and adversely impact our return on investment on original equipment manufacturer products.
Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity. In particular, as previously disclosed, Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo family of aircraft.
Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity. In particular, in 2023, Pratt & Whitney determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo family of aircraft.
Management must make assumptions and estimates regarding contract revenue and cost (such as estimates of variable consideration, including award fees and penalties), including with respect to: (1) labor productivity and availability; (2) the complexity and scope of the work to be performed; (3) the availability and cost of materials; (4) the length of time to complete the performance obligation; (5) execution by our subcontractors; (6) the availability and timing of funding from our customer; (7) overhead cost rates; and (8) current and past service cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among other variables.
Management must make assumptions and estimates regarding contract revenue and cost (such as estimates of variable consideration, including award fees and penalties), including with respect to: (1) labor productivity and availability; (2) the complexity and scope of the work to be performed; (3) the availability and cost of materials including any impact from changing costs or inflation; (4) the length of time to complete the performance obligation; (5) execution by our subcontractors; (6) the availability and timing of funding from our customer; (7) overhead cost rates; and (8) current and past maintenance cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among other variables.
“Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in this Form 10-K for a description of our share repurchase program and past share repurchases, including our ASR transactions. We face certain significant risk exposures and potential liabilities that may not be adequately covered by indemnity or insurance.
“Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in this Form 10-K for a description of our share repurchase program and past share repurchases. We face certain significant risk exposures and potential liabilities that may not be adequately covered by indemnity or insurance.
U.S. government contracts generally permit the government to terminate the contract, in whole or in part, without prior notice, at the U.S. government’s convenience or for default based on performance.
U.S. government contracts with prime contractors generally permit the government to terminate the contract, in whole or in part, without prior notice, at the U.S. government’s convenience or for default based on performance.
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.
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.
At times, our aerospace businesses also enter into firm fixed-price or cost-share development contracts with customers, which may require us to bear cost overruns related to unforeseen technical and design challenges that arise during the development and early production stages of the program.
At times, our aerospace businesses also enter into FFP or cost-share development contracts with customers, which may require us to bear cost overruns related to unforeseen technical and design challenges that arise during the development and early production stages of a program.
We expect the regulatory environment to continue to evolve, and staying apace with these regulatory changes could increase our operational and compliance expenditures and those of our suppliers, and lead to new or additional information technology and product development expenses. We also face reputational, litigation and financial risks in relation to potential required disclosures and increased risk of enforcement.
We expect the regulatory environment to continue to evolve, and these regulatory changes could increase our operational and compliance expenditures and those of our suppliers, and lead to new or additional IT and product development expenses. We also face reputational, litigation, and financial risks in relation to potential required disclosures and increased risk of enforcement.
We may also be subject to disruptions, losses, and liability resulting from various cybersecurity attacks or information technology failures, as described above.
We may also be subject to disruptions, losses, and liability resulting from various cybersecurity attacks or IT failures, as described above.
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.
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) continued financial involvement in divested businesses, such as through continued equity ownership, guarantees, retained assets or liabilities, transition services or other ongoing commercial commitments, indemnities, or other current or contingent financial or commercial commitments, following a divestiture; (5) challenges and failures in achieving strategic objectives and other expected benefits, which may result in certain liabilities to us for guarantees and other commitments; (6) 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; (7) unidentified issues not discovered in RTX’s due diligence; (8) the diversion of our attention and resources from our operations and other initiatives; (9) the potential impairment of acquired assets; (10) the performance of underlying products, capabilities, or technologies; and (11) the performance or potential loss of key employees and customers of acquired businesses.
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.
Any failure by us, our customers, or our suppliers to comply with the above-referenced laws and regulations, arising out of our voluntary disclosures or otherwise, 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.
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.
Our U.S. government contracts also require us to comply with extensive and evolving procurement laws, rules and regulations and subject us to potential U.S. government surveillance, audits, investigations, and disputes.
We may incur unexpected costs for various reasons, including technical and manufacturing challenges, schedule delays, shortages in materials, components, or labor, internal and subcontractor performance, product quality issues, inability to achieve the benefits of our cost reduction, digital transformation, manufacturing, operating, and other strategic initiatives, inflation, and changing laws or regulations, natural disasters, and public health crises.
We may incur unexpected costs for various reasons, including technical and manufacturing challenges, schedule delays, the timeliness and availability of materials, components, or labor, the inaccuracy of initial contract cost estimates, internal and subcontractor performance or product quality issues, inability to achieve the benefits of our expected cost reduction, digital transformation, manufacturing, operating, and other strategic initiatives, inflation, inability to pass on tariff costs, and changing laws or regulations, natural disasters, and public health crises.
In addition, 24 Table of Contents as previously disclosed, Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo family of aircraft.
In addition, in 2023 Pratt & Whitney determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo family of aircraft.
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.
Our ability to realize the anticipated benefits of our investments depends on a variety of factors, including the competitiveness of our offerings’ performance relative to our peers; 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; requirements to provide disclosure and company intellectual property rights for certain government procurement programs; and customer acceptance of our products and technologies.
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.
The level of orders received for the GTF family of engines, coupled with a requirement to achieve mature production levels in a very short time frame, have required significant growth in our manufacturing and supply chain capacity.
Changes in U.S. government defense spending for various reasons, including as a result of potential changes in policy or budgetary positions or priorities, could negatively impact our results of operations, financial condition, and liquidity.
Department of Defense (DoD), and a broad range of programs with other departments and agencies. Changes in U.S. government defense spending for various reasons, including as a result of potential changes in policy or budgetary positions or priorities, could negatively impact our results of operations, financial condition, and liquidity.
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.
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.
Department of Commerce, the International Traffic in Arms Regulations (ITAR) administered by the U.S. Department of State, embargoes and sanctions regulations administered by the U.S. Department of the Treasury, and import regulations administered by the U.S. Department of Homeland Security and the U.S. Department of Justice.
Department of Commerce, the International Traffic in Arms Regulations (ITAR) and Arms Export Control Act (AECA) provisions administered by the U.S. Department of State (DOS), embargoes and sanctions regulations administered by the U.S. Department of the Treasury, and import regulations administered by the U.S. Department of Homeland Security and the U.S. Department of Justice (DOJ).
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.
Cybersecurity threats are continuously evolving and may have an impact on 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 personal data or other information relating to our employees, customers, and other third parties, or to disrupt our systems or the systems of third parties.
Competition may reduce our revenues and limit our future opportunities. We operate in highly competitive industries and our competitors may have more extensive or more specialized engineering, manufacturing, marketing, and servicing capabilities than we do. Our contracts are typically awarded on a competitive basis. Our bids are based in part upon the cost to provide the products and services.
Competition may reduce our revenues and margins and limit our future opportunities. We operate in highly competitive industries and our competitors may have more extensive or more specialized engineering, manufacturing, servicing, and marketing capabilities than we do. Our contracts are typically awarded on a competitive basis.
The potential impacts to RTX are subject to change given the volatile nature of the situation. Our financial performance is dependent on the condition of the aerospace industry.
The overall impacts to RTX from this situation have been minimal; however, given the volatile nature of the situation, the potential impacts to RTX are subject to change. Our financial performance is dependent on the condition of the aerospace industry.
We have outstanding debt and other financial obligations, and we depend, in part, upon the issuance of debt to fund our business requirements. In connection with the accelerated share repurchase (ASR) transactions, we incurred $10 billion of long-term debt. The increased indebtedness of RTX in connection with the ASR transactions may have various negative impacts on our business.
We have outstanding debt and other financial obligations, and we depend, in part, upon the issuance of debt to fund our business requirements. The increased indebtedness of RTX in connection with the $10 billion accelerated share repurchase (ASR) transactions that began in October 2023 and completed at the end of September 2024 may have various negative impacts on our business.
Our final allowable incurred costs for each year are subject to audit and have from time to time resulted in disputes between us and the U.S. government, including DCMA claims to recover payments for alleged noncompliance with cost accounting standards.
Our final allowable incurred costs for each year are subject to audit and have from time to time resulted in disputes between us and the U.S. government, including DCMA claims to recover payments for alleged noncompliance with cost accounting standards. In some cases, the DOJ has conducted investigations or convened grand juries to investigate possible irregularities in our costs.
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.
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, and governmental, business, and individual actions taken in response, damaging weather or other acts of nature, physical attacks due to proximity to nation-state conflicts, cyber-attacks on IT infrastructure and products, or other events outside of our control.
Under FFP contracts, we receive a fixed price irrespective of the actual costs we incur, and we therefore carry the burden of any cost overruns. Under FPI contracts, we generally share with the U.S. government savings for cost underruns less than target costs and expenses for cost overruns exceeding target costs up to a negotiated ceiling price.
Under FPI contracts, we generally share with the U.S. government savings for cost underruns less than target costs and expenses for cost overruns exceeding target costs up to a negotiated ceiling price.
In addition, geopolitical risks could affect government priorities, budgets, and policies, such as U.S. approvals of our foreign defense sales as well as sanctions and other trade-restrictive activities, which could impact sales of defense and other products and services. Changes in U.S. government defense spending could negatively impact our financial position, results of operations, liquidity, and overall business.
In addition, geopolitical risks could affect government priorities, budgets, and policies, such as U.S. approvals of our foreign defense sales as well as sanctions, imposition of tariffs, and other trade-restrictive activities, which could impact sales of defense and other products and services.
S. and its allies, we are subject to risks and uncertainties relating to policies of the U.S. and its allies, as well as other countries, including those that are or become regarded as potential adversaries or threats.
In addition, given the role of our defense businesses in the support of the national security interests of the U.S. and its allies, we are subject to risks and uncertainties relating to policies of the U.S. and its allies, as well as other countries, including those that are or become regarded as potential adversaries or threats.
We could encounter threats to our physical security, including our facilities and personnel, and threats from workplace violence, civil unrest, terrorism, or similar acts, any of which could disrupt our business.
Our business and financial performance may be adversely affected by threats to our physical security and other events outside our control. We could encounter threats to our physical security, including our facilities and personnel, and threats from workplace violence, civil unrest, terrorism, or similar acts, any of which could disrupt our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe top ERM risks are compiled 29 Table of Contents annually and shared with the Audit Committee of the Board of Directors as well as the full Board of Directors. In addition, Internal Audit incorporates these risks into its continuous risk assessment process and periodically audits specific ERM risks. For more information on risks related to cybersecurity, see Item IA.
Biggest changeIn addition, Internal Audit incorporates these risks into its continuous risk assessment process and periodically audits specific ERM risks. For more information on risks related to cybersecurity, see Item IA. “Risk Factors” of this Form 10-K.
Additionally, our Internal Audit function regularly assesses our program effectiveness through audits of our entities, systems and processes to help maintain compliance with policies. As cybersecurity threats are continuously evolving, we also periodically engage with third parties to perform maturity assessments of our program to identify potential risk areas and improvement opportunities.
Additionally, our Internal Audit function regularly assesses our program effectiveness through audits of our systems and processes to help maintain compliance with policies. As cybersecurity threats are continuously evolving, we also periodically engage with third parties to perform maturity assessments of our program to identify potential risk areas and improvement opportunities.
Enterprise Risk Management Our cybersecurity risk processes are a key element of our Enterprise Risk Management (ERM) process, which is designed to identify and evaluate the full range of significant risks to RTX Corporation (RTX). As part of our ERM program, RTX’s functional and operations departments identify and manage enterprise risks on an annual cycle.
Enterprise Risk Management Our cybersecurity risk processes are a key element of our Enterprise Risk Management (ERM) process, which is designed to identify and evaluate the full range of significant risks to RTX. As part of our ERM program, RTX’s functional and operations departments identify and manage enterprise risks on an annual cycle.
The program includes processes and controls for the deployment of new IT systems by the Company and controls over new and existing system operation. We monitor and conduct regular testing of these controls and systems, including vulnerability management through active discovery and testing to regularly assess patching and configuration status.
Our program includes processes and controls for the deployment of new IT systems by the Company and controls over new and existing system operation. We monitor and conduct regular testing of these controls and systems, including vulnerability management through active discovery and testing to regularly assess patching and configuration status.
Cybersecurity threats include attacks on, or other attempts to infiltrate, our information technology (IT) infrastructure and the IT infrastructure of our customers, suppliers, subcontractors and other third parties, 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 our customers, suppliers, subcontractors, and other third parties.
Cybersecurity threats include attacks on, or other attempts to infiltrate, our IT infrastructure and the IT infrastructure of our customers, suppliers, subcontractors, and other third parties, 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 our customers, suppliers, subcontractors, and other third parties.
Our products and services are highly sophisticated and specialized, involve complex advanced technologies including information technology systems, and process, store, or transmit highly sensitive unclassified and classified information. Moreover, our products and services are often integrated with third-party products and services.
Our products and services are highly sophisticated and specialized, involve complex advanced technologies including information technology (IT) systems, and process, store, or transmit highly sensitive unclassified and classified information. Moreover, our products and services are often integrated with third-party products and services.
Incidents are reported internally to members of senior management and/or the Board of Directors as appropriate based on severity and incident type and are also analyzed for external reporting requirements. Our incident response process is also designed to coordinate functions to enable continuity of essential business operation in the event of a cyber crisis. Third Party Service Providers.
Incidents are reported internally to members of senior management and the Board of Directors as appropriate based on severity and incident type and are also analyzed for external reporting requirements. Our incident management process is designed to coordinate functions to enable continuity of essential business operation in the event of a cyber crisis. Third-Party Service Providers.
Our cybersecurity program includes monitoring for potential security threats that may lead to vulnerabilities. We evaluate and assign severity levels to incidents, escalate and engage incident response teams based on severity, and manage and mitigate the related risks.
Our cybersecurity program includes monitoring for potential security threats that may lead to exploitation of vulnerabilities. We evaluate and assign severity levels to incidents, escalate and engage incident response teams based on severity, and manage and mitigate the related risks.
Our cybersecurity program is made up of two components: our enterprise cybersecurity program and our cybersecurity program for our products and services. Enterprise Cybersecurity. Our enterprise cybersecurity program aligns with the National Institute of Standards and Technology (NIST) standards, among others.
Our cybersecurity program is made up of two components: our enterprise cybersecurity program and our cybersecurity program for our products and services. Enterprise Cybersecurity. Our enterprise cybersecurity program aligns with the National Institute of Standards and Technology (NIST) standards.
In addition, we strive to meet all security requirements mandated by government and commercial customers and adhere to regulatory guidance and standards for system security engineering. Many of our products also undergo industry audits and regulatory compliance certifications, and our products delivered to the Department of Defense (DoD) must comply with DoD risk management requirements where required. Cybersecurity for U.S.
In addition, we strive to meet all security requirements mandated by government and commercial customers and adhere to regulatory guidance and standards for system security engineering. Many of our products also undergo industry audits and regulatory compliance certifications, and our products delivered to the Department of Defense (DoD) must comply with DoD risk management requirements.
Cybersecurity threats also include attempts to infiltrate our products or services, including 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.
Cybersecurity threats also include attempts to infiltrate our products or services, such as attacks targeting the security, confidentiality, integrity or availability of the hardware, software and information installed, stored, or transmitted in our products, which may occur after the purchase of those products or when they are incorporated into third-party products, facilities, or infrastructure.
Our product development processes apply development, security and operations principles aligned with applicable government and commercial standards including DO-326 and NIST standards and guideline publications, and include vulnerability scanning and static and dynamic composition analysis. We regularly assess our product development processes, product cyber maturity and the teams providing our secure services in relation to cybersecurity.
Our product development processes apply development, security, and operations principles aligned with applicable government and commercial standards, and include vulnerability scanning and static and dynamic composition analysis. We regularly assess our product development processes, product cyber maturity, and the teams providing our secure services in relation to cybersecurity.
Our suppliers, subcontractors and third-party service providers are subject to cybersecurity obligations and controls. Prior to engagement, we assess the cybersecurity posture of third-party service providers who store, process, or transmit our information as a service, or connect to our networks.
Our suppliers, subcontractors, and other third-party service providers are subject to cybersecurity obligations and controls. We assess and periodically reassess the cybersecurity posture of third-party service providers who store, process, or transmit our information as a service, or connect to our networks.
The Special Activities Committee supports the Board in oversight of classified business cybersecurity, including with respect to company internal information and operational technology systems. The Audit Committee also considers enterprise cybersecurity risks in connection with its financial and compliance risk oversight role.
Our Board of Directors has primary oversight responsibility for enterprise cybersecurity risks. The Special Activities Committee of the Board supports the Board in oversight of classified business cybersecurity, including with respect to Company internal information and operational technology systems. The Audit Committee also considers enterprise cybersecurity risks in connection with its financial and compliance risk oversight role.
The program includes authorization and assessment of new and existing IT systems by our customer. We monitor use on these systems, including vulnerability management through patching and configuration. In addition, we restrict user access and require authorized users to complete additional user and cybersecurity training. Incident Response.
The program includes authorization and assessment of new and existing IT systems by our customers and third parties. We monitor use on these systems, including vulnerability management through patching and configuration. In addition, we restrict user access and require authorized users to complete additional user and cybersecurity training. 30 Table of Contents Incident Response.
We also require our suppliers, subcontractors and third-party service providers to agree to cybersecurity-related contractual terms and conditions of purchase. Many of these third parties are also subject to regulatory requirements in mandatory government procurement clauses, including those contained in the U.S. Federal Acquisition Regulation and U.S.
We also require our suppliers, subcontractors, and other third-party service providers to agree to cybersecurity-related contractual terms and conditions of purchase. Many of these third parties are also subject to regulatory requirements in mandatory government procurement clauses, including those contained in the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS).
ITEM 1C. CYBERSECURITY As a global aerospace and defense company serving commercial and government customers in the aerospace industry and domestic and international military and government customers as a defense contractor, we are the target of advanced and 27 Table of Contents persistent cyber-attacks from a variety of threat actors.
ITEM 1C. CYBERSECURITY As a global aerospace and defense company serving commercial and government customers in the aerospace industry and domestic and international military and government customers as a defense contractor, we are the target of advanced and persistent cyber-attacks from a variety of sources.
Our CISO regularly updates the Board of Directors on cybersecurity risks as they relate to our information and operational technology systems and our suppliers and partners, in addition to updates on enterprise cybersecurity incidents and key Company defenses and mitigation strategies.
Our CISO regularly updates the Board of Directors on cybersecurity risks as they relate to our information and operational technology systems, our suppliers, and other third-party service providers, in addition to updates on enterprise cybersecurity incidents and key Company defenses and mitigation strategies.
Government Authorized Systems. With respect to products and services provided to, and information technology systems used in connection with programs for, the U.S. government, our cybersecurity program aligns with the NIST standard and meets the requirements of 32 CFR Part 117 and other applicable U.S. government guidance.
Cybersecurity for Systems used in Support of U.S. Government Customers. With respect to products and services provided to, and IT systems used in connection with programs for, the U.S. government, our cybersecurity program aligns with the NIST standards and meets the requirements of 32 CFR Part 117 and other applicable U.S. government guidance.
In addition, we require our employees and contract workers to complete annual cybersecurity training, and we regularly conduct simulated phishing and cyber-related communications. Product and Services Cybersecurity.
In addition, we require our employees and contract workers to complete annual cybersecurity training, and we regularly conduct simulated phishing and cyber-related communications to educate individuals on the latest threats. Product and Services Cybersecurity.
Defense Contract Management Agency (DCMA) and Cybersecurity Maturity Model Certificate (CMMC) Third Party Assessment Organization. Moreover, some of our products are audited or reviewed for regulatory compliance certification pursuant to the relevant DoD risk management framework. Board Oversight and Management’s Role Enterprise Cybersecurity. Our Board of Directors has primary oversight responsibility for enterprise cybersecurity risks.
Several external organizations also evaluate our enterprise cybersecurity program, including the Defense Contract Management Agency (DCMA) and Cybersecurity Maturity Model Certification Third-Party Assessment Organization. Moreover, some of our products are audited or reviewed for regulatory compliance certification pursuant to the relevant DoD risk management framework. Board Oversight and Management’s Role Enterprise Cybersecurity.
This includes assessment of our overall program, policies and processes, compliance with regulatory requirements and an overall assessment of key vulnerabilities. We use these assessments to supplement our own evaluation of the overall health of our program and target improvement areas. Several external organizations also evaluate our enterprise cybersecurity program, including the U.S.
This includes assessment of our overall program, policies and processes, compliance with regulatory requirements, and assessment of key vulnerabilities. We use these assessments to supplement our own evaluation of the overall health of our program and target improvement areas.
Defense Federal Acquisition Regulation Supplement, which obligate adherence to a generally accepted cybersecurity framework, such as NIST, and occasional 28 Table of Contents assessment of their implementation of cybersecurity controls as a condition of contract award or during contract performance. Finally, we require these third parties to notify us of cybersecurity incidents that impact us. Program Assessment.
Among other things, mandatory government procurement clauses obligate adherence to a generally accepted cybersecurity framework, such as NIST, and occasional assessment of the implementation of cybersecurity controls as a condition of contract award or during contract performance. Finally, we require these third parties to notify us of cybersecurity incidents that impact us. Program Assessment.
The process consists of structured reviews, discussions, and mitigation planning, and includes risks identified by our Enterprise Cybersecurity and Product Cybersecurity functions as part of the overall review of significant RTX risks.
The process consists of structured reviews, discussions, and mitigation planning, and includes risks identified by our Enterprise Cybersecurity and Product Cybersecurity functions as part of the overall review of significant risks to RTX. The top ERM risks are compiled annually and shared with the Audit Committee of the Board of Directors as well as the full Board of Directors.
In performing his role, he regularly reviews enterprise cybersecurity risks, controls, program policy and processes, including training, oversees policy and program development, implementation and updates, and informs senior leadership on cybersecurity-related issues and activities affecting the organization.
Our CISO is an experienced cybersecurity senior executive with more than 25 years’ experience building and leading cybersecurity, risk management, and IT teams. In performing his role, he regularly reviews enterprise cybersecurity risks, controls, program policy, and processes, including training, oversees policy and program development, implementation and updates, and informs senior leadership on cybersecurity-related issues and activities affecting the organization.
Our product cybersecurity officer (PCO), under the direction of our chief technology officer, leads our cybersecurity program for our products and services and is responsible for assessing and managing related cybersecurity risks.
The Audit Committee also considers product and services cybersecurity risks in connection with its financial and compliance risk oversight role. 31 Table of Contents Our product cybersecurity officer (PCO), under the direction of our chief technology officer, leads our cybersecurity program for our products and services and is responsible for assessing and managing related cybersecurity risks.
The full Board of Directors also receives periodic briefings from management on the Company’s product cybersecurity risks and programs. The Audit Committee also considers product and services cybersecurity risks in connection with its financial and compliance risk oversight role.
The full Board of Directors also receives periodic briefings from management regarding the Company’s products and services cybersecurity risks.
Removed
Our CISO is an experienced cybersecurity senior executive with more than 25 years’ experience building and leading cybersecurity, risk management, and information technology teams.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe facilities, warehouses, machinery and equipment in use as of December 31, 2023 are in good operating condition and are well-maintained.
Biggest changeThe facilities, warehouses, machinery, and equipment in use as of December 31, 2024 are in good operating condition and are well-maintained.
Our 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.
Our fixed assets as of December 31, 2024 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 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.
ITEM 2. PROPERTIES We have significant properties in approximately 25 countries, with approximately 450 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest change“Risk Factors” of this Form 10-K. 737 MAX Aircraft Litigation Multiple lawsuits have been filed in U.S. courts relating to the October 29, 2018 Lion Air Flight 610 and the March 10, 2019 Ethiopian Airlines Flight 302 accidents. Collins Aerospace (Collins) sold certain aircraft parts and systems to The Boeing Company for the 737 MAX aircraft involved in these accidents.
Biggest changeWe do not expect liability related to this matter to have a material adverse impact on our results of operations, financial condition, or liquidity. 737 MAX Aircraft Litigation Multiple lawsuits have been filed in U.S. courts relating to the October 29, 2018 Lion Air Flight 610 and the March 10, 2019 Ethiopian Airlines Flight 302 accidents.
A 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.
A 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. “Risk Factors” of this Form 10-K.
Certain of our Collins businesses have been named, along with other third parties, as parties in many of these lawsuits. We have also fully supported all governmental investigations and inquiries relating to the accidents.
Collins Aerospace (Collins) sold certain aircraft parts and systems to The Boeing Company for the 737 MAX aircraft involved in these accidents. Certain of our Collins businesses have been named, along with other third parties, as parties in many of these lawsuits. We have also fully supported all governmental investigations and inquiries relating to the accidents.
We do not expect that the lawsuits or governmental investigations or inquiries will have a material adverse effect on our results of operations, financial condition, or liquidity.
We do not expect that the lawsuits or governmental investigations or inquiries will have a material adverse effect on our results of operations, financial condition, or liquidity. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 33 Table of Contents PART II
Added
Pursuant to the Securities and Exchange Commission (SEC) regulations, for proceedings under environmental laws to which a government authority is a party and we reasonably believe such proceedings will result in monetary sanctions, we have adopted a disclosure threshold of $1 million.
Added
Environmental Enforcement Proceeding The Colorado Department of Public Health and Environment (CDPHE) issued a Notice of Violation/Cease and Desist Order (NOV/CDO) to Raytheon Company on January 31, 2023, alleging violations of a water discharge permit at a former Raytheon Company facility in Boulder, Colorado.
Added
On March 27, 2024, the CDPHE informed Raytheon Company that it is seeking a penalty in the amount of approximately $1 million in connection with the alleged violations and is requiring Raytheon Company to undertake a compliance program.
Added
Raytheon Company is contesting the alleged violations and the penalty demand, 32 Table of Contents and has the right to appeal the NOV/CDO and any associated penalty.

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 12/31/2019 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.
Biggest changeComparison of Cumulative Five Year Total Return Annual Return Percentage Years Ending Company/Index 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 RTX Common Stock (16.73) 23.27 20.01 (14.44) 40.76 S&P 500 Index 18.40 28.71 (18.11) 26.29 25.02 S&P 500 Aerospace & Defense Index (16.06) 13.22 17.37 6.77 14.40 Indexed Returns Years Ending Company/Index Base Period 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 RTX Common Stock $ 100.00 $ 83.27 $ 102.65 $ 123.19 $ 105.41 $ 148.37 S&P 500 Index 100.00 118.40 152.39 124.79 157.59 197.02 S&P 500 Aerospace & Defense Index 100.00 83.94 95.03 111.54 119.09 136.24 34 Table of Contents Issuer Purchases of Equity Securities The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2024. 2024 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 — $ — — $ 715 November 1 - November 30 416 120.05 416 665 December 1 - December 31 — — — 665 Total 416 $ 120.05 416 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.
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.
Stock Performance Graph The following graph presents the cumulative total shareowner return for the five years ending December 31, 2024 for our common stock as compared to the Standard & Poor’s 500 Stock Index and the S&P 500 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, 2018.
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, 2019.
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.
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, which, on that date, represented approximately 85% of the shares expected to be repurchased.
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.
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 37,447 registered shareowners at December 31, 2024.
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.
The ASR agreements provided for the repurchase of our common stock based on the average of the daily volume-weighted average prices of our common stock during the term of such ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements.
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 final average price under the ASR was $94.28 per share. We may also reacquire shares outside of the program in connection with the surrender of shares to cover taxes on vesting of restricted stock. Our ability to repurchase shares is subject to applicable law.
During the quarter ended December 31, 2023, we repurchased 486 thousand shares outside of the program related to our employee savings plan.
During the quarter ended December 31, 2024, we did not repurchase shares outside of the program.
Removed
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.
Added
The shares associated with the remaining portion of the aggregate purchase price have been settled over two tranches. In July 2024, the first tranche was settled upon final delivery to us of 0.4 million shares of common stock.
Removed
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.
Added
In September 2024, with respect to the second tranche, we owed 2.2 million shares of common stock that we elected to cash settle for $261 million. The cash payment required as a result of the second tranche settlement was due to the significant increase in the price of our common stock during the ASR term.
Removed
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.

Item 7. Management's Discussion & Analysis

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

184 edited+95 added−58 removed124 unchanged
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.
Biggest changeThe 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.” Non-service Pension Income (dollars in millions) 2024 2023 2022 Non-service pension income $ (1,518) $ (1,780) $ (1,889) The change in Non-service pension income of $0.3 billion in 2024 compared to 2023 was primarily driven by the decrease in the recognized actuarial net (gain) loss as a result of the merger of the remaining Raytheon Company qualified pension plans into the RTX Consolidated Pension Plan at December 31, 2023.
The 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).
The organic change in Net sales, Cost of sales, and Operating profit excludes acquisitions and divestitures, net, and the effect of foreign currency exchange rate translation fluctuations and other significant non-operational items and/or significant operational items that may occur at irregular intervals (Other).
Net services sales increased $3.0 billion in 2023 compared to 2022, primarily due to increases in external services sales of $1.7 billion at Pratt & Whitney, $0.8 billion at Collins, and $0.6 billion at Raytheon, partially offset by a net sales charge of $0.1 billion associated with the Powder Metal Matter.
Net services sales increased $3.0 billion in 2023 compared to 2022, primarily due to increases in external services sales of $1.7 billion at Pratt & Whitney, $0.8 billion at Collins, and $0.6 billion at Raytheon, partially offset by a services sales charge of $0.1 billion associated with the Powder Metal Matter.
Given the nature of our business, we believe that Total net sales and Operating profit (loss) (and the related operating profit (loss) margin percentage), which we disclose and discuss at the segment level, are most relevant to an understanding of management’s view of our segment performance, as described below. Total Net Sales.
Given the nature of our business, we believe that Total net sales and Operating profit (loss) (and the related operating profit (loss) margin percentage), which we disclose and discuss at the segment level, are most relevant to an understanding of management’s view of our segment performance, as described below.
A reconciliation of these measures to reported U.S.
A reconciliation of these measures to reported U.S.
A reconciliation of these measures to reported U.S.
A reconciliation of these measures to reported U.S.
A reconciliation of these measures to reported U.S.
A reconciliation of these measures to reported U.S.
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.
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 and market-based valuation methodologies.
These increases were principally driven by the continued recovery of commercial air traffic which has resulted in an increase in flight hours. Commercial aerospace OEM sales increased $1.1 billion due to increased production rates in narrow-body, wide-body, and business jets. Military sales were relatively consistent in 2023 compared to 2022.
These increases were principally driven by the continued recovery of commercial air traffic which resulted in an increase in flight hours. Commercial aerospace OEM sales increased $1.1 billion due to increased production rates in narrow-body, wide-body, and business jets. Military sales were relatively consistent in 2023 compared to 2022.
The change in corporate expenses and other unallocated items of $43 million in 2023 compared to 2022 was primarily due to a decrease in expenses related to the LTAMDS program, which are included in the Raytheon segment beginning in 2023, partially offset by an increase in costs related to the segment realignment, with the remaining change spread across multiple items.
The change in corporate expenses and other unallocated items of $43 million in 2023 compared to 2022 was primarily due to a decrease in expenses related to the LTAMDS program, which are included in the Raytheon segment beginning in 2023, partially offset by an increase in costs related to our segment realignment in 2023, with the remaining change spread across multiple items.
Net products sales decreased $1.2 billion in 2023 compared to 2022, primarily driven by a $3.8 billion decrease at Pratt & Whitney primarily driven by a net sales charge of $5.3 billion associated with the Powder Metal Matter, partially offset by increases of $2.1 billion at Collins and $0.6 billion at Raytheon.
Net products sales decreased $1.2 billion in 2023 compared to 2022, primarily driven by a $3.8 billion decrease at Pratt & Whitney due to a net sales charge of $5.3 billion associated with the Powder Metal Matter, partially offset by increases of $2.1 billion at Collins and $0.6 billion at Raytheon.
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.
Management must make assumptions and estimates regarding contract revenues and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials including any impact from changing costs or inflation, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer, overhead cost rates, and current and past maintenance cost and frequency driven by estimated aircraft and engine utilization and estimated useful lives of components, among others.
In September and December 2023, the Internal Revenue Service issued interim guidance, retroactive to 2022, clarifying the capitalization requirements for certain types of research and experimental expenditures.
In September and December 2023, the Internal Revenue Service (IRS) issued interim guidance, retroactive to 2022, clarifying the capitalization requirements for certain types of research and experimental expenditures.
The inherent uncertainty related to the outcome of these matters could result in amounts materially different from any provisions made with respect to their resolution. Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo.
The inherent uncertainty related to the outcome of these matters could result in amounts materially different from any provisions made with respect to their resolution. In 2023, Pratt & Whitney determined that a rare condition in powder metal used to manufacture certain engine parts requires accelerated inspection of the PW1100 GTF fleet, which powers the A320neo.
We focus on adjusted earnings per share (EPS) and measures to assess our cash generation and the efficiency and effectiveness of our use of capital, such as free cash flow, both of which are not defined measures under U.S. GAAP and may be calculated differently by other companies.
We focus on adjusted earnings per share (EPS) and measures to assess our cash generation and the efficiency and effectiveness of our use of capital, such as free cash flow, both of which are non-GAAP measures that are not defined measures under U.S. GAAP and may be calculated differently by other companies.
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.
Included in cash flows from operating activities from continuing operations are payments related to our operating lease obligations. See “Note 11: Leases” within Item 8 of this Form 10-K for actual and expected payments on operating lease obligations. In addition, the majority of our cash flows for purchase obligations are classified as cash flows from operating activities from continuing operations.
In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: capital expenditures, customer financing requirements, investments in and divestitures of businesses, dividends, common stock repurchases, pension funding, access to the commercial paper markets, adequacy of available bank lines of credit, redemptions of debt, and the ability to attract long-term capital at satisfactory terms.
In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: capital expenditures, customer financing requirements, investments in and divestitures of businesses, dividends, common stock repurchases, pension funding, access to 54 Table of Contents the commercial paper markets, adequacy of available bank lines of credit, redemptions of debt, and the ability to attract long-term capital at satisfactory terms.
This charge also had the effect of increasing accrued liabilities by $2.8 billion in 2023.
This charge also had the effect of increasing Other accrued liabilities by $2.8 billion in 2023 .
This determination was made pursuant to Pratt & 57 Table of Contents Whitney’s safety management system. On August 4, 2023, Pratt & Whitney issued a special instruction (SI), to operators of PW1100 GTF powered A320neo aircraft, which required accelerated inspections and engine removals covering an initial subset of operational engines, no later than September 15, 2023.
This determination was made pursuant to Pratt & Whitney’s safety management system. On August 4, 2023, Pratt & Whitney issued a special instruction (SI) to operators of PW1100 GTF powered A320neo aircraft, which required accelerated inspections and engine removals covering an initial subset of operational engines, no later than September 15, 2023.
Excluding the impact of this charge, the $0.7 billion favorable change in cash flows provided by operating activities from continuing operations in 2023 compared to 2022, is primarily driven by higher net income from continuing operations after adjustments for depreciation and amortization, deferred income tax benefit, stock compensation cost, and net periodic pension and other postretirement income.
Excluding the impact of this charge, the favorable change in cash flows provided by operating activities from continuing operations in 2023 compared to 2022 , is primarily driven by higher net income from continuing operations after adjustments for depreciation and amortization, deferred income tax benefit, stock compensation cost, and net periodic pension and other postretirement income.
In addition, in 2022 and 2021, net costs associated with corporate research and development related to the LTAMDS program were included in Corporate expenses and other unallocated items. Beginning in 2023, the remaining net costs associated with the LTAMDS program are within the Raytheon segment.
In addition, in 2022, net costs associated with corporate research and development related to the LTAMDS program were included in Corporate expenses and other unallocated items. Beginning in 2023, the remaining net costs associated with the LTAMDS program are reflected within the Raytheon segment.
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.
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.
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.
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 metric that measures our revenue for the current year; • Operating profit: a measure of our profit for the year, before non-operating expenses (income), net and income tax expense; • 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.
The net change in EAC adjustments was primarily due to unfavorable changes in net EAC adjustments related to certain fixed price development contracts and $51 million of unfavorable EAC adjustments related to significant contract options exercised in 2023. The increase in volume was principally driven by the higher net sales discussed above.
The net change in EAC adjustments was primarily due to unfavorable changes in net EAC adjustments related to certain fixed price development contracts and approximately $50 million of unfavorable EAC adjustments related to significant contract options exercised in 2023. The increase in volume was principally driven by the higher net sales discussed above.
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.
A provision enacted in the Tax Cuts and Jobs Act of 2017 related to the capitalization of research and experimental expenditures for tax purposes became effective on January 1, 2022. As such, we made incremental income tax payments of $1.6 billion in 2022.
Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, are contributing to these issues. Furthermore, our suppliers and subcontractors have been impacted by these same issues. We have implemented actions and programs to mitigate some of the impacts but anticipate supply chain disruptions to continue into 2024.
Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, are contributing to these issues. Furthermore, our suppliers and subcontractors have been impacted by these same issues. We have implemented actions and programs to mitigate some of the impacts but anticipate supply chain disruptions to continue. Economic Environment.
Financial Statements and Supplementary Data of this Form 10-K, the changes in certain key items in those financial statements between select periods, and the primary factors that accounted for those changes. In addition, we discuss certain accounting principles, policies, and critical estimates that affect our financial statements.
“Financial Statements and Supplementary Data” of this Form 10-K, the changes in certain key items in those financial statements between select periods, and the primary factors that accounted for those changes. In addition, we discuss certain accounting principles, policies, and critical estimates that affect our financial statements.
We continue to pursue strategic and operational initiatives to help address these macroeconomic pressures, including our digital transformation, operational modernization, cost reduction, and advanced technology programs, and we apply our Customer Oriented Results Excellence (CORE) operating platform to the execution of these initiatives.
We continue to pursue strategic and operational initiatives to help address these macroeconomic pressures, including our digital transformation, operational modernization, cost reduction, and advanced 37 Table of Contents technology programs, and we apply our Customer Oriented Results and Excellence (CORE) operating platform to the execution of these initiatives.
The increase in Other net sales of $0.1 billion in 2023 compared to 2022 was primarily due to net favorable customer settlements in 2023, including a $112 million favorable customer settlement recorded in the fourth quarter of 2023, partially offset by a $57 million charge related to a customer litigation matter recorded in the third quarter 2023.
The increase in Other net sales of $0.1 billion in 2023 compared to 2022 was primarily due to net favorable customer settlements in 2023, including a $0.1 billion favorable customer settlement recorded in the fourth quarter of 2023, partially offset by a $0.1 billion charge related to a customer litigation matter recorded in the third quarter 2023.
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.
At December 31, 2024, we had commercial aerospace financing and other contractual commitments, including exclusivity and collaboration payment commitments, of approximately $14.1 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.
These impacts could be material to the Company’s results of operations, financial condition, and liquidity. Additionally, we have significant contracts with the U.S. government, subject to government oversight and audit, which may require significant adjustment of contract prices.
These impacts could be 61 Table of Contents material to the Company’s results of operations, financial condition, and liquidity. Additionally, we have significant contracts with the U.S. government, subject to government oversight and audit, which may require significant adjustment of contract prices.
An increase or decrease of 25 basis points in the EROA would have increased or decreased our 2023 net periodic benefit income by approximately $133 million. Refer to “Note 10: Employee Benefit Plans” within Item 8 of this Form 10-K for discussion of current and prior year discount rate and EROA assumptions.
An increase or decrease of 25 basis points in the EROA would have increased or decreased our 2024 Net periodic benefit income by approximately $131 million. Refer to “Note 10: Employee Benefit Plans” within Item 8 of this Form 10-K for discussion of current and prior year discount rate and EROA assumptions.
This reflects our current best estimate of expected customer compensation for the estimated duration of the disruption as well as the EAC adjustment impact of this matter to Pratt & Whitney’s long-term maintenance contracts. The incremental costs to the business’s long-term maintenance contracts include the estimated cost of additional inspections, replacement of parts, and other related impacts.
This amount reflected our best estimate of expected customer compensation for the estimated duration of the disruption as well as the EAC adjustment impact of this matter to Pratt & Whitney’s long-term maintenance contracts. The incremental costs to the business’s long-term maintenance contracts include the estimated cost of additional inspections, replacement of parts, and other related impacts.
Included in the change at Pratt & Whitney was the unfavorable impact of $133 million recorded in the third quarter of 2023 as a result of increased cost to our aftermarket contracts resulting from the Powder Metal Matter and an unfavorable impact of approximately $60 million recorded in the fourth quarter of 2023 as a result of increased cost on a military program.
Included in the change at Pratt & Whitney was the unfavorable impact of $0.1 billion recorded in the third quarter of 2023 as a result of increased cost to our aftermarket contracts resulting from the Powder Metal Matter and an unfavorable impact of approximately $60 million recorded in the fourth quarter of 2023 as a result of increased cost on a military program.
For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada due to its significance to Pratt & Whitney’s overall operating results.
For Pratt & Whitney only, Other also includes the transactional impact of foreign exchange hedging at Pratt & Whitney Canada due to its significance to Pratt & Whitney’s overall operating results. Total Net Sales.
The increase in air power programs includes higher net sales on the StormBreaker program, driven by awards in the first and fourth quarters of 2023 and higher net sales on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program, driven by an award in the second quarter of 2023.
The increase in air and space defense systems programs includes higher net sales on the StormBreaker program, driven by awards in the first and fourth quarters of 2023 and higher net sales on the Advanced Medium Range Air-to-Air Missile (AMRAAM) program, driven by an award in the second quarter of 2023.
Commercial aerospace operating profit in 2023 also benefited from two favorable contract matters totaling approximately $120 million, which was partially offset by the absence of a prior year $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket contract. Military operating profit was relatively consistent compared to 2022.
Commercial aerospace operating profit in 2023 also benefited from two favorable contract matters totaling $0.1 billion, which was partially offset by the absence of a prior year $50 million favorable contract adjustment resulting from a contract modification on a commercial aftermarket contract. Military operating profit was relatively consistent compared to 2022.
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.
A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above. Net sales increased $7.8 billion organically in 2024 compared to 2023, primarily due to higher organic sales of $4.4 billion at Pratt & Whitney, $2.1 billion at Collins, and $1.7 billion at Raytheon.
In making these determinations, we applied the tax law in the relevant jurisdictions to our facts and circumstances and obtained tax rulings from the relevant taxing authorities, tax opinions, and/or other external tax advice related to the concluded tax treatment.
In making these determinations, we applied the tax law in the relevant jurisdictions to our facts and circumstances and obtained tax rulings from the relevant taxing authorities, tax opinions, 60 Table of Contents and/or other external tax advice related to the concluded tax treatment.
Revenue passenger miles (RPMs), available seat miles, and the general economic health of airline carriers are key barometers for our commercial aerospace operations. Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits.
Revenue passenger miles (RPMs), available seat miles, and the general economic health of airline carriers and airframers, as well as the financial strength and performance of airframers, are key barometers for our commercial aerospace operations. Performance in the general aviation sector is closely tied to the overall health of the economy and is positively correlated to corporate profits.
We believe that these non-Generally Accepted Accounting Principles (non-GAAP) measures are useful to investors because they provide transparency to the underlying performance of our business, which allows for better year-over-year comparability.
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.
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.
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; 45 Table of Contents • impairment charges and reserve adjustments related to the global sanctions on and export controls with respect to Russia of $0.2 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.14; • combined charges associated with disposition of businesses at Collins and Raytheon of $0.1 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.07; and • restructuring charges of $0.1 billion, net of tax, which had an unfavorable impact on diluted EPS from continuing operations of $0.06.
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.
Our defense operations consist primarily of our Raytheon business and operations in the defense businesses within our Collins and Pratt & Whitney segments. Defense bookings were approximately $61 billion, $51 billion, and $47 billion for 2024, 2023, and 2022 respectively.
The change in Other operating profit (loss) of $2.9 billion in 2023 compared to 2022 was primarily due to the charge recognized in the third quarter of 2023 related to the Powder Metal Matter of $2.9 billion and a $181 million charge related to a customer insolvency during the second quarter of 2023, partially offset by the absence of $155 million of pretax charges recorded in the first quarter of 2022 related to global sanctions on and export controls with respect to Russia.
The change in Other operating profit (loss) of $2.9 billion in 2023 compared to 2022 was primarily due to the charge recognized in the third quarter of 2023 related to the Powder Metal Matter of $2.9 billion and a $0.2 billion charge related to a customer insolvency during the second quarter of 2023, partially offset by the absence of $0.2 billion of pre-tax charges recorded in the first quarter of 2022 related to global sanctions on and export controls with respect to Russia.
Required contributions are primarily determined by Employee Retirement Income Security Act of 1974 (ERISA) funding rules, which require us to fully fund our U.S qualified pension plans over a rolling seven-year period as determined annually based on the Pension Protection Act of 2006 (PPA) calculated funded status at the beginning of each year.
Required contributions are primarily determined by Employee Retirement Income Security Act of 1974 (ERISA) funding rules, which require us to fully fund our U.S qualified pension plans over a rolling fifteen-year period as determined annually based on the calculated funded status at the beginning of each year per the Pension Protection Act of 2006 and subsequent amendments.
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, 2024, we had cash and cash equivalents of $5.6 billion, of which 41% 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.
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.
During 2024 and 2022, we had net cash payments of $142 million and $205 million, respectively and had net cash receipts of $14 million during 2023, from the settlement of these derivative instruments not designated as hedging instruments.
Factoring activity resulted in a decrease of approximately $0.8 billion in cash provided by operating activities during 2023 , compared to an increase of approximately $2.3 billion in cash provided by operating activities during 2022 .
Factoring activity resulted in a decrease of $0.8 billion in cash provided by operating activities from continuing operations during 2023, compared to an increase of $2.3 billion in cash provided by operating activities from continuing operations during 2022.
The increase from the military sales volume was more than offset by higher production costs and an unfavorable EAC adjustment of approximately $60 million in the fourth quarter of 2023. Higher research and development expenses were partially offset by lower selling, general and administrative expenses.
The increase from the military sales volume was more than offset by higher production costs and an unfavorable EAC adjustment of $0.1 billion in the fourth quarter of 2023. Higher research and development expenses were partially offset by lower selling, general, and administrative expenses.
The increase in company-funded research and development of $0.1 billion in 2023 compared to 2022, was primarily driven by increased spending on commercial program development at Pratt & Whitney and higher program expenses at Collins, partially offset by decreased spend on other development programs. Company-funded research and development in 2022 was relatively consistent with 2021.
The increase in company-funded research and development of $0.1 billion in 2023 42 Table of Contents compared to 2022, was primarily driven by increased spending on commercial program development at Pratt & Whitney and higher program expenses at Collins, partially offset by decreased spend on other development programs.
At December 31, 2023, our exclusivity assets, net of accumulated amortization, were approximately $3.1 billion, and our remaining estimated commitments, net of collaborator share, were approximately $5.7 billion.
At December 31, 2024, our exclusivity assets, net of accumulated amortization, were approximately $3.3 billion, and our remaining estimated commitments, net of collaborator share, were approximately $5.5 billion.
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.
Interest Expense, Net (dollars in millions) 2024 2023 2022 Interest expense $ 1,970 $ 1,653 $ 1,300 Interest income (102) (100) (70) Other non-operating expense (income) (1) (6) (48) 46 Interest expense, net $ 1,862 $ 1,505 $ 1,276 Total average interest expense rate - average outstanding borrowings during the year: 4.6 % 4.3 % 4.0 % Total average interest expense rate - outstanding borrowings as of December 31: 4.5 % 4.6 % 4.0 % (1) Primarily consists of the gains or losses on assets associated with certain of our nonqualified deferred compensation and employee benefit plans, the gains or losses on liabilities associated with certain of our nonqualified deferred compensation plans, and non-operating dividend income.
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.
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 2024 compared to 2023 of $6.2 billion was primarily due to the organic net sales increases at Pratt & Whitney, Collins, and Raytheon noted above.
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.
Other Income (Expense), Net (dollars in millions) 2024 2023 2022 Other income (expense), net $ (132) $ 86 $ 120 Other income (expense), net includes equity earnings in unconsolidated entities, royalty income, foreign exchange gains and losses, and other ongoing and non-recurring items.
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.
We expect future payments related to our purchase obligations to be $40.1 billion, of which $25.5 billion is payable in 2025. 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.
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.
Our Board of Directors authorized the following cash dividends for the years ended December 31: (dollars in millions, except per share amounts) 2024 2023 2022 Dividends paid per share of common stock $ 2.480 $ 2.320 $ 2.160 Total dividends paid $ 3,217 $ 3,239 $ 3,128 On January 31, 2025, the Board of Directors declared a dividend of $0.63 per share payable March 20, 2025 to shareowners of record at the close of business on February 21, 2025.
The increase in Other operating profit of $0.2 billion in 2023 compared to 2022 was primarily due to the absence of $141 million of pretax charges related to global sanctions and export controls with respect to Russia recorded in 2022, the absence of $69 million of charges associated with the disposition of two non-core businesses in 2022, and the net favorable customer 44 Table of Contents settlements discussed above.
The increase in Other operating profit of $0.2 billion in 2023 compared to 2022 was primarily due to the absence of $0.1 billion of pre-tax charges related to global sanctions and export controls with respect to Russia recorded in 2022, the absence of $0.1 billion of charges associated with the disposition of two non-core businesses in 2022, and the net favorable customer settlements discussed above.
Though the Company expects to continue having adequate access to funds, further declines in our credit ratings or Company outlook could result in higher borrowing costs. 50 Table of Contents As of December 31, 2023, we had a revolving credit agreement with various banks permitting aggregate borrowings of up to $5.0 billion.
Though the Company expects to continue having adequate access to funds, declines in our credit ratings or Company outlook could result in higher borrowing costs. As of December 31, 2024, we had a revolving credit agreement with various banks permitting aggregate borrowings of up to $5.0 billion, which expires in August 2028.
For additional discussion of the ASR and associated funding, see “Liquidity and Financial Condition” below. The change in Other non-operating expense (income) of $0.1 billion was primarily driven by a change in the mark-to-market fair value of marketable securities held in trusts associated with certain of our nonqualified deferred compensation and employee benefit plans and an increase in dividend income.
The change in Other non-operating expense (income) of $0.1 billion was primarily driven by a change in the mark-to-market fair value of marketable securities held in trusts associated with certain of our nonqualified deferred compensation and employee benefit plans and an increase in dividend income.
In February 2023, China announced sanctions against Raytheon Missiles & Defense (RMD) (a former RTX Corporation (RTX) business segment which became part of Raytheon as a result of the July 1, 2023 RTX segment realignment), and previously announced it may take measures against RTX, in connection with certain foreign military sales to Taiwan.
In February 2023, China announced sanctions against Raytheon Missiles & Defense (RMD) (a former RTX business segment which became part of the Raytheon business during the third quarter of 2023), and previously announced it may take measures against RTX, in connection with certain foreign military sales to Taiwan.
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.
Net services cost of sales increased $1.2 billion in 2024 compared to 2023, primarily due to increases in external services cost of sales at Pratt & Whitney and Collins, partially offset by a decrease in external services cost of sales at Raytheon, all driven by the services sales changes noted above.
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.
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. These adjustments are not considered part of management’s evaluation of segment results.
(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.
(dollars in millions) 2024 2023 2022 Total net sales $ 80,738 $ 68,920 $ 67,074 Operating profit 6,538 3,561 5,504 Operating profit margin 8.1 % 5.2 % 8.2 % Operating cash flow from continuing operations $ 7,159 $ 7,883 $ 7,168 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.
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.
Other Matters Global, economic, and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, potential changes in U.S. government policy positions, including changes in DoD policies or priorities, geopolitical conflicts and strained intercountry relations, U.S. and non-U.S. tax law changes, foreign currency exchange rates, sanctions, tariffs, energy costs and supply, levels of air travel, the financial condition of commercial airlines, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses. 36 Table of Contents Legal Matters.
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.
Research and Development (dollars in millions) 2024 2023 2022 Company-funded $ 2,934 $ 2,805 $ 2,711 Percentage of net sales 3.6 % 4.1 % 4.0 % Customer-funded (1) $ 4,723 $ 4,456 $ 4,376 Percentage of net sales 5.8 % 6.5 % 6.5 % (1) Included in Cost of sales in our Consolidated Statement of Operations.
Selling, General, and Administrative (dollars in millions) 2023 2022 2021 Selling, general, and administrative $ 5,809 $ 5,573 $ 5,046 Percentage of net sales 8.4 % 8.3 % 7.8 % Selling, general, and administrative expenses increased $0.2 billion in 2023 compared to 2022, primarily driven by a $0.1 billion charge at Pratt & Whitney related to a customer insolvency in the second quarter of 2023, costs related to our segment realignment and recently announced divestitures in 2023, and increased employee-related costs, partially offset by the absence of $0.1 billion of charges recorded in the first quarter of 2022 related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia.
Selling, general, and administrative expenses increased $0.2 billion in 2023 compared to 2022, primarily driven by a $0.1 billion charge at Pratt & Whitney related to a customer insolvency in the second quarter of 2023, costs related to our segment realignment and divestitures in 2023, and increased employee-related costs, partially offset by the absence of $0.1 billion of charges recorded in the first quarter of 2022 related to increased estimates for credit losses due to global sanctions on and export controls with respect to Russia.
Operating profit (loss) by segment was as follows: (dollars in millions) 2023 2022 2021 Collins Aerospace $ 3,825 $ 2,816 $ 2,380 Pratt & Whitney (1) (1,455) 1,075 454 Raytheon 2,379 2,448 3,399 Total segment 4,749 6,339 6,233 Eliminations and other (42) (23) 4 Corporate expenses and other unallocated items (2) (275) (318) (552) FAS/CAS operating adjustment 1,127 1,399 1,654 Acquisition accounting adjustments (1,998) (1,893) (2,203) Consolidated $ 3,561 $ 5,504 $ 5,136 (1) 2023 includes the impacts from the Powder Metal Matter.
Operating profit (loss) by segment was as follows: (dollars in millions) 2024 2023 2022 Collins Aerospace $ 4,135 $ 3,825 $ 2,816 Pratt & Whitney (1) 2,015 (1,455) 1,075 Raytheon 2,594 2,379 2,448 Total segment 8,744 4,749 6,339 Eliminations and other (48) (42) (23) Corporate expenses and other unallocated items (2) (3) (933) (275) (318) FAS/CAS operating adjustment 833 1,127 1,399 Acquisition accounting adjustments (2,058) (1,998) (1,893) Consolidated $ 6,538 $ 3,561 $ 5,504 (1) 2023 includes the impacts from the Powder Metal Matter.
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 $2.1 billion at Collins, partially offset by lower organic sales of $0.7 billion at Raytheon.
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.
See “Segment Review” below for further information by segment. 36 Table of Contents % of Total Net Sales (dollars in millions) 2023 2022 2021 2023 2022 2021 Net sales Products sales $ 49,571 $ 50,773 $ 49,270 72 % 76 % 77 % Services sales 19,349 16,301 15,118 28 % 24 % 23 % Total net sales $ 68,920 $ 67,074 $ 64,388 100 % 100 % 100 % Refer to “Note 20: Segment Financial Data” within Item 8 of this Form 10-K for the composition of external net sales by products and services by segment.
See “Segment Review” below for further information by segment. 40 Table of Contents % of Total Net Sales (dollars in millions) 2024 2023 2022 2024 2023 2022 Net sales Products $ 59,612 $ 49,571 $ 50,773 74 % 72 % 76 % Services 21,126 19,349 16,301 26 % 28 % 24 % Total net sales $ 80,738 $ 68,920 $ 67,074 100 % 100 % 100 % Refer to “Note 20: Segment Financial Data” within Item 8 of this Form 10-K for the composition of external net sales by products and services by segment.
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.
Our sales to major customers were as follows: % of Total Net Sales (dollars in millions) 2024 2023 2022 2024 2023 2022 Sales to the U.S. government (1) $ 32,246 $ 31,628 $ 30,317 40 % 46 % 45 % Foreign military sales through the U.S. government 5,765 4,974 5,042 7 % 7 % 8 % Foreign government direct commercial sales 5,317 4,249 4,327 7 % 6 % 6 % Commercial aerospace and other commercial sales (2) 37,410 28,069 27,388 46 % 41 % 41 % Total net sales $ 80,738 $ 68,920 $ 67,074 100 % 100 % 100 % (1) Excludes foreign military sales through the U.S. government.
If China were to impose additional sanctions, enforce announced sanctions, or take other regulatory action against RTX, our suppliers, affiliates, or partners, it could potentially disrupt our business operations.
If China were to impose additional sanctions, enforce announced sanctions, or take other regulatory action against RTX, our suppliers, affiliates, or partners, it could potentially disrupt our business operations. Any impact of these or other potential sanctions or other actions by China, is uncertain.
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 Pratt & Whitney and Collins noted above.
The organic increase in Total cost of sales in 2023 compared to 2022 of $5.7 billion was primarily due to the organic net sales increases at Pratt & Whitney, Collins, and Raytheon noted above.
The increase also includes higher commercial OEM sales of $0.9 billion, primarily driven by higher volume and favorable mix. Military sales increased $0.3 billion, primarily due to higher F135 sustainment volume.
The increase also includes higher commercial OEM sales of $0.9 billion, primarily driven by higher volume and favorable mix.
Eliminations and other operating profit in 2023 was relatively consistent with 2022. 48 Table of Contents The increase in eliminations and other net sales of $159 million in 2022 compared to 2021 was primarily due to an increase in intersegment eliminations, principally driven by Collins. Eliminations and other operating profit in 2022 was relatively consistent with 2021.
Eliminations and other operating profit in 2024 was relatively consistent with 2023. The increase in eliminations and other net sales of $0.3 billion in 2023 compared to 2022 was primarily due to an increase in intersegment eliminations, principally driven by Collins. Eliminations and other operating profit in 2023 was relatively consistent with 2022.
Cost of Sales (dollars in millions) 2023 2022 2021 Total cost of sales $ 56,831 $ 53,406 $ 51,897 Percentage of net sales 82 % 80 % 81 % The factors contributing to the change year-over-year in Total cost of sales are as follows: (dollars in millions) 2023 2022 Organic (1) $ 5,721 $ 2,385 Acquisitions and divestitures, net (133) (552) Restructuring 107 3 FAS/CAS operating adjustment 238 217 Acquisition accounting adjustments 107 (348) Other (2,615) (196) Total change $ 3,425 $ 1,509 (1) See “Results of Operations” for definition of organic.
Cost of Sales (dollars in millions) 2024 2023 2022 Total cost of sales $ 65,328 $ 56,831 $ 53,406 Percentage of net sales 81 % 82 % 80 % The factors contributing to the change year-over-year in Total cost of sales are as follows: (dollars in millions) 2024 2023 Organic (1) $ 6,188 $ 5,721 Acquisitions and divestitures, net (1,210) (133) Restructuring (9) 107 FAS/CAS operating adjustment 246 238 Acquisition accounting adjustments 61 107 Other 3,222 (2,615) Total change $ 8,498 $ 3,425 (1) See “Results of Operations” for definition of organic.
Financing Activities Included in cash flows from financing activities are payments related to our long-term debt, including both interest and principal payments.
Financing Activities Included in cash flows from financing activities from continuing operations are principal payments related to our long-term debt.
Net Sales Operating Profit (dollars in millions) 2023 2022 2021 2023 2022 2021 Eliminations and other $ (1,979) $ (1,684) $ (1,525) $ (42) $ (23) $ 4 Corporate expenses and other unallocated items — — — (275) (318) (552) The increase in eliminations and other net sales of $295 million in 2023 compared to 2022 was primarily due to an increase in intersegment eliminations, principally driven by Collins.
Net Sales Operating Profit (dollars in millions) 2024 2023 2022 2024 2023 2022 Eliminations and other $ (2,325) $ (1,979) $ (1,684) $ (48) $ (42) $ (23) Corporate expenses and other unallocated items — — — (933) (275) (318) The increase in eliminations and other net sales of $0.3 billion in 2024 compared to 2023 was primarily due to an increase in intersegment eliminations, principally driven by Collins.
Guidance to affected operators was released via service bulletins (SB) and SI in November 2023 and this guidance is expected to be reflected in one or more airworthiness directives issued by the Federal Aviation Administration (FAA). Consistent with previous information, the actions are expected to result in significant incremental shop visits through the end of 2026.
Guidance to affected operators was released via service bulletins (SB) and SI in November 2023, and this guidance has been reflected in airworthiness directives issued by the Federal Aviation Administration (FAA). Consistent with previous information, the actions are resulting in significant incremental shop visits.
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.
Backlog generally increases with bookings and/or orders 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, and cost underruns on cost-type contracts as discussed further below. We believe bookings are an important measure of future performance for our defense businesses.
Cash Flow - Investing Activities (dollars in millions) 2023 2022 2021 Net cash flows used in investing activities from continuing operations $ (3,039) $ (2,829) $ (1,364) Our investing activities primarily include capital expenditures, cash investments in customer financing assets, investments in and dispositions of businesses, payments related to our collaboration intangible assets and contractual rights to provide product on new aircraft platforms, and settlements of derivative contracts not designated as hedging instruments. 2023 Compared with 2022 Investing Activities The $0.2 billion change in cash flows used in investing activities in 2023 compared to 2022 primarily related to an increase in payments for intangible assets and capital expenditures, both of which are described below, partially offset by the timing of our derivative contract settlements. 2022 Compared with 2021 Investing Activities The $1.5 billion change in cash flows used in investing activities in 2022 compared to 2021 primarily relates to the absence of 2021 investments in and dispositions of businesses, as discussed below.
Cash Flow - Investing Activities (dollars in millions) 2024 2023 2022 Net cash flows used in investing activities from continuing operations $ (1,534) $ (3,039) $ (2,829) Our investing activities primarily include capital expenditures, cash investments in customer financing assets, investments in and dispositions of businesses, payments related to our collaboration intangible assets and contractual rights to provide product on new aircraft platforms, and settlements of derivative contracts not designated as hedging instruments. 2024 Compared with 2023 Investing Activities The $1.5 billion change in cash flows used in investing activities from continuing operations in 2024 compared to 2023 primarily related to the cash proceeds from the sale of our CIS business within our Raytheon segment and the sale of our Goodrich Hoist & Winch business within our Collins segment of approximately $1.3 billion and $0.5 billion, respectively. 2023 Compared with 2022 Investing Activities The $0.2 billion change in cash flows used in investing activities from continuing operations in 2023 compared to 2022 primarily related to an increase in payments for intangible assets discussed below and capital expenditures primarily due to investments in production facilities at Pratt & Whitney and Raytheon, partially offset by the timing of our derivative contract settlements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign 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.
Biggest changeForeign exchange exposures arising from intercompany loan and deposit transactions are also hedged regularly. The present value of aggregate notional principal of our outstanding foreign currency hedges was $17 billion and $16 billion at December 31, 2024 and 2023, respectively . Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
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.
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, 2024 and 2023.
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.
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 $2.75 billion of term loans outstanding, which is affected by changes in market interest rates.
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 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.
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
Currently, we do not hold any derivative contracts that hedge our interest exposures, but may consider such strategies in the future. 64 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 $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.
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 at both December 31, 2024 and 2023, respectively. Such losses or gains would be offset by corresponding gains or losses in the remeasurement of the underlying transactions being hedged.
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.
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, including Pratt & Whitney Canada, a substantial portion of their costs are incurred in local currencies.
At 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.
At Pratt & Whitney Canada 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.

Other RTX 10-K year-over-year comparisons