UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 ____________________________________ 

FORM 10-Q

____________________________________ 

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from                  to                 

Commission file number 001-00812

____________________________________ 

RAYTHEON TECHNOLOGIES CORPORATION

____________________________________ 

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

870 Winter Street, Waltham, Massachusetts 02451

(Address of principal executive offices, including zip code)

(781) 522-3000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($1 par value)	RTX	New York Stock Exchange
(CUSIP 75513E 101)
2.150% Notes due 2030	RTX 30	New York Stock Exchange
(CUSIP 75513E AB7)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒.    No  ☐.

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

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐.    No  ☒.

At March 31, 2021 there were 1,515,089,870 shares of Common Stock outstanding.

2

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Quarter Ended March 31, 2021

	Page
PART I – FINANCIAL INFORMATION	4
Item 1. Unaudited Financial Statements:	4
Condensed Consolidated Statement of Operations for the quarters ended March 31, 2021 and 2020	4
Condensed Consolidated Statement of Comprehensive Income (Loss) for the quarters ended March 31, 2021 and 2020	5
Condensed Consolidated Balance Sheet at March 31, 2021 and December 31, 2020	6
Condensed Consolidated Statement of Cash Flows for the quarters ended March 31, 2021 and 2020	7
Condensed Consolidated Statement of Changes in Equity for the quarters ended March 31, 2021 and 2020	8
Notes to Condensed Consolidated Financial Statements	9
Report of Independent Registered Public Accounting Firm	35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3. Quantitative and Qualitative Disclosures About Market Risk	53
Item 4. Controls and Procedures	53
PART II – OTHER INFORMATION	55
Item 1. Legal Proceedings	55
Item 1A. Risk Factors	55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 6. Exhibits	57
SIGNATURES	58

Raytheon Technologies Corporation and its subsidiaries’ names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of Raytheon Technologies Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. References to internet web sites in this Form 10-Q are provided for convenience only. Information available through these web sites is not incorporated by reference into this Form 10-Q.

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PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited) 

	Quarter Ended March 31,
(dollars in millions, except per share amounts)	2021		2020
Net Sales:
Product sales	$	11,664	$	8,165
Service sales	3,587		3,195
Total Net Sales	15,251		11,360
Costs and Expenses:
Cost of sales - products	9,974		6,629
Cost of sales - services	2,563		1,943
Research and development	589		535
Selling, general and administrative	1,220		977
Total Costs and Expenses	14,346		10,084
Other income, net	108		19
Operating profit	1,013		1,295
Non-operating expense (income), net
Non-service pension benefit	(491)		(168)
Interest expense, net	346		332
Total non-operating expense (income), net	(145)		164
Income from continuing operations before income taxes	1,158		1,131
Income tax expense	345		639
Net income from continuing operations	813		492
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations	41		54
Income from continuing operations attributable to common shareowners	772		438
Discontinued operations (Note 3):
Loss from discontinued operations, before tax	(20)		(176)
Income tax (benefit) expense from discontinued operations	(1)		302
Net loss from discontinued operations	(19)		(478)
Less: Noncontrolling interest in subsidiaries’ earnings from discontinued operations	—		43
Loss from discontinued operations attributable to common shareowners	(19)		(521)
Net income (loss) attributable to common shareowners	$	753	$	(83)
Earnings (loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations	$	0.51	$	0.51
Loss from discontinued operations	(0.01)		(0.61)
Net income (loss) attributable to common shareowners	$	0.50	$	(0.10)
Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations	$	0.51	$	0.50
Loss from discontinued operations	(0.01)		(0.60)
Net income (loss) attributable to common shareowners	$	0.50	$	(0.10)

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Quarter Ended March 31,
(dollars in millions)	2021		2020
Net income from continuing and discontinued operations	$	794	$	14
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(176)		(1,453)
Pension and postretirement benefit plans adjustments	54		110
Change in unrealized cash flow hedging	(60)		(374)
Other comprehensive income (loss), before tax	(182)		(1,717)
Income tax (expense) benefit related to items of other comprehensive income (loss)	(5)		70
Other comprehensive income (loss), net of tax	(187)		(1,647)
Comprehensive income (loss)	607		(1,633)
Less: Comprehensive income attributable to noncontrolling interest	41		91
Comprehensive income (loss) attributable to common shareowners	$	566	$	(1,724)

See accompanying Notes to Condensed Consolidated Financial Statements

5

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(dollars in millions)	March 31, 2021		December 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	8,579	$	8,802
Accounts receivable, net	10,037		9,254
Contract assets	10,238		9,931
Inventory, net	9,498		9,411
Other assets, current	4,200		5,978
Total Current Assets	42,552		43,376
Customer financing assets	3,079		3,144
Fixed assets	26,554		26,346
Accumulated depreciation	(11,812)		(11,384)
Fixed assets, net	14,742		14,962
Operating lease right-of-use assets	1,913		1,880
Goodwill	54,265		54,285
Intangible assets, net	39,999		40,539
Other assets	4,058		3,967
Total Assets	$	160,608	$	162,153
Liabilities, Redeemable Noncontrolling Interest and Equity
Current Liabilities
Short-term borrowings	$	234	$	247
Accounts payable	9,182		8,639
Accrued employee compensation	2,511		3,006
Other accrued liabilities	10,184		10,517
Contract liabilities	12,879		12,889
Long-term debt currently due	1,369		550
Total Current Liabilities	36,359		35,848
Long-term debt	29,935		31,026
Operating lease liabilities, non-current	1,552		1,516
Future pension and postretirement benefit obligations	9,808		10,342
Other long-term liabilities	9,612		9,537
Total Liabilities	87,266		88,269
Commitments and contingencies (Note 17)
Redeemable noncontrolling interest	34		32
Shareowners’ Equity:
Common Stock	36,997		36,930
Treasury Stock	(10,780)		(10,407)
Retained earnings	49,460		49,423
Unearned ESOP shares	(46)		(49)
Accumulated other comprehensive loss	(3,921)		(3,734)
Total Shareowners’ Equity	71,710		72,163
Noncontrolling interest	1,598		1,689
Total Equity	73,308		73,852
Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	160,608	$	162,153

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Quarter Ended March 31,
(dollars in millions)	2021		2020
Operating Activities:
Net income from continuing operations	$	813	$	492
Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:
Depreciation and amortization	1,123		728
Deferred income tax provision	153		392
Stock compensation cost	84		63
Net periodic pension and other postretirement income	(358)		(130)
Change in:
Accounts receivable	(799)		390
Contract assets	(311)		(349)
Inventory	(113)		(395)
Other current assets	(193)		(208)
Accounts payable and accrued liabilities	538		612
Contract liabilities	(56)		(101)
Global pension contributions	(7)		(8)
Other operating activities, net	(151)		(354)
Net cash flows provided by operating activities from continuing operations	723		1,132
Investing Activities:
Capital expenditures	(387)		(325)
Investments in businesses	(6)		—
Dispositions of businesses, net of cash transferred (Note 2)	1,049		—
Increase in customer financing assets, net	(81)		(88)
Increase in collaboration intangible assets	(32)		(78)
Receipts (payments) from settlements of derivative contracts, net	49		(524)
Other investing activities, net	(10)		(25)
Net cash flows provided by (used in) investing activities from continuing operations	582		(1,040)
Financing Activities:
Distribution from discontinued operations	—		17,207
Repayment of long-term debt	(286)		(13,810)
Decrease in short-term borrowings, net	(13)		(663)
Proceeds from Common Stock issued under employee stock plans	1		6
Dividends paid on Common Stock	(705)		(614)
Repurchase of Common Stock	(375)		(47)
Net transfers to discontinued operations	(5)		(1,016)
Other financing activities, net	(161)		(23)
Net cash flows (used in) provided by financing activities from continuing operations	(1,544)		1,040
Discontinued Operations:
Net cash used in operating activities	(5)		(472)
Net cash used in investing activities	—		(241)
Net cash provided by financing activities	5		322
Net cash used in discontinued operations	—		(391)
Effect of foreign exchange rate changes on cash and cash equivalents from continuing operations	23		(19)
Effect of foreign exchange rate changes on cash and cash equivalents from discontinued operations	—		(76)
Net (decrease) increase in cash, cash equivalents and restricted cash	(216)		646
Cash, cash equivalents and restricted cash, beginning of period	8,832		4,961
Cash, cash equivalents and restricted cash within assets related to discontinued operations, beginning of period	—		2,459
Cash, cash equivalents and restricted cash, end of period	8,616		8,066
Less: Restricted cash, included in Other assets	37		48
Less: Cash, cash equivalents and restricted cash for discontinued operations	—		1,993
Cash and cash equivalents, end of period	$	8,579	$	6,025

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

	Quarter Ended March 31,
(dollars in millions, except per share amounts; shares in thousands)	2021		2020
Equity beginning balance	$	73,852	$	44,231
Common Stock
Beginning balance	36,930		23,019
Common Stock plans activity	67		81
Purchase of subsidiary shares from noncontrolling interest, net	—		(1)
Ending balance	36,997		23,099
Treasury Stock
Beginning balance	(10,407)		(32,626)
Common Stock plans activity	—		4
Common Stock repurchased	(375)		(43)
Other	2		—
Ending balance	(10,780)		(32,665)
Retained Earnings
Beginning balance	49,423		61,594
Net income (loss)	753		(83)
Dividends on Common Stock	(705)		(614)
Dividends on ESOP Common Stock	(11)		(17)
Redeemable noncontrolling interest fair value adjustment	—		1
Other, including the adoption impact of ASU 2016-13 (Note 21)	—		(55)
Ending balance	49,460		60,826
Unearned ESOP Shares
Beginning balance	(49)		(64)
Common Stock plans activity	3		3
Ending balance	(46)		(61)
Accumulated Other Comprehensive Income (Loss)
Beginning balance	(3,734)		(10,149)
Other comprehensive income (loss), net of tax	(187)		(1,639)
Ending balance	(3,921)		(11,788)
Noncontrolling Interest
Beginning balance	1,689		2,457
Net Income	41		97
Less: Redeemable noncontrolling interest net income	(2)		—
Other comprehensive income (loss), net of tax	—		(6)
Dividends attributable to noncontrolling interest	(130)		(58)
Capital contributions	—		34
Ending balance	1,598		2,524
Equity at March 31	$	73,308	$	41,935
Supplemental share information
Shares of Common Stock issued under employee plans, net	1,043		2,050
Shares of Common Stock repurchased	5,197		330
Dividends per share of Common Stock	$	0.475	$	0.735

See accompanying Notes to Condensed Consolidated Financial Statements

8

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The Condensed Consolidated Financial Statements at March 31, 2021 and for the quarters ended March 31, 2021 and 2020 are unaudited, and in the opinion of management include adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the financial statements and notes in our 2020 Annual Report on Form 10-K. In addition, we reclassified certain amounts to conform to our current period presentation.

Separation Transactions, Distributions and Raytheon Merger. On April 3, 2020, United Technologies Corporation (UTC) completed the separation of its business into three independent, publicly traded companies – UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis) (the Separation Transactions). UTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares of Otis common stock to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the distributions (the Distributions) effective at 12:01 a.m., Eastern Time, on April 3, 2020. Immediately following the Separation Transactions and Distributions, on April 3, 2020, UTC and Raytheon Company completed their all-stock merger of equals transaction (the Raytheon Merger), pursuant to which Raytheon Company became a wholly-owned subsidiary of UTC and UTC was renamed Raytheon Technologies Corporation. As a result of these transactions, we now operate in four principal business segments: Collins Aerospace Systems (Collins Aerospace), Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).

UTC was determined to be the accounting acquirer in the Raytheon Merger, and, as a result, the financial statements of Raytheon Technologies include Raytheon Company’s financial position and results of operations for all periods subsequent to the completion of the Raytheon Merger on April 3, 2020. RIS and RMD follow a 4-4-5 fiscal calendar with a quarter end of April 4, 2021 while Collins Aerospace and Pratt & Whitney continue to use a quarter calendar end of March 31, 2021. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarter ended March 31 with respect to RIS or RMD, we are referring to their April 4, 2021 fiscal quarter end. The historical results of Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

Unless the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” “Raytheon Technologies,” and “RTC” mean United Technologies Corporation and its subsidiaries when referring to periods prior to the Raytheon Merger and to the combined company, Raytheon Technologies Corporation, when referring to periods after the Raytheon Merger. Unless the context otherwise requires, the terms “Raytheon Company,” or “Raytheon” mean Raytheon Company and its subsidiaries prior to the Raytheon Merger.

COVID-19 Pandemic. In 2020, the coronavirus disease 2019 (COVID-19) negatively impacted both the U.S. and global economy and our business and operations and the industries in which we operate. The continued disruption to air travel and commercial activities and the significant restrictions and limitations on businesses, particularly within the aerospace and commercial airline industries, have negatively impacted global supply, demand and distribution capabilities. In particular, the unprecedented decrease in air travel resulting from the COVID-19 pandemic has adversely affected our airline and airframer customers, and their demand for the products and services of our Collins Aerospace and Pratt & Whitney businesses. We continue to monitor these trends and are working closely with our customers to actively mitigate costs and adjust production schedules to accommodate these declines in demand. Our RIS and RMD businesses, although experiencing minor impacts, have not experienced significant business disruptions as a result of the COVID-19 pandemic.

Given the significant reduction in business and leisure passenger air travel, the number of planes temporarily grounded, and continued travel restrictions that have resulted from the ongoing COVID-19 pandemic, and the resulting impacts on our customers and their business activities, we expect our future operating results, particularly those of our Collins Aerospace and Pratt & Whitney businesses, to continue to be negatively impacted when compared to pre-COVID-19 results. Our expectations regarding the COVID-19 pandemic and its potential financial impact are based on available information and assumptions that we believe are reasonable at this time; however, the actual financial impact is highly uncertain and subject to a wide range of factors and future developments. While we believe that the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, there is significant uncertainty with respect to the point at which commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels. While we have begun to see some indications that

9

commercial air travel is recovering in certain areas of demand, other areas continue to lag. As a result, we continue to estimate that a full recovery may occur in 2023 or 2024. New information may emerge concerning the scope, severity and duration of the COVID-19 pandemic, as well as any worsening of the pandemic, the effect of mutating strains and whether additional outbreaks of the pandemic will continue to occur, actions to contain the pandemic’s spread or treat its impact, continued availability of vaccines, and their distribution, acceptance and efficacy, and governmental, business and individual personal actions taken in response to the pandemic (including restrictions and limitations on travel and transportation, and changes in leisure and business travel patterns and work environments) among others. Some of these actions and related impacts may be trends that continue in the future even after the pandemic no longer poses a significant public health risk.

Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets

Business Acquisitions. As described above, on April 3, 2020, pursuant to the Agreement and Plan of Merger dated June 9, 2019, as amended (the Raytheon Merger Agreement) UTC and Raytheon Company completed their previously announced all-stock merger of equals, following the completion by UTC of the Separation Transactions and Distributions. Raytheon Company (previously New York Stock Exchange (NYSE): RTN) shares ceased trading prior to the market open on April 3, 2020, and each share of Raytheon common stock was converted in the merger into the right to receive 2.3348 shares of UTC common stock previously traded on the NYSE under the ticker symbol “UTX.” Upon closing of the Raytheon Merger, UTC’s name was changed to “Raytheon Technologies Corporation,” and its shares of common stock began trading as of April 3, 2020 on the NYSE under the ticker symbol “RTX.”

Total consideration is calculated as follows:

(dollars in millions)	Amount
Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards	$	33,067
Fair value attributable to pre-merger service for replacement equity awards	99
Total merger consideration	$	33,166

The fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards is calculated as follows:

(dollars and shares, in millions, except per share amounts and exchange ratio)	Amount
Number of Raytheon Company common shares outstanding as of April 3, 2020	277.3
Number of Raytheon Company stock awards vested as a result of the Raytheon Merger (1)	0.4
Total outstanding shares of Raytheon Company common stock and equity awards entitled to merger consideration	277.7
Exchange ratio (2)	2.3348
Shares of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards	648.4
Price per share of RTC common stock (3)	$	51.00
Fair value of RTC common stock issued for Raytheon Company outstanding common stock and vested equity awards	$	33,067

(1)    Represents Raytheon Company stock awards that vested as a result of the Raytheon Merger, which is considered a “change in control” for purposes of the Raytheon 2010 Stock Plan. Certain Raytheon Company restricted stock awards and Raytheon Company restricted stock unit (RSU) awards, issued under the Raytheon 2010 Stock Plan vested on an accelerated basis as a result of the Raytheon Merger. Such vested awards were converted into the right to receive RTC common stock determined as the product of (1) the number of vested awards, and (2) the exchange ratio.

(2)    The exchange ratio is equal to 2.3348 shares of UTC common stock for each share of Raytheon Company common stock in accordance with the Raytheon Merger Agreement.

(3)    The price per share of RTC common stock is based on the RTC opening stock price as of April 3, 2020.

Allocation of Consideration Transferred to Net Assets Acquired. We accounted for the Raytheon Merger under the acquisition method and are required to measure identifiable assets acquired and liabilities assumed of the acquiree (Raytheon Company) at the fair values on the closing date. During the first quarter of 2021, based on the finalization of our valuation and internal reviews, we completed the purchase price allocation which resulted in a net increase to goodwill of $61 million during the quarter.

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The final purchase price allocation, net of cash acquired, for the acquisition was as follows:

(dollars in millions)
Cash and cash equivalents	$	3,208
Accounts receivable	1,997
Inventory	705
Contract assets	6,023
Other assets, current	940
Fixed assets	4,745
Operating lease right-of-use assets	950
Intangible assets:	19,130
Customer relationships	12,900
Tradenames/trademarks	5,430
Developed technology	800
Other assets	1,218
Total identifiable assets acquired	38,916
Accounts payable	1,477
Accrued employee compensation	1,492
Other accrued liabilities	1,921
Contract liabilities	3,002
Long-term debt, including current portion	4,700
Operating lease liabilities, non-current portion	738
Future pension and postretirement benefit obligation	11,607
Other long-term liabilities	2,368
Total liabilities acquired	27,305
Total identifiable net assets	11,611
Goodwill	21,589
Redeemable noncontrolling interest	(34)
Total consideration transferred	$	33,166

Fair value adjustments to Raytheon Company’s identified assets and liabilities included an increase in fixed assets of $1.1 billion and an increase to future pension and postretirement benefit obligations of $3.6 billion, primarily related to remeasurement of the liability based on market conditions on the Raytheon Merger closing date. For further information, see “Note 10: Employee Benefit Plans.” In determining the fair value of identifiable assets acquired and liabilities assumed, a review was conducted for any significant contingent assets or liabilities existing as of the closing date. The assessment did not note any material contingencies related to existing legal or government action.

The fair values of the customer relationship intangible assets were determined by using a discounted cash flow valuation method, which is a form of the income approach. Under this approach, the estimated future cash flows attributable to the asset are adjusted to exclude the future cash flows that can be attributed to supporting assets, such as trade names or fixed assets. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant future cash flows, which require significant management judgement, included forecasted revenue growth rates, remaining developmental effort, operational performance including company specific synergies, program life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where appropriate, the net cash flows are probability-adjusted to reflect the uncertainties associated with the underlying assumptions, including cancellation rates related to backlog, government demand for sole-source and recompete contracts and win rates for recompete contracts, as well as the risk profile of the net cash flows utilized in the valuation. The probability-adjusted future cash flows are then discounted to present value, using an appropriate discount rate that requires significant judgment by management. The customer relationship intangible assets are being amortized based on the pattern of economic benefits we expect to realize over the estimated economic life of the underlying programs. The fair value of the tradename intangible assets were determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the tradename and discounted to present value, using forecasted revenue growth rate projections and a discount rate, respectively, that requires significant judgment by management. The tradename intangible assets have been determined to have an indefinite life. The developed technology intangible assets are being amortized based on the pattern of economic benefits.

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The intangible assets included above consist of the following:

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

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

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

Merger-Related Costs. Merger-related costs have been expensed as incurred. In the quarters ended March 31, 2021 and 2020, we recorded $17 million and $29 million, respectively, of transaction and integration costs, which are included in Selling, general and administrative expenses within the Condensed Consolidated Statement of Operations.

Supplemental Pro-Forma Data. Raytheon Company’s results of operations have been included in RTC’s financial statements for the period subsequent to the completion of the Raytheon Merger on April 3, 2020. The following unaudited supplemental pro-forma data presents consolidated information as if the Raytheon Merger had been completed on January 1, 2019. The pro-forma results were calculated by combining the results of Raytheon Technologies with the stand-alone results of Raytheon Company for the pre-acquisition periods, which were adjusted to account for certain costs that would have been incurred during this pre-acquisition period. The results below reflect Raytheon Technologies on a continuing operations basis, in order to more accurately represent the structure of Raytheon Technologies after completion of the Separation Transactions, the Distributions and the Raytheon Merger.

	Quarter Ended March 31,
(dollars in millions, except per share amounts)		2020
Net sales		$	18,451
Income from continuing operations attributable to common shareowners		1,239
Basic earnings per share of common stock from continuing operations		$	0.82
Diluted earnings per share of common stock from continuing operations		0.82

The unaudited supplemental pro-forma data above includes the following significant adjustments made to account for certain costs which would have been incurred if the acquisition had been completed on January 1, 2019, as adjusted for the applicable tax impact.

	Quarter Ended March 31,
(dollars in millions)		2020
Amortization of acquired Raytheon Company intangible assets, net (1)		$	(270)
Amortization of fixed asset fair value adjustment (2)		(9)
Utilization of contractual customer obligation (3)		8
Deferred revenue fair value adjustment (4)		(4)
Adjustment to non-service pension (income) expense (5)		239
RTC/Raytheon fees for advisory, legal, accounting services (6)		35
Adjustment to interest expense related to the Raytheon Merger, net (7)		9
Elimination of deferred commission amortization (8)		5
		$	13

(1)    Reflects the additional amortization of the acquired Raytheon Company’s intangible assets recognized at fair value in purchase accounting and eliminates the historical Raytheon Company intangible asset amortization expense.

(2)    Reflects the amortization of the fixed asset fair value adjustment as of the acquisition date.

(3)    Reflects the additional amortization of liabilities recognized for certain acquired loss making contracts as of the acquisition date.

(4)    Reflects the difference between prepayments related to extended arrangements and the fair value of the assumed performance obligations as they are satisfied.

(5)    Represents the elimination of unamortized prior service costs and actuarial losses, as a result of fair value purchase accounting.

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(6)    Reflects the elimination of transaction-related fees incurred by RTC and Raytheon Company in connection with the Raytheon Merger and assumes all of the fees were incurred during the first quarter of 2019.

(7)    Reflects the amortization of the fair market value adjustment related to Raytheon Company.

(8)    Reflects the elimination of amortization recognized on deferred commissions that are eliminated in purchase accounting.

The unaudited supplemental pro-forma financial information does not reflect the potential realization of cost savings related to the integration of the two companies. Further, the pro-forma data should not be considered indicative of the results that would have occurred if the acquisition had been consummated on January 1, 2019, nor are they indicative of future results.

Dispositions. As discussed further in “Note 3: Discontinued Operations,” on April 2, 2020, Carrier and Otis entered into a Separation and Distribution Agreement with UTC (since renamed Raytheon Technologies Corporation), pursuant to which, among other things, UTC agreed to separate into three independent, publicly traded companies – UTC, Carrier and Otis and distribute all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020. UTC distributed 866,158,910 and 433,079,455 shares of common stock of Carrier and Otis, respectively in the Distributions. As a result of the Distributions, Carrier and Otis are now independent publicly traded companies.

In October 2020, we entered into a definitive agreement to sell our Forcepoint business, which we completed on January 8, 2021, for proceeds of $1.0 billion, net of cash transferred. At December 31, 2020, the related assets of approximately $1.9 billion and liabilities of approximately $855 million were accounted for as held for sale at fair value less cost to sell; however, Forcepoint did not qualify for presentation as discontinued operations. These held for sale assets and liabilities are presented in Other assets, current and Other accrued liabilities, respectively, on our December 31, 2020 Condensed Consolidated Balance Sheet. Assets held for sale included $1.4 billion of goodwill and intangible assets. A further breakout of major classes of assets and liabilities has not been provided as the assets and liabilities held for sale are not material. We did not recognize a pre-tax gain or loss within the Condensed Consolidated Statement of Operations related to the sale of Forcepoint. The results of Forcepoint were included in Eliminations and other in our segment results.

Goodwill. Changes in our goodwill balances for the quarter ended March 31, 2021 were as follows:

(dollars in millions)	Balance as of January 1, 2021		Acquisitions and Divestitures		Foreign Currency Translation and Other		Balance as of March 31, 2021
Collins Aerospace Systems	$	31,571	$	—	$	(98)	$	31,473
Pratt & Whitney	1,563		—		—		1,563
Raytheon Intelligence & Space(1)	9,522		30		—		9,552
Raytheon Missiles & Defense(1)	11,608		52		—		11,660
Total Segments	54,264		82		(98)		54,248
Eliminations and other	21		—		(4)		17
Total	$	54,285	$	82	$	(102)	$	54,265

(1)    In connection with the previously announced January 1, 2021 reorganization of RIS and RMD, goodwill of $282 million was allocated from RMD to RIS on a relative fair value basis and is reflected in the revised balances at January 1, 2021.

The Company reviews goodwill for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired.

In the first quarter of 2020, the company considered the deterioration in general economic and market conditions due to the COVID-19 pandemic to be a triggering event requiring us to reassess our goodwill and intangibles valuations as well as significant assumptions of future income from our underlying assets and potential changes in our liabilities, which resulted in no impairment to our goodwill at that time. We did not have a triggering event in the first quarter of 2021.

The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining the fair value of goodwill, including long-term revenue growth projections, profitability, discount rates, including changes to U.S. treasury rates and equity risk premiums, recent market valuations from transactions by comparable companies, volatility in the Company’s market capitalization, and general industry, market and macro-economic conditions. It is possible that future changes in such circumstances, including significant future negative developments in the COVID-19 pandemic, or future changes in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of our reporting units, including the expected long-term recovery of airline travel to pre-COVID-19 levels, would require the Company to record a non-cash impairment charge.

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

	March 31, 2021				December 31, 2020
(dollars in millions)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Amortized:
Patents and trademarks	$	48	$	(36)	$	48	$	(35)
Collaboration assets	5,047		(1,042)		5,021		(1,024)
Exclusivity assets	2,581		(305)		2,541		(295)
Developed technology and other	928		(364)		906		(316)
Customer relationships	30,237		(5,804)		30,241		(5,262)
	$	38,841	$	(7,551)	$	38,757	$	(6,932)
Unamortized:
Trademarks and other	8,709		—		8,714		—
Total	$	47,550	$	(7,551)	$	47,471	$	(6,932)

Intangible assets are tested for impairment when events occur that indicate that the net book value may not be recovered from future cash flows. Given the deterioration in general economic and market conditions primarily due to the COVID-19 pandemic, we performed an assessment of our unamortized intangible assets in the first quarter of 2020 and recorded a charge of $40 million related to the impairment of a Collins Aerospace indefinite-lived tradename intangible assets. We will continue to evaluate the impact on our customers and our business in future periods which may result in a different conclusion.

Amortization of intangible assets for the quarters ended March 31, 2021 and 2020 were $596 million and $307 million, respectively. The following is the expected amortization of intangible assets for the years 2021 through 2026. 

(dollars in millions)	Remaining 2021		2022		2023		2024		2025		2026
Amortization expense	$	1,862	$	1,953	$	2,078	$	2,139	$	2,034	$	1,974

Note 3: Discontinued Operations

As discussed above, on April 2, 2020, Carrier and Otis entered into a Separation and Distribution Agreement with UTC (since renamed Raytheon Technologies Corporation), pursuant to which, among other things, UTC agreed to separate into three independent, publicly traded companies – UTC, Carrier and Otis and distribute all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020. The Separation Transactions and Distributions were completed on April 3, 2020.

Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Loss from discontinued operations attributable to common shareowners is as follows:

	Quarter Ended March 31,
(dollars in millions)	2021		2020
Otis	$	—	$	187
Carrier	—		196
Separation related transactions (1)	(19)		(904)
Loss from discontinued operations attributable to common shareowners	$	(19)	$	(521)

(1)    Reflects debt extinguishment costs in the quarter ended March 31, 2020 related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Carrier and Otis as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges and benefits related to separation activities.

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The following summarized financial information related to discontinued operations has been reclassified from Income from continuing operations attributable to common shareowners and included in Loss from discontinued operations attributable to common shareowners:

	Quarter Ended March 31,
(dollars in millions)	2021		2020
Otis
Product sales	$	—	$	1,123
Service sales	—		1,843
Cost of products sold	—		913
Cost of services sold	—		1,157
Research and development	—		38
Selling, general and administrative expense	—		450
Other income (expense), net	—		(65)
Non-operating (income) expense, net	—		3
Income from discontinued operations, before tax	—		340
Income tax expense from discontinued operations	—		116
Net income from discontinued operations	—		224