rtx-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

____________________________________

FORM 10-Q

____________________________________


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

For the quarterly period ended September 30, 2022


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

For the transition period from to

Commission file number 001-00812

____________________________________

RAYTHEON TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________


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


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


(781)			522-3000

(Registrant’s telephone number, including area code)

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

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


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

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

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

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


Large Accelerated Filer	☒	Accelerated Filer	☐

Non-accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐

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

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

At September 30, 2022 there were 1,470,060,775 shares of Common Stock outstanding.

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Quarter Ended September 30, 2022


			Page

PART I – FINANCIAL INFORMATION			4

Item 1. Unaudited Financial Statements:			4

Condensed Consolidated Statement of Operations for the quarters and nine months ended September 30, 2022 and 2021			4

Condensed Consolidated Statement of Comprehensive Income for the quarters and nine months ended September 30, 2022 and 2021			5

Condensed Consolidated Balance Sheet at September 30, 2022 and December 31, 2021			6

Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2022 and 2021			7

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

Notes to Condensed Consolidated Financial Statements			9

Report of Independent Registered Public Accounting Firm			30

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk			51

Item 4. Controls and Procedures			51

PART II – OTHER INFORMATION			53

Item 1. Legal Proceedings			53

Item 1A. Risk Factors			53

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

Item 6. Exhibits			56

SIGNATURES			57

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

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts)	2022		2021		2022		2021
Net Sales:
Products sales	$	12,756	$	12,331	$	36,876	$	36,174
Services sales	4,195		3,882		12,105		11,170
Total net sales	16,951		16,213		48,981		47,344
Costs and Expenses:
Cost of sales - products	10,493		10,296		30,353		30,267
Cost of sales - services	2,971		2,793		8,527		8,014
Research and development	662		676		1,995		1,922
Selling, general and administrative	1,391		1,229		4,284		3,817
Total costs and expenses	15,517		14,994		45,159		44,020

Other income, net	46		124		91		314
Operating profit	1,480		1,343		3,913		3,638
Non-operating expense (income), net
Non-service pension income	(468)		(491)		(1,422)		(1,472)
Interest expense, net	311		358		958		1,046
Total non-operating expense (income), net	(157)		(133)		(464)		(426)
Income from continuing operations before income taxes	1,637		1,476		4,377		4,064
Income tax expense	242		3		518		690
Net income from continuing operations	1,395		1,473		3,859		3,374
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations	8		73		65		162
Income from continuing operations attributable to common shareowners	1,387		1,400		3,794		3,212






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

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

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)


	Quarter Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2022		2021		2022		2021
Net income from continuing and discontinued operations	$	1,395	$	1,466	$	3,840	$	3,340
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(1,050)		(321)		(1,998)		(239)
Pension and postretirement benefit plans adjustments	48		86		116		190
Change in unrealized cash flow hedging	(251)		(167)		(396)		(139)
Other comprehensive income (loss), before tax	(1,253)		(402)		(2,278)		(188)
Income tax (expense) benefit related to items of other comprehensive income (loss)	62		18		71		(17)
Other comprehensive loss, net of tax	(1,191)		(384)		(2,207)		(205)
Comprehensive income	204		1,082		1,633		3,135
Less: Comprehensive income attributable to noncontrolling interest	8		73		65		162
Comprehensive income attributable to common shareowners	$	196	$	1,009	$	1,568	$	2,973

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


(dollars in millions)	September 30, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	5,381	$	7,832
Accounts receivable, net	9,233		9,661
Contract assets	12,297		11,361
Inventory, net	10,443		9,178

Other assets, current	4,467		4,018
Total current assets	41,821		42,050
Customer financing assets	2,618		2,848
Fixed assets	28,201		27,637
Accumulated depreciation	(13,533)		(12,665)
Fixed assets, net	14,668		14,972
Operating lease right-of-use assets	1,802		1,958
Goodwill	53,168		54,436
Intangible assets, net	37,046		38,516
Other assets	7,102		6,624
Total assets	$	158,225	$	161,404
Liabilities, Redeemable Noncontrolling Interest and Equity
Current Liabilities
Short-term borrowings	$	2,195	$	134
Accounts payable	9,017		8,751
Accrued employee compensation	2,390		2,658
Other accrued liabilities	11,210		10,162
Contract liabilities	13,368		13,720

Long-term debt currently due	193		24
Total current liabilities	38,373		35,449
Long-term debt	31,059		31,327
Operating lease liabilities, non-current	1,539		1,657
Future pension and postretirement benefit obligations	7,362		7,855
Other long-term liabilities	8,124		10,417
Total liabilities	86,457		86,705
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest	33		35
Shareowners’ Equity:
Common stock	37,829		37,483
Treasury stock	(15,141)		(12,727)
Retained earnings	51,652		50,265
Unearned ESOP shares	(31)		(38)
Accumulated other comprehensive loss	(4,122)		(1,915)
Total shareowners’ equity	70,187		73,068
Noncontrolling interest	1,548		1,596
Total equity	71,735		74,664
Total liabilities, redeemable noncontrolling interest and equity	$	158,225	$	161,404

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


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

Change in:
Accounts receivable	321		(397)
Contract assets	(999)		(1,117)
Inventory	(1,434)		(57)
Other current assets	(584)		(275)
Accounts payable and accrued liabilities	1,298		425
Contract liabilities	(284)		83


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

Customer financing assets receipts, net	25		24
Increase in collaboration intangible assets	(169)		(138)
(Payments) receipts from settlements of derivative contracts, net	(259)		42
Other investing activities, net	(83)		45
Net cash flows used in investing activities from continuing operations	(1,891)		(139)
Financing Activities:
Issuance of long-term debt	—		1,981
Repayment of long-term debt	(2)		(2,547)

Change in commercial paper, net (Note 8)	2,067		—
Change in other short-term borrowings, net	(14)		(41)
Dividends paid on common stock	(2,337)		(2,212)
Repurchase of common stock	(2,395)		(2,000)
Net transfers to discontinued operations	—		(27)
Other financing activities, net	(329)		(336)
Net cash flows used in financing activities from continuing operations	(3,010)		(5,182)
Discontinued Operations:
Net cash used in operating activities	—		(27)
Net cash used in investing activities	—		—
Net cash provided by financing activities	—		27



Net cash used in discontinued operations	—		—
Effect of foreign exchange rate changes on cash and cash equivalents	(57)		10

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

Cash, cash equivalents and restricted cash, end of period	5,435		7,502
Less: Restricted cash, included in other assets	54		26

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

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 September 30,				Nine Months Ended September 30,
(dollars in millions, except per share amounts; shares in thousands)	2022		2021		2022		2021
Equity beginning balance	$	71,990	$	72,721	$	74,664	$	73,852
Common Stock
Beginning balance	37,673		37,183		37,483		36,930
Common stock plans activity	156		160		359		413
Purchase of subsidiary shares from noncontrolling interest, net	—		—		(13)		—
Ending balance	37,829		37,343		37,829		37,343
Treasury Stock
Beginning balance	(14,539)		(11,424)		(12,727)		(10,407)

Common stock repurchased	(602)		(982)		(2,414)		(2,002)
Other	—		8		—		11
Ending balance	(15,141)		(12,398)		(15,141)		(12,398)
Retained Earnings
Beginning balance	50,271		48,954		50,265		49,423
Net income	1,387		1,393		3,775		3,178
Dividends on common stock	5		3		(2,337)		(2,212)
Dividends on ESOP common stock	—		—		(40)		(37)


Other	(11)		(7)		(11)		(9)
Ending balance	51,652		50,343		51,652		50,343
Unearned ESOP Shares
Beginning balance	(33)		(43)		(38)		(49)
Common stock plans activity	2		2		7		8
Ending balance	(31)		(41)		(31)		(41)
Accumulated Other Comprehensive Loss
Beginning balance	(2,931)		(3,555)		(1,915)		(3,734)
Other comprehensive loss, net of tax	(1,191)		(384)		(2,207)		(205)

Ending balance	(4,122)		(3,939)		(4,122)		(3,939)
Noncontrolling Interest
Beginning balance	1,549		1,606		1,596		1,689
Net income	8		73		65		162
Less: Redeemable noncontrolling interest net income	(3)		(2)		(6)		(5)

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

Ending balance	1,548		1,629		1,548		1,629
Equity at September 30	$	71,735	$	72,937	$	71,735	$	72,937
Supplemental share information
Shares of common stock issued under employee plans, net	189		240		2,469		1,516
Shares of common stock repurchased	6,642		11,535		25,688		24,177
Dividends declared per share of common stock	$	—	$	—	$	1.610	$	1.495

See accompanying Notes to Condensed Consolidated Financial Statements

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RAYTHEON TECHNOLOGIES CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The Condensed Consolidated Financial Statements at September 30, 2022 and for the quarters and nine months ended September 30, 2022 and 2021 are unaudited, and in the opinion of management include adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the financial statements and notes in our 2021 Annual Report on Form 10-K.

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

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

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

COVID-19 Pandemic. The coronavirus disease 2019 (COVID-19) pandemic continues to negatively affect the global economy, our business and operations, supply chains, and the industries in which we operate. However, we continue to see signs of ongoing recovery in commercial air travel. While we believe that the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, there continues to be uncertainty with respect to when commercial air traffic capacity will fully return to and/or exceed pre-COVID-19 levels. Our expectations regarding the COVID-19 pandemic and ongoing recovery and their potential financial impact are based on available information and assumptions that we believe are reasonable at this time; however, the actual financial impact is highly uncertain and subject to a wide range of factors and future developments.

Note 2: Acquisitions, Dispositions, Goodwill and Intangible Assets

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

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

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

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

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


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

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


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


Collaboration assets	$	5,480	$	(1,335)	$	5,319	$	(1,173)
Exclusivity assets	2,807		(320)		2,673		(318)
Developed technology and other	1,186		(510)		1,214		(466)
Customer relationships	29,649		(8,510)		29,982		(7,411)
	39,122		(10,675)		39,188		(9,368)
Unamortized:
Trademarks and other	8,599		—		8,696		—
Total	$	47,721	$	(10,675)	$	47,884	$	(9,368)

Amortization of intangible assets for the quarters and nine months ended September 30, 2022 and 2021 were $497 million and $1,451 million and $622 million and $1,820 million, respectively. The following is the expected amortization of intangible assets for the remainder of 2022 through 2027:


(dollars in millions)	Remaining 2022		2023		2024		2025	2026	2027
Amortization expense	$	487	$	2,084	$	2,206	$