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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 June 30, 2022
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
(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)
870 Winter Street, Waltham, Massachusetts 02451
(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  .


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 June 30, 2022 there were 1,476,514,046 shares of Common Stock outstanding.



2

RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended June 30, 2022
 
  Page
4
4
4
5
6
7
8
9


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.

3

PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements
RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) 
  Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2022 2021 2022 2021
Net Sales:
Products sales $ 12,258  $ 12,179  $ 24,120  $ 23,843 
Services sales 4,056  3,701  7,910  7,288 
Total Net Sales 16,314  15,880  32,030  31,131 
Costs and Expenses:
Cost of sales - products 10,040  9,997  19,860  19,971 
Cost of sales - services 2,816  2,658  5,556  5,221 
Research and development 698  657  1,333  1,246 
Selling, general and administrative 1,424  1,368  2,893  2,588 
Total Costs and Expenses 14,978  14,680  29,642  29,026 
Other income, net 17  82  45  190 
Operating profit 1,353  1,282  2,433  2,295 
Non-operating expense (income), net
Non-service pension income (474) (490) (954) (981)
Interest expense, net 329  342  647  688 
Total non-operating expense (income), net (145) (148) (307) (293)
Income from continuing operations before income taxes 1,498  1,430  2,740  2,588 
Income tax expense 160  342  276  687 
Net income from continuing operations 1,338  1,088  2,464  1,901 
Less: Noncontrolling interest in subsidiaries’ earnings from continuing operations 34  48  57  89 
Income from continuing operations attributable to common shareowners 1,304  1,040  2,407  1,812 
Loss from discontinued operations attributable to common shareowners   (8) (19) (27)
Net income attributable to common shareowners $ 1,304  $ 1,032  $ 2,388  $ 1,785 
Earnings (loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations $ 0.88  $ 0.69  $ 1.62  $ 1.20 
Loss from discontinued operations   —  (0.01) (0.02)
Net income attributable to common shareowners $ 0.88  $ 0.69  $ 1.61  $ 1.18 
Earnings (loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations $ 0.88  $ 0.69  $ 1.61  $ 1.20 
Loss from discontinued operations   (0.01) (0.01) (0.02)
Net income attributable to common shareowners $ 0.88  $ 0.68  $ 1.60  $ 1.18 
See accompanying Notes to Condensed Consolidated Financial Statements

4

RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2022 2021 2022 2021
Net income from continuing and discontinued operations $ 1,338  $ 1,080  $ 2,445  $ 1,874 
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments (708) 258  (948) 82 
Pension and postretirement benefit plans adjustments 47  50  68  104 
Change in unrealized cash flow hedging (182) 88  (145) 28 
Other comprehensive income (loss), before tax (843) 396  (1,025) 214 
Income tax (expense) benefit related to items of other comprehensive income (loss) 27  (30) 9  (35)
Other comprehensive income (loss), net of tax (816) 366  (1,016) 179 
Comprehensive income 522  1,446  1,429  2,053 
Less: Comprehensive income attributable to noncontrolling interest 34  48  57  89 
Comprehensive income attributable to common shareowners $ 488  $ 1,398  $ 1,372  $ 1,964 
See accompanying Notes to Condensed Consolidated Financial Statements

5

RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(dollars in millions) June 30, 2022 December 31, 2021
Assets
Current Assets
Cash and cash equivalents $ 4,767  $ 7,832 
Accounts receivable, net 10,394  9,661 
Contract assets 11,836  11,361 
Inventory, net 10,142  9,178 
Other assets, current 4,323  4,018 
Total Current Assets 41,462  42,050 
Customer financing assets 2,675  2,848 
Fixed assets 27,990  27,637 
Accumulated depreciation (13,249) (12,665)
Fixed assets, net 14,741  14,972 
Operating lease right-of-use assets 1,866  1,958 
Goodwill 53,806  54,436 
Intangible assets, net 37,562  38,516 
Other assets 6,905  6,624 
Total Assets $ 159,017  $ 161,404 
Liabilities, Redeemable Noncontrolling Interest and Equity
Current Liabilities
Short-term borrowings $ 113  $ 134 
Accounts payable 9,732  8,751 
Accrued employee compensation 2,028  2,658 
Other accrued liabilities 12,459  10,162 
Contract liabilities 13,430  13,720 
Long-term debt currently due 26  24 
Total Current Liabilities 37,788  35,449 
Long-term debt 31,274  31,327 
Operating lease liabilities, non-current 1,593  1,657 
Future pension and postretirement benefit obligations 7,543  7,855 
Other long-term liabilities 8,791  10,417 
Total Liabilities 86,989  86,705 
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest 38  35 
Shareowners’ Equity:
Common Stock 37,673  37,483 
Treasury Stock (14,539) (12,727)
Retained earnings 50,271  50,265 
Unearned ESOP shares (33) (38)
Accumulated other comprehensive loss (2,931) (1,915)
Total Shareowners’ Equity 70,441  73,068 
Noncontrolling interest 1,549  1,596 
Total Equity 71,990  74,664 
Total Liabilities, Redeemable Noncontrolling Interest and Equity $ 159,017  $ 161,404 
See accompanying Notes to Condensed Consolidated Financial Statements

6

RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
  Six Months Ended June 30,
(dollars in millions) 2022 2021
Operating Activities:
Net income from continuing operations $ 2,464  $ 1,901 
Adjustments to reconcile net income from continuing operations to net cash flows provided by operating activities:
Depreciation and amortization 2,013  2,255 
Deferred income tax (benefit) provision (1,147) 175 
Stock compensation cost 212  227 
Net periodic pension and other postretirement income (714) (715)
Change in:
Accounts receivable (790) 293 
Contract assets (525) (557)
Inventory (1,033) (133)
Other current assets (353) (258)
Accounts payable and accrued liabilities 2,109  (733)
Contract liabilities (309) (45)
Other operating activities, net (165) (361)
Net cash flows provided by operating activities from continuing operations 1,762  2,049 
Investing Activities:
Capital expenditures (918) (747)
Investments in businesses   (6)
Dispositions of businesses, net of cash transferred (Note 2)
88  1,074 
Customer financing assets payments, net (7) (102)
Increase in collaboration intangible assets (91) (60)
(Payments) receipts from settlements of derivative contracts, net (151) 50 
Other investing activities, net (57) 30 
Net cash flows (used in) provided by investing activities from continuing operations (1,136) 239 
Financing Activities:
Repayment of long-term debt (2) (307)
Change in short-term borrowings, net (17) (51)
Dividends paid on Common Stock (1,543) (1,461)
Repurchase of Common Stock (1,779) (1,007)
Net transfers to discontinued operations   (24)
Other financing activities, net (286) (269)
Net cash flows used in financing activities from continuing operations (3,627) (3,119)
Discontinued Operations:
Net cash used in operating activities   (24)
Net cash used in investing activities   — 
Net cash provided by financing activities   24 
Net cash used in discontinued operations   — 
Effect of foreign exchange rate changes on cash and cash equivalents (20) 79 
Net decrease in cash, cash equivalents and restricted cash (3,021) (752)
Cash, cash equivalents and restricted cash, beginning of period 7,853  8,832 
Cash, cash equivalents and restricted cash, end of period 4,832  8,080 
Less: Restricted cash, included in Other assets 65  29 
Cash and cash equivalents, end of period $ 4,767  $ 8,051 
See accompanying Notes to Condensed Consolidated Financial Statements

7

RAYTHEON TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in thousands) 2022 2021 2022 2021
Equity beginning balance $ 73,986  $ 73,308  $ 74,664  $ 73,852 
Common Stock
Beginning balance 37,504  36,997  37,483  36,930 
Common Stock plans activity 169  186  203  253 
Purchase of subsidiary shares from noncontrolling interest, net   —  (13) — 
Ending balance 37,673  37,183  37,673  37,183 
Treasury Stock
Beginning balance (13,483) (10,780) (12,727) (10,407)
Common Stock repurchased (1,056) (645) (1,812) (1,020)
Other    
Ending balance (14,539) (11,424) (14,539) (11,424)
Retained Earnings
Beginning balance 50,592  49,460  50,265  49,423 
Net income 1,304  1,032  2,388  1,785 
Dividends on Common Stock (1,597) (1,510) (2,342) (2,215)
Dividends on ESOP Common Stock (27) (26) (40) (37)
Other (1) (2)   (2)
Ending balance 50,271  48,954  50,271  48,954 
Unearned ESOP Shares
Beginning balance (36) (46) (38) (49)
Common Stock plans activity 3  5 
Ending balance (33) (43) (33) (43)
Accumulated Other Comprehensive Loss
Beginning balance (2,115) (3,921) (1,915) (3,734)
Other comprehensive income (loss), net of tax (816) 366  (1,016) 179 
Ending balance (2,931) (3,555) (2,931) (3,555)
Noncontrolling Interest
Beginning balance 1,524  1,598  1,596  1,689 
Net Income 34  48  57  89 
Less: Redeemable noncontrolling interest net income (2) (1) (3) (3)
Dividends attributable to noncontrolling interest (11) (39) (75) (169)
Purchase of subsidiary shares from noncontrolling interest, net   —  (19) — 
Disposition of noncontrolling interest, net (2) —  (13) — 
Capital contributions 6  —  6  — 
Ending balance 1,549  1,606  1,549  1,606 
Equity at June 30
$ 71,990  $ 72,721  $ 71,990  $ 72,721 
Supplemental share information
Shares of Common Stock issued under employee plans, net 463  223  2,280  1,276 
Shares of Common Stock repurchased 11,163  7,445  19,046  12,642 
Dividends declared per share of Common Stock $ 1.100  $ 1.020  $ 1.610  $ 1.495 
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 June 30, 2022 and for the quarters and six months ended June 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 (Collins) and Pratt & Whitney use a quarter calendar end. Throughout this Quarterly Report on Form 10-Q, when we refer to the quarters ended June 30, 2022 and June 30, 2021 with respect to RIS or RMD, we are referring to their July 3, 2022 and July 4, 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 that commercial air travel is recovering in certain areas of demand. 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
During the six months ended June 30, 2022 and 2021, cash inflows related to dispositions were $88 million and $1.1 billion, respectively.
Our dispositions of businesses in the six months ended June 30, 2022, consisted of immaterial dispositions in our aerospace businesses.
Dispositions of businesses in the six months ended June 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.

9

Goodwill. Changes in our goodwill balances for the six months ended June 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 June 30, 2022
Collins Aerospace Systems $ 31,384  $ (36) $ (614) $ 30,734 
Pratt & Whitney 1,563      1,563 
Raytheon Intelligence & Space 9,813  23  (1) 9,835 
Raytheon Missiles & Defense 11,659    (2) 11,657 
Total Segments 54,419  (13) (617) 53,789 
Eliminations and other 17      17 
Total $ 54,436  $ (13) $ (617) $ 53,806 
Intangible Assets. Identifiable intangible assets are comprised of the following:
  June 30, 2022 December 31, 2021
(dollars in millions) Gross Amount Accumulated Amortization Gross Amount Accumulated Amortization
Amortized:
Collaboration assets $ 5,414  $ (1,265) $ 5,319  $ (1,173)
Exclusivity assets 2,772  (324) 2,673  (318)
Developed technology and other 1,194  (506) 1,214  (466)
Customer relationships 29,798  (8,168) 29,982  (7,411)
39,178  (10,263) 39,188  (9,368)
Unamortized:
Trademarks and other 8,647    8,696  — 
Total $ 47,825  $ (10,263) $ 47,884  $ (9,368)
Amortization of intangible assets for the quarters and six months ended June 30, 2022 and 2021 were $467 million and $954 million and $602 million and $1,198 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 $ 1,008  $ 2,096  $ 2,219  $ 2,101  $ 2,013  $ 1,860 

10

Note 3: Earnings Per Share
  Quarter Ended June 30, Six Months Ended June 30,
(dollars and shares in millions, except per share amounts) 2022 2021 2022 2021
Net income attributable to common shareowners:
Income from continuing operations $ 1,304  $ 1,040  $ 2,407  $ 1,812 
Loss from discontinued operations   (8) (19) (27)
Net income attributable to common shareowners $ 1,304  $ 1,032  $ 2,388  $ 1,785 
Basic weighted average number of shares outstanding 1,479.2  1,506.4  1,482.9  1,508.7 
Stock awards and equity units (share equivalent) 10.4  7.1  10.8  5.0 
Diluted weighted average number of shares outstanding 1,489.6  1,513.5  1,493.7  1,513.7 
Earnings (Loss) Per Share attributable to common shareowners - Basic:
Income from continuing operations $ 0.88  $ 0.69  $ 1.62  $ 1.20 
Loss from discontinued operations   —  (0.01) (0.02)
Net income attributable to common shareowners $ 0.88  $ 0.69  $ 1.61  $ 1.18 
Earnings (Loss) Per Share attributable to common shareowners - Diluted:
Income from continuing operations $ 0.88  $ 0.69  $ 1.61  $ 1.20 
Loss from discontinued operations   (0.01) (0.01) (0.02)
Net income attributable to common shareowners $ 0.88  $ 0.68  $ 1.60  $ 1.18 
The computation of diluted earnings per share (EPS) excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted EPS excludes the effect of the potential exercise of stock awards when the awards’ assumed proceeds exceed the average market price of the common shares during the period. For the quarter and six months ended June 30, 2022, the number of stock awards excluded from the computation was 3.4 million and 5.4 million, respectively. For the quarter and six months ended June 30, 2021, the number of stock awards excluded from the computation was 11.2 million and 19.0 million, respectively.
Note 4: Changes in Contract Estimates at Completion
We review our Estimates at Completion (EACs) at least annually or when a change in circumstances warrants a modification to a previous estimate. For significant contracts, we review our EACs more frequently. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment by management on a contract by contract basis. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities relate to management’s judgment about the ability and cost to achieve the schedule, consideration of customer-directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels, such as flight hours or aircraft landings, and related variable consideration. Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials, 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. Cost estimates may also include the estimated cost of satisfying our industrial cooperation agreements, sometimes in the form of either offset obligations or in-country industrial participation (ICIP) agreements, required under certain contracts. These obligations may or may not be distinct depending on their nature. If cash is paid to a customer to satisfy our offset obligations it is recorded as a reduction in the transaction price.
Changes in estimates of net sales, cost of sales and the related impact to operating profit on contracts recognized over time are recognized on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage of completion in the current period. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. Our EAC adjustments also include the establishment of and changes to loss provisions for our contracts accounted for on a percentage of completion basis.

11

Net EAC adjustments had the following impact on our operating results:
Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions, except per share amounts) 2022 2021 2022 2021
Total Net Sales $ (19) $ 73  $ 78  $ 125 
Operating profit (41) 27  (5) 39 
Income from continuing operations attributable to common shareowners(1)
(32) 22  (4) 31 
Diluted earnings per share from continuing operations attributable to common shareholders (1)
$ (0.02) $ 0.01  $   $ 0.02 
(1)     Amounts reflect a U.S. statutory tax rate of 21%, which approximates our tax rate on our EAC adjustments.
Note 5: Accounts Receivable, Net
Accounts receivable, net consisted of the following:
(dollars in millions) June 30, 2022 December 31, 2021
Accounts receivable $ 10,897  $ 10,136 
Allowance for expected credit losses (503) (475)
Total accounts receivable, net $ 10,394  $ 9,661 
Note 6: Contract Assets and Liabilities
Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. Total contract assets and contract liabilities were as follows:
(dollars in millions) June 30, 2022 December 31, 2021
Contract assets $ 11,836  $ 11,361 
Contract liabilities (13,430) (13,720)
Net contract liabilities $ (1,594) $ (2,359)
Contract assets increased $475 million during the six months ended June 30, 2022 primarily due to sales in excess of billings at RIS and Pratt & Whitney. Contract liabilities decreased $290 million during the six months ended June 30, 2022 compared to December 31, 2021 primarily due to revenue recognized on certain contracts with milestone and performance based payments at RMD. We recognized revenue of $1.2 billion and $3.0 billion during the quarter and six months ended June 30, 2022, related to contract liabilities as of January 1, 2022 and $1.0 billion and $2.7 billion during the quarter and six months ended June 30, 2021, related to contract liabilities as of January 1, 2021.
As of June 30, 2022, our Contract liabilities include approximately $380 million of advance payments received from a Middle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated. In addition, as of June 30, 2022, our Contract liabilities include advance payments, in immaterial amounts, received from Russian customers on contracts we are currently unable to perform on due to global sanctions on Russia and export controls. Depending on the contractual terms and as allowed by sanctions, certain of these advance payments may become refundable.
Contract assets include an allowance for credit losses of $318 million and $251 million as of June 30, 2022 and December 31, 2021, respectively.
Note 7: Inventory, net
(dollars in millions) June 30, 2022 December 31, 2021
Raw materials $ 3,210  $ 3,024 
Work-in-process 3,628  3,085 
Finished goods 3,304  3,069 
Total inventory, net $ 10,142  $ 9,178 

12

Note 8: Borrowings and Lines of Credit
From time to time, we use commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The commercial paper notes have original maturities of not more than 90 days from the date of issuance. As of June 30, 2022, our maximum commercial paper borrowing limit was $5.0 billion as the commercial paper is backed by our $5.0 billion revolving credit agreement. We had no commercial paper outstanding at June 30, 2022 or December 31, 2021.
As of June 30, 2022, we had revolving credit agreements with various banks permitting aggregate borrowings of up to $7.0 billion, consisting of a $5.0 billion revolving credit agreement, which expires in April 2025, and a $2.0 billion revolving credit agreement, which was renewed in May 2022 and expires in May 2023. As of June 30, 2022, there were no borrowings outstanding under these agreements.

We had no issuances of long-term debt during the six months ended June 30, 2022 and 2021.
We made the following repayments of long-term debt during the six months ended June 30, 2021:
Repayment Date Description of Notes Aggregate Principal Balance (in millions)
March 1, 2021
8.750% notes due 2021
$ 250 
Long-term debt consisted of the following:
(dollars in millions) June 30, 2022 December 31, 2021
3.650% notes due 2023 (1)
$ 171  $ 171 
3.700% notes due 2023 (1)
400  400 
3.200% notes due 2024 (1)
950  950 
3.150% notes due 2024 (1)
300  300 
3.950% notes due 2025 (1)
1,500  1,500 
2.650% notes due 2026 (1)
719  719 
3.125% notes due 2027 (1)
1,100  1,100 
3.500% notes due 2027 (1)
1,300  1,300 
7.200% notes due 2027 (1)
382  382 
7.100% notes due 2027
135  135 
6.700% notes due 2028
285  285 
7.000% notes due 2028 (1)
185  185 
4.125% notes due 2028 (1)
3,000  3,000 
7.500% notes due 2029 (1)
414  414 
2.150% notes due 2030 (€500 million principal value) (1)
526  565 
2.250% notes due 2030 (1)
1,000  1,000 
1.900% notes due 2031 (1)
1,000  1,000 
2.375% notes due 2032 (1)
1,000  1,000 
5.400% notes due 2035 (1)
446  446 
6.050% notes due 2036 (1)
410  410 
6.800% notes due 2036 (1)
117  117 
7.000% notes due 2038
148  148 
6.125% notes due 2038 (1)
575  575 
4.450% notes due 2038 (1)
750  750 
5.700% notes due 2040 (1)
553  553 
4.875% notes due 2040 (1)
600  600 
4.700% notes due 2041 (1)
425  425 
4.500% notes due 2042 (1)
3,500  3,500 
4.800% notes due 2043 (1)
400  400 
4.200% notes due 2044 (1)
300  300 
4.150% notes due 2045 (1)
850  850 

13

3.750% notes due 2046 (1)
1,100  1,100 
4.050% notes due 2047 (1)
600  600 
4.350% notes due 2047 (1)
1,000  1,000 
4.625% notes due 2048 (1)
1,750  1,750 
3.125% notes due 2050 (1)
1,000  1,000 
2.820% notes due 2051 (1)
1,000  1,000 
3.030% notes due 2052 (1)
1,100  1,100 
Other (including finance leases)
263  270 
Total principal long-term debt 31,254  31,300 
Other (fair value adjustments, (discounts)/premiums, and debt issuance costs) 46  51 
Total long-term debt 31,300  31,351 
Less: current portion 26  24 
Long-term debt, net of current portion $ 31,274  $ 31,327 
(1)    We may redeem these notes, in whole or in part, at our option pursuant to their terms prior to the applicable maturity date.
The average maturity of our Long-term debt at June 30, 2022 is approximately 15 years.
Note 9: Employee Benefit Plans
Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined benefit pension and postretirement benefit (PRB) plans and defined contribution plans.
Contributions to our plans were as follows:
  Quarter Ended June 30, Six Months Ended June 30,
(dollars in millions) 2022 2021 2022 2021
U.S. qualified defined benefit plans $   $ —  $   $ — 
International defined benefit plans 18  14  30  21 
PRB plans 4  9 
Defined contribution plans 251  238  562  509 
The amounts recognized in the Condensed Consolidated Balance Sheet consist of:
(dollars in millions) June 30, 2022 December 31, 2021
Noncurrent pension assets (included in Other assets) $ 3,869  $ 3,214 
Current pension and PRB liabilities (included in Accrued employee compensation) 309  310 
Future pension and postretirement benefit obligations 7,543  7,855 
The amounts recognized in Future pension and postretirement benefit obligations consist of:
(dollars in millions) June 30, 2022 December 31, 2021
Noncurrent pension liabilities $ 6,596  $ 6,873 
Noncurrent PRB liabilities 876  903 
Other pension and PRB related items
71  79 
Future pension and postretirement benefit obligations $ 7,543  $ 7,855 

14

The components of net periodic benefit (income) expense for our defined pension and PRB plans were as follows:
 
Pension Benefits
Quarter Ended June 30,
PRB
Quarter Ended June 30,
(dollars in millions) 2022 2021 2022 2021
Operating expense
Service cost $ 118  $ 131  $ 2  $
Non-operating expense
Interest cost 380  313  7 
Expected return on plan assets (888) (871) (6) (5)
Amortization of prior service credit (41) (42)   (1)
Recognized actuarial net loss (gain) 77  109  (3) (2)
Net settlement, curtailment and special termination benefit (gain) loss     — 
Non-service pension income (472) (488) (2) (2)
Total net periodic benefit (income) expense $ (354) $ (357) $   $ — 
 
Pension Benefits
Six Months Ended June 30,
PRB
Six Months Ended June 30,
(dollars in millions) 2022 2021 2022 2021
Operating expense
Service cost $ 236  $ 262  $ 4  $
Non-operating expense
Interest cost 762  625  14  12 
Expected return on plan assets (1,778) (1,739) (11) (10)
Amortization of prior service credit (83) (84)   (2)
Recognized actuarial net loss (gain) 154  218  (6) (4)
Net settlement, curtailment and special termination benefit (gain) loss (6)   — 
Non-service pension income (951) (977) (3) (4)
Total net periodic benefit (income) expense $ (715) $ (715) $ 1  $ — 
We have set aside assets in separate trusts, which we expect to be used to pay for certain nonqualified defined benefit and defined contribution plan obligations in excess of qualified plan limits. These assets are included in Other assets in our Condensed Consolidated Balance Sheet. The fair value of marketable securities held in trusts was as follows:
(dollars in millions) June 30, 2022 December 31, 2021
Marketable securities held in trusts $ 788  $ 965 
Note 10: Income Taxes
Our effective tax rate was 10.7% and 23.9% in the quarters ended June 30, 2022 and 2021, respectively. The effective tax rate in the quarter ended June 30, 2022 includes a benefit of approximately 4 percentage points primarily related to an incremental Foreign Derived Intangible Income (FDII) benefit and other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the quarter ended June 30, 2021 includes tax charges of $73 million incremental to the U.S. statutory rate associated with the revaluation of deferred taxes resulting from the increase in the United Kingdom (U.K.) corporate tax rate to 25% enacted in 2021 and effective in 2023.
Our effective tax rate was 10.1% and 26.5% in the six months ended June 30, 2022 and 2021, respectively. The effective tax rate in the six months ended June 30, 2022 includes a benefit of approximately 5 percentage points primarily related to an incremental FDII benefit and other effects created by the capitalization of research or experimental expenditures for tax-purposes, which was enacted as part of the Tax Cuts and Jobs Act of 2017 and became effective on January 1, 2022. Tax expense in the six months ended June 30, 2021 includes tax charges incremental to the U.S. statutory rate of $148 million associated with the sale of the Forcepoint business, as described in “Note 2: Acquisitions, Dispositions, Goodwill and

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Intangible Assets,” and $73 million associated with the enactment of the U.K. corporate tax rate change discussed above. Subsequently, in the fourth quarter of 2021, we recognized an incremental $104 million tax benefit due to the revaluation of the Forcepoint tax benefit as a result of completing the divestiture of RIS’s global training and services business.
We conduct business globally and, as a result, Raytheon Technologies or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, China, France, Germany, India, Poland, Saudi Arabia, Singapore, Switzerland, the United Kingdom and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2012.
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that a net reduction within the range of $20 million to $400 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of uncertain tax positions arising from developments in examinations, in appeals, or in the courts, the closure of tax statutes, or the issuance of legislation, regulatory or other guidance.
Management has determined that the distributions of Carrier and Otis on April 3, 2020, and certain related internal business separation transactions, qualified as tax-free under applicable law. In making these determinations, we applied the tax law in the relevant jurisdictions to our facts and circumstances and obtained tax rulings from the relevant taxing authorities, tax opinions, and/or other external tax advice related to the concluded tax treatment. If the completed distributions of Carrier or Otis, in each case, or certain internal business separation transactions, were to fail to qualify for tax-free treatment, the Company could be subject to significant liabilities, and there could be material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods.
The Examination Division of the Internal Revenue Service (IRS) is currently auditing Raytheon Technologies tax years 2017 and 2018 and pre-merger Raytheon Company tax periods 2017, 2018 and 2019 as well as certain refund claims of Raytheon Company for tax years 2014, 2015 and 2016 filed prior to the Raytheon merger. The audit of each of these tax years is expected to continue into 2023.
The Examination Division of the IRS is currently auditing pre-acquisition Rockwell Collins fiscal tax years 2016 and 2017. During the second quarter of 2022, the IRS added fiscal tax year 2018 to their review. The audit of 2016, 2017, and 2018 is projected to close during 2023.
Note 11: Financial Instruments
We enter into derivative instruments primarily for risk management purposes, including derivatives designated as hedging instruments and those utilized as economic hedges. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, interest rate and commodity price exposures.
The aggregate notional amount of our outstanding foreign currency hedges was $10.0 billion and $8.5 billion at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022, all derivative contracts accounted for as cash flow hedges will mature by February 2030.
The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheet for derivative instruments:
(dollars in millions) Balance Sheet Location June 30, 2022 December 31, 2021
Derivatives designated as hedging instruments:
Foreign exchange contracts Other assets, current $ 44  $ 59 
Other accrued liabilities 344  202 
Derivatives not designated as hedging instruments:
Foreign exchange contracts Other assets, current $ 14  $ 11 
Other accrued liabilities 23  11 
The effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) and on the Condensed Consolidated Statement of Operations in the quarters and six months ended June 30, 2022 and 2021 are presented in “Note 16:

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Accumulated Other Comprehensive Loss.” The amounts of gain or loss are attributable to foreign exchange contract activity and are primarily recorded as a component of Products sales when reclassified from Accumulated other comprehensive loss.
The Company utilizes the critical terms match method in assessing derivatives for hedge effectiveness. Accordingly, the hedged items and derivatives designated as hedging instruments are highly effective.
As of June 30, 2022, we have €500 million of euro-denominated long-term debt outstanding, which qualifies as a net investment hedge against our investments in European businesses, which is deemed to be effective.
The effect of derivatives not designated as hedging instruments is included within Other income, net, on the Condensed Consolidated Statement of Operations.
Note 12: Fair Value Measurements
The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring basis in our Condensed Consolidated Balance Sheet:
June 30, 2022
(dollars in millions) Total Level 1 Level 2 Level 3
Recurring fair value measurements:
Marketable securities held in trusts $ 788  $ 725  $ 63  $  
Derivative assets 58    58   
Derivative liabilities 367    367   
December 31, 2021
(dollars in millions) Total Level 1 Level 2 Level 3
Recurring fair value measurements:
Marketable securities held in trusts $ 965  $ 890  $ 75  $ — 
Derivative assets 70  —  70  — 
Derivative liabilities 213  —  213  — 
Valuation Techniques. Our derivative assets and liabilities include foreign exchange contracts that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties’ credit risks.
As of June 30, 2022, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties’ credit risks.
The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance Sheet:
  June 30, 2022 December 31, 2021
(dollars in millions) Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Customer financing notes receivable $ 198  $ 187  $ 195  $ 192 
Long-term debt (excluding finance leases) 31,204  29,505  31,250  35,828 
The following tables provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance Sheet:
June 30, 2022
(dollars in millions) Total Level 1 Level 2 Level 3
Customer financing notes receivable $ 187  $   $ 187  $  
Long-term debt (excluding finance leases) 29,505    29,457  48 

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December 31, 2021
(dollars in millions) Total Level 1 Level 2 Level 3
Customer financing notes receivable $ 192  $ —  $ 192  $ — 
Long-term debt (excluding finance leases) 35,828  —  35,778  50 
The fair value of our Short-term borrowings approximates the carrying value due to their short-term nature, with commercial paper classified as level 2 and other short-term borrowings classified as level 3 within the fair value hierarchy.
Note 13: Variable Interest Entities
Pratt & Whitney holds a 61% program share interest in the International Aero Engines AG (IAE) collaboration with MTU Aero Engines AG (MTU) and Japanese Aero Engines Corporation (JAEC) and a 49.5% ownership interest in IAE. IAE’s business purpose is to coordinate the design, development, manufacturing and product support of the V2500 engine program through involvement with the collaborators. Additionally, Pratt & Whitney, JAEC and MTU are participants in the International Aero Engines, LLC (IAE LLC) collaboration, whose business purpose is to coordinate the design, development, manufacturing and product support for the PW1100G-JM engine for the Airbus A320neo aircraft. Pratt & Whitney holds a 59% program share interest and a 59% ownership interest in IAE LLC. IAE and IAE LLC retain limited equity with the primary economics of the programs passed to the participants. As such, we have determined that IAE and IAE LLC are variable interest entities with Pratt & Whitney as the primary beneficiary. IAE and IAE LLC have, therefore, been consolidated. The carrying amounts and classification of assets and liabilities for variable interest entities in our Condensed Consolidated Balance Sheet are as follows:
(dollars in millions) June 30, 2022 December 31, 2021
Current assets $ 8,130  $ 7,081 
Noncurrent assets 795  825 
Total assets $ 8,925  $ 7,906 
Current liabilities $ 9,185  $ 7,965 
Noncurrent liabilities 22  54 
Total liabilities $ 9,207  $ 8,019 
Note 14: Guarantees
We extend a variety of financial, market value and product performance guarantees to third parties. These instruments expire on various dates through 2028. Additional guarantees of project performance for which there is no stated value also remain outstanding. A portion of our third party guarantees are subject to indemnification for our benefit for any liabilities that could arise. As of June 30, 2022 and December 31, 2021, the following financial guarantees were outstanding:
June 30, 2022 December 31, 2021
(dollars in millions) Maximum Potential Payment Carrying Amount of Liability Maximum Potential Payment Carrying Amount of Liability
Commercial aerospace financing arrangements $ 304  $   $ 309  $
Third party guarantees 486  1  511 
We have made residual value and other guarantees related to various commercial aerospace customer financing arrangements. The estimated fair values of the guaranteed assets equal or exceed the value of the related guarantees, net of existing reserves. Collaboration partners’ share of these financing guarantees is $140 million and $141 million at June 30, 2022 and December 31, 2021, respectively.
We also have obligations arising from sales of certain businesses and assets, including those from representations and warranties and related indemnities for environmental, health and safety, tax and employment matters. The maximum potential payment related to these obligations is not a specified amount as a number of the obligations do not contain financial caps. The carrying amount of liabilities related to these obligations was $110 million and $120 million at June 30, 2022 and December 31, 2021, respectively. These primarily relate to environmental liabilities, which are included in our total environmental liabilities as further discussed in “Note 15: Commitments and Contingencies.”
We accrue for costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued.

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We also provide service and warranty policies on our products and extend performance and operating cost guarantees beyond our normal service and warranty policies on some of our products, particularly commercial aircraft engines. In addition, we incur discretionary costs to service our products in connection with specific product performance issues. Liabilities for performance and operating cost guarantees are based upon future product performance and durability, and are largely estimated based upon historical experience. Adjustments are made to accruals as claims data and historical experience warrant. The changes in the carrying amount of service and product warranties and product performance guarantees for the six months ended June 30, 2022 and 2021 were as follows:
(dollars in millions) 2022 2021
Balance as of January 1 $ 1,157  $ 1,057 
Warranties and performance guarantees issued 128  176 
Settlements (131) (128)
Other (11) (3)
Balance as of June 30 $ 1,143  $ 1,102 

Note 15: Commitments and Contingencies
Except as otherwise noted, while we are unable to predict the final outcome, based on information currently available, we do not believe that resolution of any of the following matters will have a material adverse effect upon our competitive position, results of operations, financial condition or liquidity.
Environmental. Our operations are subject to environmental regulation by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations. We have accrued for the costs of environmental remediation activities, including but not limited to investigatory, remediation, operating and maintenance costs and performance guarantees, and periodically reassess these amounts. We do not expect any additional liability to have a material adverse effect on our results of operations, financial condition or liquidity. As of June 30, 2022 and December 31, 2021, we had $824 million and $834 million, respectively, reserved for environmental remediation.
Commercial Aerospace Financing and Other Commitments. We had commercial aerospace financing commitments and other contractual commitments of approximately $15.4 billion and $15.6 billion as of June 30, 2022 and December 31, 2021, respectively, on a gross basis before reduction for our collaboration partners’ share. Aircraft financing commitments, in the form of debt or lease financing, are provided to certain commercial aerospace customers. The extent to which the financing commitments will be utilized is not currently known, since customers may be able to obtain more favorable terms from other financing sources. We may also arrange for third-party investors to assume a portion of these commitments. The majority of financing commitments are collateralized arrangements. We may also lease aircraft and subsequently sublease the aircraft to customers under long-term non-cancelable operating leases, or pay deposits on behalf of our customers to secure production slots with the airframers (pre-delivery payments). Our financing commitments with customers are contingent upon maintenance of certain levels of financial condition by the customers. Associated risks on these commitments are mitigated due to the fact that interest rates are variable during the commitment term and are set at the date of funding based on current market conditions, the fair value of the underlying collateral and the credit worthiness of the customers. As a result, the fair value of these financing commitments is expected to equal the amounts funded.
We also have other contractual commitments to make payments to secure certain contractual rights to provide product on new aircraft platforms. The estimated amount and timing of these payments are generally based on future sales or engine flight hours. Payments made on these contractual commitments are included within intangible assets as exclusivity assets and are amortized over the term of underlying economic benefit. We have entered into certain collaboration arrangements, which may include participation by our collaboration partners in these commitments. In addition, in connection with our 2012 agreement to acquire Rolls-Royce’s ownership and collaboration interests in IAE, additional payments are due to Rolls-Royce contingent upon each hour flown through June 2027 by the V2500-powered aircraft in service as of the acquisition date. These flight hour payments, which are considered in other contractual commitments, are capitalized as collaboration intangible assets as payments are made.
Other Financing Arrangements. We have entered into standby letters of credit and surety bonds with financial institutions to meet various bid, performance, warranty, retention and advance payment obligations for us or our affiliates. We enter into these agreements to assist certain affiliates in obtaining financing on more favorable terms, making bids on contracts and performing their contractual obligations. The stated values of these letters of credit agreements and surety bonds totaled $3.4 billion as of June 30, 2022.

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Offset Obligations. We have entered into industrial cooperation agreements, sometimes in the form of either offset agreements or ICIP agreements, as a condition to obtaining orders for our products and services from certain customers in foreign countries. At June 30, 2022, the aggregate amount of our offset agreements, both agreed to and anticipated to be agreed to, had an outstanding notional value of approximately $11.7 billion. These agreements are designed to return economic value to the foreign country by requiring us to engage in activities supporting local defense or commercial industries, promoting a balance of trade, developing in-country technology capabilities or addressing other local development priorities. Offset agreements may be satisfied through activities that do not require a direct cash payment, including transferring technology, providing manufacturing, training and other consulting support to in-country projects, and the purchase by third parties (e.g., our vendors) of supplies from in-country vendors. These agreements may also be satisfied through our use of cash for activities such as subcontracting with local partners, purchasing supplies from in-country vendors, providing financial support for in-country projects and making investments in local ventures. Such activities may also vary by country depending upon requirements as dictated by their governments. We typically do not commit to offset agreements until orders for our products or services are definitive. The amounts ultimately applied against our offset agreements are based on negotiations with the customers and typically require cash outlays that represent only a fraction of the notional value in the offset agreements. Offset programs usually extend over several or more years and may provide for penalties in the event we fail to perform in accordance with offset requirements. Historically, we have not been required to pay any penalties of significance.
Government Oversight. In the ordinary course of business, the Company and its subsidiaries and our properties are subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations and threatened legal actions and proceedings. For example, we are now, and believe that, in light of the current U.S. government contracting environment, we will continue to be the subject of one or more U.S. government investigations. Our contracts with the U.S. government are also subject to audits. Agencies that oversee contract performance include: the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), the Inspectors General of the U.S. Department of Defense (DoD) and other departments and agencies, the Government Accountability Office (GAO), the Department of Justice (DOJ), and Congressional Committees. Other areas of our business operations may also be subject to audit and investigation by these and other agencies. From time to time, agencies investigate or conduct audits to determine whether our operations are being conducted in accordance with applicable requirements. Such investigations and audits may be initiated due to a number of reasons, including as a result of a whistleblower complaint. Such investigations and audits could result in administrative, civil or criminal liabilities, including repayments, fines, treble or other damages, forfeitures, restitution, or penalties being imposed upon us, the suspension of government export licenses or the suspension or debarment from future U.S. government contracting. U.S. government investigations often take years to complete. The U.S. government also reserves the right to debar a contractor from receiving new government contracts for fraudulent, criminal or other seriously improper conduct. The U.S. government could void any contracts found to be tainted by fraud. Like many defense contractors, we have received audit reports recommending the reduction of certain contract prices because, for example, cost or pricing data or cost accounting practices used to price and negotiate those contracts may not have conformed to government regulations. Some of these audit reports recommend that certain payments be repaid, delayed, or withheld, and may involve substantial amounts. We have made voluntary refunds in those cases we believe appropriate, have settled some allegations and, in some cases, continue to negotiate and/or litigate. The Company may be, and in some cases has been, required to make payments into escrow of disputed liabilities while the related litigation is pending. If the litigation is resolved in the Company’s favor, any such payments will be returned to the Company with interest. Our final allowable incurred costs for each year are also subject to audit and have, from time to time, resulted in disputes between us and the U.S. government, with litigation resulting at the Court of Federal Claims (COFC) or the Armed Services Board of Contract Appeals (ASBCA) or their related courts of appeals. In addition, the DOJ has, from time to time, convened grand juries to investigate possible irregularities by us. We also provide products and services to customers outside of the U.S., and those sales are subject to local government laws, regulations and procurement policies and practices. Our compliance with such local government regulations or any applicable U.S. government regulations (e.g., the Foreign Corrupt Practices Act (FCPA) and International Traffic in Arms Regulations (ITAR)) may also be investigated or audited. In addition, we accrue for liabilities associated with those matters that are probable and can be reasonably estimated. The most likely liability amount to be incurred is accrued based upon a range of estimates. Where no amount within a range of estimates is more likely, then we accrue the minimum amount. Other than as specifically disclosed in this Form 10-Q, we do not expect these audits, investigations or disputes to have a material effect on our results of operations, financial condition or liquidity, either individually or in the aggregate.
Legal Proceedings. The Company and its subsidiaries are subject to various contract pricing disputes, government investigations and litigation matters across jurisdictions, updates to certain of which are set forth below.
Cost Accounting Standards Claims
As previously disclosed, in April 2019, a Divisional Administrative Contracting Officer (DACO) of the United States DCMA asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $1.73 billion plus interest ($773

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million at June 30, 2022). The claim is based on Pratt & Whitney’s alleged noncompliance with Cost Accounting Standards (CAS) from January 1, 2007 to March 31, 2019, due to its method of allocating independent research and development costs to government contracts. Pratt & Whitney believes that the claim is without merit and filed an appeal to the ASBCA on June 7, 2019.
As previously disclosed, in December 2013, a DCMA DACO asserted a claim against Pratt & Whitney to recover alleged overpayments of approximately $177 million plus interest ($124 million at June 30, 2022). The claim is based on Pratt & Whitney’s alleged noncompliance with CAS from January 1, 2005 to December 31, 2012, due to its method of determining the cost of collaborator parts used in the calculation of material overhead costs for government contracts. In 2014, Pratt & Whitney filed an appeal to the ASBCA. An evidentiary hearing was held and completed in June 2019. On November 22, 2021, the ASBCA issued its written decision sustaining in part and denying in part Pratt & Whitney’s appeal. The ASBCA rejected the DCMA’s asserted measure of the cost of collaborator parts, and ruled substantially in Pratt & Whitney’s favor on other liability issues. The ASBCA remanded the appeal to the parties for resolution of damages issues, which could require further proceedings at the ASBCA. On December 23, 2021, the DCMA filed a motion with the ASBCA seeking partial reconsideration of the November 22, 2021 decision. Although the ASBCA decision may also be subject to further appellate review, we believe that the ASBCA’s rejection of the DCMA’s asserted measure of the cost of collaborator parts is well supported in fact and law and likely will be sustained. In December 2018, a DCMA DACO issued a second claim against Pratt & Whitney that similarly alleges that its method of determining the cost of collaborator parts does not comply with the CAS for calendar years 2013 through 2017. This second claim, which asserts the same measure of the cost of collaborator parts rejected by the ASBCA’s recent decision, demands payment of $269 million plus interest ($86 million at June 30, 2022). Pratt & Whitney appealed this second claim to the ASBCA in January 2019. Although subject to further litigation at the ASBCA and potentially further appellate proceedings, we believe that the November 22, 2021 decision in the first claim will apply with equal legal effect to the second claim. Accordingly, we believe that the amounts demanded by the DCMA as set forth in the two claims are without legal basis and that any damages owed to the U.S. government for the two claims will not have a material adverse effect on our results of operations, financial condition or liquidity.
Thales-Raytheon Systems Matter
As previously disclosed, in 2019, Raytheon Company received a subpoena from the Securities and Exchange Commission (SEC) seeking information in connection with an investigation into whether there were improper payments made by Thales-Raytheon Systems (TRS) or anyone acting on their behalf in connection with TRS or Raytheon Company contracts in certain Middle East countries since 2014. In the first quarter of 2020, the DOJ advised Raytheon Company it had opened a parallel criminal investigation. In the third quarter of 2020, Raytheon Company received an additional subpoena from the SEC, seeking information and documents as part of its ongoing investigation. The Company maintains a rigorous anti-corruption compliance program, is cooperating fully with the SEC’s and DOJ’s inquiry, and is examining whether there has been any conduct that is in violation of Raytheon Company policy. At this time, the Company is unable to predict the outcome of the SEC’s or DOJ’s inquiry. Based on the information available to date, however, we do not believe the results of this inquiry will have a material adverse effect on our results of operations, financial condition or liquidity.
DOJ Investigation, Contract Pricing Disputes and Related Civil Litigation
As previously disclosed, on October 8, 2020, the Company received a criminal subpoena from the DOJ seeking information and documents in connection with an investigation relating to financial accounting, internal controls over financial reporting, and cost reporting regarding Raytheon Company’s Missiles & Defense (RMD) business since 2009. The investigation involves multi-year contracts subject to governmental regulation, including potential civil defective pricing claims for three RMD contracts entered into between 2011 and 2013. As part of the same investigation, on March 24, 2021, the Company received a second criminal subpoena from the DOJ seeking documents relating to a different RMD contract entered into in 2017. We are cooperating fully with, and will continue to review the issues raised by, the DOJ’s ongoing investigation. We have made substantial progress in our internal review of the issues raised by the DOJ investigation. Although we continue to believe we have defenses to the potential claims, the Company has determined that there is a probable risk of liability for damages, interest and potential penalties and has accrued approximately $290 million for this matter. We are currently unable to estimate an incremental loss, if any, which may result following the completion of our internal review and resolution of the DOJ investigation. Based on the information available to date, we do not believe the results of the investigation or of any potential civil litigation will have a material adverse effect on our results of operations, financial condition or liquidity.
Four shareholder lawsuits were filed against the Company after the DOJ investigation was first disclosed. A putative securities class action lawsuit was filed in the United States District Court for the District of Arizona against the Company and certain of its executives alleging that the defendants violated federal securities laws by making material misstatements in regulatory filings regarding internal controls over financial reporting in RMD. Three shareholder derivative lawsuits were filed in the United States District Court for the District of Delaware against the former Raytheon Company Board of Directors, the

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Company and certain of its executives, each alleging that defendants violated federal securities laws and breached their fiduciary duties by engaging in improper accounting practices, failing to implement sufficient internal financial and compliance controls, and making a series of false and misleading statements in regulatory filings. We believe that each of these lawsuits lacks merit.
Darnis, et al.
As previously disclosed, on August 12, 2020, several former employees of United Technologies Corporation (UTC) or its subsidiaries filed a putative class action complaint in the United States District Court for the District of Connecticut against the Company, Otis, Carrier, the former members of the UTC Board of Directors, and the members of the Carrier and Otis Boards of Directors (Geraud Darnis, et al. v. Raytheon Technologies Corporation, et al.). The complaint challenged the method by which UTC equity awards were converted to Company, Otis, and Carrier equity awards following the separation of UTC into three independent, publicly-traded companies on April 3, 2020. The complaint also claimed that the defendants are liable for breach of certain equity compensation plans and also asserted claims under certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA). On September 13, 2021, Plaintiffs filed an amended complaint which supersedes the initial complaint and continues to assert claims for breach of the equity compensation plans against the Company, Otis and Carrier, but no longer asserts ERISA claims. Further, no claim is made in the amended complaint against any current or former director of any of the three companies. Plaintiffs seek money damages, attorneys’ fees and other relief. We continue to believe that the Company has meritorious defenses to these claims. At this time, the Company is unable to predict the outcome; however, based on the information available to date, we do not believe that this matter will have a material adverse effect on our results of operations, financial condition or liquidity.
DOJ Grand Jury Investigation and Related Civil Litigation
The Company received a grand jury subpoena in late 2019, as part of a DOJ criminal investigation into purported agreements not to solicit or hire employees in violation of the federal antitrust laws. While the investigation has focused on alleged hiring restrictions between and among Pratt & Whitney and certain of its suppliers of outsourced engineering services, the subpoena also included requests regarding Collins. Since receipt of the subpoena, the Company has been cooperating with the DOJ investigation. On December 15, 2021, a criminal indictment was filed in the United States District Court for the District of Connecticut, against a former Pratt & Whitney employee and other employees of certain outsourced engineering suppliers charging each of them with one count of violating the federal antitrust laws. No current or former Collins employees were named in the indictment. We have been advised that the Company is a target of the DOJ investigation, and we continue to cooperate with the investigation. No criminal charge has been filed against the Company or its affiliates.
After the criminal charges against the individuals were filed, numerous civil class action antitrust lawsuits have been filed against Pratt & Whitney and other corporate and individual defendants in the United States District Court for the District of Connecticut. The allegations in each of the civil lawsuits track the factual assertions in the criminal indictment and generally allege that Pratt & Whitney and the other defendants agreed to restrict the hiring and recruiting of certain engineers and skilled laborers in a manner that violated federal antitrust laws. Plaintiffs in each of the civil lawsuits seek to represent different purported classes of engineers and skilled laborers employed by Pratt & Whitney and other supplier-defendants since 2011. Plaintiffs in each of the lawsuits seek treble damages in an undetermined amount, plus attorneys’ fees and costs of suit. All of the lawsuits have been consolidated, and a single amended class action complaint was filed. We believe that the claims asserted lack merit. Based on the information available to date, we do not believe that this matter will have a material adverse effect on our results of operations, financial condition or liquidity.
Where appropriate, we have recorded loss contingency accruals for the above-referenced matters, and the amounts individually, or in the aggregate, are not material.
Other. As described in “Note 14: Guarantees,” we extend performance and operating cost guarantees beyond our normal warranty and service policies for extended periods on some of our products. We have accrued our estimate of the liability that may result under these guarantees and for service costs that are probable and can be reasonably estimated.
We also have other commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising out of the normal course of business. We accrue contingencies based upon a range of possible outcomes. If no amount within this range is a better estimate than any other, then we accrue the minimum amount.
In the ordinary course of business, the Company and its subsidiaries are also routinely defendants in, parties to or otherwise subject to many pending and threatened legal actions, claims, disputes and proceedings. These matters are often based on alleged violations of contract, product liability, warranty, regulatory, environmental, health and safety, employment, intellectual property, tax and other laws. In some instances, claims for substantial monetary damages are asserted against the Company and its subsidiaries and could result in fines, penalties, compensatory or treble damages or non-monetary relief. We do not believe that these matters will have a material adverse effect upon our results of operations, financial condition or liquidity.

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Note 16: Accumulated Other Comprehensive Loss
A summary of the changes in each component of Accumulated other comprehensive loss, net of tax for the quarters and six months ended June 30, 2022 and 2021 is provided below:
(dollars in millions) Foreign Currency Translation Defined Benefit Pension and Postretirement Plans Unrealized Hedging Gains (Losses) Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2022
Balance at March 31, 2022 $ (194) $ (1,811) $ (110) $ (2,115)
Other comprehensive income (loss) before reclassifications, net (708) 14  (199) (893)
Amounts reclassified, pre-tax   33  17  50 
Tax benefit (expense) (6) (8) 41  27 
Balance at June 30, 2022 $ (908) $ (1,772) $ (251) $ (2,931)
Six Months Ended June 30, 2022
Balance at December 31, 2021 $ 49  $ (1,828) $ (136) $ (1,915)
Other comprehensive income (loss) before reclassifications, net (950) 3  (168) (1,115)
Amounts reclassified, pre-tax 2  65  23  90 
Tax benefit (expense) (9) (12) 30  9 
Balance at June 30, 2022 $ (908) $ (1,772) $ (251) $ (2,931)
(dollars in millions) Foreign Currency Translation Defined Benefit Pension and Postretirement Plans Unrealized Hedging Gains (Losses) Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2021
Balance at March 31, 2021 $ 529  $ (4,441) $ (9) $ (3,921)
Other comprehensive income (loss) before reclassifications, net 258  (14) 108  352 
Amounts reclassified, pre-tax —  64  (20) 44 
Tax benefit (expense) (11) (21) (30)
Balance at June 30, 2021 $ 789  $ (4,402) $ 58  $ (3,555)
Six Months Ended June 30, 2021
Balance at December 31, 2020 $ 710  $ (4,483) $ 39  $ (3,734)
Other comprehensive income (loss) before reclassifications, net 82  (24) 62  120 
Amounts reclassified, pre-tax —  128  (34) 94 
Tax benefit (expense) (3) (23) (9) (35)
Balance at June 30, 2021 $ 789  $ (4,402) $ 58  $ (3,555)

Note 17: Segment Financial Data
Our operations, for the periods presented herein, are classified into four principal segments: Collins, Pratt & Whitney, RIS and RMD. The segments are generally based on the management structure of the businesses and the grouping of similar operating companies, where each management organization has general operating autonomy over diversified products and services.
We present a FAS/CAS operating adjustment outside of segment results, which represents the difference between the service cost component of our pension and PRB expense under the Financial Accounting Standards (FAS) requirements of U.S. Generally Accepted Accounting Principles (GAAP) and our pension and PRB expense under U.S. government Cost Accounting

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Standards (CAS) primarily related to our RIS and RMD segments. While the ultimate liability for pension and PRB costs under FAS and CAS is similar, the pattern of cost recognition is different. Over time, we generally expect to recover the related RIS and RMD pension and PRB liabilities through the pricing of our products and services to the U.S. government. Collins and Pratt & Whitney generally record pension and PRB expense on a FAS basis.
Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions and the amortization of customer contractual obligations related to loss making or below market contracts acquired. These adjustments are not considered part of management’s evaluation of segment results.
Total sales and operating profit by segment include inter-segment sales which are generally recorded at cost-plus a specified fee or at a negotiated fixed price. These pricing arrangements may result in margins different than what the purchasing segment realizes on the ultimate third-party sale. Results for the quarters ended June 30, 2022 and 2021 are as follows:
Net Sales Operating Profit Operating Profit Margins
(dollars in millions) 2022 2021 2022 2021 2022 2021
Collins Aerospace Systems $ 5,011  $ 4,545  $ 546  $ 506  10.9  % 11.1  %
Pratt & Whitney 4,969  4,280  302  112  6.1  % 2.6  %
Raytheon Intelligence & Space 3,570  3,805  315  415  8.8  % 10.9  %
Raytheon Missiles & Defense 3,558  3,985  348  532  9.8  % 13.4  %
Total segment 17,108  16,615  1,511  1,565  8.8  % 9.4  %
Eliminations and other(1)
(794) (735) (47) (40)
Corporate expenses and other unallocated items (2)
  —  (42) (149)
FAS/CAS operating adjustment   —  379  425 
Acquisition accounting adjustments   —  (448) (519)
Consolidated $ 16,314  $ 15,880  $ 1,353  $ 1,282  8.3  % 8.1  %
(1)    Includes the operating results of certain smaller non-reportable business segments.
(2)    Includes the net expenses related to the U.S. Army’s Lower Tier Air and Missile Defense Sensor (LTAMDS) project.
Results for the six months ended June 30, 2022 and 2021 are as follows:
Net Sales Operating Profit Operating Profit Margins
(dollars in millions) 2022 2021 2022 2021 2022 2021
Collins Aerospace Systems $ 9,835  $ 8,915  $ 986  $ 820  10.0  % 9.2  %
Pratt & Whitney 9,498  8,310  453  132  4.8  % 1.6  %
Raytheon Intelligence & Space 7,142  7,570  693  803  9.7  % 10.6  %
Raytheon Missiles & Defense 7,085  7,778  735  1,028  10.4  % 13.2  %
Total segment 33,560  32,573  2,867  2,783  8.5  % 8.5  %
Eliminations and other (1)
(1,530) (1,442) (81) (71)
Corporate expenses and other unallocated items (2)
  —  (178) (230)
FAS/CAS operating adjustment   —  757  848 
Acquisition accounting adjustments   —  (932) (1,035)
Consolidated $ 32,030  $ 31,131  $ 2,433  $ 2,295  7.6  % 7.4  %
(1)    Includes the operating results of certain smaller non-reportable business segments.
(2)    Includes the net expenses related to the U.S. Army’s LTAMDS project.
We disaggregate our contracts from customers by geographic region based on customer location, by customer and by sales type. Our geographic region based on customer location uses end user customer location where known or practical to determine, or in instances where the end user customer is not known or not practical to determine, we utilize “ship to” location as the customer location. In addition, for our RIS and RMD segments, we disaggregate our contracts from customers by contract type. We believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

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Segment sales disaggregated by geographic region for the quarters ended June 30, 2022 and 2021 are as follows:
2022 2021
(dollars in millions) Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total Collins Aerospace Systems Pratt & Whitney Raytheon Intelligence & Space Raytheon Missiles & Defense Other Total
United States $ 2,458  $ 2,562  $ 2,852  $ 2,313