Raytheon Technologies Reports Second Quarter 2020 Results
WALTHAM, Mass., July 28, 2020 /PRNewswire/ -- Raytheon Technologies Corporation (NYSE: RTX) reported second quarter 2020 results.
-- Sales of $14.1 billion
-- Adjusted sales of $14.3 billion
-- GAAP EPS from continuing operations of a loss of $2.56 and included
$2.96 of net significant and/or non-recurring charges and acquisition
accounting adjustments
-- Adjusted EPS of $0.40
-- Operating cash flow from continuing operations of $210 million
-- Free cash flow of an outflow of $248 million
-- Achieved ~$600 million of cost reduction and ~$1 billion of cash
conservation actions
-- Combined book-to-bill ratio of 1.20 at RIS and RMD segments
"During the quarter, we continued to deliver good performance in our defense business, while we saw challenges in commercial aerospace as expected," said Raytheon Technologies CEO Greg Hayes. "Looking ahead, we expect the pressures in commercial aerospace to persist as OEM production levels and aftermarket activity remain low. As a result, we are taking difficult but necessary actions to strengthen the business, including achieving the previously announced cost and cash savings this year. At the same time, we continue to deliver cost synergies from the Rockwell Collins acquisition and the Raytheon merger."
Hayes continued, "I'm proud of what our team has accomplished in support of our customers, suppliers, and communities during this difficult time. Our balance sheet remains strong and the resiliency of our defense business will help us weather this storm as we continue to capitalize on growth opportunities supported by our record backlog. I am confident that our balanced portfolio and advanced technologies will position us for long-term value creation as the global economy recovers."
See "Use and Definitions of Non-GAAP Financial Measures" below for information regarding non-GAAP financial measures.
Raytheon Technologies reported second quarter sales of $14.1 billion and adjusted sales of $14.3 billion. GAAP EPS from continuing operations was a loss of $2.56 and included $2.96 of net significant and/or non-recurring charges and acquisition accounting adjustments, where $2.34 was related to charges due to the current economic environment primarily driven by the COVID-19 pandemic. Of the $2.34, $2.13 was related to an impairment of Collins Aerospace goodwill and intangibles. Other adjustments included $0.28 for acquisition accounting adjustments primarily related to intangible amortization and $0.21 for restructuring. Adjusted EPS was $0.40.
The company recorded a net loss from continuing operations in the second quarter of $3.8 billion, and included $4.4 billion of net significant and/or nonrecurring charges and acquisition accounting adjustments. Adjusted net income was $598 million. Operating cash flow from continuing operations in the second quarter was $210 million and better than expected primarily due to the timing of collections and execution on cash conservation actions. Capital expenditures were $458 million, resulting in a free cash outflow of $248 million. Free cash flow included $165 million of merger costs and restructuring.
Summary Financial Results - Continuing Operations
($ in millions, except EPS) 2nd Quarter
2020
Reported
Sales $
14,061
Net Income $
(3,844)
EPS $
(2.56)
Adjusted
Sales $
14,277
Net Income $
598
EPS $
0.40
Operating Cash Flow from Continuing Operations $
210
Free Cash Flow $
(248)
Note: Q2 2020 results include the legacy Raytheon business since the merger date of April 3, 2020. Reported and adjusted numbers do not
include the legacy Raytheon business pre-merger stub period from March 30, 2020 to April 2, 2020 which had an estimated $400M of sales, $40M
of net income, and $100M of operating cash flow.
Bookings and Orders
Backlog at the end of the second quarter was $158.7 billion, of which $85.6 billion was from commercial aerospace and a record $73.1 billion was from defense.
Notable defense bookings during the quarter included:
-- $2.3 billion on the Army Navy/Transportable Radar Surveillance-Model 2
(AN/TPY-2) radar program for the Kingdom of Saudi Arabia (KSA) at
Raytheon Missiles & Defense (RMD)
-- $1.4 billion on a number of classified programs at Raytheon Intelligence
& Space (RIS)
-- $299 million for Standard Missile-3 (SM-3®) for the Missile Defense
Agency (MDA) and an international customer at RMD
In addition, during the quarter RMD was selected by the U.S. Air Force to develop the Long-Range Standoff Weapon (LRSO).
Segment Results
The company's reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD). In connection with the merger, the company revised its segment presentation. Prior periods have been revised to reflect the current presentation. Refer to the accompanying tables for further details.
Collins Aerospace
2nd Quarter
Six Months
($ in millions) 2020 2019 % Change 2020 2019 % Change
---
Reported
Sales $
4,202 $
6,576 (36)% $
10,640 $
13,089 (19)%
Operating Profit $
(317) $
1,276 (125)% $
929 $
2,240 (59)%
ROS (7.5)% 19.4% 8.7% 17.1%
Adjusted
Sales $
4,298 $
6,576 (35)% $
10,758 $
13,089 (18)%
Operating Profit $
24 $
1,293 (98)% $
1,308 $
2,502 (48)%
ROS 0.6% 19.7% 12.2% 19.1%
Note: Prior periods have been revised to reflect the current segment presentation which excludes acquisition accounting adjustments and includes additional corporate expense allocations.
Collins Aerospace had second quarter 2020 adjusted sales of $4,298 million, down 35 percent versus the prior year. Commercial OE was down 53 percent and commercial aftermarket was down 48 percent, while military was up 10 percent. The decrease in commercial sales was driven primarily by the current economic environment which has resulted in lower flight hours, aircraft fleet utilization and commercial OEM deliveries, which was slightly offset by F-35 and defense development program growth.
Collins Aerospace recorded adjusted operating profit of $24 million in the quarter, down 98 percent versus the prior year. The decrease in adjusted operating profit was driven by lower commercial aerospace OEM and aftermarket sales volume that was slightly offset by gross margin drop through on higher military volume.
Pratt & Whitney
2nd Quarter
Six Months
($ in millions) 2020 2019 % Change 2020 2019 % Change
---
Reported
Sales $
3,487 $
5,154 (32)% $
8,840 $
9,972 (11)%
Operating Profit $
(457) $
449 (202)% $
18 $
927 (98)%
ROS (13.1)% 8.7% 0.2% 9.3%
Adjusted
Sales $
3,607 $
5,154 (30)% $
8,938 $
9,972 (10)%
Operating Profit $
(151) $
452 (133)% $
364 $
944 (61)%
ROS (4.2)% 8.8% 4.1% 9.5%
Note: Prior periods have been revised to reflect the current segment presentation which excludes acquisition accounting adjustments and includes additional corporate expense allocations.
Pratt & Whitney had second quarter 2020 adjusted sales of $3,607 million, down 30 percent versus the prior year. Commercial OE was down 42 percent and commercial aftermarket was down 51 percent, while military was up 11 percent. The decrease in commercial sales was primarily due to a significant reduction in shop visits and related spare part sales and commercial engine deliveries principally driven by the current economic environment, which was slightly offset by F135 production volume and aftermarket growth on multiple fighter jet platforms.
Pratt & Whitney recorded an adjusted operating loss of $151 million in the quarter, down 133 percent versus the prior year. The decrease in adjusted operating profit was primarily driven by lower commercial aftermarket sales volume and unfavorable mix.
Raytheon Intelligence & Space
2nd Quarter Six Months
($ in millions) 2020 2020
Reported
Sales $
3,314 $
3,314
Operating Profit $
311 $
311
ROS 9.4% 9.4%
Adjusted
Sales $
3,314 $
3,314
Operating Profit $
311 $
311
ROS 9.4% 9.4%
Note: Q2 2020 reported and adjusted results include RIS since the merger date of April 3, 2020. Reported and adjusted
numbers do not include RIS pre-merger stub period from March 30, 2020 to April 2, 2020 which had an
estimated $200M of sales and $20M of operating profit.
RIS had second quarter adjusted sales of $3,314 million and recorded $311 million of adjusted operating profit in the quarter.
Raytheon Missiles & Defense
2nd Quarter Six Months
($ in millions) 2020 2020
Reported
Sales $
3,590 $
3,590
Operating Profit $
397 $
397
ROS 11.1% 11.1%
Adjusted
Sales $
3,590 $
3,590
Operating Profit $
397 $
397
ROS 11.1% 11.1%
Note: Q2 2020 reported and adjusted results include RMD since the merger date of April 3, 2020. Reported and
adjusted numbers do not include RMD pre-merger stub period from March 30, 2020 to April 2, 2020 which had an
estimated $200M of sales and $25M of operating profit.
RMD had second quarter adjusted sales of $3,590 million and recorded $397 million of adjusted operating profit in the quarter.
About Raytheon Technologies
Raytheon Technologies Corporation is an aerospace and defense company that provides advanced systems and services for commercial, military and government customers worldwide. With 195,000 employees and four industry-leading businesses ? Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles & Defense ? the company delivers solutions that push the boundaries in avionics, cybersecurity, directed energy, electric propulsion, hypersonics, and quantum physics. The company, formed in 2020 through the combination of Raytheon Company and the United Technologies Corporation aerospace businesses, is headquartered in Waltham, Massachusetts.
Conference Call on the Second Quarter 2020 Financial Results
Raytheon Technologies' financial results conference call will be held on Tuesday, July 28, 2020 at 8:30 a.m. ET. The dial-in number for the conference call will be (866) 219-7829 in the U.S. or (478) 205-0667 outside of the U.S. The passcode is 4609655. The conference call will also be audiocast on the Internet at www.rtx.com/investors. Individuals may listen to the call and download charts that will be used during the call. These charts will be available for printing prior to the call.
Use and Definitions of Non-GAAP Financial Measures
Raytheon Technologies Corporation's ("RTC") reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP").
We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
Adjusted net sales, organic sales, adjusted operating profit (loss), adjusted net income, adjusted earnings per share ("EPS"), adjusted diluted weighted average shares outstanding, and the adjusted effective tax rate are non-GAAP financial measures. Adjusted net sales represents consolidated net sales from continuing operations (a GAAP measure), excluding significant items of a non-recurring and/or nonoperational nature (hereinafter referred to as "other significant items"). Organic sales represents consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items. Adjusted operating profit (loss) represents income from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. Adjusted net income represents net income from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. Adjusted EPS represents diluted earnings per share from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. Adjusted diluted weighted average shares outstanding represents diluted weighted average shares outstanding (a GAAP measure), including stock awards which were anti-dilutive during the quarter and six months ended June 30, 2020 as a result of the net loss from operations. The adjusted effective tax rate represents the effective tax rate (a GAAP measure), excluding the tax effect of restructuring costs, acquisition accounting adjustments and other significant items. For the Business segments, when applicable, adjustments of net sales similarly reflect continuing operations excluding other significant items, and adjustments of operating profit and margins similarly reflect continuing operations, excluding restructuring, acquisition accounting adjustments and other significant items.
Free cash flow is a non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing RTC's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of RTC's common stock and distribution of earnings to shareowners.
A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables in this Appendix. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.
When we provide our expectation for free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures (expected cash flow from operations) generally is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide Raytheon Technologies Corporation's ("RTC") management's current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "confident," "on track" and other words of similar meaning. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax rates, R&D spend, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, other anticipated benefits to RTC of United Technologies Corporation's ("UTC") Rockwell Collins acquisition, the merger between UTC and Raytheon Company ("Raytheon", and such merger, the "merger") or the spin-offs by UTC of Otis Worldwide Corporation and Carrier Global Corporation into separate independent companies (the "separation transactions"), including estimated synergies and customer cost savings resulting from the merger and the separation transactions and other statements that are not solely historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of economic conditions in the industries and markets in which RTC operates in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, and the impact of pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand and distribution capabilities as the COVID-19 outbreak continues and results in an increasingly prolonged period of disruption to air travel and commercial activities generally, and significant restrictions and limitations on businesses, particularly within the aerospace and commercial airlines industries) aviation safety concerns, weather conditions and natural disasters, the financial condition of our customers and suppliers, and the risks associated with U.S. government sales (including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration or the allocation of funds to governmental responses to COVID-19, a government shutdown, or otherwise, and uncertain funding of programs); (2) challenges in the development, production, delivery, support, performance and realization of the anticipated benefits (including our expected returns under customer contracts) of advanced technologies and new products and services; (3) the scope, nature, impact or timing of acquisition and divestiture activity, including among other things the integration of UTC's and Raytheon's businesses or the integration of RTC with other businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs and expenses; (4) RTC's levels of indebtedness, capital spending and research and development spending; (5) future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; (6) the timing and scope of future repurchases by RTC of its common stock, which have been suspended through the end of the calendar year and may continue to be suspended, or discontinued or delayed, at any time due to various factors, including market conditions and the level of other investing activities and uses of cash; (7) delays and disruption in delivery of materials and services from suppliers; (8) company and customer-directed cost reduction efforts and restructuring costs and savings and other consequences thereof (including the potential termination of U.S. government contracts and performance under undefinitized contract awards and the potential inability to recover termination costs); (9) new business and investment opportunities; (10) the ability to realize the intended benefits of organizational changes; (11) the anticipated benefits of diversification and balance of operations across product lines, regions and industries; (12) the outcome of legal proceedings, investigations and other contingencies; (13) pension plan assumptions and future contributions; (14) the impact of the negotiation of collective bargaining agreements and labor disputes; (15) the effect of changes in political conditions in the U.S. and other countries in which RTC and its businesses operate, including the effect of changes in U.S. trade policies or the U.K.'s withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; (16) the effect of changes in tax (including U.S. tax reform enacted on December 22, 2017, which is commonly referred to as the Tax Cuts and Jobs Act of 2017), environmental, regulatory and other laws and regulations (including, among other things, export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anti-corruption requirements, including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations) in the U.S. and other countries in which RTC and its businesses operate; (17) the possibility that the anticipated benefits from the combination of UTC's and Raytheon's businesses (including ongoing integration activities from historic UTC and Raytheon acquisitions prior to the merger) cannot be realized in full or at all or may take longer to realize than expected, or the possibility that costs or difficulties related to the integration of UTC's businesses with Raytheon's will be greater than expected or may not result in the achievement of estimated synergies within the contemplated time frame or at all; (18) the ability of RTC to retain and hire key personnel and the ability of our personnel to continue to operate our facilities and businesses around the world in light of, among other factors, the COVID-19 outbreak; (19) the expected benefits to RTC of the separation transactions; (20) the intended qualification of (i) the merger as a tax-free reorganization and (ii) the separation transactions as tax-free to UTC and former UTC shareowners, in each case, for U.S. federal income tax purposes; and (21) the risk that dissynergy costs incurred in connection with the separation transactions will exceed legacy UTC's or legacy Raytheon's estimates. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see the reports of RTC, UTC and Raytheon on Forms S-4, 10-K, 10-Q and 8-K filed with or furnished to the Securities and Exchange Commission from time to time. Any forward-looking statement speaks only as of the date on which it is made, and RTC assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
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Raytheon Technologies Corporation
Condensed Consolidated Statement of Operations
Quarter Ended June 30, Six Months Ended June 30,
(Unaudited)
(Unaudited)
(dollars in millions, except per share amounts; shares in millions) 2020 2019(1) 2020(1) 2019(1)
Net Sales $
14,061 $
11,329 $
25,421 $
22,282
Costs and Expenses:
Cost of sales 12,214 8,554 20,786 16,973
Research and development 695 605 1,230 1,192
Selling, general and administrative 1,811 902 2,788 1,770
Total Costs and Expenses 14,720 10,061 24,804 19,935
Goodwill impairment (3,183) (3,183)
Other (expense) income, net 82 118 101 181
Operating profit (3,760) 1,386 (2,465) 2,528
Non-service pension (benefit) (237) (200) (405) (392)
Interest expense, net 335 352 667 772
Income (loss) from continuing operations before income taxes (3,858) 1,234 (2,727) 2,148
Income tax expense (benefit) (38) 6 601 159
Net income (loss) from continuing operations (3,820) 1,228 (3,328) 1,989
Less: Noncontrolling interest in subsidiaries' earnings 24 45 78 94
from continuing operations
Income (loss) from continuing operations attributable to (3,844) 1,183 (3,406) 1,895
common shareowners
Discontinued operations:
Income (loss) from discontinued operations (56) 1,206 (232) 2,114
Income tax expense (benefit) from discontinued operations (65) 435 237 679
Income (loss) from discontinued operations 9 771 (469) 1,435
Less: Noncontrolling interest in subsidiaries' earnings 54 43 84
from discontinued operations
Income (loss) from discontinued operations attributable to 9 717 (512) 1,351
common shareowners
Net (loss) income attributable to common shareowners $
(3,835) $
1,900 $
(3,918) $
3,246
(Loss) Earnings Per Share attributable to common
shareowners - Basic:
Income (loss) from continuing operations attributable to $
(2.56) $
1.38 $
(2.78) $
2.22
common shareowners
Income (loss) from discontinued operations 0.01 0.84 (0.42) 1.58
Net income (loss) attributable to common shareowners $
(2.55) $
2.22 $
(3.20) $
3.80
(Loss) Earnings Per Share attributable to common
shareowners - Diluted:
Income (loss) from continuing operations attributable to $
(2.56) $
1.37 $
(2.78) $
2.20
common shareowners
Income (loss) from discontinued operations 0.01 0.83 (0.42) 1.56
Net income (loss) attributable to common shareowners $
(2.55) $
2.20 $
(3.20) $
3.76
Weighted Average Shares Outstanding:
Basic shares 1,501.3 854.4 1,225.4 853.8
Diluted shares 1,501.3 863.7 1,225.4 862.3
(1) As a result of the Separation
Transactions and the Distributions
we have reclassified certain prior
year amounts for the
reclassification of the historical
Otis and Carrier results to
discontinued operations.
Raytheon Technologies Corporation
Segment Net Sales and Operating Profit
Quarter Ended
Six Months Ended
(Unaudited)
(Unaudited)
June 30, 2020 June 30, 2019(1) June 30, 2020(1) June 30, 2019(1)
(dollars in millions) Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted
Net Sales
Collins Aerospace Systems $
4,202 $
4,298 $
6,576 $
6,576 $
10,640 $
10,758 $
13,089 $
13,089
Pratt & Whitney 3,487 3,607 5,154 5,154 8,840 8,938 9,972 9,972
Raytheon Intelligence & 3,314 3,314 3,314 3,314
Space
Raytheon Missiles & Defense 3,590 3,590 3,590 3,590
Total segment 14,593 14,809 11,730 11,730 26,384 26,600 23,061 23,061
Eliminations and other (532) (532) (401) (401) (963) (963) (779) (779)
Consolidated $
14,061 $
14,277 $
11,329 $
11,329 $
25,421 $
25,637 $
22,282 $
22,282
Operating Profit
Collins Aerospace Systems $
(317) $
24 $
1,276 $
1,293 $
929 $
1,308 $
2,240 $
2,502
Pratt & Whitney (457) (151) 449 452 18 364 927 944
Raytheon Intelligence & 311 311 311 311
Space
Raytheon Missiles & Defense 397 397 397 397
Total segment (66) 581 1,725 1,745 1,655 2,380 3,167 3,446
Eliminations and other (28) (28) (42) (42) (53) (53) (69) (69)
Corporate expenses and other (277) (24) (87) (50) (407) (123) (133) (86)
unallocated items
FAS/CAS operating 356 356 356 356
adjustment
Acquisition accounting (3,745) (210) (4,016) (437)
adjustments
Consolidated $
(3,760) $
885 $
1,386 $
1,653 $
(2,465) $
2,560 $
2,528 $
3,291
---
Segment Operating Profit Margin
Collins Aerospace Systems (7.5) 0.6 19.4 19.7 8.7 12.2 17.1 19.1
% % % % % % % %
Pratt & Whitney (13.1) (4.2) 8.7 8.8 0.2 4.1 9.3 9.5
% % % % % % % %
Raytheon Intelligence & Space 9.4 9.4
NM
NM 9.4 9.4
% % % %
NM
NM
Raytheon Missiles & Defense 11.1 11.1
NM
NM 11.1 11.1
% % % %
NM
NM
Total segment (0.5) 3.9 14.7 14.9 6.3 8.9 13.7 14.9
% % % % % % % %
---
(1) Legacy UTC segments have been
recast for 2019 and first quarter
2020 as a result of the
Separation Transactions, the
Distributions and the Raytheon
Merger. Refer to supplemental
information in the tables on the
following pages for additional
information.
NM Not Meaningful
Raytheon Technologies Corporation
Condensed Consolidated Balance Sheet
June 30, 2020 December 31, 2019
(dollars in millions) (Unaudited) (Unaudited)
Assets
Cash and cash equivalents $
6,975 $
4,937
Accounts receivable, net(2) 9,496 8,743
Contract assets(2) 9,943 4,462
Inventory, net 10,256 9,047
Assets related to discontinued operations(1) 135 31,823
Other assets, current 5,469 2,565
Total Current Assets 42,274 61,577
Customer financing assets 3,363 3,463
Future income tax benefits 732 884
Fixed assets, net 14,805 10,322
Operating lease right-of-use assets 2,102 1,252
Goodwill 53,269 36,609
Intangible assets, net 42,003 24,473
Other assets(2) 2,969 1,035
Total Assets $
161,517 $
139,615
Liabilities, Redeemable Noncontrolling Interests and Equity
Short-term borrowings $
243 $
2,293
Accounts payable 7,182 7,816
Accrued liabilities(2) 14,253 9,770
Contract liabilities(2) 11,997 9,014
Liabilities related to discontinued operations(1) 319 14,443
Long-term debt currently due 1,297 3,258
Total Current Liabilities 35,291 46,594
Long-term debt 31,210 37,701
Operating lease liabilities, non-current 1,723 1,093
Future pension and postretirement benefit obligations 14,972 2,487
Other long-term liabilities(2) 9,394 7,414
Total Liabilities 92,590 95,289
Redeemable noncontrolling interest 35 95
Shareowners' Equity:
Common Stock 36,679 22,955
Treasury Stock (10,398) (32,626)
Retained earnings 49,744 61,594
Accumulated other comprehensive loss (8,800) (10,149)
Total Shareowners' Equity 67,225 41,774
Noncontrolling interest 1,667 2,457
Total Equity 68,892 44,231
Total Liabilities, Redeemable Noncontrolling Interests and Equity $
161,517 $
139,615
---
As a result of the Separation Transactions, the Distributions and the Raytheon Merger, certain reclassifications have been made to the prior year amounts to conform to the current year presentation. These reclassifications include:
(1) the reclassification of the historical Otis and Carrier results to assets and liabilities related to discontinued operations
(2) the presentation of contract-related assets and liabilities as current based upon the duration of our operating cycle
Raytheon Technologies Corporation
Condensed Consolidated Statement of Cash Flows
Quarter Ended June 30, Six Months Ended June 30,
(Unaudited)
(Unaudited)
(dollars in millions) 2020 2019(1) 2020 2019(1)
Operating Activities:
Net income (loss) from continuing operations $
(3,820) $
1,228 $
(3,328) $
1,989
Adjustments to reconcile net income (loss) from continuing operations to net cash
flows provided by operating activities:
Depreciation and amortization 1,111 650 1,839 1,330
Deferred income tax provision (274) 3 118 10
Stock compensation cost 72 69 135 118
Net periodic pension and other postretirement benefit (93) (125) (223) (244)
Goodwill impairment loss 3,183 3,183
Change in:
Accounts receivable 773 (146) 1,163 736
Contract assets 725 (255) 376 (573)
Inventory (155) (317) (550) (795)
Other current assets 28 21 (180) (322)
Accounts payable and accrued liabilities (2,007) 109 (1,395) (218)
Contract liabilities 302 413 201 633
Global pension contributions (34) (33) (42) (37)
Canadian government settlement - (38)
Other operating activities, net 399 (121) 45 180
Net cash flows provided by operating activities from continuing operations 210 1,496 1,342 2,769
Investing Activities:
Capital expenditures (458) (384) (783) (678)
Dispositions of businesses 234 234 133
Cash acquired in Raytheon Merger 3,208 3,208
Increase in customer financing assets, net (41) (159) (129) (332)
Increase in collaboration intangible assets (28) (82) (106) (169)
Receipts (payments) from settlements of derivative contracts 238 (31) (286) 61
Other investing activities, net (57) (58) (82) (118)
Net cash flows provided by (used in) investing activities from continuing operations 3,096 (714) 2,056 (1,103)
Financing Activities:
Issuance of long-term debt 1,984 3 1,984 2
Dividend from discontinued operations - 17,207
Repayment of long-term debt (1,228) (9) (15,038) (13)
Decrease in short-term borrowings, net (1,382) (18) (2,045) (388)
Proceeds from Common Stock issued under employee stock plans 4 6 10 11
Dividends paid on Common Stock (724) (610) (1,338) (1,219)
Repurchase of Common Stock - (40) (47) (69)
Net transfers (to) from discontinued operations (950) 168 (1,966) 682
Other financing activities, net (76) (11) (99) (73)
Net cash flows used in financing activities from continuing operations (2,372) (511) (1,332) (1,067)
Discontinued Operations:
Net cash (used in) provided by operating activities (189) 614 (661) 841
Net cash used in investing activities - (109) (241) (114)
Net cash used in financing activities (1,803) (178) (1,481) (698)
Net cash flows (used in) provided by discontinued operations (1,992) 327 (2,383) 29
Effect of foreign exchange rate changes on cash and cash equivalents 9 (10) 4
Effect of foreign exchange rate changes on cash and cash equivalents from - (25) (76) 11
discontinued operations
Net (decrease) increase in cash, cash equivalents and restricted cash (1,049) 573 (403) 643
Cash, cash equivalents and restricted cash, beginning of period 6,073 4,057 4,961 3,731
Cash, cash equivalents and restricted cash within assets related to discontinued 1,993 2,225 2,459 2,481
operations, beginning of period
Cash, cash equivalents and restricted cash, end of period 7,017 6,855 7,017 6,855
Less: Restricted cash 42 18 42 18
Less: Cash, cash equivalents and restricted cash for discontinued operations - 2,521 2,521
Cash and cash equivalents, end of period $
6,975 $
4,316 $
6,975 $
4,316
---
(1) As a result of the Separation
Transactions, the Distributions and
the Raytheon Merger, certain
reclassifications have been made to
the prior year amounts to conform to
the current year presentation. These
reclassifications include the
reclassification of the historical
Otis and Carrier results to
discontinued operations and the
reclassification of lease amortization
within our presentation of cash flows.
Raytheon Technologies Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results
Adjusted Sales, Adjusted Operating Profit & Operating Profit Margin
Quarter Ended June 30, Six Months Ended June 30,
(Unaudited)
(Unaudited)
(dollars in millions - Income (Expense)) 2020 2019 2020 2019
Collins Aerospace Systems
Net sales $
4,202 $
6,576 $
10,640 $
13,089
Significant unfavorable contract adjustments(1) (96) (118)
Adjusted net sales $
4,298 $
6,576 $
10,758 $
13,089
Operating profit (loss) $
(317) $
1,276 $
929 $
2,240
Restructuring (151) (17) (157) (56)
Significant unfavorable contract adjustments(1) (122) (144)
Bad debt expense driven by customer bankruptcies and (89) (99)
collectability risk(1)
Foreign government wage subsidies(1) 24 24
Fixed asset impairment(1) (3) (3)
Loss on sale of business - (25)
Amortization of Rockwell Collins inventory fair value adjustment - (181)
Adjusted operating profit $
24 $
1,293 $
1,308 $
2,502
Adjusted operating profit margin 0.6
% 19.7 12.2 19.1
% % %
Pratt & Whitney
Net sales $
3,487 $
5,154 $
8,840 $
9,972
Favorable impact of a contract termination - 22
Significant unfavorable contract adjustments(1) (120) (120)
Adjusted net sales $
3,607 $
5,154 $
8,938 $
9,972
Operating profit (loss) $
(457) $
449 $
18 $
927
Restructuring (107) (3) (107) (17)
Bad debt expense driven by customer bankruptcies and (148) (210)
collectability risk(1)
Significant unfavorable contract adjustments(1) (110) (110)
Foreign government wage subsidies(1) 59 59
Favorable impact of a contract termination - 22
Adjusted operating profit $
(151) $
452 $
364 $
944
Adjusted operating profit margin (4.2)
% 8.8
% 4.1
% 9.5
%
Raytheon Intelligence & Space
Net sales $
3,314
$ $
3,314
$
Operating profit $
311
$ $
311
$
Operating profit margin 9.4
% % 9.4
% %
Raytheon Missiles & Defense
Net sales $
3,590
$ $
3,590
$
Operating profit $
397
$ $
397
$
Operating profit margin 11.1 % 11.1
% % %
Corporate, Eliminations and other items
Net sales $
(532) $
(401) $
(963) $
(779)
Operating profit $
(305) $
(129) $
(460) $
(202)
Restructuring (169) (1) (171) (2)
Transaction and integration costs related to acquisition of - (10) (19)
Rockwell Collins, Inc.
Costs associated with the separation of the commercial businesses (14) (14)
Transaction expenses associated with the Raytheon Merger (70) (26) (99) (26)
Adjusted operating profit $
(52) $
(92) $
(176) $
(155)
Acquisition Accounting Adjustments(2)
Operating Profit $
(3,745) $
(210) $
(4,016) $
(437)
Intangible impairment(1) (17) (57)
Goodwill impairment(1) (3,183) (3,183)
Acquisition accounting adjustments (545) (210) (776) (437)
Adjusted operating profit
$
$
$
$
RTC Consolidated
Net sales $
14,061 $
11,329 $
25,421 $
22,282
Significant unfavorable contract adjustments (216) (216)
Adjusted net sales $
14,277 $
11,329 $
25,637 $
22,282
Operating profit $
(3,760) $
1,386 $
(2,465) $
2,528
Restructuring (427) (21) (435) (75)
Acquisition accounting adjustments (545) (210) (776) (437)
Total significant non-recurring and non-operational items included (3,673) (36) (3,814) (251)
in Operating Profit above
Consolidated adjusted operating profit $
885 $
1,653 $
2,560 $
3,291
---
(1) For the three and six months ended June
30, 2020, included in other significant
items in the table above is a net pre-
tax charge of $3.6 billion related to
the impact of the COVID-19 pandemic.
This amount includes a $3.2 billion
impairment of goodwill, $0.2 billion of
charges related to customer
bankruptcies and increased
collectability risk, and $0.2 billion
of charges related to significant
unfavorable contract adjustments.
Management has determined these items
are directly attributable to the COVID-
19 pandemic, incremental to similar
costs incurred for reasons other than
the pandemic, not expected to recur
once the impact of the pandemic has
subsided, and therefore not indicative
of the Company's ongoing operational
performance.
(2) In conjunction with the Raytheon Merger,
we have revised our definition of
Adjusted operating profit, Adjusted net
income, and Adjusted EPS to exclude the
impact of Acquisition accounting
adjustments along with restructuring
costs and other significant items.
Acquisition accounting adjustments
include the amortization expense and
impairment charges related to acquired
intangible assets related to historical
acquisitions, the amortization of the
property, plant and equipment fair
value adjustment acquired through
historical acquisitions, and the
amortization of customer contractual
obligations related to loss making or
below market contracts acquired.
Management believes the revision to
these non-GAAP measures is useful in
providing period-to-period
comparisons of the results of the
Company's ongoing operational
performance. All periods presented
reflect the impact of this change
Raytheon Technologies Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results
Adjusted Income (Loss) from Continuing Operations, Earnings Per Share, Weighted Average
Diluted Shares Outstanding and Effective Tax Rate
Quarter Ended June 30, Six Months Ended June 30,
(Unaudited)
(Unaudited)
(dollars and shares in millions - Income (Expense)) 2020 2019 2020 2019
Income (loss) from continuing operations attributable $
(3,844) $
1,183 $
(3,406) $
1,895
to common shareowners
Total Restructuring Costs (427) (21) (435) (75)
Total Acquisition accounting adjustments (545) (210) (776) (437)
Total significant non-recurring and non-operational (3,673) (36) (3,814) (251)
items included in Operating Profit
Significant non-recurring and non-operational items
included in Non-service Pension
Pension curtailment (25) (25)
Significant non-recurring and non-operational items
included in Interest Expense, Net
Interest on tax settlements - 58 58
Deferred compensation 4 4
Tax effect of restructuring and significant non- 321 53 403 162
recurring and non-operational items above
Significant non-recurring and non-operational items
included in Income Tax Expense
Tax expenses associated with the Company's - (415)
separation of Otis and Carrier
Tax settlements - 264 264
Tax impact from business disposal (22) (22)
Tax impact related to debt exchange (60) (60)
Revaluation of certain international tax incentives (46) (46)
Revaluation of deferred taxes related to Raytheon 31 31
merger and the Company's separation of Otis and Carrier
Less: Impact on net income attributable to common (4,442) 108 (5,155) (279)
shareowners
Adjusted income (loss) from continuing operations $
598 $
1,075 $
1,749 $
2,174
attributable to common shareowners
Diluted (Loss) Earnings Per Share $
(2.56) $
1.37 $
(2.78) $
2.20
Impact on Diluted (Loss) Earnings Per Share (2.96) 0.13 (4.20) (0.32)
Adjusted Diluted Earnings Per Share $
0.40 $
1.24 $
1.42 $
2.52
Weighted Average Number of Shares Outstanding
Reported Diluted 1,501.3 863.7 1,225.4 862.3
Impact of dilutive shares(1) 2.4 4.9
Adjusted Diluted 1,503.7 863.7 1,230.3 862.3
Effective Tax Rate 1.0 0.5 (22.0) 7.4
%
% % %
Impact on Effective Tax Rate 22.0 21.9 43.2 13.1
% % % %
Adjusted Effective Tax Rate 23.0 22.4 21.2 20.5
% % % %
--- ---
(1) The computation of reported
diluted earnings per share
excludes the effect of the
potential exercise of stock
awards, including stock
appreciation rights and stock
options, because their effect
was antidilutive in the
quarter ended and six months
ended June 30, 2020 due to the
reported loss from operations.
On an adjusted basis, the
Company reported income from
continuing operations and the
dilutive effect of such awards
is included in the calculation
of Adjusted Diluted Earnings
Per Share.
Raytheon Technologies Corporation
Free Cash Flow Reconciliation
Quarter Ended June 30,
(Unaudited)
(dollars in millions) 2020 2019
Net cash flows provided by operating activities from continuing operations $
210 $
1,496
Capital expenditures (458) (384)
Free cash flow $
(248) $
1,112
Six Months Ended June 30,
(Unaudited)
(dollars in millions) 2020 2019
Net cash flows provided by operating activities from continuing operations $
1,342 $
2,769
Capital expenditures (783) (678)
Free cash flow $
559 $
2,091
Raytheon Technologies Corporation
Legacy UTC Reported Segment Results
In conjunction with the Raytheon Merger, we revised our measurement of segment performance to reflect how management now reviews and evaluates operating performance. Under the new segment performance measurement, certain acquisition accounting adjustments are now excluded from segment results in order to better represent the ongoing operational performance of those segments. In
addition, the majority of Corporate expenses are now allocated to the segments, excluding certain items that remain at Corporate because they are not included in management's review of the segment results. The tables below summarize the historical results of our Pratt and Whitney and Collins Aerospace Systems segments reflecting the impact of these adjustments.
2020 2019
Net Sales (dollars in millions) Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney $
5,353 $
4,818 $
5,154 $
5,285 $
5,645 $
20,902
Collins Aerospace Systems 6,438 6,513 6,576 6,495 6,444 26,028
Total segments 11,791 11,331 11,730 11,780 12,089 46,930
Eliminations and other (431) (378) (401) (407) (395) (1,581)
Total net sales from continuing $
11,360 $
10,953 $
11,329 $
11,373 $
11,694 $
45,349
operations
2020 2019
Operating Profit (dollars in millions) Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney $
475 $
478 $
449 $
520 $
354 $
1,801
Collins Aerospace Systems 1,246 964 1,276 1,259 1,009 4,508
Total segments 1,721 1,442 1,725 1,779 1,363 6,309
Corporate expenses and other unallocated (25) (27) (42) (46) (25) (140)
items
Eliminations and other (130) (46) (87) (83) (151) (367)
Acquisition accounting adjustments (271) (227) (210) (220) (231) (888)
Total operating profit from continuing $
1,295 $
1,142 $
1,386 $
1,430 $
956 $
4,914
operations
2020 2019
Operating Profit Margin Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney 8.9
% 9.9 8.7
% 9.8
% % 6.3
% 8.6
%
Collins Aerospace Systems 19.4 14.8 19.4 19.4 15.7 17.3
% % % % % %
Total segments operating profit margin 14.6 12.7 14.7 15.1 11.3 13.4
% % % % % %
---
Raytheon Technologies Corporation
Legacy UTC Reconciliation of Previously Reported to Reported Segment Results
(dollars in millions) 2020 2019
Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney
Net sales, as previously reported $
5,351 $
4,817 $
5,150 $
5,283 $
5,642 $
20,892
Corporate expense allocation adjustment 2 1 4 2 3 10
Net sales, reported $
5,353 $
4,818 $
5,154 $
5,285 $
5,645 $
20,902
Operating profit, as previously reported $
439 $
433 $
424 $
471 $
340 $
1,668
Corporate expense allocation adjustment (37) (32) (34) (33) (51) (150)
Acquisition accounting adjustment 73 77 59 82 65 283
Operating profit, reported $
475 $
478 $
449 $
520 $
354 $
1,801
Operating profit %, as previously reported 8.2
% 9.0 8.2
% 8.9
% % 6.0
% 8.0
%
Operating profit %, reported 8.9
% 9.9 8.7
% 9.8
% % 6.3
% 8.6
%
Collins Aerospace Systems
Net sales, reported $
6,438 $
6,513 $
6,576 $
6,495 $
6,444 $
26,028
Operating profit, as previously reported $
1,092 $
856 $
1,172 $
1,167 $
905 $
4,100
Corporate expense allocation adjustment (44) (42) (47) (46) (62) (197)
Acquisition accounting adjustment 198 150 151 138 166 605
Operating profit, reported $
1,246 $
964 $
1,276 $
1,259 $
1,009 $
4,508
Operating profit %, as previously reported 17.0 13.1 17.8 18.0 14.0 15.8
% % % % % %
Operating profit %, reported 19.4 14.8 19.4 19.4 15.7 17.3
% % % % % %
2020 2019
Total Segments Q1 Q1 Q2 Q3 Q4 FY
Net sales, reported $
11,791 $
11,331 $
11,730 $
11,780 $
12,089 $
46,930
Operating profit, reported $
1,721 $
1,442 $
1,725 $
1,779 $
1,363 $
6,309
Operating profit %, reported 14.6 12.7 14.7 15.1 11.3 13.4
% % % % % %
Corporate, Eliminations, and Other
Net sales, as previously reported $
(433) $
(384) $
(402) $
(411) $
(398) $
(1,595)
Adjustment for discontinued operations 2 6 6 6 6 24
Corporate Expense Allocation Adjustment (5) (2) (3) (10)
Net sales, reported $
(431) $
(378) $
(401) $
(407) $
(395) $
(1,581)
Operating Profit:
General corporate expenses, as $
(25) $
(101) $
(239) $
(232) $
(360) $
(932)
previously reported
Corporate expense allocation adjustment 74 197 186 335 792
Corporate expenses and other unallocated $
(25) $
(27) $
(42) $
(46) $
(25) $
(140)
items, reported
Eliminations and other, as previously $
(115) $
(98) $
(124) $
(113) $
(180) $
(515)
reported
Adjustment for discontinued operations 228 52 153 137 251 593
Corporate expense allocation adjustment (243) (116) (107) (222) (445)
Eliminations and other, reported $
(130) $
(46) $
(87) $
(83) $
(151) $
(367)
Acquisition Accounting Adjustments, $
(271) $
(227) $
(210) $
(220) $
(231) $
(888)
reported
Continuing Operations, reported
Net sales, reported $
11,360 $
10,953 $
11,329 $
11,373 $
11,694 $
45,349
Operating profit, reported $
1,295 $
1,142 $
1,386 $
1,430 $
956 $
4,914
Operating profit %, reported 11.4 10.4 12.2 12.6 8.2
% 10.8
% % % % %
---
Raytheon Technologies Corporation
Legacy UTC Segment Results, Adjusted
2020 2019
Net Sales, Adjusted (dollars in millions) Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney $
5,331 $
4,818 $
5,154 $
5,285 $
5,645 $
20,902
Collins Aerospace Systems 6,460 6,513 6,576 6,495 6,444 26,028
Total segments 11,791 11,331 11,730 11,780 12,089 46,930
Eliminations and other (431) (378) (401) (407) (395) (1,581)
Total adjusted net sales from continuing operations $
11,360 $
10,953 $
11,329 $
11,373 $
11,694 $
45,349
2020 2019
Operating Profit, Adjusted (dollars in millions) Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney $
515 $
492 $
452 $
520 $
470 $
1,934
Collins Aerospace Systems 1,284 1,209 1,293 1,286 1,061 4,849
Total segments 1,799 1,701 1,745 1,806 1,531 6,783
Corporate expenses and other unallocated items (25) (27) (42) (46) (25) (140)
Eliminations and other (99) (36) (50) (46) (96) (228)
Total adjusted operating profit from continuing operations $
1,675 $
1,638 $
1,653 $
1,714 $
1,410 $
6,415
2020 2019
Operating Profit Margin, Adjusted Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney 9.7
% 10.2 8.8
% 9.8
% 8.3
% % 9.3
%
Collins Aerospace Systems 19.9 18.6 19.7 19.8 16.5 18.6
% % % % % %
Total Segments Adjusted Operating Profit Margin 15.3 15.0 14.9 15.3 12.7 14.5
% % % % % %
---
Raytheon Technologies Corporation
Legacy UTC Reconciliation of Reported (GAAP) to Adjusted (non GAAP) Segment Results
(dollars in millions) 2020 2019
Q1 Q1 Q2 Q3 Q4 FY
Pratt & Whitney
Net sales $
5,353 $
4,818 $
5,154 $
5,285 $
5,645 $
20,902
Favorable impact of a contract termination 22
Adjusted net sales $
5,331 $
4,818 $
5,154 $
5,285 $
5,645 $
20,902
Operating profit, Recast $
475 $
478 $
449 $
520 $
354 $
1,801
Restructuring (14) (3) (116) (133)
Bad debt expense driven by customer bankruptcies and (62)
collectability risk
Favorable impact of a contract termination 22
Adjusted operating profit $
515 $
492 $
452 $
520 $
470 $
1,934
Adjusted operating profit margin 9.7
% 10.2 8.8
% 9.8
% 8.3
% % 9.3
%
Collins Aerospace Systems
Net sales $
6,438 $
6,513 $
6,576 $
6,495 $
6,444 $
26,028
Significant unfavorable adjustments to contract estimates (22)
Adjusted net sales $
6,460 $
6,513 $
6,576 $
6,495 $
6,444 $
26,028
Operating profit $
1,246 $
964 $
1,276 $
1,259 $
1,009 $
4,508
Restructuring (6) (39) (17) (27) (19) (102)
Loss on sale of business (25) (25)
Amortization of Rockwell Collins inventory fair value (181) (181)
adjustment
Costs associated with pension plan amendment (33) (33)
Bad debt expense driven by customer bankruptcies and (10)
collectability risk
Significant unfavorable adjustments to contract estimates (22)
Adjusted operating profit $
1,284 $
1,209 $
1,293 $
1,286 $
1,061 $
4,849
Adjusted operating profit margin 19.9 18.6 19.7 19.8 16.5 18.6
% % % % % %
Corporate, Eliminations, and Other
Net sales $
(431) $
(378) $
(401) $
(407) $
(395) $
(1,581)
Eliminations and other
Operating profit $
(25) $
(27) $
(42) $
(46) $
(25) $
(140)
Adjusted operating profit $
(25) $
(27) $
(42) $
(46) $
(25) $
(140)
Corporate expenses and other unallocated items
Operating profit $
(130) $
(46) $
(87) $
(83) $
(151) $
(367)
Restructuring (2) (1) (1) (1) (3) (6)
Transaction and integration costs related to merger (9) (10) (11) (10) (40)
agreement with Rockwell Collins, Inc.
Transaction expenses associated with the Raytheon (29) (26) (25) (32) (83)
Merger
Costs associated with pension plan amendment (10) (10)
Adjusted operating profit $
(99) $
(36) $
(50) $
(46) $
(96) $
(228)
Total Adjusted net sales from continuing operations $
11,360 $
10,953 $
11,329 $
11,373 $
11,694 $
45,349
Total Adjusted operating profit from continuing $
1,675 $
1,638 $
1,653 $
1,714 $
1,410 $
6,415
operations
---
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SOURCE Raytheon Technologies
